U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1999
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 0-20148
CITIZENS FINANCIAL CORPORATION
(Exact name of small business issuer as specified in its charter)
Kentucky 61-1187135
(State of Incorporation) (I.R.S. Employer Identification No.)
12910 Shelbyville Road, Louisville, Kentucky, 40243
(Address of principal executive offices)
(502) 244-2420
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by
Sections 13 or 15(d) of the Exchange Act during the past 12 months (or for
such shorter period that the registrant was required to file such reports),
and (2) has been subject to filing requirements for the past 90 days.
Yes X No ___
APPLICABLE ONLY TO CORPORATE ISSURERS
State the number of shares outstanding of each issuer's classes of common
equity, as of the latest practicable date: Class A Stock - 1,786,515 as of
November 9, 1999.
Transitional Small Business Disclosure Format (Check one):Yes___ No X
The date of this Report is November 10, 1999.
1
<PAGE>
=============================================================================
Part I - Financial Information; Item 1 - Financial Statements
Citizens Financial Corporation and Subsidiaries
Condensed Consolidated Statements of Income
(Unaudited)
Nine Months Ended September 30 1999 1998
- ------------------------------------------------------------------------------
Revenues:
Premiums and other considerations $ 16,244,717 $ 14,332,477
Premiums ceded (752,182) (740,462)
- ------------------------------------------------------------------------------
Net premiums earned 15,492,535 13,592,015
Net investment income 4,400,131 3,832,777
Net realized investment gains, net of expenses 5,666,355 2,532,217
Other income 119,301 21,397
- ------------------------------------------------------------------------------
Total Revenues 25,678,322 19,978,406
Policy Benefits and Expenses:
Policyholder benefits 11,584,806 10,113,702
Policyholder benefits ceded (854,488) (835,182)
- ------------------------------------------------------------------------------
Net benefits 10,730,318 9,278,520
Increase in net benefit reserves 1,237,198 485,239
Interest credited on policyholder deposits 654,250 637,091
Commissions 3,195,726 2,829,055
General expenses 4,210,336 3,658,552
Interest expense 379,112 335,933
Policy acquisition costs deferred (1,052,956) (725,246)
Amortization of deferred policy acquisition
costs and value of insurance acquired 1,077,431 944,779
- ------------------------------------------------------------------------------
Total Policy Benefits and Expenses 20,431,415 17,443,923
- ------------------------------------------------------------------------------
Income before Federal Income Tax 5,246,907 2,534,483
Federal Income Tax Expense 1,400,000 494,000
- ------------------------------------------------------------------------------
Net Income 3,846,907 2,040,483
Dividends on Redeemable Convertible Preferred
Stock --- 279,650
- ------------------------------------------------------------------------------
Net Income Applicable to Common Stock $ 3,846,907 $ 1,760,833
- ------------------------------------------------------------------------------
Net Income Per Common Share:
Basic $2.14 $1.54
Diluted $2.14 $1.12
- ------------------------------------------------------------------------------
See Notes to Condensed Consolidated Financial Statements.
2
<PAGE>
Citizens Financial Corporation and Subsidiaries
Condensed Consolidated Statements of Income
(Unaudited)
Three Months Ended September 30 1999 1998
- ------------------------------------------------------------------------------
Revenues:
Premiums and other considerations $ 5,621,118 $ 5,020,409
Premiums ceded (292,944) (287,876)
- ------------------------------------------------------------------------------
Net premiums earned 5,328,174 4,732,533
Net investment income 1,285,625 1,552,033
Net realized investment gains, net of expenses 1,712,277 463,188
Other income 24,211 13,143
- ------------------------------------------------------------------------------
Total Revenues 8,350,287 6,760,897
Policy Benefits and Expenses:
Policyholder benefits 3,620,233 3,697,136
Policyholder benefits ceded (221,894) (260,387)
- ------------------------------------------------------------------------------
Net benefits 3,398,339 3,436,749
Increase in net benefit reserves 670,893 159,178
Interest credited on policyholder deposits 202,689 194,061
Commissions 1,094,290 922,467
General expenses 1,421,154 1,289,652
Interest expense 127,438 143,866
Policy acquisition costs deferred (412,073) (180,375)
Amortization of deferred policy acquisition
costs and value of insurance acquired 394,610 420,702
- ------------------------------------------------------------------------------
Total Policy Benefits and Expenses 6,897,340 6,386,300
- ------------------------------------------------------------------------------
Income before Federal Income Tax 1,452,947 374,597
Federal Income Tax Expense 305,000 16,000
- ------------------------------------------------------------------------------
Net Income 1,147,947 358,597
Dividends on Redeemable Convertible Preferred
Stock --- 76,700
- ------------------------------------------------------------------------------
Net Income Applicable to Common Stock $ 1,147,947 $ 281,897
- ------------------------------------------------------------------------------
Net Income Per Common Share:
Basic $0.64 $0.22
Diluted $0.64 $0.20
- ------------------------------------------------------------------------------
See Notes to Condensed Consolidated Financial Statements.
3
<PAGE>
Part I; Item 1 (continued)
Citizens Financial Corporation and Subsidiaries
Condensed Consolidated Statements of Financial Condition
September 30, December 31,
1999 1998
- ------------------------------------------------------------------------------
ASSETS (Unaudited)
Investments:
Securities available for sale, at fair value:
Fixed maturities (amortized cost of
$69,142,555 and $75,235,199 in 1999 and 1998,
respectively) $ 70,005,349 $ 77,582,742
Equity securities (cost of $21,709,891 and
$14,733,876 in 1999 and 1998, respectively) 23,662,083 17,208,338
Investment real estate 3,411,771 3,618,698
Mortgage loans on real estate 160,537 164,757
Policy loans 4,026,377 4,034,152
Short-term investments 594,805 594,805
- ------------------------------------------------------------------------------
Total Investments 101,860,922 103,203,492
Cash and cash equivalents 12,848,460 8,301,999
Accrued investment income 1,276,748 1,263,898
Reinsurance recoverable:
Paid benefits and losses 65,865 85,299
Unpaid benefits, losses and IBNR 3,242,551 3,379,063
Premiums receivable 415,109 407,571
Property and equipment 2,068,939 1,846,768
Deferred policy acquisition costs 4,614,506 4,120,215
Value of insurance acquired 5,471,990 6,135,132
Goodwill 480,942 513,325
Other assets 305,728 242,361
- ------------------------------------------------------------------------------
Total Assets $ 132,651,760 $ 129,499,123
- ------------------------------------------------------------------------------
See Notes to Condensed Consolidated Financial Statements.
4
<PAGE>
Part I; Item 1 (continued)
Citizens Financial Corporation and Subsidiaries
Condensed Consolidated Statements of Financial Condition
September 30, December 31,
1999 1998
- ------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY (Unaudited)
Liabilities:
Policy liabilities:
Future policy benefits $ 78,776,970 $ 77,665,183
Policyholder deposits 15,978,396 16,323,652
Policy and contract claims 1,040,435 1,259,459
Unearned premiums 181,723 208,524
Other 239,790 187,779
- ------------------------------------------------------------------------------
Total Policy Liabilities 96,217,314 95,644,597
Notes payable 6,127,500 6,510,000
Accrued expenses and other liabilities 5,093,389 3,627,214
Federal income tax payable 608,922 667,013
Deferred federal income tax 497,702 1,305,018
- ------------------------------------------------------------------------------
Total Liabilities 108,544,827 107,753,842
Commitments and Contingencies
Shareholders' Equity:
Common stock, 6,000,000 shares authorized;
1,788,115 and 1,802,615 shares issued and
outstanding in 1999 and 1998, respectively 1,788,115 1,802,615
Additional paid-in capital 7,948,625 8,091,825
Accumulated other comprehensive income 1,752,061 3,079,616
Retained earnings 12,618,132 8,771,225
- ------------------------------------------------------------------------------
Total Shareholders' Equity 24,106,933 21,745,281
- ------------------------------------------------------------------------------
Total Liabilities and Shareholders' Equity $ 132,651,760 $ 129,499,123
- ------------------------------------------------------------------------------
See Notes to Condensed Consolidated Financial Statements.
5
<PAGE>
Part I; Item 1 (continued)
Citizens Financial Corporation and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Nine Months Ended September 30 1999 1998
- ------------------------------------------------------------------------------
Cash Flows from Operations:
Net income $ 3,846,907 $ 2,040,483
Adjustments to reconcile net income to cash
from operations:
Increase in benefit reserves 1,196,450 503,910
Decrease in claim liabilities (219,022) (195,683)
(Increase) decrease in reinsurance recoverable 155,946 (45,293)
Interest credited on policyholder deposits 654,250 637,091
Provision for amortization and depreciation,
net of deferrals 258,477 425,798
Amortization of premium and accretion of
discount on securities purchased, net 113,459 72,600
Net realized investment gains (5,666,355) (2,532,217)
(Increase) decrease in accrued investment
income (12,850) 64,858
Change in other assets and liabilities 194,086 (178,658)
Decrease in deferred federal income tax
liability (123,424) (287,979)
Increase (decrease) in federal income taxes
payable (58,091) 486,980
- ------------------------------------------------------------------------------
Net Cash provided by Operations 339,833 991,890
Cash Flows from Investment Activities:
Cost of securities acquired (57,021,695) (28,546,723)
Investments sold or matured 62,160,723 30,870,497
Investment management fees and margin interest (248,603) (396,369)
Additions to property and equipment, net (216,863) (132,611)
Purchase of United Liberty Life Insurance
Company,net of cash acquired --- (3,787,613)
Other investing activities, net 302 37,249
- ------------------------------------------------------------------------------
Net Cash provided by (used in) Investment
Activities 4,673,864 (1,955,570)
Cash Flows from Financing Activities:
Policyholder deposits 571,832 543,575
Policyholder withdrawals (1,571,338) (1,415,916)
Brokerage account advances, net 1,072,470 (144,454)
Proceeds from note payable - bank --- 3,400,000
Payments on notes payable - bank (382,500) (300,000)
Common stock issuance --- 45,000
Repurchase of common stock (157,700) ---
Preferred stock redemption --- (169,139)
Dividends on redeemable convertible preferred
stock --- (279,650)
- ------------------------------------------------------------------------------
Net Cash provided by (used in) Financing
Activities (467,236) 1,679,416
- ------------------------------------------------------------------------------
Net Increase in Cash and Cash Equivalents 4,546,461 715,736
Cash and Cash Equivalents at Beginning of Period 8,301,999 6,180,576
- ------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Period $ 12,848,460 $ 6,896,312
- ------------------------------------------------------------------------------
See Notes to Condensed Consolidated Financial Statements.
6
<PAGE>
Part I; Item 1 (continued)
Citizens Financial Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 1 - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with the instructions to Form 10-QSB 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, 1998
consolidated financial statements and footnotes included in the Company's
annual report on Form 10-KSB.
Note 2 - COMPREHENSIVE INCOME
The components of comprehensive income, net of related tax, for the three
months and nine months ended September 30, 1999 and 1998 are as follows:
------------------------------------------------
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------------------------------
COMPREHENSIVE INCOME: 1999 1998 1999 1998
- ------------------------------------------------------------------------------
Net Income $1,147,947 $358,597 $3,846,907 $2,040,483
Net unrealized losses
on securities (1,541,162) (2,584,460) (1,327,555) (701,545)
- ------------------------------------------------------------------------------
Comprehensive Income (Loss) $(393,215) $(2,225,863) $2,519,352 $1,338,938
- ------------------------------------------------------------------------------
Note 3 - SEGMENT INFORMATION
The Company's operations are managed along five principal insurance product
lines: Home Service Life, Broker Life, Preneed Life, Dental, and Other
Health. Products in all five lines are sold through independent agency
operations. Home Service Life consists primarily of traditional life
insurance coverage sold in amounts of $10,000 and under to middle and lower
income individuals. This distribution channel is characterized by a
significant amount of agent contact with customers throughout the year.
Broker Life product sales consist primarily of simplified issue and
graded-benefit policies in amounts of $10,000 and under. Other products in
this segment which are not aggressively marketed include: group life,
universal life, annuities and participating life coverages. Preneed Life
products are sold to individuals in connection with prearrangement of their
funeral and include single premium and multi-pay policies with coverages
generally in amounts of $10,000 and less. These policies are generally
sold to older individuals at increased premium rates. Dental products are
term coverages generally sold to small and intermediate size employer
groups. Other Health products include various accident and health
coverages sold to individuals and employer groups. Segment information as
of September 30, 1999 and 1998, and for the periods then ended is as
follows:
7
<PAGE>
Part I; Item 1 (continued)
------------------------------------------------
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------------------------------
REVENUE: 1999 1998 1999 1998
- -------------------------------------------------------------------------------
Home Service Life $ 2,116,250 $ 2,111,972 $ 6,543,506 $ 6,373,423
Broker Life 1,394,076 1,557,583 4,481,836 4,081,565
Preneed Life 934,973 739,994 2,743,028 1,146,522
Dental 1,842,930 1,564,523 5,240,319 4,823,670
Other Health 349,781 323,637 1,003,278 1,021,009
- -------------------------------------------------------------------------------
Segment Totals 6,638,010 6,297,709 20,011,967 17,446,189
Realized investment gains,
net of expenses 1,712,277 463,188 5,666,355 2,532,217
- -------------------------------------------------------------------------------
Total Revenue $ 8,350,287 $ 6,760,897 $25,678,322 $19,978,406
- -------------------------------------------------------------------------------
Below are the net investment income amounts which are included in the
revenue totals above.
------------------------------------------------
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------------------------------
INVESTMENT INCOME: 1999 1998 1999 1998
- -----------------------------------------------------------------------------
Home Service Life $ 436,156 $ 474,839 $1,486,634 $ 1,449,808
Broker Life 549,510 661,817 1,873,956 1,693,148
Preneed Life 273,485 388,952 952,497 603,252
Dental 5,973 6,627 22,276 22,420
Other Health 20,501 19,798 64,768 64,149
- -----------------------------------------------------------------------------
Segment Totals $1,285,625 $1,552,033 $4,400,131 $3,832,777
- -----------------------------------------------------------------------------
The Company evaluates performance based on several factors, of which the
primary financial measure is segment profit. Segment profit represents
pretax earnings, except net realized investment gains and interest expense
are excluded. The majority of the Company's realized investment gains are
generated from investments in equity securities. The equities portfolio
has averaged (on a cost basis) approximately $20,313,000 and $14,452,000
during the nine months ended September 30, 1999 and 1998, respectively. If
these funds had been invested in fixed-maturities yielding 6.5%, realized
investment gains would have declined and the nine month segment profit
totals below would have increased by an additional $564,000 and $407,000 in
1999 and 1998, respectively. Investment income was also reduced in the
third quarter of 1999 due to the accumulation of additional cash and
short-term investment positions in anticipation of potential interest rate
increases.
------------------------------------------------
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------------------------------
SEGMENT PROFIT (LOSS): 1999 1998 1999 1998
- -------------------------------------------------------------------------------
Home Service Life $ 116,530 $ (50,982) $142,400 $ 67,810
Broker Life (182,334) 118,925 13,405 212,680
Preneed Life (209,313) (114,461) (510,679) (161,860)
Dental 149,847 57,811 405,112 195,152
Other Health (6,622) 43,982 (90,574) 24,417
- -------------------------------------------------------------------------------
Segment Totals (131,892) 55,275 (40,336) 338,199
Realized investment gains,
net of expenses 1,712,277 463,188 5,666,355 2,532,217
Interest expense 127,438 143,866 379,112 335,933
- -------------------------------------------------------------------------------
Income before Federal
Income Tax $1,452,947 $374,597 $5,246,907 $2,534,483
- -------------------------------------------------------------------------------
8
<PAGE>
Part I; Item 1 (continued)
Depreciation and amortization amounts below consist of amortization of the
value of insurance acquired, deferred policy acquisition costs and
goodwill, along with depreciation expense.
------------------------------------------------
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------------------------------
DEPRECIATION AND AMORTIZATION: 1999 1998 1999 1998
- --------------------------------------------------------------------------------
Home Service Life $ 172,362 $ 178,509 $ 475,538 $ 509,594
Broker Life 196,253 248,770 482,536 479,970
Preneed Life 81,623 47,528 289,689 97,623
Dental 12,733 13,032 36,541 37,022
Other Health 14,322 14,485 31,810 32,335
- --------------------------------------------------------------------------------
Segment Totals $ 477,293 $ 502,324 $1,316,114 $ 1,156,544
- --------------------------------------------------------------------------------
Segment asset totals are determined based on policy liabilities outstanding
in each segment.
------------------------------
September 30, December 31,
ASSETS: 1999 1998
- ---------------------------------------------------------
Home Service Life $45,279,655 $43,299,037
Broker Life 56,506,798 55,139,933
Preneed Life 28,226,112 28,513,188
Dental 652,078 674,728
Other Health 1,987,117 1,872,237
- ---------------------------------------------------------
Segment Totals $132,651,76 $129,499,123
- ---------------------------------------------------------
Note 4 - NET REALIZED CAPITAL GAINS, NET OF EXPENSE
The Company nets certain direct, incremental investment management fees and
margin loan interest cost against net realized investment gains and losses
presented in the Condensed Consolidated Statements of Income. Such costs
are based directly on or, are primarily associated with, realized capital
gains. Costs netted against realized investment gains total $304,900 and
$93,018 for the nine months ended September 30, 1999 and 1998, respectively.
Note 5 - INCOME TAXES
Current taxes are provided based on estimates of the projected effective
annual tax rate. Deferred taxes reflect the net effects of temporary
differences between the carrying amount of assets and liabilities for
financial reporting purposes and the amounts used for income tax purposes.
Note 6 - SUBSEQUENT EVENT
On October 14, 1999, the Company acquired all of the stock of Kentucky
Insurance Company (KIC) for $3.5 million. $2.5 million of the purchase
price was funded through additional bank borrowings at the prime rate, with
the balance funded internally. KIC is licensed as a property and casualty
insurance company in four states and has approximately $3.2 million of
statutory capital and surplus; however, it currently has no insurance
operations.
9
<PAGE>
Part I; Item 2 - Management's Discussion and Analysis or Plan of Operations
FINANCIAL POSITION. Fixed maturities decreased $6,093,000 based on
amortized cost, during the first nine months of 1999. Equity securities
increased $6,976,000 on a cost basis and increased $6,454,000 on market
value basis, during the same period. Gross unrealized appreciation for
available-for-sale fixed maturities and equity securities decreased
approximately $2,007,000 during the nine months ended September 30, 1999.
OPERATIONS. Net premiums and other considerations increased approximately
14% during the first nine months of 1999 compared to the first nine months
of 1998. This increase is primarily attributable to the acquisition of
United Liberty Life Insurance Company (United Liberty) during May 1998,
along with approximately 4% growth in the Company's other product lines.
Preneed Life premium earned after the United Liberty acquisition accounted
for approximately 9% of the overall growth, while Dental and Home Service
Life increases accounted for 3% and 1% of the remaining growth,
respectively. The 15% increase in investment income compared to the first
nine months of the prior year is also primarily attributable to the United
Liberty acquisition.
Total pretax earnings increased approximately 107% to $5,247,000 for the
nine months ended September 30, 1999, primarily due to an approximate
$3,134,000 increase in realized investment gains, net of expenses. Pretax
Segment Profit (excluding realized investment gains and interest expense)
for the first nine months of 1999 was approximately $(40,000) compared to
$338,000 for the first nine months of 1998. This decrease is primarily due
to lower investment income associated with increased positions in the
favorable equity markets, larger cash and short-term positions in the
investment portfolio, and costs associated with expanding the Company's
recently acquired Preneed Life segment. Dental profit margins continue to
improve due to a number of sales and profitability initiatives, including
selective non-renewal of groups with excessive claim ratios. Improvements
in Home Service Life mortality during 1999 were exceeded by adverse Broker
Life mortality. The Company also incurred approximately $50,000 of
additional net costs associated with a commercial property management
initiative.
The Company's increased earnings has also resulted in a higher effective
income tax rate due to a phasing-out of available small-life insurance
company deductions and full utilization of previously available non-life
insurance net operating loss carryforwards.
CASH FLOW AND LIQUIDITY. Cash flow from operations totaled $340,000 for
the nine months ended September 30, 1999 compared to $992,000 for the same
period in the prior year. This change is principally attributable to
higher levels of income taxes paid for the current year. The $4,674,000 of
cash provided by investing activities for the nine months ended September
30, 1999 reflects liquidation of certain fixed maturity positions as a
hedge against possible interest rate increases, while the $1,956,000 of
cash used in investing activities for the nine months ended September 30,
1998 was primarily attributable to the acquisition of United Liberty Life
Insurance Company and growth in equity security positions. The $467,000 of
cash used in financing activities during the first nine months of 1999 is
primarily attributable to annuity and Universal Life account withdrawals
net of an increase in the Company's investment margin account advances,
which total $2,580,000 at September 30, 1999.
YEAR 2000 ISSUE. Some of the Company's older computer programs were
written using two digits rather than four to define the applicable year.
As a result, those computer programs could fail to properly distinguish
between dates in the 1900's and 2000's. This could cause system failures
or miscalculations, creating disruption of operations, including, among
other things, a temporary inability to process insurance transactions,
conduct banking activities, or engage in other normal business activities.
Also, some systems and equipment that are not typically thought of as
"computer-related" ("non-IT") contain embedded hardware or software that may
not perform properly after 1999.
The Company has completed an internal assessment of the year 2000 issue and
implemented a program to install updated releases or modify its software so
that its computer systems will function properly with respect to dates in
10
<PAGE>
Part I; Item 2 - Management's Discussion and Analysis or Plan of Operations
the year 2000 and thereafter. The Company's two primary insurance
administrative systems (Individual and Group) are vendor supplied programs
which have been modified as part of the ongoing vendor maintenance
process. The peripheral, internally developed programs associated with
these systems have also been modified. The Company's investment accounting
and general ledger systems are also vendor supplied programs which have
been properly updated. The Company's primary non-IT systems involve
building equipment control modules at its home office. The Company has
verified these systems are year 2000 compliant.
The most significant third-parties potentially impacting the Company are
banks, investment brokers, and suppliers of utility and telecommunication
services. Their critical functions include safekeeping and managing
investment portfolios, processing the Company's operating bank accounts,
and supplying utilities. Assurances of year 2000 compliance have been
received from the Company's primary banking service provider and many other
key providers. Efforts are ongoing to obtain additional assurances.
The total year 2000 project cost was approximately $100,000, which is
primarily internal salary cost for testing and modifying peripheral
programs associated with the Individual and Group insurance systems. These
costs have been expensed. The direct cost of modifying the Individual and
Group system vendor programs is included in annual maintenance fees which
total approximately $25,000.
The Company has investments in publicly and privately placed securities and
loans. The Company may be exposed to credit risk to the extent that
related borrowers are materially adversely impacted by the year 2000
issue. Portfolio diversification reduces the overall risk. Although the
Company believes its critical systems are compliant, there is no guarantee
disruptions will not occur. Specifically, from year 2000 problems, the
Company could experience an interruption in its ability to collect and
process premiums, process claim payments, safeguard and manage its invested
assets and operating cash accounts, accurately maintain policyholder
information, accurately maintain accounting records, issue new policies
and/or perform adequate customer service. While the Company believes the
occurrence of such a situation is unlikely, a possible worst case scenario
might include one or more of the Company's significant insurance systems
being non-compliant. Such an event could result in a material disruption
to the Company's operations. Should the worst case scenario occur, it
could, depending on its duration, have a material impact on the Company's
results of operations and liquidity and ultimately on its financial
position. With respect to contingency plans, if unforeseen problems arise,
the Company will utilize supplemental manual and personal computer-based
processing procedures. Regarding third-party systems, the Company is
continuing to monitor their compliance and has received no formal
notification of critical non-compliant systems.
FORWARD-LOOKING INFORMATION. The Company makes forward-looking statements
from time to time and desires to take advantage of the "safe harbor" which
is afforded such statements under the Private Securities Litigation Reform
Act of 1995 when they are accompanied by meaningful cautionary statements
identifying important factors that could cause actual results to differ
materially from those in the forward-looking statements. The statements
contained in this "Management's Discussion and Analysis or Plan of
Operations," and statements contained in future filings with the Securities
and Exchange Commission and publicly disseminated press releases, and
statements which may be made from time to time in the future by management
of the Company in presentations to shareholders, prospective investors, and
others interested in the business and financial affairs of the Company,
which are not historical facts, may be deemed to be forward-looking
statements that involve known and unknown risks and uncertainties that
could cause actual results to differ materially from those expressed or
implied in the forward-looking statements. Specific factors that might
cause such a difference include, but are not limited to potential
fluctuations in the Company's operating results as a result of: general
economic conditions; investment activities, including volatility in the
equity markets; year 2000 risks; competitive factors, including pricing
pressures, technological developments, and product innovations; and changes
in federal and state laws and regulations, including changes in financial
services industry regulations or tax laws. Any projections of financial
performance or statements concerning expectations as to future developments
should not be construed in any manner as a guarantee such results or
developments will, in fact, occur. There can be no assurance that any
forward-looking statement will be realized or actual results will not be
significantly different from those set forth in such forward-looking
statement. In addition to the risks and uncertainties of ordinary business
operations, the forward-looking statements of the Company referred to above
are also subject to risks and uncertainties.
11
<PAGE>
Part II - Other Information
Item 6. Exhibits and Reports on Form 8-K.
a). Exhibit 10.10 Citizens Financial Corporation 1999 Stock Option
Plan (filed as Appendix A to the Board of Directors'
Proxy Statement for the May 20, 1999 Annual Meeting
of Shareholders, filed April 22, 1999)
Exhibit 11. Statement re: computation of per share earnings.
Exhibit 27. Financial Data Schedule.
b). none
SIGNATURES
In accordance with the requirements of the Securities and Exchange Act of
1934, the registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
CITIZENS FINANCIAL CORPORATION
BY: /s/ Darrell R. Wells
-------------------------------------
Darrell R. Wells
President and Chief Executive Officer
BY: /s/ Brent L. Nemec
-------------------------------------
Brent L. Nemec
Treasurer and Principal Accounting
Officer
Date: November 10, 1999
12
<PAGE>
EXHIBIT INDEX
- ----------------------------------------------------------------
Exhibit No. Description
- ----------------------------------------------------------------
11 Statement re: computation of per share earnings
27 Financial Data Schedule (electronic filing only)
13
<PAGE>
EXHIBIT 11
Citizens Financial Corporation and Subsidiaries
Computation of Per Share Earnings
(Unaudited)
Nine Months Ended September 30 1999 1998
- ------------------------------------------------------------------------------
Numerator:
Diluted: Net income $3,846,907 $2,040,483
Less: Preferred stock dividends --- (279,650)
- ------------------------------------------------------------------------------
Basic: Net income applicable to common stock $3,846,907 $1,760,833
- ------------------------------------------------------------------------------
Denominator:
Basic: Weighted average common shares 1,796,355 1,139,838
Plus: Assumed conversion of preferred
stock --- 675,495
- ------------------------------------------------------------------------------
Diluted: Weighted average shares assuming
preferred conversion 1,796,355 1,815,333
- ------------------------------------------------------------------------------
Basic Earnings Per Share $2.14 $1.54
Diluted Earnings Per Share $2.14 $1.12
Three Months Ended September 30 1999 1998
- ------------------------------------------------------------------------------
Numerator:
Diluted: Net income $1,147,947 $358,597
Less: Preferred stock dividends --- (76,700)
- ------------------------------------------------------------------------------
Basic: Net income applicable to common stock $1,147,947 $281,897
- ------------------------------------------------------------------------------
Denominator:
Basic: Weighted average common shares 1,790,924 1,264,115
Plus: Assumed conversion of preferred
stock --- 549,848
- ------------------------------------------------------------------------------
Diluted: Weighted average shares assuming
preferred conversion 1,790,924 1,813,963
- ------------------------------------------------------------------------------
Basic Earnings Per Share $0.64 $0.22
Diluted Earnings Per Share $0.64 $0.20
14
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 7
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<DEBT-HELD-FOR-SALE> 70,005
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 23,662
<MORTGAGE> 161
<REAL-ESTATE> 3,412
<TOTAL-INVEST> 101,861
<CASH> 12,849
<RECOVER-REINSURE> 66
<DEFERRED-ACQUISITION> 4,615
<TOTAL-ASSETS> 132,652
<POLICY-LOSSES> 78,777
<UNEARNED-PREMIUMS> 181
<POLICY-OTHER> 1,281
<POLICY-HOLDER-FUNDS> 15,978
<NOTES-PAYABLE> 6,128
0
0
<COMMON> 1,788
<OTHER-SE> 22,319
<TOTAL-LIABILITY-AND-EQUITY> 132,652
15,493
<INVESTMENT-INCOME> 4,400
<INVESTMENT-GAINS> 5,666
<OTHER-INCOME> 119
<BENEFITS> 12,622
<UNDERWRITING-AMORTIZATION> 414
<UNDERWRITING-OTHER> 7,017
<INCOME-PRETAX> 5,247
<INCOME-TAX> 1,400
<INCOME-CONTINUING> 3,847
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,847
<EPS-BASIC> 2.14
<EPS-DILUTED> 2.14
<RESERVE-OPEN> 0
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 0
<PAYMENTS-PRIOR> 0
<RESERVE-CLOSE> 0
<CUMULATIVE-DEFICIENCY> 0
</TABLE>
