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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB/A
QUARTERLY REPORT UNDER SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 1997 Commission File Number 0-28162
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LENOX BANCORP, INC.
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(Exact name of small business issuer as specified in its charter)
Ohio 31-1445959
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(State or other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
5255 Beech Street, St. Bernard, Ohio 45217
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(Address of principal executive offices)
(513) 242-4690
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(Issuer's telephone number, including area code)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12
months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days.
YES X NO
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At March 31, 1997, there were 425,677 shares of Common Stock, without Par
Value per share outstanding.
Traditional Small Business Disclosure Format (Check One):
YES NO X
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TABLE OF CONTENTS
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PART I - FINANCIAL INFORMATION PAGE
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Item 1 - Consolidated Financial Statements.............................1
Item 2 - Management's Discussion and Analysis..........................5
PART II - OTHER INFORMATION
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Item 1 - Legal Proceedings.............................................7
Item 2 - Changes in Securities.........................................7
Item 3 - Defaults Upon Senior Securities...............................7
Item 4 - Submission of Matters to a Vote of Security Holders...........7
Item 5 - Other Information.............................................7
Item 6 - Exhibits and Reports on Form 8-K..............................7
SIGNATURES...................................................................8
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PART I - FINANCIAL INFORMATION
LENOX BANCORP, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
MARCH 31, DECEMBER 31,
1997 1996
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(UNAUDITED)
ASSETS
Cash and due from banks ........................................ $518 $1,115
Certificates of deposits ....................................... 165 162
Investment securities - available for sale, at fair value
(amortized cost of $6,193 and $6,193 at March 31, 1997 and
December 31, 1996) ........................................... 5,959 6,089
Mortgage-backed securities - available for sale, at fair value
(amortized cost of $1,102 and $1,148 at March 31, 1997 and
December 31, 1996)............................................ 1,086 1,148
Loan receivable, net ........................................... 38,159 37,495
Accrued interest receivable:
Loans ................................................ 161 148
Mortgage-backed securities ......................... 7 8
Investments and certificates of deposit ............... 103 130
Property and equipment, net ................................. 270 264
Federal Home Loan Bank stock - at cost ...................... 443 436
Prepaid expenses and other assets ........................... 43 79
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$46,914 $47,074
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LIABILITIES AND RETAINED EARNINGS
Liabilities:
Deposits:
Savings, club and other accounts ..................... $5,180 $5,349
Money market and NOW accounts ........................ 4,894 5,332
Certificate accounts ................................. 21,522 21,870
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Total deposits .................................. 31,596 32,551
Advances from Federal Home Loan Bank............................ 7,885 7,007
Capitalized lease obligations .................................. 3 5
Advance payments by borrowers for taxes and insurance .......... 56 93
Accrued expenses ............................................... 106 52
Accrued federal income taxes ................................... 39 44
Deferred federal income taxes .................................. 2 52
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Total liabilities .................................... $39,687 $39,804
Stockholder's equity
Common Stock - no par value: 2,000,000 authorized,
425,677 issued and outstanding at March 31, 1997 and
December 31, 1996 ....................................
Additional paid in capital ............................ 3,711 3,711
Retained earnings - substantially restricted .......... 4,007 3,954
Less unearned ESOP shares.............................. (326) (326)
Unrealized gain (loss) on available for sale securities
net of tax of $85,013 and $53,550 for March 31, 1997
and December 31, 1996................................ (165) (69)
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Total stockholders' equity ........................... 7,227 7,270
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Total liabilities and stockholders' equity ..................... $46,914 $47,074
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LENOX BANCORP, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
MARCH 31, 1997
(IN THOUSANDS)
THREE MONTHS ENDING
MARCH 31,
1997 1996
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(UNAUDITED)
INTEREST INCOME AND DIVIDEND INCOME
Loan ............................................... $ 729 $ 635
Mortgage-backed securities ......................... 19 26
Investments and interest bearing deposits ............ 123 117
FHLB stock dividends ............................... 7 7
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Total ......................................... 878 785
INTEREST EXPENSE
Deposits ............................................ 375 403
Borrowed money and capitalized leases .............. 112 80
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Total ......................................... 487 483
Net interest income before provision for loan losses ... 391 302
Provision for loan losses ................................ 2 0
Net interest income after provision for loan losses .... 389 302
OTHER INCOME
Service fee income .................................. 26 35
Gain on sale of investments ......................... --- ---
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Total .......................................... 26 35
GENERAL AND ADMINISTRATIVE EXPENSES
Compensation and employee benefits .................. 138 123
Occupancy and equipment ............................. 38 30
Federal insurance premium ........................... 8 21
Franchise taxes ..................................... 16 13
Other expenses ...................................... 101 74
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Total .......................................... 301 261
Interest before provision for income taxes .......... 114 76
Provision for income taxes ............................... 39 25
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Net income .......................................... $ 75 $ 51
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Earnings per share ................................... $0.18 N/A
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LENOX BANCORP, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
MARCH 31, 1997
(IN THOUSANDS)
FOR THE THREE MONTHS
ENDED MARCH 31,
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1997 1996
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(UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income............................................... $ 75 $ 51
Adjustments to reconcile net income to net
cash provided (used) by operating activities
Depreciation and amortization....................... 8 11
Provision (credit) for losses on loans.............. 2 0
Amortization of deferred loan fees.................. 0 (7)
Deferred loan origination fees (costs).............. 14 2
FHLB stock dividends................................ (8) (8)
Loss on sale of investments and mortgage
backed securities.................................. 0 1
Effect of change in operating assets
and liabilities
Accrued interest receivable.................... 22 15
Prepaid expenses............................... 59 (51)
Advances by borrowers for taxes
and insurance................................. (38) (42)
Accrued expenses............................... 54 32
Accrued federal income taxes................... (5) 6
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Net cash provided (used) by
operating activities...................... 183 10
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CASH FLOWS FROM INVESTING ACTIVITIES
Property and equipment additions......................... (17) 0
Proceeds from sale of equipment.......................... 0 0
Purchase of mortgage backed securities - AFS............. 0 (653)
Repayments of mortgage backed securities................. 44 76
Purchase of certificates of deposit...................... (3) (3)
Loan disbursements....................................... (2,914) (1,327)
Loan principal repayments................................ 2,212 1,660
Purchase of investments - AFS............................ 0 (2,943)
Maturity of investments - AFS............................ 0 2,360
Proceeds from sale of investments - AFS.................. 0 454
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Net cash used by investing activities....... (678) (376)
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CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in deposits...................... (956) 794
Borrowings from FHLB..................................... 975 650
Repayment of FHLB advances............................... (97) (20)
Payments on capitalized lease obligations................ (2) (3)
Dividends paid........................................... (21) 0
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Net cash provided (used) by financing
activities................................. (101) 1,421
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INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS.............. (596) 1,055
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD.............. 1,115 1,249
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CASH AND CASH EQUIVALENTS AT END OF PERIOD.................... $ 519 $2,304
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Supplemental disclosure
Cash paid for:
Interest expense.................................... $ 448 $ 477
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Income taxes........................................ 44 0
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LENOX BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THREE MONTHS ENDED MARCH 31, 1997 AND 1996
1. PRINCIPLES OF CONSOLIDATION
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The consolidated financial statements include the accounts of Lenox
Bancorp, Inc. ("Lenox" or the "Company") and its wholly-owned subsidiary Lenox
Savings Bank (the "Bank"). 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 March 31, 1997 and related consolidated
statement of income, cash flows and changes in stockholder's equity for the
three months ending March 31, 1997 and 1996 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 as presented in Lenox's Form 10-K dated December 31, 1996.
2. CONVERSION TO CAPITAL STOCK FORM OF OWNERSHIP
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The Board of Directors of Lenox Savings Bank adopted a plan of conversion,
pursuant to which the Bank would convert 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 a mutual form of ownership to a 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, and 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
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The initial public offering was completed July 17, 1996. Net income for
the three months ended March 31, 1997 was $75,000 or .18 per share. Earnings per
share information for the three months period ending March 31, 1996 are not
applicable since the Bank's mutual to stock conversion was not consummated until
July 17, 1996.
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ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.
Comparison of Financial Condition at March 31, 1997 and December 31, 1996.
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ASSETS. Total assets decreased by $160,000 or 0.3% to $46.9 million at
March 31, 1997 from $47.1 million at December 31, 1996. Cash and due from banks
totaling $597,000 were invested into loans. Loans increased $664,000 or 1.8% to
$38.2 million from $37.5 million. Investments and mortgage-backed securities
decreased $192,000 or 2.7% to $7.0 million at March 31, 1997 from $7.2 million
at December 31, 1996 reflecting a $146,000 or 2.0% change in market value.
LIABILITIES. Total liabilities decreased by $117,000 or 0.3% from $39.8
million at December 31, 1996 to $39.7 million to March 31, 1997 primarily due to
a decrease in deposits amounting to $955,000 or 2.9%, from $32.5 million to
$31.6 million, and was offset by an increase of $878,000 or 12.5% Federal Home
Loan Bank ("FHLB") advances to $7.9 million at March 31, 1997 from $7.0 million
at December 31, 1996. Certificate accounts decreased $348,000 or 1.6%, while
savings, club and other accounts decreased $169,000 or 3.2%, and money market
and NOW accounts decreased $438,000 or 8.2%. The decrease in the certificate
accounts was a result of reducing the cost of funds. The decrease in the other
accounts reflect the nature of those accounts.
CAPITAL. Stockholders' equity decreased $43,000 or 0.6% from $7.27 million
at December 31, 1996 to $7.23 million at March 31, 1997. The decrease is a
combination of net income of $75,000, and offset by a $.05 per share dividend
being declared, and an increase of unrealized loss on securities available for
sale of $96,000 net of tax.
LIQUIDITY AND CAPITAL RESOURCES. The Company's primary sources of funds
are deposits and principal and interest payments on loans. 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 three months ended
March 31, 1997 was the origination of mortgage and consumer loan in the amount
of $2.9 million. The most significant source of funds for the three months
ending March 31, 1997 was the borrowing from the FLHB of $1.0 million.
The Bank is required to maintain a minimum level of liquidity (net cash,
short term and marketable assets divided by total deposits and short term
liabilities), as defined by the Federal Deposit Insurance Corporation ("FDIC").
The Bank's liquidity at March 31, 1997 was 19.8%. 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 March 31, 1997, assets
qualifying for short term liquidity, including cash and short term investment,
totaled $7.7 million.
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At March 31, 1997, 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 15.8% and 31.9%, respectively.
Comparison of Results of Operations for the Three months ended March 31, 1997
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and 1996.
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GENERAL. Net income for the three months ending March 31, 1997 increased
by $24,000 or 47.1% to $75,000 from $51,000 for the three months ended March 31,
1996. This increase was primarily due to the increase in interest income.
INTEREST INCOME. Interest income for the three months ended March 31, 1997
was $878,000 compared to $785,000 for the three months ended March 31, 1996, an
increase of $93,000 or 11.8%. Interest earned on loans increased $94,000 or
14.8% to $729,000 for the three months ended March 31, 1997 from $635,000 for
the three months ended March 31, 1996 and was the primary reason for the
increase in interest income. The increase in interest earned on loans was due to
an increase in the average balance of loans for the three months ended March 31,
1997 from the comparable 1996 period.
INTEREST EXPENSE. Interest expense for the three months ended March 31,
1997 was $487,000 compared to $483,000 for the three months ended March 31,
1996, an increase of $4,000 or 0.8%. Interest expense on deposits was $375,000
for the three months ended March 31, 1997 as compared to $403,000 for the three
months ended March 31, 1996, a decrease of $28,000 or 6.9%. The decrease was due
to lower average deposits outstanding period to period. Interest expense on
borrowed money and capitalized leases was $112,000 for the three months ended
March 31, 1997 as compared to $80,000 for the three months ended March 31, 1996,
an increase of $32,000 or 40.0%. The increase was due to an increase in
outstanding Federal Home Loan Bank advances for the period ending March 31,
1997, compared to the period ending March 31, 1996.
NET INTEREST INCOME. Net interest income increase $89,000 or 29.5% for the
three months ended March 31, 1997 to $391,000 from $302,000 for the three months
ended March 31, 1996. This increase was due to interest income increasing by
$93,000 or 11.8% compared to interest expense for the three months ending March
31, 1997 increasing $4,000 or 0.8%.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
for the three months ended March 31, 1997 were $301,000 compared to $261,000 for
the three months ended March 31, 1996, an increase of $40,000 or 15.3%.
Compensation and employee benefits increased $ 15,000 or 12.2% to $ 138,000 for
the three months ended March 31, 1997 due to an increase in staff. The increase
in other expenses to $101,000 for the three months ended March 31, 1997, an
increase of $27,000 or 36.5% was due to additional expenses associated with
becoming a public company.
INCOME TAXES. Income taxes for the three months ended March 31, 1997
increased $14,000 or 56.0% to $39,000 from $25,000 for the three months ending
March 31, 1996. This was the result of an increase in income before taxes of
$114,000 for the three months ended March 31, 1997 compared to $76,000 for the
same period of the prior year.
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PART II - OTHER INFORMATION
Item 1 - Legal Proceedings
None
Item 2 - Changes in Securities
None
Item 3 - Defaults Upon Senior Securities
None
Item 4 - Submission of Matters to a Vote of Security Holders
None
Item 5 - Other Information
None
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 3.1 Certificate of Incorporation of Lenox Bancorp, Inc.*
Exhibit 3.2 Bylaws of Lenox Bancorp, Inc. *
Exhibit 4.0 Stock Certificate of Lenox Bancorp, Inc.*
Exhibit 27.0 Financial Data Schedule (filed herewith)
(b) Reports on Form 8-K
None
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* Incorporated herein by reference into this document from Exhibits to Form
S-1, Registration Statement, filed August 28, 1995, as amended, Registration
No. 33-96248.
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SIGNATURES
In accordance with the requirements of the Securities Exchange Act of
1934, the registrant caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
LENOX BANCORP, INC.
Date: May 14, 1997 /s/ Virginia M. Porowski
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Virginia M. Porowski
President and Chief Executive Officer
Date: May 14, 1997 /s/ Michael P. Cooper
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Michael P. Cooper
Treasurer and Chief Financial Officer
(Principal Accounting Officer)
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