##### 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, 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
 (614) 255-3333
 þ o
 o þ
  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
    
    
    22Item 5. Other Information
    
    
    22Item 6. Exhibits
    
    
    23Signatures
    
    
    24Exhibit 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
 9/30/2009
    
    
    12/31/2008(Unaudited)ASSETSCash and cash equivalents
    
    $
    27,216,341
    
    
    $
    15,788,560Investment portfolio
    
    
    19,066,779
    
    
    
    17,185,611Accounts receivable
    
    
    7,732,948
    
    
    
    5,339,558Prepaid expenses
    
    
    702,817
    
    
    
    1,067,388Fixed assets, net of depreciation, and other assets
    
    
    1,222,508
    
    
    
    835,314Income tax receivable
    
    
    356,566
    
    
    
    2,334,836Deferred taxes
    
    
    863,745
    
    
    
    1,989,016Total assets
    
    $
    57,161,704
    
    
    $
    44,540,283LIABILITIES AND SHAREHOLDERS EQUITYLiabilitiesAccounts payable and accrued expenses
    
    $
    3,596,950
    
    
    $
    1,294,396Accrued incentive compensation
    
    
    8,460,000
    
    
    
    13,000,000Total liabilities
    
    
    12,056,950
    
    
    
    14,294,396Commitments and contingencies
    
    
    
    
    
    
    Shareholders EquityCommon stock, no par value 
7,000,000 shares authorized;

2,612,214 issued and outstanding at September 30, 2009;

2,447,299 issued and outstanding at December 31, 2008
    
    
    22,737,753
    
    
    
    16,233,501Preferred stock, undesignated, 1,000,000 shares
authorized and unissued
    
    
    
    
    
    
    Deferred compensation
    
    
    (4,425,245
    )
    
    
    (4,908,215
    )Retained earnings
    
    
    26,792,246
    
    
    
    18,920,601Total shareholders equity
    
    
    45,104,754
    
    
    
    30,245,887Total liabilities and shareholders equity
    
    $
    57,161,704
    
    
    $
    44,540,283Tangible book value per share
    
    $
    17.27
    
    
    $
    12.36
   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 30,2009
    
    
    2008
    
    
    2009
    
    
    2008REVENUES:Investment advisory
    
    $
    9,516,666
    
    
    $
    11,577,006
    
    
    $
    25,773,460
    
    
    $
    31,845,121Mutual fund administration, net
    
    
    1,854,978
    
    
    
    1,770,894
    
    
    
    4,075,351
    
    
    
    4,801,714Total revenue
    
    
    11,371,644
    
    
    
    13,347,900
    
    
    
    29,848,811
    
    
    
    36,646,835OPERATING EXPENSES:Compensation and related costs
    
    
    6,744,380
    
    
    
    7,125,709
    
    
    
    17,267,784
    
    
    
    19,582,071General and administrative
    
    
    809,375
    
    
    
    789,248
    
    
    
    2,201,294
    
    
    
    1,946,986Sales and marketing
    
    
    157,539
    
    
    
    169,981
    
    
    
    439,971
    
    
    
    440,911Third party distribution
    
    
    201,259
    
    
    
    381,211
    
    
    
    665,672
    
    
    
    1,173,037Mutual fund administration
    
    
    610,522
    
    
    
    659,758
    
    
    
    1,765,567
    
    
    
    1,700,639Total operating expenses
    
    
    8,523,075
    
    
    
    9,125,907
    
    
    
    22,340,288
    
    
    
    24,843,644NET OPERATING INCOME
    
    
    2,848,569
    
    
    
    4,221,993
    
    
    
    7,508,523
    
    
    
    11,803,191Investment return
    
    
    2,064,283
    
    
    
    (2,319,263
    )
    
    
    4,517,328
    
    
    
    (4,025,376
    )INCOME BEFORE TAXES
    
    
    4,912,852
    
    
    
    1,902,730
    
    
    
    12,025,851
    
    
    
    7,777,815Income tax provision
    
    
    (1,708,934
    )
    
    
    (678,339
    )
    
    
    (4,154,206
    )
    
    
    (2,788,362
    )NET INCOME
    
    $
    3,203,918
    
    
    $
    1,224,391
    
    
    $
    7,871,645
    
    
    $
    4,989,453Earnings per shareBasic
    
    $
    1.23
    
    
    $
    0.50
    
    
    $
    3.06
    
    
    $
    2.09Diluted
    
    $
    1.23
    
    
    $
    0.50
    
    
    $
    3.05
    
    
    $
    2.08Weighted average shares outstandingBasic
    
    
    2,607,129
    
    
    
    2,430,772
    
    
    
    2,572,006
    
    
    
    2,383,621Diluted
    
    
    2,611,933
    
    
    
    2,444,340
    
    
    
    2,576,657
    
    
    
    2,396,999
   4




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##### Table of Contents



Diamond Hill Investment Group, Inc.
Consolidated Statements of Cash Flow (unaudited)
 Nine Months Ended September 30,2009
    
    
    2008CASH FLOWS FROM OPERATING ACTIVITIES:Net Income
    
    $
    7,871,645
    
    
    $
    4,989,453Adjustments to reconcile net income to net cash provided by
(used in) operating activities:Depreciation on furniture and equipment
    
    
    188,034
    
    
    
    131,610Amortization of deferred compensation
    
    
    1,241,008
    
    
    
    2,287,358(Increase) in accounts receivable
    
    
    (2,393,390
    )
    
    
    (1,932,008
    )Change in deferred taxes
    
    
    1,112,086
    
    
    
    (2,484,624
    )Stock option expense
    
    
    
    
    
    
    2,233Noncash director fee expense
    
    
    150,062
    
    
    
    167,281Investment (gain) loss, net
    
    
    (2,445,832
    )
    
    
    3,275,157Increase in accrued liabilities
    
    
    2,614,770
    
    
    
    7,784,979Other changes in assets and liabilities
    
    
    2,500,790
    
    
    
    (390,528
    )Net cash provided by operating activities
    
    
    10,839,173
    
    
    
    13,830,911CASH FLOWS FROM INVESTING ACTIVITIES:Purchase of property and equipment
    
    
    (575,228
    )
    
    
    (338,957
    )Cost of investments purchased and other portfolio activity
    
    
    (9,896,273
    )
    
    
    (10,380,729
    )Proceeds from sale of investments
    
    
    10,460,937
    
    
    
    13,704,181Net cash provided by (used in) investing activities
    
    
    (10,564
    )
    
    
    2,984,495CASH FLOWS FROM FINANCING ACTIVITIES:Payment for repurchase of common shares
    
    
    
    
    
    
    (862,115
    )Payment of taxes withheld on employee stock transactions
    
    
    (26,865
    )
    
    
    (167,335
    )Proceeds from common stock issuance
    
    
    626,037
    
    
    
    1,301,554Net cash provided by financing activities
    
    
    599,172
    
    
    
    272,104CASH AND CASH EQUIVALENTSNet change during the period
    
    
    11,427,781
    
    
    
    17,087,510At beginning of period
    
    
    15,788,560
    
    
    
    11,783,278At end of period
    
    $
    27,216,341
    
    
    $
    28,870,788Cash paid during the period for:Interest
    
    
    
    
    
    
    Income taxes
    
    
    1,655,900
    
    
    
    1,905,000Noncash 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 September 30,2009
    
    
    2008AUM  Contractual Period Ends Quarterly
    
    $
    106,500,933
    
    
    $
    249,888,929AUM  Contractual Period Ends Annually
    
    
    154,601,503
    
    
    
    299,504,260Total AUM Subject to Performance Incentive
    
    $
    261,102,436
    
    
    $
    549,393,189
 For The Three Months Ending
    
    
    For The Nine Months EndingSeptember 30,
    
    
    September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Performance Incentive Fees  Method 1
    
    $
    
    
    
    $
    
    
    
    $
    4,645
    
    
    $
    378,881Performance Incentive Fees  Method 2
    
    $
    (20,620
    )
    
    $
    
    
    
    $
    179,406
    
    
    $
    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 September 30,
    
    
    Nine Months Ended September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Mutual fund administration:Administration Revenue, gross
    
    $
    2,545,453
    
    
    $
    2,647,960
    
    
    $
    6,535,520
    
    
    $
    7,161,02412b-1/service fees and commission
revenue received from Fund clients
    
    
    1,770,999
    
    
    
    
    
    
    
    3,113,628
    
    
    
    12b-1/service fees and commission
expense payments to third parties
    
    
    (1,770,999
    )
    
    
    
    
    
    
    (3,113,628
    )
    
    
    Fund related expense
    
    
    (709,395
    )
    
    
    (892,451
    )
    
    
    (2,408,964
    )
    
    
    (2,378,500
    )Revenue, net of fund related expenses
    
    
    1,836,058
    
    
    
    1,755,509
    
    
    
    4,126,556
    
    
    
    4,782,524DHCM C-Share financing:Broker commission advance repayments
    
    
    108,028
    
    
    
    502,519
    
    
    
    631,497
    
    
    
    1,333,370Broker commission amortization
    
    
    (89,108
    )
    
    
    (487,134
    )
    
    
    (682,702
    )
    
    
    (1,314,180
    )Financing activity, net
    
    
    18,920
    
    
    
    15,385
    
    
    
    (51,205
    )
    
    
    19,190Mutual fund administration revenue, net
    
    $
    1,854,978
    
    
    $
    1,770,894
    
    
    $
    4,075,351
    
    
    $
    4,801,714
 Third Party Distribution Expense
  Income Taxes
    9




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##### Table of Contents



Significant Accounting Policies (Continued)
 Earnings Per Share
  Reclassifications
  Investment Portfolio
  September 30,
    
    
    December 31,2009
    
    
    2008Diamond Hill Small Cap Fund
    
    $
    675,398
    
    
    $
    Diamond Hill Small-Mid Cap Fund
    
    
    738,864
    
    
    
    Diamond Hill Large Cap Fund
    
    
    639,418
    
    
    
    Diamond Hill Select Fund
    
    
    649,452
    
    
    
    Diamond Hill Long-Short Fund
    
    
    571,323
    
    
    
    Diamond Hill Strategic Income Fund
    
    
    602,673
    
    
    
    Diamond Hill Investment Partners, L.P.
    
    
    3,807,308
    
    
    
    7,494,929Diamond Hill Investment Partners II, L.P.
    
    
    4,705,356
    
    
    
    3,767,480Diamond Hill Research Partners, L.P.
    
    
    6,676,987
    
    
    
    Other marketable equity securities
    
    
    
    
    
    
    5,923,202Total Investment Portfolio
    
    $
    19,066,779
    
    
    $
    17,185,611
  September 30,
    
    
    December 31,2009
    
    
    2008Total partnership assets
    
    $
    187,781,843
    
    
    $
    196,021,226Total partnership liabilities
    
    
    41,112,728
    
    
    
    33,056,747Net partnership assets
    
    
    146,669,115
    
    
    
    162,964,479Net partnership income (loss)
    
    
    27,670,563
    
    
    
    (75,625,562
    )DHCMs portion of net assets
    
    
    15,189,651
    
    
    
    11,262,409DHCMs portion of net income (loss)
    
    
    4,002,243
    
    
    
    (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
    
    
    85,500
    
    
    
    8.95
    
    
    
    3,000
    
    
    
    56.67Outstanding September 30, 2008
    
    
    7,000
    
    
    $
    28.10
    
    
    
    10,400
    
    
    $
    13.35Exercisable September 30, 2008
    
    
    7,000
    
    
    $
    28.10
    
    
    
    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 September 30, 2009
    
    
    
    
    
    $
    
    
    
    
    6,000
    
    
    $
    10.42Exercisable September 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
    
    
    0.41
    
    
    
    4,000
    
    
    $
    11.252,000
    
    
    0.61
    
    
    
    2,000
    
    
    
    8.756,000
    
    
    0.48
    
    
    
    6,000
  Operating Leases
  2009
    
    2010
    
    
    2011
    
    
    2012
    
    
    2013
    
    
    Thereafter$
    89,000
    
    $
    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 September 30,
    
    
    Nine Months Ended September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Basic and Diluted net income
    
    $
    3,203,918
    
    
    $
    1,224,391
    
    
    $
    7,871,645
    
    
    $
    4,989,453Weighted average number
of outstanding sharesBasic
    
    
    2,607,129
    
    
    
    2,430,772
    
    
    
    2,572,006
    
    
    
    2,383,621Diluted
    
    
    2,611,933
    
    
    
    2,444,340
    
    
    
    2,576,657
    
    
    
    2,396,999Earnings per shareBasic
    
    $
    1.23
    
    
    $
    0.50
    
    
    $
    3.06
    
    
    $
    2.09Diluted
    
    $
    1.23
    
    
    $
    0.50
    
    
    $
    3.05
    
    
    $
    2.08
 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 September 30,(in millions)
    
    2009
    
    
    2008
    
    

% ChangeMutual funds
    
    $
    3,317
    
    
    $
    3,864
    
    
    
    -14
    %Separate accounts
    
    
    1,957
    
    
    
    1,315
    
    
    
    49
    %Private investment funds
    
    
    215
    
    
    
    369
    
    
    
    -42
    %Total
    
    $
    5,489
    
    
    $
    5,548
    
    
    
    -1
    %
 Assets Under Management by ObjectiveAs of September 30,(in millions)
    
    2009
    
    
    2008
    
    

% ChangeSmall and Small-Mid Cap
    
    $
    716
    
    
    $
    582
    
    
    
    23
    %Large Cap and Select
    
    
    2,508
    
    
    
    1,422
    
    
    
    76
    %Long-Short
    
    
    2,115
    
    
    
    3,363
    
    
    
    -37
    %Strategic and fixed income
    
    
    150
    
    
    
    181
    
    
    
    -17
    %Total
    
    $
    5,489
    
    
    $
    5,548
    
    
    
    -1
    %
 Change in Assets Under ManagementFor the Nine Months Ended September 30,(in millions)
    
    2009
    
    
    2008AUM at beginning of the period
    
    $
    4,510
    
    
    $
    4,403Net cash inflows (outflows)mutual funds
    
    
    (229
    )
    
    
    1,482separate accounts
    
    
    423
    
    
    
    545private investment funds
    
    
    (46
    )
    
    
    (73
    )148
    
    
    
    1,954Net market appreciation (depreciation) and income
    
    
    831
    
    
    
    (809
    )Increase during the period
    
    
    979
    
    
    
    1,145AUM at end of the period
    
    $
    5,489
    
    
    $
    5,548
  16




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##### Table of Contents



Consolidated Results of Operations
  Three Months Ended September 30,
    
    
    Nine Months Ended September 30,(in thousands, except per share amounts)
    
    2009
    
    
    2008
    
    

% Change
    
    
    2009
    
    
    2008
    
    

% ChangeNet operating income after tax (a)
    
    $
    1,858
    
    
    $
    2,717
    
    
    
    -32
    %
    
    $
    4,915
    
    
    $
    7,572
    
    
    
    -35
    %Net income
    
    $
    3,204
    
    
    $
    1,224
    
    
    
    162
    %
    
    $
    7,872
    
    
    $
    4,989
    
    
    
    58
    %Net operating income after tax per share(a)Basic
    
    $
    0.71
    
    
    $
    1.12
    
    
    
    -36
    %
    
    $
    1.91
    
    
    $
    3.18
    
    
    
    -40
    %Diluted
    
    $
    0.71
    
    
    $
    1.11
    
    
    
    -36
    %
    
    $
    1.91
    
    
    $
    3.16
    
    
    
    -40
    %Net income per shareBasic
    
    $
    1.23
    
    
    $
    0.50
    
    
    
    146
    %
    
    $
    3.06
    
    
    $
    2.09
    
    
    
    46
    %Diluted
    
    $
    1.23
    
    
    $
    0.50
    
    
    
    146
    %
    
    $
    3.05
    
    
    $
    2.08
    
    
    
    47
    %Weighted average shares outstandingBasic
    
    
    2,607
    
    
    
    2,431
    
    
    
    
    
    
    
    2,572
    
    
    
    2,384Diluted
    
    
    2,612
    
    
    
    2,444
    
    
    
    
    
    
    
    2,577
    
    
    
    2,397
 (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 September 30, 2009 compared with Three Months Ended September 30, 2008
  Revenue
 Three Months EndedSeptember 30,(in thousands)
    
    2009
    
    
    2008
    
    
    % ChangeInvestment advisory
    
    $
    9,517
    
    
    $
    11,577
    
    
    
    -18
    %Mutual fund administration, net
    
    
    1,855
    
    
    
    1,771
    
    
    
    5
    %Total
    
    $
    11,372
    
    
    $
    13,348
    
    
    
    -15
    %
  Investment Advisory Fees.
  17




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##### Table of Contents



Mutual Fund Administration Fees.
 Expenses
 Three Months EndedSeptember 30,(in thousands)
    
    2009
    
    
    2008
    
    
    % ChangeCompensation and related costs
    
    $
    6,744
    
    
    $
    7,126
    
    
    
    -5
    %General and administrative
    
    
    809
    
    
    
    789
    
    
    
    3
    %Sales and marketing
    
    
    158
    
    
    
    170
    
    
    
    -7
    %Third party distribution
    
    
    201
    
    
    
    381
    
    
    
    -47
    %Mutual fund administration
    
    
    611
    
    
    
    660
    
    
    
    -7
    %Total
    
    $
    8,523
    
    
    $
    9,126
    
    
    
    -7
    %
 Compensation and Related Costs.
 General and Administrative.
 Sales and Marketing.
 Third Party Distribution.
 Mutual Fund Administration.
 Nine Months Ended September 30, 2009 compared with Nine Months Ended September 30, 2008
   18




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##### Table of Contents



Revenue
 Nine Months EndedSeptember 30,(in thousands)
    
    2009
    
    
    2008
    
    
    % ChangeInvestment advisory
    
    $
    25,774
    
    
    $
    31,845
    
    
    
    -19
    %Mutual fund administration, net
    
    
    4,075
    
    
    
    4,802
    
    
    
    -15
    %Total
    
    $
    29,849
    
    
    $
    36,647
    
    
    
    -19
    %
  Investment Advisory Fees.
 Mutual Fund Administration Fees.
 Expenses
 Nine Months EndedSeptember 30,(in thousands)
    
    2009
    
    
    2008
    
    
    % ChangeCompensation and related costs
    
    $
    17,268
    
    
    $
    19,582
    
    
    
    -12
    %General and administrative
    
    
    2,201
    
    
    
    1,947
    
    
    
    13
    %Sales and marketing
    
    
    440
    
    
    
    441
    
    
    
    0
    %Third party distribution
    
    
    666
    
    
    
    1,173
    
    
    
    -43
    %Mutual fund administration
    
    
    1,765
    
    
    
    1,701
    
    
    
    4
    %Total
    
    $
    22,340
    
    
    $
    24,844
    
    
    
    -10
    %
 Compensation and Related Costs.
  19




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##### Table of Contents



General and Administrative.
 Sales and Marketing.
 Third Party Distribution.
 Mutual Fund Administration.
 Beacon Hill Fund Services
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Gross revenue
    
    $
    372,958
    
    
    $
    28,250
    
    
    $
    663,551
    
    
    $
    47,637Less: revenue from DHCM
    
    
    (42,725
    )
    
    
    
    
    
    
    (92,267
    )
    
    
    Net revenue
    
    
    330,233
    
    
    
    28,250
    
    
    
    571,284
    
    
    
    47,637Expenses
    
    
    473,204
    
    
    
    488,412
    
    
    
    1,393,693
    
    
    
    1,074,504Net loss
    
    $
    (142,971
    )
    
    $
    (460,162
    )
    
    $
    (822,409
    )
    
    $
    (1,026,867
    )
 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 Sept. 30,
    
    
    Nine Months Ended Sept. 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Net Operating Income, GAAP basis
    
    $
    2,848,569
    
    
    $
    4,221,993
    
    
    $
    7,508,523
    
    
    $
    11,803,191Non-GAAP Adjustments:Tax Provision excluding impact of Investment Return
    
    
    990,874
    
    
    
    1,505,175
    
    
    
    2,593,742
    
    
    
    4,231,467Net operating income after tax, non-GAAP basis
    
    
    1,857,695
    
    
    
    2,716,818
    
    
    
    4,914,781
    
    
    
    7,571,724Net operating income after tax per basic share, non-GAAP basis
    
    $
    0.71
    
    
    $
    1.12
    
    
    $
    1.91
    
    
    $
    3.18Net operating income after tax per diluted share, non-GAAP basis
    
    $
    0.71
    
    
    $
    1.11
    
    
    $
    1.91
    
    
    $
    3.16Basic weighted average shares outstanding, GAAP basis
    
    
    2,607,129
    
    
    
    2,430,772
    
    
    
    2,572,006
    
    
    
    2,383,621Diluted weighted average shares outstanding, GAAP basis
    
    
    2,611,933
    
    
    
    2,444,340
    
    
    
    2,576,657
    
    
    
    2,396,999
 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
  
 ITEM 3: Defaults Upon Senior Securities
  
 ITEM 4: Submission of Matters to a Vote of Security Holders
  
 ITEM 5: Other Information
   22




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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.
  23




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##### Table of Contents



SIGNATURES
   Date
    
    Title
    
    SignatureNovember 6, 2009
    
    President, Chief Executive Officer,
    
    /s/ R. H. Dillonand a Director
    
    R. H. DillonNovember 6, 2009
    
    Chief Financial Officer, Treasurer,
    
    /s/ James F. Lairdand Secretary
    
    James F. Laird
  24




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##### Table of Contents



EXHIBIT
INDEX
 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.
  25