Attached files
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EX-32 - BNL FINANCIAL CORP | ex32.htm |
EX-31.2 - BNL FINANCIAL CORP | ex31-2.htm |
EX-31.1 - BNL FINANCIAL CORP | ex31-1.htm |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
x QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarter Ended June 30, 2010
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from______to_____
Commission File No. 000-16880
BNL FINANCIAL CORPORATION
(Exact name of Registrant as specified in its charter)
IOWA
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42-1239454
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(State of incorporation)
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(I.R.S. Employer Identification No.)
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7010 Hwy 71 W., Ste 100
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Austin, Texas
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78735
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(Address of principal executive offices)
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(Zip Code)
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Registrant's telephone number, including area code: (512) 383-0220
Indicate by check mark whether 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 o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x Noo
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer.
See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer o Accelerated filer o
Non-accelerated filer x Smaller Reporting Company o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes o No x
As of June 30, 2010, the Registrant had 15,095,743 shares of Common Stock, no par value, outstanding.
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PART I Financial Information
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Item 1.
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3
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Item 2.
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14
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Item 3.
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Item 4.
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16
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Item 4T.
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16
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PART II Other Information
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Item 1.
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17
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Item 1A.
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17
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Item 2.
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17
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Item 3.
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18
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Item 4.
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18
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Item 5.
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Item 6.
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19
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BNL FINANCIAL CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To The Board of Directors
BNL Financial Corporation
We have reviewed the accompanying Consolidated Balance Sheet of BNL Financial Corporation and Subsidiaries as of June 30, 2010 and the related Consolidated Statements of Income and Comprehensive Income for the three-month and six-month periods ended June 30, 2010 and 2009 and the Consolidated Statements of Cash Flows for the six-month periods ended June 30, 2010 and 2009. These interim financial statements are the responsibility of the Corporation’s management.
We conducted our review in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should be made to the accompanying interim consolidated financial statements referred to above for them to be in conformity with accounting principles generally accepted in the United States of America.
We have previously audited, in accordance with auditing standards of the Public Company Accounting Oversight Board, the Consolidated Balance Sheet of BNL Financial Corporation and Subsidiaries as of December 31, 2009 and the related Consolidated Statements of Income and Comprehensive Income, Changes in Shareholders’ Equity and Cash Flows for the year then ended (not presented herein); and in our report dated March 30, 2010, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying Consolidated Balance Sheet as of December 31, 2009 is fairly stated, in all material respects, in relation to the Consolidated Balance Sheet from which it has been derived.
/s/ Smith, Carney & Co.
Oklahoma City, Oklahoma SMITH, CARNEY & CO., p.c.
August 13, 2010
BNL FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 30,
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December 31,
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|||||||
ASSETS
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2010 (Unaudited)
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2009 (Audited)
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||||||
Cash and cash equivalents
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$ | 9,655,382 | $ | 8,090,103 | ||||
Investment in fixed maturities, at fair value Available for Sale (amortized cost $42,000)
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158,000 | 146,720 | ||||||
Investment in fixed maturities, at amortized cost, Held to Maturity (fair value $16,896,556; $18,423,612, respectively)
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16,402,594 | 18,358,628 | ||||||
Other long-term investments (fair value $677,256, $769,663)
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1,156,829 | 1,180,041 | ||||||
Investment in equity securities (cost $611,559, $711,915)
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485,280 | 674,671 | ||||||
Total Investments, Including Cash and Cash Equivalents
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27,858,085 | 28,450,163 | ||||||
Accrued investment income
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114,869 | 128,469 | ||||||
Furniture and equipment, net
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835,739 | 835,367 | ||||||
Deferred policy acquisition costs
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247,982 | 253,254 | ||||||
Policy loans
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151,627 | 162,395 | ||||||
Receivable from reinsurer
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47,475 | 47,475 | ||||||
Premiums due and unpaid
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1,000,318 | 967,508 | ||||||
Income tax assets
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96,000 | 106,000 | ||||||
Intangible assets
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122,500 | 125,408 | ||||||
Other assets
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166,075 | 292,002 | ||||||
Total Assets
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$ | 30,640,670 | $ | 31,368,041 | ||||
LIABILITIES AND SHAREHOLDERS' EQUITY
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||||||||
Liabilities:
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||||||||
Liabilities for future policy benefits
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$ | 2,051,666 | $ | 2,143,273 | ||||
Policy claims payable
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1,496,935 | 1,348,590 | ||||||
Annuity deposits
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2,440,251 | 2,505,778 | ||||||
Deferred annuity profits
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192,800 | 201,492 | ||||||
Premium deposit funds
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20,818 | 20,547 | ||||||
Supplementary contracts without life contingencies
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33,475 | 36,791 | ||||||
Advanced and unallocated premium
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1,194,941 | 968,159 | ||||||
Commissions payable
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625,935 | 615,455 | ||||||
Accrued taxes and expenses
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230,337 | 406,932 | ||||||
Bonds payable
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1,300,708 | 1,323,388 | ||||||
Other liabilities
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1,028,978 | 1,066,525 | ||||||
Total Liabilities
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10,616,844 | 10,636,930 | ||||||
Shareholders' Equity:
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||||||||
Common stock, $.02 stated value, 45,000,000 shares authorized, 15,463,965 shares issued and outstanding
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309,279 | 309,279 | ||||||
Additional paid-in capital
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5,709,216 | 5,725,590 | ||||||
Accumulated other comprehensive income (loss)
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(55,325 | ) | 36,042 | |||||
Accumulated surplus
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14,526,450 | 15,092,975 | ||||||
Treasury stock at cost, 368,222; 343,194 shares, respectively
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(465,794 | ) | (432,775 | ) | ||||
Total Shareholders' Equity
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20,023,826 | 20,731,111 | ||||||
Total Liabilities and Shareholders' Equity
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$ | 30,640,670 | $ | 31,368,041 |
See accompanying notes and Independent Accountants’ Report
BNL FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
Three Months Ended
June 30
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Six Months Ended
June 30
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|||||||||||||||
2010
(Unaudited)
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2009
(Unaudited)
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2010
(Unaudited)
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2009
(Unaudited)
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Income:
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Premium income
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$ | 10,012,029 | $ | 10,395,720 | $ | 20,145,999 | $ | 20,940,846 | ||||||||
Vision insurance income
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598,126 | 587,522 | 1,181,009 | 1,189,040 | ||||||||||||
Net investment income
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244,969 | 310,613 | 503,222 | 607,345 | ||||||||||||
Realized gains on debt retirement
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4,860 | 4,017 | 4,536 | 15,985 | ||||||||||||
Realized gains (loss)
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(16,552 | ) | 2,497 | (16,552 | ) | 2,694 | ||||||||||
Total Income
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10,843,432 | 11,300,369 | 21,818,214 | 22,755,910 | ||||||||||||
Expenses:
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Liability for future policy benefits expense
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(33,311 | ) | 83,432 | (91,607 | ) | 40,168 | ||||||||||
Policy benefits and other insurance costs
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7,974,422 | 8,073,895 | 15,735,019 | 16,127,308 | ||||||||||||
Amortization of deferred policy acquisition costs
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5,079 | 9,116 | 5,273 | 5,134 | ||||||||||||
Operating expenses
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2,190,414 | 2,241,346 | 4,239,923 | 4,339,500 | ||||||||||||
Taxes, other than income, fees and assessments
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390,241 | 399,284 | 793,874 | 821,371 | ||||||||||||
Total Expenses
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10,526,845 | 10,807,073 | 20,682,482 | 21,333,481 | ||||||||||||
Income from Operations before
Income Taxes
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316,587 | 493,296 | 1,135,732 | 1,422,429 | ||||||||||||
Provision for income taxes
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58,000 | 81,566 | 189,000 | 245,005 | ||||||||||||
Net Income
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$ | 258,587 | $ | 411,730 | $ | 946,732 | $ | 1,177,424 | ||||||||
Net income per common share (basic and
diluted)
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$ | 0.02 | $ | 0.03 | $ | 0.06 | $ | 0.08 | ||||||||
Weighted average number of fully paid
common shares
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15,113,923 | 15,120,897 | 15,116,858 | 15,161,277 | ||||||||||||
Other comprehensive income (loss), net of tax:
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||||||||||||||||
Unrealized gains (losses) on securities:
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Unrealized holding gain (loss) arising
during period (net of tax)
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$ | (124,160 | ) | $ | 57,265 | $ | (104,930 | ) | $ | 75,160 | ||||||
Reclassification adjustment for loss
included in net income
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13,563 | (2,073 | ) | 13,563 | (2,235 | ) | ||||||||||
Other Comprehensive Income (loss)
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(110,597 | ) | 55,192 | (91,367 | ) | 72,925 | ||||||||||
Comprehensive Income
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$ | 147,990 | $ | 466,922 | $ | 855,365 | $ | 1,250,348 |
See accompanying notes and Independent Accountants’ Report
BNL FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended
June 30,
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||||||||
Cash flows from operating activities:
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2010
(Unaudited)
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2009
(Unaudited)
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Net income
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$ | 946,732 | $ | 1,177,424 | ||||
Adjustments to reconcile net income to net cash provided by operating activities:
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Realized (gain) loss on investments
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16,342 | (2,694 | ) | |||||
Realized gain on debt retirement
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(4,536 | ) | (15,985 | ) | ||||
Decrease in deferred tax asset
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(4,000 | ) | (29,000 | ) | ||||
Depreciation
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141,833 | 147,038 | ||||||
Amortization of deferred acquisition costs, and intangibles
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8,180 | 8,041 | ||||||
Accretion of bond discount
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12,446 | 1,522 | ||||||
Change in assets and liabilities:
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||||||||
Decrease in accrued investment income
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13,599 | 7,854 | ||||||
(Increase) decrease in premiums due and unpaid
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(32,811 | ) | 64,317 | |||||
Increase (decrease) in liability for future policy benefits
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(91,607 | 40,168 | ||||||
Increase (decrease) in policy claims payable
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148,345 | (73,772 | ) | |||||
Increase (decrease) in annuity deposits and deferred profits
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(74,219 | ) | 114,630 | |||||
Increase (decrease) in premium deposit funds
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271 | (653 | ) | |||||
Increase in advanced and unallocated premium
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226,782 | 325,067 | ||||||
Increase in commissions payable
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10,479 | (6,263 | ) | |||||
Other, decrease
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(86,069 | ) | (178,242 | ) | ||||
Net Cash Provided By Operating Activities
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1,231,767 | 1,579,452 | ||||||
Cash flows from investing activities:
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||||||||
Proceeds from maturity or redemption - Held to Maturity Investments
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4,288,011 | 6,979,475 | ||||||
Proceeds from sale of equity securities
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63,014 | - | ||||||
Proceeds from sale of furniture and equipment
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(210 | ) | - | |||||
Purchase of furniture and equipment
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(142,236 | ) | (32,571 | ) | ||||
Purchase of fixed maturity securities - Held to Maturity Investments
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(2,337,192 | ) | (5,512,934 | ) | ||||
Other investments – Line of credit payments received
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23,212 | (2,033 | ) | |||||
Net Cash Provided By In Investing Activities
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1,894,599 | 1,456,003 | ||||||
Cash flows from financing activities:
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||||||||
Net payments on supplementary contracts
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(3,316 | ) | (1,533 | ) | ||||
Purchase of treasury stock
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(64,894 | ) | (109,679 | ) | ||||
Dividends to shareholders
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(1,513,257 | ) | - | |||||
Bonds payable purchased
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(27,871 | ) | (16,422 | ) | ||||
Exercised stock options
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48,251 | - | ||||||
Net Cash Used In Financing Activities
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(1,561,087 | ) | (127,634 | ) | ||||
Net Increase in Cash and Cash Equivalents
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1,565,279 | 2,907,821 | ||||||
Cash And Cash Equivalents, Beginning Of Period
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8,090,103 | 4,989,381 | ||||||
Cash And Cash Equivalents, End Of Period
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$ | 9,655,382 | $ | 7,897,202 |
See accompanying notes and Independent Accountant’s Report
BNL FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. Basis of Presentation
The accompanying Consolidated Financial Statements (unaudited) as of June 30, 2010 have been reviewed by independent certified public accountants. In the opinion of management, the aforementioned financial statements contain all adjustments necessary to present fairly the financial position as of June 30, 2010, and the results of operations and cash flows for the period ended June 30, 2010. All such adjustments are of a normal and recurring nature.
The statements have been prepared to conform to the requirements of Form 10-Q and do not necessarily include all disclosures required by generally accepted accounting principles (GAAP). The reader should refer to the Company's Annual Report on Form 10-K for the year ended December 31, 2009, previously filed with the Commission, for financial statements for the year ended December 31, 2009, prepared in accordance with GAAP. Net income per share of common stock is based on the weighted average number of outstanding common shares.
2. Change in Accounting Estimate
The group dental claims loss ratio was 63.9% during the first six months of 2010 compared to 62.8% for the same period in 2009. The claims liability at December 31, 2009 was over estimated by approximately $34,000, which had the effect of decreasing claims expense in 2010 in accordance with the ASC 250-10 requirements regarding accounting for a change in estimate. The over estimation of claims liability at December 31, 2009 resulted in an increase in net income of approximately $28,200, net of tax, for the six months ended June 30, 2010. Due to the monthly fluctuation in claims incurred this accrual is difficult to estimate.
3. Investments
The amortized cost and estimated market value of investments in fixed maturity securities are as follows:
Portfolio Designated “Held to Maturity”
June 30, 2010
|
Amortized Cost
|
Gross Unrealized Gains
|
Gross Unrealized Losses
|
Estimated Market Value
|
||||||||||||
US Treasury securities and obligations of
US government corporations and agencies
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$ | 4,700,156 | $ | 76,378 | $ | - | $ | 4,776,534 | ||||||||
Canadian government
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478,623 | - | 3,226 | 475,397 | ||||||||||||
Corporate securities
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3,743,824 | 184,845 | 119,169 | 3,809,500 | ||||||||||||
Mortgage-backed securities
GNMA and FNMA CMO
|
7,479,991 | 369,497 | 14,363 | 7,835,125 | ||||||||||||
Totals
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$ | 16,402,594 | $ | 630,720 | $ | 136,758 | $ | 16,896,556 |
Portfolio Designated “Available for Sale”
June 30, 2010
|
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Corporate securities
|
$ | 42,000 | $ | 116,000 | $ | - | $ | 158,000 | ||||||||
Totals
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$ | 42,000 | $ | 116,000 | $ | - | $ | 158,000 |
The amortized cost and estimated fair value of investments in fixed maturity securities at June 30, 2010 by contractual maturity are shown below. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties and because most mortgage-backed securities provide for periodic payments throughout their life.
Held to Maturity | Available for Sale | |||||||||||||||
June 30, 2010 | June 30, 2010 | |||||||||||||||
Amortized Cost
|
Estimated
Market Value
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Amortized Cost
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Estimated
Market Value
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|||||||||||||
Due in one year or less
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$ | 1,293,324 | $ | 1,298,402 | $ | - | $ | - | ||||||||
Due after one year through five years
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4,611,086 | 4,689,152 | - | - | ||||||||||||
Due after five years through ten years
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1,218,194 | 1,260,060 | - | - | ||||||||||||
Due after ten years
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1,800,000 | 1,813,818 | 42,000 | 158,000 | ||||||||||||
8,922,604 | 9,061,432 | 42,000 | 158,000 | |||||||||||||
Mortgage-backed securities
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7,479,990 | 7,835,124 | - | - | ||||||||||||
$ | 16,402,594 | $ | 16,896,556 | $ | 42,000 | $ | 158,000 |
Proceeds from sales and maturities of investments in fixed maturity securities, and equity securities for the six month periods ended June 30, 2010 and 2009 were $4,351,025 and $6,979,475, respectively. Gross gains were $14,717 and $2,694 and gross losses were $31,059 and $0 as of June 30, 2010 and 2009, respectively.
Investment in equity securities at June 30, 2010 represents common stock investments as follows:
2010
|
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Cost
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Market
Value
|
|||||||
Banks, trusts and
Insurance companies
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$ | 81,183 | $ | 12,680 | ||||
Industrial and other
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530,376 | 472,600 | ||||||
$ | 611,559 | $ | 485,280 |
Other long-term investments of $1,156,829 consist of, in part, a $1,152,825 convertible debenture loan investment (“Debenture”) to EPSI Benefits, Inc. (“EBI”). The original loan, dated July 25, 2001, was $1,357,407 at 14% interest. Monthly principal payments were scheduled to begin on September 15, 2008 with a maturity date of August 15, 2015. On July 14, 2008, the Company and EBI amended the Debenture whereby the monthly principal payments will start on September 15, 2013 with the maturity date extended to August 15, 2020.
Because of the extension of the commencement of principal payments and maturity of the Debenture, the Company analyzed discounted expected future cash flows in accordance with applicable generally accepted accounting principles and established an allowance for credit losses in the amount of $204,582 resulting in a net book value of $1,152,825. Interest on the debentures is and has been current.
The Company’s policy for recognizing interest income on impaired investments is to recognize interest under the stated loan terms. Interest on the investment is and has been current.
The average book value on impaired investments during the period ended June 30, 2010 was $1,152,825. Interest income recognized in 2010 on the impaired investments was $95,019.
Activity in the allowance for credit losses is as follows:
2010
|
||||
Beginning Balance
|
$ | 204,582 | ||
Additions charged to operations
|
- | |||
Direct write downs
|
- | |||
Recoveries previously charged to operations
|
- | |||
Ending Balance
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$ | 204,582 |
There was no other-than-temporary impairment recognized in 2010 and therefore no other-than-temporary impairment included in accumulated other comprehensive income.
Other long-term investments also include an operating line of credit agreement in the amount of $4,004. On October 15, 2002 BNLAC and EPSI entered into a loan agreement whereby BNLAC will provide EPSI with a $200,000 line of credit maturing October 15, 2004. The line of credit was renewed and extended with interest only payments to August 1, 2006. Thereafter EPSI pays principal and interest over 60 equal monthly installments until paid in full. The line of credit is at 6.75% and interest and principal payments are current.
The Company’s conservative investment philosophies minimize market risk and risk of default by investing in high quality debt instruments with staggered maturity dates. The Company does not hedge investment risk through the use of derivative financial instruments. The market value of the Company’s investments in debt instruments varies with changes in interest rates. A significant increase in interest rates could cause decreases in the market values of investments and have a negative effect on comprehensive income and capital.
The following table shows the gross unrealized losses and fair value of the Company’s investments with unrealized losses that are not deemed to be other-than-temporarily impaired, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at June 30, 2010.
Less than 12 Months
|
12 Months or Greater
|
Total
|
||||||||||||||||||||||
Description of Securities
|
Fair Value
|
Unrealized Losses
|
Fair Value
|
Unrealized
Losses
|
Fair Value
|
Unrealized
Losses
|
||||||||||||||||||
Investment in Fixed Maturities,
Held to Maturity:
|
||||||||||||||||||||||||
Canadian Government
|
$ | 475,397 | $ | 3,226 | $ | - | $ | - | $ | 475,397 | $ | 3,226 | ||||||||||||
Corporate securities
|
449,952 | 3,835 | 400,000 | 107,588 | 849,952 | 111,423 | ||||||||||||||||||
Mortgage-backed securities
GNMA and FNMA CMO
|
660,359 | 15,364 | - | - | 660,359 | 15,364 | ||||||||||||||||||
Totals
|
$ | 1,585,708 | $ | 22,425 | $ | 400,000 | $ | 107,588 | $ | 1,985,708 | $ | 130,013 | ||||||||||||
Other Long-Term Investments
|
$ | - | $ | - | $ | 673,252 | $ | 479,572 | $ | 673,252 | $ | 479,572 | ||||||||||||
Totals
|
$ | - | $ | - | $ | 673,252 | $ | 479,572 | $ | 673,252 | $ | 479,572 | ||||||||||||
Equity Securities
|
$ | 101,325 | $ | 1,795 | $ | 284,073 | $ | 204,536 | $ | 385,398 | $ | 206,331 | ||||||||||||
Totals
|
$ | 101,325 | $ | 1,795 | $ | 284,073 | $ | 204,536 | $ | 385,398 | $ | 206,331 |
Federal Agency Mortgage-Backed Securities
The unrealized losses on the Company's investment in federal agency mortgage-backed securities were caused by unprecedented circumstances in the economy and problems at government agencies which required a federal bailout. The contractual cash flows of those investments are guaranteed by an agency of the U.S. government. Accordingly, it is expected that the securities would not be settled at a price less than the amortized cost of the Company's investment. Because the decline in market value is attributable to factors other than credit quality, and because the Company has the ability and intent to hold those investments until a recovery of fair value, which may be maturity, the Company does not consider those investments to be other-than-temporarily impaired at June 30, 2010.
Corporate Bonds
The following table discloses the unrealized losses on corporate bonds with significant unrealized losses.
Corporate Bonds
June 30, 2010
|
S&P
Rating
|
Amortized Book Value
|
Gross Unrealized Losses
|
Estimated Market Value
|
||||||||||||
American General Finance
|
B | $ | 200,000 | $ | 43,086 | $ | 156,914 | |||||||||
MBIA
|
BB+
|
200,000 | 72,248 | 127,752 | ||||||||||||
Totals
|
$ | 400,000 | $ | 115,334 | $ | 284,666 |
The corporate bonds with unrealized losses in the table are insurance corporations that have had their fair value reduced due to the significant economic problems world wide. The Company currently does not believe it is probable that it will be unable to collect all amounts due according to the contractual terms of the investments. Therefore, it is expected that the debentures would not be settled at a price less than the amortized cost of the investment. Because the Company has the ability and intent to hold these investments until a recovery of fair value, which may be maturity, it does not consider the investments to be other than temporarily impaired at June 30, 2010.
Marketable Equity Securities
The table below discloses the unrealized losses on the Company’s marketable equity securities.
Equity Securities
June 30, 2010
|
Cost
|
Gross Unrealized Gains (Losses)
|
Estimated Market Value
|
|||||||||
Garmin LTD
|
$ | 220,322 | $ | (118,192 | ) | $ | 102,130 | |||||
Treaty Oak Bank
|
50,813 | (44,713 | ) | 6,100 | ||||||||
Regions Financial Corporation
|
30,370 | (23,790 | ) | 6,580 | ||||||||
International Assets
|
27,282 | (17,842 | ) | 9,440 | ||||||||
Kimberly Clark
|
62,125 | (1,495 | ) | 60,630 | ||||||||
Intel
|
39,200 | (300 | ) | 38,900 | ||||||||
Totals
|
$ | 430,112 | $ | (206,332 | ) | $ | 223,780 |
The Company's marketable equity securities include a variety of industries and the following information was obtained from their websites. Garmin LTD has the largest unrealized loss of $118,192, which compares to an unrealized loss of $112,872 at December 31, 2009. Garmin manufactures communication and navigational products, and they are the leader in personal navigational devices. Garmin was profitable in 2009, and the decrease in the stock’s fair value was due to the challenging economic environment in 2008 and 2009. Treaty Oak Bank is a small local bank that has not been in business long. The bank’s stock price decreased due to problem commercial loans. Regions Financial Corporation has suffered from the recession and the reduced demand for loans. The Company evaluated the near-term prospects of the issuers in relation to the severity and duration of the impairment. Based on that evaluation and the Company's ability and intent to hold those investments for a reasonable period of time sufficient for a forecasted recovery of fair value, the Company does not consider those investments to be other than temporarily impaired at June 30, 2010.
4. Fair Value of Financial Instruments
Effective January 1, 2008, the Company adopted ASC 820, which, among other things, requires enhanced disclosures about assets and liabilities carried at fair value. ASC 820 establishes a hierarchal disclosure framework associated with the level of observable pricing to be utilized in measuring assets and liabilities at fair value. The three broad levels defined by ASC 820 hierarchy are as follows:
Level 1 – Fair value is based on unadjusted quoted prices in active markets that are accessible to the Company for identical assets or liabilities. These generally provide the most reliable evidence and are used to measure fair value whenever available. The Company’s Level 1 assets and liabilities primarily include equity securities that are traded in an active exchange market. Valuations are obtained from readily available pricing sources for market transactions involving identical assets or liabilities.
Level 2 – Fair value is based on significant inputs, other than Level 1 inputs, that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability through corroboration with observable market data. Level 2 inputs include quoted market prices in active markets for similar assets and liabilities, quoted market prices in markets that are not active for identical or similar assets or liabilities and other observable inputs. The Company’s Level 2 assets and liabilities include: fixed maturities short-term investments and cash equivalents (primarily money market funds). Valuations are generally obtained from third party pricing services for identical or comparable assets or liabilities.
Level 3 – Fair value is based on significant unobservable inputs for the asset or liability. These inputs reflect the Company’s assumptions about the assumptions market participants would use in pricing the asset or liability. The Company’s Level 3 assets and liabilities primarily include certain private fixed maturities. Valuations are determined using valuation methodologies such as discounted cash flow models, other similar techniques and consultation with investment brokers.
The table below presents the balances of assets and liabilities measured at fair value on a recurring basis as of June 30, 2010.
Description
|
Quoted Prices in Active Markets for Identical Assets
(Level 1)
|
Significant Other Observable Inputs
(Level 2)
|
Significant Unobservable Inputs
(Level 3)
|
Total
|
||||||||||||
Trading Securities
|
||||||||||||||||
Equity Securities – Banks
|
$ | 12,680 | $ | - | $ | - | $ | 12,680 | ||||||||
Equity Securities - Industrial
and Other
|
472,600 | - | - | 472,600 | ||||||||||||
Total Trading Securities
|
$ | 485,280 | $ | - | $ | - | $ | 485,280 | ||||||||
Fixed Maturity, Available for
Sale – Corporate
|
$ | - | $ | 158,000 | $ | - | $ | 158,000 | ||||||||
Total Fixed Maturity,
Available for Sale
|
$ | - | $ | 158,000 | $ | - | $ | 158,000 | ||||||||
Fixed Maturities , Held to
Maturity
|
||||||||||||||||
US Treasury Securities and
Obligations of US Government
Corporations and Agencies
|
$ | 4,776,534 | $ | - | $ | - | $ | 4,776,534 | ||||||||
Canadian Government Securities
|
475,397 | - | - | 475,397 | ||||||||||||
Corporate Securities
|
3,456,835 | 224,913 | 127,752 | 3,809,500 | ||||||||||||
Mortgage-Backed Securities
GNMA and FNMA CMO
|
7,835,125 | - | - | 7,835,125 | ||||||||||||
Total Fixed Maturities,
Held to Maturity
|
$ | 16,543,891 | $ | 224,913 | $ | 127,752 | $ | 16,896,556 | ||||||||
Other Long Term Investments
|
$ | - | $ | - | $ | 677,256 | $ | 677,256 | ||||||||
Cash
|
4,443,312 | - | - | 4,443,312 | ||||||||||||
Cash Equivalents
|
- | 5,212,070 | - | 5,212,070 | ||||||||||||
Total Other Investments
|
$ | 4,443,312 | $ | 5,212,070 | $ | 677,256 | $ | 10,332,638 | ||||||||
Total Assets
|
$ | 21,472,483 | $ | 5,594,983 | $ | 805,008 | $ | 27,872,474 |
The following table provides a summary of the changes in fair value of Level 3 assets and liabilities for the period January 1, 2010 to June 30, 2010, as well as the portion of gains or losses included in income attributable to unrealized gains or losses related to those assets and liabilities still held at June 30, 2010.
Other Long-term Investments
|
Fixed
Maturity
|
Total
|
||||||||||
Fair value, beginning of period
|
$ | 769,663 | $ | 90,000 | $ | 859,663 | ||||||
Other-than-temporary decline in fair value:
|
||||||||||||
Included in net income
|
- | - | - | |||||||||
Included in other comprehensive income
|
- | - | - | |||||||||
Purchases, sales, issuances and settlements
|
(23,211 | ) | - | (23,211 | ) | |||||||
Investment reclassified
|
- | - | - | |||||||||
Temporary increase (decline) in fair value
|
(69,196 | ) | 37,752 | (31,444 | ) | |||||||
Total
|
$ | 677,256 | ) | $ | 127,752 | $ | 805,008 |
The following table summarizes the fair value and carrying amount of all financial asset and liabilities as of June 30, 2010.
2010
|
|||||||||
Carrying
|
Fair
|
||||||||
Assets
|
Amount
|
Value
|
|||||||
Cash and Cash Equivalents
|
$ | 9,655,382 | $ | 9,655,382 |
(a)
|
||||
Investments-fixed maturity, available for sale
|
158,000 | 158,000 |
(b)
|
||||||
Investments-fixed maturity, held to maturity
|
16,402,594 | 16,896,556 |
(b)
|
||||||
Investments-equity securities
|
485,280 | 485,280 |
(b)
|
||||||
Other long term investments
|
1,156,829 | 677,256 |
(b)
|
||||||
Other financial instruments-Assets
|
323,885 | 323,885 |
(a)
|
||||||
Total financial instruments-Assets
|
$ | 28,181,970 | $ | 28,196,359 | |||||
Liabilities
|
|||||||||
Premium deposit funds
|
$ | 20,818 | $ | 20,818 |
(a)
|
||||
Bonds payable
|
1,300,708 | 1,300,708 |
(a)
|
||||||
Supplementary contracts without life contingencies
|
33,475 | 33,475 |
(a)
|
||||||
Annuity deposits
|
2,440,251 | 2,440,251 |
(a)
|
||||||
Total financial instruments-Liabilities
|
$ | 3,795,252 | $ | 3,795,252 |
(a) The indicated assets and liabilities are carried at book value, which approximates fair value.
(b) Fair value of investments is based on methods prescribed in ASC 820 as described herein.
5. Dividends Paid.
Dividends in the amount of $1,513,257 were paid on February 26, 2010.
6. Subsequent Events
In the second quarter of 2009 management adopted ASC 855 and has evaluated subsequent events through August 13, 2010, the date of issuance of the 10-Q. There are no subsequent events to report.
BNL FINANCIAL CORPORATION AND SUBSIDIARIES
In this section, we review the consolidated results of operations for the six months ended June 30, 2010 and 2009 and significant changes in the consolidated financial condition of the Company. This discussion should be read in conjunction with the accompanying consolidated financial statements, notes and selected financial data.
Forward-Looking Statements
All statements, trend analyses and other information contained in this report and elsewhere (such as in filings by us with the Securities and Exchange Commission, press releases, presentations by us or our management or oral statements) relative to markets for our products and trends in our operations or financial results, as well as other statements including words such as “anticipate,” “believe,” “plan,” “estimate,” “expect,” “intend,” and other similar expressions, constitute forward-looking statements under the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to known and unknown risks, uncertainties and other factors which may cause actual results to be materially different from those contemplated by the forward-looking statements. Such factors include, among other things: (i) general economic conditions and other factors, including prevailing interest rate levels and stock and credit market performance which may affect (among other things) our ability to sell our products, our ability to access capital resources and the costs associated therewith, the market value of our investments and the lapse rate and profitability of policies; (ii) world conflict, including but not limited to the war in Iraq, which may affect consumers spending trends and priorities; (iii) customer response to new products and marketing initiatives: (iv) mortality, morbidity and other factors which may affect the profitability of our products; (v) changes in the federal income tax laws and regulations which may affect the relative income tax advantages of our products; (vi) regulatory changes or actions, including those relating to regulation of financial services affecting (among other things) bank sales and underwriting of insurance products and regulation of the sale, underwriting and pricing of products; and (vii) the risk factors or uncertainties listed from time to time in our filings with the Securities and Exchange Commission.
Liquidity and Capital Resources
At June 30, 2010, we had liquid assets of $9,655,382 in cash, money market savings accounts, money market funds, Treasury Bills and short-term certificates of deposit. All of the non-cash liquid assets can readily be converted to cash.
The major components of operating cash flows are premium income and investment income while policy benefits are the most significant cash outflow. During the first six months of 2010, BNLAC collected $20,121,328 of premiums and annuity deposits (gross before reinsurance) and we had consolidated investment income of $503,222. Other sources of cash flow in the first six months of 2010 were override commissions of $1,181,009 on vision products. The Company paid $12,902,133 of policy benefits in the first six months of 2010.
The Company's investments are primarily in U.S. Government, U.S. Government Agency, Canadian Government and other investment grade bonds. We do not hedge our investment income through the use of derivatives.
Other long term investments of $1,156,829 consist of, in part, a convertible debenture (“debenture”) loan in the amount of $1,152,825 to EPSI Benefits, Inc. (“EBI”). On July 14, 2008, the Company and EBI, amended the Debenture whereby the monthly principal payments and the maturity date were extended five years. For various business reasons, management of both companies deemed the amendment as advantageous. Because of the amendment to the debenture, the Company analyzed discounted expected future cash flows and estimated an adjustment in the book value of the Debenture of ($204,582), from $1,357,407 down to $1,152,825 in 2008. The note is one of several agreements entered into by the Company's subsidiary which expand the business relationship with EBI and its subsidiary, Employer Plan Services, Inc. (EPSI), which provides substantially all of the A&H claims processing and adjudication for the Company's insurance subsidiary, Brokers National Life Assurance Company ("BNLAC").
Other long-term investments also include an operating line of credit agreement to EPSI in the amount of $4,004. On October 15, 2002 BNLAC and EPSI entered into a loan agreement whereby BNLAC will provide EPSI with a $200,000 line of credit maturing October 15, 2004. The line of credit was renewed and extended with interest only payments to August 1, 2006. Thereafter EPSI will pay principal and interest over 60 equal monthly installments until paid in full. The line of credit is at 6.75% and interest and principal payments are current.
In prior years the Company became a third party indemnitor by entering into a series of bond indemnity and guarantee agreements totaling approximately $545,000 in conjunction with a marketing agreement with, EPSI Benefits Inc. and Employer Plan Services Inc. (EPSI). The purpose of these agreements is to assist EPSI to become licensed in additional states. The Company received personal guarantees from the owners of EPSI to effectively limit potential liability under the guarantee agreement. With regard to the bond indemnities, the Company will be obligated only if EPSI, EPSI’S parent and its shareholders, who are the primary obligors, were all to become insolvent. Management considers the likelihood of the Company realizing a liability under these agreements to be remote.
We believe liquid assets, along with investment income and premium income will be sufficient to meet our long and short-term liquidity needs. We do not have any current plans to borrow money for operations.
Our insurance operations are conducted through BNLAC. At June 30, 2010, BNLAC had statutory capital and surplus of $18,611,446. BNLAC is required to maintain minimum levels of statutory capital and surplus, which differ from state to state, as a condition to conducting business in those states in which it is licensed. The State of Arkansas, which is the legal domicile of BNLAC, requires a minimum of $2,300,000 in capital and surplus. The highest requirement in any state in which BNLAC is licensed is $5,000,000. Management monitors the minimum capital and surplus requirements to maintain compliance in each state in which it is licensed.
Consolidated Results of Operations
Premium income for the second quarter of 2010 was $10,012,029 compared to $10,395,720 for the same period in 2009. Premium income for the first half of 2010 was $20,145,999 compared to $20,940,846 for the same period in 2009. The decrease for the quarter and first half of the year was primarily due to a 16% decrease in new sales of group dental insurance as a result of the impact of the recession on voluntary employee benefits.
BNLAC markets group vision insurance products that are underwritten by other insurance companies (BNLAC does not have any exposure to underwriting (claims) losses on these products.) Vision insurance income for the second quarter of 2010 was $598,126 compared to $587,522 in the second quarter of 2009. In the first half of 2010 vision income was $1,181,009 compared to $1,189,040 for the same period in 2009. Vision insurance sales decreased 4.7% and lapses were 3.2% lower in 2010 compared to 2009 resulting in earned vision income being comparable between periods.
Net investment income was $244,969 for the second quarter of 2010 compared to $310,613 for the second quarter of 2009. Net investment income for the first half of 2010 was $503,222 compared to $607,345 for the same period in 2009. The decrease in the first half and second quarter was due to the decrease in interest rates on short term investments and fixed securities and a decrease in investments due to dividends paid to shareholders.
Realized gains on debt retirement were $4,860 for the second quarter of 2010 compared to a $4,017 gain for the same period in 2009. For the first half of 2010 realized gains were $4,536 compared to $15,985 for the same period in 2009. The realized gains are due to the purchase of a portion of the Company’s outstanding debentures at less than face value. Realized gains on debt retirement are directly proportional to the number of bonds purchased.
Realized losses on the sale of investments were ($16,552) for the second quarter and first half of 2010 compared to a gain of $2,497 for the second quarter and $2,694 for the first half of 2009. The realized loss in 2010 was primarily due to the sale of BP Corporation stock owned by the Company.
For the second quarter of 2010, liability for future policy benefits expense was ($33,311) compared to $83,432 for the same period in 2009. For the six-month period ended June 30, 2010, liability for future policy benefits expense was ($91,607) compared to $40,168 for the same period in 2009. The decrease in future policy benefits expense in 2010 was primarily due an increase in surrendered policies in 2010 compared to 2009.
Policy benefits and other insurance costs were $7,974,422 in the second quarter of 2010 compared to $8,073,895 for the same period in 2009. In the first six months of 2010 policy benefits and other insurance costs were $15,735,019 compared to $16,127,308 for the same period in 2009. The decrease for the quarter and first half of 2010 was primarily due to a decrease in group and individual dental premium income. Group dental claims were $274,000 less for the first half of 2010 compared to the same period last year. The claims ratio on group dental insurance, which represents the ratio of claims expensed to premium earned, was 63.9% for the first half of 2010 compared to 62.8% for the first half of 2009. The liability for unpaid claims is difficult to calculate and group dental claims at December, 2009, were $34,000 less than estimated and they were $139,000 less than estimated at December 31, 2008.
Amortization of deferred policy acquisition costs was $5,079 and $9,116 for the second quarter and $5,273 and $5,134 for the first half of 2010 and 2009, respectively. Amortization of deferred policy acquisition costs vary in relation to lapses or surrenders of existing policies.
For the second quarter of 2010 operating expenses were $2,190,414 compared to $2,241,346 for the same period in 2009. Operating expenses were $4,239,923 in the first six months of 2010 compared to $4,339,500 for the same period in 2009. The decrease for 2010 is primarily due to a decrease in payroll expense and incentive bonuses.
Taxes, other than on income, fees and assessments, were $390,241 for the second quarter of 2010 compared to $399,284 for the second quarter of 2009. Taxes, other than on income, fees and assessments, were $793,874 for the first half of 2010 compared to $821,371 for the same period in 2009. The decrease for the second quarter and year to date is primarily due to the decrease in premium taxes which are based on premium collected.
The provision for income taxes in the second quarter of 2010 includes $45,000 current tax expense and $13,000 deferred tax expense compared to $103,566 current tax expense and $22,000 deferred tax credit in the second quarter of 2009. The provision for income taxes in the first half of 2010 was $193,000 current tax expense and $4,000 deferred tax credit compared to $274,005 current expense and $29,000 deferred tax credit for the same period in 2009. The decrease for the year in 2010 is primarily due to the decrease in net income. Deferred tax expense is based on the estimated change in book versus tax assets and liabilities.
Income from operations before income taxes for the second quarter of 2010 was $316,587 compared to $493,296 for the same period in 2009. For the first half of 2010 income from operations before income taxes was $1,135,732 compared to $1,422,429 for the same period in 2009. The decrease for the second quarter and first half of 2010 was primarily due to the decrease in premium income, investment income and the increase in the loss ratio on group dental business.
Market risk represents the potential loss resulting from adverse changes in the value of financial instruments, either derivative or non-derivative, caused by fluctuations in interest rates, foreign exchange rates, commodity prices, and equity security prices. We handle market risks in accordance with our established policies. We did not have financial instruments to manage and reduce the impact of changes in interest rates at June 30, 2010 and December 31, 2009, however we held various financial instruments at June 30, 2010 and December 31, 2009, consisting of financial assets reported in our Consolidated Balance Sheets.
Interest Rate Risk - We are subject to interest rate risk through the investment in fixed maturity securities, such as U.S. Government and Government Agency securities and other investment grade bonds. The fair market value of long-term, fixed-interest rate debt is subject to interest rate risk. Generally, the fair value of fixed-interest rate debt will increase as interest rates fall and will decrease as interest rates rise. The estimated fair value of our fixed maturity securities at June 30, 2010 and December 31, 2009 was $17,054,556 and $18,570,332, respectively.
Based on testing at December 31, 2009, a one-percentage point increase in interest rates would result in a decrease in the estimated fair value of fixed maturity securities of $422,000. Initial fair values were determined using the current rates at which we could enter into comparable financial instruments with similar remaining maturities. The estimated earnings and cash flows impact for the first six months of 2010 resulting from a one percentage point increase in interest rates would be immaterial, holding other variables constant.
Foreign-Exchange Rate Risk – The Company is exposed to foreign exchange risk as a result of the Company’s purchase of $478,623 of Canadian Government bonds. The Company does not use derivative instruments to hedge against foreign exchange risk.
Commodity Price Risk - We have no financial instruments subject to commodity price risk.
Equity Security Price Risk - Equity securities at June 30, 2010 totaled $485,280, or 1.7% of total investments and cash on a consolidated basis.
The preceding discussion of estimated fair value of our financial instruments and the sensitivity analyses resulting from hypothetical changes in interest rates are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements reflect our current expectations and involve uncertainties. These forward-looking market risk disclosures are selective in nature and only address the potential impact from financial instruments. They do not include other potential effects which could impact our business as a result of changes in interest rates, foreign-exchange rates, commodity prices, or equity security prices.
Not applicable
The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company's reports pursuant to the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to the Company's management, including its Chief Executive Officer and its Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurances of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
Within 90 days prior to the date of this report, the Company carried out an evaluation, under the supervision and with the participation of the Company's Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures, as that term is defined in Rule 13a-14(c) under the Securities Exchange Act of 1934, as amended. Based on this evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that the Company's disclosure controls and procedures are effective in timely alerting the Company's Chief Executive Officer and Chief Financial Officer to material information required to be disclosed in the periodic reports filed with the SEC.
In addition, the Company's Chief Executive Officer and Chief Financial Officer have reviewed the Company's internal controls, and there have been no significant changes in the Company's internal controls or in other factors that could significantly affect those controls subsequent to the date of the last evaluation.
PART II -- OTHER INFORMATION
The Company was not a part of any new legal proceedings during the second quarter of 2010.
No material changes from the Company’s response in its 2009 10-K to Item 1A, Part I.
The following table reports the purchases by the Company of its Common Stock during the first half of 2010.
Issuer Purchases of Equity Securities
Period
|
(a)
Total
Number of
Shares
Purchased
|
(b)
Average
Price
Paid
Per Share
|
(c)
Total number of shares purchased as part of publicly announced plans or programs
|
(d)
Maximum number of shares that may yet be purchased under the plans or programs
|
||||||
Month #1, Jan. 1 thru Jan. 31, 2010
|
13,706 | $ | 1.25 |
None
|
None
|
|||||
Month #2, Feb. 1 thru Feb. 28, 2010
|
- | - |
None
|
None
|
||||||
Month #3, March 1 thru March 31, 2010
|
12,582 | $ | 1.37 |
None
|
None
|
|||||
Month #4, April 1 thru April 30, 2010
|
1,860 | $ | 1.37 |
None
|
None
|
|||||
Month #5, May 1 thru May 31, 2010
|
- | - |
None
|
None
|
||||||
Month #6, June 1 thru June 30, 2010
|
22,381 | $ | 1.25 |
None
|
None
|
|||||
Totals
|
50,529 |
During the period covered by this report there was no material default in the payment of any principal, interest, sinking or purchase fund installment, or any other material default not cured within 30 days with respect to any indebtedness of the Company.
The Company reported the results of matters voted upon at its May 27, 2010 Annual Meeting of Stockholders on Form 8-K during the period covered by this report.
(a) None
(b) None
(a) Exhibits Index
No.
|
Description
|
Page or Method of Filing
|
||
3.1
|
Articles of Incorporation of BNL Financial Corporation, dated January 27, 1984 and Amendment to Articles of Incorporation of BNL Financial Corporation, dated November 13, 1987.
|
Incorporated by reference to Exhibit 3.1 of the Company's Annual Report on Form 10-K for the period ending December 31, 1993.
|
||
3.2
|
By-laws of BNL Financial Corporation.
|
Incorporated by reference to Exhibit 3.2 of the Company’s Registration Statement No. 33-70318.
|
||
4.1
|
Instruments defining the rights of security holders, including indentures.
|
Incorporated by reference to Exhibit 4 of the Company's Registration Statement No. 2-94538 and Exhibits 3.5 and 4 of Post-Effective Amendment No. 3 thereto.
|
||
4.2
|
Articles of Incorporation of BNL Financial Corporation, dated January 27, 1984 and Amendment to Articles of Incorporation on BNL Financial Corporation, dated November 13, 1987.
|
Incorporated by reference to Exhibits 4.2 of the Company's Annual Report on Form 10-KSB for the period ending December 31, 1998.
|
||
10.1
|
Form of Agreement between Commonwealth Industries Corporation, American Investors Corporation and Wayne E. Ahart regarding rights to purchase shares of the Company.
|
Incorporated by reference to Exhibit I of the Company's Quarterly Report on 10-QSB for the period ended September 30, 1994.
|
||
10.2
|
Agreement dated December 21, 1990 between Registrant and C. Donald Byrd granting Registrant right of first refusal as to future transfers of Mr. Byrd's shares of the Company's common stock.
|
Incorporated by reference to Exhibit I of the Company's Quarterly Report on 10-QSB for the period ended March 31, 1996.
|
||
10.3
|
Convertible Debenture Agreement dated July 25, 2001 between BNL Equity Corporation and EPSI Benefits Inc.
|
Incorporated by reference to Exhibit 10.9 of the Company's Annual Report on 10-K for the period ended December 31, 2005.
|
||
10.4
|
Claims Service Agreement dated June 1, 1999 between Brokers National Life Assurance Company and Employer Plan Services Inc.
|
Incorporated by reference to Exhibit 10.5 of the Company's Annual Report on 10-K for the period ended December 31, 2005.
|
||
10.5
|
Office lease agreement dated January 21, 2005, between Brokers National Life Assurance Company and KIMCO for premises in Austin.
|
Incorporated by reference to Exhibit 10.6 of the Company's Annual Report on 10-K for the period ended December 31, 2005.
|
||
10.6
|
Line of Credit Agreement dated October 15, 2004 between Brokers National Life Assurance Company and Employer Plan Services Inc.
|
Incorporated by reference to Exhibit 10.7 of the Company's Annual Report on 10-K for the period ended December 31, 2005.
|
||
10.7
|
Marketing Agreement dated July 25, 2001 between BNL Equity Corporation and Employer Plan Services Inc. and EPSI Benefits Inc.
|
Incorporated by reference to Exhibit 10.8 of the Company's Annual Report on 10-K for the period ended December 31, 2005.
|
||
10.8
|
Outsourcing Agreement dated May 1, 2007 between Brokers National Life Assurance Company and Virtual Item Processing Systems, Inc.
|
Incorporated by reference as filed with the Company’s Annual Report on 10-K for the period ended December 31, 2007.
|
||
10.9
|
Amended Convertible Debenture Date July 14, 2008 between BNL Financial Corporation and EPSI Benefits Inc.
|
Incorporated by reference to Exhibit 1 of the Company’s periodic Report on Form 8-K dated July 14, 2008.
|
||
11
|
Statement Re computation of per share earnings.
|
Reference is made to the computation of per share earnings as shown page 5 herein and the explanation in Note 1 to the Notes to Consolidated Financial Statements (unaudited), page 5 herein.
|
||
18
|
Letter Re Change in accounting principles.
|
None. Not applicable.
|
||
22
|
Published report regarding matters submitted to vote of security holders.
|
The Company’s definitive proxy statement dated May 27, 2010, as filed with the SEC on Schedule 14A on April 20, 2010, is incorporated by reference herein.
|
23
|
Consents of experts and counsel incorporated by reference into a previously filed Securities Act registration statement.
|
Not applicable.
|
||
31.1
|
Filed herewith - E1
|
|||
31.2
|
Filed herewith – E3
|
|||
32
|
Filed herewith – E5
|
Pursuant to the requirements of Section 13 or 15(d) 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.
BNL FINANCIAL CORPORATION
|
||
(Registrant)
|
||
/s/ Wayne E. Ahart
|
||
Date: August 13, 2010
|
By: Wayne E. Ahart, Chairman of the Board
|
|
(Chief Executive Officer)
|
||
/s/ Barry N. Shamas
|
||
Date: August 13, 2010
|
By: Barry N. Shamas, Executive V.P.
|
|
(Chief Financial Officer)
|
20