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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2003
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)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes ~~X~~ No ~~~~~
Indicate by check mark whether the registrant is an accelerated filer (as
determined in Rule 12b-2 of the Securities Exchange Act of 1934). Yes ~~~~~
No ~~X~~
APPLICABLE ONLY TO CORPORATE ISSUERS:
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 - 1,685,228 as of
May 19, 2003.
The date of this Report is May 20, 2003.
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Part I - Financial Information; Item 1 - Financial Statements
Citizens Financial Corporation and Subsidiaries
Condensed Consolidated Statements of Operations
(Unaudited)
Three Months Ended March 31 2003 2002
------------------------------------------------------------------------ -------------------- --------------------
Revenues:
Premiums and other considerations $ 9,238,935 $ 8,595,976
Premiums ceded (261,295) (338,734)
------------------------------------------------------------------------ -------------------- --------------------
Net premiums earned 8,977,640 8,257,242
Net investment income 1,373,989 1,467,823
Net realized investment losses (276,163) (328,401)
Other income 56,353 51,823
------------------------------------------------------------------------ -------------------- --------------------
Total Revenues 10,131,819 9,448,487
Policy Benefits and Expenses:
Policyholder benefits 5,257,211 4,776,105
Policyholder benefits ceded (234,011) (491,128)
------------------------------------------------------------------------ -------------------- --------------------
Net benefits 5,023,200 4,284,977
Increase in net benefit reserves 1,682,187 2,286,494
Interest credited on policyholder deposits 164,885 187,322
Commissions 1,693,668 1,694,633
General expenses 1,812,072 1,500,883
Interest expense 92,208 81,228
Policy acquisition costs deferred (579,542) (570,895)
Amortization of deferred policy acquisition costs
and value of insurance acquired 649,459 450,788
------------------------------------------------------------------------ -------------------- --------------------
Total Policy Benefits and Expenses 10,538,137 9,915,430
------------------------------------------------------------------------ -------------------- --------------------
Loss before income tax (406,318) (466,943)
Income Tax Benefit (73,000) (70,000)
------------------------------------------------------------------------ -------------------- --------------------
Net Loss $ (333,318) $ (396,943)
------------------------------------------------------------------------ -------------------- --------------------
Net Loss per Common Share $ (0.20) $ (0.23)
------------------------------------------------------------------------ -------------------- --------------------
See Notes to Condensed Consolidated Financial Statements.
Part I; Item 1 (continued)
Citizens Financial Corporation and Subsidiaries
Condensed Consolidated Statements of Financial Condition
March 31, December 31,
2003 2002
------------------------------------------------------------------------ -------------------- --------------------
ASSETS (Unaudited)
Investments:
Securities available for sale, at fair value:
Fixed maturities (amortized cost of $101,465,075
and $101,161,174 in 2003 and 2002 respectively) $ 105,149,894 $ 103,953,815
Equity securities (cost of $8,622,971 and
$7,108,735 in 2003 and 2002, respectively) 9,040,987 7,761,892
Investment real estate 3,237,579 3,252,424
Policy loans 4,254,773 4,239,128
Short-term investments 632,381 632,381
------------------------------------------------------------------------ -------------------- --------------------
Total Investments 122,315,614 119,839,640
Cash and cash equivalents 5,427,544 6,699,171
Accrued investment income 1,386,820 1,330,036
Reinsurance recoverable 2,593,079 2,886,256
Premiums receivable 297,438 215,759
Property and equipment 2,733,661 2,767,763
Deferred policy acquisition costs 9,946,410 9,915,288
Value of insurance acquired 3,496,261 3,617,602
Goodwill 755,782 755,782
Federal income tax receivable 285,158 250,158
Other assets 127,634 164,077
------------------------------------------------------------------------ -------------------- --------------------
Total Assets $ 149,365,401 $148,441,532
------------------------------------------------------------------------ -------------------- --------------------
See Notes to Condensed Consolidated Financial Statements.
Part I; Item 1 (continued)
Citizens Financial Corporation and Subsidiaries
Condensed Consolidated Statements of Financial Condition
March 31, December 31,
2003 2002
------------------------------------------------------------------------ -------------------- --------------------
LIABILITIES AND SHAREHOLDERS' EQUITY (Unaudited)
Liabilities:
Policy Liabilities:
Future policy benefits $ 104,214,257 $ 102,649,565
Policyholder deposits 15,643,185 15,743,293
Policy and contract claims 1,535,093 1,797,195
Unearned premiums 244,661 247,625
Other 275,714 277,955
------------------------------------------------------------------------ -------------------- --------------------
Total Policy Liabilities 121,912,910 120,715,633
Note payable - bank 5,120,835 5,779,168
Note payable - related party 2,000,000 2,000,000
Accrued expenses and other liabilities 2,041,779 1,851,467
Deferred federal income tax 455,088 337,632
------------------------------------------------------------------------ -------------------- --------------------
Total Liabilities 131,530,612 130,683,900
Commitments and Contingencies
Shareholders' Equity:
Common stock, 6,000,000 shares authorized;
1,685,228 and 1,686,828 shares issued and outstanding
in 2003 and 2002, respectively 1,685,228 1,686,828
Additional paid-in capital 7,170,321 7,176,480
Accumulated other comprehensive income 2,641,993 2,223,759
Retained earnings 6,337,247 6,670,565
------------------------------------------------------------------------ -------------------- --------------------
Total Shareholders' Equity 17,834,789 17,757,632
------------------------------------------------------------------------ -------------------- --------------------
Total Liabilities and Shareholders' Equity $ 149,365,401 $ 148,441,532
------------------------------------------------------------------------ -------------------- --------------------
See Notes to Condensed Consolidated Financial Statements.
Part I; Item 1 (continued)
Citizens Financial Corporation and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Three Months Ended March 31 2003 2002
------------------------------------------------------------------------ -------------------- --------------------
Cash Flows from Operations:
Net loss $ (333,318) $ (396,943)
Adjustments to reconcile net loss to cash from operations:
Increase in benefit reserves 1,567,918 2,316,777
Increase (decrease) in claim liabilities (262,102) 62,154
(Increase) decrease in reinsurance recoverable 293,177 (27,672)
Interest credited on policyholder deposits 164,885 187,322
Provision for amortization and depreciation, net of deferrals 141,604 (43,198)
Amortization of premium and accretion of discount on
securities purchased, net 9,227 (7,394)
Net realized investment losses 276,163 328,401
(Increase) decrease in accrued investment income (56,784) 146,959
Change in other assets and liabilities (9,385) 40,946
Decrease in deferred federal income tax liability (98,000) (41,000)
(Increase) decrease in federal income taxes receivable (35,000) 3,627
------------------------------------------------------------------------ -------------------- --------------------
Net Cash provided by Operations 1,658,385 2,569,979
Cash Flows from Investment Activities:
Cost of securities acquired (17,128,419) (8,961,804)
Investments sold or matured 15,170,175 4,720,959
Investment management fees (2,298) (41,968)
Additions to real estate (17,669) ---
Additions to property and equipment, net (5,071) (13,423)
Other investing activities, net (15,645) 7,273
------------------------------------------------------------------------ -------------------- --------------------
Net Cash used in Investment Activities (1,998,927) (4,288,963)
Cash Flows from Financing Activities:
Policyholder deposits 151,298 169,524
Policyholder withdrawals (416,291) (351,732)
Payments on notes payable - bank (658,333) (329,167)
Repurchase of common stock (7,759) ---
------------------------------------------------------------------------ -------------------- --------------------
Net Cash used in Financing Activities (931,085) (511,375)
------------------------------------------------------------------------ -------------------- --------------------
Net Decrease in Cash and Cash Equivalents (1,271,627) (2,230,359)
Cash and Cash Equivalents at Beginning of Period 6,699,171 18,433,626
------------------------------------------------------------------------ -------------------- --------------------
Cash and Cash Equivalents at End of Period $ 5,427,544 $ 16,203,267
------------------------------------------------------------------------ -------------------- --------------------
See Notes to Condensed Consolidated Financial Statements.
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, 2002 consolidated financial
statements and footnotes included in the Company's annual report on Form 10-K.
Note 2 - COMPREHENSIVE INCOME
The components of comprehensive income, net of related tax, for the three months
ended March 31, 2003 and 2002 are as follows:
----------------------------------
Three Months Ended March 31,
COMPREHENSIVE INCOME: 2003 2002
------------------------------------------- ----------------- ----------------
Net Loss $ (333,318) $ (396,943)
Net unrealized gain (loss) on securities 418,234 (737,785)
------------------------------------------- ----------------- ----------------
Comprehensive Income (Loss) $ 84,916 $ (1,134,728)
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Note 3 - DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
The Company's derivatives outstanding at March 31, 2002 include approximately
$41,000 of embedded options on convertible bonds and $123,000 of other open
option positions. Hedge accounting is not used for these securities and changes
in market value are reported currently as realized gains or losses.
Note 4 - NET REALIZED INVESTMENT GAINS (LOSSES), NET OF EXPENSES
The Company recorded pretax reductions to the carrying value of available for
sale securities totaling $68,329 and $513,007 for the three months ended March
31, 2003 and 2002, respectively, relating to declines in value which were
considered by management to be other than temporary. These amounts are included
along with other net realized losses. The Company also nets certain direct,
incremental investment management fees against net realized investment gains and
losses presented in the Condensed Consolidated Statements of Operations. Such
costs are based directly on or, are primarily associated with capital gains.
Costs netted against realized investment gains and losses total $21,030 and
$2,875 for the three months ended March 31, 2003 and 2002, 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.
Part I; Item 1 (continued)
Note 6 - 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 March 31, 2003 and 2002, and for the
periods then ended is as follows:
----------------------------------
Three Months Ended March 31,
REVENUE: 2003 2002
-------------------------------------------- ----------------- ----------------
Home Service Life $ 2,287,941 $ 2,316,284
Broker Life 1,464,206 1,553,223
Preneed Life 4,141,607 3,527,266
Dental 2,147,260 2,012,898
Other Health 366,968 367,217
-------------------------------------------- ----------------- ----------------
Segment Totals 10,407,982 9,776,888
Realized investment losses (276,163) (328,401)
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Total Revenue $10,131,819 $ 9,448,487
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Below are the net investment income amounts which are included in the revenue
totals above.
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Three Months Ended March 31,
INVESTMENT INCOME: 2003 2002
------------------------------------------ ----------------- ----------------
Home Service Life $ 396,342 $ 476,831
Broker Life 541,107 587,537
Preneed Life 409,834 375,560
Dental 6,637 7,022
Other Health 20,069 20,873
------------------------------------------ ----------------- ----------------
Segment Totals $ 1,373,989 $ 1,467,823
------------------------------------------ ----------------- ----------------
Part I; Item 1 (continued)
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. A
significant portion of the Company's realized investment gains are generated
from investments in equity securities. The equities portfolio averaged (on a
cost basis) approximately $7,866,000 and $7,018,000 during the three months
ended March 31, 2003 and 2002, respectively.
----------------------------------
Three Months Ended March 31,
SEGMENT PROFIT (LOSS): 2003 2002
-------------------------------------------- ----------------- ----------------
Home Service Life $ 121,867 $ (3,604)
Broker Life 65,209 38,593
Preneed Life (121,412) (216,053)
Dental 141,912 156,757
Other Health (245,523) (33,007)
-------------------------------------------- ----------------- ----------------
Segment Totals (37,947) (57,314)
Realized investment gains (losses) (276,163) (328,401)
Interest expense 92,208 81,228
-------------------------------------------- ----------------- ----------------
Income (Loss) before Federal Income Tax $ (406,318) $ (466,943)
-------------------------------------------- ----------------- ----------------
Depreciation and amortization amounts below consist of depreciation expense
along with amortization of the value of insurance acquired and deferred policy
acquisition costs.
----------------------------------
Three Months Ended March 31,
DEPRECIATION AND AMORTIZATION: 2003 2002
-------------------------------------------- ----------------- ----------------
Home Service Life $ 175,984 $ 159,270
Broker Life 199,537 160,706
Preneed Life 318,675 180,950
Dental 14,294 14,844
Other Health 12,656 11,930
-------------------------------------------- ----------------- ----------------
Segment Totals $ 721,146 $ 527,700
-------------------------------------------- ----------------- ----------------
Segment asset totals are determined based on policy liabilities outstanding in
each segment.
----------------- ----------------
March 31, December 31,
ASSETS: 2003 2002
-------------------------------------------- ----------------- ----------------
Home Service Life $ 39,423,910 $39,587,175
Broker Life 53,639,314 54,232,558
Preneed Life 53,609,258 51,991,206
Dental 664,056 658,963
Other Health 2,028,863 1,971,630
-------------------------------------------- ----------------- ----------------
Segment Totals $149,365,401 $148,441,532
-------------------------------------------- ----------------- ----------------
Part I; Item 1 (continued)
Note 7 - LITIGATION
United Liberty, which the Company acquired in 1998, is defending an action in an
Ohio state court brought by two policyholders. The Complaint refers to a
particular class of life insurance policies that United Liberty issued over a
period of years ending around 1971. It alleges that United Liberty's dividend
payments on these policies from 1993 through 1999 were less than the required
amount. It does not specify the amount of the alleged underpayment but implies a
maximum of about $850,000. The plaintiffs also allege that United Liberty 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 action has been certified as a class action on behalf of all
policyholders who were Ohio residents and whose policies were still in force in
1993. United Liberty has denied the material allegations of the Complaint and is
defending the action vigorously. Pre-trial discovery is continuing. United
Liberty has filed a motion for summary judgment, which has been fully briefed by
both parties and will be argued to the Court on May 29, 2003. At United
Liberty's request, an initial mediation session has been completed and
negotiations are continuing. As a pre-requisite for the mediation, United
Liberty offered to settle the matter for payments over time, which would include
attorneys' fees, and which would be contingent upon an exchange or reformation
of the insurance policies currently owned by the members of the class. At this
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. In addition, the Company is
party to other lawsuits in the normal course of business. Management believes
that recorded claims liabilities are adequate to ensure that these other suits
will be resolved without material financial impact to the Company.
Part I; Item 2 - Management's Discussion and Analysis
FINANCIAL POSITION. Shareholders' equity totaled approximately $17,835,000 and
$17,758,000 at March 31, 2003 and December 31, 2002, respectively. These
balances reflect an approximate one-half percent increase for the three months
ended March 31, 2003. As described above, the comprehensive income (loss)
totaled approximately $85,000 and $(1,135,000) for the three months ended March
31, 2003 and 2002, respectively. A significant portion of the prior year
comprehensive loss is attributable to changes in the value of the Company's
fixed maturity and equity portfolios. Equity securities comprised approximately
6.1% and 5.2% of the Company's total assets as of March 31, 2003 and December
31, 2002, respectively. Accordingly, as also described below, the Company's
financial position can be significantly affected by movements in the equities
markets. Equity portfolio positions increased $1,514,000 on a cost basis and
$1,279,000 on a market value basis, during the first three months of 2003. Fixed
maturity portfolio positions increased $304,000 on an amortized cost basis and
increased $1,196,000 on a market value basis during the same period. This
difference resulted primarily from increasing bond prices during the quarter.
Cash and cash equivalent positions also decreased approximately $1,272,000
during the quarter ended March 31, 2003.
Equity markets continue to be highly volatile and were unfavorable in the first
quarter of 2003, although improvements have been experienced in the first half
of the second quarter. In addition, interest yields on fixed maturity
investments are continuing to decline and economic pressures continue to
adversely impact certain fixed maturity issuers. The significant decline in
short-term rates has and, continues to adversely impact the Company's investment
portfolio yield and operating earnings. The 2003 environment described continues
to generate a relatively high level of qualitative investment risk. However,
measures of quantitative risk per unit of investment are not believed to have
changed significantly from those previously disclosed in the Company's 2002 Form
10-K
OPERATIONS. Net premiums and other considerations increased approximately
$720,000, or 9% during the first quarter of 2003 compared to the first quarter
of 2002. Preneed Life, Dental and Home Service Life premium increases were
approximately $577,000, $135,000, and $53,000 respectively, while Broker Life
experienced a modest decrease. The Preneed Life segment growth is attributable
primarily to continued expansion into independently owned funeral homes and
increased production generated by third-party marketing organizations. The
Dental premium increase is attributable primarily to an additional broker
relationship and normal inflationary premium increases. The Other Health segment
represents approximately only 4% of total premium.
Pretax (loss) improved approximately $61,000 to $(406,000) for the three months
ended March 31, 2003, primarily due to favorable Home Service Life and Broker
Life mortality and certain product pricing increases, partially offset by an
increase in Other Health claims and lower investment portfolio yields.
Additionally, a significant portion of the $312,000 increase in general expenses
for the quarter is attributable to costs associated with outside consultants who
were employed to review profitability of the Company's life products in the
current interest rate environment and perform other actuarial calculations and
analysis. Pretax Segment (loss) (excluding realized investment gains and
interest expense) for the first three months of 2003 was approximately $(38,000)
compared to $(57,000) for the first three months of 2002. This improvement is
also primarily attributable to the factors described above. Below are the
approximate, annualized pretax investment income and total return yields for the
three months ended March 31, 2003 and 2002.
----------------- -----------------
Three Months Ended March 31 2003 2002
------------------------------------------- ----------------- -----------------
Investment Income $ 1,373,989 $ 1,467,823
Realized and Unrealized Gains (Losses) 380,874 (1,481,686)
------------------------------------------- ----------------- -----------------
Total Return $ 1,754,863 $ (13,863)
------------------------------------------- ----------------- -----------------
Average Cash and Investments $127,140,985 $112,716,671
Investment Income Yield - Annualized 4.32% 5.21%
Total Return - Annualized 5.52% (0.05)%
The change in the Company's effective income tax rate is due to the lack of tax
loss carryback potential for a portion of the Company's operations.
CASH FLOW AND LIQUIDITY. Cash flow from operations totaled $1,658,000 for the
quarter ended March 31, 2003 compared to $2,570,000 for the same period in the
prior year. This positive cash flow for both periods is primarily attributable
to growth in Preneed Life business. The $1,999,000 of cash used by investing
activities for the quarter ended March 31, 2003 resulted primarily from
investing the proceeds of Preneed Life sales. The $931,000 of cash used in
financing activities during the first quarter of 2003 is primarily attributable
to bank loan principal repayments along with annuity and Universal Life account
withdrawals. The quarterly bank loan payment due on April 1, 2003 was paid by
March 31, 2003, accordingly, the outstanding bank loan balance decreased by two
quarterly installments. Due to continued investment losses and earnings pressure
from lower yields on investments and cash equivalents, the Company is completing
a strategic review of its products and operations. A key element of this
initiative is improving profitability of the Preneed, Home Service, and Broker
Life segments by increasing premiums, strengthening underwriting practices,
modifying commissions, and where possible, lowering interest crediting or policy
growth rates. Regarding the currently scheduled debt repayments, the Company
believes its available funds will be adequate to service 2003 debt obligations
and, with other available assets, will probably be adequate to service debt
obligations through 2004. In addition, the Company's Chairman has expressed
potential willingness to loan the Company an additional $3,000,000 if necessary,
which could service debt obligations through the majority of 2006.
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, 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:
|X| the market value of the Company's investments, including stock market
performance and prevailing interest rate levels;
|X| customer and agent response to new products, distribution channels
and marketing initiatives, including exposure to unrecoverable advanced
commissions;
|X| mortality, morbidity, lapse rates, and other factors which may affect
the profitability of the Company's insurance products;
|X| regulatory changes or actions, including those relating to regulation
of insurance products and insurance companies;
|X| ratings assigned to the Company and its subsidiaries by independent
rating organizations which the Company believes are important to the
sale of its products;
|X| general economic conditions and increasing competition which may affect
the Company's ability to sell its products;
|X| the Company's ability to achieve anticipated levels of operating
efficiencies and meet cash requirements based upon projected liquidity
sources;
|X| unanticipated adverse litigation outcomes; and
|X| changes in the Federal income tax laws and regulations which may affect
the relative tax advantages of some of the Company's products.
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.
Part I; Item 3 - Quantitative and Qualitative Disclosures about Market Risk
Quantitative and Qualitative Risk. The primary changes in quantitative market
risks during the three months ended March 31, 2003 are discussed in Part I, Item
2 above.
Part I; Item 4 - Controls and Procedures
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES. Within the past 90 days, the
Company conducted an evaluation of its disclosure controls and procedures, with
the supervision and participation of its Chief Executive Officer and Chief
Financial Officer. The Company does not expect that its disclosure controls and
procedures will prevent all error and fraud. Such a control system, no matter
how well conceived and operated, can provide only reasonable, not absolute,
assurance that the objectives of the control system are met. Further, the design
of a control system must balance the constraint of prudent resource expenditure
with a judgmental evaluation of risks and benefits. Based on this evaluation of
disclosure controls and procedures, the Company's Chief Executive Officer and
Chief Financial Officer have concluded that such controls and procedures provide
reasonable assurance that material information required to be included in the
Company's periodic SEC reports is made known on a timely basis to the Company's
principal executive and financial officers.
CHANGES IN INTERNAL CONTROLS. There have been no significant changes in the
Company's internal controls or changes in other factors that could significantly
affect these controls subsequent to their evaluation, nor has the Company
implemented any corrective actions regarding significant deficiencies or
material weaknesses in internal controls.
Part II - Other Information
Item 6. Exhibits and Reports on Form 8-K.
a). Exhibit 11: Statement re: computation of per share earnings.
Exhibit 99.1 Certification of Chief Executive Officer
Exhibit 99.2 Certification of Chief Financial Officer
b). Reports on Form 8-K: On January 6, 2003 the Company filed a Form 8-K
which noted that the Company's Board of Directors
has authorized $250,000 of additional common
stock repurchase capacity and the Company
completed the borrowing of $2,000,000 from the
Company's Chairman at the greater of 6% annual
interest or prime plus one percent.
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: May 20, 2003
Part II - Other Information (continued)
Certification of Principal Executive Officer
Certification for Quarterly Report on Form 10Q
I, Darrell R. Wells, certify that:
1) I have reviewed this quarterly report on Form 10-Q of Citizens Financial
Corporation;
2) Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3) Based on my knowledge, the financial statements and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4) The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report
is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5) The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6) The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Signature and Title: /s/ Darrell R. Wells Date: 05/20/2003
--------------------------- -------------------
Part II - Other Information (continued)
Certification of Principal Financial Officer
Certification for Quarterly Report on Form 10Q
I, Brent L. Nemec, certify that:
1) I have reviewed this quarterly report on Form 10-Q of Citizens Financial
Corporation;
2) Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3) Based on my knowledge, the financial statements and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4) The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5) The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6) The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Signature and Title: /s/ Brent L. Nemec Date: 05/20/2003
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EXHIBIT INDEX
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Exhibit No. Description
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11 Statement re: computation of per share earnings
99.1 Certification of Chief Executive Officer
99.2 Certification of Chief Financial Officer