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SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
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Lenox Bancorp, Inc.
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(Name of Registrant as Specified in Its Charter)
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LENOX BANCORP, INC.
Chairman Brown Sets the Record Straight
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The shareholders and public have heard and read information from John C. Lame, a
company director since 1998, about Lenox Bancorp, Inc., the parent of Lenox
Savings Bank. Mr. Lame has cast blame on the majority directors and management
for the company's performance, while failing to accept personal responsibility
for many of the reasons for the Company's performance since Mr. Lame joined the
Board. It is now time to set the record straight.
o Lame has cited various facts that he wants shareholders to consider. Among
others, Lame cites poor earnings, but fails to acknowledge his role in the
Company's failure to be profitable. The cost to fend off Lame's harmful
proposals and attacks on management and directors has been significant. Since
Mr. Lame has joined the board, the Company's expenses have more than doubled.
Had the Company's expenses remained at 1998 levels, we believe the Company
could have reported a profit in 1999 and 2000. Most recently, Lame has
promised to sue because we chose to hire a proxy solicitor because of the
proxy fight initiated by Mr. Lame.
o Lame has hired a proxy solicitor, and has stated that if he wins, he will
have the Company reimburse his expenses. This will take money away from the
Company and further impair the ability of the Company to report net income.
o Lame urged Lenox Savings Bank to buy loans from his brother-in-law's mortgage
company. Lame not only urged us to buy those loans, but to do so based on
interest rates that other Board members questioned. The ultimate effect of
Lame urging the Bank to do business with his brother-in-law's company, and
being wrong about the direction interest rates would take, materially and
negatively impacted earnings.
o The significant decrease in stockholders' equity and liquidity of the
Company's stock that has been cited by Lame was primarily due to the
substantial stock repurchase program that Lame promoted and approved. The
stock repurchase program also had the effect of reducing the Company's return
on equity and capital because interest-earning assets were used to fund the
stock repurchases.
o Lame sought to have some of his shares purchased by the Company following the
completion of the repurchase program, which would have made Lame's asserted
negative aspects of the program even worse.
o When Lame was soliciting support for being appointed to the Board in 1998,
his written presentation to the Board stated he thought be could refer up to
$9.0 million in loans directly to Lenox Savings Bank and thought he could
help raise deposits as well. Increased deposits never materialized and no
loans were ever directly referred to the Bank by Lame.
o Lame identifies the Supervisory Agreement with the Office of Thrift
Supervision as a negative factor. In fact, OTS cited the uncertainty of who
controlled the Company caused by Lame's actions as the reason the Supervisory
Agreement was required, and specifically demanded Lame be a signatory to that
Agreement.
o Lame cites the failure of the Company to pay dividends to shareholders as a
negative issue. Lame insisted that we stop paying dividends~ and has informed
the Board that he is opposed to paying dividends in the future, regardless of
the Company's performance.
Lenox will have its Annual Meeting on May 9, 2001. The agenda for the meeting
includes the election of two directors, including the director seat now occupied
by Mr. Lame. The Company's Nominating Committee declined to nominate Mr. Lame
for another term after considering that Mr. Lame's bank management experience is
limited to his tenure with the Company and Bank, Mr. Lame's judgment at times
has been poor and has negatively affected the Bank, and our belief that Lame has
sought to promote his own interests.
We urge you to consider what we have been doing to improve the performance of
the Company's primary asset, the Bank. Notwithstanding the distractions caused
by Lame, we restructured the Bank's portfolio to eliminate the loans Lame urged
us to purchase, among other things. The effect has been very positive. For the
quarter ended March 31, 2001, the Bank reported interest income totaling 1.3
million and net income of $93,000. The Bank's net interest margin is widening,
not shrinking. We believe the Bank is well positioned for the future, that its
improved performance will improve the Company's performance and urge our
shareholders to continue to support management.
/s/ Henry E. Brown, Chairman of the Board