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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2000
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 registrant 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
(Registrant's telephone number)
Check whether the registrant (1) has filed all reports required to be filed by
Sections 13 or 15(d) of the Exchange Act 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 ~~~~~~
APPLICABLE ONLY TO CORPORATE ISSURERS:
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 - 1,761,415 as of
November 6, 2000.
The date of this Report is November 9, 2000.
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<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 2000 1999
--------------------------------------------- ---------------- -----------------
Revenues:
Premiums and other considerations $18,154,881 $16,244,717
Premiums ceded (734,408) (752,182)
--------------------------------------------- ---------------- -----------------
Net premiums earned 17,420,473 15,492,535
Net investment income 4,561,218 4,400,131
Net realized investment gain, net of expenses 4,660,783 5,666,355
Other income 181,250 119,301
--------------------------------------------- ---------------- -----------------
Total Revenues 26,823,724 25,678,322
Policy Benefits and Expenses:
Policyholder benefits 12,331,784 11,584,806
Policyholder benefits ceded (813,517) (854,488)
--------------------------------------------- ---------------- -----------------
Net benefits 11,518,267 10,730,318
Increase in net benefit reserves 2,024,241 1,237,198
Interest credited on policyholder deposits 653,598 654,250
Commissions 3,629,503 3,195,726
General expenses 4,750,193 4,177,953
Interest expense 575,742 379,112
Policy acquisition costs deferred (1,201,812) (1,052,956)
Amortization of deferred policy acquisition
costs, value of insurance acquired, and
goodwill 1,048,561 1,109,814
--------------------------------------------- ---------------- -----------------
Total Policy Benefits and Expenses 22,998,293 20,431,415
--------------------------------------------- ---------------- -----------------
Income Before Income Tax Expense 3,825,431 5,246,907
Income Tax Expense 1,272,000 1,400,000
--------------------------------------------- ---------------- -----------------
Net Income $2,553,431 $3,846,907
--------------------------------------------- ---------------- -----------------
Net Income Per Common Share $1.45 $2.14
--------------------------------------------- ---------------- -----------------
See Notes to Condensed Consolidated Financial Statements.
<PAGE>
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Part I; Item 1 (continued)
Citizens Financial Corporation and Subsidiaries
Condensed Consolidated Statements of Income
(Unaudited)
Three Months Ended September 30 2000 1999
--------------------------------------------- ---------------- -----------------
Revenues:
Premiums and other considerations $6,386,687 $5,621,118
Premiums ceded (249,058) (292,944)
--------------------------------------------- ---------------- -----------------
Net premiums earned 6,137,629 5,328,174
Net investment income 1,595,522 1,285,625
Net realized investment gain (loss),
net of expenses (1,664,106) 1,712,277
Other income 69,813 24,211
--------------------------------------------- ---------------- -----------------
Total Revenues 6,138,858 8,350,287
Policy Benefits and Expenses:
Policyholder benefits 4,340,600 3,620,233
Policyholder benefits ceded (390,940) (221,894)
--------------------------------------------- ---------------- -----------------
Net benefits 3,949,660 3,398,339
Increase in net benefit reserves 975,558 670,893
Interest credited on policyholder deposits 247,494 202,689
Commissions 1,245,928 1,094,290
General expenses 1,569,337 1,410,359
Interest expense 196,435 127,438
Policy acquisition costs deferred (414,141) (412,073)
Amortization of deferred policy acquisition
costs, value of insurance acquired, and
goodwill 421,066 405,405
--------------------------------------------- ---------------- -----------------
Total Policy Benefits and Expenses 8,191,337 6,897,340
--------------------------------------------- ---------------- -----------------
Income (Loss) Before Income Tax Expense (2,052,479) 1,452,947
Income Tax Expense (Benefit) (868,000) 305,000
--------------------------------------------- ---------------- -----------------
Net Income (Loss) $ (1,184,479) $1,147,947
--------------------------------------------- ---------------- -----------------
Net Income (Loss) Per Common Share $(0.67) $0.64
--------------------------------------------- ---------------- -----------------
See Notes to Condensed Consolidated Financial Statements.
<PAGE>
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Part I; Item 1 (continued)
Citizens Financial Corporation and Subsidiaries
Condensed Consolidated Statements of Financial Condition
September 30, December 31,
2000 1999
--------------------------------------------- ---------------- -----------------
ASSETS (Unaudited)
Investments:
Securities available for sale, at fair value:
Fixed maturities (amortized cost of
$69,634,411 and $68,958,634 in 2000
and 1999, respectively) $ 68,906,569 $ 69,501,248
Equity securities (cost of
$23,387,715 and $18,228,519 in 2000
and 1999, respectively) 24,784,128 22,941,274
Investment real estate 3,551,278 3,513,579
Mortgage loans on real estate 156,000 158,309
Policy loans 4,233,018 4,059,801
Short-term investments 580,425 580,425
--------------------------------------------- ---------------- -----------------
Total Investments 102,211,418 100,754,636
Cash and cash equivalents 17,954,067 18,696,401
Accrued investment income 1,215,319 1,145,447
Reinsurance recoverable 3,510,735 3,607,349
Premiums receivable 335,325 388,146
Property and equipment 1,996,347 2,051,414
Deferred policy acquisition costs 5,680,194 4,690,774
Value of insurance acquired 5,057,981 5,295,818
Goodwill 751,298 809,809
Federal income tax receivable --- 169,502
Deferred federal income tax 1,184,692 ---
Other assets 472,574 370,734
--------------------------------------------- ---------------- -----------------
Total Assets $140,369,950 $137,980,030
--------------------------------------------- ---------------- -----------------
See Notes to Condensed Consolidated Financial Statements.
<PAGE>
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Part I; Item 1 (continued)
Citizens Financial Corporation and Subsidiaries
Condensed Consolidated Statements of Financial Condition
September 30, December 31,
2000 1999
--------------------------------------------- ---------------- -----------------
LIABILITIES AND SHAREHOLDERS' EQUITY (Unaudited)
Liabilities:
Policy Liabilities:
Future policy benefits $ 83,635,691 $ 79,507,902
Policyholder deposits 16,580,819 15,811,486
Policy and contract claims 1,479,765 1,456,030
Unearned premiums 175,189 176,779
Other 187,194 241,502
--------------------------------------------- ---------------- -----------------
Total Policy Liabilities 102,058,658 97,193,699
Notes payable 8,125,000 8,500,000
Accrued expenses and other liabilities 2,527,369 2,270,660
Federal income tax payable 498 ---
Deferred federal income tax --- 1,979,214
--------------------------------------------- ---------------- -----------------
Total Liabilities 112,711,525 109,943,573
Commitments and Contingencies
Shareholders' Equity:
Common stock, 6,000,000 shares authorized;
1,761,415 and 1,767,215 shares issued and
outstanding in 2000 and 1999, respectively 1,761,415 1,767,215
Additional paid-in capital 7,675,538 7,736,201
Accumulated other comprehensive income 457,971 3,322,971
Retained earnings 17,763,501 15,210,070
--------------------------------------------- ---------------- -----------------
Total Shareholders' Equity 27,658,425 28,036,457
--------------------------------------------- ---------------- -----------------
Total Liabilities and Shareholders' Equity $140,369,950 $137,980,030
--------------------------------------------- ---------------- -----------------
See Notes to Condensed Consolidated Financial Statements.
<PAGE>
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Part I; Item 1 (continued)
Citizens Financial Corporation and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Nine Months Ended September 30 2000 1999
--------------------------------------------- ---------------- -----------------
Cash Flows from Operations:
Net income $ 2,553,431 $ 3,846,907
Adjustments to reconcile net income to cash
from operations:
Increase in benefit reserves 2,068,882 1,196,450
Decrease in claim liabilities (30,858) (219,022)
Decrease in reinsurance recoverable 96,614 155,946
Interest credited on policyholder deposits 653,598 654,250
Provision for amortization and depreciation,
net of deferrals 74,174 258,477
Amortization of premium and accretion of
discount on securities purchased, net 35,591 113,459
Net realized investment gains (4,660,783) (5,666,355)
Increase in accrued investment income (65,420) (12,850)
Change in other assets and liabilities (397,447) 194,086
Decrease in deferred federal income tax
liability (1,688,000) (123,424)
Increase (decrease) in federal income
taxes payable 170,000 (58,091)
--------------------------------------------- ---------------- -----------------
Net Cash provided by (used in) Operations (1,190,218) 339,833
Cash Flows from Investment Activities:
Cost of securities acquired (70,458,472) (57,021,695)
Investments sold or matured 71,876,615 62,160,723
Net cash received on block of insurance
business acquired 1,894,271 ---
Investment management fees and margin interest (679,254) (248,603)
Additions to property and equipment, net (210,058) (216,863)
Other investing activities, net (9,263) 302
--------------------------------------------- ---------------- -----------------
Net Cash provided by Investment Activities 2,413,839 4,673,864
Cash Flows from Financing Activities:
Policyholder deposits 596,659 571,832
Policyholder withdrawals (2,020,267) (1,571,338)
Brokerage account advances, net (100,884) 1,072,470
Payments on notes payable - bank (375,000) (382,500)
Repurchase of common stock (66,463) (157,700)
--------------------------------------------- ---------------- -----------------
Net Cash used in Financing Activities (1,965,955) (467,236)
--------------------------------------------- ---------------- -----------------
Net Increase (Decrease) in Cash and
Cash Equivalents (742,334) 4,546,461
Cash and Cash Equivalents at Beginning
of Period 18,696,401 8,301,999
--------------------------------------------- ---------------- -----------------
Cash and Cash Equivalents at End of Period $ 17,954,067 $ 12,848,460
--------------------------------------------- ---------------- -----------------
See Notes to Condensed Consolidated Financial Statements.
<PAGE>
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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-Q in conformity with
accounting principles generally accepted in the United States. 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, 1999 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, 2000 and 1999 are as follows:
------------------------ ----------------------------
Three Months Ended Nine Months Ended
September 30, September 30,
------------- ------------- -------------- -------------
COMPREHENSIVE INCOME: 2000 1999 2000 1999
----------------------- ------------- ------------- -------------- -------------
Net Income (Loss) $ (1,184,479) $ 1,147,947 $ 2,553,431 $ 3,846,907
Net unrealized losses
on securities (2,000,020) (1,541,162) (2,865,000) (1,327,555)
----------------------- ------------- ------------- -------------- -------------
Comprehensive Income
(Loss) $ (3,184,499) $ (393,215) $ (311,569) $ 2,519,352
----------------------- ------------- ------------- -------------- -------------
Note 3 - ACQUISITION
On July 7, 2000, the Company acquired a small block of individual life insurance
business through the National Organization of Life and Health Guaranty
Associations for a net purchase price of approximately $340,000. This business
includes policy reserves of approximately $3,500,000 and annual premium of
approximately $300,000.
Note 4 - RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS No. 133"). In general, SFAS No. 133 requires that
all derivatives be recognized as either assets or liabilities in the balance
sheet at their fair value, and sets forth the manner in which gains or losses
thereon are to be recorded. The treatment of such gains or losses is dependent
upon the type of exposure, if any, for which the derivative is designated as a
hedge. This standard is effective for the Company's financial statements
beginning January 1, 2001, with early adoption permitted. Management of the
Company anticipates that adoption of SFAS No. 133 on January 1, 2001 will not
have a material impact on the Company's financial position, results of
operations, or cash flows.
<PAGE>
Part I; Item 1 (continued)
Note 5 - 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
funerals 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, 2000 and 1999, and for
the periods then ended is as follows:
--------------------------- ----------------------------
Three Months Ended Nine Months Ended
September 30, September 30,
------------- ------------- -------------- -------------
REVENUE: 2000 1999 2000 1999
----------------------- ------------- ------------- -------------- -------------
Home Service Life $ 2,252,559 $ 2,116,250 $ 6,797,357 $ 6,543,506
Broker Life 1,609,712 1,394,076 4,575,552 4,481,836
Preneed Life 1,595,490 934,973 3,875,964 2,743,028
Dental 1,993,461 1,842,930 5,828,971 5,240,319
Other Health 351,742 349,781 1,085,097 1,003,278
----------------------- ------------- ------------- -------------- -------------
Segment Totals 7,802,964 6,638,010 22,162,941 20,011,967
Realized investment
gain (loss), net (1,664,106) 1,712,277 4,660,783 5,666,355
----------------------- ------------- ------------- -------------- -------------
Total Revenue $ 6,138,858 $ 8,350,287 $26,823,724 $25,678,322
----------------------- ------------- ------------- -------------- -------------
Below are the net investment income amounts included in the revenue totals
above.
---------------------------- ---------------------------
Three Months Ended Nine Months Ended
September 30, September 30,
------------- -------------- ------------- -------------
INVESTMENT INCOME: 2000 1999 2000 1999
----------------------- ------------- -------------- ------------- -------------
Home Service Life $ 524,942 $ 436,156 $1,553,985 $1,486,634
Broker Life 702,021 549,510 1,938,719 1,873,956
Preneed Life 336,452 273,485 974,073 952,497
Dental 8,996 5,973 27,697 22,276
Other Health 23,111 20,501 66,744 64,768
----------------------- ------------- -------------- ------------- -------------
Segment Totals $1,595,522 $1,285,625 $4,561,218 $4,400,131
----------------------- ------------- -------------- ------------- -------------
The Company evaluates performance based on several factors, of which the primary
financial measure is segment profit. Segment profit represents pretax earnings,
excluding net realized investment gains and interest expense. The majority of
the Company's realized investment gains are generated from investments in equity
securities. The equities portfolio averaged (on a cost basis) approximately
$20,508,000 and $20,626,000 during the nine months ended September 30, 2000 and
1999, respectively. If these funds had been invested in fixed-maturities
yielding 7%, realized investment gains would have declined and the nine month
segment profit totals below would have increased by an additional $763,000 and
$657,000 in 2000 and 1999, respectively. Investment income was also
<PAGE>
Part I; Item 1 (continued)
impacted during the first nine months of 2000 due to the accumulation of
additional cash and cash equivalent positions due to increased market volatility
and some additional real estate vacancies.
--------------------------- ----------------------------
Three Months Ended Nine Months Ended
September 30, September 30,
------------- ------------- -------------- -------------
SEGMENT PROFIT (LOSS): 2000 1999 2000 1999
----------------------- ------------- ------------- -------------- -------------
Home Service Life $ (17,494) $ 116,530 $ 77,454 $ 142,400
Broker Life 63,395 (182,334) 259,408 13,405
Preneed Life (274,706) (209,313) (829,929) (510,679)
Dental 47,080 149,847 269,575 405,112
Other Health (10,213) (6,622) (36,118) (90,574)
----------------------- ------------- ------------- -------------- -------------
Segment Totals (191,938) (131,892) (259,610) (40,336)
Realized investment
gain (loss), net (1,664,106) 1,712,277 4,660,783 5,666,355
Interest expense 196,435 127,438 575,742 379,112
----------------------- ------------- ------------- -------------- -------------
Income (Loss) before
Federal Income Tax $ (2,052,479) $1,452,947 $3,825,431 $5,246,907
----------------------- ------------- ------------- -------------- -------------
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: 2000 1999 2000 1999
---------------------- -------------- ------------- -------------- -------------
Home Service Life $ 233,834 $ 172,362 $ 538,399 $ 475,538
Broker Life 160,873 196,253 436,980 482,536
Preneed Life 77,434 81,623 230,241 289,689
Dental 13,818 12,733 40,080 36,541
Other Health 13,257 14,322 30,287 31,810
---------------------- -------------- ------------- -------------- -------------
Segment Totals $ 499,216 $ 477,293 $1,275,987 $1,316,114
---------------------- -------------- ------------- -------------- -------------
Segment asset totals are determined based on policy liabilities outstanding in
each segment.
------------ ------------
September December
30, 31,
ASSETS: 2000 1999
----------------------------------------- ------------ ------------
Home Service Life $47,276,511 $47,347,032
Broker Life 61,038,024 57,958,271
Preneed Life 29,311,283 29,754,353
Dental 704,518 913,939
Other Health 2,039,614 2,006,435
----------------------------------------- ------------ ------------
Segment Totals $140,369,950 $137,980,030
----------------------------------------- ------------ ------------
<PAGE>
Part I; Item 1 (continued)
Note 6 - NET REALIZED INVESTMENT GAINS, NET OF EXPENSES
The Company recorded gross pretax reductions to the carrying value of available
for sale securities totaling $5,063,000 and $1,358,000 for the nine months ended
September 30, 2000 and 1999, respectively, relating to declines in value which
were considered by management to be other than temporary. These amounts are
reported as reductions of net realized investment gains. The Company also nets
certain direct, incremental investment management fees and margin loan interest
cost against net realized investment gains 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 $211,000 and $305,000 for the nine months ended September
30, 2000 and 1999, respectively.
Note 7 - 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 8 - LITIGATION
During June 2000, the Company was informed of an action filed against its
subsidiary, United Liberty Life Insurance Company ("United") by two
policyholders. The Company acquired United in May, 1998. The complaint in the
action refers to a particular class of life insurance policies that United
issued over a period of years ending around 1971. The complaint alleges that
United's dividend payments on these policies from 1993 through 1999 were less
than the required amount. The complaint does not specify the amount of the
alleged underpayment but implies a maximum of about $1 million. The plaintiffs
also allege that United is liable to pay punitive damages, also in an
unspecified amount, for breach of an implied covenant of good faith and fair
dealing to the plaintiffs in relation to the dividends. The plaintiffs are
seeking to have the action certified as a class action on behalf of all other
policyholders whose policies were still in force in 1993. United has filed its
answer denying the material allegations of the complaint and intends to defend
the action vigorously. The Company has engaged in pre-trial discovery
proceedings, in relation both to the plaintiffs' underlying allegations and
their request for class action certification. At this early stage of the
litigation, the Company is unable to determine whether an unfavorable outcome of
the action is likely to occur or, alternatively, whether the chance of such an
outcome is remote. Therefore, at this time, management has no basis for
estimating potential losses, if any.
<PAGE>
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Part I; Item 2 - Management's Discussion and Analysis
FINANCIAL POSITION. Shareholders' equity totaled approximately $27,658,000 and
$24,107,000 at September 30, 2000 and 1999, respectively. These balances reflect
net increases (decreases) of approximately (1%) and 11%, respectively for the
nine month periods then ended. As described above, comprehensive income (loss)
totaled approximately $(312,000) and $2,519,000 for the nine months ended
September 30, 2000 and 1999, respectively. A significant portion of
comprehensive income activity arose from the Company's equity securities
portfolio. Equity securities comprised approximately 18% of the Company's total
assets as of September 30, 2000 and 1999. Accordingly, as also described below,
the Company's financial position can be significantly affected by movements in
the equities markets. Equity portfolio positions increased $5,159,000 on a cost
basis and $1,843,000 on a market value basis during the first nine months of
2000. Fixed maturity portfolio positions increased $676,000 on an amortized cost
basis and decreased $695,000 on a market value basis during the same period.
Cash and cash equivalent positions also decreased approximately $742,000 during
the period.
OPERATIONS. Net premiums and other considerations increased approximately 12%
during the first nine months of 2000 compared to the first nine months of 1999.
This total includes increases of 3%, 62%, 11% and 8% in the Home Service Life,
Preneed Life, Dental, and Other Health segments, respectively, along with a
comparable amount of Broker Life premium. The Home Service Life and Preneed Life
segments have each benefited from product redesign, expanded agent recruiting
and other focused marketing efforts. Dental premium has demonstrated continuing
quarterly growth during 1999 and into 2000 due to consistent marketing efforts
and a modest agent incentive program. The Other Health segment represents
approximately 6% of total premium. The 4% increase in investment income compared
to the first nine months of the prior year is attributable to the October 1999
acquisition of an inactive home service fire insurance company and the July 2000
acquisition of a small block of life insurance business. However, this benefit
is substantially offset by interest expense associated with increased
borrowings.
Total pretax earnings decreased approximately 27% to $3,825,000 for the nine
months ended September 30, 2000, primarily due to an approximate $1,006,000
decrease in realized investment gains, net of expenses. Pretax Segment Profit
(Loss) (excluding realized investment gains and interest expense) for the first
nine months of 2000 was approximately $(260,000), compared to approximately
$(40,000) for the first nine months of 1999. This decrease resulted primarily
from additional costs associated with expanding Preneed Life marketing efforts,
increased employee benefit costs, and initiation of a small property management
operation. Partially offsetting these costs were improved Broker Life mortality
and Other Health morbidity, net of somewhat higher Dental claims. The Company is
targeting Preneed volume growth within the next few years sufficient to produce
Preneed segment profits.
The Company's higher effective income tax rate compared to the prior year is due
to a phasing-out of available small-life insurance company deductions and full
utilization of previously available alternative minimum-tax credit carryforwards
and non-life insurance net operating loss carryforwards.
CASH FLOW AND LIQUIDITY. Cash flow used in operations totaled $1,190,000 for the
nine months ended September 30, 2000 compared to $340,000 provided by operations
for the same period in the prior year. This change resulted primarily from
additional income tax payments made in the current year. The $2,414,000 of cash
provided by investing activities for the nine months ended September 30, 2000
resulted primarily from net receipt of cash associated with the acquisition of a
block of life insurance business and retaining the net proceeds from investment
sales as cash. The $1,966,000 of cash used in financing activities during the
first nine months of 2000 is primarily attributable to annuity and Universal
Life account withdrawals.
FORWARD-LOOKING INFORMATION. All statements, trend analyses and other
information contained in this report relative to markets for the Company's
products and trends in the Company's operations or financial results, as well as
other statements including words such as "anticipate", "believe", "plan",
"estimate", "expect", "intend", and other similar expressions, constitute
forward-looking statements under the Private Securities Litigation Reform Act of
1995. These forward-looking statements are subject to known and unknown risks,
<PAGE>
Part I; Item 2 - Management's Discussion and Analysis, continued
uncertainties and other factors which may cause actual results to be materially
different from those contemplated by the forward-looking statements. Such
factors include, among other things: (1) general economic conditions and other
factors, including prevailing interest rate levels and stock market performance,
which may affect the Company's ability to sell its products, the market value of
the Company's investments and the lapse rate and profitability of policies; (2)
the Company's ability to achieve anticipated levels of operating efficiencies
and meet cash requirements based upon projected liquidity sources; (3) customer
response to new products, distribution channels and marketing initiatives; (4)
mortality, morbidity, and other factors which may affect the profitability of
the Company's insurance products; (5) changes in the Federal income tax laws and
regulations which may affect the relative tax advantages of some of the
Company's products; (6) increasing competition in the sale of insurance; (7)
regulatory changes or actions, including those relating to regulation of
insurance products and insurance companies; (8) ratings assigned to the Company
and its subsidiaries by independent rating organizations which the Company
believes are important to the sale of its products; and (9) unanticipated
litigation. There can be no assurance that other factors not currently
anticipated by management will not also materially and adversely affect the
Company's results of operations.
<PAGE>
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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 July 19, 2000 was filed relating to Item 5 - Other
Events. The form disclosed the filing of an action against a
subsidiary of the Company, United Liberty Life Insurance Company.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CITIZENS FINANCIAL CORPORATION
/s/ Darrell R. Wells
BY: -------------------------------------------
Darrell R. Wells
President and Chief Executive Officer
/s/ Brent L. Nemec
BY: -------------------------------------------
Brent L. Nemec
Treasurer and Principal Accounting Officer
Date: November 9, 2000
<PAGE>
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EXHIBIT INDEX
------------------ ---------------------------------------------------------
Exhibit No. Description
------------------ ---------------------------------------------------------
11 Statement re: computation of per share earnings
27 Financial Data Schedule (electronic filing only)
<PAGE>
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EXHIBIT 11
Citizens Financial Corporation and Subsidiaries
Computation of Per Share Earnings
(Unaudited)
Nine Months Ended September 30 2000 1999
--------------------------------------------- ---------------- -----------------
Numerator:
Net income $2,553,431 $3,846,907
Denominator:
Weighted average common shares 1,762,430 1,796,355
Earnings Per Share $1.45 $2.14
Three Months Ended September 30 2000 1999
--------------------------------------------- ---------------- -----------------
Numerator:
Net income $ (1,184,479) $1,147,947
Denominator:
Weighted average common shares 1,761,415 1,790,924
Earnings Per Share $(0.67) $0.64
