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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 September 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
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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
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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 September 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>
<TABLE>
Item 1. Financial Statements
BNL FINANCIAL CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
<CAPTION>
September 30
ASSETS 1995 December 31,
(Unaudited) 1994
----------- ------------
<S> <C> <C>
Investments:
Investments available for sale, at
fair value $10,849,531 $10,448,215
Equity securities, common stock 63,120 110,792
Cash and cash investments 2,304,358 2,207,537
----------- -----------
Total Investments 13,217,009 12,766,544
Accrued investment income 229,700 201,120
Furniture and equipment 243,058 151,935
Deferred policy acquisition costs 525,764 562,750
Receivable from reinsurer 209,797 315,527
Other assets 284,362 227,958
----------- ----------
TOTAL ASSETS $14,709,690 $14,225,834
=========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Liability for future policy benefits $1,638,867 $1,571,899
Premium deposit fund 203,599 220,885
Annuity deposits 3,425,375 3,319,236
Deferred annuity profits 600,000 591,637
Supplementary contracts without
life contingencies 87,528 173,593
Other liabilities 240,529 167,191
---------- ----------
Total liabilities 6,195,898 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 396,643 (288,590)
Treasury stock (64,105) (64,105)
Accumulated deficit (6,593,215) (6,240,423)
---------- -----------
Total shareholders' equity 8,513,792 8,181,393
---------- ----------
TOTAL LIABILITIES & SHAREHOLDER'S EQUITY $14,709,690 $14,225,834
========== ==========
<FN>
(See Notes to Consolidated Financial Statements)
</FN>
</TABLE>
2
<PAGE>
<TABLE>
BNL FINANCIAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------------- ---------------------------
1995 1994 1995 1994
----------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
REVENUES:
Premium income .................................. $ 670,947 $ 256,383 $ 1,851,338 $ 792,128
Investment income ............................... 211,576 260,341 650,751 685,340
Realized gains on investments ................... 11,577 54,388 162,522 154,674
----------- ----------- ----------- -----------
Total income ................................... 894,100 571,112 2,664,611 1,632,142
----------- ----------- ----------- -----------
EXPENSES:
Policy benefits and other insurance costs ....... 494,207 110,902 1,546,129 325,310
Increase in liability for future policy benefits 251 44,626 16,668 75,669
Amortization of deferred policy acquisition costs 29,174 16,965 56,989 58,590
Operating expenses .............................. 456,766 407,697 1,317,691 1,309,407
Taxes, other than on income ..................... 30,052 17,716 79,926 76,861
---------- ---------- ---------- ----------
Total expenses ................................. 1,010,450 597,906 3,017,403 1,845,837
---------- ---------- ---------- ----------
OPERATING INCOME (LOSS) ........................ (116,350) (26,794) (352,792) (213,695)
Provision for income taxes ......................... 0 0 0 0
---------- ---------- ---------- ----------
NET INCOME (LOSS) .............................. ($ 116,350) ($ 26,794) ($ 352,792) ($ 213,695)
========== ========== ========== ==========
Net loss per share .............................. ($ 0.00) $ 0.00 ($ 0.02) ($ 0.01)
========== ========== ========== ==========
Weighted average number
of shares ...................................... 23,311,944 23,706,368 23,311,944 24,028,459
========== ========== ========== ==========
<FN>
(See Notes to Consolidated Financial Statements)
</FN>
3
</TABLE>
<PAGE>
<TABLE>
BNL FINANCIAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
<CAPTION>
Nine Months
Ended Ended
09/30/95 09/30/94
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net loss ................................................ ($ 352,792) ($ 213,695)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Realized (gain) loss on investments .................... (162,522) (154,674)
Depreciation ........................................... 44,771 41,292
Amortization of deferred acquisition
costs and state licenses acquired ................... 39,217 60,921
Accretion of bond discount ............................. (5,864) (5,261)
Change in assets and liabilities:
Increase in accrued investment income .................. (28,580) (49,724)
Decrease in premium deposit fund ....................... (17,286) (11,570)
Increase in annuity deposits and deferred profits ...... 114,502 26,625
Increase in liability for future policy benefits ....... 66,968 129,818
Other net .............................................. 120,385 (58,568)
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Total adjustments .................................. 171,591 (21,141)
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Total cash provided by (used in)
operating activities ........................... (181,201) (234,836)
Cash flows from investing activities:
Sales of debt securities .............................. 2,570,871 2,028,832
Sales of equity securities ............................ 22,625 1,024
Sales of furniture and equipment ...................... 7,341 50
Purchase of equity securities ......................... 0 0
Purchase of furniture and equipment ................... (141,595) (33,043)
Purchase of fixed maturity securities ................. (2,095,155) (3,484,817)
--------- ---------
Net cash provided by (used in) investing activities 364,087 (1,487,954)
--------- ---------
Cash flows from financing activities:
Payments on supplementary contracts ................... (90,288) (22,500)
Interest credited on supplementary contracts .......... 4,223 7,717
--------- ----------
Net cash provided by (used in) financing activities (86,065) (14,783)
--------- ----------
Net increase (decrease) in cash and cash equivalents .... 96,821 (1,737,573)
Cash and cash equivalents, beginning of year ............ 2,207,537 4,412,484
--------- ---------
Cash and cash equivalents, end of period ................ $ 2,304,358 $ 2,674,911
========= =========
<FN>
(See notes to Consolidated Financial Statements)
</FN>
</TABLE>
4
<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>
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, strengthened 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 September 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 September 30, 1995, the Company had liquid assets of $2,300,000 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 nine months of 1995, BNLAC collected $3,598,000
of premiums and annuity deposits (gross before reinsurance) and the Company had
consolidated investment income of $651,000.
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 nine months of 1995 was $1,851,338 compared to
$792,128 for the same period in 1994. The increase of $1,059,210 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. Effective June 1,
1995, BNLAC retained 100% of new dental business and on November 1, 1995 BNLAC
began administering and retaining 100% of all dental business.
Net investment income was $650,751 for the period ended September 30, 1995
compared to $685,340 for the same period of 1994. The slight increase in
investment income in 1994 was due to interest in arrears paid on $700,000 par
value bonds which had been in default since 1991.
Realized gains on investments were $162,522 in the first three quarters of 1995
compared to $154,674 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 nine months of 1995, policy benefits and other insurance costs were
$1,546,129 compared to $325,310 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% of the group dental claims
and commissions in 1995 compared to 10% in 1994.
For the period ended September 30 , 1995, the increase in liability for future
policy benefits was $16,668 compared to $75,669 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 $56,989 and $58,590 for
the first nine months of 1995 and 1994 respectively.
Operating expenses increased slightly from $1,309,407 in the first three
quarters of 1994 to $1,317,691 in 1995. The increase in operating expenses in
1995 was primarily due to preparation expense for the takeover of administration
of the dental business and claims administraion expenses on the dental business.
Taxes, other than on income, fees and assessments were $79,926 for the first
nine months of 1995 compared to $76,861 for the same period in 1994. These costs
increased due to an increase in premium taxes from the increase in premiums
which was partially offset by 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 three quarters of 1995 was $352,792 compared to
$213,695 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.
No items were submitted for a vote of security holders during the covered
period.
Item 5. Other Information.
None
<PAGE>
Item 6. Exhibits and Reports on Form 10-QSB
<TABLE>
<CAPTION>
No. Description Page or Method of Filing
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<S> <C> <C>
3.1 Articles of Incorporation of BNL Financial Incorporated by reference to Exhibit 3.1 of the
Corporation (formerly United Iowa Corporation), Company's Annual Report on Form 10-K for the
dated January 27, 1984 and Amendment to Articles period ending December 31, 1993.
of Incorporation of BNL Financial 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 defining the rights of security Incorporated by reference to Exhibit 4 of the
holders, including indentures 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 Incorporated by reference to Exhibit 3.1 of the
Corporation (formerly United Iowa Corporation), Company's Annual Report on Form 10-K for the
dated January 27, 1984 and Amendment to Articles period ending December 31, 1993.
of Incorporation on BNL Financial Corporation,
dated November 13, 1987.
10.1 Office Lease dated January 1, 1985 between Incorporated by reference to Exhibit 10.4 of
Registrant and William L. Kopatick. Pre-Effective Amendment No. 1 of the Company's
Registration Statement No. 2-94538.
10.2 Form of Agreement between Commonwealth Industries Filed with 10-QSB for the period ended September
Corporation, American Investors Corporation and 30, 1994.
Wayne E. Ahart regarding rights to purchase shares
of the Company.
10.3 Agreement dated December 21, 1990 between Incorporated by reference to Exhibit 10.9 of the
Registrant and C. Donald Byrd granting Registrant Company's Annual Report on Form 10-K for the year right
of first refusal as to future transfers of ended December 31, 1990.
Mr. Byrd's shares of the Company's common stock.
10.4 Quota Share Reinsurance Agreement dated 8/10/91 Incorporated by reference to Exhibit 10.10 of the
between Registrant and UniLife Insurance Co. of Company's Annual Report on Form 10-K for the year
San Antonio, Texas. 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 Registration
Corporation and USSA Acquisition Inc. dated Statement No. 33-70318
February 11, 1994
10.8 Merger Agreement between Iowa Life Assurance Filed with 10-QSB for the period ended March 31,
Company and United Arkansas Life Assurance Company 1994
dated March 2, 1994
10.9 Office lease dated March 24, 1994, between Iowa Filed with 10-QSB for the period ended September
Life Assurance Company and Enclave KOW, Ltd., for 30, 1994
premises in Austin, Texas.
10.10 Amendment Number Two to the Quota Share Filed with Form 8-K dated January 18, 1995
Reinsurance Agreement dated 8/10/91 between
Registrant and UniLife Insurance Co. of San
Antonio, Texas
11 Statement re computation of per share earnings Not applicable
12 Statements re computation of ratios Not applicable
22 Brokers National Life Assurance Company and BNL
Equity Corporation, both wholly owned by Registrant
</TABLE>
(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: November 1, 1995 __________________________________
By: Wayne E. Ahart, Chairman of the Board
(Chief Executive Officer)
Date: November 1, 1995 __________________________________
By: Barry N. Shamas, Executive V.P.
(Chief Financial Officer)
<TABLE> <S> <C>
<ARTICLE> 7
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JUL-01-1995
<PERIOD-END> SEP-30-1995
<DEBT-HELD-FOR-SALE> 10849531
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 63120
<MORTGAGE> 0
<REAL-ESTATE> 0
<TOTAL-INVEST> 10912651
<CASH> 2304358
<RECOVER-REINSURE> 0
<DEFERRED-ACQUISITION> 525764
<TOTAL-ASSETS> 14709690
<POLICY-LOSSES> 1638867
<UNEARNED-PREMIUMS> 0
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 291127
<NOTES-PAYABLE> 0
<COMMON> 466239
0
0
<OTHER-SE> 8047553
<TOTAL-LIABILITY-AND-EQUITY> 14709690
1851338
<INVESTMENT-INCOME> 650751
<INVESTMENT-GAINS> 162522
<OTHER-INCOME> 0
<BENEFITS> 1546129
<UNDERWRITING-AMORTIZATION> 56989
<UNDERWRITING-OTHER> 0
<INCOME-PRETAX> (352792)
<INCOME-TAX> 0
<INCOME-CONTINUING> (352792)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (352792)
<EPS-PRIMARY> (.02)
<EPS-DILUTED> (.02)
<RESERVE-OPEN> 289700
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 1014968
<PAYMENTS-PRIOR> 326167
<RESERVE-CLOSE> 320000
<CUMULATIVE-DEFICIENCY> (36421)
</TABLE>
