<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________________ to ________________
Commission File Number 0-28162
LENOX BANCORP, INC.
(Exact name of small business issuer as specified in its charter)
Ohio 31-1445959
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization Identification No.)
4730 Montgomery Road, Norwood, Ohio 45212
(Address of principal executive offices) (Zip Code)
(513) 531-8655
(Issuer's telephone number)
Not Applicable
(Former name, former address and former fiscal year,
if changes since last report)
APPLICABLE ONLY TO CORPORATE ISSUERS:
State the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: 285,028 shares of common stock,
par value $0.01 per share, were outstanding as of August 10, 2000.
Transitional Small Business Disclosure Format (check one): Yes No X
---- -----
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LENOX BANCORP, INC.
FORM 10-QSB
FOR THE QUARTER ENDED JUNE 30, 2000
INDEX
Page
----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements-Unaudited
Consolidated Balance Sheets at
June 30, 2000 and December 31, 1999............................. 3
Consolidated Statements of Income - For the Three and Six
Months Ended June 30, 2000 and 1999............................. 4
Consolidated Statements of Cash Flows - For the
Six Months Ended June 30, 2000 and 1999......................... 5
Notes to Unaudited Consolidated Financial Statements............ 6
Item 2. Management's Discussion and Analysis or Plan of Operation....... 7
PART II: OTHER INFORMATION
Item 1. Legal Proceedings............................................. 12
Item 2. Changes in Securities..........................................12
Item 3. Defaults Upon Senior Securities................................12
Item 4. Submission of Matters to a Vote of Security Holders............12
Item 5. Other Information..............................................13
Item 6. Exhibits and Reports on Form 8-K...............................13
SIGNATURES
2
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<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION
LENOX BANCORP, INC.
Item 1. FINANCIAL STATEMENTS.
LENOX BANCORP, INC.
CONSOLIDATED BALANCE SHEETS
AT AT
JUNE 30, DECEMBER 31,
2000 1999
---------------- ---------------
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<S> <C> <C>
ASSETS
Cash and due from banks......................................................... $ 1,237 $ 738
Certificates of deposit......................................................... 96 193
Investment securities - available for sale, at fair value (amortized cost
of $2,700 and $2,702 at June 30, 2000 and December 31, 1999).................. 2,549 2,535
Mortgage-backed securities - available for sale, at fair value (amortized
cost of $541 and $602 at June 30, 2000 and December 31, 1999)................. 529 588
Collateralized mortgage obligations - available for sale, at fair value
(amortized cost of $4,158 and $4,159 at June 30, 2000 and December 31, 1999).. 4,026 4,171
Loans receivable, net........................................................... 62,293 59,434
Loans held for sale - at lower of cost or market................................ 611 5,611
Accrued interest receivable:
Loans................................................................... 424 361
Mortgage-backed securities.............................................. 4 4
Collateralized mortgage obligations..................................... 25 23
Investments and certificates of deposit................................. 50 50
Property and equipment, net..................................................... 1,325 399
Federal Home Loan Bank stock - at cost.......................................... 1,681 1,583
Prepaid expenses and other assets............................................... 402 217
Deferred Federal income tax benefit............................................. 11 -
Prepaid federal income taxes.................................................... 46 77
------- -------
Total assets...................................................... $75,309 $75,984
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
DEPOSITS:
Savings, club and other accounts........................................ $ 6,717 $ 5,129
Money market and NOW accounts........................................... 4,401 5,050
Certificate accounts.................................................... 26,335 29,257
------- -------
Total deposits.................................................... 37,453 39,436
Advances from Federal Home Loan Bank......................................... 32,710 31,139
Advance payments by borrowers for taxes and insurance........................ 39 265
Accrued expenses............................................................. 394 309
Accrued federal income taxes.................................................... - -
Deferred federal income taxes................................................ - 55
------- -------
Total liabilities................................................. $ 70,596 $71,204
======= =======
STOCKHOLDERS' EQUITY:
Common stock - no par value: 2,000,000 authorized, 425,677 issued
and 285,028 outstanding at June 30, 2000 and at December 31, 1999........... - -
Additional paid in capital................................................... 3,776 3,776
Retained earnings - substantially restricted................................. 4,115 4,108
Unearned ESOP shares......................................................... (208) (208)
Shares acquired for Stock Incentive Plan..................................... (207) (217)
Treasury stock 140,649 shares at June 30, 2000 and December 31, 1999......... (2,567) (2,567)
Accumulated other comprehensive income (loss):
Unrealized loss on available for sale securities, net of taxes.......... (196) (112)
------- -------
Total stockholders' equity........................................ 4,713 4,780
------- -------
Total liabilities and stockholders' equity................................... $75,309 $75,984
======= =======
</TABLE>
3
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<TABLE>
<CAPTION>
LENOX BANCORP, INC.
CONSOLIDATED STATEMENT OF INCOME
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------------ ------------------------
2000 1999 2000 1999
----------- ---------- ---------- -----------
(UNAUDITED)
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
INTEREST INCOME AND DIVIDEND INCOME:
Loans.................................................... $1,178 $890 $2,379 $1,625
Mortgage-backed securities............................... 8 10 19 21
Collateralized mortgage obligations...................... 73 81 142 166
Investments and interest bearing deposits................ 75 47 109 115
FHLB stock dividends..................................... 29 16 58 30
------ ----- ------ ------
Total........................................... 1,363 1,044 2,707 1,957
INTEREST EXPENSE:
Deposits................................................. 480 421 931 818
Borrowed money and capitalized leases.................... 499 237 957 438
------ ----- ------ ------
Total........................................... 979 658 1,887 1,256
Net interest income before provision for loan losses..... 384 386 820 701
Provision for loan losses..................................... 9 9 32 18
------ ----- ------ ------
Net interest income after provision for loan losses...... 375 377 788 683
OTHER INCOME:
Service fee income and mortgage corporation operations... 44 28 79 61
Gain on sale of loans and investments.................... 54 26 126 69
------ ----- ------ ------
Total........................................... 99 54 205 130
GENERAL AND ADMINISTRATIVE EXPENSES:
Compensation and employee benefits....................... 262 165 479 327
Occupancy and equipment.................................. 84 53 133 108
Federal insurance premiums............................... 2 5 4 10
Franchise taxes.......................................... 13 24 29 45
Other expenses........................................... 150 155 334 285
------ ----- ------ ------
Total........................................... 511 402 979 775
Income (loss) before provision for income taxes.......... (37) 51 14 38
Provision (credit) for income taxes........................... (12) 20 7 17
---- --- --- ---
Net income (loss)........................................ $(25) $31 $ 7 $21
==== === === ===
Basic earnings (loss) per share............................... $(0.09) $0.09 $0.02 $0.06
======= ===== ===== =====
Diluted earnings (loss) per share............................. $(0.09) $0.09 $0.02 $0.06
======= ===== ===== =====
</TABLE>
4
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<TABLE>
<CAPTION>
LENOX BANCORP, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED
JUNE 30,
-----------------------------------
2000 1999
--------------- ----------------
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income(loss)......................................................... $ 7 $ 21
Adjustments to reconcile net income to net cash provided (used)
by operating activities:
Depreciation and amortization.......................................... 36 72
Provision for losses on loans.......................................... 32 18
Amortization of deferred loan (fees) costs............................. 34 (11)
Deferred loan origination fees (costs)................................. (27) (54)
FHLB stock dividends................................................... (58) (30)
Gain (loss) on sale of investments..................................... - (22)
Gain (loss) on sale of loans........................................... (126) (47)
Amortization of stock incentive plan award............................. 10 13
ESOP expense, net of tax benefit....................................... - 33
Effect of change in operating assets and liabilities:
Accrued interest receivable.......................................... (65) (90)
Prepaid expenses..................................................... (185) (78)
Prepaid federal income tax........................................... 31 -
Advances by borrowers for taxes and insurance........................ (226) (41)
Accrued expenses..................................................... 84 (79)
Accrued federal income taxes......................................... - (34)
Deferred federal income taxes........................................ - (33)
-------- --------
Net cash provided (used) by operating activities................... (453) (362)
CASH FLOWS FROM INVESTING ACTIVITIES:
Property and equipment additions......................................... (955) (6)
Repayments of mortgage-backed securities................................. 57 140
Purchase of certificates of deposits..................................... (3) (5)
Maturity of certificate of deposits...................................... 100 -
Net change in loans...................................................... (4,598) (18,595)
Proceeds from sale of investments........................................ 6,778 1,154
Proceeds from sale of mortgage loans..................................... - 2,605
Purchase of FHLB stock................................................... (40) (399)
Maturity of investments - held-to-maturity............................... - 1,337
Maturity of investments - available-for-sale............................. - 600
-------- --------
Net cash provided (used) by investing activities....................... 1,339 13,169
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in deposits...................................... (1,983) 4,182
Borrowings from FHLB..................................................... 13,000 20,775
Repayments of FHLB advances.............................................. (11,429) (11,100)
Purchase of Treasury Stock............................................... - (2,223)
Reissue Treasury Stock................................................... - 4
Dividends paid........................................................... - (40)
-------- --------
Net cash provided (used) by financing activities....................... (412) 11,598
-------- --------
Increase (decrease) in cash and cash equivalents........................... 499 (1,933)
-------- --------
Cash and cash equivalents at beginning of period........................... 738 2,350
-------- --------
Cash and cash equivalents at end of period................................. $ 1,237 $ 417
======== ========
SUPPLEMENTAL DISCLOSURE:
Cash paid for:
Interest expense....................................................... $ 1,864 $ 1,254
Income taxes........................................................... - 51
</TABLE>
5
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LENOX BANCORP, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
FOR SIX MONTHS ENDED JUNE 30, 2000 AND 1999
1. Principles of Consolidation
---------------------------
The consolidated unaudited financial statements include the accounts of
Lenox Bancorp, Inc. ("Lenox" or the "Company") and its wholly-owned subsidiary
Lenox Savings Bank (the "Bank"), which includes Lenox Mortgage Corporation. All
significant intercompany transactions have been eliminated in consolidation. The
investment in the Bank on Lenox's financial statements is carried at the parent
company's equity in the underlying net assets.
The consolidated balance sheet as of June 30, 2000 and the related
consolidated statement of income, cash flows and changes in stockholders' equity
for the three and six months ending June 30, 2000 and 1999 are unaudited. In the
opinion of management, all adjustments necessary for a fair presentation of such
financial statements have been included. Such adjustments consisted of normal
recurring items. Interim results are not necessarily indicated of results for a
full year.
The financial statements and notes are presented as permitted by Form
10-QSB. The interim statements are unaudited and should be read in conjunction
with the financial statements and notes thereto contained in the Bank's annual
report for the year ended December 31, 1999.
2. Conversion to Capital Stock Form of Ownership
---------------------------------------------
The Board of Directors of Lenox Savings Bank adopted a plan of conversion,
pursuant to which the Bank converted from an Ohio-chartered mutual savings bank
to an Ohio-chartered capital stock savings bank, with the concurrent formation
of the holding company, Lenox Bancorp, Inc. On July 17, 1996, the conversion
from the mutual to stock form was finalized. Lenox was capitalized through the
initial sale of 425,677 shares of common stock to eligible account holders, an
employee benefit plan of the Bank, supplemental eligible account holders, other
members of the Bank and the general public. Lenox then used a portion of the
proceeds from the sale to purchase all of the outstanding shares of the Bank.
This transaction was accounted for in a manner similar to the pooling of
interest method.
The Bank may not declare or pay cash dividends on or repurchase any of its
shares of common stock if the effect thereof would cause equity to be reduced
below applicable regulatory capital maintenance requirements or if such
declaration and payment would otherwise violate regulatory requirements.
3. Earnings Per Share
------------------
The Company reported a net loss for the three months ended June 30, 2000
of $0.09 per share, or $25,000, on an average of 285,028 shares, compared to net
income for the quarter ending June 30, 1999 of $31,000, or $0.09, per share on
an average of 285,028 shares. Earnings
6
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for the six months ending June 30, 2000 was $7,000, or $0.02 per share, on an
average of 285,028 shares compared to $21,000, or $0.06 per share, on an average
of 285,028 shares for the six months ended June 30, 1999. At present, there is
no difference between the average shares outstanding for the computation of
basic and dilutive earnings per share as options will have a dilutive effect
only when the average market price of the common stock exceeds the exercise
price of the options.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION
The following analysis discusses changes in the financial condition and
results of operations at and for the six months ended June 30, 2000, and should
be read in conjunction with the Bank's Consolidated Financial Statements and the
notes thereto, appearing in Part I, Item 1 of this document.
FORWARD-LOOKING STATEMENTS
This report contains certain forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. The Company intends such
forward-looking statements to be covered by the safe harbor provisions for
forward-looking statements contained in the Private Securities Reform Act of
1995, and is including this statement for purposes of these safe harbor
provisions. Forward-looking statements, which are based on certain assumptions
and describe future plans, strategies and expectations of the Company, are
generally identified by use of the words "believe," "expect," "intend,"
"anticipate," "estimate," "project," or similar expressions. The Company's
ability to predict results or the actual effect of future plans or strategies is
inherently uncertain. Factors which could have a material adverse effect on the
operations of the Company and the subsidiaries include, but are not limited to,
changes in: interest rates, general economic conditions, legislative/regulatory
changes, monetary and fiscal policies of the U.S. Government, including policies
of the U.S. Treasury and the Federal Reserve Board, the quality or composition
of the loan or investment portfolios, demand for loan products, deposit flows,
competition, demand for financial services in the Company's market area and
accounting principles and guidelines. These risks and uncertainties should be
considered in evaluating forward-looking statements and undue reliance should
not be placed on such statements. Further information concerning the Company and
its business, including additional factors that could materially affect the
Company's financial results, is included in the Company's filings with the
Securities and Exchange Commission.
The Company does not undertake -- and specifically disclaims any
obligation -- to publicly release the result of any revisions which may be made
to any forward-looking statements to reflect events or circumstances after the
date of such statements or to reflect the occurrence of anticipated or
unanticipated events.
7
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MANAGEMENT STRATEGY
The Bank's current strategic plan is to enhance its long-term
profitability, reduce the level of interest rate risk and improve market share.
Management is committed to achieving a substantial increase in the Bank's return
on equity within the next three years. Improved earnings through asset growth is
an important step toward meeting this objective. Asset growth has increased 61%
since the Bank's conversion from mutual to stock form in 1996. Expanding the
loan portfolio to include multi-family lending, originating and selling more
loans through the Bank's newly established subsidiary, Lenox Mortgage
Corporation, and the opportunity to attract new customers through the Bank's new
branch and executive offices are major components of planned growth. The Bank
also intends to enhance profitability by continuing to seek means of increasing
non-interest income through the generation of transaction fees, commissions and
participation in the secondary market. Finally, the Bank intends to continue to
seek to reduce costs. Management is committed to its goal of enhancing
shareholder value through improving profitability, reducing interest rate risk
and increasing market share and believes that the actions it has taken to date
and its future strategic plans will enhance the long-term profitability of the
Company.
COMPARISON OF FINANCIAL CONDITION AT JUNE 30, 2000 AND DECEMBER 31, 1999
ASSETS. Total assets decreased by $675,000 or 0.89% to $75.3 million at
June 30, 2000, from $76.0 million at December 31, 1999. This decrease was due to
a $2.1 million, or 3.3% decrease in loans receivable from $65.0 million at
December 31, 1999, to $62.9 million at June 30, 2000 as the Company sold
approximately $5.4 million of loans with servicing rights retained during
January 2000 to strengthen the Bank's capital position. This decrease was offset
by an increase in property and equipment of $926,000 or 233.1% in connection
with the change in the Company's executive officers to Norwood, Ohio in March
2000. Prepaid expenses and other assets also increased $185,000 or 85.3% from
$217,000 at December 31, 1999, to $402,000 at June 30, 2000, resulting primarily
from an increase in prepaid and other assets which include mortgage loan
servicing rights. Cash and due from banks increased $499,000 to $1.2 million at
June 30, 2000 from $738,000 at December 31, 1999 as excess funds were held in
interest bearing accounts.
LIABILITIES. Total liabilities decreased by $608,000 or 0.85% from $71.2
million at December 31, 1999, to $70.6 million at June 30, 2000, primarily due
to a decrease in deposits of $2.0 million or 5.03% from $39.4 million at
December 31, 1999, to $37.5 million at June 30, 2000. The decrease in deposits
was primarily due to $3.6 million decrease in certificates of deposits and Money
Market and NOW accounts to $30.7 million at June 30, 2000 from $34.7 million at
December 31, 1999, as customers utilized other investment vehicles. Savings
accounts increased $1.6 million to $6.7 million at June 30, 2000, from $5.1
million at December 31, 1999. Accrued expenses and other liabilities also
increased $85,000, to $394,000 at June 30, 2000, from $309,000 at December 31,
1999 for payments received on loans serviced for others. The decreases in
liabilities were offset by an increase in advances from the FHLB of $1.6
million, or
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5.05% from $31.1 million at December 31, 1999, to $32.7 million at June 30, 2000
as FHLB advances was used to replace the loss of deposits.
STOCKHOLDERS' EQUITY. Stockholder's equity decreased by $67,000 or 1.40%
from $4.8 million at December 31, 1999, to $4.7 million at June 30, 2000.
Retained earnings increased $7,000 for net income earned for the period while
the unrealized loss on available for sale securities increased by $83,000. Other
components of equity change by $10,000.
LIQUIDITY AND CAPITAL RESOURCES. The Company's primary sources of funds
are deposits, FHLB advances, principal and interest payments on loans and loan
sales in the secondary market. While maturities and scheduled amortization of
loans are predictable sources of funds, deposit flow and mortgage prepayments
are strongly influenced by changes in general interest rates, economic
conditions and competition.
The primary investment activity of the Company for the six months ended
June 30, 2000 was the origination of mortgage and consumer loans. The most
significant sources of funds for the six months ended June 30, 2000 was the
repayment of mortgage loans, the sale of mortgage loans and advances from the
Federal Home Loan Bank.
The Bank is required to maintain a minimum level of liquidity (net cash,
short term and marketable assets divided by total withdrawable deposits and
short term liabilities), as defined by the Federal Deposit Insurance Corporation
(the "FDIC"). The Bank's liquidity at June 30, 2000 was 11.72%. The Bank's most
liquid assets are cash, federal funds sold, and marketable securities. The
levels of the Bank's liquid assets are dependent on the Bank's operation,
financing, lending and investing activities during any given period. At June 30,
2000 assets qualifying for short term liquidity, including cash and short term
investment, totaled $4.0 million.
At June 30, 2000, the Bank's capital exceeded all the capital requirements
of the FDIC. The Bank's Tier 1 leverage and total capital to risk-weighted
capital ratios were 6.4% and 12.0%, respectively.
For the six months ended June 30, 2000 and 1999, the Company reported
comprehensive loss of $77,000 and $11,000, respectively. The difference between
net income and comprehensive income consists solely of the effect of unrealized
gain and losses, net of taxes, on available for sale securities.
COMPARISON OF RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND
1999
GENERAL. The Company reported net income of $7,000 for the six months
ending June 30, 2000, which represents a $14,000 decrease from $21,000 of net
income reported for the six months ended June 30, 1999. The decrease in net
income is primarily attributable to the general
9
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and administrative expenses related to the Mortgage Corporation which exceeded
the revenue generated by it and resulted in a net loss attributable to the
Mortgage Corporation of $(43,000).
INTEREST AND DIVIDEND INCOME. Interest and dividend income for the six
months ended June 30,2000 was $2.7 million compared to $2.0 million for the six
months ended June 30, 1999, an increase of $750,000 or 38.3%. The primary reason
for the increase was a $754,000 or 46.4% increase in interest earned on loans
receivable to $2.4 million for the six months ended June 30, 2000, from $1.6
million for the six months ended June 30, 1999, due to a $18.4 million increase
in the average loans receivable outstanding and an increase in the yield from
7.24% for the period ending June 30, 1999, to 7.48% for the period ending June
30, 2000. Other interest and dividend income did not change materially from the
prior quarter.
INTEREST EXPENSE. Interest expense for the six months ended June 30, 2000,
was $1.9 million compared to $1.3 million for the six months ended June 30,
1999, an increase of $631,000 or 50.2% primarily due to a $16.9 million increase
in the average balances outstanding. The increase was due to decreased average
deposits of $2.0 million and an increase in the yield on deposits from 4.57% for
the period ending June 30, 1999 to 4.78% for the period ending June 30, 2000.
The Bank utilized FHLB advances to fund the asset growth as the average balance
on FHLB advances increased to $30.9 million for the period ended June 30, 2000
from $16.2 million for the period ended June 30, 1999. The Bank also experienced
an increase in the yield on FHLB advances of 78 basis points due the increases
in interest rates and the Bank's use of short term Federal Home Loan Bank
advance programs.
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES. Net interest income
after provision for loan losses increased $105,000 or 15.4% for the six months
ended June 30, 2000, to $788,000 from $683,000 for the six months ended June 30,
1999. Such increase was offset by an increase of $14,000 in the provision for
loan losses for the six months ending June 30, 2000 as compared to the prior
period, due to an increase in the Bank's loan portfolio and the inherent risk in
lending. The total loan loss allowance was 0.19% of total loans outstanding and
44.5% of nonperforming loans at June 30, 2000 and 0.15% and 120% of total loans
and nonperforming loans, respectively, at June 30, 1999.
OTHER INCOME. Other income increased $75,000 or 57.6% to $205,000 for the
six months ending June 30, 2000 from $130,000 for the six months ending June 30,
1999. This increase was due to the loan sales and fees made by the Mortgage
Corporation as the Mortgage Corporation was fully operational during the first
two quarters of 2000. The Mortgage Corporation originates loans to be sold to
third parties and to the Bank.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
for the six months ended June 30, 2000, were $979,000 compared to $775,000 for
the six months ended June 30, 1999, an increase of $204,000 or 26.3%. The
increase in general and administrative expenses is primarily comprised of an
increase of $152,000 in compensation and benefits and an increase of $52,000 in
other expenses. The increase in compensation and benefits is due to the
10
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additional expenses relating to the Mortgage Corporation. The increase in other
expenses relate to additional expenses relating to the Mortgage Corporation and
higher professional fees related to the Company's response to recent regulatory
and shareholder issues.
INCOME TAXES. Income taxes for the six months ended June 30, 1999,
decreased $10,000 to $7,000 from $17,000 for the six months ending June 30,
1999, because of the decrease in pretax earnings. Net loss before tax provision
was $37,000 for the three months ended June 30, 2000, compared to net income of
$51,000 for the same period ending June 30, 1999.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which established for derivative
instruments, including derivative instruments imbedded in other contracts, and
for hedging activities. It requires that an entity recognize all derivatives as
either assets or liabilities in the statement of financial position and measure
those instruments at fair value. SFAS No. 133, as amended by SFAS No. 137, is
effective for all fiscal quarters of fiscal years beginning after June 15, 2000.
Management does not believe the adoption of this standard will have an impact on
the Company's financial statement as the Company does not hold any instruments
covered by this standard.
11
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
-----------------
On June 9, 2000, four stockholders of the Company, including two
members of the Board of Directors and two additional individuals, filed a
complaint for declaratory judgment and preliminary and permanent injunctive
relief against the Company and each of the other three directors individually in
the Court of Common Pleas in Hamilton, Ohio. The plaintiffs allege that four of
the plaintiffs were duly elected to the Board of Directors at the 2000 Annual
Meeting of Stockholders. The plaintiffs seek a declaratory judgment that such
individuals were properly elected and are members of the Board of Directors and
are further attempting to enjoin the Lenox Board of Directors from taking or
approving any action without the participation of such individuals. The Company
in its answer to the compliant has denied the allegations that any board members
were up for election and does not recognize the validity or legal effect of the
nominations of the plaintiffs for director or their election.
Item 2. Changes in Securities and Use of Proceeds.
-----------------------------------------
None.
Item 3. Defaults Upon Senior Securities.
-------------------------------
None.
Item 4. Submission of Matters to a Vote of Security Holders.
----------------------------------------------------
On May 24, 2000, the Company held its annual meeting of stockholders
to ratify the appointment of Clark, Schaefer, Hackett & Company as the Company's
independent auditors and to consider and vote upon a stockholder proposal. The
number of votes cast at the meeting as to each matter to be acted upon was as
follows:
NUMBER OF NUMBER OF NUMBER OF
VOTES VOTES VOTES
FOR AGAINST ABSTAIN
-------------- ------------- -----------
1. Ratification of Clark, Schaefer,
Hackett & Company as the
Company's Independent Auditors... 221,701 3,371 --
12
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NUMBER OF NUMBER OF NUMBER OF
VOTES VOTES VOTES
FOR AGAINST ABSTAIN
-------------- ------------- -----------
2. Stockholder proposal that the
Board of Directors take all
reasonable steps to maximize
stockholder value including sale
or merger of the Company.......... 98,972 88,425 2,400
Item 5. Other Information.
-----------------
None.
Item 6. Exhibits and Reports on Form 8-K (ss.249.308 of this Chapter).
-------------------------------------------------------------
(a) Exhibits
3.1 Amended Articles of Incorporation of Lenox Bancorp,
Inc.*
3.2 Amended and Restated Code of Regulations of Lenox
Bancorp, Inc.*
11.0 Statement re: Computation of Per Share Earnings
27.0 Financial Data Schedule
(b) Reports on Form 8-K
None.
----------------------
* Incorporated herein by reference to the Company's Form 10-KSB, filed on March
25, 1998.
13
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
LENOX BANCORP, INC.
Dated: August 11, 2000 By: /s/ Virginia M. Heitzman
--------------------------------------------
Virginia M. Heitzman
President and Chief Executive Officer
(principal executive officer)
Dated: August 11, 2000 By: /s/ David K. Brown
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David K. Brown
Chief Financial Officer and Treasurer
(principal financial and accounting officer)
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