##### 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 September 30, 2010
 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
 Yes o No o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o
 Yes: o No: 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
    
    
    14Item 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
    
    
    23Item 4. (Removed and Reserved)
    
    
    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
 9/30/2010
    
    
    12/31/2009(Unaudited)ASSETSCash and cash equivalents
    
    $
    28,840,495
    
    
    $
    11,513,194Investment portfolio
    
    
    13,562,355
    
    
    
    16,429,967Accounts receivable
    
    
    8,316,700
    
    
    
    10,144,004Prepaid expenses
    
    
    780,200
    
    
    
    724,825Furniture and equipment, net of depreciation, and other assets
    
    
    982,151
    
    
    
    1,171,670Income tax receivable
    
    
    403,492
    
    
    
    Deferred taxes
    
    
    940,447
    
    
    
    520,965Total assets
    
    $
    53,825,840
    
    
    $
    40,504,625LIABILITIES AND SHAREHOLDERS EQUITYLiabilitiesAccounts payable and accrued expenses
    
    $
    2,282,006
    
    
    $
    4,465,011Accrued incentive compensation
    
    
    12,985,000
    
    
    
    12,300,650Dividend payable
    
    
    36,263,591
    
    
    
    Income tax payable
    
    
    
    
    
    
    758,257Total liabilities
    
    
    51,530,597
    
    
    
    17,523,918Commitments and contingencies
    
    
    
    
    
    
    Shareholders EquityCommon stock, no par value7,000,000 shares authorized; 
2,789,507 issued and outstanding at September 30, 2010;
2,677,577 issued and outstanding at December 31, 2009
    
    
    33,892,870
    
    
    
    26,922,484Preferred stock, undesignated, 1,000,000 shares
authorized and unissued
    
    
    
    
    
    
    Deferred compensation
    
    
    (7,401,541
    )
    
    
    (8,070,697
    )Retained earnings (deficit)
    
    
    (24,196,086
    )
    
    
    4,128,920Total shareholders equity
    
    
    2,295,243
    
    
    
    22,980,707Total liabilities and shareholders equity
    
    $
    53,825,840
    
    
    $
    40,504,625Book value per share
    
    $
    0.82
    
    
    $
    8.58
   3




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##### Table of Contents



Diamond Hill Investment Group, Inc.  Consolidated Statements of Income (unaudited)
 Three Months Ended September 30,
    
    
    Nine Months Ended September 30,2010
    
    
    2009
    
    
    2010
    
    
    2009REVENUES:Investment advisory
    
    $
    12,215,574
    
    
    $
    9,516,666
    
    
    $
    35,629,445
    
    
    $
    25,773,460Mutual fund administration, net
    
    
    1,827,426
    
    
    
    1,854,978
    
    
    
    5,558,699
    
    
    
    4,075,351Total revenue
    
    
    14,043,000
    
    
    
    11,371,644
    
    
    
    41,188,144
    
    
    
    29,848,811OPERATING EXPENSES:Compensation and related costs
    
    
    8,095,735
    
    
    
    6,744,380
    
    
    
    23,707,288
    
    
    
    17,267,784General and administrative
    
    
    856,058
    
    
    
    809,375
    
    
    
    2,539,120
    
    
    
    2,201,294Sales and marketing
    
    
    143,689
    
    
    
    157,539
    
    
    
    481,709
    
    
    
    439,971Third party distribution
    
    
    238,890
    
    
    
    201,259
    
    
    
    756,546
    
    
    
    665,672Mutual fund administration
    
    
    509,598
    
    
    
    610,522
    
    
    
    1,473,933
    
    
    
    1,765,567Total operating expenses
    
    
    9,843,970
    
    
    
    8,523,075
    
    
    
    28,958,596
    
    
    
    22,340,288NET OPERATING INCOME
    
    
    4,199,030
    
    
    
    2,848,569
    
    
    
    12,229,548
    
    
    
    7,508,523Investment return
    
    
    1,169,916
    
    
    
    2,064,283
    
    
    
    231,130
    
    
    
    4,517,328INCOME BEFORE TAXES
    
    
    5,368,946
    
    
    
    4,912,852
    
    
    
    12,460,678
    
    
    
    12,025,851Income tax provision
    
    
    (1,930,540
    )
    
    
    (1,708,934
    )
    
    
    (4,522,093
    )
    
    
    (4,154,206
    )NET INCOME
    
    $
    3,438,406
    
    
    $
    3,203,918
    
    
    $
    7,938,585
    
    
    $
    7,871,645Earnings per shareBasic
    
    $
    1.24
    
    
    $
    1.23
    
    
    $
    2.88
    
    
    $
    3.06Diluted
    
    $
    1.24
    
    
    $
    1.23
    
    
    $
    2.88
    
    
    $
    3.05Weighted average shares outstandingBasic
    
    
    2,779,345
    
    
    
    2,607,129
    
    
    
    2,757,539
    
    
    
    2,572,006Diluted
    
    
    2,779,345
    
    
    
    2,611,933
    
    
    
    2,759,066
    
    
    
    2,576,657
   4




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Diamond Hill Investment Group, Inc.  Consolidated Statements of Cash Flow (unaudited)
 Nine Months Ended September 30,2010
    
    
    2009CASH FLOWS FROM OPERATING ACTIVITIES:Net Income
    
    $
    7,938,585
    
    
    $
    7,871,645Adjustments to reconcile net income to net cash provided by
(used in) operating activities:Depreciation on furniture and equipment
    
    
    243,161
    
    
    
    188,034Amortization of deferred compensation
    
    
    1,767,787
    
    
    
    1,241,008(Increase) decrease in accounts receivable
    
    
    1,827,304
    
    
    
    (2,393,390
    )Change in deferred taxes
    
    
    (449,201
    )
    
    
    1,112,086Noncash director fee expense
    
    
    179,836
    
    
    
    150,062Investment (gain) loss, net
    
    
    706,745
    
    
    
    (2,445,832
    )Increase in accrued liabilities
    
    
    3,504,491
    
    
    
    2,614,770Other changes in assets and liabilities
    
    
    (1,175,670
    )
    
    
    2,500,790Net cash provided by operating activities
    
    
    14,543,038
    
    
    
    10,839,173CASH FLOWS FROM INVESTING ACTIVITIES:Purchase of property and equipment
    
    
    (53,642
    )
    
    
    (575,228
    )Cost of investments purchased and other portfolio activity
    
    
    (889,133
    )
    
    
    (9,896,273
    )Proceeds from sale of investments
    
    
    3,050,000
    
    
    
    10,460,937Net cash provided by
(used in) investing activities
    
    
    2,107,225
    
    
    
    (10,564
    )CASH FLOWS FROM FINANCING ACTIVITIES:Payment of taxes withheld on employee stock transactions
    
    
    (11,360
    )
    
    
    (26,865
    )Proceeds from common stock issuance
    
    
    688,398
    
    
    
    626,037Net cash provided by financing activities
    
    
    677,038
    
    
    
    599,172CASH AND CASH EQUIVALENTSNet change during the period
    
    
    17,327,301
    
    
    
    11,427,781At beginning of period
    
    
    11,513,194
    
    
    
    15,788,560At end of period
    
    $
    28,840,495
    
    
    $
    27,216,341Cash paid during the period for:Interest
    
    $
    
    
    
    $
    Income taxes
    
    
    6,088,700
    
    
    
    1,655,900Noncash transactions during the period for:Common stock issued as incentive compensation
    
    
    5,003,146
    
    
    
    4,852,216Dividend payable
    
    
    36,263,591
    
    
    
    
   5




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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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Significant Accounting Policies (Continued)
 Accounts Receivable
  Valuation of Investment Portfolio
   Limited Partnership Interests
      7




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Significant Accounting Policies (Continued)
 Furniture and Equipment
  Revenue Recognition  General
  Revenue Recognition  Performance Incentive Revenue
  As Of September 30,2010
    
    
    2009AUM  Contractual Period Ends Quarterly
    
    $
    105,112,498
    
    
    $
    106,500,933AUM  Contractual Period Ends Annually
    
    
    164,760,591
    
    
    
    154,601,503Total AUM Subject to Performance Incentive
    
    $
    269,873,089
    
    
    $
    261,102,436
 For The Three Months Ending Sept. 30,
    
    
    For The Nine Months Ending Sept. 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Performance Incentive Fees  Method 1
    
    $
    3,934
    
    
    $
    
    
    
    $
    3,934
    
    
    $
    4,645Performance Incentive Fees  Method 2
    
    $
    37,823
    
    
    $
    (20,620
    )
    
    $
    37,823
    
    
    $
    179,406
 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 Sept. 30,
    
    
    Nine Months Ended Sept. 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Mutual fund administration:Administration revenue, gross
    
    $
    2,618,017
    
    
    $
    2,545,453
    
    
    $
    8,180,583
    
    
    $
    6,535,52012b-1/service fees and commission revenue
received from fund clients
    
    
    1,903,486
    
    
    
    1,770,999
    
    
    
    6,223,147
    
    
    
    3,113,62812b-1/service fees and commission expense
payments to third parties
    
    
    (1,903,486
    )
    
    
    (1,770,999
    )
    
    
    (6,223,147
    )
    
    
    (3,113,628
    )Fund related expense
    
    
    (824,032
    )
    
    
    (709,395
    )
    
    
    (2,700,106
    )
    
    
    (2,408,964
    )Revenue, net of fund related expenses
    
    
    1,793,985
    
    
    
    1,836,058
    
    
    
    5,480,477
    
    
    
    4,126,556C-Share financing:Broker commission advance repayments
    
    
    179,531
    
    
    
    108,028
    
    
    
    500,895
    
    
    
    631,497Broker commission amortization
    
    
    (146,090
    )
    
    
    (89,108
    )
    
    
    (422,673
    )
    
    
    (682,702
    )Financing activity, net
    
    
    33,441
    
    
    
    18,920
    
    
    
    78,222
    
    
    
    (51,205
    )Mutual fund administration revenue, net
    
    $
    1,827,426
    
    
    $
    1,854,978
    
    
    $
    5,558,699
    
    
    $
    4,075,351
 Third Party Distribution Expense
  Income Taxes
   9




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Significant Accounting Policies (Continued)
 Income Taxes (Continued)
  Earnings Per Share
  Investment Portfolio
  September 30,
    
    
    December 31,2010
    
    
    2009Diamond Hill Small Cap Fund
    
    $
    192,292
    
    
    $
    709,881Diamond Hill Small-Mid Cap Fund
    
    
    194,585
    
    
    
    785,714Diamond Hill Large Cap Fund
    
    
    194,085
    
    
    
    684,554Diamond Hill Select Fund
    
    
    201,960
    
    
    
    705,790Diamond Hill Long-Short Fund
    
    
    196,888
    
    
    
    606,800Diamond Hill Strategic Income Fund
    
    
    199,116
    
    
    
    615,431Diamond Hill Investment Partners, L.P.
    
    
    2,589,047
    
    
    
    2,653,856Diamond Hill Investment Partners II, L.P.
    
    
    2,574,785
    
    
    
    2,649,665Diamond Hill Research Partners, L.P.
    
    
    7,219,597
    
    
    
    7,018,276Total Investment Portfolio
    
    $
    13,562,355
    
    
    $
    16,429,967
  10




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##### Table of Contents



Investment Portfolio (Continued)
  September 30,
    
    
    December 31,2010
    
    
    2009Total partnership assets
    
    $
    155,518,800
    
    
    $
    188,716,374Total partnership liabilities
    
    
    18,641,224
    
    
    
    40,583,059Net partnership assets
    
    
    136,877,576
    
    
    
    148,133,315Net partnership income (loss)
    
    
    (4,918,663
    )
    
    
    35,193,357DHCMs portion of net assets
    
    
    12,383,429
    
    
    
    12,321,797DHCMs portion of net income
    
    
    61,631
    
    
    
    4,634,391
  Capital Stock
 Common Shares
  Authorization of Preferred Shares
  Stock-Based Compensation
 Equity Incentive Plans
 2005 Employee and Director Equity Incentive Plan
  401(k) Plan
   11




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##### Table of Contents



Stock-Based Compensation (Continued)
 Stock Options and Warrants
  WarrantsWeighted AverageShares
    
    
    Exercise PriceOutstanding December 31, 2008
    
    
    10,000
    
    
    $
    13.00Exercisable December 31, 2008
    
    
    10,000
    
    
    $
    13.00Granted
    
    
    
    
    
    
    Expired / Forfeited
    
    
    
    
    
    
    Exercised
    
    
    4,000
    
    
    
    16.88Outstanding September 30, 2009
    
    
    6,000
    
    
    $
    10.42Exercisable September 30, 2009
    
    
    6,000
    
    
    $
    10.42Outstanding December 31, 2009
    
    
    6,000
    
    
    $
    10.42Exercisable December 31, 2009
    
    
    6,000
    
    
    $
    10.42Granted
    
    
    
    
    
    
    Expired / Forfeited
    
    
    4,000
    
    
    
    10.00Exercised
    
    
    2,000
    
    
    
    11.25Outstanding September 30, 2010
    
    
    
    
    
    $
    Exercisable September 30, 2010
    
    
    
    
    
    $
    
 Operating Leases
  2010
    
    2011
    
    
    2012
    
    
    2013
    
    
    2014
    
    
    Thereafter$
    90,000
    
    $
    340,000
    
    
    $
    348,000
    
    
    $
    356,000
    
    
    $
    358,000
    
    
    $
    571,000
   12




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Income Taxes
  Earnings Per Share
  Three Months Ended September 30,
    
    
    Nine Months Ended September 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Basic and Diluted net income
    
    $
    3,438,406
    
    
    $
    3,203,918
    
    
    $
    7,938,585
    
    
    $
    7,871,645Weighted average number of outstanding sharesBasic
    
    
    2,779,345
    
    
    
    2,607,129
    
    
    
    2,757,539
    
    
    
    2,572,006Diluted
    
    
    2,779,345
    
    
    
    2,611,933
    
    
    
    2,759,066
    
    
    
    2,576,657Earnings per shareBasic
    
    $
    1.24
    
    
    $
    1.23
    
    
    $
    2.88
    
    
    $
    3.06Diluted
    
    $
    1.24
    
    
    $
    1.23
    
    
    $
    2.88
    
    
    $
    3.05
 Regulatory Requirements
  September 30,
    
    
    December 31,2010
    
    
    2009Net Capital
    
    $
    157,509
    
    
    $
    279,718Minimum Net Capital Requirement
    
    
    62,814
    
    
    
    132,199Ratio of Aggregate Indebtedness
to Net Capital
    
    
    5.9819 to 1
    
    
    
    7.09 to 1
 Commitments and Contingencies
   13




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ITEM 2: Managements Discussion and Analysis of Financial Condition and Results of Operations
 Forward-looking Statements
  General
     14




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##### Table of Contents



Assets Under Management
  Assets Under Management by ProductAs of September 30,(in millions)
    
    2010
    
    
    2009
    
    
    % ChangeMutual funds
    
    $
    4,026
    
    
    $
    3,317
    
    
    
    21
    %Separate accounts
    
    
    2,851
    
    
    
    1,957
    
    
    
    46
    %Private investment funds
    
    
    203
    
    
    
    215
    
    
    
    -6
    %Total
    
    $
    7,080
    
    
    $
    5,489
    
    
    
    29
    %
 Assets Under Management by ObjectiveAs of September 30,(in millions)
    
    2010
    
    
    2009
    
    
    % ChangeSmall
    
    $
    803
    
    
    $
    577
    
    
    
    39
    %Small-Mid Cap
    
    
    167
    
    
    
    139
    
    
    
    20
    %Large Cap
    
    
    3,296
    
    
    
    2,149
    
    
    
    53
    %Select
    
    
    398
    
    
    
    359
    
    
    
    11
    %Long-Short
    
    
    2,235
    
    
    
    2,115
    
    
    
    6
    %Strategic and fixed income
    
    
    181
    
    
    
    150
    
    
    
    21
    %Total
    
    $
    7,080
    
    
    $
    5,489
    
    
    
    29
    %
 Change in Assets Under ManagementFor the Nine Months Ended September 30,(in millions)
    
    2010
    
    
    2009AUM at beginning of the period
    
    $
    6,283
    
    
    $
    4,510Net cash inflows (outflows)mutual funds
    
    
    415
    
    
    
    (229
    )separate accounts
    
    
    385
    
    
    
    423private investment funds
    
    
    (9
    )
    
    
    (46
    )791
    
    
    
    148Net market appreciation and income
    
    
    6
    
    
    
    831Increase during the period
    
    
    797
    
    
    
    979AUM at end of the period
    
    $
    7,080
    
    
    $
    5,489
  15




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Consolidated Results of Operations
  Three Months Ended September 30,
    
    
    Nine Months Ended September 30,(in thousands, except per share amounts)
    
    2010
    
    
    2009
    
    
    % Change
    
    
    2010
    
    
    2009
    
    
    % ChangeNet operating income after tax (a)
    
    $
    2,350
    
    
    $
    1,858
    
    
    
    26
    %
    
    $
    7,790
    
    
    $
    4,915
    
    
    
    58
    %Net income
    
    $
    3,438
    
    
    $
    3,204
    
    
    
    7
    %
    
    $
    7,938
    
    
    $
    7,872
    
    
    
    1
    %Net operating income after tax per share(a)Basic
    
    $
    0.85
    
    
    $
    0.71
    
    
    
    19
    %
    
    $
    2.82
    
    
    $
    1.91
    
    
    
    48
    %Diluted
    
    $
    0.85
    
    
    $
    0.71
    
    
    
    19
    %
    
    $
    2.82
    
    
    $
    1.91
    
    
    
    48
    %Net income per shareBasic
    
    $
    1.24
    
    
    $
    1.23
    
    
    
    1
    %
    
    $
    2.88
    
    
    $
    3.06
    
    
    
    -6
    %Diluted
    
    $
    1.24
    
    
    $
    1.23
    
    
    
    1
    %
    
    $
    2.88
    
    
    $
    3.06
    
    
    
    -6
    %Weighted average shares outstandingBasic
    
    
    2,779
    
    
    
    2,607
    
    
    
    
    
    
    
    2,758
    
    
    
    2,572Diluted
    
    
    2,779
    
    
    
    2,612
    
    
    
    
    
    
    
    2,759
    
    
    
    2,577
 (a)
    
    - Net operating income after tax is a non-GAAP performance measure. See Use of Supplemental
Data as Non-GAAP Performance Measure on page 20 of this report. Three Months Ended September 30, 2010 compared with Three Months Ended September 30, 2009
  Revenue
 Three Months EndedSeptember 30,(in thousands)
    
    2010
    
    
    2009
    
    
    % ChangeInvestment advisory
    
    $
    12,216
    
    
    $
    9,517
    
    
    
    28
    %Mutual fund administration, net
    
    
    1,827
    
    
    
    1,855
    
    
    
    -2
    %Total
    
    $
    14,043
    
    
    $
    11,372
    
    
    
    23
    %
   16




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##### Table of Contents



Investment Advisory Fees.
 Mutual Fund Administration Fees.
 Expenses
 Three Months EndedSeptember 30,(in thousands)
    
    2010
    
    
    2009
    
    
    % ChangeCompensation and related costs
    
    $
    8,096
    
    
    $
    6,744
    
    
    
    20
    %General and administrative
    
    
    856
    
    
    
    809
    
    
    
    6
    %Sales and marketing
    
    
    144
    
    
    
    158
    
    
    
    -9
    %Third party distribution
    
    
    239
    
    
    
    201
    
    
    
    19
    %Mutual fund administration
    
    
    509
    
    
    
    611
    
    
    
    -17
    %Total
    
    $
    9,844
    
    
    $
    8,523
    
    
    
    15
    %
 Compensation and Related Costs.
 General and Administrative.
 Sales and Marketing.
 Third Party Distribution.
  17




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##### Table of Contents



Mutual Fund Administration.
 Nine Months Ended September 30, 2010 compared with Nine Months Ended September 30, 2009
  Revenue
 Nine Months EndedSeptember 30,(in thousands)
    
    2010
    
    
    2009
    
    
    % ChangeInvestment advisory
    
    $
    35,629
    
    
    $
    25,774
    
    
    
    38
    %Mutual fund administration, net
    
    
    5,559
    
    
    
    4,075
    
    
    
    36
    %Total
    
    $
    41,188
    
    
    $
    29,849
    
    
    
    38
    %
  Investment Advisory Fees.
 Mutual Fund Administration Fees.
  18




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##### Table of Contents



Expenses
 Nine Months EndedSeptember 30,(in thousands)
    
    2010
    
    
    2009
    
    
    % ChangeCompensation and related costs
    
    $
    23,707
    
    
    $
    17,268
    
    
    
    37
    %General and administrative
    
    
    2,539
    
    
    
    2,201
    
    
    
    15
    %Sales and marketing
    
    
    482
    
    
    
    440
    
    
    
    10
    %Third party distribution
    
    
    757
    
    
    
    666
    
    
    
    14
    %Mutual fund administration
    
    
    1,474
    
    
    
    1,765
    
    
    
    -16
    %Total
    
    $
    28,959
    
    
    $
    22,340
    
    
    
    30
    %
 Compensation and Related Costs.
 General and Administrative.
 Sales and Marketing.
 Third Party Distribution.
 Mutual Fund Administration.
  19




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##### Table of Contents



Beacon Hill Fund Services
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,(in thousands)
    
    2010
    
    
    2009
    
    
    2010
    
    
    2009Revenue1
    
    $
    375
    
    
    $
    330
    
    
    $
    1,158
    
    
    $
    571Expenses
    
    
    592
    
    
    
    473
    
    
    
    1,810
    
    
    
    1,393Net loss
    
    $
    (217
    )
    
    $
    (143
    )
    
    $
    (652
    )
    
    $
    (822
    )
 1
    
    Beacon Hills revenue for the three months ended September 30, 2010 and 2009
includes $119 thousand and $42 thousand, respectively, of inter-company revenue earned from
services provided to DHCM. Beacon Hills revenue for the nine months ended September 30, 2010
and 2009 includes $360 thousand and $92 thousand, respectively, of inter-company revenue
earned from services provided to DHCM. These amounts have been eliminated from the
Consolidated Statements of Income. Liquidity and Capital Resources
    Use of Supplemental Data as Non-GAAP Performance Measure  Net Operating Income After Tax
   20




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##### Table of Contents



Three Months Ended Sept. 30,
    
    
    Nine Months Ended Sept. 30,(in thousands)
    
    2010
    
    
    2009
    
    
    2010
    
    
    2009Net Operating Income, GAAP basis
    
    $
    4,199
    
    
    $
    2,849
    
    
    $
    12,230
    
    
    $
    7,509Non-GAAP Adjustments:Tax Provision excluding impact of Investment Return
    
    
    1,849
    
    
    
    991
    
    
    
    4,440
    
    
    
    2,594Net operating income after tax, non-GAAP basis
    
    
    2,350
    
    
    
    1,858
    
    
    
    7,790
    
    
    
    4,915Net operating income after tax per basic share, non-GAAP basis
    
    $
    0.85
    
    
    $
    0.71
    
    
    $
    2.82
    
    
    $
    1.91Net operating income after tax per diluted share, non-GAAP basis
    
    $
    0.85
    
    
    $
    0.71
    
    
    $
    2.82
    
    
    $
    1.91Basic weighted average shares outstanding, GAAP basis
    
    
    2,779
    
    
    
    2,607
    
    
    
    2,758
    
    
    
    2,572Diluted weighted average shares outstanding, GAAP basis
    
    
    2,779
    
    
    
    2,612
    
    
    
    2,759
    
    
    
    2,576
 Off-Balance Sheet Arrangements
  Critical Accounting Policies and Estimates
 
  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
  Total Number
    
    
    Maximum Numberof Shares Purchased
    
    
    of Shares That Mayas part of a Publicly
    
    
    Yet Be PurchasedTotal Number
    
    
    Average Price
    
    
    Announced Plans
    
    
    Under the Plans orPeriod
    
    of Shares Purchased
    
    
    Paid Per Share
    
    
    or Programs
    
    
    Programs (1)July 1,
2010 through 
July 31, 2010
    
    
    
    
    
    
    
    
    
    
    16,105
    
    
    
    333,895August 1,
2010 through 
August 31, 2010
    
    
    
    
    
    
    
    
    
    
    16,105
    
    
    
    333,895September 1, 2010 through
September 30, 2010
    
    
    
    
    
    
    
    
    
    
    16,105
    
    
    
    333,895
 (1)
    
    - The Companys current share repurchase program was announced on August 9, 2007. The board of
directors authorized management to repurchase up to 350,000 shares of its common stock in the open
market and in private transactions in accordance with applicable securities laws. The Companys
stock repurchase program is not subject to an expiration date.  22




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##### Table of Contents



ITEM 3: Defaults Upon Senior Securities
  
 ITEM 4: (Removed and Reserved).
 
 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
    
    SignatureNovember 5, 2010
    
    President, Chief Executive Officer,
    
    /s/ R. H. Dillonand a Director
    
    R. H. DillonNovember 5, 2010
    
    Chief Financial Officer, Treasurer,
    
    /s/ James F. Lairdand Secretary
    
    James F. Laird
  25