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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, 1997
[ ] 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, 1997, the
Registrant had 23,311,944 shares of Common Stock, no par value, outstanding.
Transitional Small Business Disclosure Format (check one) Yes___ No__X__
Item 1. Financial Statements
BNL FINANCIAL CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
March 31
ASSETS 1997 December 31,
(Unaudited) 1996
----------- ------------
<S> <C> <C>
Investments:
Investments available for sale, at
fair value ....................... $11,829,278 $11,885,909
Equity securities, common stock ....... 30,438 35,438
Cash and cash investments ............. 246,610 702,769
----------- -----------
Total Investments 12,106,326 12,624,116
Accrued investment income ................ 231,040 222,101
Furniture and equipment .................. 269,302 266,234
Deferred policy acquisition costs ........ 465,199 474,667
Receivable from reinsurer ................ 23,301 28,462
Other assets ............................. 785,395 485,995
----------- ----------
TOTAL ASSETS $13,880,563 $14,101,575
=========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Liability for future policy benefits . $1,407,969 $1,382,280
Policy claims payable................. 950,000 816,500
Premium deposit fund ................. 140,152 177,909
Annuity deposits ..................... 3,456,954 3,495,571
Deferred annuity profits ............. 615,737 610,536
Supplementary contracts without
life contingencies ............... 66,955 70,515
Other liabilities .................... 453,392 415,901
---------- ----------
Total liabilities 7,091,159 6,969,212
---------- ----------
SHAREHOLDERS' EQUITY:
Common stock ......................... 466,239 466,239
Additional paid-in capital ........... 14,308,230 14,308,230
Unrealized appreciation (depreciation)
of securities ................... (199,683) (41,679)
Treasury stock ....................... (64,105) (64,105)
Accumulated deficit .................. (7,721,277) (7,536,322)
---------- -----------
Total shareholders' equity 6,789,404 7,132,363
---------- ----------
TOTAL LIABILITIES & SHAREHOLDER'S EQUITY $13,880,563 $14,101,575
========== ==========
<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
March 31,
---------------------------
1997 1996
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<S> <C> <C> <C> <C>
REVENUES:
Premium income .................................. $ 2,267,090 $ 1,615,379
Investment income ............................... 209,567 215,290
Realized gains on investments ................... 18,764 3,913
----------- -----------
Total income ................................... 2,495,421 1,834,582
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EXPENSES:
Policy benefits and other insurance costs ....... 1,878,840 1,454,981
Increase in liability for future policy benefits 19,189 (16,294)
Amortization of deferred policy acquisition costs 9,468 7,376
Operating expenses .............................. 664,099 582,620
Taxes, other than on income ..................... 108,780 61,493
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Total expenses ................................. 2,680,376 2,090,176
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OPERATING INCOME (LOSS) ........................ (184,955) (255,594)
Provision for income taxes ......................... 0 0
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NET INCOME (LOSS) .............................. ($ 184,955) ($ 255,594)
=========== ===========
Net loss per share .............................. ($ 0.01) ($ 0.01)
=========== ===========
Weighted average number
of shares ...................................... 23,311,944 23,311,944
=========== ===========
<FN>
(See Notes to Consolidated Financial Statements)
</FN>
</TABLE>
3
<PAGE>
<TABLE>
BNL FINANCIAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
<CAPTION>
Three Months
Ended Ended
03/31/97 03/31/96
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net loss ...................................................($ 184,955) ($ 255,594)
Adjustments to reconcile net loss to net cash provided by (used in) operating
activities:
Realized (gain) loss on investments ....................... (22,843) (143)
Realized (gain) loss on sale of furniture and equipment.... 4,079 (3,770)
Depreciation .............................................. 22,921 22,486
Amortization of deferred acquisition
costs and state licenses acquired ...................... 9,468 8,153
Accretion of bond discount ................................ (1,038) (3,179)
Change in assets and liabilities:
Increase in accrued investment income ..................... (8,939) (7,160)
Decrease (increase) in receivable from reinsurer........... 5,161 (29,757)
Decrease in premium deposit fund .......................... (37,757) (8,366)
Increase (decrease)in annuity deposits and deferred profits (33,416) 88,371
Increase in liability for future policy
benefits ............................................... 25,689 32,718
Increase in policy claims payable.......................... 133,500 313,735
Other net ................................................. (261,911) (332,145)
---------- ---------
Total adjustments ..................................... (165,086) 80,943
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Total cash provided by (used in)
operating activities .............................. (350,041) (174,651)
Cash flows from investing activities:
Sales of debt securities ................................. 726,760 897,765
Sales of equity securities ............................... 0 0
Sales of furniture and equipment ......................... 201 9,000
Purchase of equity securities ............................ 0 0
Purchase of furniture and equipment ...................... (30,269) (34,216)
Purchase of fixed maturity securities .................... (799,250) (2,047,067)
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Net cash provided by (used in) investing activities (102,558) (1,174,518)
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Cash flows from financing activities:
Payments on supplementary contracts ...................... (3,560) (3,360)
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Net cash provided by (used in) financing activities (3,560) (3,360)
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Net increase (decrease) in cash and cash equivalents ....... (456,159) (1,352,529)
Cash and cash equivalents, beginning of year ............ 702,769 1,910,596
--------- ---------
Cash and cash equivalents, end of period ................ $ 246,610 $ 558,067
========= =========
<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, 1996, previously filed with the Commission, for financial
statements for the year ended December 31, 1996, prepared in accordance with
GAAP. Net income (loss) 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
At March 31, 1997, the Company had liquid assets of $246,610 in cash, money
market savings accounts 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 quarter of 1997, BNLAC collected $2,333,000 of
premiums and annuity deposits (gross before reinsurance) and the Company had
consolidated investment income of $209,567.
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's insurance operations are conducted through its wholly owned
subsidiary, Brokers National Life Assurance Company (BNLAC). At March 31, 1997,
BNLAC had statutory capital and surplus exceeding $5.4 million. In February
1997, the Company and BNL Equity Corporation contributed $500,000 to the gross
paid in and contributed surplus of BNLAC.
Results of Operations
Premium income for the first three months of 1997 was $2,267,090 compared to
$1,615,379 for the same period in 1996. The increase of $651,711 or 40% was due
to increase in sales of group dental insurance in the last three quarters of
1996 and first quarter of 1997.
Net investment income was $209,567 for the period ended March 31, 1997 compared
to $215,290 for the same period in 1996. The decrease was due to a reduction in
the amount of investments in 1997 compared to 1996.
Realized gains on investments were $18,764 in the first nine months of 1997
compared to $3,913 for the same period in 1996. The increase in realized gains
was due to bonds sold in the normal course of the Company's investment activity.
In the first three months of 1997, policy benefits and other insurance costs
were $1,878,840 compared to $1,454,981 for the same period in 1996. The increase
was due to an increase in claims and commissions resulting from the increase in
dental business in force.
For the period ended March 31, 1997, the increase (decrease) in liability for
future policy benefits was $19,189 compared to $(16,294) in 1996. The increase
in 1997 was due to an increase in group dental unearned premium reserves for the
year and an increase in GAAP life reserves.
Amortization of deferred policy acquisition costs were $9,468 and $7,376 for the
first quarter of 1997 and 1996 respectively. Amortization of deferred policy
acquisition costs should continue to decrease as the asset is reduced over the
upcoming years.
Operating expenses increased from $582,620 in the first quarter of 1996 to
$664,099 in 1997. The increase in operating expenses was primarily due to an
increase in printing expense and claims administrative expense - all of which
are attributable to the increase volume of dental insurance in force.
Taxes, other than on income, fees and assessments were $108,780 for the first
three months of 1997 compared to $61,493 for the same period in 1996. The
increase was due to an increase in premium taxes on the increased premiums
collected and an increase in state filing fees for advertising and policy form
approval.
The net loss from operations for the first quarter of 1997 was $184,955 compared
to $255,594 for the same period in 1996. The decrease is primarily due to a
reduction in policy benefits and other insurance costs and operating expenses as
a percentage of premium income in 1997 versus 1996. Manangement anticipates this
trend will continue as increased dental business is put in force.
<PAGE>
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings.
On April 30, 1996, Myra Jo Pearson and Paul Pearson filed a class action
complaint in the Circuit Court of Pulaski County, Arkansas (3rd Division) naming
the Company, BNL Equity Corporation and several officers of the Company, as
defendants. On July 19, 1996, the plaintiffs filed their first amended complaint
and on and after July 24, 1996, the defendants were first served and notified of
the complaint and first amended complaint. The plaintiffs have alleged that the
defendants violated the Arkansas Securities Act in several respects in
connection with the public offerings of securities made by United Arkansas
Corporation ("UAC") (now known as BNL Equity Corporation) during the period from
January 1989 until May, 1992. The plaintiffs have filed on behalf of themselves,
as well as all other similarly situated persons who acquired UAC stock in these
offerings. The crux of the plaintiffs' allegations is that the defendants made
alleged misrepresentations and omissions concerning the business plan and
insurance marketing strategy of UAC in connection with the public offerings.
The Company has retained the firm of Friday, Eldredge & Clark, Little Rock,
Arkansas, to handle the defense of the action on behalf of all defendants. The
company believes the action is frivolous and that substantial evidence exists
which directly refutes the allegations. The Company intends to vigorously defend
the matter and on August 13, 1996, filed an answer denying all alleged
violations. The Company is pursuing sanctions against appropriate parties.
.
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
te 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 d
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 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.
10.2 Agreement dated December 21, 1990 between Filed with 10-QSB for the period ended March 31,
Registrant and C. Donald Byrd granting Registrant 1996.
right of first refusal as to future transfers of
Mr. Byrd's shares of the Company's common stock.
10.3 Subscription Agreement dated March 2, 1994 Incorporated by reference to S-4 Registration
Statement No. 33-70318
10.4 Stock Escrow Agreement dated February 28, 1994 Incorporated by reference to S-4 Registration
Statement No. 33-70318
10.5 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
10.6 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
10.7 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.
10.8 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 9, 1997 __________________________________
By: Wayne E. Ahart, Chairman of the Board
(Chief Executive Officer)
Date: May 9, 1997 __________________________________
By: Barry N. Shamas, Executive V.P.
(Chief Financial Officer)
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 7
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<DEBT-HELD-FOR-SALE> 11829278
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 30438
<MORTGAGE> 0
<REAL-ESTATE> 0
<TOTAL-INVEST> 11859716
<CASH> 246610
<RECOVER-REINSURE> 23301
<DEFERRED-ACQUISITION> 465199
<TOTAL-ASSETS> 13880563
<POLICY-LOSSES> 2313617
<UNEARNED-PREMIUMS> 44352
<POLICY-OTHER> 4072691
<POLICY-HOLDER-FUNDS> 207107
<NOTES-PAYABLE> 0
0
0
<COMMON> 466239
<OTHER-SE> 6323165
<TOTAL-LIABILITY-AND-EQUITY> 13880563
2267090
<INVESTMENT-INCOME> 209567
<INVESTMENT-GAINS> 18764
<OTHER-INCOME> 0
<BENEFITS> 1566649
<UNDERWRITING-AMORTIZATION> 9468
<UNDERWRITING-OTHER> 331380
<INCOME-PRETAX> (184955)
<INCOME-TAX> 0
<INCOME-CONTINUING> (184955)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (184955)
<EPS-PRIMARY> (.01)
<EPS-DILUTED> (.01)
<RESERVE-OPEN> 427000
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 3010026
<PAYMENTS-PRIOR> 755797
<RESERVE-CLOSE> 816500
<CUMULATIVE-DEFICIENCY> 54203
</TABLE>
