FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________________________ to _______________
Commission file number 000-20148
Citizens Financial Corporation
(Exact name of registrant as specified in its charter)
Kentucky 61-1187135
(State or other jurisdiction of (I.R.S. Employer
organization) Identification No.)
The Marketplace, Suite 300
12910 Shelbyville Road
Louisville, Kentucky 40243
(Address of principal offices)
(Zip Code)
(502) 244-2420
(Registrant's telephone number, including area code)
_____________________________
(Former name, former address and former fiscal year,
if changed since last report)
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
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable date. Class
A Stock -- 1,075,615 as of May 8, 1996
This report consists of 12 consecutively numbered pages. An Exhibit Index
appears on page 10.
Part I. - Financial Information
Item 1. - Financial Statements
CITIZENS FINANCIAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Unaudited)
<TABLE>
<CAPTION>
ASSETS March 31, December 31,
1996 1995
<S> <C> <C>
Investments:
Available-for-sale, fixed maturities at market value
(cost, $49,437,949 and $45,369,804) $49,785,015 $46,917,198
Equity securities, at market value
(cost, $5,436,122 and $4,263,273) 7,081,097 5,742,914
Investment real estate 4,066,155 4,095,094
Mortgage loans on real estate 182,338 183,935
Policy loans 2,848,831 2,720,396
Short-term investments 1,173,382 821,271
65,136,818 60,480,808
Cash and cash equivalents 6,545,825 9,776,964
Accrued investment income 708,822 636,758
Reinsurance recoverable:
Paid benefits and losses 111,722 91,773
Unpaid benefits, losses and IBNR 1,521,753 1,468,413
Premiums receivable 449,254 485,585
Property and equipment 1,126,991 1,133,315
Deferred policy acquisition costs 3,552,979 3,477,377
Goodwill 141,497 146,738
Value of insurance acquired 5,889,998 6,059,095
Other assets 453,709 498,435
$85,639,368 $84,255,261
</TABLE>
Item 1. (Continued)
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY March 31, December 31,
1996 1995
<S> <C> <C>
Policy and contract reserves:
Future policy benefits $41,805,268 $41,429,165
Unearned premiums 213,106 201,772
Policyholder deposits 15,917,110 15,925,201
Policy and contract claims 884,864 1,139,777
Other 158,504 163,100
58,978,852 58,859,015
Notes payable 9,191,527 9,306,982
Accrued expenses and other liabilities 2,011,103 2,745,673
Deferred income taxes 121,568 333,466
70,303,050 71,245,136
Redeemable convertible preferred stock :
370 and 157 shares issued and outstanding
as of March 31, 1996 and December 31, 1995,
respectively 4,043,907 1,700,907
Shareholders' Equity:
Common stock, 2,000,000 shares authorized;
1,275,724 shares issued and outstanding 1,275,724 1,275,724
Paid-in capital 5,198,250 5,198,250
Unrealized appreciation of investments 1,284,977 1,871,652
Retained earnings 4,095,762 3,525,894
11,854,713 11,871,520
Less 200,109 shares of common stock owned by
wholly owned subsidiary (562,302) (562,302)
TOTAL SHAREHOLDERS' EQUITY 11,292,411 11,309,218
$85,639,368 $84,255,261
</TABLE>
See accompanying notes.
Item 1. (Continued)
CITIZENS FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
for the three months ended March 31
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
REVENUES
Premiums and other considerations $4,736,460 $2,353,846
Premiums ceded (233,316) (188,758)
4,503,144 2,165,088
Investment income, net of expenses 1,024,313 483,422
Net realized gain (loss) on investment securities 591,100 (92,130)
Other income 4,193 3,331
6,122,750 2,559,711
BENEFITS AND EXPENSES
Policyholder benefits 2,490,467 1,475,019
Policyholder benefits ceded (95,155) (66,055)
2,395,312 1,408,964
Interest credited on policyholder deposits 267,123 212,874
Increase in benefit reserves 343,053 31,254
Commissions 1,025,944 346,150
Salaries and wages 435,054 328,908
Other general expenses 484,835 310,718
Interest expense 258,764 86,161
Policy acquisition costs deferred (169,433) (131,585)
Amortization of deferred policy acquisition
costs and value of insurance acquired 387,230 160,498
5,427,882 2,753,942
INCOME (LOSS) FROM OPERATIONS BEFORE FEDERAL
INCOME TAXES 694,868 (194,231)
Federal income taxes 125,000 4,820
NET INCOME (LOSS) $ 569,868 $ (199,051)
NET INCOME (LOSS) PER SHARE OF COMMON STOCK:
Primary $ 0.45 $ (0.19)
Fully diluted $ 0.37 $ (0.19)
Weighted average number of shares of common stock
outstanding during the period:
Primary 1,075,615 1,075,615
Fully diluted 1,401,142 1,075,615
</TABLE>
See accompanying notes.
Item 1. (Continued)
CITIZENS FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
for the three months ended March 31
(Unaudited)
<TABLE>
<CAPTION>
OPERATING ACTIVITIES 1996 1995
<S> <C> <C>
Net Income (loss) $ 569,868 $ (199,051)
Adjustments to reconcile net income (loss)
to net cash provided by (used in) operating
activities:
Increase in benefit reserves 387,437 31,254
Increase (decrease) in claims liabilities (254,913) 46,040
(Increase) decrease in reinsurance receivable:
Paid benefits (19,949) 116,945
Unpaid benefits (53,340) (13,756)
Provision for amortization and depreciation,
net of deferrals 216,805 82,351
Amortization of premium and accretion of
discount on securities purchased, net (2,504) (7,283)
Net realized (gain) loss on investment
securities (604,754) 92,130
(Increase) decrease in accrued investment
income (72,064) 140,114
Change in other assets and other liabilities (710,256) (22,872)
Deferred federal income taxes 90,000 2,000
Federal income taxes payable 5,000 2,820
Interest credited on policyholder deposits 267,123 212,874
NET CASH PROVIDED BY OPERATING ACTIVITIES (181,547) 483,566
INVESTING ACTIVITIES
Cost of securities and mortgage loans acquired (17,126,566) (4,439,866)
Investments sold or matured 12,527,285 3,458,643
Additions to property and equipment, net (19,245) (33,046)
Short-term investments sold (acquired), net (352,111) 2,974,406
Other investing activities, net (88,435) 193,246
NET CASH PROVIDED BY (USED IN) INVESTING
ACTIVITIES (5,059,072) 2,153,383
FINANCING ACTIVITIES
Issuance of redeemable preferred stock 2,343,000 ---
Policyholder deposits 200,097 240,510
Policyholder withdrawals (475,312) (599,450)
Payments on note payable (120,101) (17,810)
Other 61,796 ---
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES 2,009,480 (376,750)
Net increase (decrease) in cash and cash
equivalents (3,231,139) 2,260,199
Cash and cash equivalents at beginning of period 9,776,964 921,285
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 6,545,825 $ 3,181,484
</TABLE>
See accompanying notes.
Item 1. (Continued)
CITIZENS FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with the instructions to Form 10-Q in conformity
with generally accepted accounting principles. The accompanying unaudited
condensed financial statements reflect all adjustments which are, in the
opinion of management, necessary to a fair presentation of the results for
the interim periods. All such adjustments are of a normal recurring nature.
For further information, refer to the December 31, 1995 consolidated
financial statements and footnotes included in the Company's annual report
on Form 10-K.
2. On September 22, 1995, the Company acquired 98.85% of the common stock of
Integrity National Life Insurance Company ("Integrity National") from
Southwestern Life Corporation ("Southwestern"), a Dallas-based insurance
holding company (the "Acquisition"). The Acquisition was accounted for as a
purchase with the results of Integrity National's operations being
included in the consolidated statements since the date of acquisition.
The Company acquired the remaining 1.15% of the common stock of Integrity
National in conjunction with the merger of Integrity National into a
Company subsidiary as of December 31, 1995.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
FINANCIAL POSITION
Fixed maturities increased $4,068,145, based on amortized cost, during the
first three months of 1996. Equity securities increased $1,172,849 and
$1,338,183 on a cost and market value basis, respectively, during the same
period. Gross unrealized appreciation for available-for-sale fixed
maturities and equity securities decreased $1,034,994 during the quarter
ended March 31, 1996.
RESULTS OF OPERATIONS
An analysis of first quarter results, before federal income taxes, by
segment is shown below:
<TABLE>
<CAPTION>
Segment Income (Loss): 1996 1995
<S> <C> <C>
Life and Annuity $447,675 $(272,023)
Accident and Health 247,193 77,792
$694,868 $(194,231)
<CAPTION>
Segment income (loss) before gains (loss)
on investment securities
<S> <C> <C>
Life and Annuity $(125,692) $(184,591)
Accident and Health 229,460 82,490
$ 103,768 $(102,101)
</TABLE>
The improvement of the Life and Annuity segment results is
principally attributable to a significant increase in realized capital gains and
investment income, offset, to an extent, by increased interest expense on
bank borrowings and an increase in the allocation of overhead to this segment
due to its increases in premium volume. The improvement in the Accident and
Health segment is attributable to a decrease in cancer claims and the
reallocation of overhead to the Life and Annuity segment discussed above.
Premiums and other considerations increased 108% during the first
quarter of 1996 compared to the same period in 1995. The increase is
attributable to increases in traditional life product premiums, which
increased 508.1% in the first quarter of 1996 compared to 1995. Premiums
which resulted from the acquisition of Integrity National Life Insurance
Company in September, 1995, represented 83.2% of the life premium increase
with the remaining increase being attributable to sales of the Company's
graded death benefit product. The Company's Accident and Health premiums
increased 34.7% due to increased sales of the Company's dental products.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Continued)
CASH FLOW AND LIQUIDITY
Cash flow from operations decreased $665,113 during the quarter
ending March 31, 1996 compared to the same period in the prior year. This
decrease was principally attributable to the payment during the first quarter
of 1996 of integration costs, bonuses, agent awards, and other expenses
associated with Integrity which were accrued as of December 31, 1995.
The $5,059,072 of cash used in investing activities resulted from
the Company's investment of cash balances into fixed maturities and stocks.
The increase in cash provided by financing activities during the
first quarter of 1996 compared to the same period in 1995 is attributable to
the issuance of an additional 213 shares of convertible preferred stock.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a. Exhibit 11. Statement re computation of per share earnings
Exhibit 27. Financial Data Schedule
b. A Form 8-K dated January 23, 1996, was filed relating to
Item 5. Other Events. The form disclosed the Company's
completion on January 19, 1996, of a private offering of
preferred stock upon the purchase by investors of the
offering for $4,070,000.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, Registrant has duly caused this Report to be signed on its behalf by
the undersigned, thereunto duly authorized.
CITIZENS FINANCIAL CORPORATION
BY: ___________________________________________
Darrell Wells
President and Chief Executive Officer
BY: ___________________________________________
Lane A. Hersman
Executive Vice President and Treasurer
Date: May 13, 1996<PAGE>
EXHIBIT INDEX
Exhibit No. Description Page No.
11 Statement re computation of per share earnings 11
27 Financial Data Schedule 12
(SEC filing only)
Exhibit 11 - COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1996 1995
(In thousands, except share
and per share data)
Primary earnings per common share:
<S> <C> <C>
Net income (loss) $ 569,868 $ (199,051)
Convertible preferred stock dividends 89,393 ---
Income (loss) applicable to common stock $ 480,475 $ (199,051)
Average common shares outstanding 1,075,615 1,075,615
Primary earnings (loss) per common share $ 0.45 $ (0.19)
Fully diluted earnings per common share:
Net income (loss) $ 569,868 $ (199,251)
Convertible preferred stock dividends 44,696 ---
Income (loss) applicable to common stock $ 525,172 $ (199,051)
Average number of shares for computation
of fully diluted earnings per common share 1,401,142 1,075,615
Fully diluted earnings (loss) per common share $ 0.37 $ (0.19)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 7
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CITIZENS
FINANCIAL CORPORATION AND SUBSIDIARIES FINANCIAL STATEMENTS FOR THE QUARTER
ENDED MARCH 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1996
<DEBT-HELD-FOR-SALE> 49,785
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 7,081
<MORTGAGE> 182
<REAL-ESTATE> 4,066
<TOTAL-INVEST> 65,137
<CASH> 6,546
<RECOVER-REINSURE> 112
<DEFERRED-ACQUISITION> 3,553
<TOTAL-ASSETS> 85,639
<POLICY-LOSSES> 41,805
<UNEARNED-PREMIUMS> 213
<POLICY-OTHER> 889
<POLICY-HOLDER-FUNDS> 16,076
<NOTES-PAYABLE> 9,192
4,044
0
<COMMON> 1,276
<OTHER-SE> 10,017
<TOTAL-LIABILITY-AND-EQUITY> 85,639
4,503
<INVESTMENT-INCOME> 1,024
<INVESTMENT-GAINS> 591
<OTHER-INCOME> 4
<BENEFITS> 2,395
<UNDERWRITING-AMORTIZATION> 387
<UNDERWRITING-OTHER> 1,945
<INCOME-PRETAX> 695
<INCOME-TAX> 125
<INCOME-CONTINUING> 570
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<RESERVE-OPEN> 0
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 0
<PAYMENTS-PRIOR> 0
<RESERVE-CLOSE> 0
<CUMULATIVE-DEFICIENCY> 0
</TABLE>
