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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 March 31, 1996
[ ] 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 March 31, 1996, 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>
Item 1. Financial Statements
BNL FINANCIAL CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
March 31
ASSETS 1996 December 31,
(Unaudited) 1995
----------- ------------
<S> <C> <C>
Investments:
Investments available for sale, at
fair value ....................... $12,297,736 $11,504,802
Equity securities, common stock ....... 55,000 41,870
Cash and cash investments ............. 558,067 1,910,596
----------- -----------
Total Investments 12,910,803 13,457,268
Accrued investment income ................ 259,777 252,617
Furniture and equipment .................. 309,761 303,262
Deferred policy acquisition costs ........ 507,187 514,561
Receivable from reinsurer ................ 172,424 142,677
Other assets ............................. 466,365 433,827
----------- ----------
TOTAL ASSETS $14,626,317 $15,104,212
=========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Liability for future policy benefits . $1,939,455 $1,877,749
Premium deposit fund ................. 187,176 195,542
Annuity deposits ..................... 3,516,388 3,435,834
Deferred annuity profits ............. 610,536 602,719
Supplementary contracts without
life contingencies ............... 80,853 84,213
Other liabilities .................... 301,265 315,358
---------- ----------
Total liabilities 6,635,673 6,511,415
---------- ----------
SHAREHOLDERS' EQUITY:
Common stock ......................... 466,239 466,239
Additional paid-in capital ........... 14,308,230 14,308,230
Unrealized appreciation (depreciation)
of securities ................... 132,223 478,783
Treasury stock ....................... (64,105) (64,105)
Accumulated deficit .................. (6,851,943) (6,596,350)
---------- -----------
Total shareholders' equity 7,990,644 8,181,393
---------- ----------
TOTAL LIABILITIES & SHAREHOLDER'S EQUITY $14,626,317 $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
September 30,
--------------------------
1996 1995
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<S> <C> <C>
REVENUES:
Premium income .................................. $ 1,615,379 $ 579,175
Investment income ............................... 215,290 209,583
Realized gains on investments ................... 3,913 4,253
----------- -----------
Total income ................................... 1,834,582 793,011
----------- -----------
EXPENSES:
Policy benefits and other insurance costs ....... 1,454,982 537,806
Increase in liability for future policy benefits (16,294) 803
Amortization of deferred policy acquisition costs 7,376 12,501
Operating expenses .............................. 582,619 444,869
Taxes, other than on income ..................... 61,493 43,360
---------- ----------
Total expenses ................................. 2,090,176 1,039,339
---------- ----------
OPERATING INCOME (LOSS) ........................ (255,594) (246,328)
Provision for income taxes ......................... 0 0
---------- ----------
NET INCOME (LOSS) .............................. ($ 255,594) ($ 246,328)
========== ==========
Net loss per share .............................. ($ 0.00) $ 0.00
========== ==========
Weighted average number
of shares ...................................... 23,311,944 23,311,944
========== ==========
<FN>
(See Notes to Consolidated Financial Statements)
</FN>
3
</TABLE>
<PAGE>
<TABLE>
BNL FINANCIAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
<CAPTION>
Three Months
Ended Ended
03/31/96 03/31/95
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net loss ................................................ ($ 255,594) ($ 246,328)
Adjustments to reconcile net loss to net cash provided by (used in) operating
activities:
Realized (gain) loss on investments .................... (3,913) (4,253)
Depreciation ........................................... 22,486 14,122
Amortization of deferred acquisition
costs and state licenses acquired ................... 8,153 13,278
Accretion of bond discount ............................. (3,179) (1,963)
Change in assets and liabilities:
Increase in accrued investment income .................. (7,160) (33,302)
Decrease in premium deposit fund ....................... (8,366) (9,421)
Increase in annuity deposits and deferred profits ...... 88,371 50,582
Increase in liability for future policy benefits ....... 61,706 21,103
Other net .............................................. (77,155) 34,511)
---------- ---------
Total adjustments .................................. 80,943 84,657
---------- ---------
Total cash provided by (used in)
operating activities ........................... (174,651) (161,671)
Cash flows from investing activities:
Sales of debt securities .............................. 897,765 304,573
Sales of equity securities ............................ 0 0
Sales of furniture and equipment ...................... 9,000 6,000
Purchase of equity securities ......................... 0 0
Purchase of furniture and equipment ................... (34,216) (43,706)
Purchase of fixed maturity securities ................. (2,047,067) (498,630)
--------- ---------
Net cash provided by (used in) investing activities (1,174,518) (231,763)
--------- ---------
Cash flows from financing activities:
Payments on supplementary contracts ................... (4,500) (7,500)
Interest credited on supplementary contracts .......... 1,140 2,332
--------- ----------
Net cash provided by (used in) financing activities (3,360) (5,168)
--------- ----------
Net increase (decrease) in cash and cash equivalents .... (1,352,529) (398,602)
Cash and cash equivalents, beginning of year ............ 1,910,596 2,207,537
--------- ---------
Cash and cash equivalents, end of period ................ $ 558,067 $ 1,808,935
========= =========
<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-QSB 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-KSB
for the year ended December 31, 1995, previously filed with the Commission, for
financial statements for the year ended December 31, 1995, prepared in
accordance with GAAP. Net income (loss) per share of common stock is based on
the weighted average number of outstanding common shares.
-5-
<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). At March 31, 1996,
BNLAC had statutory capital and surplus exceeding $5.5 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 March 31, 1996, the Company had liquid assets of $558,067 in cash, money
market savings accounts and short-term certificates of deposit, all of which can
readily be converted to cash. The Company's cash and cash investments have
decreased by $1,,352,529 since December 31, 1995 primarily due to investing
short term cash investments in long term bonds.
The major components of operating cash flows are premium, annuity deposits and
investment income. In the first quarter of 1996, BNLAC collected $1,749,456 of
premiums and annuity deposits (gross before reinsurance) and the Company had
consolidated investment income of $215,290.
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 unrealized appreciation of securities
decreased from $478,783 at December 31, 1995 to $132,223 at March 31, 1996. The
Company does not hedge its investment income through the use of derivatives.
Results of Operations
Premium income for the first three months of 1996 was $1,615,379 compared to
$579,175 for the same period in 1995. 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 from 50% in 1995 to 100% in 1996. Effective November 1, 1995,
BNLAC began retaining 100% of the group dental business and administering the
dental business.
Net investment income was $215,290 for the period ended March 31, 1996 compared
to $209,583 for the same period in 1995. The slight increase in investment
income in 1996 was due to reinvesting short term investment proceeds in fixed
securities with higher interest rates in the first quarter of 1996.
Realized gains on investments were $3,913 in the first quarter of 1996 compared
to $4,253 for the same period in 1995.
In the first three months of 1996, policy benefits and other insurance costs
were $1,454,982 compared to $537,806 for the same period in 1995. The increase
was primarily due to an increase in claims and commissions resulting from the
increase in dental business in force and the change in retention of dental
business from 50% to 100% in the fourth quarter of 1995.
For the period ended March 31, 1996, the increase in liability for future policy
benefits was ($16,294) compared to $803 in 1995. The decrease in 1996 was due to
a decrease in group dental unearned premium reserves for the year.
Amortization of deferred policy acquisition costs were $7,376 and $12,501 for
the first three months of 1996 and 1995 respectively. Amortization of deferred
policy acquisition costs should continue to decrease as the asset is reduced
over the upcoming years.
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<PAGE>
Operating expenses increased from $444,869 in the first quarter of 1995 to
$582,619 in 1996. The increase in operating expenses in 1996 was primarily due
to overhead necessary to administer the dental business and claims
administration expenses on the dental business.
Taxes, other than on income, fees and assessments were $61,493 for the first
three months of 1996 compared to $43,690 for the same period in 1995. These
costs increased due to an increase in premium taxes from the increase in
premiums.
The net loss for the first quarter of 1996 was $255,594 compared to $246,328 for
the same period in 1995. The increase is primarily due to the increase in policy
benefits and other insurance costs discussed above.
-7-
<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
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<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 Attached as exhibit 10.3.
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.
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
-9-
<PAGE>
10.9 Office lease dated March 24, 1994, between Brokers Filed with 10-QSB for the period ended September
National Life Assurance Company (formerly Iowa 30, 1994
Life Assurance Company) and Enclave KOW, Ltd., for
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 BNL Brokerage Corporation, Brokers National Life
Assurance Company and BNL Equity Corporation, all
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: May 1, 1996 /s/ Wayne E. Ahart
_________________________________
By: Wayne E. Ahart, Chairman of the Board
(Chief Executive Officer)
Date: May 1, 1996 /s/ Barry N. Shamas
__________________________________
By: Barry N. Shamas, Executive V.P.
(Chief Financial Officer)
-10-
<PAGE>
Exhibit 10.3
AGREEMENT
Agreement made this 21st day of December, 1990, by and between United Iowa
Corporation (the "Company") and C. Don Byrd ("Byrd").
Whereas, Byrd is the owner of 1,360,000 shares of common stock of the
Company; and
Whereas, Byrd found it necessary to sell 390,000 of his shares; and
Whereas, the market for the Company's common stock would have been
saturated should Byrd have offered his shares for sale on the open market; and
Whereas, the directors of the Company believed that it was in the best
interests of the Company and its shareholders to repurchase Byrd's shares at a
price acceptable to the Company and Byrd; and
Whereas, the Company desires to enter into an agreement pursuant to which
Byrd will give the Company a right-of-first refusal to acquire other shares of
the Company's common stock owned by him;
NOW, THEREFORE, FOR MUTUAL CONSIDERATION ACKNOWLEDGED BY THE COMPANY AND
BYRD, THE PARTIES HERETO AGREE, as follows:
1. From the date hereof Byrd shall not transfer, pledge, hypothecate
or in any way create any security interest in the Company stock currently owned
or hereafter acquired by him, except with permission of the Company, except as
provided herein.
2. Byrd may not sell any shares of Company stock he owns or
hereafter acquires unless he
Agreement Page 2
has first notified the Company of his intention to sell such Company as provided
herein (the "Notification"). The Company shall have thirty (30) days after
receiving Notification from Byrd that it intends to exercise its right to
purchase the shares. If the Company does not inform Byrd that it is exercising
its right-of-first refusal within thirty (30) day period or if the Company
informs Byrd that it declines to exercise its right, Byrd may sell his Company
shares to the person and on the terms identified in the Notification. If the
Company elects to exercise its right to purchase shares, it shall make payment
therefor within forty-five (45) days after accepting the offer. Notwithstanding
any other provision herein, the right-of-first refusal must be excised with
respect to all of the shares owned by Byrd which he proposes to sell. The
Company shall not have the right-of-first refusal with respect to any shares
owned by Byrd which he proposed to sell unless the right has been exercised with
respect to all such shares.
3. In giving the notice of the intent to sell under paragraph
2 hereof, Byrd must set forth the identity of the party to whom he proposes to
sell the shares, the per share price and all the terms of payment and conditions
at which the sale is to take place. If the Company exercises its right to
purchase the shares as provided in paragraph 2 hereof, the price, terms and
conditions to be paid to Byrd for such shares shall be the same as those to be
paid by the third party set forth in the Notification; provided, however, that
the Company shall be entitled, at its sole option, to pay the entire purchase
price in cash. If the Company elects not to exercise its rights to purchase
pursuant to this Agreement, Byrd may sell only to the person identified in the
Notification at the price and on the terms and conditions set forth in the
notice.
Agreement Page 3
4. Notwithstanding paragraph 1 hereof and the rights given to the
Company herein, Byrd may sell or transfer to a trust controlled by him, to one
or more members of his immediate family or to his heirs in the event of death,
any of the Company shares owned by him; provided, however, that the person or
entity acquiring the shares shall thereafter be subject to this right-of-first
refusal with respect to the shares so acquired.
5. All notices required or permitted herein shall be given in
writing to the addresses set forth below or at such other address as may be
designated by the parties:
If to the Company:
United Iowa Corporation
7748 Highway 290 W., Ste. 200
P.O. Box 33280, Ste. 330
Austin, TX. 78764-0280
If to Byrd:
C. Don Bryd
631-47th Street
West Des Moines, IA 50265
All notices will be deemed to have been given when deposited in the
first-class United States mail, postage prepaid.
6. All certificates evidencing the Company stock owned by Byrd which
are subject to the rights provided herein shall have the following legend
printed or typed thereon:
"The shares represented by this certificate are subject to certain
rights provided for in an Agreement dated December 21, 1990,
between United Iowa Corporation and the shareholder. A copy of the
Agreement is on file in the office of the Corporation."
Agreement Page 4
7. The closing of any of the transactions herein contemplated shall
take place at the offices of the Company at a time agreed to between the
parties. At the closing Byrd shall deliver the certificates for the Company
stock being sold, together with assignments of such stock and all other
documents that the Company may reasonably request and the Company shall deliver
a certified cashier's check in payment for the shares, made payable to Byrd, and
such other documents as Byrd may reasonably request.
8. This Agreement shall be governed by the laws of the State of
Iowa.
<TABLE> <S> <C>
<ARTICLE> 7
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<DEBT-HELD-FOR-SALE> 12297736
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 55000
<MORTGAGE> 0
<REAL-ESTATE> 0
<TOTAL-INVEST> 12352736
<CASH> 558067
<RECOVER-REINSURE> 172424
<DEFERRED-ACQUISITION> 507187
<TOTAL-ASSETS> 14626317
<POLICY-LOSSES> 1911339
<UNEARNED-PREMIUMS> 28116
<POLICY-OTHER> 4126924
<POLICY-HOLDER-FUNDS> 268029
<NOTES-PAYABLE> 0
0
0
<COMMON> 466239
<OTHER-SE> 7524405
<TOTAL-LIABILITY-AND-EQUITY> 14626317
1615379
<INVESTMENT-INCOME> 215290
<INVESTMENT-GAINS> 3913
<OTHER-INCOME> 0
<BENEFITS> 1454982
<UNDERWRITING-AMORTIZATION> 7376
<UNDERWRITING-OTHER> 252815
<INCOME-PRETAX> (255594)
<INCOME-TAX> 0
<INCOME-CONTINUING> (255594)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (255594)
<EPS-PRIMARY> (.02)
<EPS-DILUTED> (.02)
<RESERVE-OPEN> 427000
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 677977
<PAYMENTS-PRIOR> 400820
<RESERVE-CLOSE> 475000
<CUMULATIVE-DEFICIENCY> 26178
</TABLE>
