##### Table of Contents



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 June 30, 2009
 Commission file number 000-24498
 DIAMOND HILL INVESTMENT GROUP, INC.
  Ohio
    
    65-0190407(State of incorporation)
    
    (I.R.S. Employer Identification No.)
 325 John H. McConnell Blvd, Suite 200, Columbus, Ohio 43215
 (Registrants telephone number, including area code)
 þ o
 o o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o
 o þ




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##### 



PAGEPart I: FINANCIAL INFORMATIONItem 1. Consolidated Financial Statements
    
    
    3Item 2. Managements Discussion and Analysis of Financial
Condition and Results of Operations
    
    
    15Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    22Item 4. Controls and Procedures
    
    
    22Part II: OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    22Item 1A. Risk Factors
    
    
    22Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    22Item 3. Defaults Upon Senior Securities
    
    
    22Item 4. Submission of Matters to a Vote of Security Holders
    
    
    23Item 5. Other Information
    
    
    23Item 6. Exhibits
    
    
    24Signatures
    
    
    25Exhibit 31.1Exhibit 31.2Exhibit 32.1
   2




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##### Table of Contents



PART I: FINANCIAL INFORMATION
 
 ITEM 1: Consolidated Financial Statements
 Diamond Hill Investment Group, Inc.
 Consolidated Balance Sheets
 6/30/2009
    
    
    12/31/2008(Unaudited)ASSETSCash and cash equivalents
    
    $
    16,278,697
    
    
    $
    15,788,560Investment portfolio
    
    
    22,029,205
    
    
    
    17,185,611Accounts receivable
    
    
    5,459,990
    
    
    
    5,339,558Prepaid expenses
    
    
    543,498
    
    
    
    1,067,388Fixed assets, net of depreciation, and other assets
    
    
    1,052,285
    
    
    
    835,314Income tax receivable
    
    
    422,187
    
    
    
    2,334,836Deferred taxes
    
    
    1,462,058
    
    
    
    1,989,016Total assets
    
    $
    47,247,920
    
    
    $
    44,540,283LIABILITIES AND SHAREHOLDERS EQUITYLiabilitiesAccounts payable and accrued expenses
    
    $
    1,485,683
    
    
    $
    1,294,396Accrued incentive compensation
    
    
    4,450,000
    
    
    
    13,000,000Total liabilities
    
    
    5,935,683
    
    
    
    14,294,396Commitments and contingencies
    
    
    
    
    
    
    Shareholders EquityCommon stock, no par value 
7,000,000 shares authorized;  
2,602,059 issued and outstanding
at June 30, 2009;  
2,447,299 issued and
outstanding at December 31,
2008
    
    
    22,217,630
    
    
    
    16,233,501Preferred stock, undesignated, 1,000,000 shares
authorized and unissued
    
    
    
    
    
    
    Deferred compensation
    
    
    (4,493,722
    )
    
    
    (4,908,215
    )Retained earnings
    
    
    23,588,329
    
    
    
    18,920,601Total shareholders equity
    
    
    41,312,237
    
    
    
    30,245,887Total liabilities and shareholders equity
    
    $
    47,247,920
    
    
    $
    44,540,283Tangible book value per share
    
    $
    15.88
    
    
    $
    12.36
   3




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##### Table of Contents



Diamond Hill Investment Group, Inc.
 Consolidated Statements of Income (unaudited)
 Three Months Ended June 30,
    
    
    Six Months Ended June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008REVENUES:Investment advisory
    
    $
    8,467,852
    
    
    $
    10,755,220
    
    
    $
    16,256,795
    
    
    $
    20,268,115Mutual fund administration, net
    
    
    1,124,980
    
    
    
    1,640,493
    
    
    
    2,220,372
    
    
    
    3,030,821Total revenue
    
    
    9,592,832
    
    
    
    12,395,713
    
    
    
    18,477,167
    
    
    
    23,298,936OPERATING EXPENSES:Compensation and related costs
    
    
    5,385,309
    
    
    
    6,614,608
    
    
    
    10,523,404
    
    
    
    12,456,362General and administrative
    
    
    745,740
    
    
    
    600,590
    
    
    
    1,391,920
    
    
    
    1,157,738Sales and marketing
    
    
    136,844
    
    
    
    152,240
    
    
    
    282,432
    
    
    
    266,270Third party distribution
    
    
    215,742
    
    
    
    395,721
    
    
    
    464,412
    
    
    
    791,826Mutual fund administration
    
    
    577,860
    
    
    
    576,926
    
    
    
    1,155,045
    
    
    
    1,045,541Total operating expenses
    
    
    7,061,495
    
    
    
    8,340,085
    
    
    
    13,817,213
    
    
    
    15,717,737NET OPERATING INCOME
    
    
    2,531,337
    
    
    
    4,055,628
    
    
    
    4,659,954
    
    
    
    7,581,199Investment return
    
    
    4,031,896
    
    
    
    (1,331,449
    )
    
    
    2,453,045
    
    
    
    (1,706,113
    )INCOME BEFORE TAXES
    
    
    6,563,233
    
    
    
    2,724,179
    
    
    
    7,112,999
    
    
    
    5,875,086Income tax provision
    
    
    (2,247,738
    )
    
    
    (944,805
    )
    
    
    (2,445,271
    )
    
    
    (2,110,024
    )NET INCOME
    
    $
    4,315,495
    
    
    $
    1,779,374
    
    
    $
    4,667,728
    
    
    $
    3,765,062Earnings per shareBasic
    
    $
    1.66
    
    
    $
    0.75
    
    
    $
    1.83
    
    
    $
    1.60Diluted
    
    $
    1.66
    
    
    $
    0.73
    
    
    $
    1.82
    
    
    $
    1.55Weighted average shares outstandingBasic
    
    
    2,598,178
    
    
    
    2,381,474
    
    
    
    2,553,562
    
    
    
    2,359,649Diluted
    
    
    2,602,637
    
    
    
    2,447,151
    
    
    
    2,558,119
    
    
    
    2,424,601
   4




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##### Table of Contents



Diamond Hill Investment Group, Inc.
 Consolidated Statements of Cash Flow (unaudited)
 Six Months Ended June 30,2009
    
    
    2008CASH FLOWS FROM OPERATING ACTIVITIES:Net Income
    
    $
    4,667,728
    
    
    $
    3,765,062Adjustments to reconcile net income to net cash provided by
(used in) operating activities:Depreciation on furniture and equipment
    
    
    112,531
    
    
    
    83,657Amortization of deferred compensation
    
    
    840,435
    
    
    
    1,287,279(Increase) in accounts receivable
    
    
    (120,432
    )
    
    
    (1,206,581
    )Change in deferred taxes
    
    
    513,773
    
    
    
    1,939,345Stock option expense
    
    
    
    
    
    
    2,233Noncash director fee expense
    
    
    150,062
    
    
    
    167,281Investment (gain) loss, net
    
    
    (577,134
    )
    
    
    2,407,110(Decrease) in accrued liabilities
    
    
    (3,506,497
    )
    
    
    (979,432
    )Other changes in assets and liabilities
    
    
    2,594,488
    
    
    
    (502,428
    )Net cash provided by operating activities
    
    
    4,674,954
    
    
    
    6,963,526CASH FLOWS FROM INVESTING ACTIVITIES:Purchase of property and equipment
    
    
    (329,502
    )
    
    
    (287,363
    )Cost of investments purchased and other portfolio activity
    
    
    (9,727,397
    )
    
    
    (3,971,023
    )Proceeds from sale of investments
    
    
    5,460,937
    
    
    
    Net cash (used in) investing activities
    
    
    (4,595,962
    )
    
    
    (4,258,386
    )CASH FLOWS FROM FINANCING ACTIVITIES:Payment for repurchase of common shares
    
    
    
    
    
    
    (116,896
    )Payment of taxes withheld on employee stock transactions
    
    
    (26,865
    )
    
    
    (131,800
    )Proceeds from common stock issuance
    
    
    438,010
    
    
    
    754,608Net cash provided by financing activities
    
    
    411,145
    
    
    
    505,912CASH AND CASH EQUIVALENTSNet change during the period
    
    
    490,137
    
    
    
    3,211,052At beginning of period
    
    
    15,788,560
    
    
    
    11,783,278At end of period
    
    $
    16,278,697
    
    
    $
    14,994,330Cash paid during the period for:Interest
    
    
    
    
    
    
    Income taxes
    
    
    610,090
    
    
    
    1,805,000Noncash transactions during the period for:Common stock issued as incentive compensation
    
    
    4,852,216
    
    
    
    5,754,140
   5




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##### Table of Contents



Diamond Hill Investment Group, Inc.
 Notes to Consolidated Financial Statements (unaudited)
 Organization
     Significant Accounting Policies
  Principles of Consolidation
  Segment Information
  Cash and Cash Equivalents
   6




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##### Table of Contents



Significant Accounting Policies (Continued)
 Accounts Receivable
  Valuation of Investment Portfolio
   Limited Partnership Interests
  Furniture and Equipment
  Revenue Recognition  General
   7




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##### Table of Contents



Significant Accounting Policies (Continued)
 Revenue Recognition  Performance Incentive Revenue
  As Of June 30,2009
    
    
    2008AUM  Contractual Period Ends Quarterly
    
    $
    101,882,369
    
    
    $
    243,704,401AUM  Contractual Period Ends Annually
    
    
    74,652,767
    
    
    
    324,211,714Total AUM Subject to Performance Incentive
    
    $
    176,535,136
    
    
    $
    567,916,115
 For The Three Months Ending June 30,
    
    
    For The Six Months Ending June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Performance
Incentive Fees - Method 1
    
    $
    
    
    
    $
    97,980
    
    
    $
    4,645
    
    
    $
    378,881Performance
Incentive Fees - Method 2
    
    $
    
    
    
    $
    97,980
    
    
    $
    4,645
    
    
    $
    378,881
  Revenue Recognition  Mutual Fund Administration
    8




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##### Table of Contents



Significant Accounting Policies (Continued)
 Revenue Recognition  Mutual Fund Administration (Continued)
  Three Months Ended June 30,
    
    
    Six Months Ended June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008DHCM mutual fund administration:Revenue, gross
    
    $
    1,990,667
    
    
    $
    2,449,128
    
    
    $
    3,749,016
    
    
    $
    4,493,676Fund related expense
    
    
    984,879
    
    
    
    825,010
    
    
    
    1,699,570
    
    
    
    1,486,048Revenue, net of fund related expenses
    
    
    1,005,788
    
    
    
    1,624,118
    
    
    
    2,049,446
    
    
    
    3,007,628Beacon Hill revenue
    
    
    153,177
    
    
    
    19,388
    
    
    
    241,052
    
    
    
    19,388DHCM C-Share financing:Broker commission advance repayments
    
    
    176,015
    
    
    
    431,904
    
    
    
    523,468
    
    
    
    830,851Broker commission amortization
    
    
    210,000
    
    
    
    434,917
    
    
    
    593,594
    
    
    
    827,046Financing activity, net
    
    
    (33,985
    )
    
    
    (3,013
    )
    
    
    (70,126
    )
    
    
    3,805Mutual fund administration revenue, net
    
    $
    1,124,980
    
    
    $
    1,640,493
    
    
    $
    2,220,372
    
    
    $
    3,030,821
 Third Party Distribution Expense
  Income Taxes
   Earnings Per Share
  Reclassifications
   9




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##### Table of Contents



Investment Portfolio
  June 30,
    
    
    December 31,2009
    
    
    2008Diamond Hill Small Cap Fund
    
    $
    575,265
    
    
    $
    Diamond Hill Small-Mid Cap Fund
    
    
    616,744
    
    
    
    Diamond Hill Large Cap Fund
    
    
    547,141
    
    
    
    Diamond Hill Select Fund
    
    
    557,903
    
    
    
    Diamond Hill Long-Short Fund
    
    
    528,086
    
    
    
    Diamond Hill Strategic Income Fund
    
    
    551,640
    
    
    
    Diamond Hill Investment Partners, L.P.
    
    
    8,437,066
    
    
    
    7,494,929Diamond Hill Investment Partners II, L.P.
    
    
    4,248,417
    
    
    
    3,767,480Diamond Hill Research Partners, L.P.
    
    
    5,966,943
    
    
    
    Other marketable equity securities
    
    
    
    
    
    
    5,923,202Total Investment Portfolio
    
    $
    22,029,205
    
    
    $
    17,185,611
  June 30,
    
    
    December 31,2009
    
    
    2008Total partnership assets
    
    $
    177,702,483
    
    
    $
    196,021,226Total partnership liabilities
    
    
    38,542,317
    
    
    
    33,056,747Net partnership assets
    
    
    139,160,166
    
    
    
    162,964,479Net partnership income (loss)
    
    
    13,525,240
    
    
    
    (75,625,562
    )DHCMs portion of net assets
    
    
    18,652,426
    
    
    
    11,262,409DHCMs portion of net income (loss)
    
    
    2,465,019
    
    
    
    (3,866,314
    )
   10




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##### Table of Contents



Capital Stock
 Common Shares
  Authorization of Preferred Shares
  Stock-Based Compensation
 Equity Incentive Plans
 2005 Employee and Director Equity Incentive Plan
  Equity Compensation Grants
  Accelerated Vesting of Certain Equity Incentive Plans and Compensation Grants
   11




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##### Table of Contents



Stock-Based Compensation (Continued)
 401(k) Plan
  Stock Options and Warrants
   Options
    
    
    WarrantsWeighted Average
    
    
    
    
    
    
    Weighted AverageShares
    
    
    Exercise Price
    
    
    Shares
    
    
    Exercise PriceOutstanding December 31, 2007
    
    
    92,500
    
    
    $
    10.40
    
    
    
    25,400
    
    
    $
    47.00Exercisable December 31, 2007
    
    
    72,500
    
    
    $
    12.03
    
    
    
    25,400
    
    
    $
    47.00Granted
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Expired / Forfeited
    
    
    
    
    
    
    
    
    
    
    12,000
    
    
    
    73.75Exercised
    
    
    27,500
    
    
    
    9.15
    
    
    
    3,000
    
    
    
    56.67Outstanding June 30, 2008
    
    
    65,000
    
    
    $
    10.93
    
    
    
    10,400
    
    
    $
    13.35Exercisable June 30, 2008
    
    
    65,000
    
    
    $
    10.93
    
    
    
    10,400
    
    
    $
    13.35Outstanding December 31, 2008
    
    
    
    
    
    $
    
    
    
    
    10,000
    
    
    $
    13.00Exercisable December 31, 2008
    
    
    
    
    
    $
    
    
    
    
    10,000
    
    
    $
    13.00Granted
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Expired / Forfeited
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Exercised
    
    
    
    
    
    
    
    
    
    
    4,000
    
    
    
    16.88Outstanding June 30, 2009
    
    
    
    
    
    $
    
    
    
    
    6,000
    
    
    $
    10.42Exercisable June 30, 2009
    
    
    
    
    
    $
    
    
    
    
    6,000
    
    
    $
    10.42
  12




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##### Table of Contents



Stock-Based Compensation (Continued)
 Stock Options and Warrants (Continued)
  WarrantsRemainingNumber
    
    Life
    
    
    NumberOutstanding
    
    In Years
    
    
    Exercisable
    
    
    Exercise Price4,000
    
    
    0.67
    
    
    
    4,000
    
    
    $
    11.252,000
    
    
    0.86
    
    
    
    2,000
    
    
    
    8.756,000
    
    
    0.73
    
    
    
    6,000
  Operating Leases
  2009
    
    2010
    
    
    2011
    
    
    2012
    
    
    2013
    
    
    Thereafter$      177,000
    
    $
    358,000
    
    
    $
    340,000
    
    
    $
    348,000
    
    
    $
    356,000
    
    
    $
    929,000
  Income Taxes
  Tax Impact of Stock Option and Warrant Exercises
   13




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##### Table of Contents



Earnings Per Share
  Three Months Ended June 30,
    
    
    Six Months Ended June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Basic and Diluted net income
    
    $
    4,315,495
    
    
    $
    1,779,374
    
    
    $
    4,667,728
    
    
    $
    3,765,062Weighted average number of
outstanding sharesBasic
    
    
    2,598,178
    
    
    
    2,381,474
    
    
    
    2,553,562
    
    
    
    2,359,649Diluted
    
    
    2,602,637
    
    
    
    2,447,151
    
    
    
    2,558,119
    
    
    
    2,424,601Earnings per shareBasic
    
    $
    1.66
    
    
    $
    0.75
    
    
    $
    1.83
    
    
    $
    1.60Diluted
    
    $
    1.66
    
    
    $
    0.73
    
    
    $
    1.82
    
    
    $
    1.55
 Commitments and Contingencies
  Subsequent Events
   14




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##### Table of Contents



ITEM 2: Managements Discussion and Analysis of Financial Condition and Results of Operations
 Forward-looking Statements
  General
     15




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##### Table of Contents



Assets Under Management
  Assets Under Management by ProductAs of June 30,(in millions)
    
    2009
    
    
    2008
    
    
    % ChangeMutual funds
    
    $
    2,930
    
    
    $
    3,899
    
    
    
    -25
    %Separate accounts
    
    
    1,600
    
    
    
    1,146
    
    
    
    40
    %Private investment funds
    
    
    203
    
    
    
    441
    
    
    
    -54
    %Total
    
    $
    4,733
    
    
    $
    5,486
    
    
    
    -14
    %
 Assets Under Management by ObjectiveAs of June 30,(in millions)
    
    2009
    
    
    2008
    
    
    % ChangeSmall and Small-Mid Cap
    
    $
    589
    
    
    $
    548
    
    
    
    7
    %Large Cap and Select
    
    
    1,862
    
    
    
    1,221
    
    
    
    52
    %Long-Short
    
    
    2,149
    
    
    
    3,466
    
    
    
    -38
    %Strategic and fixed income
    
    
    133
    
    
    
    251
    
    
    
    -47
    %Total
    
    $
    4,733
    
    
    $
    5,486
    
    
    
    -14
    %
 Change in Assets Under ManagementFor the Six Months Ended June 30,(in millions)
    
    2009
    
    
    2008AUM at beginning of the period
    
    $
    4,510
    
    
    $
    4,403Net cash inflows (outflows)mutual funds
    
    
    (269
    )
    
    
    1,223separate accounts
    
    
    343
    
    
    
    222private investment funds
    
    
    (38
    )
    
    
    (44
    )36
    
    
    
    1,401Net market appreciation (depreciation) and income
    
    
    187
    
    
    
    (318
    )Increase during the period
    
    
    223
    
    
    
    1,083AUM at end of the period
    
    $
    4,733
    
    
    $
    5,486
  16




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##### Table of Contents



Consolidated Results of Operations
  Three Months Ended June 30,
    
    
    Six Months Ended June 30,(in thousands, except per share amounts)
    
    2009
    
    
    2008
    
    
    % Change
    
    
    2009
    
    
    2008
    
    
    % ChangeNet operating income after tax (a)
    
    $
    1,664
    
    
    $
    2,649
    
    
    
    -37
    %
    
    $
    3,058
    
    
    $
    4,858
    
    
    
    -37
    %Net income
    
    $
    4,315
    
    
    $
    1,779
    
    
    
    143
    %
    
    $
    4,668
    
    
    $
    3,765
    
    
    
    24
    %Net operating income after tax per share(a)Basic
    
    $
    0.64
    
    
    $
    1.11
    
    
    
    -42
    %
    
    $
    1.20
    
    
    $
    2.06
    
    
    
    -42
    %Diluted
    
    $
    0.64
    
    
    $
    1.08
    
    
    
    -41
    %
    
    $
    1.20
    
    
    $
    2.00
    
    
    
    -40
    %Net income per shareBasic
    
    $
    1.66
    
    
    $
    0.75
    
    
    
    121
    %
    
    $
    1.83
    
    
    $
    1.60
    
    
    
    14
    %Diluted
    
    $
    1.66
    
    
    $
    0.73
    
    
    
    127
    %
    
    $
    1.82
    
    
    $
    1.55
    
    
    
    17
    %Weighted average shares outstandingBasic
    
    
    2,598
    
    
    
    2,381
    
    
    
    
    
    
    
    2,554
    
    
    
    2,360Diluted
    
    
    2,603
    
    
    
    2,447
    
    
    
    
    
    
    
    2,558
    
    
    
    2,425
 (a)
    
     Net operating income after tax is a non-GAAP performance measure. See Use of
Supplemental Data as Non-GAAP Performance Measure on page 21 of this report. Three Months Ended June 30, 2009 compared with Three Months Ended June 30, 2008
  Revenue
 Three Months EndedJune 30,(in thousands)
    
    2009
    
    
    2008
    
    
    % ChangeInvestment advisory
    
    $
    8,468
    
    
    $
    10,755
    
    
    
    -21
    %Mutual fund administration, net
    
    
    1,125
    
    
    
    1,641
    
    
    
    -31
    %Total
    
    $
    9,593
    
    
    $
    12,396
    
    
    
    -23
    %
  Investment Advisory Fees.
  17




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##### Table of Contents



Mutual Fund Administration Fees.
 Expenses
 Three Months EndedJune 30,(in thousands)
    
    2009
    
    
    2008
    
    
    % ChangeCompensation and related costs
    
    $
    5,385
    
    
    $
    6,615
    
    
    
    -19
    %General and administrative
    
    
    746
    
    
    
    600
    
    
    
    24
    %Sales and marketing
    
    
    137
    
    
    
    152
    
    
    
    -10
    %Third party distribution
    
    
    216
    
    
    
    396
    
    
    
    -45
    %Mutual fund administration
    
    
    578
    
    
    
    577
    
    
    
    0
    %Total
    
    $
    7,062
    
    
    $
    8,340
    
    
    
    -15
    %
 Compensation and Related Costs.
 General and Administrative.
 Sales and Marketing.
 Third Party Distribution.
 Mutual Fund Administration.
 Six Months Ended June 30, 2009 compared with Six Months Ended June 30, 2008
   18




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##### Table of Contents



Revenue
 Six Months EndedJune 30,(in thousands)
    
    2009
    
    
    2008
    
    
    % ChangeInvestment advisory
    
    $
    16,257
    
    
    $
    20,268
    
    
    
    -20
    %Mutual fund administration, net
    
    
    2,220
    
    
    
    3,031
    
    
    
    -27
    %Total
    
    $
    18,477
    
    
    $
    23,299
    
    
    
    -21
    %
  Investment Advisory Fees.
 Mutual Fund Administration Fees.
 Expenses
 Six Months EndedJune 30,(in thousands)
    
    2009
    
    
    2008
    
    
    % ChangeCompensation and related costs
    
    $
    10,523
    
    
    $
    12,456
    
    
    
    -16
    %General and administrative
    
    
    1,392
    
    
    
    1,158
    
    
    
    20
    %Sales and marketing
    
    
    283
    
    
    
    266
    
    
    
    6
    %Third party distribution
    
    
    464
    
    
    
    792
    
    
    
    -41
    %Mutual fund administration
    
    
    1,155
    
    
    
    1,046
    
    
    
    10
    %Total
    
    $
    13,817
    
    
    $
    15,718
    
    
    
    -12
    %
 Compensation and Related Costs.
 General and Administrative.
  19




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##### Table of Contents



Sales and Marketing.
 Third Party Distribution.
 Mutual Fund Administration.
 Beacon Hill Fund Services
  Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Gross revenue
    
    $
    187,094
    
    
    $
    19,388
    
    
    $
    290,594
    
    
    $
    19,388Less: revenue from
DHCM
    
    
    (33,917
    )
    
    
    
    
    
    
    (49,542
    )
    
    
    Expenses
    
    
    435,957
    
    
    
    394,690
    
    
    
    920,490
    
    
    
    586,092Net loss
    
    $
    (282,780
    )
    
    $
    (375,302
    )
    
    $
    (679,438
    )
    
    $
    (566,704
    )
 Liquidity and Capital Resources
     20




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##### Table of Contents



Use of Supplemental Data as Non-GAAP Performance Measure
Net Operating Income After Tax
   Three Months Ended June 30,
    
    
    Six Months Ended June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Net Operating Income, GAAP basis
    
    $
    2,531,337
    
    
    $
    4,055,628
    
    
    $
    4,659,954
    
    
    $
    7,581,199Non-GAAP Adjustments:Tax Provision excluding impact of Investment Return
    
    
    866,918
    
    
    
    1,406,581
    
    
    
    1,601,976
    
    
    
    2,722,771Net
operating income after tax, non-GAAP basis
    
    
    1,664,419
    
    
    
    2,649,047
    
    
    
    3,057,978
    
    
    
    4,858,428Net operating income after tax per diluted share, non-GAAP basis
    
    $
    0.64
    
    
    $
    1.08
    
    
    $
    1.20
    
    
    $
    2.00Diluted weighted average shares outstanding, GAAP basis
    
    
    2,602,637
    
    
    
    2,447,151
    
    
    
    2,558,119
    
    
    
    2,424,601
 Off-Balance Sheet Arrangements
  Critical Accounting Policies and Estimates
 Recent Accounting Pronouncements:
    21




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##### Table of Contents



ITEM 3: Quantitative and Qualitative Disclosures About Market Risk
  
 ITEM 4: Controls and Procedures
  
 PART II: OTHER INFORMATION
 
 ITEM 1: Legal Proceedings
  
 ITEM 1A: Risk Factors
  
 ITEM 2: Unregistered Sales of Equity Securities and Use of Proceeds
  
 ITEM 3: Defaults Upon Senior Securities
   22




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##### Table of Contents



ITEM 4: Submission of Matters to a Vote of Security Holders
   Name
    
    Votes For
    
    
    WithheldLawrence E. Baumgartner
    
    
    2,341,725
    
    
    
    2,601R. H. Dillon
    
    
    2,341,181
    
    
    
    3,145David P. Lauer
    
    
    2,277,311
    
    
    
    67,015Dr. James G. Mathias
    
    
    2,321,121
    
    
    
    23,205David R. Meuse
    
    
    2,331,408
    
    
    
    12,918Diane D. Reynolds
    
    
    2,327,110
    
    
    
    17,216Donald B. Shackelford
    
    
    2,310,968
    
    
    
    33,358Tim Eriksen
    
    
    8,414
    
    
    
    
 
 ITEM 5: Other Information
   23




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##### Table of Contents



ITEM 6: Exhibits
 3.1
    
    
    Amended and Restated Articles of Incorporation of the Company. (Incorporated by
reference from Form 8-K Current Report for the event on May 2, 2002 filed with the SEC
on May 7, 2002; File No. 000-24498.)3.2
    
    
    Code of Regulations of the Company. (Incorporated by reference from Form 8-K Current
Report for the event on May 2, 2002 filed with the SEC on May 7, 2002; File No.
000-24498.)31.1
    
    
    Certification of Chief Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a).31.2
    
    
    Certification of Chief Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a).32.1
    
    
    Section 1350 Certifications.
  24




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##### Table of Contents



SIGNATURES
   Date
    
    Title
    
    SignatureAugust 7, 2009
    
    President, Chief Executive Officer, and a Director
    
    /s/ R. H. DillonR. H. DillonAugust 7, 2009
    
    Chief Financial Officer, Treasurer, and Secretary
    
    /s/ James F. LairdJames F. Laird
  25




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##### Table of Contents



EXHIBIT INDEX
 31.1
    
    
    Certification of Chief Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a).31.2
    
    
    Certification of Chief Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a).32.1
    
    
    Section 1350 Certifications.
  26