<PAGE>

                    U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, DC 20549

                                  FORM 10-KSB

[X] Annual Report under Section 13 or 15(d) of the Securities Exchange Act of
1934 for the fiscal year ended December 31, 2001; or

[_] Transition Report under Section 13 or 15(d) of the Securities Exchange Act
of 1934

                         Commission File No.: 0-28162

                              LENOX BANCORP, INC.
             -----------------------------------------------------
                (Name of small business issuer in its charter)

         Ohio                                              31-1445959
----------------------                         ---------------------------------
   (State or other                                    (I.R.S. Employer of
    jurisdiction)                                incorporation or organization
                                                      Identification No.)

                 4730 Montgomery Road, Cincinnati, Ohio 45212
             -----------------------------------------------------
                   (Address of principal executive offices)

                   Issuer's telephone number: (513) 531-8655

          Securities registered pursuant to Section 12(b) of the Act:

 Title of each class                             Name of each Exchange on which
 on which registered                                        registered
----------------------                         ---------------------------------
        None

     Securities registered under Section 12(g) of the Exchange Act: Common
Shares, no par value

     Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act 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 ___
     ---

     Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B contained herein, and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB.  [X]

     The issuer's revenues for its most recent fiscal year were: $5,447,629.

     The aggregate market value of the voting and non-voting common equity held
by non-affiliates computed by reference to the price at which the common equity
was sold, as of March 15, 2002, was approximately $1.28 million (182,802 shares
at $8.07 per share).  Solely for purposes of this calculation, it is assumed
that directors and officers are not affiliates of the Registrant.

     As of March 22, 2002, the issuer had 366,847 Common Shares outstanding.

                      DOCUMENTS INCORPORATED BY REFERENCE

     Portions of Lenox's Proxy Statement filed with the Commission for its 2002
Annual Meeting of Shareholders as specified are incorporated by reference in
Part III as specified.

     Transitional Small Business Disclosure Format:   Yes ______  No   X
                                                                     -----
<PAGE>

                                     INDEX

<TABLE>
<S>                                                                                                     <C>
Part I................................................................................................   3
Item 1.     Description of Business...................................................................   3
Item 2.     Description of Property...................................................................  22
Item 3.     Legal Proceedings.........................................................................  23
Item 4.     Submission of Matters to a Vote of Security Holders.......................................  23

Part II...............................................................................................  23
Item 5.     Market for Common Equity and Related Stockholder Matters..................................  23
Item 6.     Management's Discussion and Analysis of Financial Condition and Results of Operations.....  24
Item 7.     Financial Statements......................................................................  32
Item 8.     Changes in and Disagreements with Accountants on Accounting and Financial Disclosure......  32
Item 9.     Directors, Executive Officers, Promoters and Control Persons; Compliance with Section
            16(a) of the Exchange Act.................................................................  33
Item 10.    Executive Compensation....................................................................  33
Item 11.    Security Ownership of Certain Beneficial Owners and Management............................  33
Item 12.    Certain Relationships and Related Transactions............................................  33

Part III..............................................................................................  33
Item 13.    Exhibits and Reports on Form 8-K..........................................................  33
</TABLE>

                     Forward-Looking Statements Statement

     The Private Securities Litigation Reform Act of 1995 provides a safe harbor
from civil litigation for forward-looking statements accompanied by meaningful
cautionary statements. The statements contained in this report and the
information incorporated by reference into this report that are not historical
facts are forward-looking statements based on our current expectations and
beliefs concerning future developments. There can be no assurance that future
developments affecting us will be the same as those that we anticipated. Actual
results could differ materially from those projected in the forward-looking
statements. Forward-looking statements, which are based on certain assumptions
and describe our future plans, strategies and expectations, are generally
identified by use of the words "may," "will," "continue," "believe," "expect,"
"intend," "anticipate," "estimate," "project," or similar expressions. Our
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 our
operations include:

     .  changes in the performance of the financial markets;
     .  changes in the demand for and market acceptance of our products and
        services;
     .  changes in general economic conditions including interest rates and the
        presence of competitors with greater financial resources;
     .  the continued availability of adequate funding sources;
     .  loan delinquency rates and the possible inadequacy of allowances for
        loan losses; and
     .  changes in state and federal banking regulations and regulatory actions
        affecting Lenox.

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 us and our business, including additional factors that
could materially affect our financial results, is included in our filings with
the Securities and Exchange Commission.

                                       2
<PAGE>

                                    Part I

Item 1.   Description of Business.

General

     Lenox Bancorp, Inc. was incorporated under Ohio law on July 24, 1995.  On
July 17, 1996, Lenox acquired Lenox Savings Bank.  Lenox is a savings and loan
holding company and is subject to regulation by the Office of Thrift
Supervision, the Federal Deposit Insurance Corporation, the Superintendent of
the Ohio Division of Commerce, Division of Financial Institutions, and the
Securities and Exchange Commission.  Lenox Mortgage Corp. is a wholly-owned
subsidiary of the Bank that, in the past, has been in the business of
originating one- to four-family mortgage loans.  Lenox Mortgage Corp. ceased
operations on December 31, 2001.  Currently, Lenox does not transact any
material business other than through the Bank.

     The Bank was originally chartered in 1887 as an Ohio building and loan
company for the primary purpose of serving the financial needs of the employees
of The Procter & Gamble Company.  The Bank later converted to an Ohio savings
and loan company and, in November 1993, converted to an Ohio savings bank under
its current name.  On March 20, 2000, the Bank relocated its main office to
Cincinnati, Ohio.  Prior to its move, the Bank had leased space from Procter &
Gamble in St. Bernard, Ohio.  The Bank also operates out of a branch office
located at 3521 Erie Avenue, Cincinnati, Ohio 45208.

     The Bank is primarily engaged in attracting deposits from the general
public in its primary market area of the greater Cincinnati metropolitan area
and investing such deposits and other available funds in mortgage loans secured
by one- to four-family residences.  To a lesser extent, the Bank also invests in
consumer, multi-family and construction loans.  Due to the close ties that have
existed between the Bank and Procter & Gamble, the Bank continues to have a high
concentration of borrowers and depositors who are Procter & Gamble employees.
In times of low mortgage demand, the Bank has sought to invest available funds
in short-term investment securities including U.S. Government and Agency
securities, and most recently, through the purchase of collaterialized mortgage
obligations.

Market Area and Competition

     The Bank primarily originates one- to four-family residential mortgage
loans within its primary market area.  The Bank's deposit gathering and lending
markets are concentrated in Hamilton County, Ohio, however, the Bank also offers
loans in the Ohio counties of Warren, Butler and Clermont in the Cincinnati
vicinity and Franklin in the Columbus vicinity, and in the Kentucky counties of
Boone, Campbell and Kenton.  The Bank's high concentration of lending to and
deposit gathering from Procter & Gamble employees has resulted in the Bank
directly competing with institutions throughout the Cincinnati area and, in
recent years, directly competing with a Cincinnati commercial bank that has
opened branch offices at Procter & Gamble facilities.

     The Bank faces significant competition both in making loans and attracting
deposits.  The Bank's competitors are the financial institutions operating in
its primary market area, many of which are significantly larger and have greater
financial resources than the Bank.  The Bank's competition for loans comes
principally from commercial banks, savings and loan associations, mortgage
banking companies, credit unions and insurance companies.  Its most direct
competition for deposits has historically come from savings and loan
associations and commercial banks.  In addition, the Bank faces increasing
competition for deposits from non-bank institutions such as brokerage firms and
insurance companies in such areas as short-term money market funds, corporate
and government securities funds, mutual funds and annuities.  The Bank expects
competition to increase in the future as a result of legislative, regulatory and
technological changes and the continuing trend of consolidation in the financial
services industry.  Technological advances, for example, have lowered barriers
to market entry, allowed banks to expand their geographic reach by providing
services over the Internet and made

                                       3
<PAGE>

it possible for non-depositing institutions to offer products and services that
traditionally have been provided by banks. The Gramm-Leach-Bliley Act, which
permits affiliation among banks, securities firms and insurance companies, will
also change the competitive environment in which the Bank operates.

Lending Activities

     General.  The Bank's principal lending activity is the origination of
conventional, adjustable and fixed-rate real estate loans secured by one- to
four-family residences located in its primary market area.  In general, the Bank
originates the adjustable loans for its own portfolio and sells the fixed-rate
loans in the secondary markets.  Interest rates charged by the Bank on loans are
affected by the demand for such loans, the supply of money available for lending
purposes and the rates offered by competitors.  These factors are, in turn,
affected by, among other things, economic conditions, monetary policies of the
federal government, including the Federal Reserve Board, and legislative tax
policies.

     The following table sets forth the composition of the Bank's loan portfolio
in dollar amounts and in percentages of the respective portfolios at the dates
indicated.

<TABLE>
<CAPTION>
                                                                    At December 31,
                                                            -------------------------------
                                                          2001                           2000
                                             -------------------------------------------------------------
                                                Amount         Percent of      Amount          Percent of
                                                                 Total                           Total
<S>                                            <C>             <C>            <C>              <C>
        Real estate loans:                                       (Dollars in thousands)
          One-to four-family(1)                $  41,941           82.80%     $  49,444           85.30%
          Multi-family                             6,997           13.81          5,892           10.17
          Commercial real estate                     240            0.47            249            0.43
          Construction                             1,423            2.81            819            1.41
                                             -------------------------------------------------------------
          Total real estate loans                 50,601           99.89         56,404           97.31
        Other loans:
          Consumer loans (2)                       1,099            2.17          1,836            3.17
                                             -------------------------------------------------------------
          Total loans                             51,700          102.06         58,240          100.48
        Less:
          Deferred loan fees/(costs)                 (57)          (0.11)           (93)          (0.16)
          Loans in process                           805            1.59            245             .42
          Allowance for loan losses                  293             .58            126             .22
          Total reductions                         1,041            2.06            278            0.48
        Total loans receivable, net            $  50,659          100.00%     $  57,962          100.00%
                                             -------------------------------------------------------------
</TABLE>

(1)  Includes second mortgage loans and home equity lines of credit on
     residential one- to four-family properties.

(2)  Includes loans secured by automobiles, boats, common stock, savings
     accounts and unsecured loans.

     Loan Maturity.  The following table shows the maturity of the Bank's loans
at December 31, 2001.  The table does not include principal repayments.  While
the Bank cannot project future loan prepayment activity, the Bank anticipates
that in periods of stable or rising interest rates, prepayment activity would be
lower than prepayment activity experienced in periods of declining interest
rates.

                                       4
<PAGE>

<TABLE>
<CAPTION>
                                                               At December 31, 2001
                                              --------------------------------------------------
                                  One-to
                                  Four-           Multi-          Commercial                          Total Loans
                                 Family(1)        Family          Real Estate       Consumer(2)       Receivable
                              ------------------------------------------------------------------------------------
                                                                  (In thousands)
<S>                              <C>             <C>                <C>               <C>              <C>
   Amount due:
   One year or less               $  4,199       $       0           $    0           $   107          $  4,306
   Between one and five years        3,963               0                0               992             4,955
   More than five years             35,202           6,997              240                 0            42,439
                                  --------       ---------           ------           -------          --------

   Total amount due               $ 43,364       $   6,997           $  240           $ 1,099          $ 51,700
                                  ========       =========           ======           =======          ========

   Less:
    Undisbursed loan funds                                                                                  805
    Deferred loan costs, net                                                                                (57)
    Loan loss allowance                                                                                     293
                                                                                                       --------
         Total loans, net                                                                              $ 50,659
                                                                                                       ========
</TABLE>

(1)  Includes second mortgage loans on residential one- to four-family
     properties and construction loans originated to fund the construction of
     residential one- to four-family mortgage loans and home equity loans.

(2)  Includes loans secured by automobiles, boats, common stock, savings
     accounts and unsecured loans.

     The following table sets forth the dollar amount of gross loan receivables
contractually due after December, 2002 and whether such loans have fixed
interest rates or adjustable interest rates.

<TABLE>
<CAPTION>
                                                 Due After December 31, 2002
                                         -------------------------------------------
                                            Fixed           Adjustable        Total
                                                         (In thousands)
<S>                                         <C>             <C>              <C>
            One-to four-family              $7,213             $31,952       $39,165
            Multi-family                         -               6,997         6,997
            Commercial Real Estate               -                 240           240
            Consumer                           992                   0           992
                                            ------             -------       -------

              Total Loans                   $8,205             $39,189       $47,394
                                            ======             =======       =======
</TABLE>

     Loan Originations.  The following table sets forth the Bank's loan
originations, purchases, sales and principal repayment information for the
periods indicated:

                                       5
<PAGE>

<TABLE>
<CAPTION>
                                                                    For the Year Ended
                                                                        December 31,
                                                                   2001             2000
                                                                 --------------------------
                                                                       (In thousands)
<S>                                                              <C>              <C>
               Loan receivable, beginning of period              $ 58,088         $ 65,135
               Loans originated: (1)
                 One-to four-family (2)                            22,148           14,261
                 Multi-family                                       2,189              938
                 Commercial real estate                                 0              250
                 Consumer (3)                                         633            1,085
               Loans purchased:
                 One- to four-family                                    0                0
                 Multi-family                                           0                0
               Loans sold:
                 One- to four-family                              (20,511)         (13,798)
                 Multi-family                                           0                0
               Principal repayments                               (11,559)          (9,761)
               Other changes, net                                     (36)             (22)
                                                                 --------         --------

               Increase (decrease) in loans receivable             (7,136)          (7,047)
                                                                 --------         --------

               Loans receivable, end of period                   $ 50,952         $ 58,088
                                                                 ========         ========
</TABLE>

(1)  Includes loans originated through brokers and Lenox Mortgage Corp.
(2)  Includes second mortgage loans and construction loans on residential one-
     to four- family properties.
(3)  Includes loans secured by automobiles, boats, common stock, savings
     accounts and unsecured loans.

     One- to Four-Family Residential Mortgage Lending.  The Bank offers both
fixed-rate and adjustable-rate mortgage loans secured by one- to four-family
residences, primarily owner-occupied, located in the Bank's primary market area,
and non-owner occupied residences located in the Columbus, Ohio area, with
maturities of up to thirty years.  Substantially all of such loans are secured
by property located in Hamilton County, Ohio in Cincinnati and Franklin County,
Ohio in Columbus.

     At December 31, 2001, $41.9 million or 81.1% of the Bank's total loan
portfolio consisted of one- to four-family residential mortgage loans.  Of the
one- to four-family residential mortgage loans outstanding at that date, 16.6%
were fixed-rate loans, and 83.4% were adjustable-rate mortgage ("ARM") loans.
Currently, the interest rate for the Bank's ARM loans are tied to the one- and
three-year Constant Maturity Index ("CMI").  The Bank currently offers a number
of adjustable-rate mortgage loan programs with interest rates which adjust
either annually or every three-year period.  Such interest rate adjustments are
limited to 2% annually and 6% over the life of the loan for the Bank's 15-year
ARMs and 30-year ARMs, respectively.  The Bank also offers mortgage loans with
balloon features.  The Bank currently has no mortgage loans that are subject to
negative amortization.  In addition, the Bank offers fixed-rate second mortgage
loans with maturities of up to ten years.

     Consumer Lending.  The Bank's portfolio of consumer loans consists of a
combination of automobile, boat, common stock, savings secured and unsecured
loans.  Consumer loans are generally originated in the Bank's primary market
area and generally have maturities of one to five years.  The consumer loans
secured by common stock are originated with terms up to five years and the loan
amounts are limited to 80% of the value of the common stock securing the loan.
The Bank reviews the loans secured by common stock on a quarterly basis and
requires that borrowers pledge additional collateral in the event fluctuations
in the market value of the

                                       6
<PAGE>

pledged common stock results in the value of the collateral dropping below 80%,
the required loan to value ratio.

     Multi-family and Construction Lending.  The Bank originates a limited
amount of multi-family and construction loans.  The Bank originates multi-family
loans secured by five or more units of real estate.  The multi-family loans bear
greater risk than one- to four-family loans because the ability of the borrower
to pay frequently depends on the cash flow earned from use of the property.
However, such loans generally carry higher interest rates, which generate
greater income for the Bank.  At December 31, 2001, the Bank's largest multi-
family loan was $766,294.  Most of the Bank's multi-family loans have been made
to borrowers outside of the Cincinnati area.  Construction loans are originated
for the construction of residential one- to four-family homes.  The Bank
approves the borrowers for the end loan financing on all construction loans it
originates.

     Loan Approval Procedures and Authority.  The Board of Directors of the Bank
authorizes the Bank's lending activity, establishes the lending policies of the
Bank and reviews properties offered as security in connection with loans.
Individual loans over $500,000 must be approved by the Board of Directors.

     For all loans originated by the Bank, upon receipt of a completed loan
application from a prospective borrower, a credit report is ordered and certain
other information is verified by an independent credit agency.  If necessary,
additional financial information may be requested.  An appraisal of real estate
intended to secure a proposed loan generally is required to be performed by an
appraiser designated and approved by the Bank.  For proposed mortgage loans, the
Board annually approves independent appraisers used by the Bank and approves the
Bank's appraisal policy.  The Bank's policy is to obtain title opinions or title
insurance and hazard insurance on all mortgage loans.

     Delinquencies and Classified Assets.  The Bank's management and Board of
Directors perform a monthly review of all delinquent loans.  The procedures
taken by the Bank with respect to delinquencies vary depending on the nature of
the loan and period of delinquency.  The Bank generally requires that delinquent
mortgage loans be reviewed and that a written late charge notice be mailed no
later than the 15th day of delinquency.  The Bank's policies provide that
telephone contact will be attempted to ascertain the reasons for delinquency and
the prospects of repayment.  When contact is made with the borrower at any time
prior to foreclosure, the Bank will attempt to obtain full payment or work out a
repayment schedule with the borrower to avoid foreclosure.  It is the Bank's
policy to place all loans that are delinquent by three or more payments on non-
accrual status, resulting in the Bank no longer accruing interest on such loans
and reversing any interest previously accrued but not collected.  A non-accrual
loan may be restored to accrual status when delinquent principal and interest
payments are brought current and future monthly principal and interest payments
are expected to be collected.  Property acquired by the Bank as a result of
foreclosure on a mortgage loan is classified as "real estate owned" and is
recorded at the lower of the unpaid principal balance or fair value less costs
to sell at the date of acquisition and thereafter.  Upon foreclosure, the Bank
generally requires an appraisal of the property and, thereafter, appraisals of
the property on an annual basis and external inspections on at least a quarterly
basis.

     The Bank's Classification of Assets Policy requires that the Bank utilize
an internal asset classification system as a means of reporting problem, as well
as potential problem, assets.  The Bank currently classifies problem and
potential problem assets as "Special Mention," "Substandard," "Doubtful" or
"Loss" assets. "Special Mention" loans are assets that have a potential weakness
or pose an unwarranted financial risk that, if not corrected, could weaken the
asset and increase the risk in the future.  "Substandard" loans are assets that
are 90 days or more delinquent or 60 days delinquent if outstanding for less
than 12 months, are inadequately protected by the current net worth and paying
capacity of the obligor or of the collateral pledged, have a well defined
weakness based upon objective evidence, and are characterized by the distinct
possibility of sustaining some loss if the deficiencies are not corrected.
"Doubtful" loans are assets that have all the weaknesses in those

                                       7
<PAGE>

classified as "Substandard", with the added characteristic that the weaknesses
make collection or liquidation in full highly questionable and improbable.
"Loss" loans are assets considered to be non-collectible and of such little
value that their continued consideration as assets is not warranted. When an
insured institution classifies one or more assets, or portions thereof, as
"Substandard" or "Doubtful", it is required to establish a general valuation
allowance for loan losses in an amount deemed prudent by management.  General
valuation allowances, which is a regulatory term, represent loss allowances
which have been established to recognize the perceived inherent risk associated
with lending activities, but which, unlike specific allowances, have not been
allocated to particular problem assets.  When an insured institution classifies
one or more assets, or portions thereof, as "Loss", it is required either to
establish a specific allowance for losses equal to 100% of the amount of the
asset so classified or to charge off such amount.

     Management, on a periodic basis, evaluates the loan portfolio and specific
loans that indicate situations that may affect the borrower's ability to pay and
the estimated underlying collateral.  Once classified by management, all assets
are analyzed on a quarterly basis to monitor the differences between actual
losses and the estimated losses. The Bank classifies loans in accordance with
the management guidelines described above.  At December 31, 2001, the Bank had
the following classified assets:

<TABLE>
<CAPTION>
                    Substandard                  Doubtful                       Loss                   Special Mention
            ---------------------------------------------------------------------------------------------------------------
              Number of    Principal     Number of      Principal      Number of     Principal     Number of    Principal
                Loans       Balance        Loans         Balance         Loans        Balance        Loans       Balance
            ---------------------------------------------------------------------------------------------------------------
<S>          <C>          <C>           <C>           <C>            <C>            <C>           <C>          <C>
                                                         (Dollars in thousands)
One- to                6          $741             1            $12              1            $3           11        $1,504
                    ----
four-family

Consumer               -             -             -              -              -             -            3            20
                    ----          ----           ---           ----            ---          ----          ---        ------
Total                  6          $741             1            $12              1            $3           14        $1,524
                    ====          ====           ===           ====            ===          ====          ===        ======
</TABLE>

     The following table sets forth delinquencies in the Bank's loan portfolio
as of the dates indicated:

<TABLE>
<CAPTION>
                                                           At December 31, 2001
                                                    --------------------------------
                                 60-89 Days                   90 Days or More
                      --------------------------------------------------------------
                                          Principal                   Principal
                         Number of       Balance of     Number of    Balance of
                           Loans            Loans         Loans         Loans
                      --------------------------------------------------------------
                                         (Dollars in thousands)
<S>                    <C>             <C>             <C>          <C>
One- to four-family                 2          $ 527             5              314
Consumer                            0              0             3               16
                                    -          -----            --            -----
  Total                             2            527             8              330
                                    -          -----            --            -----
Delinquent loans to
 total gross loans                              1.02%                          0.64%
                                               =====                          =====

                                          At December 31, 2000
                                     -----------------------------
                                60-89 Days                   90 Days or More
                     --------------------------------------------------------------
                                         Principal                     Principal
                         Number of      Balance of      Number of     Balance of
                           Loans           Loans          Loans          Loans
                     --------------------------------------------------------------
                                         (Dollars in thousands)
One- to four-family                 3          $ 138             3            $ 182
Consumer                            4             32             7              267
                                   --          -----            --            -----
  Total                             7          $ 170            10            $ 449
                                   --          -----            --            -----
Delinquent loans to
total gross loans                               0.29%                          0.77%
                                               =====                          =====
</TABLE>

                                       8
<PAGE>

     Non-Accrual and Past-Due Loans.  The following table sets forth information
regarding loans contractually past due 90 days or more.  At December 31, 2001,
there were no accruing loans past due 90 days or more.  If all non-accrual loans
had been performing in accordance with their original term and had been
outstanding from the earlier of the beginning of the period or origination, the
Bank would have additional interest income of $26,616, for the year ended
December 31, 2001, none of which was included in net income for the period.  The
Bank had no troubled debt restructurings within the meaning of SFAS No. 15 at
any of the dates indicated.

     At December 31, 2001, the Bank had real estate owned ("REO") in the amount
of $38,892.  For a description of how the Bank treats REO, see the Financial
Statements and Notes thereto appearing under Item 13 of this Form 10-KSB.

<TABLE>
<CAPTION>
                                                                                     At December 31,
                                                                                -------------------------
                                                                                 2001              2000
                                                                                -------------------------
                                                                                 (Dollars in thousands)
<S>                                                                              <C>               <C>
     Non-accrual one- to four-family loans delinquent 90 days
      or more                                                                    $ 314             $ 182
     Non-accrual consumer loans delinquent 90 days or more                          16                17
                                                                                 -----             -----
     Total non-performing loans                                                    330               199
     Total investment in REO                                                        39                 -
                                                                                 -----             -----
       Total non-performing assets                                               $ 369             $ 199
                                                                                 =====             =====
     Non-performing loans to total loans                                          0.73%             0.34%
     Non-performing assets to total assets                                        0.59%             0.28%
</TABLE>

     Allowance for Loan Losses.  The allowance for loan losses is increased by
changing provisions for loan losses against income based on management's
evaluation of the perceived inherent risks in its loan portfolio and the general
economy.  The allowance for loan loss is maintained at an amount management
considers adequate to cover estimated losses in loans receivable.  While
management believes the Bank's allowance for loan losses is sufficient to cover
losses inherent in its loan portfolio at this time, no assurances can be given
that the Bank's level of allowance for loan losses will be sufficient to cover
future loan losses incurred by the Bank or that future adjustments to the
allowance for loan losses will not be necessary if economic and other conditions
differ substantially from the economic and other conditions used by management
to determine the current level of the allowance for loan losses.  The allowance
is based upon a number of factors, including asset classifications, economic
trends, industry experience and trends, industry and geographic concentrations,
estimated collateral values, management's assessment of the credit risk inherent
in the portfolio, historical loan loss experience and the Bank's underwriting
policies.  The Bank will continue to monitor and modify its allowances for loan
losses as conditions dictate.  Various regulatory agencies, as an integral part
of their examination process, periodically review the Bank's valuation
allowance.  These agencies may require the Bank to establish additional
valuation allowances, based on their judgments of the information available at
the time of the examination.

     The following table sets forth activity in the Bank's allowance for loan
losses for the periods indicated:

                                       9
<PAGE>

<TABLE>
<CAPTION>
                                                                               At or For the Year
                                                                               Ended December 31,
                                                                      ------------------------------------
                                                                          2001                   2000
                                                                      ------------------------------------
                                                                              (Dollars in thousands)
<S>                                                                      <C>                     <C>
     Allowance for loan losses:
     Balance at beginning of period                                      $   126                 $   90
     Provision for loan losses                                               247                     59
      Charge-offs:
         Mortgage                                                             58
         Consumer                                                             26                     31
                                                                         -------                 ------
          Total charge-offs                                                   84                     31
     Recoveries:
         Consumer                                                              4                      8
                                                                         -------                 ------
          Total recoveries                                                     4                      8
                                                                         -------                 ------
          Net charge-offs                                                     80                     23
                                                                         -------                 ------
          Balance at end of period                                       $   293                 $  126
                                                                         =======                 ======
          Ratio of net loan charge-offs during the
           period to average loans outstanding during period                0.15%                  0.04%
          Ratio of allowance for loan losses to gross loans at
           end of period                                                    0.57                   0.22
          Ratio of allowance for loan losses to non-performing
           loans at end of period                                          88.79                  63.32
</TABLE>

     The following table sets forth the Bank's allocation of allowance for loan
losses by loan category, the percent of the allocated allowance to the total
allowance and the percent of each specific loan category to total loans.  The
portion of the allowance for loan losses allocated to each loan category does
not represent the total available for future losses which may occur within the
loan category since the total allowance for loan losses is a valuation reserve
applicable to the entire loan portfolio.

<TABLE>
<CAPTION>
                                                                      At December 31,
                          -------------------------------------------------------------------------------------------------
                                                   2001                                         2000
                          -------------------------------------------------------------------------------------------------
                                          Percent of         Percent of                   Percent of         Percent of
                                         Allowance to       Loans in Each                 Allowance         Loans in Each
                                            Total            Category to                  to Total           Category to
                             Amount       Allowance          Total Loans    Amount        Allowance          Total Loans
                                                                (Dollars in thousands)
<S>                         <C>          <C>                <C>             <C>           <C>               <C>
One-to four-family            $ 289         98.63%              97.87%       $  97          76.98%              96.88%
Consumer                          4          1.37                2.13           29          23.02                3.12
Total allowance for
 loan losses                  $ 293        100.00%             100.00%       $ 126         100.00%             100.00%
</TABLE>

Investment Activities

     Federal and state regulations require the Bank to maintain a prudent amount
of liquid assets to protect the safety and soundness of the Bank.  Therefore,
the investment policy of the Bank as established by its Board of Directors
attempts to provide and maintain liquidity, generate a favorable return on
investments without

                                       10
<PAGE>

incurring undue interest rates and credit risks and complement the Bank's
lending activities. The Bank's policies generally limit investments to
government and federal agency-backed securities and other non-government
guaranteed securities, including corporate debt obligations that are investment
grade. The Bank's policies provide the authority to invest in U.S. Treasury and
U.S. Government guaranteed securities, securities backed by federal agencies
such as Fannie Mae, Freddie Mac and the Federal Farm Credit Bureau, mortgage-
backed securities which are backed by federal agency securities, including CMOs
(described below), obligations of state and political subdivisions with at least
an "A" rating, certificates of deposit purchased through the FHLB and securities
issued by mutual funds which invest in securities consistent with the Bank's
allocable investments.

     At December 31, 2001, $4.3 million of investment and mortgage-backed
securities were classified as available for sale.  Included in this total are
$366,484 in mortgage-backed securities and $4.0 million in CMOs.  A CMO is a
special type of pass-through debt in which the stream of principal and interest
payments on the underlying mortgages or mortgage-backed securities is used to
create classes with different maturities, and, in some cases, amortization
schedules, as well as a residual interest, with each class possessing different
characteristics.  Investments in mortgage-backed securities carry a reduced
credit risk as compared to whole loans; however, such securities involve a risk
that actual prepayments will exceed prepayments estimated over the life of the
security which may result in a loss of any premium paid for such instruments
thereby reducing the net yield on such securities.  In addition, if interest
rates increase, the market value of such securities may be adversely affected
which, in turn, would adversely affect stockholders' equity to the extent such
securities are held for sale.  In contrast to mortgage-backed securities in
which cash flow is received (and, hence prepayment risk is shared) pro rata by
all holders, the cash flows from the mortgages or mortgage-backed securities
underlying CMOs are segmented and paid in accordance with a predetermined
priority to investors holding various tranches of such securities or
obligations.  A particular tranche may therefore carry prepayment risk that
differs from that of both the underlying collateral or other tranches.

     The following table sets forth certain information regarding the carrying
and market values of the Bank's federal funds sold and other short-term
investments and investment securities at the dates indicated:

<TABLE>
<CAPTION>
                                                                     At December 31
                                                ----------------------------------------------------------
                                                            2001                          2000
                                                ----------------------------------------------------------
                                                   Amortized         Fair        Amortized         Fair
                                                        Cost        Value             Cost        Value
                                                                     (In thousands)
                                                ----------------------------------------------------------
<S>                                                <C>             <C>           <C>            <C>
        Certificates of deposit(1)                    $    0       $    0          $    98      $    98
        Other interest-earning deposits                2,868        2,868            1,856        1,856
        Investment securities:
          FHLB stock                                   1,886        1,886            1,765        1,765
          U.S. government obligations                      0            0            2,700        2,661
          Mortgage-backed securities(2)                4,324        4,336            4,671        4,556
                                                      ------       ------          -------      -------

              Total                                   $9,078       $9,090          $11,090      $10,939
                                                      ======       ======          =======      =======
</TABLE>

(1)  Includes certificates of deposit with original maturities of greater than
     90 days.
(2)  Includes mortgage-backed securities and collateralized mortgage
     obligations.

     The table below sets forth certain information regarding the carrying
value, weighted average yields and contractual maturities of the Bank's
certificates of deposit, other interest-bearing deposits and investment
securities as of December 31, 2001.

                                       11
<PAGE>

<TABLE>
<CAPTION>
                                                              At December 31, 2001
            ------------------------------------------------------------------------------------------------------------------------
                One Year or Less        More than One       More than Five Years        More than Ten          Total
                                      Year to Five Years        to Ten Years                Years
            ------------------------------------------------------------------------------------------------------------------------
                           Weighted             Weighted                                          Weighted                 Weighted
               Carrying    Average    Carrying  Average   Carrying      Weighted      Carrying    Average      Carrying    Average
                Value       Yield      Value     Yield     Value      Average Yield    Value       Yield        Value       Yield
            ------------------------------------------------------------------------------------------------------------------------
                                                              (Dollars in thousands)
<S>           <C>         <C>         <C>       <C>        <C>        <C>             <C>         <C>          <C>         <C>
Other
interest-
bearing
deposits      $2,868      1.74         --        --          --               --            --          --       $2,868       1.74

FHLB stock        --        --         --        --          --               --        $1,886        5.50        1,886       5.50

Mortgage-
backed
securities(2)     --        --         --        --       $ 111             6.08         4,225        6.44        4,336       6.43
                                                          -----             ----        ------        ----       ------       ----

Total         $2,868      1.74%                           $ 111             6.08%       $6,111        6.15%      $9,090       4.76%
              ======      ====                            =====             ====        ======        ====       ======       ====
</TABLE>

(1)  Includes mortgage-backed securities and collateralized mortgage
     obligations.

Source of Funds

     General.  Deposits, loan repayments and prepayments, and cash flows
generated from operations are the primary source of the Bank's funds for use in
lending, investing and for other general purposes.  The Bank also relies upon
advances from the FHLB.

     Deposits.  The Bank offers a variety of deposit accounts with a range of
interest rates and terms.  The Bank's current deposit products include savings,
checking, money market and certificate of deposit accounts ranging in term from
ninety days to five years.  Included in the Bank's certificate of deposit
accounts are certificates of deposit with balances in excess of $100,000 (jumbo
certificates) and Individual Retirement Accounts.

     Deposits are obtained primarily from residents of Hamilton County, Ohio.
The Bank seeks to attract deposit accounts by offering a variety of products,
competitive rates, extended hours and personal service.  The Bank has sought to
attract new depositors through traditional methods of advertising, including
print media advertising.  The Bank does not generally advertise outside of its
market area or utilize the services of deposit brokers.

     The Bank sets interest rates on its deposits on a weekly basis, based upon
a number of factors, including: the previous week's deposit flow; a current
survey of a selected group of competitors' rates for similar products; external
data which may influence interest rates; investment opportunities and loan
demand; and scheduled maturities.

                                       12
<PAGE>

     The following table presents the deposit activity of the Bank for the
periods indicated:

<TABLE>
<CAPTION>
                                                                   2001                 2000
                                                                -------------------------------
                                                                         (In thousands)
        <S>                                                     <C>                   <C>
        Balance beginning of period                              $36,544              $39,436
          Net increase (decrease) before interest credited        (4,851)              (4,750)
          Interest credited                                        1,606                1,858
                                                                 -------              -------
                 Balance end of period                           $33,299              $36,544
                                                                 =======              =======
</TABLE>

     At December 31, 2001, the Bank had $4.7 million in certificate accounts in
amounts of $100,000 or more maturing as follows:

<TABLE>
<CAPTION>
                         Maturity Date                            Amount            Weighted Rate
                                                                ----------------------------------
                                                                      (Dollars in thousands)
        <S>                                                     <C>                 <C>
        Three months or less                                      $  724                 4.84%
        Over three through six months                                943                 5.09
        Over six through 12 months                                 1,251                 4.39
        Over 12 months                                             1,756                 6.04
                                                                  ------                 ----
        Total                                                     $4,674                 5.22%
                                                                  ======                 ====
</TABLE>

     The following table sets forth the distribution of the Bank's average
deposit accounts for the periods indicated and the weighted average interest
rates on each category of deposits presented.

<TABLE>
<CAPTION>
                                                             For the Year Ended December 31,
                                ----------------------------------------------------------------------------------------
                                                    2001                                       2000
                                ----------------------------------------------------------------------------------------
                                                Percent of                                   Percent of
                                                  Total          Weighted                       Total         Weighted
                                  Average        Average         Average      Average          Average         Average
                                  Balance        Deposits          Rate       Balance         Deposits         Weight
                                ----------------------------------------------------------------------------------------
                                                                 (Dollars in thousands)
<S>                               <C>           <C>              <C>          <C>            <C>              <C>
Statement savings account         $ 7,348         21.20%           3.18%       $ 6,111          16.21%          3.73%
NOW and Money Market
 accounts                           4,448         12.84            1.35          5,090          13.50           2.14
Total certificate accounts         22,859         65.96            5.70         26,493          70.29           5.81
                                  -------        ------                        -------         ------
Total average deposits            $34,654        100.00%           4.60%       $37,694         100.00%          4.93%
                                  =======        ======            ====        =======         ======           ====
</TABLE>

     The following table presents, by various rate categories, the amount of
certificate accounts outstanding at the dates indicated and the periods to
maturity of the certificate accounts outstanding at December 31, 2001 and 2000.

                                      13
<PAGE>

<TABLE>
<CAPTION>
                                    Period to Maturity from December 31, 2001                    At December 31,
                       ---------------------------------------------------------------------------------------------
                                      One to       Two to        Three to
                       Less than       Two         Three           Four        Four to Five
                       One Year       Years        Years          Years           Years           2001        2000
                       ---------------------------------------------------------------------------------------------
Certificate                                             (In thousands)
accounts(1):
<S>                    <C>            <C>          <C>           <C>           <C>            <C>          <C>
3.01 to 4.00%           $ 3,926         $  592       $    0           $  0           $  0      $ 4,518     $     0
4.01 to 5.00%             5,480          2,031            0              0            367        7,878         247
5.01 to 6.00%             2,444            748          881              1              3        4,077      10,541
6.01 to 7.00%             1,893          1,027        1,798            686              0        5,404      13,681
7.01 to 8.00%                 0              0            0              0              0            0         134
                        -------         ------       ------           ----           ----      -------     -------
Total                   $13,743         $4,398       $2,679           $687           $370      $21,877     $24,603
                        =======         ======       ======           ====           ====      =======     =======
</TABLE>

(1)  Certificates of deposit include IRA accounts of $6,894 and $7,446 as of
December 31, 2001 and 2000, respectively.

Borrowings

     At December 31, 2001, the Bank had $23.2 million in outstanding advances
from the FHLB and had no other borrowings.  The FHLB advances are used by the
Bank to fund assets, including loan originations.  The FHLB advances bear fixed
rates and have maturities of 90 days to 15 years. The maximum amount that the
FHLB will advance to member institutions, including the Bank, fluctuates from
time to time in accordance with current regulations.  At December 31, 2001, the
Bank had a borrowing capacity of $11.8 million from the FHLB.  The Bank may
obtain additional advances from the FHLB as part of its operating strategy.

     The following table sets forth certain information regarding the Bank's
borrowed funds at or for the periods ended on the dates indicated:

<TABLE>
<CAPTION>
                                                                                   At or For the Year
                                                                                   Ended December 31,
                                                                              ---------------------------
                                                                                  2001          2000
                                                                              ---------------------------
                                                                                (Dollars in thousands)
     <S>                                                                      <C>               <C>
     FHLB advances:
       Average balance outstanding                                               $26,488         $30,675
       Maximum amount outstanding at any month-end during the period              30,719          34,000
       Balance outstanding at end of period                                       23,179          26,864
       Weighted average interest rate during the period                             5.64%           6.32%
       Weighted average interest rate at end of period                              5.67%           6.26%
</TABLE>

Personnel

     As of December 31, 2001, the Bank had 16 full-time and 4 part-time
employees and Lenox had no full-time or part-time employees.  The Bank's
employees are not represented by a collective bargaining unit and the Bank
considers its relationship with its employees to be good.

                                       14
<PAGE>

                           REGULATION AND SUPERVISION

General

     The Bank is an Ohio chartered savings bank, a member of the Federal Home
Loan Bank system, and its deposit accounts are insured up to applicable limits
by the Federal Deposit Insurance Corporation through the Savings Association
Insurance Fund, a division of the FDIC ("SAIF").  The Bank is subject to
extensive regulation, examination and supervision by the FDIC and the
Superintendent of the Ohio Division of Commerce, Division of Financial
Institutions. The Bank must file reports with the Superintendent and the FDIC
concerning its activities and financial condition, in addition to obtaining
regulatory approvals prior to entering into certain transactions such as mergers
with, or acquisitions of, other financial institutions.  There are periodic
examinations by the Superintendent and the FDIC to test the Bank's compliance
with various regulatory requirements.  This regulation and supervision
establishes a comprehensive framework of activities in which an institution can
engage and is intended primarily for the protection of the insurance fund and
depositors.  The regulatory structure also gives the regulatory authorities
extensive discretion in connection with their supervisory and enforcement
activities and examination policies, including policies with respect to the
classification of assets and the establishment of adequate loan loss reserves
for regulatory purposes.  Any change in such policies, whether by the
Superintendent, the FDIC or the Congress, could have a material adverse impact
on Lenox, the Bank and their operations.  Lenox, as a savings and loan holding
company, is also required to file certain reports with, and otherwise comply
with the rules and regulations of the Office of Thrift Supervision and of the
Securities and Exchange Commission under the federal securities laws.  Certain
of the regulatory requirements applicable to the Bank and to Lenox are referred
to below or elsewhere in this Form 10-KSB.

Ohio Regulation

     The Superintendent is responsible for the regulation and supervision of
Ohio savings banks in accordance with the laws of the State of Ohio.  Ohio law
prescribes the permissible investments and activities of Ohio savings banks,
including the types of lending that such banks may engage in and the investments
in real estate, subsidiaries and corporate or government securities that such
banks may make.  The ability of Ohio savings banks to engage in these state-
authorized investments generally is subject to various limitations under FDIC
regulations and oversight by the FDIC.

     The Superintendent may initiate certain supervisory measures or formal
enforcement actions against Ohio savings banks.  Ultimately, if the grounds
provided by law exist, the Superintendent may place an Ohio savings bank in
conservatorship or receivership.

     The Superintendent conducts regular examinations of the Bank approximately
once a year.  The Superintendent imposes assessments on Ohio savings banks based
on the savings bank's asset size to cover the cost of supervision and
examination.

     In addition to being governed by the laws of Ohio specifically governing
savings banks, the Bank is also governed by Ohio corporate law, to the extent
such law does not conflict with the laws specifically governing savings banks.

     All FDIC-insured state-chartered savings banks and their subsidiaries have
generally been limited to activities and equity investments of the type and in
the amount authorized for national banks, notwithstanding state law.  The FDIC
is authorized to permit such institutions to engage in state authorized
activities or investments that do not meet this standard (other than non-
subsidiary equity investments) for institutions that meet all applicable capital
requirements if it is determined that such activities or investments do not pose
a significant risk to the SAIF.  All non-subsidiary equity investments not
permitted for national banks were

                                       15
<PAGE>

required to be divested by December 19, 1996, pursuant to an FDIC-approved
divestiture plan. The FDIC restrictions on state-chartered institutions have not
affected the operations of the Bank.

     The Gramm-Leach-Bliley Act of 1999 authorized FDIC-regulated banks that are
well-capitalized and meet certain other conditions to invest in financial
subsidiaries which may engage in a broad array of financial activities as
principal authorized for financial holding companies.

Federal Regulations

     Capital Requirements.  The FDIC has adopted risk-based capital guidelines
to which the Bank is subject.  The guidelines establish a systematic analytical
framework that makes regulatory capital requirements more sensitive to
differences in risk profiles among banking organizations.  The Bank is required
to maintain certain levels of regulatory capital in relation to regulatory risk-
weighted assets.  The ratio of such regulatory capital to regulatory risk-
weighted assets is referred to as the Bank's "risk-based capital ratio." Risk-
based capital ratios are determined by allocating assets and specified off-
balance sheet items to four risk-weighted categories ranging from 0% to 100%,
with higher levels of capital being required for the categories perceived as
representing greater risk.

     These guidelines divide a savings bank's capital into two tiers.  The first
tier ("Tier I") includes common equity, retained earnings, certain non-
cumulative perpetual preferred stock (excluding auction rate issues) and
minority interests in equity accounts of consolidated subsidiaries, less
goodwill and other intangible assets (except mortgage servicing rights and
purchased credit card relationships subject to certain limitations).
Supplementary ("Tier II") capital includes, among other items, cumulative
perpetual and long-term limited-life preferred stock, mandatory convertible
securities, certain hybrid capital instruments, term subordinated debt and the
allowance for loan and lease losses limited to a maximum of 1.25% of risk
weighted assets, subject to certain limitations, less required deductions.
Savings banks are required to maintain a total risk-based capital ratio of 8%,
of which at least 4% must be Tier I capital.

     In addition, the FDIC has established regulations prescribing a minimum
Tier I leverage ratio (Tier I capital to adjusted total assets as specified in
the regulations).  These regulations provide for a minimum Tier I leverage ratio
of 3% for banks that meet certain specified criteria, including that they have
the highest examination rating and are not experiencing or anticipating
significant growth.  All other banks are required to maintain a Tier I leverage
ratio of at least 4%.  The FDIC may, however, set higher capital requirements on
individual institutions when particular circumstances warrant.  Savings banks
experiencing or anticipating significant growth are expected to maintain capital
ratios, including tangible capital positions, well above the minimum levels.

     The following is a summary of the Bank's regulatory capital at December 31,
2001:

     GAAP Capital to Total Assets                 8.9%
     Total Capital to Risk-Weighted Assets       17.0%
     Tier I Leverage Ratio                        8.7%

     The FDIC, along with the other federal banking agencies, have adopted a
regulation providing that the agencies will take account of the exposure of a
bank's capital and economic value to changes in interest rate risk in assessing
a bank's capital adequacy.

     Dividend Limitations.  The FDIC has authority to use its enforcement powers
to prohibit a savings bank from paying dividends if, in its opinion, the payment
of dividends would constitute an unsafe or unsound practice.  Under Ohio law,
Lenox and the Bank are prohibited from paying a dividend which would result in
insolvency.  Ohio law requires the Bank to obtain Division approval before
payment of dividends in excess of

                                       16
<PAGE>

net profits for the current and two prior fiscal years, with certain
adjustments. Federal law prohibits the payment of dividends by a bank that will
result in the bank failing to meet applicable capital requirements on a pro
forma basis. Additionally, the Bank, as a subsidiary of a savings and loan
holding company, is required to provide the OTS with 30 days prior written
notice before declaring any dividend. The Bank's Plan of Conversion also
restricts the Bank's payment of dividends in the event the dividend would impair
the liquidation account established in connection with the Conversion.

     Standards for Safety and Soundness.  The federal banking agencies have
adopted final regulations and Interagency Guidelines Prescribing Standards for
Safety and Soundness (the "Guidelines") to implement safety and soundness
standards used to identify and address problems at insured depository
institutions before capital becomes impaired.  If the appropriate federal
banking agency determines that an institution fails to meet any standard
prescribed by the Guidelines, the agency may require the institution to submit
to the agency an acceptable plan to achieve compliance with the standard, as
required by the Federal Deposit Insurance Act, as amended (the "FDI Act").

     On February 9, 2000, the Bank entered into a Memorandum of Understanding
(the "MOU") with the FDIC and the Ohio Superintendent of Financial Institutions
which required the Bank to, among other things, formulate a three-year strategic
plan with specific provisions required in the MOU, review management, adopt a
management plan and increase capital.  Lenox, under prior management, had
submitted five strategic plans during the period of January 2000 to April 2001,
all of which were deemed inadequate and denied by the FDIC and the
Superintendent.  Other areas that were required to be addressed under the MOU
included the Bank's earnings, interest rate risk, growth and liquidity.  The
Bank and its Board were required to work with regulators to carry out the
requirements under the MOU.  The FDIC and the Superintendent review the Bank's
progress quarterly.  On February 28, 2001, the Bank was notified by the FDIC and
the Superintendent that its compliance with the MOU was inadequate.  A revised
MOU was issued on May 4, 2001, including the above items, along with specific
items requiring a formal training and development plan for the CEO, and specific
Information Systems Security items.  John Lame and Guy Napier were elected to
Lenox's Board at the Annual Shareholders Meeting on May 9, 2001; the Lenox Board
in turn removed the previous CEO.  A new CEO was hired and took office July 11,
2001.  On September 28, 2001, the directors infused capital of $753,500, with an
additional infusion of $146,509 in December 31, 2001, thereby meeting the
capital requirements of the MOU.  On October 22, 2001, the Bank received notice
from the FDIC and the Superintendent that its first three-year strategic plan
submitted had been approved.  On November 15, 2001, the Bank received notice
from the FDIC and the Superintendent that it had complied with all items of the
MOU.

     Prompt Corrective Regulatory Action.  Federal law requires, among other
things, that federal bank regulatory authorities take "prompt corrective action"
with respect to banks that do not meet minimum capital requirements.  The
severity of such action depends on the degree of undercapitalization.

     An institution is deemed to be "undercapitalized" if it has a total risk-
based capital ratio of less than 8%, a Tier I risk-based capital ratio of less
than 4%, or generally a leverage ratio of less than 4% (3% or less for
institutions with the highest examination rating).  An institution is deemed to
be "significantly undercapitalized" if it has a total risk-based capital ratio
of less than 6%, a Tier I risk-based capital ratio of less than 3%, or a
leverage ratio of less than 3%.  An institution is deemed to be "critically
undercapitalized" if it has a ratio of tangible equity (as defined in the
regulations) to total assets that is equal to or less than 2%.

     Subject to a narrow exception, the banking regulator is required to appoint
a receiver or conservator for an institution that is "critically
undercapitalized."  The regulation also provides that a capital restoration plan
must be filed with the FDIC within 45 days of the date a savings institution
receives notice that it is "undercapitalized," "significantly undercapitalized"
or "critically undercapitalized."  Compliance with the plan must be guaranteed
by any parent holding company.  In addition, numerous mandatory supervisory
actions

                                       17
<PAGE>

become immediately applicable to an undercapitalized institution, including, but
not limited to, increased monitoring by regulators and restrictions on growth,
capital distributions and expansion. The FDIC could also take any one of a
number of discretionary supervisory actions, including the issuance of a capital
directive and the replacement of senior executive officers and directors.

     Insurance of Deposit Accounts.  Deposits of the Bank are presently insured
by the SAIF.  The FDIC maintains a risk-based assessment system by which
institutions are assigned to one of three categories based on their
capitalization and one of three subcategories based on examination ratings and
other supervisory information.  An institution's assessment rate depends upon
the categories to which it is assigned.  Assessment rates for SAIF member
institutions are determined semiannually by the FDIC and currently range from
zero basis points for the healthiest institutions to 27 basis points for the
riskiest.

     The FDIC has authority to increase insurance assessments.  A significant
increase in SAIF insurance premiums would likely have an adverse effect on the
operating expenses and results of operations of the Bank.  Management cannot
predict what insurance assessment rates will be in the future.

     Insurance of deposits may be terminated by the FDIC upon a finding that the
institution has engaged in unsafe or unsound practices, is in an unsafe or
unsound condition to continue operations or has violated any applicable law,
regulation, rule, order or condition imposed by the FDIC or the OTS.  The
management of the Bank does not know of any practice, condition or violation
that might lead to termination of deposit insurance.

     Transactions with Related Parties.  The Bank's authority to engage in
transactions with "affiliates" (e.g., any company that controls or is under
common control with an institution, including Lenox and its non-savings
institution subsidiaries) is limited by federal law.  The aggregate amount of
covered transactions with any individual affiliate is limited to 10% of the
capital and surplus of the savings institution.  The aggregate amount of covered
transactions with all affiliates is limited to 20% of the savings institution's
capital and surplus.  Certain transactions with affiliates are required to be
secured by collateral in an amount and of a type described in federal law and
the purchase of low quality assets from affiliates is generally prohibited.
Transactions with affiliates, including loans and asset purchases, must be on
terms and under circumstances, including credit standards, that are
substantially the same or at least as favorable to the institution as those
prevailing at the time for comparable transactions with non-affiliated
companies.  In addition, institutions are prohibited from lending to any
affiliate that is engaged in activities that are not permissible for bank
holding companies and no institution may purchase the securities of any
affiliate other than a subsidiary.

     The Bank's authority to extend credit to executive officers, directors and
10% shareholders ("insiders"), as well as entities such persons control, is
governed by federal law.  Among other things, such loans are required to be made
on terms substantially the same as those offered to unaffiliated individuals and
to not involve more than the normal risk of repayment.  There is an exception
for loans made pursuant to a benefit or compensation program that is widely
available to all employees of the institution and does not give preference to
insiders over other employees.  Federal law places individual and aggregate
limits on the amount of loans the Bank may make to insiders based, in part, on
the Bank's capital position and requires certain board approval procedures to be
followed loans to executive officers are subject to additional restrictions.

     Enforcement.  The FDIC has primary federal enforcement responsibility over
the Bank and has the authority to bring actions against the institution, its
directors and all institution-affiliated parties, including stockholders, and
any attorneys, appraisers and accountants who knowingly or recklessly
participate in wrongful action likely to have an adverse effect on an insured
institution.  Formal enforcement action may range from the issuance of a capital
directive or cease and desist order to removal of officers and/or directors to
institution of receivership, conservatorship or termination of deposit
insurance.  Civil penalties cover a wide

                                       18
<PAGE>

range of violations and can amount to $25,000 per day, or even $1 million per
day in especially egregious cases. Federal law also establishes criminal
penalties for certain violations.

Federal Home Loan Bank System

     The Bank is a member of the Federal Home Loan Bank system, which consists
of 12 regional Federal Home Loan Banks.  The Federal Home Loan Bank provides a
central credit facility primarily for member institutions.  The Bank, as a
member of the Federal Home Loan Bank, is required to acquire and hold shares of
capital stock in that Federal Home Loan Bank in an amount at least equal to 1.0%
of the aggregate principal amount of its unpaid residential mortgage loans and
similar obligations at the beginning of each year, or 1/20 of its advances
(borrowings) from the Federal Home Loan Bank, whichever is greater.  The Bank
was in compliance with this requirement with an investment in Federal Home Loan
Bank stock at December 31, 2001.

     Federal Home Loan Banks are required to provide funds for the resolution of
thrifts which became insolvent in the late 1980s and to contribute funds for
affordable housing programs.  These requirements could reduce the amount of
dividends that the Federal Home Loan Banks pay to their members and could also
result in the Federal Home Loan Banks imposing a higher rate of interest on
advances to their members.  If dividends were reduced, or interest on future
Federal Home Loan Bank advances increased, the Bank's net interest income would
likely also be reduced.  Recent legislation has changed the structure of the
Federal Home Loan Banks funding obligations for insolvent thrifts, revised the
capital structure of the Federal Home Loan Banks and implemented entirely
voluntary membership for Federal Home Loan Banks.  Management cannot predict the
effect that these changes may have with respect to its Federal Home Loan Bank
membership.

Federal Reserve System

     The Federal Reserve Board regulations require savings institutions to
maintain non-interest earning reserves against their transaction accounts
(primarily NOW and regular checking accounts).  The regulations generally
provide that reserves be maintained against aggregate transaction accounts as
follows: for accounts aggregating $42.8 million or less (subject to adjustment
by the Federal Reserve Board) the reserve requirement is 3%; and for accounts
aggregating greater than $42.8 million, the reserve requirement is $1.284
million plus 10% (subject to adjustment by the Federal Reserve Board between 8%
and 14%) against that portion of total transaction accounts in excess of $42.8
million.  The first $5.5 million of otherwise reservable balances (subject to
adjustments by the Federal Reserve Board) are exempted from the reserve
requirements.  The Bank complies with the foregoing requirements.

Holding Company Regulation

     Lenox is a nondiversified unitary savings and loan holding company within
the meaning of federal law.  As a unitary savings and loan holding company,
Lenox is not restricted by federal law as to the types of business activities in
which it may engage, provided that the Bank continues to be a qualified thrift
lender.  The Gramm-Leach-Bliley Act of 1999 provides that no company may acquire
control of a savings association after May 4, 1999 unless it engages only in the
financial activities permitted for financial holding companies under the law or
for multiple savings and loan holding companies as described below.  Further,
the Gramm-Leach-Bliley Act specifies that existing savings and loan holding
companies may only engage in such activities.  The Gramm-Leach-Bliley Act,
however, grandfathered the unrestricted authority for activities with respect to
unitary savings and loan holding companies existing prior to May 4, 1999, such
as Lenox, so long as the Bank continues to comply with the qualified thrift
lender test, described below.  Upon any non-supervisory acquisition by Lenox of
another savings association as a separate subsidiary, Lenox would become a
multiple savings and loan holding company and would be subject to extensive
limitations on the types of business activities in which it could engage.
Federal law limits the activities of a multiple savings and loan holding

                                       19
<PAGE>

company and its non-insured institution subsidiaries primarily to activities
permissible for bank holding companies under Section 4(c)(8) of the Bank Holding
Company Act, subject to the prior approval of the OTS, and to other activities
authorized by OTS regulation. Multiple savings and loan holding companies are
generally prohibited from acquiring or retaining more than 5% of a non-
subsidiary holding company, or a non-subsidiary company engaged in activities
other than those permitted by federal law.

     A savings and loan holding company is prohibited from, directly or
indirectly, acquiring more than 5% of the voting stock of another savings
institution or holding company thereof, or from acquiring such an institution or
company by merger, consolidation or purchase of its assets, without prior
written approval of the OTS or acquiring or retaining control of a depository
institution that is not insured by the FDIC.  In evaluating applications by
holding companies to acquire savings institutions, the OTS must consider the
financial and managerial resources and future prospects of Lenox and institution
involved, the effect of the acquisition on the risk to the insurance funds, the
convenience and needs of the community and competitive factors.

     The OTS is prohibited from approving any acquisition that would result in a
savings and loan holding company controlling savings institutions in more than
one state, except: (i) interstate supervisory acquisitions by savings and loan
holding companies; and (ii) the acquisition of a savings institution in another
state if the laws of the state of the target savings institution specifically
permit such acquisitions.  The states vary in the extent to which they permit
interstate savings and loan holding company acquisitions.

     In order to elect and continue to be regulated as a savings and loan
holding company by the OTS (rather than as a bank holding company by the Federal
Reserve Board), the Bank must continue to qualify as a qualified thrift lender.
To be a qualified thrift lender, a savings institution is required to maintain
at least 65% of its "portfolio assets" (total assets less: (i) specified liquid
assets up to 20% of total assets; (ii) intangibles, including goodwill; and
(iii) the value of property used to conduct business) in certain "qualified
thrift investments" (primarily residential mortgages and related investments,
including certain mortgage-backed and related securities) in at least 9 months
out of each 12 month period.  A holding company of a savings institution that
fails the test must either convert to a bank holding company and thereby become
subject to the regulation and supervision of the Federal Reserve Board, or
operate under certain restrictions.  As of December 31, 2001, the Bank
maintained in excess of 85% of its portfolio assets in qualified thrift
investments and was a qualified thrift lender.  Recent legislative amendments
have broadened the scope of "qualified thrift investments" that go toward
meeting the qualified thrift lender test to fully include credit card loans,
student loans and small business loans.  A savings association may also satisfy
the test by qualifying as a "domestic building and loan association" as defined
in the Internal Revenue Code of 1986.

     On August 2, 2000, Lenox entered into a Supervisory Agreement with the OTS
that requires Lenox, among other things, to obtain the OTS' prior approval
before entering into contracts for goods and services in excess of $5,000 or
making any payments for goods and services in excess of $2,000 per month.  Lenox
is also restricted in its ability to borrow money and may not make any changes
to its directorate or executive officer staff unless prior notice has been given
to the OTS.

                           FEDERAL AND STATE TAXATION

Federal Taxation

     General.  Lenox and the Bank report their income on a consolidated basis
using the accrual method of accounting, and are subject to federal income
taxation in the same manner as other corporations with some exceptions,
including particularly the Bank's reserve for bad debts as discussed below.  The
following discussion of tax matters is intended only as a summary and does not
purport to be a comprehensive description of the tax rules applicable to the
Bank or Lenox.  The Bank has not been audited by the IRS during the past five
years.  For its 2001 taxable year, the Bank was subject to a maximum federal
income tax rate of 34%.

                                       20
<PAGE>

     Bad Debt Reserves.  For fiscal years beginning prior to December 31, 1995,
thrift institutions which qualified under certain definitional tests and other
conditions of the Internal Revenue Code of 1986 were permitted to use certain
favorable provisions to calculate their deductions from taxable income for
annual additions to their bad debt reserve.  A reserve could be established for
bad debts on qualifying real property loans (generally secured by interests in
real property improved or to be improved) under (i) the Percentage of Taxable
Income Method (the "PTI Method"), or (ii) the Experience Method.  The reserve
for nonqualifying loans was computed using the Experience Method.

     The Small Business Job Protection Act of 1996 (the "1996 Act"), enacted on
August 20, 1996, repeals the reserve method of accounting for bad debts
effective for tax years beginning after 1995, and requires savings institutions
to recapture (i.e., take into income) certain portions of their accumulated bad
debt reserves.  Thrift institutions eligible to be treated as "small banks"
(assets of $500 million or less) are allowed to use the Experience Method
applicable to such institutions, while thrift institutions that are treated as
large banks (assets exceeding $500 million) are required to use only the
specific charge-off method.  The PTI Method of accounting for bad debts is no
longer available for any financial institution.

     A thrift institution required to change its method of computing reserves
for bad debts will treat such change as a change in method of accounting,
initiated by the taxpayer, and having been made with the consent of the IRS.
Any Section 481(a) adjustment required to be taken into income with respect to
such change generally will be taken into income ratably over a six-taxable year
period, beginning with the first taxable year beginning after 1995, subject to a
two-year suspension if the "residential loan requirement" is satisfied.

     Under the residential loan requirement provision, the recapture required by
the 1996 Act will be suspended for each of two successive taxable years,
beginning with the Bank's 1996 taxable year, in which the Bank originates a
minimum of certain residential loans based upon the average of the principal
amounts of such loans made by the Bank during its six taxable years preceding
its current taxable year.

     The Bank is required to pay over a six-year period the excess of the
balance of its tax bad debt reserves as of December 31, 1995 over the balance of
such reserves as of December 31, 1987.  As a result of such recapture, the Bank
incurred additional tax payments of approximately $21,000 which were taken into
income beginning in 1999 over a six-year period.

     Distributions.  Under the 1996 Act, if the Bank makes "non-dividend
distributions" to Lenox, such distributions will be considered to have been made
from the Bank's unrecaptured tax bad debt reserves (including the balance of its
reserves as of December 31, 1987) to the extent thereof, and then from the
Bank's supplemental reserve for losses on loans, to the extent thereof, and an
amount based on the amount distributed (but not in excess of the amount of such
reserves) will be included in the Bank's income.  Non-dividend distributions
include distributions in excess of the Bank's current and accumulated earnings
and profits, as calculated for federal income tax purposes, distributions in
redemption of stock and distributions in partial or complete liquidation.
Dividends paid out of the Bank's current or accumulated earnings and profits
will not be so included in the Bank's income.

     The amount of additional taxable income triggered by a non-dividend
distribution is an amount that, when reduced by the tax attributable to the
income, is equal to the amount of the distribution.  Thus, if the Bank makes a
non-dividend distribution to Lenox, approximately one and one-half times the
amount of such distribution (but not in excess of the amount of such reserves)
would be includable in income for federal income tax purposes, assuming a 35%
federal corporate income tax rate.  The Bank does not intend to pay dividends
that would result in a recapture of any portion of its bad debt reserves.

     Dividends Received Deduction and Other Matters.  Lenox may exclude from its
income 100% of dividends received from the Bank as a member of the same
affiliated group of corporations.  The corporate

                                       21
<PAGE>

dividends received deduction is generally 70% in the case of dividends received
from unaffiliated corporations with which Lenox and the Bank will not file a
consolidated tax return, except that if Lenox or the Bank own more than 20% of
the stock of a corporation distributing a dividend then 80% of any dividends
received may be deducted.

     SAIF Recapitalization Assessment.  The Funds Act levied a 65.7-cent fee on
every $100 of thrift deposits held on March 31, 1995.  For financial statement
purposes, this assessment was reported as an expense for the quarter ended
September 30, 1996.  The Funds Act includes a provision which states that the
amount of any special assessment paid to capitalize the SAIF under this
legislation is deductible under Section 162 of the Code in the year of payment.

Ohio Taxation

     Lenox is subject to the Ohio corporation franchise tax, which, as applied
to Lenox, is a tax measured by both net earnings and net worth.  The rate of tax
is the greater of (i) 5.1% on the first $50,000 of computed Ohio taxable income
and 8.9% of computed Ohio taxable income in excess of $50,000 or (ii) 0.582%
times taxable net worth.

     In computing its tax under the net worth method, Lenox may exclude 100% of
its investment in the capital stock of the Bank after the Conversion, as
reflected on the balance sheet of Lenox, in computing its taxable net worth as
long as it owns at least 25% of the issued and outstanding capital stock of the
Bank.  The calculation of the exclusion from net worth is based on the ratio of
the excludable investment (net of any appreciation or goodwill included in such
investment) to total assets multiplied by the net value of the stock.  As a
holding company, Lenox may be entitled to various other deductions in computing
taxable net worth that are not generally available to operating companies.

     A special litter tax is also applicable to all corporations, including
Lenox, subject to the Ohio corporation franchise tax other than "financial
institutions." If the franchise tax is paid on the net income basis, the litter
tax is equal to 0.11% of the first $50,000 of computed Ohio taxable income and
0.22% of computed Ohio taxable income in excess of $50,000.  If the franchise
tax is paid on the net worth basis, the litter tax is equal to 0.014% times
taxable net worth.

     The Bank is a "financial institution" for Ohio tax purposes.  As such, it
is subject to the Ohio corporate franchise tax on "financial institutions,"
which is imposed annually at a rate of 1.3% of the Bank's book net worth
determined in accordance with GAAP.  As a "financial institution," the Bank is
not subject to any tax based upon net income or net profits imposed by the State
of Ohio.

Item 2.        Description of Property.

     On March 20, 2000 Lenox and the Bank relocated their main office to 4730
Montgomery Road, Cincinnati, Ohio.  Prior to its move, the Bank had maintained
leased space from The Procter & Gamble Company in St. Bernard, Ohio.  However,
Procter & Gamble found an alternative use for the space occupied by the Bank and
decided not to renew the Bank's lease necessitating the Bank's relocation.  The
Bank also operates out of a branch office it opened in 1997 on Erie Avenue in
Cincinnati, Ohio.  Lenox believes that the Bank's current facilities and their
condition are adequate to meet the present and immediately foreseeable needs of
the Bank and Lenox.  The following table sets forth certain information relating
to the Bank's offices.

                                       22
<PAGE>

<TABLE>
<CAPTION>
                                                                      Net Book Value of
                                                                         Property or
                                      Original Date                       Leasehold
                           Leased or    Leased or     Date of Lease    Improvements at
       Location              Owned      Acquired        Expiration    December 31, 2001
---------------------------------------------------------------------------------------
                                                                        (In thousands)
<S>                        <C>        <C>             <C>             <C>
4730 Montgomery Road         Owned        2000              --              $910
Cincinnati, Ohio 45212

3521 Erie Avenue             Owned        1997              --               287
Cincinnati, Ohio 45208
</TABLE>

     At December 31, 2001, the Bank owned four ATMs.  In the opinion of Lenox's
management, the above properties are adequately covered by insurance.

Item 3.   Legal Proceedings.

     On September 25, 2001, Virginia M. Heitzman, the former CEO and President
of Lenox and the Bank, filed with the American Arbitration Association a demand
for arbitration with Lenox and the Bank. Ms. Heitzman's demand sets forth claims
for, among other things, reinstatement of employment and an unspecified amount
of damages, including punitive damages, as a result of alleged wrongful
termination of her employment agreements with Lenox and the Bank. On July 13,
2001, the Boards of Directors of Lenox and the Bank notified Ms. Heitzman of the
termination of her employment agreements for cause. Lenox and the Bank have
accrued for the potential payout of the employment agreements and are contesting
the arbitration demands of Ms. Heitzman. The matter is currently pending before
the American Arbitration Association panel. Lenox and the Bank have filed a
motion to stay or dismiss the case. The motion to dismiss was denied by the
arbitrator who also ruled that Ms. Heitzman was entitled to compensation from
Lenox only (and not the Bank) during the pendency of the arbitration. Lenox has
filed a complaint with the Federal District Court for the Southern District of
Ohio to vacate that award. Lenox and the Bank have submitted to the FDIC the
question as to whether Ms. Heitzman is entitled to any payments under applicable
federal regulations prohibiting such payments by certain institutions regulated
by the FDIC. On March 8, 2002, the Office of Thrift Supervision ordered Lenox
not to make payments called for by the interim award unless it receives notice
from the OTS that such payment is permissible.

Item 4.   Submission of Matters to a Vote of Security Holders.

     None.

                                    Part II

Item 5.   Market for Common Equity and Related Stockholder Matters.

     Lenox's Common Shares are traded on the over-the-counter bulletin board
(OTC BB) under the symbol "LNXC.OB." The following table indicates, for the
periods indicated, the range of high and low bid prices for Lenox Common Shares:

                                       23
<PAGE>

<TABLE>
<CAPTION>
                                   2001                                        2000
                  ------------------------------------------------------------------------------------
                  Fourth      Third     Second      First     Fourth      Third     Second      First
                  Quarter    Quarter    Quarter    Quarter    Quarter    Quarter    Quarter    Quarter
   <S>            <C>        <C>        <C>        <C>        <C>        <C>        <C>        <C>
   High Bid       $10.52     $13.00     $12.00     $10.00     $11.00     $13.38     $13.50     $16.00
   Low Bid          8.10      10.50       9.75       8.25       8.25       9.56      12.50      12.75
</TABLE>

     The above bids were derived from the over-the-center bulletin board. The
above quotations reflect inter-dealer prices, without retail mark-up, mark-down
or commission and may not represent actual transactions.

     As of December 31, 2001, Lenox had approximately 194 holders of record of
Common Shares.

     In the past two years, Lenox has not paid cash dividends. Lenox currently
intends to retain all future earnings, if any, for use in its business and does
not anticipate paying any cash dividends in the foreseeable future. Lenox is
subject to the various limitations on paying dividends as discussed under
"Dividend Limitations" set forth in the "Federal Regulations" section of Item 1
above.

     On September 28, 2001, Lenox sold 68,500 Common Shares at a price of $11
per share pursuant to a private offering. The following officers and directors
of Lenox purchased Lenox shares in the private offering: John C. Lame -23,000;
Gail R. Behymer - 10,000; Gary P. Kreider - 10,000; Guy E. Napier -12,500; Jane
Schank - 3,000; and Michael Jordan (a director of the Bank) -10,000. The share
price was determined by an independent appraisal of Lenox Common Shares provided
by Keefe, Bruyette & Woods. On December 28, 2001, Mr. Lame, Ms. Schank and Mr.
Jordan purchased 7,319, 2,000 and 4,000 shares, respectively, from Lenox
pursuant to the September private offering at a price of $11 per share. The
issuances of the shares were exempt from registration under the Securities Act
of 1933 pursuant to the exemption provided by Section 4(2) of that Act.

Item 6.   Management's Discussion and Analysis of Financial Condition and
          Results of Operations.

General

     Lenox does not transact any material business other than through the Bank.
The Bank's results of operations are dependent primarily on net interest income,
which is the difference between the interest income earned on its interest-
earning assets, such as loans and investments, and the interest expense on its
interest-bearing liabilities, such as deposits and borrowings. The Bank also
generates non-interest income, such as service fee income. The Bank's general,
administrative and other expenses primarily consist of employee compensation,
occupancy and equipment expense, franchise taxes, federal deposit insurance
premiums and other operating expenses. The Bank's results of operations are also
significantly affected by general economic and competitive conditions,
particularly changes in market interest rates, government policies and action of
regulatory agencies.

Asset and Liability Management

     In managing its interest rate risk the Bank attempts to match the maturity
of its liabilities and the maturity or repricing of its assets. In monitoring
this process the Bank regularly conducts a comprehensive analysis of its balance
sheet. The Bank utilizes a discounted cash flow analysis to arrive at a mark-to-
market comparison of assets and liabilities to book values and in calculating
the net present value of the Bank's equity

                                       24
<PAGE>

position. The net present value is the present value of expected cash flows from
assets, liabilities and off-balance sheet contracts. The primary focus is on
managing market value and total return. The Bank uses a model which internally
generates estimates of the changes in the Bank's net portfolio value over a
range of interest rate scenarios. In addition, but to a much lesser degree, the
Bank will review its asset-liability gap position as an indication of how it is
faring on matching its assets/liability maturity-repricing profile.

     For purposes of the following net portfolio value table all mortgage-backed
securities and mortgages secured by one- to four-family residences are assumed
to prepay at various constant prepayment rates, which were chosen based upon a
consensus of prepayment rates that apply to various weighted average maturities
and which are published by the larger brokerage houses who deal in mortgage-
backed and related securities. Lines of credit reprice monthly, and consumer
loans are based on amortized balances. Additionally, all variable rate deposit
accounts assume various decay rates determined by the deposit investment and the
rate environment. The liability assumptions for variable rate deposit accounts
were derived partly from industry methodology standards of valuing core deposits
and a blend of the Bank's own historical experience. Management believes that
all of the above assumptions are reasonable.

     Certain shortcomings are inherent in the methodology used in the above
interest rate risk measurements. Modeling changes in net portfolio value require
the making of certain assumptions which may or may not reflect the manner in
which actual yields and costs respond to changes in market interest rates. In
this regard, the net portfolio value model presented assumes that the
composition of the Bank's interest sensitive assets and liabilities existing at
the beginning of a period remains constant over the period being measured and
also assumes that a particular change in interest rates is reflected uniformly
across the yield curve regardless of the duration to maturity or repricing of
specific assets and liabilities. Accordingly, although the net portfolio value
table provides an indication of the Bank's interest rate risk exposure at a
particular point in time, such measurements are not intended to and do not
provide a precise forecast of the effect of changes in market interest rates on
the Bank's net interest income and will differ from actual results.

     The following table sets forth the Bank's net portfolio value as of
December 31, 2001. As it shows, increases in interest rates will result in net
decreases in the Bank's net portfolio value, while decreases in interest rates
will result in net increases in the Bank's net portfolio value.


          Change In                                     Net Present Value as %
      Interest Rates In       Net Portfolio Value             of Portfolio
        Basis Points          -------------------           Value Of Assets
                                                        ----------------------
        (Rate Shock)      Amount  $ Change    % Change    NPV Ratio    Change
        ------------      ------  --------    --------    ---------    ------
                                (Dollars in thousands)
            200            7,166   $ 1,236      20.84%      11.38%     24.64%
            100            6,528       598      10.08       10.22      11.94
          Static           5,930        --         --        9.13         --
           (100)           5,291      (639)    (10.76)       8.01     (12.27)
           (200)           4,282    (1,648)    (27.79)       6.41     (29.79)

     The matching of the repricing characteristics of assets and liabilities may
be analyzed by examining the extent to which such assets and liabilities are
"interest rate sensitive" and by monitoring an institution's interest rate
sensitivity "gap." An asset or liability is said to be interest rate sensitive
within a specific time period if it matures or reprices within that time period.
The interest rate sensitivity gap is defined as the difference between

                                       25
<PAGE>

the amount of interest-earning assets anticipated, based upon certain
assumptions, to mature or reprice within a specific time period and the amount
of interest-bearing liabilities anticipated, based upon certain assumptions, to
mature or reprice within that time period. At December 31, 2001, Lenox's
cumulative interest rate gap (which is the difference between the amount of
interest-earning assets maturing or repricing within the year and interest-
bearing liabilities maturing or repricing within one year) as a percentage of
total assets was a positive 20.42%. A gap is considered positive when the amount
of interest rate sensitive assets exceeds the amount of interest rate sensitive
liabilities maturing or repricing within a specific time frame. A gap is
considered negative when the amount of interest rate sensitive liabilities
exceed the amount of interest rate sensitive assets maturing or repricing within
that same time frame. Accordingly, in a rising interest rate environment, an
institution with a positive gap would be in a better position to invest in
higher yielding assets compared to an institution with a negative gap. This may
result in the yield on its assets increasing at a faster pace than the increase
in the cost of its interest-bearing liabilities. During a period of falling
interest rates, an institution with a positive gap would tend to have its assets
repricing at a faster rate than its interest-bearing liabilities, which
consequently, may tend to restrain the growth of its net interest income or
result in a decrease in net interest income.

Average Balance Sheet

     The following table sets forth certain information relating to the Bank at
December 31, 2001 and for the years ended December 31, 2000 and 1999. The yields
and costs are derived by dividing income or expense by the average balance of
assets or liabilities, respectively, for the periods shown except where noted
otherwise. Average balances are derived from average month-end balances.
Management does not believe that the use of average monthly balances instead of
average daily balances has caused a material difference in the information
presented. The yields and costs include fees which are considered adjustments to
yields.

<TABLE>
<CAPTION>

                                             At December 31,                           Year Ended December 31,
                                                                  -----------------------------------------------------------------
                                                  2001                        2001                               2000
                                            ---------------------------------------------------------------------------------------
                                            Balance    Average     Average  Interest     Average     Average   Interest    Average
                                                     Yield/Cost    Balance             Yield/Cost    Balance             Yield/Cost
                                            ---------------------------------------------------------------------------------------
                                                                                                         (Dollars in Thousands)
<S>                                         <C>      <C>           <C>      <C>        <C>           <C>       <C>       <C>
ASSETS:
Interest-earning assets:

Interest-bearing deposits                    $ 2,868     1.74%     $ 1,419    $   77       5.43%     $   223    $   16      7.17%
Investments                                    1,886     5.50        3,213       211       6.57        4,479       296      6.61
Mortgage-backed securities                     4,336     6.43        4,070       275       6.76        4,710       333      7.07
Loan receivable, net                          50,659     7.63       54,182     4,217       7.78       61,071     4,666      7.64
                                             -------     ----      -------    ------       ----      -------    ------      ----
Total interest-earning assets                 59,749     7.19       62,884     4,780       7.60       70,483     5,311      7.54
Non-interest-earning assets                    3,248       --        3,266                             3,285
                                                                   -------                           -------
Total assets                                 $62,997               $66,150                           $73,768
                                             =======               =======                           =======
</TABLE>

                                       26
<PAGE>

<TABLE>
<S>                                         <C>         <C>        <C>       <C>          <C>        <C>       <C>        <C>
LIABILITIES AND EQUITY:
Interest-bearing liabilities

Deposits                                     $33,299     3.62      $34,654     1,606       4.60      $37,694     1,858      4.93
FHLB advances                                 23,179     5.67       26,488     1,493       5.64       30,675     1,938      6.32
                                             -------               -------    ------                 -------    ------
Total interest-bearing liabilities            56,478     4.46       61,142     3,099       5.07       68,369     3,796      5.55
Non-interest-bearing liabilities                 945       --          187                               667
                                                                   -------
Total liabilities                             57,423                61,329                            69,036
Stockholders' equity                           5,574       --        4,821                             4,732
                                             -------               -------                           -------
Total liabilities and equity                 $62,997               $66,150                           $73,768
                                             =======               =======                           =======
Net interest income/interest rate spread                 2.73%                $1,681       2.53%                $1,515      1.99%
                                                         ====                 ======       ====                 ======      ====

Net interest-earning assets                  $ 3,271               $ 1,742                           $ 2,114
                                             =======               =======                           =======

Net interest margin                                        --                              2.67%                            2.15%
                                                         ====                              ====                             ====
</TABLE>


                          Year Ended December 31, 1999
--------------------------------------------------------------------------------
                                             Average                 Average
                                             Balance    Interest    Yield/Cost
                                             ---------------------------------
                                                   (Dollars in thousands)

Assets:                                      $   490     $    23          4.69%
Interest-earning assets:
     Interest-bearing deposits
     Investments                               4,142         267          6.45
     Mortgage-backed securities                6,307         363          5.76
     Loans receivable, net                    52,879       3,805          7.20
                                             -------     -------
Total interest-earning assets                 63,818       4,458          6.99
Non-interest-earning assets                    2,194
Total assets                                 $66,012
                                             =======
Liabilities and Equity:
Interest-bearing liabilities:
     Deposits                                $37,702       1,731          4.59
     FHLB advances                            22,162       1,208          5.45
                                             -------
Total interest-bearing liabilities            59,864       2,939          4.91
Non-interest-bearing liabilities                 390
                                             -------
Total liabilities                             60,254
Stockholders' equity                           5,758
                                             -------
Total liabilities and equity                 $66,012
                                             =======
Net interest income/interest rate spread                 $ 1,519          2.08%
                                                         =======          ====
Net interest-earning assets                  $ 3,954
                                             =======
Net interest margin                                                       2.38%
                                                                          ====


                                       27
<PAGE>

Ratio of interest-earning assets to
 interest-bearing liabilities                 105.79%     102.85%       103.09%
Ratio of interest-earning assets to
 interest-bearing liabilities                 106.60%
                                              ------
Rate/Volume Analysis

     The following table presents the extent to which changes in interest rates
and changes in the volume of interest-earning assets and interest-bearing
liabilities have affected the Bank's interest income and interest expense during
the period indicated.  Information is provided in each category with respect to
(i) changes attributable to changes in volume (changes in volume multiplied by
prior rate), (ii) changes attributable to changes in rate (changes in rate
multiplied by prior volume), and (iii) the net change.  The changes attributable
to the combined impact of volume and rate have been allocated proportionately to
the changes due to volume and the changes due to rate.

<TABLE>
<CAPTION>
                                               Year Ended December 31,            Year Ended December 31,
                                                2001 Compared To Year              2000 Compared To Year
                                               Ended December 31, 2000            Ended December 31, 1999
                                          ----------------------------------------------------------------------------
                                              Increase (Decrease) Due To         Increase (Decrease) Due To
                                          ----------------------------------------------------------------------------
                                              Volume        Rate          Net         Volume         Rate        Net
                                          ----------------------------------------------------------------------------
                                                                         (In Thousands)
<S>                                           <C>           <C>         <C>            <C>          <C>       <C>
INTEREST-EARNING ASSETS:
     Interest-earning deposits                 $  86        $ (25)       $  61          $ (16)       $  9       $ (7)
     Investments                                 (84)          (1)         (85)            22           7         29
     Mortgage-backed securities                  (45)         (13)         (58)          (103)         73        (30)
     Loans receivable, net                      (526)          77         (449)           615         246        861
                                               -----        -----        -----          -----        ----       ----
     Total interest income                      (569)          38         (531)           518         335        853
                                               -----        -----        -----          -----        ----       ----
INTEREST-BEARING LIABILITIES:
     Deposits                                  $(150)       $(102)       $(252)            --         127        127
     FHLB advances                              (265)        (180)        (445)           516         214        730
                                               -----        -----        -----          -----        ----       ----
     Total interest expense                     (415)        (282)        (697)           516         341        857
                                               -----        -----        -----          -----        ----       ----

Net change in net interest income              $(154)       $ 320        $ 166          $   2        $ (6)      $ (4)
                                               =====        =====        =====          =====        ====       ====
</TABLE>

Comparison of Financial Condition at December 31, 2001 and December 31, 2000

     Lenox's total assets decreased 12.3% during 2001 due to a 12.7% decrease in
loans receivable.  The decrease in loans was due to a decrease of $6.9 million
in one- to four-family loans (including construction loans in one- to four-
family properties).  These asset decreases were used to decrease advances from
the FHLB by $6.7 million.  Lenox also experienced a decrease in its investment
portfolio of $3.0 million from $7.3 million at December 31, 2000.  These
decreases were offset by increases in cash and due from banks and FHLB stock.
Cash and due from banks increased $1.5 million as excess funds were invested in
short-term interest earning assets as of December 31, 2001. FHLB stock increased
by 6.9% to $1.9 million at December 31, 2001.

     Lenox's total liabilities decreased 14.3% to $57.4 million at December 31,
2001 due to a decrease in deposits of $3.2 million to $33.3 million and a
decrease in advances from the FHLB of $6.7 million.  The decrease in deposits
was primarily due to a $2.7 million decrease in certificates of deposits.  The
advances from the FHLB decreased as borrowings were repaid with loan decreases.

                                       28
<PAGE>

     Stockholders' equity increased $771,000 to $5.57 million at December 31,
2001.  The increase in stockholders' equity was primarily due to $900,000 from
the sale of Common Shares and the increase in the market value on investments
available for sale of $108,000 net of taxes.

Comparison of Operating Results for the Years Ended December 31, 2001 and
December 31, 2000

     General.  Lenox reported a net loss of $272,800 for 2001 compared to a net
loss of $50,500 for 2000.  The increased loss was primarily due to a
compensation reserve of $300,000 on the potential payout of the employment
contract of the former CEO, and an increase in loan loss provisions of $247,000,
resulting from former management's increase in the amount of loans secured by
non-owner occupied real estate outside the Cincinnati lending area and the
associated perceived inherent risk.

     Interest Income.  Interest and dividend income decreased $531,000 in 2001
primarily due to a decrease in average loans receivable of $6.9 million.
Interest income on investments and mortgage-backed securities decreased $143,000
due to a reduction in the average balance outstanding.  The reduction in
investments and mortgage-backed securities was partially offset by an increase
of $61,000 on interest-earning deposits.

     Interest Expense.  Interest expense decreased by $697,000 to $3.1 million
in 2001 primarily due to a decrease in the average outstanding FHLB advances to
$23.2 million.  The decrease in the interest expense was also due to a decrease
in the average cost of funds from 5.55% for 2000 to 5.07% for 2001, due to the
lower interest rate environment during 2001.

     Provision for Loan Losses.  The provision for loan losses increased
$189,000 to $247,000 for 2001 compared to $58,500 for 2000.  Under prior
management, the Bank experienced an aggressive increase in the concentration of
its non-owner occupied real estate portfolio from 30% as of December 31, 2000 to
approximately 46% as of December 31, 2001. The increase in the allowance for
loan losses was based on the increase in the amount of loans secured by non-
owner occupied real estate located outside the Cincinnati lending area.  Most of
this increase occurred in non-owner occupied real estate in the first six months
of the year and is the result of decisions made by former management.  The
increase in non-owner occupied real estate loans and the increased inherent risk
in this type of lending are the primary reasons for the increase in the
provisions for loan loss.

     Other Income.  Other income increased to $667,500 for 2001 due to
additional fee and loan sale income generated by Lenox Mortgage Corp. of
$327,000.

     General, Administrative and Other Expenses.  General, administrative and
other expenses increased $657,000 during 2001 primarily due to an increase in
compensation and benefits of $401,000 and an increase of $256,000 in legal and
professional fees.  Compensation and benefits increased due to a $300,000
compensation reserve for the potential payout on the employment contract of the
former CEO and additional compensation relating to the change of management in
2001.  Legal and professional fees increased due to additional professional fees
in responding to the regulatory and shareholder issues, as a result of
litigation with the former CEO and as a result of the transition of new
management.

     Income Taxes.  The income tax credit for 2001 was $146,000 compared to
$25,000 for 2000.

Comparison of Financial Condition at December 31, 2000 and December 31, 1999

     Lenox's total assets decreased 5.5% during 2000 due to a 10.9% decrease in
loans receivable.  The decrease in loans was due to a decrease of $7.3 million
in one- to four-family loans (including construction loans in one-to four-family
properties) from $57.5 million to $50.2 million due to the sale of $9.4 million
in lower-yielding adjustable-rate loans in the open market in 2000.  The
proceeds of the sale were used to repay

                                       29
<PAGE>

higher costing FHLB advances. Consumer and multi-family loans also decreased
during 2000 due to lower demand. Lenox also experienced a 4.2% decrease in
mortgage-backed securities during 2000 due to repayments of $84,000 and a
decrease in the unrealized loss of $87,000. These decreases were offset by
increases in cash and due from banks, FHLB stock and property and equipment.
Cash and due from banks increased $1.8 million as excess funds were invested in
short-term interest earning assets as of December 31, 2000. FHLB stock increased
11.5% during 2000. The increase in FHLB stock was necessary to allow for
additional borrowings. Property and equipment increased $867,000 as Lenox
purchased and renovated its new main office in Cincinnati, Ohio.

     Lenox's total liabilities decreased 5.9% in 2000 due to a decrease in
deposits of 7.3% and a decrease in advances from the FHLB of 4.1% in 2000.  The
decrease in deposits was primarily due to a 15.9% decrease in certificates of
deposits during 2000, due to increased competition in Lenox's market area.  The
advances from the FHLB decreased as borrowings were repaid with loan sale
proceeds.  These decreases were offset by a growth in demand deposit accounts of
17.6% during 2000 as Lenox introduced new higher-yielding demand deposit
products.

     Stockholders' equity increased $23,000 to $4.80 million at December 31,
2000.  The increase in stockholders' equity was primarily due to the increase in
the market value on investments available for sale of $12,000 net of taxes and
the amortization of the ESOP and the 1997 Incentive Plan totaling $61,000,
offset by the net loss of $50,000.

Comparison of Operating Results for the Years Ended December 31, 2000 and
December 31, 1999

     General.  Lenox reported a net loss of $50,000 for 2000 compared to a net
loss of $53,000 for 1999.  The increase in revenue was primarily due to an
increase of $96,000 in other income relating to additional fee income and
additional gain on sale of loans of $37,000 from Lenox Mortgage Corp.
operations.  The increase was offset by an increase in general, administrative
and other expenses of $82,000 and a higher provision for loan losses of $19,000.
The increase in general, administrative and other expenses was the result of
higher compensation and benefits expenses relating to Lenox Mortgage Corp.
operations and higher legal and professional fees relating to shareholder
issues.  The increase was offset by a reduction in the occupancy and equipment
expense as there was a one-time charge for the acceleration of the amortization
of leasehold improvements upon termination of the lease agreement on the former
site of the main office of Lenox in 1999.

     Interest Income.  Interest and dividend income increased $853,000 for 2000
due to an increase in average interest-earning assets from $63.8 million for
1999 to $70.5 million for 2000 and an increase in the yield on interest-earning
assets from 6.99% for 1999 to 7.54% for 2000.  The increase in average interest-
earning assets was almost exclusively due to loan growth, especially adjustable-
rate loans.  The increase in the yield on interest-earning assets was due to the
rising interest rate environment.  Interest income on investments and mortgage-
backed securities decreased $7,500 due to a reduction in the average balance
outstanding.  The reduction in investments and mortgage-backed securities was
primarily due to sales of mortgage-backed securities during 1999 plus principal
repayments in 2000, offset by a higher yield on such investments due to the
higher interest rate environment.  Lenox sold no investments or mortgage-backed
securities during 2000.

     Interest Expense.  Interest expense increased 29.2% for 2000 due to an
increase in the average outstanding FHLB advances to $30.7 million from $22.2
million.  Lenox has utilized FHLB advances as an alternative funding source due
to the competition for savings deposits in Lenox's market area.  The average
amount of outstanding deposits remained relatively stable during 2000 compared
to the prior year.  The increase in the interest expense was also due to an
increase in the average cost of funds from 4.91% for 1999 to 5.55% for 2000, due
to the higher interest rate environment during 2000.

                                       30
<PAGE>

     Provision for Loan Losses.  The provision for loan losses increased 46.3%
during 2000 due to the increase in the loan portfolio and the increased risk of
default due to the possibility of a slowing economy.  Additionally, the
increased provision reflects the increase in non-performing loans to total loans
to 0.34% for 2000 compared to 0.08% for 1999.  Lenox's management closely
monitors its loan portfolio and maintains the allowance for loan losses at a
level which Lenox believes to be adequate based on the evaluation of the
collectibility of the loans, prior loan losses and general economic conditions.
While Lenox utilizes the best information available to establish the allowance
for loan losses, future adjustments to the allowance may be necessary due to
economic, operating, regulatory and other conditions that may be beyond Lenox's
control.

     Other Income.  Other income increased to $332,000 for 2000 from $236,000
for 1999, an increase of 40.8%.  The increase was due to additional fee and loan
sale income generated by Lenox Mortgage Corp.  Lenox Mortgage Corp. reported a
full year of operations in 2000 compared to only three months of activity in
1999.  Additional gain on sale of loans was due to the sale of approximately
$9.4 million of lower-yielding adjustable-rate loans during 2000 as part of the
restructuring of the balance sheet.  Lenox used the loan sale proceeds to repay
higher-yielding FHLB advances.

     General, Administrative and Other Expenses.  General, administrative and
other expenses increased 4.6% during 2000 due to an increase of $154,000 in
compensation and benefits expenses and an increase of $53,000 in legal and
professional fees.  The increase was offset by a reduction in occupancy and
equipment due to the one-time charge of $138,000 in 1999 for the acceleration of
amortization on Lenox's leasehold improvements upon termination of the lease on
the former main office location.  Compensation and benefits expenses increased
due to additional compensation relating to Lenox Mortgage Corp. operations.
Legal and professional fees increased due to additional professional fees in
responding to the regulatory and shareholder issues.

     Income Taxes.  The income tax credit for 2000 was $25,000 compared to
$14,000 for 1999.  Taxes are calculated on net income less the ESOP expense as
to SOP 93-6.  The effective tax rates for 2000 and 1999 were 32.9% and 21.5%,
respectively.

Liquidity and Capital Resources

     Lenox's primary sources of funds are deposits, principal and interest
payments on loans, and FHLB advances.  While maturities and scheduled
amortization of loans are predictable sources of funds, deposits flows and
mortgage prepayments are greatly influenced by general interest rates, economic
conditions and competition.  The FDIC requires savings banks to maintain a level
of investment in specified types of liquid assets sufficient to protect and
ensure the safety and soundness of the Bank.  The Bank maintains a minimum level
of liquidity, as defined by the FDIC, such that the liquidity rates, defined as
the total of cash and marketable investment securities divided by total deposits
and short term liabilities, will exceed 15%.  The Bank's liquidity ratios were
25%, 24% and 17% at December 31, 2001, 2000 and 1999, respectively.

     The primary investment activity of Lenox is the origination of one- to
four-family mortgage loans, multi-family mortgage loans and consumer loans, and
the purchase of investments, including CMOs.  During the years ended December
31, 2001, 2000, and 1999, the Bank originated mortgage loans in the amounts of
$25.0 million, $15.5 million and $37.7 million, respectively, and consumer loans
in the amount of $0.6 million, $1.1 million and $1.2 million, respectively.

     The Bank's most liquid assets are cash and short-term investments.  The
levels of these assets are dependent on the Bank's operating, financing, lending
and investing activities during any given period.  At December 31, 2001, cash
and short term investments totaled $4.1 million.

                                       31
<PAGE>

     At December 31, 2001, the Bank had outstanding loan commitments (including
undisbursed loan proceeds and unused lines of credit) of $3.0 million.  The Bank
anticipates that it will have sufficient funds available to meet its current
loan origination commitments.  Certificates of deposits which are scheduled to
mature in one year or less from December 31, 2001, totaled $13.7 million.  The
Bank relies primarily on competitive rates, customer service, and long-standing
relationships with customers to retain deposits.  Occasionally, the Bank will
also offer special competitive promotions to its customers to increase retention
and promote deposit growth.  Based upon the Bank's historical experience with
deposit retention, management believes that, although it is not possible to
predict future terms and conditions upon renewal, a significant portion of such
deposits will remain with the Bank.

Impact of Inflation and Changing Prices

     The Consolidated Financial Statements and Notes thereto presented in this
report have been prepared in accordance with GAAP, which require the measurement
of the financial position and operating results in terms of historical dollars
without considering the changes in the relative purchasing power of money over
time due to inflation.  The impact of inflation is reflected in the increased
cost of Lenox's operations.  Unlike industrial companies, nearly all of the
assets and liabilities of Lenox are monetary in nature.  As a result, interest
rates have a greater impact on Lenox's performance than do the effects of
general levels of inflation.  Interest rates do not necessarily move in the same
direction or to the same extent as the price of goods and services.

Impact of New Accounting Standards

     The following does not constitute a comprehensive summary of all material
changes or developments affecting the manner in which Lenox keeps its books and
records and performs its financial accounting responsibilities.  It is intended
only as a summary of some of the recent pronouncements made by the FASB which
are of particular interest to financial institutions.

     On July 20, 2001, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standard (SFAS) No. 141 and 142.  SFAS No. 141 requires
that all business combinations be accounted for under a single method, the
purchase method.  The use of the pooling of interest method is no longer
permitted.  SFAS No. 141 requires that the purchase method be used for
combination initiated after June 30, 2001.  The adoption of this standard did
not impact the Bancorp because they have not entered into any business
combinations.

     SFAS No. 142 requires that goodwill no longer be amortized to earnings, but
instead be reviewed for impairment.  The amortization of goodwill ceases upon
adoption of the Statement, which for most companies will be January 1, 2002.
Management has determined that there will be no impact upon the adoption of this
standard.

Item 7.   Financial Statements.

     See Item 13 below and the Index therein for a listing of the financial
statements and supplementary data filed as part of this report.

Item 8.   Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.

     Effective March 14, 2002, Lenox dismissed Clark, Schaefer, Hackett & Co. as
its independent public accountants and engaged Baird, Kurtz & Dobson LLP as its
new independent public accountants.  The decision to change accountants was
recommended by the Audit Committee and approved by the Executive Committee of
the Board of Directors.

                                       32
<PAGE>

     The reports of Clark, Schaefer, Hackett & Co. on the financial statements
of Lenox for the two most recent fiscal years contained no adverse opinion or
disclaimer of opinion, and were not qualified or modified as to uncertainty,
audit scope or accounting principles.

     During Lenox's two most recent fiscal years and through March 14, 2002
there were no disagreements with Clark, Schaefer, Hackett & Co. on any matter of
accounting principles or practices, financial statement disclosure, or auditing
scope or procedure, which disagreements, if not resolved to the satisfaction of
Clark, Schaefer, Hackett & Co., would have caused them to make reference thereto
in their reports on the financial statements for such years.  During Lenox's two
most recent fiscal years and through March 14, 2002, there were no "reportable
events" as defined by Item 304(a)(1)(v) of Regulation S-K.  Neither Lenox nor
anyone on its behalf has consulted with Baird, Kurtz & Dobson LLP during Lenox's
two most recent fiscal years, or any subsequent interim period, prior to its
engagement of Baird, Kurtz & Dobson LLP, except in connection with an
information systems audit performed by Baird, Kurtz & Dobson LLP in December
2001 required by federal and state banking regulators.

                                    Part III

     Items 9, 10, 11 and 12 are incorporated by reference to Lenox's Proxy
Statement for its 2002 Annual Meeting of Shareholders filed with the Commission
pursuant to Regulation 14A.

Item 13.    Exhibits and Reports on Form 8-K.

(a)(1) and (2)  Financial Statements and Schedules
                ----------------------------------


<TABLE>
<CAPTION>
                                                                                    Page
                                                                                    ----
<S>                                                                                 <C>
Report of Independent Certified Public Accountant                                   F-1
Consolidated Balance Sheets at December 31, 2001 and 2000                           F-2 to F-3
Consolidated Statements of Operations for the years ended December 31, 2001,        F-4
 2000 and 1999
Consolidated Statements of Comprehensive Loss for the years ended December 31,      F-5
 2001, 2000 and 1999
Consolidated Statements of Changes in Stockholders' Equity for the years ended      F-6 to F-8
 December 31, 2001, 2000 and 1999
Consolidated Statements of Cash Flows for the years ended December 31, 2001,        F-9 to F-11
 2000 and 1999
Notes to Consolidated Financial Statements                                          F-12 to F-34
</TABLE>

                                       33
<PAGE>

                              LENOX BANCORP INC.

                       Consolidated Financial Statements

                          December 31, 2001 and 2000

                                     With

                         Independent Auditors' Report
<PAGE>

                              LENOX BANCORP INC.

                               Table of Contents
                               -----------------

<TABLE>
<CAPTION>
                                                               Page
                                                              -------
<S>                                                           <C>
Independent Auditors' Report                                      F-1

Consolidated Financial Statements:

     Balance Sheets                                         F-2 - F-3

     Statements of Operations                                     F-4

     Statements of Comprehensive Loss                             F-5

     Statements of Changes in Stockholders' Equity          F-6 - F-8

     Statements of Cash Flows                              F-9 - F-11

     Notes to Financial Statements                        F-12 - F-34
</TABLE>
<PAGE>

                        Clark, Schaefer, Hackett & Co.
                         CERTIFIED PUBLIC ACCOUNTANTS
                             BUSINESS CONSULTANTS



                         Independent Auditors' Report
                         ----------------------------


The Board of Directors
Lenox Bancorp Inc.:

We have audited the accompanying consolidated balance sheets of Lenox Bancorp
Inc. as of December 31, 2001 and 2000, and the related consolidated statements
of operations, comprehensive loss, changes in stockholders' equity, and cash
flows for each of the three years in the period ended December 31, 2001. These
financial statements are the responsibility of the Bancorp's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Lenox Bancorp Inc.
as of December 31, 2001 and 2000, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 2001, in
conformity with accounting principles generally accepted in the United States of
America.


  /s/ Clark, Schaefer, Hackett & Co.


Cincinnati, Ohio
February 11, 2002

                                      F-1
<PAGE>

                              LENOX BANCORP INC.

                          Consolidated Balance Sheets

                          December 31, 2001 and 2000

                                    Assets
                                    ------

<TABLE>
<CAPTION>
                                                                              December 31,
                                                                   ---------------------------------
                                                                       2001                  2000
                                                                       ----                  ----
<S>                                                                <C>                  <C>
Cash and due from banks (including interest
     bearing deposits of $2,867,542 and $1,856,491
     at December 31, 2001 and 2000)                                $  4,094,621            2,590,782
Certificates of deposit                                                       -               98,483
Investment securities - available for
     sale, at fair value (amortized cost of
     $2,700,000 at December 31, 2000)                                         -            2,661,115
Mortgage-backed securities - available
     for sale, at fair value (amortized cost
     of $360,456 and $514,186 at
     December 31, 2001 and 2000)                                        366,484              509,021
Collateralized mortgage obligations - available
     for sale, at fair value (amortized cost
     of $3,963,338 and $4,157,144 at
     December 31, 2001 and 2000)                                      3,969,713            4,049,881
Loans receivable, net                                                50,658,807           54,250,641
Loans held for sale - at lower of cost or market                              -            3,711,567
Accrued interest receivable:
     Loans                                                              320,860              420,971
     Mortgage-backed securities                                           2,844                3,852
     Collateralized mortgage obligations                                 22,226               25,943
     Investments and certificates of deposit                                  -               50,181
Property and equipment, net                                           1,197,361            1,266,378
Real estate owned                                                        38,892                    -
Federal Home Loan Bank stock - at cost                                1,886,400            1,764,600
Prepaid expenses and other assets                                       399,312              335,987
Prepaid federal income taxes                                             21,900               89,609
Deferred federal income taxes                                            17,100                    -
                                                                   ------------         ------------

                                                                   $ 62,996,520           71,829,011
                                                                   ============         ============
</TABLE>

See accompanying notes to financial statements.

                                      F-2
<PAGE>

                     Liabilities and Stockholders' Equity
                     ------------------------------------

<TABLE>
<CAPTION>
                                                                                      December 31,
                                                                         ------------------------------------
                                                                                2001                 2000
                                                                                ----                 ----
<S>                                                                      <C>                  <C>
Deposits                                                                 $   33,298,932          36,544,254
Advances from Federal Home Loan Bank                                         23,178,728          29,864,223
Advance payments by borrowers for taxes
     and insurance                                                              363,984             256,778
Accrued expenses                                                                580,639             285,664
Deferred federal income taxes                                                         -              75,590
                                                                         --------------       -------------
                                                                             57,422,283          67,026,509
                                                                         --------------       -------------
Commitments

Stockholders' equity:
     Common stock-authorized 2,000,000 shares
        no par value, 507,496 and 425,677 issued
        and 366,847 and 285,028 outstanding at
        December 31, 2001 and 2000, respectively                                      -                   -
     Additional paid in capital                                               4,681,860           3,767,033
     Retained earnings - substantially restricted                             3,784,731           4,057,524
     Unearned ESOP shares                                                      (135,767)           (171,395)
     Shares acquired for Stock Incentive Plan                                  (197,635)           (183,654)
     Less 140,649 shares held in treasury at
        December 31, 2001 and 2000                                           (2,567,139)         (2,567,139)
     Accumulated other comprehensive income:
        Unrealized gain (loss) on available for sale
           securities, net of income taxes                                        8,187             (99,867)
                                                                         --------------       -------------
                                                                              5,574,237           4,802,502
                                                                         --------------       -------------


                                                                         $   62,996,520          71,829,011
                                                                         ==============       =============
</TABLE>

                                      F-3
<PAGE>

                              LENOX BANCORP INC.

                     Consolidated Statements of Operations

                      Three Years Ended December 31, 2001

<TABLE>
<CAPTION>
                                                                          2001                 2000                1999
                                                                          ----                 ----                ----
<S>                                                                 <C>                    <C>                 <C>
Interest and dividend income:
     Loans                                                          $   4,217,488            4,665,829           3,805,200
     Mortgage-backed securities                                            27,497               37,125              44,440
     Collateralized mortgage obligations                                  247,714              296,089             318,994
     Investments and interest bearing deposits                            165,311              189,477             209,759
     Federal Home Loan Bank                                               122,112              122,749              79,781
                                                                    -------------          -----------         -----------
                                                                        4,780,122            5,311,269           4,458,174
                                                                    -------------          -----------         -----------
Interest expense:
     Deposits                                                           1,606,309            1,858,226           1,731,320
     Borrowed money and capitalized leases                              1,493,105            1,938,314           1,208,308
                                                                    -------------          -----------         -----------
                                                                        3,099,414            3,796,540           2,939,628
                                                                    -------------          -----------         -----------

           Net interest income before provision
              for loan losses                                           1,680,708            1,514,729           1,518,546

Provision for loan losses                                                 247,143               58,500              40,000
                                                                    -------------          -----------         -----------

           Net interest income after provision
              for loan losses                                           1,433,565            1,456,229           1,478,546
                                                                    -------------          -----------         -----------

Other income:
     Service fee and other income                                         190,755              193,128             129,202
     Mortgage brokerage fee income                                        327,049                    -                   -
     Gain on sale of real estate owned                                        236                    -                   -
     Gain (loss) on sale of investments                                   (24,664)                   -               4,842
     Gain on sale of loans                                                174,131              138,858             101,675
                                                                    -------------          -----------         -----------
                                                                          667,507              331,986             235,719
                                                                    -------------          -----------         -----------
General, administrative and other expenses:
     Compensation and employee benefits                                 1,312,344              911,413             756,922
     Occupancy and equipment                                              313,076              286,066             388,837
     Federal deposit insurance premiums                                    19,103               13,635              20,726
     Franchise taxes                                                       49,543               51,038              80,639
     Legal and professional fees                                          568,798              313,384             260,667
     Advertising                                                            7,444               21,743              38,275
     Other operating expenses                                             249,846              266,162             235,467
                                                                    -------------          -----------         -----------
                                                                        2,520,154            1,863,441           1,781,533
                                                                    -------------          -----------         -----------
           Loss before benefit
              for income taxes                                           (419,082)             (75,226)            (67,268)

Benefit for income taxes                                                 (146,289)             (24,750)            (14,477)
                                                                    -------------          -----------         -----------

           Net loss                                                 $    (272,793)             (50,476)            (52,791)
                                                                    ==============         ============        ============

Basic loss per share                                                $       (0.99)               (0.20)              (0.18)
                                                                    ==============         ============        ============

Diluted loss per share                                              $       (0.99)               (0.20)              (0.18)
                                                                    ==============         ============        ============
</TABLE>

See accompanying notes to financial statements

                                      F-4
<PAGE>

                              LENOX BANCORP INC.

                 Consolidated Statements of Comprehensive Loss

                      Three Years Ended December 31, 2001

<TABLE>
<CAPTION>
                                                                           2001                2000                1999
                                                                           ----                ----                ----
<S>                                                                <C>                     <C>               <C>
Net loss                                                           $     (272,793)            (50,476)            (52,791)

Other comprehensive loss, net of tax
     Unrealized gains (losses) on available for
        sale securities:
           Unrealized holding gains (losses)
              during the year                                              91,776              11,692            (119,374)
           Reclassification adjustments for (gains)
              losses included in net loss                                  16,278                   -              (3,196)
                                                                   --------------          ----------        ------------

                 Net gain (loss) recognized in other
                    comprehensive income                                  108,054              11,692            (122,570)
                                                                   --------------          ----------        ------------

Comprehensive loss                                                 $     (164,739)            (38,784)           (175,361)
                                                                   ==============          ==========        ============
</TABLE>

See accompanying notes to financial statements

                                      F-5
<PAGE>

                              LENOX BANCORP INC.

          Consolidated Statements of Changes in Stockholders' Equity

                      Three Years Ended December 31, 2001

<TABLE>
<CAPTION>
                                                                                                             Unrealized
                                                                                                             Gain (Loss)
                                                   Additional               Unearned    Stock               on Available
                                          Common    Paid in      Retained     ESOP    Incentive   Treasury    for Sale
                                           Stock    Capital      Earnings    Shares      Plan       Stock    Securities     Total
                                           -----    -------      --------    -------     ----       -----    ----------     -----
<S>                                       <C>      <C>          <C>         <C>       <C>        <C>        <C>           <C>
Balance at December 31, 1998              $    -   3,743,279    4,216,005   (240,463) (235,469)    (347,728)     11,011   7,146,635

Net loss for the year ended
     December 31, 1999                         -           -      (52,791)         -         -            -           -     (52,791)

ESOP shares committed to be
     allocated at average market price
     (3,798 shares at $16.40 per share)        -      30,277            -     31,993         -            -           -      62,270

Shares acquired to be held in treasury         -           -            -          -         -   (2,223,172)          -  (2,223,172)

Shares reissued for exercised stock
     options                                   -           -            -          -         -        3,761           -       3,761

Stock Incentive Plan awards                    -        (128)           -          -       128            -           -           -

Unvested stock awards returned to
     Plan                                      -       2,758            -          -    (2,758)           -           -           -

Amortization of Stock Incentive Plan           -           -            -          -    21,087            -           -      21,087

Change in net unrealized gain on
     available-for-sale securities net
     deferred tax benefit of $63,142          -            -            -          -         -            -    (122,570)   (122,570)

Cash dividends of $.20 per share              -            -      (55,214)         -         -            -           -     (55,214)
                                         ------    ---------    ---------   --------  --------   ----------    --------   ---------

Balance at December 31, 1999             $    -    3,776,186    4,108,000   (208,470) (217,012)  (2,567,139)   (111,559)  4,780,006
                                         ======    =========    =========   ========  ========   ==========    ========   =========
</TABLE>


See accompanying notes to financial statements.

                                      F-6
<PAGE>

                              LENOX BANCORP INC.

          Consolidated Statements of Changes in Stockholders' Equity

                      Three Years Ended December 31, 2001

<TABLE>
<CAPTION>
                                                                                                             Unrealized
                                                                                                             Gain (Loss)
                                                   Additional               Unearned    Stock               on Available
                                          Common    Paid in      Retained     ESOP    Incentive   Treasury    for Sale
                                           Stock    Capital      Earnings    Shares      Plan       Stock    Securities     Total
                                           -----    -------      --------    -------     ----       -----    ----------     -----
<S>                                       <C>      <C>          <C>         <C>       <C>        <C>         <C>          <C>
Balance at December 31, 1999              $    -   3,776,186    4,108,000   (208,470) (217,012)  (2,567,139)   (111,559)  4,780,006

Net loss for the year ended
     December 31, 2000                         -           -      (50,476)         -         -            -           -     (50,476)

ESOP shares committed to be
     allocated at average market price
     (3,707 shares at $12.18 per share)        -       8,094            -     37,075         -            -           -      45,169

Stock Incentive Plan awards                    -     (18,135)           -          -    18,135            -           -           -

Unvested stock awards returned to
     Plan                                      -         888            -          -      (888)           -           -           -

Amortization of Stock Incentive Plan           -           -            -          -    16,111            -           -      16,111

Change in net unrealized gain on
     available-for-sale securities net of
     deferred tax benefit of $6,023            -           -            -          -         -            -      11,692      11,692
                                          ------   ---------    ---------   --------  --------   ----------    --------   ---------

Balance at December 31, 2000              $    -   3,767,033    4,057,524   (171,395) (183,654)  (2,567,139)    (99,867)  4,802,502
                                          ======   =========    =========   ========  ========   ==========    ========   =========
</TABLE>

See accompanying notes to financial statements.

                                      F-7
<PAGE>

                              LENOX BANCORP INC.

          Consolidated Statements of Changes in Stockholders' Equity

                      Three Years Ended December 31, 2001

<TABLE>
<CAPTION>
                                                                                                             Unrealized
                                                                                                             Gain (Loss)
                                                   Additional               Unearned    Stock               on Available
                                          Common    Paid in      Retained     ESOP    Incentive   Treasury    for Sale
                                           Stock    Capital      Earnings    Shares      Plan       Stock    Securities     Total
                                           -----    -------      --------    -------     ----       -----    ----------     -----
<S>                                       <C>      <C>          <C>         <C>       <C>        <C>        <C>           <C>
Balance at December 31, 2000              $    -   3,767,033    4,057,524   (171,395) (183,654)  (2,567,139)    (99,867)  4,802,502

Net loss for the year ended
     December 31, 2001                         -           -     (272,793)         -         -            -           -    (272,793)

Issuance of 81,819 shares of common
     stock at $11 per share in
     September and December 2001               -     900,009            -          -         -            -           -     900,009

ESOP shares committed to be
     allocated at average market price
     (3,563 shares at $10.14 per share)        -         482            -     35,628         -            -           -      36,110

Unvested stock awards returned to
     Plan                                      -      14,336            -          -   (14,336)           -           -           -

Amortization of Stock Incentive Plan           -           -            -          -       355            -           -         355

Change in net unrealized gain on
     available-for-sale securities net of
     deferred tax liability of $55,664         -           -            -          -         -            -     108,054     108,054
                                          ------   ---------    ---------   --------  --------   ----------    --------   ---------

Balance at December 31, 2001              $    -   4,681,860    3,784,731   (135,767) (197,635)  (2,567,139)      8,187   5,574,237
                                          ======   =========    =========   ========  ========   ==========    ========   =========
</TABLE>


See accompanying notes to financial statements.

                                      F-8
<PAGE>

                               LENOX BANCORP INC.

                      Consolidated Statements of Cash Flows

                       Three Years Ended December 31, 2001


<TABLE>
<CAPTION>
                                                                   2001            2000            1999
                                                                   ----            ----            ----
<S>                                                           <C>             <C>             <C>
Cash flows from operating activities:
     Interest and dividends received                          $  4,989,823       5,268,417       4,314,562
     Interest paid                                              (3,144,261)     (3,795,934)     (2,867,583)
     Loans disbursed for sale in the secondary market           (9,282,115)     (4,083,701)     (4,749,444)
     Proceeds from sale of loans in the secondary market         9,360,907       4,373,956       4,846,531
     Loan origination fees paid                                    (39,042)        (95,782)       (146,057)
     Other fees received                                           517,804         193,128         129,202
     Cash paid to suppliers and employees                       (2,000,493)     (1,804,576)     (1,379,832)
     Income taxes refunded (paid)                                   65,645          26,806         (51,000)
                                                              ------------    ------------    ------------

          Net cash provided by operating activities                468,268          82,314          96,379
                                                              ------------    ------------    ------------

Cash flows from investing activities:
     Property and equipment additions                              (16,384)       (961,550)        (33,095)
     Proceeds from sale of building improvements                        --          22,000              --
     Repayments of mortgage-backed securities                      148,355          83,721         189,962
     Purchase of collateralized mortgage obligations -
       available for sale                                       (6,284,115)             --              --
     Repayments of collateralized mortgage obligations           2,349,705              --       1,567,603
     Proceeds from sale of collateralized mortgage
       obligations - available for sale                          4,093,692              --       2,344,782
     Maturity of certificates of deposit                           100,000         100,000              --
     Purchase of certificates of deposit                            (1,517)         (5,202)        (10,190)
     Purchase of Federal Home Loan Bank stock                           --         (59,200)       (681,100)
     Net change in loans                                         3,228,770      (2,666,737)    (24,348,454)
     Proceeds from sale of loans                                 3,695,329       9,423,365              --
     Loans participations purchased                                     --              --      (2,431,200)
     Proceeds from loan participations sold                             --              --         300,000
     Maturity of investments - available for sale                2,000,000              --         600,000
     Proceeds from sale of investments - available for sale        711,410              --              --
     Proceeds from sale of real estate acquired through
       foreclosure                                                  41,134              --              --
                                                              ------------    ------------    ------------

          Net cash provided (used) by investing activities      10,066,379       5,936,397     (22,501,692)
                                                              ------------    ------------    ------------

          Net cash flows provided (used) by operating and
            investing activities (subtotal carried forward)   $ 10,534,647       6,018,711     (22,405,313)
                                                              ------------    ------------    ------------
</TABLE>

See accompanying notes to financial statements

                                      F-9
<PAGE>

                              LENOX BANCORP INC.

                     Consolidated Statements of Cash Flows

                      Three Years Ended December 31, 2001

<TABLE>
<CAPTION>
                                                                          2001                2000                1999
                                                                          ----                ----                ----
<S>                                                              <C>                        <C>               <C>
          Net cash flows provided (used) by operating and
            investing activities (subtotal brought forward)       $      10,534,647           6,018,711         (22,405,313)

Cash flows from financing activities:
     Net increase (decrease) in deposits                                 (3,245,322)         (2,891,528)          6,369,044
     Net borrowings from Federal Home Loan Bank                                   -             165,000          17,050,000
     Repayment of Federal Home Loan Bank advances                        (6,685,495)         (1,439,441)           (351,342)
     Purchase of shares to be held in treasury                                    -                   -          (2,223,172)
     Proceeds from exercised stock options                                        -                   -               3,761
     Proceeds from issuance of stock                                        900,009                   -                   -
     Dividends paid on common stock                                               -                   -             (55,214)
                                                                  -----------------     ---------------      --------------

          Net cash provided (used) by financing activities               (9,030,808)         (4,165,969)         20,793,077
                                                                  -----------------     ---------------      --------------

     Increase (decrease) in cash and cash equivalents                     1,503,839           1,852,742          (1,612,236)

     Cash and due from banks at beginning of period                       2,590,782             738,040           2,350,276
                                                                  -----------------     ---------------      --------------

     Cash and due from banks at end of period                     $       4,094,621           2,590,782             738,040
                                                                  =================     ===============      ==============


Supplemental disclosure of noncash investing activities:

     Change in unrealized gains (losses) on securities
       available for sale - net of related tax effects            $         108,054              11,692            (122,570)
                                                                  =================     ===============      ==============

     Reclassification of mortgage loans to real
       estate owned                                               $          97,337                   -                   -
                                                                  =================     ===============      ==============
</TABLE>

See accompanying notes to financial statements.

                                     F-10
<PAGE>

                              LENOX BANCORP INC.

                     Consolidated Statements of Cash Flows

                      Three Years Ended December 31, 2001

                    Reconciliation of Net Loss to Net Cash
                       Provided by Operating Activities
                       --------------------------------

<TABLE>
<CAPTION>
                                                                             2001                2000              1999
                                                                             ----                ----              ----
<S>                                                                     <C>                   <C>              <C>
Net loss                                                                $   (272,793)           (50,476)          (52,791)

Adjustments to reconcile net loss to net cash provided by
    operating activities:
         Depreciation and amortization                                        89,227             80,181           231,301
         Provision for losses on loans                                       247,143             58,500            40,000
         Amortization of deferred loan costs (fees)                           62,318             59,455            38,342
         Deferred loan origination fees (costs)                              (42,702)           (82,541)         (171,263)
         Federal Home Loan Bank stock dividends                             (121,800)          (122,600)          (79,500)
         (Gain) loss on sale of investment and mortgage-backed
            securities                                                        24,664                  -            (4,842)
         Gain on sale of loans                                               (95,339)           (27,091)                -
         Gain on sale of real estate acquired through foreclosure               (236)                 -                 -
         Amortization of stock incentive plan awards                             355             16,111            21,087
         ESOP expense                                                         36,110             45,169            62,270
         Effect of change in operating assets and liabilities:
               Loans held for sale                                                 -            164,450            55,570
               Accrued interest receivable                                   155,017            (63,140)         (168,778)
               Excess servicing rights                                       110,340             74,151           (21,511)
               Prepaid expenses and other assets                             (45,573)           (39,567)          (38,936)
               Prepaid income taxes                                           67,709            (12,500)          (48,157)
               Advances by borrowers for taxes and insurance                 107,206             (8,712)          103,085
               Accrued expenses                                              294,975            (23,632)          147,822
               Deferred federal income tax                                  (148,353)            14,556           (17,320)
                                                                        ------------          ---------        ----------

                      Net cash provided by operating activities         $    468,268             82,314            96,379
                                                                        ============          =========        ==========
</TABLE>


See accompanying notes to financial statements.

                                     F-11
<PAGE>

                              LENOX BANCORP INC.

                         Notes to Financial Statements

1.   Organization and Summary of Significant Accounting Policies:
     -----------------------------------------------------------

     The following describes the organization and the significant accounting
     policies followed in the preparation of these financial statements.

          Nature of operations and principles of consolidation
          ----------------------------------------------------

          Lenox Bancorp Inc. (the Bancorp) is a holding company formed in 1995
          in conjunction with the conversion of Lenox Savings Bank from a mutual
          savings bank to a stock savings bank in July 1996. The conversion
          culminated in the Bancorp's issuance of 425,677 shares. The Bancorp's
          financial statements include the accounts of its wholly-owned
          subsidiary, Lenox Savings Bank and Lenox Savings Bank's wholly-owned
          subsidiary, Lenox Mortgage Corporation. All significant intercompany
          transactions have been eliminated.

          Lenox Savings Bank is a state-chartered savings bank and a member of
          the Federal Home Loan Bank system (FHLB) and subject to regulation by
          the Federal Deposit Insurance Corporation (FDIC) and the State of
          Ohio. As a member of the FHLB system, Lenox Savings Bank maintains a
          required investment in capital stock of the Federal Home Loan Bank of
          Cincinnati.

          The Bancorp's business consists of attracting deposits from the
          general public and applying those funds in the origination of real
          estate and consumer loans. The Bancorp's profitability is
          significantly dependent on its net interest income, which is the
          difference between interest income generated from interest-earning
          assets (i.e. loans and investments) and the interest expense paid on
          the interest-bearing liabilities (i.e. customer deposits and borrowed
          funds). Net interest income is affected by the relative amount of
          interest-earning assets and interest-bearing liabilities and the
          interest received or paid on these balances. The level of interest
          rates paid or received by the Bancorp can be significantly influenced
          by a number of environmental factors, such as governmental monetary
          policy, that are outside of management's control.

          Savings accounts are insured by the Savings Association Insurance Fund
          (SAIF), a division of the FDIC, within certain limitations. Semi-
          annual premiums are required by the SAIF for the insurance of such
          savings accounts.

                                     F-12
<PAGE>

          Use of estimates
          ----------------

          The preparation of financial statements in conformity with generally
          accepted accounting principles requires management to make estimates
          and assumptions that affect the reported amounts of assets and
          liabilities and disclosure of contingent assets and liabilities at the
          date of the financial statements and that affect the reported amounts
          of revenues and expenses during the reporting period. Actual results
          could differ from those estimates. Areas where management's estimates
          and assumptions are more susceptible to change in the near-term
          include the allowance for loan losses and the fair value of certain
          securities.

          Cash and due from banks
          -----------------------

          For the purpose of presentation in the statements of cash flows, the
          Bancorp considers all highly liquid debt instruments with original
          maturity when purchased of three months or less to be cash
          equivalents. Cash and cash equivalents are defined as those amounts
          included in the balance sheets caption cash and due from banks.

          The Bancorp maintains its cash deposit accounts at financial
          institutions where the balance, at times, may exceed federally insured
          limits.

          Investments in debt and equity securities
          -----------------------------------------

          Investments in debt and equity securities are classified upon
          acquisition into one of three categories: held to maturity, trading,
          and available for sale. Debt securities that the Bancorp has the
          positive intent and ability to hold to maturity are classified as held
          to maturity securities and reported at amortized cost. Debt and equity
          securities that are bought and held principally for the purpose of
          selling in the near-term are classified as trading securities and
          reported at fair value, with unrealized gains and losses included in
          earnings. The Bancorp has no trading securities. Debt and equity
          securities not classified as either held to maturity securities or
          trading securities are classified as available for sale securities and
          reported at fair value, with unrealized gains or losses excluded from
          earnings and reported as a separate component of equity, net of
          deferred taxes.

          Gains or losses on the sale of investment securities, mortgage-backed
          securities and collateralized mortgage obligations available for sale
          are determined on the specific identification method. Premiums and
          discounts on investment securities, mortgage-backed securities and
          collateralized mortgage obligations are amortized or accredited using
          the interest method over the expected lives of the related securities.

                                     F-13
<PAGE>

          Loans receivable
          ----------------

          Loans receivable that management has the intent and ability to hold
          for the foreseeable future or until maturity or payoff are reported at
          their outstanding unpaid principal balances reduced by any charge offs
          or specific valuation accounts and net of any deferred fees or costs
          on originated loans, or unamortized premiums or discounts on purchased
          loans.

          Loan origination fees and certain direct origination costs are
          capitalized and recognized as an adjustment of the yield of the
          related loan.

          In 1998, the Bancorp began selling all eligible fixed rate and some
          adjustable rate, single-family loans originated in the secondary
          market. Loans held for sale are carried at the lower of cost or
          market, determined in the aggregate. In computing cost, deferred loan
          origination fees and costs are aggregated with the principal balances
          of the related loans.

          The Bancorp retains the servicing on some of the loans sold and agrees
          to remit to the investor loan principal and interest at agreed-upon
          rates. These rates can differ from the loan's contractual interest
          rate due to servicing fees retained.

          The allowance for loan and real estate losses is increased by charges
          to income and decreased by charge offs (net of recoveries).
          Management's periodic evaluation of the adequacy of the allowance is
          based on the Bancorp's past loan loss experience, known and inherent
          risks in the portfolio, adverse situations that may affect the
          borrower's ability to repay, the estimated value of any underlying
          collateral, and current economic conditions. In addition, various
          regulatory agencies, as an integral part of their examination process,
          periodically review the Bancorp's allowance for loan losses. Such
          agencies may require the Bancorp to recognize additions to the
          allowance based on judgments different from those of management.

          Although management uses the best information available to make these
          estimates, future adjustments to the allowances may be necessary in
          the near term due to economic, operating, regulatory and other
          conditions that may be beyond the Bancorp's control. However, the
          amount of the change that is reasonably possible cannot be estimated.

          Loans, including impaired loans, are generally classified as non-
          accrual if they are past due as to maturity or payment of principal or
          interest for a period of more than 90 days, unless such loans are
          well-secured and in the process of collection. Loans that are on a
          current payment status or past due less than 90 days may also be
          classified as non-accrual if repayment in full of principal and/or
          interest is in doubt.

                                     F-14
<PAGE>

          Loans may be returned to accrual status when all principal and
          interest amounts contractually due (including arrearages) are
          reasonably assured of repayment within an acceptable period of time,
          and there is a sustained period of repayment performance by the
          borrower, in accordance with the contractual terms of interest and
          principal. While a loan is classified as non-accrual, interest income
          is generally recognized on a cash basis.

          Foreclosed real estate
          ----------------------

          Real estate properties acquired through, or in lieu of, loan
          foreclosure are to be sold and are initially recorded at fair value at
          the date of foreclosure establishing a new cost basis. After
          foreclosure, valuations are periodically performed by management and
          the real estate is carried at the lower of carrying amount or fair
          value less cost to sell. Revenue and expenses from operations and
          changes in the valuation allowance are included in loss on foreclosed
          real estate.

          Property and equipment
          ----------------------

          Property and equipment are carried at cost, less accumulated
          depreciation and amortization computed by straight-line and
          accelerated methods over the estimated useful lives of the respective
          assets.

          Income taxes
          ------------

          Deferred tax assets and liabilities represent the tax effects of the
          temporary differences in the basis of certain assets and liabilities
          for tax and financial statement purposes, calculated at currently
          effective tax rates of future deductible or taxable amounts
          attributable to events that have been recognized on a cumulative basis
          in the financial statements.

          The Bancorp's principal temporary differences between pretax financial
          income and taxable income result from different methods of accounting
          for deferred loan origination fees and costs, Federal Home Loan Bank
          stock dividends, the general loan loss allowance and the post-1987
          percentage of earnings bad debt deduction. For certain assets acquired
          after December 31, 1980, a temporary difference is also recognized for
          depreciation utilizing accelerated methods for Federal income tax
          purposes.

          Concentration of customers
          --------------------------

          The Bancorp accepts deposits from customers who are primarily in the
          Metropolitan Cincinnati area. The Bancorp grants the majority of its
          real estate and consumer loans to customers who are primarily in the
          Metropolitan Cincinnati and Columbus areas. The majority of loans in
          the Columbus area are non-owner occupied investment real estate.

                                     F-15
<PAGE>

          Fair values of financial instruments
          ------------------------------------

          The following methods and assumptions were used by the Bancorp in
          estimating fair values of financial instruments as disclosed herein:

                 Cash and short-term instruments. The carrying amounts of cash
                 and short-term instruments approximate their fair value.

                 Available-for-sale and held-to-maturity securities. Fair values
                 for securities excluding restricted equity securities, are
                 based on quoted market prices. The carrying values of
                 restricted equity securities approximate fair values.

                 Loans receivable. For variable-rate loans that reprice
                 frequently and have no significant change in credit risk, fair
                 values are based on carrying values. Fair values for certain
                 mortgage loans (for example, one-to-four family residential),
                 credit-card loans, and other consumer loans were estimated by
                 discounting the future cash flows using the current rates at
                 which similar loans would be made to borrowers with similar
                 credit ratings and for the same remaining maturities.

                 Deposit liabilities. The fair values disclosed for demand
                 deposits, NOW and money market accounts are, by definition,
                 equal to the amount payable on demand at the reporting date
                 (that is, their carrying amounts). Fair values for fixed-rate
                 certificates of deposit are estimated using a discounted cash
                 flow calculation that applies interest rates currently being
                 offered on certificates to a schedule of aggregated expected
                 monthly maturities on time deposits.

                 FHLB advances. The fair values of FHLB advances are estimated
                 using discounted cash flow analyses based on the Bancorp's
                 current incremental borrowing rates for similar types of
                 borrowing arrangements.

                 Accrued interest. The carrying amounts of accrued interest
                 approximate their fair values.

          Off balance sheet instruments
          -----------------------------

          In the ordinary course of business, the Bancorp has entered into off-
          balance sheet financial instruments consisting of commitments to
          extend credit and commitments under line of credit loans. Such
          financial instruments are recorded in the financial statements when
          they are funded or related fees are incurred or received.

                                     F-16
<PAGE>

          Recent accounting pronouncements
          --------------------------------

          On July 20, 2001, the Financial Accounting Standards Board issued
          Statement of Financial Accounting Standard (SFAS) No. 141 and 142.
          SFAS No. 141 requires that all business combinations be accounted for
          under a single method, the purchase method. The use of the pooling of
          interest method is no longer permitted. SFAS No. 141 requires that the
          purchase method be used for combinations initiated after June 30,
          2001. The adoption of this standard did not impact the Bancorp because
          they have not entered into any business combinations.

          SFAS No. 142 requires that goodwill no longer be amortized to
          earnings, but instead be reviewed for impairment. The amortization of
          goodwill ceases upon adoption of the Statement, which for most
          companies will be January 1, 2002. Management has determined that
          there will be no impact upon the adoption of this standard.

          Earnings per share
          ------------------

          Earnings per common share have been computed on the basis of the
          weighted average number of common shares outstanding, and, when
          applicable, those stock options that are dilutive.

          Reclassifications
          -----------------

          Certain amounts in the 2000 and 1999 financial statements have been
          reclassified to conform to the current year presentation.

2. Investments, Mortgage-Backed Securities and Collateralized Mortgage
   -------------------------------------------------------------------
   Obligations:
   -----------

   The amortized cost and estimated fair values of investments and mortgage-
   backed securities available for sale are as follows:

                                           December 31, 2001
                            -----------------------------------------------
                                            Gross       Gross
                              Amortized   Unrealized  Unrealized    Fair
                                Cost        Gains       Losses      Value
                                ----        -----       ------      -----

   Mortgage-backed
     securities               $  360,456     7,463       1,435      366,484
   Collateralized mortgage
     obligations               3,963,338    14,410       8,035    3,969,713
                              ----------    ------       -----    ---------
                              $4,323,794    21,873       9,470    4,336,197
                              ==========    ======       =====    =========

                                     F-17
<PAGE>

                                            December 31, 2000
                             ----------------------------------------------
                                            Gross       Gross
                              Amortized   Unrealized  Unrealized    Fair
                                Cost        Gains       Losses      Value
                                ----        -----       ------      -----

  U.S. Government and
     agencies securities      $2,700,000    4,609       43,494    2,661,115
  Mortgage-backed
     securities                  514,186    2,150        7,315      509,021
  Collateralized mortgage
     obligations               4,157,144        -      107,263    4,049,881
                              ----------    -----      -------    ---------
                              $7,371,330    6,759      158,072    7,220,017
                              ==========    =====      =======    =========

  The amortized cost and estimated market values of investments, mortgage-backed
  securities and collateralized mortgage obligations at December 31, 2001 and
  2000 by contractual maturity are shown below. Expected maturities will differ
  from contractual maturities because borrowers may have the right to call or
  prepay obligations with or without call or prepayment penalties.

  The Bancorp has pledged its investments, mortgage-backed securities and
  collateralized mortgage obligations to the FHLB for future advances.

                                       December 31, 2001     December 31, 2000
                                       -----------------     -----------------
                                                Estimated             Estimated
                                                 Market                Market
                                        Cost      Value       Cost      Value
                                        ----      -----       ----      -----

  Due in one to five years          $        -          -  1,200,000  1,200,590
  Due in over five to ten years              -          -    500,000    493,392
  Due in over ten years                      -          -  1,000,000    967,133
  Mortgage-backed
     securities                        360,456    366,484    514,186    509,021
  Collateralized mortgage
     obligations                     3,963,338  3,969,713  4,157,144  4,049,881
                                    ----------  ---------  ---------  ---------
                                    $4,323,794  4,336,197  7,371,330  7,220,017
                                    ==========  =========  =========  =========

                                     F-18
<PAGE>

   Proceeds and resulting gains and losses realized from sale of investments,
   mortgage-backed securities and collateralized mortgage obligations for year
   ended December 31, 2001 and 1999 were as follows:
                                                                   Net
                                       Gross    Gross   Gross    Realized
                                     Proceeds   Gains   Losses  Gain (Loss)
                                     --------   -----   ------  -----------

   Year ended December 31, 2001     $4,805,102  27,229  51,893    (24,664)
                                    ==========  ======  ======    =======

   Year ended December 31, 1999     $2,344,782  22,500  17,658      4,842
                                    ==========  ======  ======    =======

   There were no sales of investments, mortgage-backed securities or
   collateralized mortgage obligations for the year ended December 31, 2000.

3. Loans Receivable:
   -----------------

   Loans receivable, including loans held for sale, are summarized as follows:

                                                2001         2000
                                                ----         ----
   Mortgage loans secured by one to
    four family residences                  $41,116,981   47,768,714
   Multi-family residential real estate       6,997,046    5,892,504
   Commercial property                          239,733      248,771
   Home equity line of credit                 2,247,398    2,494,221
   Consumer                                     984,325    1,680,311
   Unsecured consumer line of credit             81,544      122,685
   Passbook loans                                32,765       32,732
                                            -----------   ----------
                                             51,699,792   58,239,938
                                            -----------   ----------
   Add/(Less):
      Loans in process                         (805,209)    (245,546)
      Allowance for loan loss                  (293,013)    (125,552)
      Deferred loan costs                        57,237       93,368
                                            -----------   ----------
                                             (1,040,985)    (277,730)
                                            -----------   ----------
                                            $50,658,807   57,962,208
                                            ===========   ==========

   At December 31, 2001 and 2000, adjustable rate loans approximated $41,648,000
   and $41,625,000, respectively.

   As discussed previously, the Bancorp has sold certain whole loans in the
   secondary market, retaining servicing on the loans sold. Loans sold and
   serviced for others totaled approximately $24,993,000 and $19,075,000 at
   December 31, 2001 and 2000, respectively.

                                     F-19
<PAGE>

   Mortgage servicing rights of $128,092 and $155,106 were capitalized in 2001
   and 2000. The fair value of mortgage servicing rights approximates the
   current book value as of December 31, 2001 and 2000 of $200,605 and $182,853,
   respectively. Amortization of mortgage servicing rights was $110,340, $75,799
   and $32,545 for the years 2001, 2000 and 1999, respectively.

   Activity in the allowance for loan losses is as follows:

                                           Years Ended December 31,
                                           ------------------------
                                           2001       2000      1999
                                           ----       ----      ----

           Beginning balance             $125,552    90,264    66,472
           Provision for loan losses      247,143    58,500    40,000
           Charge off of loans            (84,321)  (31,175)  (22,397)
           Recoveries of prior
            charge-offs                     4,639     7,963     6,189
                                         --------   -------   -------
                                         $293,013   125,552    90,264
                                         ========   =======   =======

   Loans to officers and directors totaled $0 and $397,735 as of December 31,
   2001 and 2000, respectively. An analysis of loan activity for the years ended
   December 31, 2001 and 2000 follows:


                                                    2001        2000
                                                    ----        ----

           Outstanding balance, beginning       $  397,735   1,040,255
           Director changes                       (315,945)   (270,718)
           Repayments                              (81,790)   (371,802)
                                                ----------   ---------

           Outstanding balance, ending          $        -     397,735
                                                ==========   =========

4. Property and Equipment:
   ----------------------

   Property and equipment at December 31, 2001 and 2000 is summarized by major
   classification as follows:

                                                    2001        2000
                                                    ----        ----

       Land and buildings                       $1,159,790   1,151,853
       Furniture and equipment                     514,493     506,045
                                                ----------   ---------
                                                 1,674,283   1,657,898
       Accumulated depreciation                    476,922     391,520
                                                ----------   ---------

                                                $1,197,361   1,266,378
                                                ==========   =========

                                     F-20
<PAGE>

   In 1993, the Bancorp constructed an addition with a cost of $126,938 to the
   building that it was leasing as its main office. The Bancorp had an agreement
   with the lessor that if the lease was terminated, the Bancorp would receive
   from the lessor a set dollar amount based on a ten year declining schedule.
   The building addition at the end of the lease became the property of the
   lessor. During 1999, the Bancorp received notice that it would be required to
   vacate the main office. This resulted in a one-time after tax charge to
   earnings of approximately $91,000 during 1999. The net book value of the
   addition and related leasehold improvements at December 31, 1999 was $22,000,
   which approximates the amount the Bancorp received in 2000.

   Effective July 1, 1995, the Bancorp entered into a lease with Procter and
   Gamble for its main office facilities that expired December 31, 1999 and was
   extended until March 2000. Rent expense for the years ended December 31, 2000
   and 1999 was $1,791 and $22,986, respectively.

5. Deposits:
   ---------

   Deposit amounts are summarized as follows:

<TABLE>
<CAPTION>
                                                      December 31,
                                                      ------------
                                             2001                      2000
                                   -------------------------   ---------------------
                                                  Weighted                  Weighted
                                                  Average                   Average
                                      Balance       Rate         Balance      Rate
                                      -------       ----         -------      ----
   <S>                             <C>            <C>          <C>          <C>
   Statement savings               $  6,890,361     1.67%       7,233,007     4.65%
   NOW and money market accounts      4,505,227     0.91        4,667,980     2.03
   Other                                 26,424     0.74           40,755     1.98
                                   ------------                ----------
                                     11,422,012                11,941,742
                                   ------------                ----------

   Certificates:
      Three months                      365,726     3.04          106,514     5.50
      Six months                      1,288,608     2.92        1,429,059     6.22
      Nine months                     1,796,513     3.52          286,157     6.45
      One year                        5,755,755     4.27        7,667,131     6.52
      Fifteen months                  1,138,968     4.91          386,058     6.53
      Eighteen months                 1,338,722     4.20        1,236,175     6.04
      Two years                       2,818,920     5.03        5,724,081     5.76
      Three years                     1,902,247     5.64        1,821,789     5.67
      Four years                        281,092     5.28          308,728     5.38
      Five years                      5,190,369     6.10        5,636,820     6.19
                                   ------------     ----       ----------     ----

                                     21,876,920     4.80       24,602,512     6.14
                                   ------------     ----       ----------     ----

                                   $ 33,298,932     3.62%      36,544,254     5.32%
                                   ============     ====       ==========     ====
</TABLE>

                                     F-21
<PAGE>

   Scheduled maturities of certificate accounts are as follows:

                                        2001            2000
                                        ----            ----

          Within one year          $ 13,742,464      15,944,358
          1 - 2 years                 4,397,623       4,159,884
          2 - 3 years                 2,679,450       1,587,081
          Over 3 years                1,057,383       2,911,189
                                   ------------      ----------
                                   $ 21,876,920      24,602,512
                                   ============      ==========

   Interest expense on deposits is summarized as follows:

                                              December 31,
                                          --------------------
                                       2001          2000        1999
                                       ----          ----        ----

   Statement savings              $   231,031       222,724     130,790
   NOW and Money Market                75,391       110,267     127,156
   Certificates of Deposit          1,299,887     1,525,235   1,473,374
                                  -----------     ---------  ----------
                                  $ 1,606,309     1,858,226   1,731,320
                                  ===========     =========  ==========

   The aggregate amount of certificates of deposit in denominations of $100,000
   or more was $4,673,924 and $3,725,388 at December 31, 2001 and 2000,
   respectively.

6. Federal Home Loan Bank Advances:
   -------------------------------

   The Bancorp has advances from the Federal Home Loan Bank of $23,178,728 and
   $29,864,223 at December 31, 2001 and 2000, respectively. These advances range
   in maturity from ninety days to 15 years with interest rates of between 4.83%
   and 6.70%. At December 31, 2001, all of the Bancorp's advances were fixed
   rate advances. Future maturities on the advances from the Federal Home Loan
   Bank are as follows:

            2002                 $ 2,156,688
            2003                   5,577,788
            2004                      68,104
            2005                      67,510
            2006                   6,067,055
            Subsequent years       9,241,583
                                 -----------
                                 $23,178,728
                                 ===========

   The advances are collateralized by a blanket pledge of residential mortgage
   loans held by the Bancorp. The Bancorp has also pledged its Federal Home Loan
   Bank stock, mortgage-backed securities and mortgage notes with unpaid
   principal balances of approximately $35 million for future advances.

                                     F-22
<PAGE>

7. Income Taxes:
   ------------

   The Bancorp had qualified under provisions of the Internal Revenue Code,
   which permitted the Bancorp to deduct from taxable income an allowance for
   bad debts based on a percentage of taxable income before such deduction. The
   Tax Reform Act of 1969 gradually reduced this deduction to 40% for years
   beginning in 1979. The Tax Reform Act of 1986 reduced this deduction to 8%
   beginning in 1988.

   A bill repealing the thrift bad debt reserve was signed into law and was
   effective for taxable years beginning after December 31, 1995. All savings
   banks and thrifts will be required to account for tax reserves for bad debts
   in the same manner as banks. Such entities with assets less than $500 million
   will be required to maintain a moving average experience based reserve and no
   longer will be able to calculate a reserve based on a percentage of taxable
   income.

   Tax reserves accumulated after 1987 will automatically be subject to
   recapture. The recapture will occur in equal amounts over six years beginning
   in 1997 and can be deferred up to two years, depending on the level of loans
   originated.

   As a result of the tax law change, the Bancorp is expected to ultimately
   recapture approximately $61,000 of tax reserves accumulated after 1987,
   resulting in additional tax payments of $21,000. The recapture of these
   reserves will not result in any significant income statement effect to the
   Bancorp. Pre-1988 tax reserves will not have to be recaptured unless the
   thrift or successor institution liquidates, redeems shares or pays a dividend
   in excess of earnings and profits.

   Appropriated and unappropriated retained earnings at December 31, 2001
   included earnings of approximately $1,096,000 representing such bad debt
   deductions for which no provision for federal income taxes has been made. In
   the future, if the Bancorp does not meet the federal income tax requirements
   necessary to permit it to deduct an allowance for bad debts, the Bancorp will
   be subject to federal income tax at the then current corporate rate.

   An analysis of the provision (benefit) for federal income taxes is as
   follows:

                        Years Ended December 31,
                        -----------------------
                        2001       2000      1999
                        ----       ----      ----

   Current           $   2,064   (39,306)  (20,457)
   Deferred           (148,353)   14,556     5,980
                     ---------   -------   -------
                     $(146,289)  (24,750)  (14,477)
                     =========   =======   =======

                                     F-23
<PAGE>

     At December 31, 2001 and 2000, the deferred components of the Bancorp's
     income tax (assets) liabilities, as included in the consolidated balance
     sheets are summarized as follows:

<TABLE>
<CAPTION>


                                                             2001          2000
                                                           ---------     ---------
     <S>                                                   <C>           <C>
     Deferred tax liabilities:
      FHLB stock dividends                                 $ 230,100      188,800
      Bad debt reserve                                         6,900       10,300
      Net unrealized gain on available
       for sale securities                                     4,200            -
      Depreciation                                             2,500        2,500
                                                           ---------     --------

         Gross deferred tax liabilities                      243,700      201,600
                                                           ---------     --------

     Deferred tax assets:
      Bad debt reserve                                       140,100       56,100
      Deferred loan fees                                         900        1,400
      Amortization of stock awards                               700        2,700
      ESOP expense                                             7,700        7,160
      Accrued compensation                                   102,000            -
      Net unrealized loss on available
        for sale securities                                        -       51,450
      Other                                                    9,400        7,200
                                                           ---------     --------

         Gross deferred tax assets                           260,800      126,010
                                                           ---------     --------

     Valuation allowance                                           -            -
                                                           ---------     --------

     Net deferred tax (asset) liability                    $ (17,100)      75,590
                                                           =========     ========
</TABLE>

     The Bancorp's income tax expense (benefit) differed from the statutory
     federal rate of 34% as follows:

<TABLE>
<CAPTION>
                                                           Years Ended December 31,
                                                           ------------------------
                                                         2001        2000       1999
                                                         ----        ----       ----
     <S>                                             <C>          <C>       <C>
     Tax benefit at 34% statutory rate               $(142,488)    (25,600)  (22,900)
     Permanent book/tax differences                      1,754       4,406     8,737
     Other                                              (5,555)     (3,556)     (314)
                                                     ---------    --------  --------
                                                     $(146,289)    (24,750)  (14,477)
                                                     =========    ========  ========

     Effective tax rate                                   34.9%       32.9%     21.5%
                                                     =========    ========  ========

</TABLE>

                                     F-24
<PAGE>

8.   Stockholders' Equity:
     --------------------

     In accordance with regulatory requirements, the Bancorp established a
     special "Liquidation Account" for the benefit of certain savings account
     holders in an amount equal to the regulatory capital of the Bancorp as of
     July 1996 of $3.8 million. In the event of a complete liquidation (and only
     in such event), each eligible savings account holder will be entitled to
     receive a liquidation distribution from the liquidation account in the
     amount of the then current adjusted balance of savings accounts held before
     any liquidation distribution may be made with respect to capital stock.
     Except for the repurchase of stock and payment of dividends by the Bancorp,
     the existence of the liquidation account will not restrict the use or
     application of such related earnings.

     The Bancorp may not declare or pay a cash dividend on, or repurchase any
     of, its capital stock if the effect thereof would cause the regulatory
     capital of the Bancorp to be reduced below either the amount required for
     the liquidation account or the regulatory capital requirements imposed by
     the FDIC.

     On May 27, 1999, the Bancorp declared a dividend distribution of one right
     (the "Rights") for each share of common stock to shareholders of record on
     that date. Each Right represents the right to purchase one one-hundredth of
     a share of the Series A Junior Participating Preferred Stock upon the terms
     and subject to conditions set forth in the Rights Agreement. The exercise
     price of the Rights initially shall be $54 per Right and the redemption
     price shall be $.01 per Right. The Rights expire in ten years. Initially,
     4,047 shares of Series A Junior Participating Preferred Stock have been
     reserved for issuance upon exercise of the Rights.

9.   Capital Requirements:
     --------------------

     The Savings Bank is subject to various regulatory capital requirements
     administered by the federal banking agencies. Failure to meet minimum
     capital requirements can initiate certain mandatory - and possibly
     additional discretionary - actions by regulators that, if undertaken, could
     have a direct material effect on the Savings Bank's financial statements.
     The regulations require the Savings Bank to meet specific capital adequacy
     guidelines that involve quantitative measures of the Savings Bank
     liabilities, and certain off-balance-sheet items as calculated under
     regulatory accounting practices. The Savings Bank capital classification is
     also subject to qualitative judgments by the regulators about components,
     risk weightings, and other factors.

     Quantitative measures established by regulation to ensure capital adequacy
     require the Savings Bank to maintain minimum amounts and ratios (set forth
     in the table below) of Tier I capital (as defined in the regulations) to
     total average assets (as defined), and minimum ratios of Tier I and total
     capital (as defined) to risk-weighted assets (as defined). To be considered
     adequately capitalized (as defined) under the regulatory framework for
     prompt corrective action, the Savings Bank must maintain minimum Tier I
     leverage and Tier II risk-based ratios as set forth in the table. The
     Savings Bank's actual capital amounts and ratios are also presented in the
     table.

                                     F-25
<PAGE>

<TABLE>
<CAPTION>
                                  December 31, 2001
                -----------------------------------------------------
                             Required              Actual  Required
                   Amount     Amount     Excess     Rate     Rate
                   ------     ------     ------     ----     ----
     <S>        <C>          <C>        <C>        <C>     <C>

     Tier I     $ 5,592,000  2,568,000  3,024,000     8.7     4.0
     Tier II      5,885,000  2,764,000  3,121,000    17.0     8.0
</TABLE>

<TABLE>
<CAPTION>
                                  December 31, 2000
                -----------------------------------------------------
                             Required              Actual  Required
                   Amount     Amount     Excess     Rate     Rate
                   ------     ------     ------     ----     ----
     <S>        <C>          <C>        <C>        <C>     <C>
     Tier I     $ 4,776,000  2,878,000  1,898,000     6.6     4.0
     Tier II      4,893,000  3,109,000  1,784,000    12.6     8.0
</TABLE>

10.  Retirement Plans:
     ----------------

     401(k) Savings Plan
     -------------------

     The Bancorp has a 401(k) savings plan that covers substantially all
     employees. The employees may elect to make contributions pursuant to a
     salary reduction agreement upon meeting age and length of service
     requirements. The Bancorp annually determines the contribution based on the
     percentage of the employees plan compensation or employee pay contributed
     to the Plan. The Bancorp matches the employee contribution to the plan up
     to 6% of employee compensation. Total contributions by the Bancorp for the
     years ended December 31, 2001, 2000 and 1999 were $15,762, $12,461, and
     $11,455, respectively.

     Employee Stock Ownership Plan
     -----------------------------

     Concurrent with the conversion from the mutual savings bank form to the
     stock holding company form of organization in July 1996, the Savings Bank
     established an Employee Stock Ownership Plan (ESOP), which provides
     retirement benefits for substantially all employees who have completed one
     year of service and have attained age 21. The ESOP initially acquired
     34,054 shares of common stock in the conversion offering. The funds used by
     the ESOP to purchase the stock were provided by a loan from the Bancorp
     that will be repaid by contributions to the ESOP by the Savings Bank in the
     future. Management intends to allocate these shares to eligible employees'
     accounts over a ten-year period from the establishment of the plan. Expense
     for shares committed to be allocated during 2001, 2000 and 1999 was
     $36,110, $45,169 and $62,270, respectively. Shares committed to be
     allocated as of December 31, 2001, 2000 and 1999 totaled 3,563, 3,707 and
     3,798, respectively. Remaining unallocated shares at December 31, 2001 were
     13,577.

                                     F-26
<PAGE>

     1997 Stock Incentive Plan
     -------------------------

     During 1997, the shareholders approved the 1997 Incentive Plan. Under the
     provisions of the Plan, 59,594 shares of common stock can be reserved for
     awards. The maximum number of shares reserved for award as Stock Awards is
     17,027 shares. Shares awarded to employees and non-employee directors under
     the plan totaled 6,159, 10,113 and 7,308 at December 31, 2001, 2000 and
     1999, respectively. The share awards vest over a 5-year period. The Bancorp
     recognized $355, $16,111 and $21,087 of amortization expense relating to
     these stock awards during 2001, 2000 and 1999, respectively.

     The Plan also allows for 42,567 shares to be reserved for incentive and
     non-statutory stock options. Grantees are awarded ten-year options to
     acquire shares at the market price on the date the option is granted in
     five equal installments commencing one year after the date of the grant.
     All options have an exercise price between $9.00 and $17.00.

     Set forth below is activity under the plan.

<TABLE>
<CAPTION>
                                          Years Ended December 31,
                                          ------------------------
                                          2001      2000     1999
                                         -------   ------   ------
     <S>                                 <C>       <C>      <C>
     Options outstanding at beginning
          of the year                     30,439   23,242   31,161
     Granted                              10,000   12,135      639
     Canceled/forfeited                  (14,477)  (4,938)  (8,303)
     Exercised                                 -        -     (255)
                                         -------   ------   ------

     Options outstanding at end
          of the year                     25,962   30,439   23,242
                                         =======   ======   ======
</TABLE>

     At December 31, 2001, 11,572 shares were exercisable under this plan.

     2001 Directors' Stock Option Plan
     ---------------------------------

     During 2001, a Directors' Stock Option Plan was approved that allows for
     100,000 shares to be reserved for directors' stock options. Grantees are
     awarded ten-year options to acquire shares at the market price on the date
     the option is granted with immediate vesting. During 2001, 25,000 shares
     were granted under this plan. All options have an exercise price of $9.25.

     The Bancorp applies Accounting Principles Board (APB) Opinion No. 25,
     "Accounting for Stock Issued to Employees", and related Interpretations in
     accounting for its option plans. Accordingly, no compensation cost has been
     recognized. Had compensation cost for the Bancorp's stock-based
     compensation plans been determined based on the fair value at the grant
     dates for awards under those plans consistent with the method of SFAS No.
     123, "Accounting for Stock-Based Compensation", the effect on net income
     and earnings per share would have been reduced to pro forma amounts
     indicated below:

                                     F-27
<PAGE>

<TABLE>
<CAPTION>
                                                  2001       2000       1999
                                                ---------   -------   --------
          <S>                                   <C>         <C>       <C>
          Net loss:
            As reported                         $(272,793)  (50,476)  (52,791)
            Additional compensation expense        84,814    12,738    13,807
            Pro forma                            (357,607)  (63,214)  (66,598)

          Basic loss per share:
            As reported                         $   (0.99)    (0.20)    (0.18)
            Pro forma                               (1.30)    (0.25)    (0.22)
</TABLE>

     The fair value and pro forma income information calculated for options
     granted is estimated on the date of grant using the Black-Scholes
     option-pricing model with the following weighted-average assumptions for
     2001, 2000, and 1999, respectively: expected volatility of .38 percent, .33
     percent, and .29 percent; risk free interest rates of 5.54 percent, 5.89
     percent, and 6.31 percent; expected dividend of $0, $0 and $0.20 per share;
     and for all years, expected lives of ten years.

     Restricted Stock Award
     ----------------------

     On December 6, 2001, the Board approved a restricted stock award of 10,000
     shares, which vest in full on July 21, 2007, to the President/CEO of Lenox
     Savings Bank. All unvested shares subject to this restricted stock award
     are forfeited as of the date of termination of this employee.

11.  Fair Value of Financial Instruments:
     -----------------------------------

     The estimated fair values of the Bancorp's financial instruments at
     December 31, 2001 and 2000 were as follows:

<TABLE>
<CAPTION>
                                                 2001                    2000
                                       -----------------------   ---------------------
                                         Carrying      Fair       Carrying     Fair
                                          Value        Value       Value       Value
                                       -----------  ----------   ---------- ----------
     <S>                               <C>          <C>         <C>         <C>
     Financial assets:
        Cash and certificates of
         deposit                       $ 4,094,621   4,094,621   2,689,265   2,689,265
        Investments and mortgage-
         backed securities                 366,484     366,484   3,170,136   3,170,136
        Collateralized mortgage
         obligations                     3,969,713   3,969,713   4,049,881   4,049,881
        Loans receivable, net           50,658,807  52,568,000  57,962,208  58,015,000
        Accrued interest receivable        345,930     345,930     500,947     500,947
     Financial liabilities:
        Deposits:
         Demand accounts                11,422,012  11,422,012  11,941,742  11,941,742
         Certificates                   21,876,920  22,206,000  24,602,512  24,595,000
        FHLB advances                   23,178,728  24,736,000  29,864,223  29,599,000
</TABLE>

                                     F-28
<PAGE>

12.  Summarized Financial Information of the Parent Company:
     ------------------------------------------------------

     The following condensed financial statements summarize the financial
     position of Lenox Bancorp Inc. as of December 31, 2001 and 2000, and the
     results of its operations for the year then ended.

                               LENOX BANCORP INC.

<TABLE>
<CAPTION>
                        Statements of Financial Condition
                        ---------------------------------



                                                       2001         2000
                                                    -----------   ----------
     <S>                                            <C>           <C>
     Assets:
        Cash                                        $    95,264       30,000
        Investment in Lenox Savings Bank              1,602,441      768,717
        Accounts receivable and prepaid expenses         40,866       79,321
        Deferred income taxes                            68,000            -
                                                    -----------  -----------
                                                    $ 1,806,571      878,038
                                                    ===========  ===========

     Liabilities and stockholders' equity:
        Liabilities:
          Accounts payable and
               accrued expenses                     $   266,249       29,341

        Stockholders' equity:
          Common stock                                        -            -
          Additional paid in capital                  4,600,633    3,686,288
          Retained earnings                            (136,472)     106,321
          Less unearned ESOP shares                    (159,065)    (193,119)
          Shares acquired for Stock Plan               (197,635)    (183,654)
          Less 140,649 held in treasury              (2,567,139)  (2,567,139)
                                                    -----------  -----------
                                                    $ 1,806,571      878,038
                                                    ===========  ===========

                         Statements of Operations
                         ------------------------

     Interest income                                $    13,357       21,618
     Dividend income                                     30,000            -
     Equity in earnings of Lenox Savings                 80,224       53,632
     Professional fees                                 (287,216)    (154,644)
     Management fee                                      (6,000)      (6,000)
     Compensation                                      (200,000)           -
     Other operating expenses                           (54,245)     (18,663)
     Franchise taxes                                        (50)         (50)
     Income tax benefit                                 181,137       53,631
                                                    -----------  -----------
               Net loss                             $  (242,793)     (50,476)
                                                    ===========  ===========
</TABLE>

                                     F-29
<PAGE>

13.  Lenox Mortgage Corporation:
     --------------------------

     In accordance with regulatory requirements, the following summary of
     financial information of Lenox Mortgage Corporation for the years ended
     December 31, 2001 and 2000, is presented:

                           LENOX MORTGAGE CORPORATION


<TABLE>
<CAPTION>
                      Statements of Financial Condition
                      ---------------------------------

                                                           2001       2000
                                                         ---------   --------
     <S>                                                 <C>         <C>
     Assets:
        Cash                                             $ 178,148     75,552
        Property and equipment, net                         14,577     23,504
        Prepaid expenses and other assets                   28,026     50,952
                                                         ---------   --------

                                                         $ 220,751    150,008
                                                         =========   ========

     Liabilities and stockholder's equity:
        Liabilties:
            Accrued expenses                             $   3,750          -

        Stockholder's equity:
            Common stock                                   250,000    250,000
            Accumulated deficit                            (32,999)   (99,992)
                                                         ---------   --------
                                                           217,001    150,008
                                                         ---------   --------

                                                         $ 220,751    150,008
                                                         =========   ========

                        Statements of Operations
                        ------------------------

     Interest income                                     $   2,437     41,496
     Gain on sale of loans                                       -    154,983
     Mortgage brokerage fees                               327,049          -
     Interest expense                                            -    (17,185)
     Operating expenses                                   (227,893)  (271,598)
     Income tax (expense) benefit                          (34,600)    30,700
                                                         ---------   --------

        Net income (loss)                                $  66,993    (61,604)
                                                         =========   ========

</TABLE>

                                     F-30
<PAGE>

     a.   Summary of significant accounting policies:

          The accounting policies followed in the preparation of the financial
          statements of Lenox Mortgage Corporation are included in Note 1.

     b.   Intercompany transactions:

          Intercompany transactions with Lenox Savings Bank have been eliminated
          in consolidation.

     c.   Lenox Savings Bank's investment in Lenox Mortgage Corporation consists
          of:


                                              2001            2000
                                              ----            ----

               Common stock, 100 shares
                 issued and outstanding     $250,000        250,000
               Accumulated deficit           (32,999)       (99,992)
                                            --------        -------

                                            $217,001        150,008
                                            ========        =======

     d.   Effective January 1, 2002, all assets and liabilities of Lenox
          Mortgage Corporation were transferred to Lenox Savings Bank.

14.  Commitments, Contingencies and Off Balance Sheet Items:
     ------------------------------------------------------

     The Bancorp is a party to financial instruments with off-balance-sheet risk
     in the normal course of business to meet the financing needs of their
     customers including commitments to extend credit. Such commitments involve,
     to varying degrees, elements of credit and interest-rate risk in excess of
     the amount recognized in the balance sheets. The contract or notional
     amounts of the commitments reflect the extent of the Bancorp's involvement
     in such financial instruments.

     The Bancorp's exposure to credit loss in the event of nonperformance by the
     other party to the financial instrument for commitments to extend credit is
     represented by the contractual notional amount of those instruments. The
     Bancorp uses the same credit policies in making commitments and conditional
     obligations as those utilized for on-balance-sheet instruments.

     The following schedule lists commitments and off-balance-sheet items at
     December 31, 2001 and 2000.

                              Loan                  Unused
                           Commitments          Lines of Credit
                           -----------          ---------------

                 2001       $ 613,000             2,415,145
                 2000       $       -             4,249,369

                                     F-31
<PAGE>

     In the opinion of management, the loan commitments equaled or exceeded
     prevalent market interest rates as of December 31, 2001, and all
     commitments will be funded via cash flow from operations and existing
     excess liquidity. Of the total loan commitments, at December 31, 2001,
     $121,000 of the total was fixed rate residential loans. Management expects
     no losses as a result of these transactions.

     As more fully described in Note 18, the Bancorp has a contingent liability
     related to potential payment of proxy expenses.

15.  Earnings Per Share:
     ------------------

     Earnings per share is calculated as follows:


                                                 Years Ended December 31,
                                                 ------------------------
                                              2001         2000        1999
                                              ----         ----        ----

     Net loss                              $(272,793)    (50,476)    (52,791)
                                           =========     =======     =======

     Weighted-average shares - basic         274,912     252,500     299,555

     Effect of dilutive securities:
        Employee stock awards                      -           -           -
        Employee stock options                     -           -           -
                                           ---------     -------     -------
     Weighted-average shares - diluted       274,912     252,500     299,555
                                           =========     =======     =======

     Basic loss per share                  $    (.99)       (.20)       (.18)
     Diluted loss per share                $    (.99)       (.20)       (.18)

     Diluted loss per share is computed using the weighted-average number of
     common shares and excludes dilutive potential common shares, as their
     effect is antidilutive. The dilutive potential common shares, which were
     antidilutive for 2001, 2000 and 1999, amounted to 2,562, 4,427 and 8,037
     shares, respectively.

16.  Regulatory Agreements:
     ---------------------

     On February 9, 2000, the Savings Bank entered into a Memorandum of
     Understanding (MOU) with the FDIC and the Ohio Department of Financial
     Institutions, as a result of certain unsatisfactory practices and
     conditions that were found to exist. The MOU requires the Savings Bank to,
     among other things, formulate a three-year strategic plan with specific
     provisions required in the MOU, review management and adopt a management
     capital plan and increase capital ratios. Other areas that must be
     addressed under the terms of the MOU include the Savings Bank's earnings,
     interest rate risk, growth and liquidity. The failure of the Savings Bank
     to comply with all the provisions of the present MOU could have a material
     adverse effect upon the Savings Bank and its operations. On October 22,
     2001, the strategic plan as submitted by management was accepted.

                                     F-32
<PAGE>

     On November 15, 2001, the Savings Bank was notified by the FDIC and Ohio
     Department of Financial Institutions that their compliance with the MOU was
     acceptable.

     On August 2, 2000, the Bancorp entered into a Supervisory Agreement with
     the Office of Thrift Supervision (OTS). This agreement requires, among
     other things, the Bancorp to obtain the OTS' prior approval before entering
     into contracts for goods and services in excess of $5,000 or making any
     payments for goods and services in excess of $2,000 per month. The Bancorp
     is also restricted in its ability to borrow money and may not make any
     changes to its directors or executive officers unless prior notice has been
     given to the OTS.

17.  Litigation:
     ----------

     On September 25, 2001, the former CEO and President of Lenox Bancorp and
     Lenox Savings Bank, filed with the American Arbitration Association a
     demand for arbitration with the Bancorp and Savings Bank. The former CEO
     and President's demand sets forth claims for, among other things,
     reinstatement of employment and an unspecified amount of damages, including
     punitive damages, as a result of alleged wrongful termination of her
     employment agreements with the Bancorp and Savings Bank. On July 13, 2001,
     the Boards of Directors of the Bancorp and the Savings Bank notified the
     former CEO and President of the termination of her employment agreements
     for cause. The Bancorp and the Savings Bank have accrued for the potential
     payout of the employment agreements and are contesting the arbitration
     demands. The matter is currently pending before the American Arbitration
     Association panel. The Bancorp and the Savings Bank have filed a motion to
     stay/dismiss the case and are awaiting a decision from the arbitrators on
     the motion. If the motion to dismiss is denied, the Bancorp and the Savings
     Bank currently intend to defend the action in arbitration.

18.  Proxy Expenses:
     --------------

     A director has submitted a request for approval of approximately $318,000
     for the reimbursement of expenses incurred with the 2001 Annual
     Shareholders Meeting. The proposed reimbursement, if approved, will be made
     in the form of an issue of unregistered common stock of the Bancorp at the
     appraised value. The entire reimbursement is subject to regulatory approval
     and $258,000 is subject to shareholder approval. All amounts submitted are
     subject to review by a special committee of the Board of Directors.
     Approval of the expenses would result in a charge to earnings in the
     future.

                                     F-33
<PAGE>

19.  Selected Quarterly Financial Data (unaudited):
     ---------------------------------------------
     Summarized quarterly financial information (in thousands) for 2001 and 2000
     is as follows:

<TABLE>
<CAPTION>
                                                                      2001
                                             -------------------------------------------------
                                                                  Quarter Ended
                                                                  -------------
                                                3/31/01       6/30/01      9/30/01    12/31/01
                                                -------       -------      -------    --------
     <S>                                     <C>            <C>          <C>        <C>
     Interest income                         $  1,287         1,235        1,189         1,069
     Interest expense                             879           806          760           654
                                             --------       -------      -------      --------
          Net interest income                     408           429          429           415
     Provision for loan losses                      9           220            9             9
                                             --------       -------      -------      --------
          Net interest income after
             provision for loan losses            399           209          420           406
     Other income                                 131           224          118           194
     Other expenses                               470           850          518           682
                                             --------       -------      -------      --------
          Income (loss) before provision
             for income taxes                      60          (417)          20           (82)
     Provision (benefit) for income taxes          23          (133)          12           (48)
                                             --------       -------      -------      --------
          Net income (loss)                  $     37          (284)           8           (34)
                                             ========       =======      =======      ========
     Basic earnings (loss) per share         $   0.13         (1.00)        0.02         (0.14)
                                             ========       =======      =======      ========
     Diluted earnings (loss) per share       $   0.13         (1.00)        0.02         (0.14)
                                             ========       =======      =======      ========

<CAPTION>
                                                                      2000
                                             -------------------------------------------------
                                                                  Quarter Ended
                                                                  -------------
                                                3/31/00       6/30/00      9/30/00    12/31/00
                                                -------       -------      -------    --------
     <S>                                     <C>            <C>          <C>         <C>
     Interest income                         $  1,343         1,363        1,361         1,245
     Interest expense                             909           979          990           919
                                             --------       -------      -------      --------
          Net interest income                     434           384          371           326
     Provision for loan losses                     23             9            9            18
                                             --------       -------      -------      --------
          Net interest income after
             provision for loan losses            411           375          362           308
     Other income                                 107            99           56            70
     Other expenses                               467           511          477           408
                                             --------       -------      -------      --------
          Income (loss) before provision
             for income taxes                      51           (37)         (59)          (30)
     Provision (benefit) for income taxes          19           (12)         (17)          (15)
                                             --------       -------      -------      --------
          Net income (loss)                  $     32           (25)         (42)          (15)
                                             ========       =======      =======      ========

     Basic earnings (loss) per share         $   0.11         (0.09)       (0.15)        (0.07)
                                             ========       =======      =======      ========
     Diluted earnings (loss) per share       $   0.11         (0.09)       (0.15)        (0.07)
                                             ========       =======      =======      ========
</TABLE>

                                     F-34
<PAGE>

(a)(3)  Exhibit List
        ------------

<TABLE>
<CAPTION>
        Number  Exhibit                                                            Filing Status
        ------  -------                                                            -------------
<C>             <S>                                                                <C>
        3.1     Amended Articles of Incorporation of Lenox Bancorp, Inc.                (1)
        3.2     Amended and Restated Code of Regulations of Lenox Bancorp, Inc.         (1)
        4       Stock Certificate of Lenox Bancorp, Inc.                                (2)
        10.1    Lenox Savings Bank Employee Stock Ownership Plan*                       (2)
        10.2    1997 Incentive Plan*                                                    (3)
        10.3    2001 Directors' Stock Option Plan*                                 Filed herewith
        16      Letter on Changes in Certifying Accountant                              (4)
        21      Subsidiaries of the Registrant                                     Filed herewith
        23      Consent of Clark, Schaefer, Hackett & Co.                          Filed herewith
</TABLE>


(b)     Reports on Form 8-K
        -------------------

        None.



_____________

(1)     Incorporated herein by reference to Form 10-KSB for the year ended
        December 31, 1997.
(2)     Incorporated herein by reference to Form S-1, filed on August 25, 1995,
        and Pre-Effective Amendment No. 1, filed on March 8, 1996 (File No. 333-
        96248).
(3)     Incorporated herein by reference to Form 10-KSB for the year ended
        December 31, 1998.
(4)     Incorporated herein by reference to Form 8-K/A filed with the Commission
        on March 20, 2002.

*       Management Compensatory Agreements.

                                       34
<PAGE>

                                   SIGNATURES

     In accordance with Section 13 or 15(d) of the Securities Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.

                                    LENOX BANCORP, INC.

Dated: March 26, 2002

                                    By:/s/ Jane Schank
                                       ------------------------
                                       Jane Schank
                                       Secretary and Treasurer

     In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and on
the dates indicated.

<TABLE>
<CAPTION>
             Name                                    Title                           Date
             ----                                    -----                           ----
<S>                             <C>                                              <C>
/s/ John C. Lame                President, Chief Executive Officer and Director  March 26, 2002
------------------------------  (Principal Executive Officer)
John C. Lame

/s/ Gail R. Behymer             Director                                         March 26, 2002
------------------------------
Gail R. Behymer

/s/ Guy E. Napier               Director                                         March 26, 2002
------------------------------
Guy E. Napier

/s/ Gary P. Kreider             Director                                         March 26, 2002
------------------------------
Gary P. Kreider
                                Director                                         March 26, 2002
------------------------------
Virginia M. Heitzman
</TABLE>

                                       35