<PAGE> 1


                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                    FORM 10-K

                   Annual report pursuant to Section 13 of the
                         Securities Exchange Act of 1934

                   For the fiscal year ended DECEMBER 31, 1996

                          Commission File No.: 0-28162

                               LENOX BANCORP, INC.
             (exact name of registrant as specified in its charter)

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

                   5255 BEECH STREET, ST. BERNARD, OHIO 45217
                    (Address of principal executive offices)

       Registrant's telephone number, including area code: (513) 242-6900
        Securities registered pursuant to Section 12(b) of the Act: NONE
           Securities registered pursuant to Section 12(g) of the Act:

                           COMMON STOCK, NO PAR VALUE
                                (Title of class)

      The registrant  (1) has filed all reports  required to be filed by Section
13 or 15(d) of the  Securities  Exchange  Act of 1934  during the  preceding  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          .
    --------      --------

      Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best  of  the  registrant's   knowledge,  in  definitive  proxy  or  information
statements  incorporated  by  reference  in Part  III of this  Form  10-K or any
amendment to this Form 10-K. |X|

      The aggregate market value of the voting stock held by  non-affiliates  of
the registrant, I.E., persons other than directors and executive officers of the
registrant is $5,785,486 and is based upon the last sales price as quoted in the
National Daily Quotation Service "Pink Sheet" for March 24, 1997.

      As of March 24,  1997,  the  Registrant  had  425,677  shares  outstanding
(excluding treasury shares).

                       DOCUMENTS INCORPORATED BY REFERENCE

      PORTIONS OF THE ANNUAL REPORT TO STOCKHOLDERS  FOR THE YEAR ENDED DECEMBER
31, 1996 ARE INCORPORATED BY REFERENCE INTO PART II OF THIS FORM 10-K.

      PORTIONS  OF  THE  PROXY   STATEMENT  FOR  THE  1997  ANNUAL   MEETING  OF
STOCKHOLDERS ARE INCORPORATED BY REFERENCE INTO PART III OF THIS FORM 10-K.



<PAGE> 2



                                     INDEX

PART I                                                                  PAGE
                                                                        ----

Item 1.  Business ...........................................             1

Additional Item.  Executive Officers of the Registrant.......            34

Item 2.  Properties..........................................            34

Item 3.  Legal Proceedings...................................            35

Item 4.  Submission of Matters to a Vote of Security Holders.            35


PART II

Item 5.  Market for Registrant's Common Equity and Related
         Stockholder Matters.................................            35

Item 6.  Selected Financial Data.............................            35

Item 7.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations.................            35

Item 8.  Financial Statements and Supplementary Data.........            35

Item 9.  Changes in and Disagreements with Accountants
         on Accounting and Financial Disclosure..............            35

PART III

Item 10. Directors and Executive Officers of the Registrant..            36

Item 11. Executive Compensation..............................            36

Item 12. Security Ownership of Certain Beneficial Owners
         and Management......................................            36

Item 13. Certain Relationships and Related Transactions......            36

PART IV

Item 14. Exhibits, Financial Statement Schedules and Reports
         on Form 8-K.........................................            37

SIGNATURES...................................................            39


<PAGE> 3



                                    PART I

ITEM 1.  BUSINESS.
-----------------

GENERAL

      Lenox Bancorp,  Inc. (also referred to as the "Company") was  incorporated
under Ohio law on July 24, 1995. On July 17, 1996, the Registrant acquired Lenox
Savings Bank (the "Bank" or "Lenox") as a part of the Bank's  conversion  from a
mutual to a stock Ohio  chartered  savings bank. The Registrant is a savings and
loan  holding  company  and is  subject  to  regulation  by the Office of Thrift
Supervision (the "OTS"), the Federal Deposit Insurance  Corporation (the "FDIC")
and  the  Securities  and  Exchange  Commission  (the  "SEC").   Currently,  the
Registrant does not transact any material  business other than through the Bank.
The Registrant  retained 50% of the net conversion  proceeds  amounting to $1.89
million which was used to purchase  investment  securities and fund loan demand.
At  December  31,  1996,  the  Company  had total  assets of $47.1  million  and
stockholders' equity of $7.3 million (15.4% of total assets).

      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  Procter & Gamble.  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.  The Bank  conducts its business  from one office  located in St.
Bernard, Ohio.

      The Bank is  primarily  engaged in  attracting  deposits  from the general
public  in its  primary  market  area and  investing  such  deposits  and  other
available funds in mortgage loans secured by one- to four-family residences.  At
December 31, 1996, the Bank had invested $34.8 million,  or 92.8%,  of its total
loan portfolio in one- to four-family  mortgage loans.  The Bank also invests in
consumer  loans.  Due to the close ties that have  existed  between the Bank and
Procter & Gamble,  the Bank has a high concentration of borrowers and depositors
who are  Procter  &  Gamble  employees.  The  Bank  has  hired a  mortgage  loan
originator  to help it  attract  borrowers  and has  also  begun to  market  its
products and services more  aggressively  throughout its primary market area. 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.

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 Warren,  Butler and  Clermont  counties,  Ohio and Boone,  Campbell and
Kenton  counties,  Kentucky.  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 most
recently  directly  with a  Cincinnati  commercial  bank that has opened  branch
offices at Procter & Gamble facilities.

      The Cincinnati area, which includes Hamilton County, has a stable economic
base supported by a variety of industries and employment sectors.  Cincinnati is
the second largest metropolitan area in the state of Ohio. Although Cincinnati's
economy was founded on  manufacturing,  which  remained the dominant  employment
sector throughout much of the twentieth  century,  manufacturing  industries now
trail services and wholesale and retail trade in terms of employment.  Following
the national trend, service

                                      1

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industries were the fastest growing  employment sector through the 1980s and are
now the largest  employment sector in the Cincinnati  metropolitan  area, led by
health,  business,  and legal services.  The second largest employment sector is
the wholesale and retail trade sector.  Although less  prominent,  manufacturing
remains a large employment  sector,  providing  employment in such industries as
transportation equipment, food products, industrial machinery and chemicals.

      Cincinnati  is the chosen  headquarters  for many  Fortune 500  companies,
including  Procter & Gamble,  E.W.  Scripps,  Federated  Department  Stores  and
Cincinnati  Milacron.  Many  other  companies  among the  Fortune  500 have also
established  operations in  Cincinnati,  including  Ford Motor Corp. and General
Electric.  Overall,  Cincinnati's popularity among large employers has served to
increase the size and stability of the Cincinnati economy.

      The  Cincinnati  area's  increasingly  diverse  economic  mix provides the
metropolitan area with a strong degree of economic  stability,  which has served
to lessen the impact the  national  recession  has had on the  Cincinnati  area.
Employment  increases  in the service  and  wholesale/retail  trade  industries,
coupled with less dependence on manufacturing  employment has further  insulated
the  economy  from  recessionary  trends.   Hamilton  County,  the  location  of
Cincinnati,  has  benefitted  the most from  this  economic  diversification  as
evidenced by its lower rate of unemployment relative to Ohio and U.S. averages.

      The  Bank  faces  significant  competition  both in  making  loans  and in
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.  The  Cincinnati  area is the home to many
commercial  banks and savings  institutions.  As of December 31, 1996,  the Bank
estimates that it represented  less than 1% of the total assets and market share
for loans and deposits,  among  financial  institutions  serving the  Cincinnati
area.  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.  Competition may also increase as a result of
the  lifting  of  restrictions   on  the  interstate   operations  of  financial
institutions.



                                      2

<PAGE> 5



LENDING ACTIVITIES

      GENERAL. Historically, the principal lending activity of the Bank has been
the origination of long-term  fixed-rate and adjustable rate one- to four-family
mortgage  loans.  To a lesser extent,  the Bank  originates  consumer  loans. At
December 31, 1996, the Bank had invested  $34.8  million,  or 92.8% of its total
loan  portfolio  in one- to  four-family  mortgage  loans.  The Bank has hired a
mortgage  loan  originator  to help it attract  borrowers  and has also begun to
market its products and services more aggressively throughout its primary market
area.  As of  December  31,  1996,  the Bank  exceeded  all  regulatory  capital
requirements.

      LOAN PORTFOLIO  COMPOSITION.  The Bank's loan portfolio consists primarily
of one- to four-family loans. The types of loans that the Bank may originate are
subject to federal and state law and regulations.  Interest rates charged by the
Bank on loans are  affected by the demand for such loans and 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.


                                      3

<PAGE> 6


      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,
                              -------------------------------------------------------------------------------------------------
                                     1996                 1995                1994               1993               1992
                              -------------------  -------------------  ----------------   -----------------  -----------------
                                         Percent              Percent            Percent             Percent            Percent
                               Amount    of Total   Amount   of Total   Amount   of Total   Amount   of Total  Amount  of Total
                              --------   --------  --------  ---------  -------  -------   --------  -------  --------  -------
                                                                   (Dollars in thousands)
<S>                           <C>        <C>       <C>        <C>       <C>       <C>     <C>       <C>       <C>       <C>   
REAL ESTATE LOANS:
  One- to four-family(1)....  $35,124     93.68%   $30,633     91.76%   $29,265    92.60%  $26,112   92.58%   $26,466    91.91%
  Construction(2)...........      120      0.32         53       .16         --       --       107     .38        291     1.01
                              -------    ------    -------    ------    -------   ------   -------  ------    -------   ------
    Total real estate loans.   35,244     94.00     30,686     91.92     29,265    92.60    26,219   92.96     26,757    92.92

OTHER LOANS:
  Consumer loans(3).........    2,399      6.39      2,817      8.44      2,465     7.80     2,213    7.85      2,450     8.51
                              -------    ------    -------    ------    -------   ------   -------  ------    -------   ------
    Total loans.............   37,643    100.39     33,503    100.36     31,730   100.40    28,432  100.81     29,207   101.43
                              -------              -------              -------            -------            -------

LESS:
  Deferred loan fees.              42      0.11         43       .13         59      .19        80     .29        166      .58
  Loans in process...              48      0.13         16       .05         --       --        82     .29        188      .65
  Allowance for loan losses.       58      0.15         60       .18         66      .21        66     .23         57      .20
                              -------    ------    -------    ------    -------   ------   -------  ------    -------   ------
  Total reductions..........      148      0.39        119       .36        125      .40       228     .81        411     1.43
                              -------    ------    -------    ------    -------   ------   -------  ------    -------   ------
TOTAL LOANS RECEIVABLE, NET   $37,495    100.00%   $33,384    100.00%   $31,605   100.00%  $28,204  100.00%   $28,796   100.00%
                              =======    ======    =======    ======    =======   ======   =======  ======    =======   ======

----------------------------
(1)  Includes  second  mortgage  loans  and  home  equity  lines  of  credit  on
     residential one- to four-family properties.
(2)  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.  
(3)  Includes  loans  secured  by automobiles, boats, common stock, savings accounts and unsecured loans.
</TABLE>

                                                                     4

<PAGE> 7



      LOAN MATURITY.  The following table shows the maturity of the Bank's loans
at December 31, 1996. The table does not include principal repayments. Principal
repayments  totaled  $7.3  million,  $6.5 million and $7.4 million for the years
ended December 31, 1996, 1995 and 1994, respectively.  At December 31, 1996, all
loans held by the Bank were  classified as held to maturity.  The table does not
include the effect of future  loan  prepayment  activity.  While the Bank cannot
project future loan prepayment activity, the Bank anticipates that in periods of
stable  interest  rates,  prepayment  activity  would be lower  than  prepayment
activity  experienced in periods of declining  interest rates.  In general,  the
Bank  originates  adjustable  and  fixed-rate  one- to  four-family  loans  with
maturities from 15 to 30 years,  one- to four-family loans with balloon features
which mature from 5 to 7 years and  consumer  loans with  maturities  of up to 5
years.

<TABLE>
<CAPTION>

                                                 At December 31, 1996
                                         -------------------------------------
                                          One- to
                                           Four-                   Total Loans
                                         Family(1)   Consumer(2)   Receivable
                                         ----------  -----------  ------------
                                                      (In thousands)
<S>                                         <C>         <C>           <C>   
Amounts due:
  One year or less.....................     $  63       $  163        $  226
  After one year:
   More than one year to three years...       319        1,156         1,475
   More than three years to five years.     1,845          989         2,834
   More than five years to ten years...     2,920           --         2,920
   More than 10 years to twenty years..     9,188           --         9,188
   More than twenty years..............    20,909           91        21,000
                                           ------        -----        ------
     Total due after December 31, 1997.    35,181        2,236        37,417
                                           ------        -----        ------
     Total amount due..................    35,244        2,399        37,643
                                           ------        -----        ------
  Less:
   Undisbursed loan funds..............                                   48
   Deferred loan fees, net.............                                   42
   Allowance for loan losses...........                                   58
                                                                    --------
        Total loans, net...............                              $37,495
                                                                     =======

-----------------------------
(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.
(2) Includes loans secured by automobiles, boats, common stock, savings accounts
    and unsecured loans.
</TABLE>

                                        5

<PAGE> 8



      The following  table sets forth at December 31, 1996, the dollar amount of
gross loans  receivable,  contractually due after December 31, 1997, and whether
such loans have fixed interest rates or adjustable interest rates.

<TABLE>
<CAPTION>

                                   Due After December 31, 1997
                           --------------------------------------------
                               Fixed        Adjustable        Total
                           -------------  --------------  -------------
                                          (In thousands)

<S>                            <C>             <C>            <C>    
One- to four-family......      $18,025         $17,156        $35,181
Consumer.................        2,145              91          2,236
                               -------         -------        -------
  Total loans............      $20,170         $17,247        $37,417
                               =======         =======        =======
</TABLE>


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

<TABLE>
<CAPTION>


                                            For the Year Ended December 31,
                                            -------------------------------
                                               1996       1995       1994
                                            ---------  ----------  --------
                                                    (In thousands)
<S>                                           <C>        <C>       <C>    
Gross loans:
Loans receivable, beginning of period.......  $33,444    $31,671   $28,270
Loans originated:
   One- to four-family(1)...................    9,278      6,201     8,524
   Consumer(2)..............................    1,311      2,096     2,149
Loans purchased.............................      884         --        --
Principal repayments........................   (7,365)    (6,524)   (7,375)
Other changes, net..........................        1         --       103
                                              -------   --------   -------
   Increase (decrease) in loans receivable..    4,109      1,773     3,401
Loans receivable, end of period.............  $37,553    $33,444   $31,671
                                              =======    =======   =======
---------------------
(1) Includes  second mortgage loans and construction loans on residential one- to four- family properties. 
(2) Includes loans secured by automobiles, boats, common stock, savings accounts and unsecured loans.
</TABLE>

                                        6

<PAGE> 9



      ONE- TO FOUR-FAMILY  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,  with
maturities  up to thirty years.  Substantially  all of such loans are secured by
property located in Hamilton County, Ohio.

      At December 31, 1996, the Bank's total loans,  net outstanding  were $37.5
million, of which $34.8 million or 92.8% of the Bank's total loan portfolio were
one- to  four-family  residential  mortgage  loans.  Of the one- to  four-family
residential  mortgage  loans  outstanding  at that date,  50.4% were  fixed-rate
loans, and 49.6% were ARM loans. Currently, the interest rate for the Bank's ARM
loans  are tied to the one and  three  year  Constant  Maturity  Index  ("CMI").
However,  in the past,  the  Bank's  index was based upon the  monthly  national
median cost of funds as  reported by the OTS,  which lags behind CMI and the one
year U.S.  Treasury index and which results in those loans repricing at interest
rates  that  may  be  higher  or  lower  than  the   prevailing   market  rates.
Approximately $7.2 million of the Bank's ARM loans, or 41.7% of the Bank's total
ARM loans, are based on that index,  which adversely  affects the Bank's results
of operations in an increasing rate  environment  because loans may be repricing
at a  rate  that  is  slower  than  the  Bank's  cost  of  funds.  In  addition,
approximately  $2.5  million of the loans tied to the lagging  market index bear
margins as little as 50 basis points above the lagging  market  index.  The Bank
does not intend to offer one- to four-family  ARM loans based on a lagging index
in the future and has  standardized  the margin it uses,  which is  currently at
least 2.75%. The Bank currently offers a number of adjustable-rate mortgage loan
programs  with  interest  rates which  adjust  either  annually or every  3-year
period. Such interest rate adjustments are limited to a 2% annual adjustment cap
and a 5% and 6%  life-of-the-loan  cap for the  Bank's  15 year ARMs and 30 year
ARMs,  respectively.  The Bank also offers mortgage loans with balloon features.
In general,  these loans may be  refinanced  on the balloon date if the customer
completes  a new loan  application  and meets all of the  underwriting  criteria
required of new  customers.  The Bank  currently has no mortgage  loans that are
subject to negative  amortization.  Finally, the Bank offers a limited amount of
construction  loans for the construction of one- to four-family  homes that will
serve as the  primary  residence  of the  borrower.  These  loans are only made,
however, when the Bank will provide the end loan financing.

      The origination of adjustable-rate  residential mortgage loans, as opposed
to fixed-rate  residential  mortgage loans,  helps reduce the Bank's exposure to
increases in interest  rates.  However,  adjustable-rate  loans  generally  pose
credit risks not inherent in  fixed-rate  loans,  primarily  because as interest
rates rise, the underlying payments of the borrower rise, thereby increasing the
potential for default.  At the same time,  the  marketability  of the underlying
property  may  be   adversely   affected.   Periodic   and   lifetime   caps  on
adjustable-rate  mortgage  loans help to reduce  these  risks but also limit the
interest rate sensitivity of such loans.

      The Bank's policy is to originate one- to four-family residential mortgage
loans in amounts up to 80% of the lower of the  appraised  value or the  selling
price of the property  securing the loan and up to 95% of the appraised value or
selling  price  if  private  mortgage  insurance  is  obtained.  Mortgage  loans
originated by the Bank generally include  due-on-sale  clauses which provide the
Bank with the contractual  right to deem the loan immediately due and payable in
the event the borrower  transfers  ownership of the property  without the Bank's
consent.  Due-on-sale  clauses are an important  means of adjusting the rates on
the  Bank's  fixed-rate  mortgage  loan  portfolio  and the Bank  has  generally
exercised its rights under these clauses.



                                        7

<PAGE> 10



      The Bank also offers  second  mortgage  loans based upon a lagging  market
index,  the monthly  national  median cost of funds as reported by the OTS.  The
second  mortgage  loans are  originated  as fixed  rate loans for the first five
years and thereafter  adjust on an annual basis.  At December 31, 1996, the Bank
had second mortgage loans totalling $723,000.

      CONSUMER  LENDING.  The Bank's  portfolio of consumer  loans consists of a
combination of automobile,  boat and common stock and savings secured loans. The
Bank also offers  unsecured loans up to $5,000 for a maximum three year term. As
of December 31, 1996,  consumer  loans  amounted to $2.4 million or 6.39% of the
Bank's total loan  portfolio.  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
monthly basis and requires that borrowers  pledge  additional  collateral in the
event  fluctuations  in the market value of the pledged  common stock results in
the value of the  collateral  dropping below the required loan to value ratio of
80%.

      Consumer  loans are shorter term and  generally  contain  higher  interest
rates than  residential  mortgage loans.  Management  believes the consumer loan
market has been helpful in improving its spread  between  average loan yield and
costs of funds and at the same time improved the matching of its rate  sensitive
assets and liabilities.

      The underwriting standards employed by the Bank for consumer loans include
a  determination  of the  applicant's  credit  history and an  assessment of the
applicant's  ability to meet existing  obligations  and payments on the proposed
loan.  The  stability of the  applicant's  monthly  income may be  determined by
verification of gross monthly income from primary  employment,  and additionally
from any verifiable  secondary income.  Creditworthiness  of the applicant is of
primary  consideration;  however,  the  underwriting  process  also  includes  a
comparison  of the value of the  collateral  in  relation to the  proposed  loan
amount.

      Consumer loans entail  greater risks than one- to four-family  residential
mortgage  loans,  particularly  consumer  loans  that  are  secured  by  rapidly
depreciable  assets such as automobiles  or that are  unsecured.  In such cases,
repossessed  collateral for a defaulted loan may not provide an adequate  source
of  repayment  of  the  outstanding  loan  balance,  since  there  is a  greater
likelihood  of  damage,  loss  or  depreciation  of the  underlying  collateral.
Further,  consumer loan  collections are dependent on the borrower's  continuing
financial  stability,  and therefore are more likely to be adversely affected by
job loss, divorce,  illness or personal bankruptcy.  Finally, the application of
various  federal and state laws,  including  federal  and state  bankruptcy  and
insolvency  laws,  may limit the amount  which can be recovered on such loans in
the event of a default.  At December  31,  1996,  the Bank had 8 consumer  loans
totalling $14,000 that were 90 days or more delinquent.

      LOAN APPROVAL PROCEDURES AND AUTHORITY.  The Board of Directors authorizes
the lending  activity of the Bank,  establishes the lending policies of the Bank
and reviews  properties  offered as security.  Consumer loans  conforming to the
Bank's loan policy may be approved by the President, the Chief Operating Officer
or the lending operations supervisor.  All other loans in amounts up to $200,000
may be approved by two of the Bank's  executive  officers.  Loans over  $200,000
must be approved by the Board of Directors.


                                      8

<PAGE> 11



      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 required.  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 and  hazard
insurance on all mortgage loans.

      DELINQUENCIES AND CLASSIFIED ASSETS. Management and the 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 would require 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 and
potential problem assets.  The Bank currently  classifies  problem and potential
problem  assets  as  "Substandard,"  "Doubtful"  or "Loss"  assets.  An asset is
considered  Substandard if it is inadequately protected by the current net worth
and  paying  capacity  of the  obligor  or of the  collateral  pledged,  if any.
Substandard assets include those characterized by the distinct  possibility that
the insured  institution  will sustain "some loss" if the  deficiencies  are not
corrected.  Assets classified as Doubtful have all of the weaknesses inherent in
those classified  Substandard with the added  characteristic that the weaknesses
present  make  collection  or  liquidation  in full,  on the basis of  currently
existing  facts,  conditions and values,  highly  questionable  and  improbable.
Assets classified as Loss are those considered  uncollectible and of such little
value that their  continuance as assets without the  establishment of a specific
loss reserve is not warranted.  Assets which do not currently expose the insured
institution  to  sufficient  risk  to  warrant  classification  in  one  of  the
aforementioned  categories but possess  weaknesses are required to be designated
"Special Mention."

      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 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.

                                      9

<PAGE> 12




      The FDIC, in conjunction with the other federal banking agencies, recently
adopted an  interagency  policy  statement on the  allowance  for loan and lease
losses.  The policy statement  provides  guidance for financial  institutions on
both the  responsibilities of management for the assessment and establishment of
adequate  allowances  and  guidance  for  banking  agency  examiners  to  use in
determining the adequacy of general valuation guidelines.  Generally, the policy
statement  recommends that  institutions  have effective systems and controls to
identify,  monitor and address  asset  quality  problems;  that  management  has
analyzed all significant factors that affect the collectibility of the portfolio
in a reasonable manner; and that management has established acceptable allowance
evaluation processes that meet the objectives set forth in the policy statement.
As a result of the declines in local and regional  real estate market values and
the significant  losses  experienced by many financial  institutions,  there has
been a  greater  level  of  scrutiny  by  regulatory  authorities  of  the  loan
portfolios of financial  institutions  undertaken as part of the  examination of
institutions  by the FDIC.  While the Bank believes that it has  established  an
adequate  allowance for loan losses,  there can be no assurance that regulators,
in reviewing the Bank's loan portfolio,  will not request the Bank to materially
increase  at that  time  its  allowance  for  loan  losses,  thereby  negatively
affecting the Bank's  financial  condition  and earnings at that time.  Although
management believes that adequate specific and general loan loss allowances have
been  established,  actual losses are dependent upon future events and, as such,
further  additions to the level of specific and general loan loss allowances may
become necessary.

      The  President of the Bank reviews the Bank's loans on a monthly basis and
classifies  loans on a quarterly  basis and reports the results of her review to
the  Board of  Directors.  The Bank  classifies  loans  in  accordance  with the
management  guidelines  described  above.  At December 31, 1996, the Bank had no
real estate owned as a result of foreclosure  ("REO"). At December 31, 1996, the
Bank had $137,000 of assets  classified  as Special  Mention,  $77,000 of assets
classified as Substandard, and $6,000 classified as Doubtful or Loss.



                                      10

<PAGE> 13



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

<TABLE>
<CAPTION>

                                             At December 31, 1996                   At December 31, 1995
                                     -------------------------------------  --------------------------------------

                                         60-89 Days       90 Days or More       60-89 Days      90 Days or More
                                     ------------------  -----------------  ------------------  ------------------

                                               Principal           Principal          Principal          Principal
                                      Number   Balance   Number    Balance    Number   Balance   Number  Balance
                                     of Loans  of Loans  of Loans  of Loans  of Loans of Loans  of Loans of Loans
                                     --------  --------  --------  --------  -------- --------- -------- ---------
                                                               (Dollars in thousands)
<S>                                     <C>      <C>       <C>      <C>          <C>     <C>        <C>    <C>
One- to four-family...............      2         $90       3        $95          4      $116        2     $66
Consumer..........................      6          25       8         14         10        20       11      23
                                        -         ---      --        ---         --       ---       --      --
      Total.......................      8        $115      11       $109         14      $136       13     $89
                                        =        ====      ==       ====         ==       ===       ==     ===

Delinquent loans to total gross loans            0.31%              0.29%                 .41%             .27%
</TABLE>


<TABLE>
<CAPTION>

                                                    At December 31, 1994
                                          --------------------------------------

                                              60-89 Days        90 Days or More
                                          ------------------  ------------------
                                                   Principal           Principal
                                           Number   Balance   Number    Balance
                                          of Loans  of Loans  of Loans  of Loans
                                          --------  --------  --------  --------
                                                   (Dollars in thousands)
  
<S>                                           <C>      <C>         <C>     <C>
One- to four-family.....................      5        $161        2       $88
Consumer................................      3          15        3         5
                                              -        ----        -       ---
      Total.............................      8        $176        5       $93
                                              =        ====        =       ===

Delinquent loans to total gross loans...                .56%               .29%

</TABLE>




                                       11

<PAGE> 14



      NON-ACCRUAL AND PAST-DUE LOANS. The following table sets forth information
regarding loans contractually past due 90 days or more. At such date, 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
recorded interest income of $3,303,  $3,146,  $7,470,  $5,008 and $3,119 for the
years ended  December  31,  1996,  1995,  1994,  1993 and 1992.  The Bank had no
troubled  debt  restructurings  within the  meaning of SFAS No. 15 at any of the
dates indicated.

<TABLE>
<CAPTION>

                                                         At December 31,
                                        --------------------------------------------
                                          1996     1995      1994     1993     1992
                                        -------  -------  --------  -------  -------
                                                   (Dollars in thousands)

<S>                                       <C>       <C>       <C>     <C>      <C> 
Non-accrual one- to four-family loans
    delinquent 90 days or more........    $95       $66       $88     $109     $148

Non-accrual consumer loans
    delinquent 90 days or more........     14        23         5        1       --
                                         ----        --       ---     ----     ----

Total non-performing loans............    109        89        93      110      148

Total investment in REO...............     --        --        --       --       --
                                         ----       ---       ---     ----     ----

   Total non-performing assets........   $109       $89       $93     $110     $148
                                         ====       ===       ===     ====     ====

Non-performing loans to total loans...    .29%      .27%      .29%     .39%     .51%

Non-performing assets to total assets.    .23       .21       .23      .26      .35

</TABLE>

                                                  12

<PAGE> 15



      ALLOWANCE FOR LOAN LOSSES.  The  allowance for loan losses is  established
through a provision  for loan losses  based on  management's  evaluation  of the
risks inherent in its loan portfolio and the general economy.  The allowance for
loan losses is maintained at an amount  management  considers  adequate to cover
estimated  losses in loans  receivable  which are deemed  probable and estimable
based on  information  available to  management at such time.  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. As of December 31, 1996, the Bank's allowance for loan losses was .15%
of  total  loans as  compared  to .18% as of  December  31,  1995.  The Bank had
$109,000 of nonperforming loans at December 31, 1996 and $89,000 at December 31,
1995.  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.

      At December 31, 1996,  the Bank had no REO. For a  description  of how the
Bank would treat REO, see the Financial  Statements and Notes thereto  appearing
elsewhere in this Form 10-K.



                                       13

<PAGE> 16



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

<TABLE>
<CAPTION>

                                             At or For the Year Ended December 31,
                                     -----------------------------------------------------
                                       1996        1995       1994       1993       1992
                                     ---------   --------   --------   --------   --------
                                                     (Dollars in thousands)
<S>                                      <C>        <C>        <C>        <C>        <C>
Allowance for loan losses:

Balance at beginning of period....       $60        $66        $66        $57        $60

Provision (credit) for loan losses        --         (2)        --          6          4

Charge-offs:

   Consumer.......................         4          5          1         --         10
                                          --         --         --        ---         --

     Total charge-offs............         4          5          1         --         10

Recoveries:

   Consumer.......................         2          1          1          3          3
                                         ---         --         --        ---        ---

     Total recoveries.............         2          1          1          3          3
                                         ---         --        ---        ---        ---

Net charge-offs...................         2          4         --         (3)         7
                                         ---         --       ----                   ---

Balance at end of period..........       $58        $60        $66        $66        $57
                                         ===        ===        ===        ===        ===

Ratio of net loan charge-offs
  during the period to average
  loans outstanding during period.       .01%       .01%        --%      (.01)%      .02%

Ratio of allowance for loan losses
  to gross loans at end of period.       .15        .18        .21        .23        .20

Ratio of allowance for loan losses
  to non-performing loans
  at end of period................     53.21      66.67      71.17      59.86      38.39

</TABLE>




                                                    14

<PAGE> 17



      The following tables set 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,
                     ---------------------------------------------------------------------------------------------------------
                                     1996                               1995                               1994
                     ----------------------------------  ---------------------------------- ----------------------------------
                                PERCENT OF  PERCENT OF           PERCENT OF  PERCENT OF             PERCENT OF   PERCENT OF
                                ALLOWANCE   LOANS IN              ALLOWANCE   LOANS IN               ALLOWANCE  LOANS IN EACH
                                TO TOTAL  EACH CATEGORY           TO TOTAL  EACH CATEGORY            TO TOTAL     CATEGORY
                      AMOUNT    ALLOWANCE TO TOTAL LOANS AMOUNT   ALLOWANCE  TO TOTAL LOANS  AMOUNT  ALLOWANCE  TO TOTAL LOANS
                     ---------  --------- -------------- ------   ---------  -------------- -------- ---------  --------------
                                                         (DOLLARS IN THOUSANDS)
<S>                    <C>      <C>         <C>           <C>      <C>         <C>            <C>      <C>         <C>   
One- to four-family... $20       34.48%      93.63%       $20       33.33%      91.59%        $20       30.30%      92.23%
Consumer..............  38       65.52        6.37         40       66.67        8.41          46       69.70        7.77
                       ---      ------      ------         --       -----       -----         ---      ------        ----
 Total allowance for
      loan losses..... $58      100.00%     100.00%       $60      100.00%     100.00%        $66      100.00%     100.00%
                       ===      ======      ======        ===      ======      ======         ===      ======      ======
</TABLE>


<TABLE>
<CAPTION>

                                                           AT DECEMBER 31,
                          ------------------------------------------------------------------------
                                          1993                                  1992
                          ----------------------------------   -----------------------------------
                                    PERCENT OF  PERCENT OF               PERCENT OF   PERCENT OF
                                     ALLOWANCE LOANS IN EACH             ALLOWANCE  LOANS IN EACH
                                     TO TOTAL   CATEGORY TO               TO TOTAL    CATEGORY
                           AMOUNT   ALLOWANCE  TOTAL LOANS      AMOUNT   ALLOWANCE  TO TOTAL LOANS
                          --------- ---------  ------------    --------  ---------  --------------
                                                                      (DOLLARS IN THOUSANDS)
<S>                         <C>      <C>         <C>             <C>      <C>          <C>    
One- to four-family.....    $20       30.30%      92.22%         $20       35.09%       91.61% 
Consumer................     46       69.70        7.78           37       64.91         8.39
                            ---      ------        ----          ---      ------         ----
 Total allowance for
   loan losses..........    $66      100.00%     100.00%         $57      100.00%      100.00%
                            ===      ======      ======          ===      ======       ======
</TABLE>



                                                                   15

<PAGE> 18



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 the Board of
Directors  attempts  to provide  and  maintain  liquidity,  generate a favorable
return on investments  without incurring undue interest rate and credit risk 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 Federal National Mortgage Association ("FNMA"), Federal
Home Loan Mortgage  Corporation  ("FHLMC")  and the Federal Farm Credit  Bureau,
mortgage-backed  securities  which are  backed  by  federal  agency  securities,
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.  The Bank's policies  provide that the Chief  Financial  Officer is
authorized  to  execute  all  transactions  within  specified  limits  which are
reviewed by the Board of Directors  on a monthly  basis and are  currently  $1.0
million.  From  time to time the  Board of  Directors  may  authorize  the Chief
Financial Officer to exceed the policy limitations.

      At  December  31,  1996,  the  Bank  had  a  total  of  $8.67  million  in
certificates  of deposit,  other interest  earning  deposits,  corporate  notes,
federal funds and other investment and mortgage-backed  securities.  At December
31, 1996, all  investment  and  mortgage-backed  securities  were  classified as
available for sale.  Included in this total,  at December 31, 1996, the Bank had
$6.2  million in U.S.  Government  and agencies  securities  and $1.1 million in
mortgage-backed securities.  Investments in mortgage-backed 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. The Bank may invest in mortgage-backed  securities
in the future.


                                      16

<PAGE> 19



      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,
                                    ----------------------------------------------------
                                          1996              1995              1994
                                    ----------------- ----------------  ----------------
                                    AMORTIZED  FAIR   AMORTIZED FAIR    AMORTIZED FAIR
                                      COST     VALUE    COST    VALUE     COST    VALUE
                                    --------  ------- -------- -------  -------- -------
                                                       (IN THOUSANDS)

<S>                                <C>      <C>      <C>      <C>      <C>     <C>   
Certificates of deposit(1)......     $162     $162   $  151   $  151   $  488  $  488

Other interest-earning deposits.      357      357      164      164      195     195

Investment securities:

  Corporate notes...............       --       --      455      456    1,159   1,150

  Federal funds.................      364      364       97       97      204     204

  FHLB stock....................      436      436      407      407      381     381

  U. S. government obligations..    6,193    6,089    5,567    5,625    2,997   2,926

  Mutual Funds..................       14       14        1        1    1,000   1,000

  FHLMC preferred stock.........       --       --       --       --       --      --

  Mortgage-backed securities....    1,148    1,148    1,024    1,082      787     799
                                   ------   ------   ------   ------   ------  ------
    Total.......................   $8,674   $8,570   $7,866   $7,983   $7,211  $7,143
                                   ======   ======   ======   ======   ======  ======

----------------------------
(1) Includes certificates of deposit with original maturities of greater than 90 days.

</TABLE>

                                      17

<PAGE> 20



      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, 1996.

<TABLE>
<CAPTION>

                                                                       AT DECEMBER 31, 1996
                                    --------------------------------------------------------------------------------------------
                                                         MORE THAN ONE     MORE THAN FIVE
                                    ONE YEAR OR LESS   YEAR TO FIVE YEARS YEARS TO TEN YEARS MORE THAN TEN YEARS      TOTAL
                                    -----------------  -----------------  -----------------  -------------------  --------------
                                             WEIGHTED           WEIGHTED           WEIGHTED           WEIGHTED          WEIGHTED
                                    CARRYING AVERAGE   CARRYING AVERAGE   CARRYING AVERAGE   CARRYING AVERAGE  CARRYING AVERAGE
                                     VALUE    YIELD     VALUE    YIELD     VALUE    YIELD     VALUE    YIELD    VALUE    YIELD
                                    -------  --------  -------  --------  -------  --------  -------  -------  -------  -------
                                                                      (DOLLARS IN THOUSANDS)

<S>                                 <C>      <C>        <C>      <C>       <C>       <C>     <C>      <C>      <C>       <C>  
Certificates of Deposit(1)......    $   --     --%      $162     5.98%     $   --     --%    $   --     --%      $162    5.98%

Other interest-bearing deposit..       357   6.15         --       --          --     --         --     --        357    6.15

Investment securities:

   U.S. government obligations..        --     --         --       --       2,956   7.14      3,133   7.51      6,089    7.33

   Federal funds................       364   5.50         --       --          --     --         --     --        364    5.50

   Mutual funds.................        14   4.92         --       --          --     --         --     --         14    4.92

   Corporate notes..............        --     --         --       --          --     --         --     --         --      --

   FHLB stock...................        --     --         --       --         --      --        436   7.04        436    7.04

   Mortgage-backed securities...        --     --         20     9.75         --      --      1,128   7.89      1,148    7.92
                                      ----               ---              ------             ------            ------
     Total......................      $735   5.80       $182     6.39     $2,956    7.14     $4,697   7.56     $8,570    7.24
                                      ====              ====              ======             ======            ======

-----------------------------
(1) Includes  certificates of deposit with original maturities of greater than 90 days.

</TABLE>

                                            18

<PAGE> 21



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. For the year ended December 31, 1996,  certificates of
deposit constituted 66.90% of total average deposits.

      The Bank's current deposit products include savings,  NOW accounts,  money
market and certificate of deposit  accounts  ranging in term from thirty 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 ("IRAs").

      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,  and service  hours.  Although a  substantial  amount of the
Bank's depositors are past and present Procter & Gamble employees,  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.  Management
believes  that  an  insignificant   number  of  deposit  accounts  are  held  by
non-residents of the Bank's primary market area.

      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.

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

<TABLE>
<CAPTION>

                                 For the Year Ended December 31,
                                 -------------------------------
                                   1996       1995        1994
                                 --------  ----------  ---------
                                     (Dollars in thousands)

<S>                              <C>        <C>         <C>    
Balance beginning of period      $33,669    $35,526     $38,120

   Net increase (decrease)
      before interest credited    (2,745)    (3,506)     (4,171)

   Interest credited..........     1,627      1,649       1,577
                                  ------     ------     -------
       Balance end of period     $32,551    $33,669     $35,526
                                 =======    =======     =======
</TABLE>





                                      19

<PAGE> 22



      At December 31 , 1996, the Bank had $3.6 million in  certificate  accounts
in amounts of $100,000 or more maturing as follows:

<TABLE>
<CAPTION>

                                                                    WEIGHTED
                         MATURITY PERIOD             AMOUNT       AVERAGE RATE
                         ---------------            --------     --------------
                                                         (DOLLARS IN THOUSANDS)

<S>                                                <C>           <C>  
Three months or less...................              $100        5.60%

Over three through nine months.........               234        5.40

Over six through 12 months.............               202        5.84

Over 12 months.........................             3,032        6.32
                                                    -----     
      Total............................            $3,568        6.21
                                                   ======
</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,
                        --------------------------------------------------------------------------------------
                                1996                            1995                          1994
                        ---------------------------  ---------------------------  ----------------------------
                                 PERCENT                      PERCENT                       PERCENT
                                OF TOTAL  WEIGHTED           OF TOTAL  WEIGHTED            OF TOTAL  WEIGHTED
                       AVERAGE  AVERAGE   AVERAGE   AVERAGE  AVERAGE   AVERAGE    AVERAGE  AVERAGE    AVERAGE
                       BALANCE  DEPOSITS    RATE    BALANCE  DEPOSITS   RATE      BALANCE  DEPOSITS    RATE
                       ------- ---------  --------  -------  --------  --------  --------  --------   -------
                                                    (DOLLARS IN THOUSANDS)
<S>                   <C>        <C>        <C>    <C>        <C>        <C>     <C>        <C>        <C>  
Statement savings
  accounts........     $6,047     17.67%    2.58%  $ 5,805     16.94%    2.68%   $ 6,406     17.75%    2.64%

NOW and Money
   Market accounts      5,281     15.43     2.46     5,155     15.05     2.47      6,091     16.87     2.64

Total certificate
   accounts.......     22,896     66.90     5.75    23,299     68.01     5.87     23,603     65.38     5.28
                      -------    ------            -------    ------             -------    ------

Total average
deposits..........    $34,224    100.00%    4.68   $34,259    100.00%    4.81%   $36,100    100.00%    4.37%
                      =======    ======            =======    ======             =======    ======
</TABLE>





                                                                   20

<PAGE> 23



      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, 1996.

<TABLE>
<CAPTION>


                              PERIOD TO MATURITY FROM DECEMBER 31, 1996                 AT DECEMBER 31,
                         ----------------------------------------------------  -----------------------------
                                                 TWO TO               FOUR TO
                          LESS THAN   ONE TO     THREE     THREE TO    FIVE
                          ONE YEAR   TWO YEARS   YEARS    FOUR YEARS   YEARS     1996       1995      1994
                         ----------  ---------- -------   ----------  -------  --------- --------- ---------
                                                            (IN THOUSANDS)
<S>                          <C>        <C>      <C>         <C>       <C>      <C>       <C>        <C>    
Certificate accounts(1):

0 to 4.00%...............    $    --    $   --   $   --      $   --    $   --$       --   $    --    $ 1,506

4.01 to 5.00%............        370        --       --          42        --       412       797      6,229

5.01 to 6.00%............      9,665     3,392    1,021         698     1,346    16,122    12,972      9,377

6.01 to 7.00%............      1,181       571    2,347       1,088        --     5,187     7,944      3,942

7.01 to 8.00%............         --        --       --         149        --       149       753      1,166

8.01 to 9.00%............         --        --       --          --        --        --        --      1,231

Over 9.01%...............         --        --       --          --        --        --        --        259
                             -------    ------   ------      ------    ------    ------   -------     ------

  Total..................    $11,216    $3,963   $3,368      $1,977    $1,346   $21,870   $22,466    $23,710
                             =======    ======   ======      ======    ======   =======   =======    =======

-------------------------
(1)  Certificates of deposit include IRA accounts of $9,430,  $9,899 and $10,666 as of 
     December 31, 1996, 1995 and 1994, respectively.

</TABLE>


                                      21

<PAGE> 24



BORROWINGS

      At December 31, 1996,  the Bank had $7.0 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 majority of FHLB advances
bear fixed rates and have terms of one year or less. The maximum amount that the
FHLB will advance to member  institutions,  including the Bank,  fluctuates from
time to time in  accordance  with  current  regulations.  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,
                                                       --------------------------------
                                                          1996        1995       1994
                                                       ---------  ---------- ----------
                                                            (DOLLARS IN THOUSANDS)
<S>                                                      <C>         <C>         <C>  
FHLB advances:

  Average balance outstanding.......................     $5,924      $3,199      $ 398

  Maximum amount outstanding at any
     month-end during the period....................      7,007       5,806        417

  Balance outstanding at end of period..............      7,007       5,327        402

  Weighted average interest rate during the period..       5.77%       6.16%      5.78%

  Weighted average interest rate at end of period...       5.73%       6.09%      5.99%

</TABLE>


PERSONNEL

      As of December  31,  1996,  the Bank had 10  full-time  employees  and one
part-time employee. The employees are not represented by a collective bargaining
unit, and the Bank considers its relationship with its employees to be good.



                                      22

<PAGE> 25



                          REGULATION AND SUPERVISION


GENERAL

      The Bank is an Ohio  chartered  savings bank, a member of the FHLB system,
and its deposit accounts are insured up to applicable limits by the FDIC through
the  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  "Superintendent").  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 the  Company,  the Bank and
their operations.  The Company,  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 OTS and of the Securities and Exchange Commission (the "SEC")
under the  federal  securities  laws.  Certain  of the  regulatory  requirements
applicable  to the Bank and to the  Company are  referred to below or  elsewhere
herein.

      As an insured depository institution, the Bank is subject to the Community
Reinvestment Act ("CRA") and to various  statutes and  implementing  regulations
promulgated by the Board of Governors of the Federal  Reserve System (the "FRB")
including, without limitation, regulations relating to equal credit opportunity,
reserves,  electronic fund transfers,  truth in lending,  availability of funds,
and truth in savings. As lenders whose loans are secured by real property and as
owners of real  property,  financial  institutions,  including the Bank,  may be
subject to potential liability under various statutes and regulations applicable
to property owners generally, including statutes and regulations relating to the
environmental  condition of real property. The Bank is also subject to the usury
laws of Ohio and  other  states  in which it makes  loans.  In Ohio,  there is a
maximum  interest rate  applicable to mortgage  loans secured by the  borrower's
residence  which is no greater than eight percent in excess of the discount rate
on  ninety-day  commercial  paper in effect at the Federal  Reserve  Bank in the
Fourth Federal Reserve  District.  There are also  limitations on interest rates
for other loans,  such as consumer loans, and limitations on the amounts of fees
which may be charged in connection with such loans.

      The FDIC has extensive enforcement  authority over insured  Ohio-chartered
savings banks,  including the Bank. This enforcement  authority includes,  among
other things,  the ability to assess civil money  penalties,  to issue cease and
desist or removal orders and to initiate injunctive  actions. In general,  these
enforcement  actions may be  initiated  in response  to  violations  of laws and
regulations and unsafe or unsound practices.



                                      23

<PAGE> 26



      The FDIC has authority to appoint a conservator or receiver for an insured
savings  bank under  certain  circumstances.  The grounds for  appointment  of a
conservator   or  receiver  for  a  state  savings  bank  on  the  basis  of  an
institution's financial condition include: (i) insolvency, in that the assets of
the savings bank are less than its  liabilities to depositors  and others;  (ii)
substantial  dissipation  of assets or  earnings  through  violations  of law or
unsafe or unsound  practices;  (iii) existence of an unsafe or unsound condition
to transact  business;  (iv)  likelihood that the savings bank will be unable to
meet the  demands  of its  depositors  or to pay its  obligations  in the normal
course of business;  and (v)  insufficient  capital,  or the incurring or likely
incurring  of  losses  that will  deplete  substantially  all the  institution's
capital with no reasonable  prospect of replenishment of capital without federal
assistance.

DIVISION 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.

      Any mergers  involving,  or acquisitions of control of, Ohio savings banks
are subject to the prior approval of the Superintendent.  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.

      Since  the  enactment  of  the  Federal  Deposit   Insurance   Corporation
Improvement Act of 1991, all state-chartered  financial institutions,  including
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 were 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.

FDIC 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.  Risk-based  capital
ratios are determined by allocating assets and specified off-balance sheet items
to four risk-

                                      24

<PAGE> 27



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,  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.  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.

      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 3% plus an additional cushion of at least 100 to 200 basis points.

      The  following is a summary of the Bank's  regulatory  capital at December
31, 1996:

<TABLE>
<CAPTION>

            <S>                                              <C>
            GAAP Capital to Total Assets..............       15.4%
            Total Capital to Risk-Weighted Assets.....       11.7%
            Tier I Leverage Ratio.....................       24.1%
</TABLE>


      In August 1995, the FDIC,  along with the other federal banking  agencies,
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.  According to the agencies,  applicable
considerations  include the quality of the bank's  interest rate risk management
process,  the  overall  financial  condition  of the bank and the level of other
risks at the bank for which  capital is needed.  Institutions  with  significant
interest  rate risk may be required to hold  additional  capital.  The  agencies
recently  issued a joint policy  statement  providing  guidance on interest rate
risk management,  including a discussion of the critical  factors  affecting the
agencies'  evaluation of interest rate risk in connection with capital adequacy.
The agencies have determined not to proceed with a previously issued proposal to
develop a supervisory framework for measuring interest rate risk and an explicit
capital component for interest rate risk.

      Banking  regulators  continue to indicate  their  desire to raise  capital
requirements  applicable to banking  organizations  beyond their current levels.
Management  is unable to predict  whether and when higher  capital  requirements
would be imposed and, if so, to what levels and on what schedule.

      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, the
Company 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

                                      25

<PAGE> 28



of  dividends  in excess of 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,  will be 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.  Federal law  requires  each federal
banking agency to prescribe for depository  institutions  under its jurisdiction
standards  relating  to,  among other  things,  internal  controls;  information
systems and audit systems;  loan documentation;  credit  underwriting;  interest
rate risk  exposure;  asset growth;  compensation,  fees and benefits;  and such
other operational and managerial standards as the agency deems appropriate.  The
federal banking  agencies adopted final  regulations and Interagency  Guidelines
Prescribing  Standards for Safety and Soundness (the  "Guidelines") to implement
these safety and soundness  standards.  The  Guidelines set forth the safety and
soundness  standards  that the federal  banking  agencies  use to  identify  and
address  problems at insured  depository  institutions  before  capital  becomes
impaired.  The Guidelines  address  internal  controls and information  systems;
internal audit system;  credit underwriting;  loan documentation;  interest rate
risk exposure; asset growth; asset quality; earnings and compensation;  fees and
benefits.   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 FDI Act.  The final
regulation  establishes  deadlines for the  submission and review of such safety
and soundness compliance plans.

      LIQUIDITY.  FDIC policy  requires that savings  banks  maintain an average
daily  balance  of  liquid  assets  (cash,   certain  time  deposits,   bankers'
acceptances  and specified  United States  government,  state or federal  agency
obligations)  in an amount  which it deems  adequate  to protect  the safety and
soundness of the savings bank. The FDIC currently has no specific level which is
required.

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.  For these purposes, the law establishes five
capital  tiers:  well  capitalized,  adequately  capitalized,  undercapitalized,
significantly undercapitalized, and critically undercapitalized. At December 31,
1996, the Bank was categorized as "well capitalized."

      The FDIC has adopted regulations to implement the prompt corrective action
legislation.  Among other things,  the regulations  define the relevant  capital
measures for the five capital  categories.  An institution is deemed to be "well
capitalized"  if it has a total  risk-based  capital ratio of 10% or greater,  a
Tier I risk-based capital ratio of 6% or greater,  and a leverage ratio of 5% or
greater,  and is not subject to a  regulatory  order,  agreement or directive to
meet  and  maintain  a  specific  capital  level  for any  capital  measure.  An
institution  is  deemed  to  be  "adequately  capitalized"  if it  has  a  total
risk-based  capital ratio of 8% or greater, a Tier I risk-based capital ratio of
4% or greater,  and generally a leverage ratio of 4% or greater.  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%. 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

                                      26

<PAGE> 29



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%.

      "Undercapitalized"  banks are  subject  to  growth,  capital  distribution
(including  dividend) and other limitations and are required to submit a capital
restoration  plan.  A  bank's  compliance  with  such  plan  is  required  to be
guaranteed by any company that controls the undercapitalized institutions. If an
"undercapitalized"  bank fails to submit an acceptable plan, it is treated as if
it is "significantly  undercapitalized."  "Significantly undercapitalized" banks
are subject to one or more of a number of additional restrictions,  including an
order  by the  FDIC  to  sell  sufficient  voting  stock  to  become  adequately
capitalized,  requirements  to reduce total assets and cease receipt of deposits
from correspondent  banks or dismiss directors or officers,  and restrictions on
interest rates paid on deposits,  compensation of executive officers and capital
distributions  by the  parent  holding  company.  "Critically  undercapitalized"
institutions  also  may  not,  beginning  60  days  after  becoming  "critically
undercapitalized,"  make  any  payment  of  principal  or  interest  on  certain
subordinated  debt or extend credit for a highly leveraged  transaction or enter
into any  material  transaction  outside the  ordinary  course of  business.  In
addition,  "critically undercapitalized" institutions are subject to appointment
of a receiver or  conservator.  Generally,  subject to a narrow  exception,  the
appointment  of  a  receiver  or  conservator  is  required  for  a  "critically
undercapitalized" institution within 270 days after it obtains such status.

TRANSACTIONS WITH AFFILIATES

      Under current federal law,  transactions  between depository  institutions
and their affiliates are governed by Sections 23A and 23B of the Federal Reserve
Act. An affiliate of a savings bank is any company or entity that  controls,  is
controlled  by, or is under common  control with the savings  bank. In a holding
company context, at a minimum,  the parent holding company of a savings bank and
any companies which are controlled by such parent holding company are affiliates
of the  savings  bank.  Generally,  Section  23A  limits the extent to which the
savings bank or its subsidiaries may engage in "covered  transactions"  with any
one affiliate to an amount equal to 10% of such savings bank's capital stock and
surplus,  and  contains an  aggregate  limit on all such  transactions  with all
affiliates to an amount equal to 20% of such capital stock and surplus. The term
"covered transaction" includes the making of loans or other extensions of credit
to an affiliate;  the purchase of assets from an affiliate,  the purchase of, or
an investment in, the  securities of an affiliate;  the acceptance of securities
of an affiliate as  collateral  for a loan or extension of credit to any person;
or  issuance  of a  guarantee,  acceptance,  or letter of credit on behalf of an
affiliate.  Section 23A also establishes  specific  collateral  requirements for
loans or  extensions  of credit  to, or  guarantees,  acceptances  on letters of
credit  issued on behalf of an  affiliate.  Section 23B  requires  that  covered
transactions  and a broad  list of  other  specified  transactions  be on  terms
substantially  the  same,  or no  less  favorable,  to the  savings  bank or its
subsidiary as similar transactions with nonaffiliates.

      Further, Section 22(h) of the Federal Reserve Act restricts a savings bank
with  respect  to  loans  to  directors,   executive  officers,   and  principal
stockholders.  Under Section 22(h),  loans to directors,  executive officers and
stockholders  who  control,  directly  or  indirectly,  10% or  more  of  voting
securities  of a savings  bank,  and  certain  related  interests  of any of the
foregoing,  may not exceed,  together with all other  outstanding  loans to such
persons and affiliated  entities,  the savings bank's total capital and surplus.
Institutions of less than $100 million in deposits may increase this limit to up
to two times capital and surplus under  certain  conditions.  Section 22(h) also
prohibits  loans above amounts  prescribed by the  appropriate  federal  banking
agency to directors,  executive officers, and shareholders who control more than
10% of a savings  bank,  and their  respective  affiliates,  unless such loan is
approved in advance by

                                      27

<PAGE> 30



a majority of the board of  directors  of the  savings  bank.  Any  "interested"
director may not participate in the voting.  The loan amount (which includes all
other outstanding loans to such person) as to which such prior board of director
approval is required,  is the greater of $25,000 or 5% of capital and surplus or
any loans over $500,000. Further, pursuant to Section 22(h), loans to directors,
executive   officers,   and  principal   shareholders  must  be  made  on  terms
substantially  the same as offered in comparable  transactions to other persons.
Section 22(g) of the Federal Reserve Act places additional  limitations on loans
to executive officers.

INSURANCE OF DEPOSIT ACCOUNTS

      Deposits of the Bank are presently  insured by the SAIF. Both the SAIF and
the Bank  Insurance  Fund ("BIF") (the deposit  insurance  fund that covers most
commercial bank deposits),  are statutorily  required to be  recapitalized  to a
1.25% of insured reserve deposits ratio. Until recently, members of the SAIF and
BIF were paying average  deposit  insurance  premiums of between 24 and 25 basis
points.  The BIF met the  required  reserve  in 1995,  whereas  the SAIF was not
expected to meet or exceed the required  level until 2002 at the earliest.  This
situation was primarily due to the statutory  requirement that SAIF members make
payments on bonds issued in the late 1980s by the Financing Corporation ("FICO")
to recapitalize the predecessor to the SAIF.

      In view of the  BIF's  achieving  the  1.25%  ratio,  the FDIC  ultimately
adopted a new assessment  rate schedule of from 0 to 27 basis points under which
92% of BIF members paid an annual  premium of only $2,000.  With respect to SAIF
member  institutions,  the FDIC adopted a final rule  retaining  the  previously
existing  assessment rate schedule  applicable to SAIF member institutions of 23
to 31 basis points. As long as the premium differential  continued,  it may have
had adverse  consequences  for SAIF members,  including  reduced earnings and an
impaired  ability to raise  funds in the  capital  markets.  In  addition,  SAIF
members, such as the Bank were placed at a substantial competitive  disadvantage
to BIF members  with respect to pricing of loans and deposits and the ability to
achieve lower operating costs.

      On September 30, 1996, the President signed into law the Deposit Insurance
Funds Act of 1996 (the "Funds Act") which, among other things, imposed a special
one-time  assessment  on  SAIF  member  institutions,  including  the  Bank,  to
recapitalize  the SAIF. As required by the Funds Act, the FDIC imposed a special
assessment of 65.7 basis points on SAIF assessable deposits held as of March 31,
1995,  payable  November  27,  1996 (the "SAIF  Special  Assessment").  The SAIF
Special Assessment was recognized by the Bank as an expense in the quarter ended
September 30, 1996 and is generally tax deductible.  The SAIF Special Assessment
recorded by the Bank  amounted to $225,000 on a pre-tax basis and $148,000 on an
after-tax basis.

      The Funds Act also spreads the  obligations  for payment of the FICO bonds
across all SAIF and BIF members. Beginning on January 1, 1997, BIF deposits will
be assessed for FICO payment of 1.3 basis  points,  while SAIF deposits will pay
6.48 basis points.  Full pro rata sharing of the FICO  payments  between BIF and
SAIF  members  will occur on the  earlier of January 1, 2000 or the date the BIF
and SAIF are  merged.  The  Funds  Act  specifies  that the BIF and SAIF will be
merged on January 1, 1999,  provided no savings  associations  remain as of that
time.

      As a result of the Funds Act, the FDIC recently voted to effectively lower
SAIF  assessments  to 0 to 27  basis  points  as of  January  1,  1997,  a range
comparable  to that of BIF members.  SAIF members will also continue to make the
FICO  payments  described  above.  The FDIC  also  lowered  the SAIF  assessment
schedule  for the fourth  quarter of 1996 to 18 to 27 basis  points.  Management
cannot predict

                                      28

<PAGE> 31



the level of FDIC  insurance  assessments  on an  on-going  basis,  whether  the
savings  association charter will be eliminated or whether the BIF and SAIF will
eventually be merged.

      The Bank's  assessment  rate for fiscal  1996 was 23 basis  points and the
premium  paid for this  period  was  $58,000.  A  significant  increase  in SAIF
insurance premiums would likely have an adverse effect on the operating expenses
and results of operations of the Bank.

      Under the FDI Act,  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  operation or has violated any
applicable law, regulation,  rule, order or condition imposed by the FDIC or the
Division. The management of the Bank does not know of any practice, condition or
violation that might lead to termination of deposit insurance.

THRIFT RECHARTERING LEGISLATION

      The Funds Act provides that the BIF and SAIF will merge on January 1, 1999
if there are no more savings associations as of that date. That legislation also
requires that the  Department  of Treasury  submit a report to Congress by March
31, 1997 that makes  recommendations  regarding a common financial  institutions
charter, including whether the separate charters for thrifts and banks should be
abolished.  Various proposals to eliminate the federal thrift charter,  create a
uniform financial  institutions charter and abolish the OTS have been introduced
in Congress.  The bills would require federal savings institutions to convert to
a national  bank or some type of state  charter by a specified  date (January 1,
1998 in one bill, June 30, 1998 in the other) or they would automatically become
national banks. State chartered thrifts would become subject to the same federal
regulation as applies to state commercial  banks.  Holding companies for savings
institutions  would become subject to the same  regulation as holding  companies
that control commercial banks, with a limited grandfather  provision for unitary
savings  and loan  holding  company  activities.  The Bank is unable to  predict
whether such legislation  would be enacted,  the extent to which the legislation
would  restrict or disrupt its operations or whether the BIF and SAIF funds will
eventually merge.

FEDERAL RESERVE SYSTEM

      The Federal Reserve Board regulations  require depository  institutions to
maintain   non-interest-earning  reserves  against  their  transaction  accounts
(primarily  NOW and  regular  checking  accounts).  The  Federal  Reserve  Board
regulations  generally  require that  reserves be maintained  against  aggregate
transaction  accounts  as  follows:  for that  portion of  transaction  accounts
aggregating  $52.0 million or less (subject to adjustment by the Federal Reserve
Board) the  reserve  requirement  is 3%;  and for  accounts  greater  than $52.0
million, the reserve requirement is $1.6 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 $52.0  million.  The first  $4.3  million of
otherwise  reservable  balances  (subject to adjustments by the Federal  Reserve
Board) are exempted  from the reserve  requirements.  The Bank is in  compliance
with the foregoing requirements. Because required reserves must be maintained in
the form of either  vault  cash,  a  non-interest-bearing  account  at a Federal
Reserve Bank or a pass-through  account as defined by the Federal Reserve Board,
the effect of this reserve requirement is to reduce the Bank's  interest-earning
assets.  FHLB  System  members  are also  authorized  to borrow from the Federal
Reserve  "discount  window,"  but  Federal  Reserve  Board  regulations  require
institutions to exhaust all FHLB sources before borrowing from a Federal Reserve
Bank.


                                      29

<PAGE> 32



HOLDING COMPANY REGULATION

      The Company is a  nondiversified  unitary savings and loan holding company
within the meaning of the HOLA. As a unitary  savings and loan holding  company,
the Company  generally is not restricted  under existing laws as to the types of
business activities in which it may engage,  provided that the Bank continues to
be a qualified  thrift lender  ("QTL") for purposes of the federal  regulations.
Upon  any  non-  supervisory  acquisition  by the  Company  of  another  savings
institution  or  savings  bank  that  meets  the QTL test and is  deemed to be a
savings  institution by the OTS, the Company would become a multiple savings and
loan  holding  company  (if the  acquired  institution  is  held  as a  separate
subsidiary)  and  would be  subject  to  extensive  limitations  on the types of
business  activities in which it could engage. The HOLA limits the activities of
a multiple  savings and loan  holding  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 ("BHC Act"),  subject to
the  prior  approval  of the  OTS,  and  certain  activities  authorized  by OTS
regulation.

      The HOLA  prohibits  a  savings  and loan  holding  company,  directly  or
indirectly, or through one or more subsidiaries,  from acquiring more than 5% of
the voting stock of another  savings  institution  or holding  company  thereof,
without prior written approval of the OTS; acquiring or retaining,  with certain
exceptions,  more than 5% of a nonsubsidiary company engaged in activities other
than  those  permitted  by the HOLA;  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 the
company 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 multiple savings and loan holding company controlling savings  institutions in
more than one state,  subject to two exceptions:  (i) the approval of 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.


                          FEDERAL AND STATE TAXATION
FEDERAL TAXATION

      GENERAL.  The Company and the Bank report their income on a calendar  year
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 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 the  Company.  The Bank has not been  audited by the IRS during the past
five years.  For its 1996 taxable year, the Bank is subject to a maximum federal
income tax rate of 34%.

      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 (the "Code") 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

                                      30

<PAGE> 33



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"),  which was
enacted on August 20, 1996,  requires  savings  institutions to recapture (I.E.,
take into income) certain portions of their  accumulated bad debt reserves.  The
1996 Act repeals the reserve  method of accounting  for bad debts  effective for
tax years beginning  after 1995.  Thrift  institutions  that would be treated as
small banks are  allowed to utilize the  Experience  Method  applicable  to such
institutions,  while thrift  institutions that are treated as large banks (those
generally  exceeding  $500  million  in  assets)  are  required  to use only the
specific charge-off method.  Thus, 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
the residential loan requirement.

      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 current  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.

      Under the 1996 Act, for its current and future taxable years,  the Bank is
permitted to make additions to its tax bad debt reserves. In addition,  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  will  incur
additional tax payments of approximately  $82,000 which is generally expected to
be taken into income beginning in 1998 over a six year period.

      DISTRIBUTIONS.  Under  the  1996  Act,  if the  Bank  makes  "non-dividend
distributions"  to the Company,  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 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 the  Company,  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.


                                      31

<PAGE> 34



      CORPORATE  ALTERNATIVE  MINIMUM TAX. The Internal Revenue Code of 1986, as
amended  (the  "Code")  imposes  a tax on  alternative  minimum  taxable  income
("AMTI") at a rate of 20%.  The excess of the bad debt reserve  deduction  using
the  percentage of taxable income method over the deduction that would have been
allowable  under the  experience  method is  treated  as a  preference  item for
purposes of computing the AMTI.  Only 90% of AMTI can be offset by net operating
loss  carryovers of which the Bank  currently has none.  AMTI is increased by an
amount equal to 75% of the amount by which the Bank's adjusted  current earnings
exceeds its AMTI  (determined  without  regard to this  preference  and prior to
reduction for net operating  losses).  In addition,  for taxable years beginning
after December 31, 1986 and before January 1, 1996, an environmental tax of .12%
of the excess of AMTI (with certain  modifications) over $2.0 million is imposed
on corporations,  including the Bank, whether or not an Alternative  Minimum Tax
("AMT") is paid.  The Bank does not expect to be subject to the AMT,  but may be
subject to the environmental tax liability.

      DIVIDENDS  RECEIVED  DEDUCTION AND OTHER MATTERS.  The Company may exclude
from its income 100% of dividends received from the Bank as a member of the same
affiliated group of corporations.  The corporate dividends received deduction is
generally 70% in the case of dividends  received from unaffiliated  corporations
with which the  Company  and the Bank will not file a  consolidated  tax return,
except  that if the  Company  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

      The Company is subject to the Ohio  corporation  franchise tax,  which, as
applied to the  Company,  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,  the Company may exclude
100% of its investment in the capital stock of the Bank after the Conversion, as
reflected  on the balance  sheet of the Company,  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,  the Company  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 the
Company,  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 .11% of the first  $50,000 of computed  Ohio taxable  income and
 .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 .014% times  taxable
net worth.


                                      32

<PAGE> 35



      The Bank is a "financial  institution" for State of 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 1.5% 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.

IMPACT OF NEW ACCOUNTING STANDARDS

The  following  does not  constitute  a  comprehensive  summary of all  material
changes or  developments  affecting  the manner in which the  Company  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.

In May 1995, the Financial  Accounting Standards Board ("FASB") issued Statement
of Financial  Accounting  Standard  ("SFAS") No. 122,  "Accounting  for Mortgage
Servicing  Rights." This statement  requires that a mortgage banking  enterprise
recognize  as  separate  assets  rights to service  mortgage  loans for  others,
however those servicing rights are acquired.  A mortgage banking enterprise that
acquires mortgage servicing rights through either the purchase or origination of
mortgage  loans and sells or  securitizes  those  loans  with  servicing  rights
retained  would  allocate the total cost of the  mortgage  loans to the mortgage
servicing rights and the loans based on their relative fair value. Statement No.
122 is effective for fiscal years beginning  after December 15, 1995.  There was
no impact from the adoption of this standard in 1996.

      In October 1995, the FASB issued SFAS No. 123, "Accounting for Stock-Based
Compensation." This statement establishes accounting and reporting standards for
stock-based  employee  compensation  plans including stock options The statement
defines a "fair value based method" for employee  stock  options and  encourages
all entities to adopt that method for such options. However, it allows an entity
to continue to measure  compensation  cost for those plans using the  "intrinsic
value based  method" of accounting  prescribed  by APB Opinion No. 25.  Entities
electing  to  remain  with the  accounting  in  Opinion  25 must  make  proforma
disclosures of net income and earnings per share, as if the fair value method of
accounting defined in this statement had been applied.  There was no impact from
the adoption of this standard since the Company does not have any stock options.

      In June 1996, the FASB issued SFAS No. 125  "Accounting  for Transfers and
Servicing  of  Financial  Assets  and   Extinguishments  of  Liabilities"  which
established  accounting  and reporting  standards for transfers and servicing of
financial assets and extinguishments of liabilities.  The standards are based on
a consistent  application  of a financial  components  approach  that focuses on
control.  Under that approach,  after a transfer of financial  assets, an entity
recognizes the financial and servicing assets it controls and the liabilities it
has incurred,  derecognizes  financial assets when control has been surrendered,
and derecognizes liabilities when extinguished. SFAS No. 125 supersedes SFAS No.
122. SFAS No. 125 is effective for  transactions  occurring  after  December 31,
1996. Management is currently assessing the impact of this standard.


                                      33

<PAGE> 36



ADDITIONAL ITEM.  EXECUTIVE OFFICERS OF THE REGISTRANT.
------------------------------------------------------

      The following table sets forth certain information regarding the executive
officers of the Company and the Bank who are not also directors.

<TABLE>
<CAPTION>

                       Age at      Position with the Company and Bank
Name                   12/31/96    and Past Five Years Experience
----                   --------    ------------------------------------
<S>                      <C>       <C>
Michael P. Cooper        39        Chief Financial Officer and Treasurer of the Company and the
                                   Bank.  Prior to joining the Company in 1997, Mr. Cooper was
                                   Comptroller of a property management/personnel service and
                                   dental insurer.  From 1987-1994, Mr. Cooper was Chief Financial
                                   Officer of Guardian Savings Bank.
Diane P. Irwin           41        Vice President and Chief Operating Officer of the Company and
                                   the Bank.
</TABLE>


ITEM 2.  PROPERTIES.
-------------------

      The Company and the Bank are  located  and conduct  their  business at the
Bank's  office  located at 5255 Beech Street,  St.  Bernard,  Ohio.  The Company
believes that the Bank's current facilities are adequate to meet the present and
immediately  foreseeable needs of the Bank and the Company.  In prior years, the
Bank has not been required to pay rent for the office that the Bank has operated
from. In 1995, the lessor  negotiated for lease  payments  through  December 31,
1999 totalling $105,000. The lease payments will be lower in the first years and
increase  in later  years to cover the total  amount of the lease.  There are no
renewal  options,  and the Bank may need to  renegotiate at the end of the term.
The  following  table  sets forth  certain  information  relating  to the Bank's
office.

<TABLE>
<CAPTION>

                                       ORIGINAL               NET BOOK VALUE
                                         DATE                 OF PROPERTY OR
                              LEASED    LEASED    DATE OF       LEASEHOLD
                                OR        OR       LEASE     IMPROVEMENTS AT
         LOCATION             OWNED    ACQUIRED  EXPIRATION  DECEMBER 31, 1996
---------------------------   ------   --------  ----------  ----------------
<S>                           <C>         <C>         <C>        <C>     
5255 Beech Street
St. Bernard, Ohio  45217...   Leased      1995        2000       $264,000
</TABLE>


      In  addition,  at  December  31,  1996 the Bank  had a  capitalized  lease
obligation  related  to 3 of its  ATMs.  See Note 6 to the  Notes  to  Financial
Statements appearing elsewhere in this Form 10-K. At December 31, 1996, the Bank
had a total of 3 ATMs. The Bank is currently in the process of renegotiating the
agreements it has with Procter & Gamble  relating to the ATMs located at Procter
& Gamble  facilities.  The Bank expects that as the agreements are renegotiated,
it will  either  reduce the costs  borne by the Bank  related to the  continuing
operation of the ATMs or eliminate them.

      For further  information  related to the Bank's properties,  see Note 4 to
the Notes to the  Financial  Statements  included in the  Company's  1996 Annual
Report to Stockholders.




                                      34

<PAGE> 37



ITEM 3.  LEGAL PROCEEDINGS.
--------------------------

      Neither the Company nor its subsidiaries are involved in any pending legal
proceedings,  other than routine legal matters  occurring in the ordinary course
of  business,  which in the  aggregate  involve  amounts  which are  believed by
management to be immaterial to the consolidated  financial  condition or results
of  operations  of the  Company.  See  Note  15 to the  Notes  to the  Financial
Statements  included  elsewhere herein for more information  regarding a settled
claim related to an employment matter.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
------------------------------------------------------------

      None.

                                    PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
------------------------------------------------------------------------------

      Information  relating  to the market for  Registrant's  common  equity and
related  stockholder  matters appears in the Registrant's  1996 Annual Report to
Stockholders on the back inside cover. On December 31, 1996, the Company had 235
registered shareholders.


ITEM 6.  SELECTED FINANCIAL DATA.
--------------------------------

      The  above-captioned  information  appears  under  "Selected  Consolidated
Financial and Other Data of the Company" in the Registrant's  1996 Annual Report
to Stockholders on pages 2 and 3 and is incorporated herein by reference.

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
--------------------------------------------------------------------------------
OF OPERATIONS.
-------------

      The above-captioned information appears under "Management's Discussion and
Analysis of Financial  Condition and Results of Operations" in the  Registrant's
1996 Annual  Report to  Stockholders  on pages 4 through 13 and is  incorporated
herein by reference.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
----------------------------------------------------

      The  Consolidated  Financial  Statements  of Lenox  Bancorp,  Inc. and its
subsidiary,  together with the report thereon by Clark, Schaefer,  Hackett & Co.
appear  in the  Registrant's  1996  Annual  Report to  Stockholders  on pages 14
through 44 and are incorporated herein by reference.

ITEM 9. CHANGE IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
--------------------------------------------------------------------------------
DISCLOSURE.
----------

      None.




                                      35

<PAGE> 38



                                   PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
------------------------------------------------------------

      The  information  relating  to  Directors  and  Executive  Officers of the
Registrant  is  incorporated  herein  by  reference  to the  Registrant's  Proxy
Statement for the Annual Meeting of  Stockholders  to be held on April 23, 1997,
on pages 4 through 7.  Information  concerning  Executive  Officers  who are not
directors  is contained  in Part I of this report  pursuant to paragraph  (b) of
Item 401 of Regulation S-K in reliance on Instruction G.

ITEM 11.  EXECUTIVE COMPENSATION.
--------------------------------

      The  information  relating  to  director  and  executive  compensation  is
incorporated  herein by reference to the  Registrant's  Proxy  Statement for the
Annual Meeting of  Stockholders to be held on April 23, 1997, on pages 8 through
12.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
------------------------------------------------------------------------

      The  information  relating to  security  ownership  of certain  beneficial
owners and management is  incorporated  herein by reference to the  Registrant's
Proxy  Statement for the Annual Meeting of  Stockholders to be held on April 23,
1997, on pages 3 and 4, and 5 through 7.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
--------------------------------------------------------

      The information relating to certain relationships and related transactions
is incorporated  herein by reference to the Registrant's Proxy Statement for the
Annual Meeting of Stockholders to be held on April 23, 1997, on page 12.



                                      36

<PAGE> 39



                                    PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
-------------------------------------------------------------------------

(a)   The following documents are filed as a part of this report:

(1)   Consolidated  Financial  Statements  of the  Company are  incorporated  by
      reference to the  following  indicated  pages of the 1996 Annual Report to
      Stockholders.

                                                                      PAGE
                                                                      ----
      Independent Auditors' Report................................     14

      Consolidated Balance Sheets
      as of December 31, 1996 and 1995............................    15-16

      Consolidated Statement of Income
      for the Three Years Ended December 31, 1996.................     17

      Consolidated Statement of Changes in
      Stockholders' Equity for Three Years Ended
      December 31, 1996...........................................     18

      Consolidated Statement of Cash Flows for
      the Three Years Ended December 31, 1996.....................    19-20

      Notes to Consolidated Financial Statements..................    21-44



                                      37

<PAGE> 40



The remaining information appearing in the 1996 Annual Report to Stockholders is
not  deemed to be filed as part of this  report,  except as  expressly  provided
herein.

(2)   All schedules are omitted because they are not required or applicable,  or
      the required information is shown in the consolidated financial statements
      or the notes thereto.

(3)   Exhibits

      (a)   The following exhibits are filed as part of this report:

             3.1     Amended Articles of Incorporation of Lenox Bancorp, Inc.*
             3.2     Code of Regulations of Lenox Bancorp, Inc.*
             4.0     Stock Certificate of Lenox Bancorp, Inc.*
            10.1     Form  of  Employment  Agreement  between  the  Company  and
                     Virginia M. Porowski*
            10.2     Form  of Employment Agreement between the Bank and Virginia
                     M. Porowski*
            10.3     Lenox Bancorp, Inc. Incentive Plan**
            13.0     1996 Annual Report to Stockholders (filed herewith)
            21.0     Subsidiary information is incorporated herein by  reference
                     to "Item 1 - General"
            27.0     Financial Data Schedule (filed herewith)

      (b)   Reports on Form 8-K
            None

-----------------------------
*     Incorporated herein by reference to the Exhibits to Form S-1, Registration
      Statement, and Pre-Effective Amendment No. 1, filed on August 25, 1995 and
      March 8, 1996, respectively, Registration No. 33-96248.
**    Incorporated  herein  by  reference  to the Proxy  Statement  for the 1997
      Annual Meeting of Stockholders filed herewith.



                                      38

<PAGE> 41



                                    SIGNATURES

      Pursuant to the requirements of Section 13 of the Securities  Exchange Act
of 1934,  the  Registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.

                                 LENOX BANCORP, INC.


                                 By: /s/ Virginia M. Porowski
                                     ----------------------------------
                                 Virginia M. Porowski
DATED:  March 28, 1997           President, Chief Executive Officer and Director


      Pursuant to the  requirements  of the Securities and Exchange Act of 1934,
this report has been signed by the following  persons in the  capacities  and on
the dates indicated.

      Name                   Title                                     Date
      ----                   -----                                     ----

/s/ Virginia M. Porowski     President, Chief Executive           March 28, 1997
---------------------------  Officer and Director
Virginia M. Porowski         (Principal Executive Officer)

/s/ Michael P. Cooper        Chief Financial Officer and          March 28, 1997
---------------------------  Treasurer (Principal Financial 
Michael P. Cooper            and Accounting Officer)

/s/ Richard O. Plunk         Chair of the Board                   March 28, 1997
---------------------------
Richard O. Plunk

/s/ Wyvette D. Jordan        Vice Chair of the Board              March 28, 1997
---------------------------
Wyvette D. Jordan

/s/ Gail R. Behymer          Director                             March 28, 1997
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Gail R. Behymer

/s/ Richard C. Harmeyer      Director and Secretary               March 28, 1997
---------------------------
Richard C. Harmeyer

/s/ Robert R. Keller         Director                             March 28, 1997
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Robert R. Keller

/s/ William P. Riekert, Jr.  Director and Assistant Secretary     March 28, 1997
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William P. Riekert, Jr.



<PAGE> 42



/s/ Henry E. Brown           Director                             March 28, 1997
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Henry E. Brown

/s/ Curtis L. Jackson        Director                             March 28, 1997
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Curtis L. Jackson

/s/ Reba St. Clair            Director                            March 28, 1997
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Reba St. Clair