SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarter Ended June 30, 1995
[ ] 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. 0-16880
BNL FINANCIAL CORPORATION
(Exact name of Registrant as specified in its charter)
IOWA 42-1239454
(State of incorporation) (I.R.S. Employer Identification No.)
301 Camp Craft Road, Suite 200 Austin, Texas 78746
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (512) 327-
3065
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____
As of June 30, 1995, the Registrant had 23,311,944 shares of
Common Stock, no par value, outstanding.
Transitional Small Business Disclosure Format (check one)
Yes___ No__X__
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
The financial statements included herein reflect all adjustments which are,
in the opinion of management, necessary to present a fair statement of the
interim results on a basis consistent with the prior period. 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, 1994,
previously filed with the Commission, for financial statements for the year
ended December 31, 1994, prepared in accordance with GAAP. Net income per
share of common stock is based on the weighted average number of
outstanding common shares.
<PAGE>
<TABLE>
Item 1. Financial Statements
BNL FINANCIAL CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
<CAPTION>
June 30
ASSETS 1995 December 31,
(Unaudited) 1994
------------- ---------------
<S> <C> <C>
Investments:
Investments available for sale, at fair value $10,575,192 $10,448,215
Equity securities, common stock 88,465 110,792
Cash and cash investments 2,700,059 2,207,537
------------ ------------
Total Investments 13,363,716 12,766,544
Accrued investment income 214,857 201,120
Furniture and equipment 176,876 151,935
Deferred policy acquisition costs 534,938 562,750
Receivable from reinsurer 179,797 315,527
Other assets 307,175 227,958
------------- ------------
TOTAL ASSETS $14,777,359 $14,225,834
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Liability for future policy benefits $1,618,616 $1,571,899
Premium deposit fund 208,253 220,885
Annuity deposits 3,371,644 3,319,236
Deferred annuity profits 597,178 591,637
Supplementary contracts without life contingencies 163,235 173,593
Other liabilities 221,502 167,191
----------- -----------
Total liabilities 6,180,428 6,044,441
SHAREHOLDERS' EQUITY:
Common stock 466,239 466,239
Additional paid-in capital 14,308,230 14,308,272
Unrealized appreciation (depreciation)
of securities 363,432 (288,590)
Treasury stock (64,105) (64,105)
Accumulated deficit (6,476,865) (6,240,423)
------------ ------------
Total shareholders' equity 8,596,931 8,181,393
TOTAL LIABILITIES & SHAREHOLDER'S ----------- ------------
EQUITY $14,777,359 $14,225,834
=========== ============
<FN>
(See Notes to Consolidated Financial Statements)
</TABLE>
<PAGE>
<TABLE>
BNL FINANCIAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1995 1994 1995 1994
-------- --------- ---------- ------------
<S> <C> <C> <C> <C>
REVENUES:
Premium income $601,216 $275,901 $1,180,391 $535,745
Investment income 229,592 230,295 439,175 424,999
Realized gains on investments 146,692 83,652 150,945 100,286
-------- -------- ---------- ---------
Total income 977,500 589,848 1,770,511 1,061,030
EXPENSES:
Policy benefits and other
insurance costs 514,116 158,569 1,051,922 214,408
Increase in liability for
future policy benefits 15,614 (389) 16,417 31,043
Amortization of deferred
policy acquisition costs 15,314 7,129 27,815 41,625
Operating expenses 416,056 421,849 860,925 901,711
Taxes, other than on income 6,513 21,240 49,874 59,144
-------- -------- ---------- ---------
Total expenses 967,613 618,398 2,006,953 1,247,931
-------- -------- ---------- ---------
OPERATING INCOME (LOSS) 9,887 (28,550) (236,442) (186,901)
Provision for income taxes 0 0 0 0
-------- -------- ---------- ---------
NET INCOME (LOSS) $9,887 ($28,550) ($236,442) ($186,901)
======== ========== ========== ==========
Net loss per share $0.00 $0.00 ($0.01) ($0.01)
====== ====== ======= ======
Weighted average number
of shares 23,173,149 24,243,186 23,173,149 24,243,186
<FN>
(See Notes to Consolidated Financial Statements)
</TABLE>
<PAGE>
<TABLE>
BNL FINANCIAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
<CAPTION>
Six Months
Ended Ended
Cash flows from operations 06/30/95 06/30/94
------------- ------------
<S> <C> <C>
Net loss ($236,442) ($186,901)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities
Realized (gain) loss (150,945) (100,286)
Depreciation 28,243 27,528
Amortization of deferred acquisition
costs and state licenses acquired 29,369 43,179
Accretion of bond discount (3,907) (2,940)
Decrease in deferred policy acquisition costs 0 6,717
Change in assets and liabilities:
Increase in accrued investment income (13,737) (22,114)
Decrease in premium deposit fund (12,632) (2,971)
Increase in annuity deposits and deferred profits 57,949 389
Increase in liability for future policy benefits 46,717 72,192
Other net 109,222 (119,631)
---------- -----------
Total adjustments 90,279 (97,937)
---------- -----------
Total cash provided by (used in)
operating activities (146,163) (284,838)
Cash flows from investing activities:
Sales of debt securities 1,498,114 1,286,650
Sales of equity securities 0 1,024
Sales of furniture and equipment 7,341 0
Purchase of equity securities 0 0
Purchase of furniture and equipment (58,885) (22,014)
Purchase of fixed maturity securities (797,527) (2,734,881)
----------- ----------
Net cash provided by (used in) investing activities 649,043 (1,469,221)
----------- ----------
Cash flows from financing activities:
Payments on supplementary contracts (15,000) (15,000)
Interest credited on supplementary contracts 4,642 5,193
----------- ----------
Net cash provided by (used in) financing activities (10,358) (9,807)
----------- ----------
Net increase (decrease in cash and cash equivalents) 492,522 (1,763,866)
Cash and cash equivalents, beginning of year 2,207,537 4,412,484
----------- ----------
Cash and cash equivalents, end of period $2,700,059 $2,648,618
=========== ==========
<FN>
(See notes to Consolidated Financial Statements)
</TABLE>
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Liquidity and Capital Resources
The Company's insurance operations are conducted through its wholly owned
subsidiary, Brokers National Life Assurance Company (BNLAC). The merger of
Iowa Life Assurance Company and United Arkansas Life Assurance Company on
August 1, 1994, to form BNLAC, strengthed the capital and surplus of the
subsidiary. On August 31, 1994, the Company and BNL Equity Corporation
contributed $1,000,000 to the surplus of BNLAC. At June 30, 1995, BNLAC
had statutory capital and surplus exceeding $5.9 million, which is
sufficient to meet BNLAC's capital requirements in the states in which it
is licensed and which management believes is sufficient to support
anticipated future growth.
At June 30, 1995, the Company had liquid assets of $2,700,000 in cash,
money market savings accounts, treasury bills and short-term certificates
of deposit, all of which can readily be converted to cash.
The major components of operating cash flows are premium, annuity deposits
and investment income. In the first half of 1995, BNLAC collected
$1,151,000 of premiums and annuity deposits (gross before reinsurance) and
the Company had consolidated investment income of $439,175.
The Company's investments are primarily in U.S. Government and Government
Agencies and other investment grade bonds which have been marked to market
and classified as available for sale. The Company does not hedge its
investment income through the use of derivatives.
Results of Operations
Premium income for the first half of 1995 was $1,180,391 compared to
$535,745 for the same period in 1994. The increase of $644,66 was due to
an increase in dental insurance premiums written and an increase in dental
premiums retained by BNLAC to 50% in 1995 as compared to 10% in 1994.
Prior to January 1, 1996, BNLAC will retain 100% of these premiums.
Net investment income was $439,175 for the first half of 1995 compared to
$424,999 for the same period of 1994. The slight increase in investment
income was due to an increase in interest rates and an increase in bond
investments.
<PAGE>
Realized gains on investments were $150,945 in the first half of 1995
compared to $100,286 for the same period in 1994. In the second quarter of
1995, the Company received approximately $70,000 return of principal on GIC
bonds that exceeded the book value of the bonds.
In the first half of 1995, policy benefits and other insurance costs were
$1,051,922 compared to $214,408 for the same period in 1994. The increase
was primarily due to an increase in claims and commissions resulting from
the increase in dental business in force and an amendment to a
reinsurance agreement with UniLife Insurance Company whereby BNLAC pays 50%
the group dental claims and commissions in 1995 compared to 10% in 1994.
For the first half of 1995 the increase in liability for future policy
benefits was $16,417 compared to $31,043 in 1994. The decrease between
years is directly related to the decrease in life business and reflects the
marketing shift to group dental insurance.
Amortization of deferred policy acquisition costs were $27,815 and $41,625
for the first half of 1995 and 1994 respectively. The decrease is directly
related to lapses of life insurance and annuities in force.
Operating expenses decreased from $901,711 in the first half of 1994 to
$860,925 in 1995. Operating expenses declined in 1995 primarily due to a
decline in salaries, printing expenses, agency conferences and accounting
fees.
Taxes, other than on income, fees and assessments were $49,874 for the
first half of 1995 compared to $59,144 for the same period in 1994. These
costs decreased due to a reimbursement of 1994 premium taxes by UniLife
for which an excessive accrual had been made at year end.
The net loss for the first half of 1995 was $236,442 compared to $186,901
for the same period in 1994. The increase is primarily due to the increase
in policy benefits and other insurance costs discussed above.
<PAGE>
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings.
There were no material, pending legal proceedings to which the Company was
a party or of which any of its property was the subject during the period
covered by this report.
Item 2. Changes in Securities.
None of the rights of the holders of any of the Company's securities were
materially modified during the period covered by this report. In addition,
no class of securities of the Company was issued or modified which
materially limited or qualified any class of its registered securities.
Item 3. Defaults Upon Senior Securities.
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 exceeding 5 per cent of the
total assets of the Company and its consolidated subsidiary.
Item 4. Submission of Matters to a Vote of Security Holders.
The Company's Annual Meeting of Shareholders was held on May 22, 1995
in N. Little Rock Arkansas. At the annual meeting, the following
individuals were elected to the Company's Board of Directors.
Wayne E. Ahart Hayden Fry James A. Mullins
C. Donald Byrd John Greig C. James McCormick
Kenneth Tobey Roy Keppy Knox Nelson
Barry N. Shamas Thomas Landry Robert R. Rigler
Cecil Alexander Roy Ledbetter Chris Schenkel
Richard Barclay Mahlon A. Martin L. Stanley Schoelerman
Eugene A. Cernan John E. Miller Orville Sweet
Charles Thone
13,296,243 shares had been voted in favor of Messrs. Shamas, Sweet,
Schenkel, and Barclay; 13,281,819 shares voted in favor of Mr. Ahart;
13,285,341 shares voted in favor of Mr Byrd; 13,289,163 shares voted
in favor of Mr. Fry; 13,249,239 shares voted in favor of Mr. Tobey; 13,293,243
shares voted in favor of Messrs. Thone, Keppy, Alexander, Miller and
Nelson; 13,296,441 shares voted in favor of Messrs. Landry and
McCormick; 13,294,443 shares voted in favor of Messrs. Martin,
Mullins and Schoelerman: and 13,297,443 shares voted in favor of
Messrs. Cernan, Greig, Rigler and Ledbetter.
The shareholders ratified the selection of Amend, Smith & Co., p.c., as the
Company's independent auditors for the year ending December 31, 1995 with
13,409,874 shares voted in favor, 39,666 shares voted against and 122,330
abstained
Item 5. Other Information.
None
<PAGE>
Item 6. Exhibits and Reports on Form 10-QSB
<TABLE>
<CAPTION>
No. Description Page or Method of Filing
<S> <C> <C>
3.1 Articles of Incorporation of BNL Financial Incorporated by reference to Exhibit
Corporation (formerly United Iowa Corporation), 3.1 of the Company's Annual Report
dated January 27, 1984 and Amendment to on Form 10-K for the period ending
Articles of Incorporation of BNL Financial December 31, 1993.
Corporation, dated November 13, 1987.
3.2 Bylaws of BNL Financial Corporation Incorporated by reference to Exhibit 3.2 of the
Company's Registration Statement No. 33-70318.
4.1 Instruments of defining the rights of security Incorporated by reference to Exhibit 4
holders, including indentures of the Company's Registration
Statement No. 2-94538 and Exhibits
3.5 and 4 of Post-Effective Amend-
ment No. 3 thereto.
4.2 Articles of Incorporation of BNL Financial Incorporated by reference to Exhibit
Corporation (formerly United Iowa Corporation), 3.1 of the Company's Annual Report
dated January 27, 1984 and Amendment to on Form 10-K for the period ending
Articles of Incorporation of BNL Financial December 31, 1993.
Corporation, dated November 13, 1987.
10.1 Office Lease dated January 1, 1985 between Incorporated by reference to Exhibit
Registrant and William L. Kopatick. 10.4 of Pre-Effective Amendment No.
1 of the Company's Registration
Statement No. 2-94538.
10.2 Form of Agreement between Commonwealth Filed with 10-QSB for the period
Industries Corporation, American Investors ended September 30, 1994.
Corporation and Wayne E. Ahart regarding
rights to purchase shares of the Company.
10.3 Agreement dated December 21, 1990 between Incorporated by reference to Exhibit
Registrant and C. Donald Byrd granting Registrant 10.9 of the Company's Annual Report
right of first refusal as to future transfers of Mr. on Form 10-K for the year ended
Byrd's shares of the Company's common stock. December 31, 1990.
10.4 Quota Share Reinsurance Agreement dated Incorporated by reference to Exhibit
August 10, 1991 between Registrant and 10.10 of the Company's Annual Report
UniLife Insurance Company of San Antonio, Tx. on Form 10-K for the year ended
December 31, 1991.
10.5 Subscription Agreement dated March 2, 1994 Incorporated by reference to S-4
Registration Statement No. 33-70318.
10.6 Stock Escrow Agreement dated February 28, 1994. Incorporated by reference to S-4
Registration Statement No. 33-70318.
10.7 Merger Agreement between United Arkansas Incorporated by reference to S-4
Corporation and USSA Acquisition Inc. dated Registration Statement No. 33-70318.
February 11, 1994.
10.8 Merger Agreement between Iowa Life Assurance Filed with 10-QSB for the period ended
Company and United Arkansas Life Insurance March 31, 1994.
Company dated March 2, 1994.
10.9 Office lease dated March 24, 1994, between Iowa Filed with 10-QSB for the period ended
Life Assurance Company and Enclave KOW, LTD., September 30, 1994
for premises in Austin, Texas.
10.10 Amendment Number Two to the Quota Share Filed with Form 8-K dated January 18,
Reinsurance Agreement dated August 10, 1991 1995.
between Registrant and UniLife Insurance Company
of San Antonio, Texas.
11 Statement re computation of per share earnings Not Applicable
12 Statement re computation of ratios Not Applicable
22 Brokers National Life Assurance Company and BNL
Equity Corporation, both wholly owned by Registrant
</TABLE>
<PAGE>
(b) Reports on Form 8-K
The Company filed no reports on Form 8-K for the period covered by this
report
SIGNATURES
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)
Date: July 21, 1995 Wayne E. Ahart
-------------------------
By: Wayne E. Ahart, Chairman of the Board
(Chief Executive Officer)
Date: July 21, 1995 Barry N. Shamas
-------------------------
By: Barry N. Shamas, Executive V.P.
(Chief Financial Officer)
<TABLE> <S> <C>
<ARTICLE> 7
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<DEBT-HELD-FOR-SALE> 10575192
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 88465
<MORTGAGE> 0
<REAL-ESTATE> 0
<TOTAL-INVEST> 10663657
<CASH> 2700059
<RECOVER-REINSURE> 0
<DEFERRED-ACQUISITION> 534938
<TOTAL-ASSETS> 14777359
<POLICY-LOSSES> 1618616
<UNEARNED-PREMIUMS> 0
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 3743132
<NOTES-PAYABLE> 0
<COMMON> 466239
0
0
<OTHER-SE> 8130692
<TOTAL-LIABILITY-AND-EQUITY> 14777359
1180391
<INVESTMENT-INCOME> 439175
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<UNDERWRITING-AMORTIZATION> 27815
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<RESERVE-OPEN> 289700
<PROVISION-CURRENT> 320000
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 1185017
<PAYMENTS-PRIOR> 312811
<RESERVE-CLOSE> 320000
<CUMULATIVE-DEFICIENCY> 23111
</TABLE>
