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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarter Ended June 30, 2002
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from______to_____ .
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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.)
2100 W. William Cannon, Suite L
Austin, Texas 78745
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (512) 383-0220
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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 June 30, 2002, the Registrant had 20,451,980 shares of Common Stock, no
par value, outstanding.
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BNL FINANCIAL CORPORATION AND SUBSIDIARIES
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
INDEPENDENT ACCOUNTANTS' REPORT
To The Board of Directors
BNL Financial Corporation
We have reviewed the accompanying Consolidated Balance Sheet of BNL Financial
Corporation and Subsidiaries as of June 30, 2002 and the related Consolidated
Statements of Income and Comprehensive Income and Cash Flows for the six-month
periods ended June 30, 2002 and 2001. These financial statements are the
responsibility of the Corporation's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and of making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to such consolidated financial statements for them to be in conformity
with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the Consolidated Balance Sheet of BNL Financial Corporation and
Subsidiaries as of December 31, 2001 and the related Consolidated Statements of
Income and Comprehensive Income and Cash Flows for the year then ended (not
presented herein); and in our report dated February 9, 2002, we expressed an
unqualified opinion on those consolidated financial statements. In our opinion,
the information set forth in the accompanying Consolidated Balance Sheet as of
December 31, 2001 is fairly stated, in all material respects, in relation to the
Consolidated Balance Sheet from which it has been derived.
Oklahoma City, Oklahoma SMITH, CARNEY & CO., p.c.
August 14, 2002
BNL FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
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ASSETS
June 30, December 31,
2002 (Unaudited) 2001 (Audited)
--------------------- -------------------
Cash and cash equivalents $ 845,401 $ 1,726,746
Investment in fixed maturities, at fair value (amortized cost $15,998,162;
$14,349,209, respectively) 15,984,464 14,331,818
Note receivable 1,357,407 1,357,407
Investment in preferred stock, at fair value (cost $100,000) 100,400 -
Investment in common stock (cost $191,608; $86,100, respectively) 105,180 47,449
--------------------- -------------------
18,392,852
Total Investments, Including Cash and Cash Equivalents 17,463,420
Accrued investment income 253,593 224,100
Furniture and equipment, net 411,120 423,608
Deferred policy acquisition costs 267,507 278,258
Policy loans 120,161 115,652
Receivable from reinsurer 34,990 34,990
Premiums due and unpaid 835,051 786,345
Income tax assets 379,000 524,000
Intangible assets 170,959 173,867
Other assets 172,550 149,616
--------------------- -------------------
$21,037,783
Total Assets $20,173,856
===================== ===================
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Liabilities for future policy benefits $ 1,477,118 $ 1,454,007
Policy claims payable 2,412,350 2,446,935
Annuity deposits 2,856,255 2,866,464
Deferred annuity profits 497,470 496,338
Premium deposit funds 56,542 61,987
Supplementary contracts without life contingencies 94,780 66,148
Advanced and unallocated premium 607,041 798,790
Commissions payable 622,368 623,484
Accrued taxes and expenses 584,600 491,513
Other liabilities 348,635 349,477
--------------------- -------------------
Total Liabilities 9,557,159 9,655,143
--------------------- -------------------
COMMITMENTS AND CONTINGENCIES (NOTE 2)
Contingent settlement expenses payable 575,000 575,000
Contingent long-term liabilities 4,269,404 4,269,404
--------------------- -------------------
Total Commitments and Contingencies 4,844,404 4,844,404
--------------------- -------------------
Shareholders' Equity:
Common stock, $.02 stated value, 45,000,000 shares
authorized, 23,311,944 shares issued and outstanding 466,239 466,239
Additional paid-in capital 14,313,000 14,313,000
Accumulated other comprehensive income (loss) (93,054) (49,455)
Accumulated deficit (3,774,236) (4,779,746)
Contingent Treasury stock, 2,846,269 shares (Note 2) (4,269,404) (4,269,404)
Treasury stock, at cost; 13,695 shares (6,325) (6,325)
--------------------- -------------------
Total Shareholders' Equity 6,636,220 5,674,309
--------------------- -------------------
$21,037,783
Total Liabilities and Shareholders' Equity $20,173,856
===================== ===================
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(See accompanying notes and Independent Accountants' Report)
BNL FINANCIAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
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Three Months Ended Six Months Ended
June 30 June 30
--------------------------------- ----------------------------------
2002 2001 2002 2001
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
--------------- -------------- -------------- ----------------
Income:
Premium income $10,180,891 $ 9,333,402 $20,280,598 $18,830,495
Net investment income 306,582 248,820 598,603 496,478
Marketing fees 37,517 0 74,156 0
Realized gains (loss) (41,988) 10,964 (44,317) 11,643
--------------- -------------- -------------- ----------------
Total Income 10,483,002 9,593,186 20,909,040 19,338,616
--------------- -------------- -------------- ----------------
Expenses:
Increase (decrease) in liability for
future policy benefits 16,243 (14,722) 23,111 11,900
Policy benefits and other insurance costs 7,766,114 7,537,993 15,502,590 14,478,281
Amortization of deferred policy acquisition
costs 4,973 18,379 10,751 24,707
Operating expenses 1,784,285 1,628,444 3,511,052 3,108,644
Taxes, other than on income 315,361 250,317 662,027 589,124
--------------- -------------- -------------- ----------------
Total Expenses 9,886,976 9,420,411 19,709,531 18,212,656
--------------- -------------- -------------- ----------------
Income from Operations before
Income Taxes 596,026 172,775 1,199,509 1,125,960
Provision for income taxes 121,211 4,000 194,000 252,000
--------------- -------------- -------------- ----------------
Net Income $474,815 $168,775 $1,005,509 $873,960
=============== ============== ============== ================
Net income per common share (basic and diluted) $0.02 $0.01 $0.05 $0.04
=============== ============== ============== ================
Weighted average number of fully
Paid common shares 20,451,098 23,311,944 20,451,098 23,311,944
=============== ============== ============== ================
Other comprehensive income, net of tax:
Unrealized gains on securities:
Unrealized holding gain (loss)
arising during period $ (37,022) $70,433 $(87,916) $231,043
Reclassification adjustment for gain
(loss) included in net income 41,989 (10,964) 44,318 (11,642)
--------------- -------------- -------------- ----------------
Other Comprehensive Income (Loss) 4,967 59,469 (43,598) 219,400
--------------- -------------- -------------- ----------------
Comprehensive Income $ 479,782 $228,244 $ 961,911 $ 1,093,360
=============== ============== ============== ================
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(See accompanying notes and Independent Accountants' Report)
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BNL FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
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Six Months Ended
June 30,
-------------------------------------
2002 2001
(Unaudited) (Unaudited)
----------------- ----------------
Cash flows from operating activities:
Net income $ 1,005,509 $ 873,960
Adjustments to reconcile net income to net cash
provided by operating activities:
Realized loss (gain) on investments 44,317 (11,643)
Decrease in deferred tax asset 145,000 214,000
Depreciation 89,989 54,262
Amortization of deferred acquisition costs,
organization costs and state licenses acquired 13,658 26,261
Accretion of bond discount (139) 750
Change in assets and liabilities:
(Increase) decrease in accrued investment income (29,493) 21,538
(Increase) decrease in premiums due and unpaid (48,706) 208,204
Increase in liability for future policy benefits 23,111 11,900
Decrease in policy claims payable (34,585) (144,000)
Increase (decrease) in annuity deposits and deferred (9,077) 47,543
profits
Decrease in premium deposit funds (5,445) (26,698)
Decrease in advanced and unallocated premium (191,749) (287,788)
Increase (decrease) in commissions payable (1,116) 95,446
Other, decrease (increase) 64,799 (410,639)
----------------- ----------------
Net Cash Provided By Operating Activities 1,066,073 673,096
----------------- ----------------
Cash flows from investing activities:
Proceeds from sales of fixed maturity securities 615,786 2,100,593
Proceeds from sales of equity securities 74,208 92,932
Purchase of furniture and equipment (77,500) (75,279)
Purchase of fixed maturity securities (2,406,500) (899,607)
Purchase of equity securities (182,044) (90,652)
----------------- ----------------
Net Cash Provided By (Used In) Investing Activities (1,976,050) 1,127,987
----------------- ----------------
Cash flows from financing activities:
Treasury shares sold - 62,550
Net (payments) receipts on supplementary contracts 28,632 (31,234)
----------------- ----------------
Net Cash Provided By Financing Activities 28,632 31,316
----------------- ----------------
Net Increase (Decrease) In Cash and Cash Equivalents (881,345) 1,832,399
Cash And Cash Equivalents, Beginning Of Period 1,726,746 932,816
----------------- ----------------
Cash And Cash Equivalents, End Of Period $ 845,401 $2,765,215
================= ================
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(See accompanying notes and Independent Accountant's Report)
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BNL FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
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Note 1.
The accompanying Consolidated Financial Statements (unaudited) as of June 30,
2002 and June 30, 2001 have been reviewed by independent certified public
accountants. In the opinion of management, the aforementioned financial
statements contain all adjustments necessary to present fairly the financial
position as of June 30, 2002, and the results of operations for the periods
ended June 30, 2002 and June 30, 2001, and the cash flows for the periods ended
June 30, 2002 and June 30, 2001.
The statements have been prepared to conform to the requirements of Form 10-Q
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-K for the year ended December 31, 2001, previously filed with
the Commission, for financial statements for the year ended December 31, 2001,
prepared in accordance with GAAP. Net income per share of common stock is based
on the weighted average number of outstanding common shares.
Note 2.
On November 5, 2001, the Board of Directors of the Company and BNL Equity
Corporation approved a settlement in the class action case of Myra Jo Pearson,
Paul Pearson and James Stilwell v. BNL Equity Corporation (Formerly Known as
United Arkansas Corporation), BNL Financial Corporation (Formerly Known as
United Iowa Corporation), and certain Officers of the Company, Pulaski County
Circuit Court, Third Division, No. 96-4971. The settlement, which was approved
by the Pulaski County Circuit Court and the Arkansas Insurance Commissioner
subsequent to December 31, 2001, is subject to various conditions, including the
approvals by any other applicable regulatory authorities and conditioned upon
compliance with federal and state securities laws.
As part of the settlement agreement, the Company shall issue and exchange its
Bonds in the principal amount of $1.50 for each share of common stock of BNL
owned by the members of the Class. The Bonds shall be for a term of twelve years
with principal payable at maturity and shall bear interest at the rate of 6% per
annum payable annually from the previous fiscal year's earnings of BNL. If any
interest payment is not made, it will be added to the principal and paid at
maturity. The Bonds shall be fully callable and redeemable at par at any time by
BNL.
The Company has reflected the settlement provisions in the June 30, 2002 and
December 31, 2001 financial statements as recorded contingencies since
management considers it probable the settlement will be finalized in its current
form in 2002. These are reflected on the Balance Sheet as contingent long-term
liabilities of $4,269,404 and contingent treasury stock of a like amount and has
no effect on the Statement of Cash Flows. The settlement includes a provision
for paying Class Counsel collectively the single sum of $575,000 for all legal
fees, costs and expenses. Additional expenses for registration of the bonds and
the incidental costs are not determinable at this time.
Note 3.
In March 2002, the Board of Directors approved the 2002 Non-Director,
Non-Executive Stock Option Plan, subject to any necessary authorizations from
any regulatory authority. The plan is intended to assist the Company in
attracting and retaining individuals of outstanding ability and to promote
concurrence of their interests with those of the Shareholders of the Company. No
options have been issued under the Plan and due to its preliminary nature, the
plan has no material effect on the financial statements of the Company.
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BNL FINANCIAL CORPORATION AND SUBSIDIARIES Managements Discussion and Analysis
of Financial Condition and Results of Operations
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Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
In this section, we review the consolidated results of operations for the six
months ended June 30, 2002 and 2001 and significant changes in the consolidated
financial condition of the Company. This discussion should be read in
conjunction with the accompanying consolidated financial statements, notes and
selected financial data.
Forward-Looking Statements
All statements, trend analyses and other information contained in this report
and elsewhere (such as in filings by us with the Securities and Exchange
Commission, press releases, presentations by us or our management or oral
statements) relative to markets for our products and trends in our 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, 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: (i)
general economic conditions and other factors, including prevailing interest
rate levels and stock and credit market performance which may affect (among
other things) our ability to sell our products, our ability to access capital
resources and the costs associated therewith, the market value of our
investments and the lapse rate and profitability of policies; (ii) customer
response to new products and marketing initiatives: (iii) mortality, morbidity
and other factors which may affect the profitability of our products; (iv)
changes in the federal income tax laws and regulations which may affect the
relative income tax advantages of our products; (v) regulatory changes or
actions, including those relating to regulation of financial services affecting
(among other things) bank sales and underwriting of insurance products and
regulation of the sale, underwriting and pricing of products; and (vi) the risk
factors or uncertainties listed from time to time in our filings with the
Securities and Exchange Commission.
Liquidity and Capital Resources
At June 30, 2002, we had liquid assets of $845,401 in cash, money market savings
accounts, and short-term certificates of deposit.
The major components of operating cash flows are premium income and investment
income while policy benefits are the most significant cash outflow. In the first
six months of 2002, BNLAC collected $20,057,866 of premiums and annuity deposits
(gross before reinsurance) and we had consolidated investment income of
$598,603. Other sources of cash flow in 2002 were overwrite commissions of
$205,017 on vision products and marketing fees from EPSI Benefits Inc. of
$74,156. The Company paid $15,502,591 of policy benefits in the first half of
2002.
The Company's investments are primarily in U.S. Government, Government Agency
and other investment grade bonds which have been marked to market and classified
as available for sale. We do not hedge our investment income through the use of
derivatives.
We believe liquid assets, along with investment income, premium income and
marketing fees will be sufficient to meet our long and short-term liquidity
needs. We do not have any current plans to borrow money for operations.
Our insurance operations are conducted through Brokers National Life Assurance
Company ("BNLAC"). At June 30, 2002, BNLAC had statutory capital and surplus of
$9,005,463. BNLAC is required to maintain minimum levels of statutory capital
and surplus, which differ from state to state, as a condition to conducting
business in those states in which it is licensed. The State of Arkansas, which
is the legal domicile of BNLAC, requires a minimum of $2,300,000 in capital and
surplus. The highest requirement in any state in which BNLAC is licensed is
$3,000,000. Management monitors the minimum capital and surplus requirements to
maintain compliance in each state in which it is licensed.
Consolidated Results of Operations
Premium income for the second quarter of 2002 was $10,180,891 compared to
$9,333,402 for the same period in 2001. For the first six months of 2002 premium
income was $20,280,598 compared to $18,830,494 for the same period in 2001. The
increase of 9.1% for the second quarter and 7.7% for the first six months was
due to an increase in group dental insurance premiums written.
Net investment income was $306,582 for the second quarter of 2002 compared to
$248,820 for the second quarter of 2001. Net investment income was $598,603 for
the six-month period ended June 30, 2002 compared to $496,478 for the same
period in 2001. The 23.2% increase for the second quarter and 20.6% increase for
the first six months were primarily due to an increase in the amount of
investments purchased with the positive cash flow from operations and the
interest on the note receivable from EPSI Benefits Inc.
The Company received $37,517 of marketing fees from EPSI Benefits Inc. in the
second quarter, and $74,156 for the first half of 2002. The Marketing Fees are
collectable in conjunction with the expanded business relationship of the
Company with EPSI Benefits Inc. effective as of July 25, 2001.
Realized gains (loss) on investments were ($41,988) for the second quarter of
2002 and ($44,317) for the first six months of 2002 compared to $10,964 for the
second quarter and $11,643 for the first six months in 2001. The loss in 2002
was due to a 20% mark down in the book value of $200,000 par value MCI Bonds,
which created a realized loss of $41,988. The decrease in book value of the
bonds was appropriate due to the financial problems of WorldCom (parent of MCI).
While it is not possible at this time to determine the future value of these
bonds, we believe the likelihood is great that a portion of the par value of the
bond is permanently impaired. However, the bonds are senior debentures and,
based on market value comparison to other MCI bonds, should have higher priority
in bankruptcy.
For the second quarter of 2002, increase in liability for future policy benefits
was $16,243 compared to $(14,722) for the same period in 2001. For the six-month
period ended June 30, 2002, liability for future policy benefits expense was
$23,111 compared to $11,900 for the same period in 2001. The increase in expense
for both periods in 2002 was due to a decline in lapsed life insurance policies
compared to the same periods in 2001.
Policy benefits and other insurance costs consist primarily of commission
expense and group dental insurance claims expense. Policy benefits and other
insurance costs increased from $7,537,993 in the second quarter of 2001 to
$7,766,114 for the second quarter of 2002. In the first six months of 2002,
policy benefits and other insurance costs were $15,502,591 compared to
$14,478,282 for the same period in 2001. The increase for both periods in 2002
was due to an increase in claims and commissions resulting from the increase in
insurance premiums collected. The claims ratio on group dental insurance, which
represents the ratio of claims incurred to premium earned, remained unchanged at
65.9% for the first half of 2002 and 2001.
Amortization of deferred policy acquisition costs was $4,973 and $18,379 for the
second quarter and $10,751and $24,707 for the first six months of 2002 and 2001,
respectively. Amortization of deferred policy acquisition costs vary in relation
to lapses or surrenders of existing policies. As indicated by 2002 expenses, a
reduction in lapsed policies decreases the amortization expense.
For the second quarter of 2002 operating expenses were $1,784,285 compared to
$1,628,440 for the same period in 2001. Operating expenses were $3,511,052 in
the first six months of 2002 compared to $3,108,644 for the same period in 2001.
The increase for both periods in operating expenses was primarily due to
increased personnel expenses, claims administration expenses and general office
expense attributable to the increase in volume of business processed.
Taxes, other than on income, fees and assessments, were $315,361 for the second
quarter of 2002 compared to $250,317 for the second quarter of 2001. Taxes,
other than on income, fees and assessments, were $662,027 for the first half of
2002 compared to $589,124 for the first half of 2001. The increase for both
periods was primarily due to an increase in premium taxes on the increase in
premiums collected.
The provision for federal income taxes in the second quarter of 2002 includes
$51,211 current expense and $70,000 deferred tax expense compared to $20,000
current federal tax expense and ($16,000) deferred tax expense in the second
quarter of 2001. The provision for federal income taxes in the first half of
2002 was $49,000 current expense and $145,000 deferred tax expense compared to
$38,000 current expense and $214,000 deferred tax expense for the same period in
2001. For the first half of 2002, the Company's current federal tax expense was
reduced due to a change in the Alternate Minimum Tax laws for 2001 and 2002. In
2001 and 2002, the Company continued to reduce the deferred tax asset
appropriately as net operating loss carryovers are utilized.
Net income for the second quarter of 2002 was $474,815 compared to $168,775 for
the same period in 2001. The increase in net income for the second quarter of
2002 compared to the same period in 2001 was primarily due to increased premium
income and a lower group dental claims ratio during the second quarter of 2002.
Net income for the first half of 2002 was $1,005,509 and $873,960 for the same
period in 2001. The increase was primarily due to an increase in premium income
and net investment income.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Market risk represents the potential loss resulting from adverse changes in the
value of financial instruments, either derivative or non-derivative, caused by
fluctuations in interest rates, foreign exchange rates, commodity prices, and
equity security prices. We handle market risks in accordance with our
established policies. We did not have financial instruments to manage and reduce
the impact of changes in interest rates at June 30, 2002 and December 31, 2001.
We held various financial instruments at June 30, 2002 and 2001, consisting of
financial assets reported in our Consolidated Balance Sheets.
Interest Rate Risk - We are subject to interest rate risk through the investment
in fixed maturity securities, such as U.S. Government and Government Agency
securities and other investment grade bonds. The fair market value of long-term,
fixed-interest rate debt is subject to interest rate risk. Generally, the fair
value of fixed-interest rate debt will increase as interest rates fall and will
decrease as interest rates rise. The estimated fair value of our fixed maturity
securities at June 30, 2002 and December 31, 2001 was $15,984,464 and
$14,331,818, respectively.
Based on testing at December 31, 2001, a one-percentage point increase would
result in a decrease in the estimated fair value of fixed maturity securities of
$1,300,000. Initial fair values were determined using the current rates at which
we could enter into comparable financial instruments with similar remaining
maturities. The estimated earnings and cash flows impact for the first six
months of 2002 resulting from a one percentage point increase in interest rates
would be immaterial, holding other variables constant.
Foreign-Exchange Rate Risk - We currently have no exposure to foreign-exchange
rate risk because all of our financial instruments are denominated in U.S.
dollars.
Commodity Price Risk - We have no financial instruments subject to commodity
price risk.
Equity Security Price Risk - Equity securities at June 30, 2002 totaled
$205,580, or only 1.2% of total investments and cash on a consolidated basis.
The preceding discussion of estimated fair value of our financial instruments
and the sensitivity analyses resulting from hypothetical changes in interest
rates are "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. Such statements reflect our current
expectations and involve uncertainties. These forward-looking market risk
disclosures are selective in nature and only address the potential impact from
financial instruments. They do not include other potential effects which could
impact our business as a result of changes in interest rates, foreign-exchange
rates, commodity prices, or equity security prices.
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings.
On November 5, 2001, the Boards of Directors of the Company and BNL Equity
Corporation approved a settlement in the class action case of Myra Jo Pearson,
Paul Pearson and James Stilwell v. BNL Equity Corporation (Formerly Known as
United Arkansas Corporation), BNL Financial Corporation (Formerly Known as
United Iowa Corporation), and certain officers of the Company, in Pulaski County
Circuit Court, Third Division, No. 96-4971. The settlement, which was approved
by the Pulaski County Circuit Court and the Arkansas Insurance Commissioner
subsequent to December 31, 2001, is subject to various conditions, including the
approvals by any other applicable regulatory authorities and conditioned upon
compliance with federal and state securities laws.
As part of the settlement agreement, the Company has agreed to issue in exchange
bonds in the principal amount of $1.50, for each share of common stock of BNL
owned by the members of the Class. The Bonds shall be for a term of twelve years
with principal payable at maturity and shall bear interest at the rate of 6% per
annum payable annually from the previous fiscal year's earnings of BNL. If any
interest payment is not made, it will be added to the principal and paid at
maturity. The Bonds shall be fully callable and redeemable at par at any time by
BNL.
The Company has reflected the settlement provisions in the June 30, 2002 and
December 31, 2001 financial statements as recorded contingencies since
management considers it probable the settlement will be finalized in its current
form in 2002. These are reflected on the Balance Sheet as contingent long-term
liabilities of $4,269,404 and contingent treasury stock of a like amount and has
no effect on the Statement of Cash Flows. The settlement includes a provision
for paying Class Counsel collectively the single sum of $575,000 for all legal
fees, costs and expenses.
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.
Item 4. Submission of Matters to a Vote of Security Holders.
No matters were submitted to a vote of security holders during the time period
covered by this filing.
Item 5. Other Information.
None
Item 6. Exhibits and Reports on Form 10-Q.
(a) Exhibits
Exhibit
Number Description of Exhibit
- -------- ---------------------------------------------------------------------
99.1 Certificate of Chief Executive Officer of BNL Financial Corporation
pursuant to 18 U.S.C.ss.1350
99.2 Certificate of Chief Financial Officer of BNL Financial Corporation
pursuant to 18 U.S.C.ss.1350
(b) Reports on Form 8-K.
The Company did not file a Form 8-K during the period covered by this document.
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)
/s/ Wayne E. Ahart
Date: August 14, 2002 ____________________________________
By: Wayne E. Ahart, Chairman of the Board
(Chief Executive Officer)
/s/ Barry N. Shamas
Date: August 14, 2002 ____________________________________
By: Barry N. Shamas, Executive V.P.
(Chief Financial Officer)
Exhibit 99.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
OF BNL FINANCIAL CORPORATION
PURSUANT TO 18 U.S.C.ss.1350
In connection with the accompanying report on Form 10-Q for the period ending
June 30, 2002 and filed with the Securities and Exchange Commission on the date
hereof (the "Report"), I Wayne E. Ahart, Chief Executive Officer of BNL
Financial Corporation, hereby certify, pursuant to 18 U.S.C. ss. 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
1. The Report fully complies with the requirements of Section 13 (a) or 15
(d) of the Securities Exchange Act of 1934; and
2. The information contained in this Report fairly presents, in all
material respects the financial condition and results of operations of
the Company.
/s/ Wayne E. Ahart
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Wayne E. Ahart
Chief Executive Officer
August 14, 2002
Exhibit 99.2
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
OF BNL FINANCIAL CORPORATION
PURSUANT TO 18 U.S.C.ss.1350
In connection with the accompanying report on Form 10-Q for the period ending
June 30, 2002 and filed with the Securities and Exchange Commission on the date
hereof (the "Report"), I Barry N. Shamas, Chief Financial Officer of BNL
Financial Corporation, hereby certify, pursuant to 18 U.S.C. ss. 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
1. The Report fully complies with the requirements of Section 13 (a) or 15
(d) of the Securities Exchange Act of 1934; and
2. The information contained in this Report fairly presents, in all
material respects the financial condition and results of operations of
the Company.
/s/ Barry N. Shamas
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Barry N. Shamas
Chief Financial Officer
August 14, 2002