What changed in this filing

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Item 1. Financial Statements

2022-08-11 compared with 2022-05-12 · 146 added, 68 removed, 527 unchanged (29% of the section changed)

25 unchanged sentences

Common stock, no par value ( 100,000,000 shares authorized;

9,715,324 and

9,707,817 issued and outstanding, respectively)

9 unchanged sentences

Three Months Ended

Six Months Ended

Revenue and Other Income

24 unchanged sentences

Three Months Ended

Six Months Ended June 30,

Net income (loss)

19 unchanged sentences

Income (Loss)

Balances at December 31, 2021

Balances at March 31, 2022

Net income (loss)

Repurchase of common stock

Stock-based compensation expense

Other comprehensive income (loss)

Balances at June 30, 2022

Balances at March 31, 2021

Net income (loss)

Repurchase of common stock

Stock-based compensation expense

Other comprehensive income (loss)

Balances at June 30, 2021

No Par, Common Stock

Comprehensive

Shareholders'

Income (Loss)

Balances at December 31, 2021

Net income (loss)

Repurchase of common stock

Stock-based compensation expense

Other comprehensive income (loss)

Balances at March 31, 2021

Balances at June 30, 2022

Balances at December 31, 2020

Net income (loss)

Repurchase of common stock

Stock-based compensation expense

Other comprehensive income (loss)

Balances at June 30, 2021

The accompanying notes are an integral part of the Consolidated Financial Statements.

3 unchanged sentences

(dollars in thousands)

Three Months Ended March 31,

Six Months Ended June 30,

Cash Flows From Operating Activities

1 unchanged sentence

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:

Gain on sale of agency business

Depreciation and amortization

20 unchanged sentences

Proceeds from sales of investments

Proceeds from sale of agency business

Dividends from Affiliate

Purchases of property and equipment

1 unchanged sentence

Cash Flows From Financing Activities

Proceeds received from common stock subscription agreement

Repurchase of common stock

Borrowings under debt arrangements

7 unchanged sentences

Income taxes paid (refunded), net

Note receivable from sale of agency business

Payable from purchase of agency

The accompanying notes are an integral part of the Consolidated Financial Statements.

24 unchanged sentences

These consolidated financial statements and the notes thereto should be read in conjunction with the Company's audited consolidated financial statements and related notes included in its Annual Report on Form 10-K for the year ended December 31, 2021, as filed with the SEC.

The results of operations for the three months ended March 31, 2022, are not necessarily indicative of the results expected for the year ended December 31, 2022.

The results of operations for the six months ended June 30, 2022, are not necessarily indicative of the results expected for the year ended December 31, 2022.

The Company is engaged in the sale of property and casualty insurance products and has organized its principal operations into three types of insurance businesses:

22 unchanged sentences

Management does not expect the new guidance to have a material impact on the Company’s consolidated financial statements.

The cost or amortized cost, gross unrealized gains or losses, and estimated fair value of the investments in securities classified as available for sale at March 31, 2022 and December 31, 2021, were as follows (dollars in thousands):

March 31, 2022

The cost or amortized cost, gross unrealized gains or losses, and estimated fair value of the investments in securities classified as available for sale at June 30, 2022 and December 31, 2021, were as follows (dollars in thousands):

June 30, 2022

Gross Unrealized

21 unchanged sentences

The table segregates the holdings based on the length of time that individual securities have been in a continuous unrealized loss position (dollars in thousands):

March 31, 2022

June 30, 2022

Less than 12 months

31 unchanged sentences

Total debt securities available for sale

The Company analyzed its investment portfolio in accordance with its other-than-temporary impairment ("OTTI") review procedures and determined the Company did not need to record a credit-related OTTI loss in net income, nor recognize a non-credit related OTTI loss in other comprehensive income for the three months ended March 31, 2022 and 2021.

The Company’s sources of net investment income and losses are as follows (dollars in thousands):

Three Months Ended

Six Months Ended June 30,

Debt securities

6 unchanged sentences

Three Months Ended

Six Months Ended June 30,

Debt securities:

7 unchanged sentences

Total net realized investment gains (losses)

Proceeds from available-for-sale debt securities were $ 6.7 million and $ 14.2 million for the three months ended March 31, 2022 and 2021, respectively.

There were no gross realized gains or losses from the sales of available-for-sale securities for the three months ended March 31, 2022.

The gross realized gains and losses from the sales of available-for-sale debt securities for the three months ended March 31, 2021, were $ 27,000 and $ 6,000 , respectively.

As of March 31, 2022 and 2021, there were $ 750,000 and $ 0 of payables from securities purchased, respectively.

There were $ 1.3 million and $ 3,000 of receivables from securities sold as of March 31, 2022, and 2021, respectively.

The Company carries other equity investments that do not have a readily determinable fair value at cost, less impairment or observable changes in price.

Proceeds from available-for-sale debt securities were $ 27.2 million and $ 20.0 million for the six months ended June 30, 2022 and 2021, respectively.

The gross realized gains and losses from the sale of available-for-sale debt securities for three months and six months ended June 30, 2022, were $ 5,000 and $ 155,000 , respectively.

There were no gross realized gains or losses from the sales of available-for-sale securities for the three months ended June 30, 2021.

The gross realized gains and losses from the sales of available-for-sale debt securities for the six months ended June 30, 2021, were $ 27,000 and $ 6,000 , respectively.

As of June 30, 2022 and 2021, there were $ 0 and $ 249,000 of payables from securities purchased, respectively.

There were $ 6.9 million and $ 11,000 of receivables from securities sold as of June 30, 2022, and 2021, respectively.

The Company’s gross unrealized losses related to its equity investments were $ 443,000 and $ 1.0 million as of June 30, 2022 and December 31, 2021, respectively.

The Company also carries other equity investments that do not have a readily determinable fair value at cost, less impairment or observable changes in price.

We review these investments for impairment during each reporting period.

There were no impairments or observable changes in price recorded during 2022 related to the Company's equity securities without readily determinable fair value.

These investments are included in Other Assets in the Consolidated Balance Sheets and amounted to $ 1.2 million as of March 31, 2022 and December 31, 2021.

The table below summarizes the amortized cost and fair value of available-for-sale debt securities by contractual maturity at March 31, 2022.

These investments are included in Other Assets in the Consolidated Balance Sheets and amounted to $ 1.2 million as of June 30, 2022 and December 31, 2021.

The table below summarizes the amortized cost and fair value of available-for-sale debt securities by contractual maturity at June 30, 2022.

Actual maturities may differ from contractual maturities because certain borrowers have the right to call or prepay obligations with or without call or prepayment penalties (dollars in thousands):

9 unchanged sentences

Total debt securities

At March 31, 2022 and December 31, 2021, the Insurance Company Subsidiaries had $ 8.2 million and $ 8.5 million, respectively, on deposit in trust accounts to meet the deposit requirements of various state insurance departments.

At March 31, 2022 and December 31, 2021, the Company had $ 78.0 million and $ 76.1 million, respectively, held in trust accounts to meet collateral requirements with other third-party insurers, relating to various fronting arrangements.

At June 30, 2022 and December 31, 2021, the Insurance Company Subsidiaries had $ 8.6 million and $ 8.5 million, respectively, on deposit in trust accounts to meet the deposit requirements of various state insurance departments.

At June 30, 2022 and December 31, 2021, the Company had $ 81.2 million and $ 76.1 million, respectively, held in trust accounts to meet collateral requirements with other third-party insurers, relating to various fronting arrangements.

There are withdrawal and other restrictions on these deposits, including the type of investments that may be held, however, the Company may generally invest in high-grade bonds and short-term investments and earn interest on the funds.

10 unchanged sentences

or other inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability.

The Level 2 financial instruments also include our line of credit and our Paycheck Protection Program loan.

The Level 2 financial instruments also include our line of credit.

Level 3 —Unobservable inputs that are supported by little or no market activity.

2 unchanged sentences

These capital account balances reflect the fair value of the investment funds.

The following tables present the Company’s assets and liabilities measured at fair value on a recurring basis, classified by the valuation hierarchy as of March 31, 2022 and December 31, 2021 (dollars in thousands):

March 31, 2022

The following tables present the Company’s assets and liabilities measured at fair value on a recurring basis, classified by the valuation hierarchy as of June 30, 2022 and December 31, 2021 (dollars in thousands):

June 30, 2022

Fair Value Measurements

15 unchanged sentences

Subordinated Notes *

Line of credit *

Total Liabilities measured at fair value

23 unchanged sentences

Level 1 also includes money market funds and other interest-bearing deposits at banks, which are reported as short-term investments.

The fair value measurements that were based on Level 1 inputs comprise 16.4 % of the fair value of the total investment portfolio as of March 31, 2022.

The fair value measurements that were based on Level 1 inputs comprise 19.1 % and 17.6 % of the fair value of the total investment portfolio as of June 30, 2022 and December 31, 2021, respectively.

Level 2 investments include debt securities, which consist of U.S.

2 unchanged sentences

The third-party pricing service monitors market indicators, as well as industry and economic events.

The fair value measurements that were based on Level 2 inputs comprise 83.4 % of the fair value of the total investment portfolio as of March 31, 2022.

The fair value measurements that were based on Level 2 inputs comprise 80.6 % and 82.1 % of the fair value of the total investment portfolio as of June 30, 2022 and December 31, 2021, respectively.

The Company obtains pricing for each security from independent pricing services, investment managers or consultants to assist in determining fair value for its Level 2 investments.

4 unchanged sentences

The fair value of the borrowings under the senior revolving credit facility approximates its carrying amount because interest is based on a short-term, variable, market-based rate.

As of March 31, 2022 and December 31, 2021, Level 3 is entirely comprised of the Company's subordinated debt.

In determining the fair value of the subordinated debt outstanding at March 31, 2022 and December 31, 2021, the security attributes (issue date, maturity, coupon, calls, etc.) and market rates on September 24, 2018 (the date of the restated and amended agreement which was repriced at that time) were entered into a valuation model.

A lognormal trinomial interest rate lattice was created within the model to compute the option adjusted spread (“OAS”) which is the amount, in basis points, of interest rate required to be paid under the debt agreement over the risk-free U.S.

As of June 30, 2022 and December 31, 2021, Level 3 is entirely comprised of the Company's subordinated debt.

In determining the fair value of the subordinated debt outstanding at June 30, 2022 and December 31, 2021, the security attributes (issue date, maturity, coupon, calls, etc.) and market rates on September 24, 2018 (the date of the restated and amended agreement which was repriced at that time) were entered into a valuation model.

A lognormal trinomial interest rate lattice was created within the model to compute the option adjusted spread (“OAS”) which is the amount, in basis points, of interest rate

required to be paid under the debt agreement over the risk-free U.S .

Treasury rates .

The OAS was then used in the

model along with the March 31, 2022 and December 31, 2021 U.S .

The OAS was then used in the model along with the June 30, 2022 and December 31, 2021 U.S .

Treasury rates .

4 unchanged sentences

Net deferred policy acquisition costs are amortized and charged to expense in proportion to premium earned over the estimated policy term.

The Company anticipates that its deferred policy acquisition costs will be fully recoverable and there were no premium deficiencies for the three months ended March 31, 2022 and 2021.

The Company anticipates that its deferred policy acquisition costs will be fully recoverable and there were no premium deficiencies for the six months ended June 30, 2022 and 2021.

The activity in deferred policy acquisition costs, net of reinsurance transactions, is as follows (dollars in thousands):

Three Months Ended

Six Months Ended June 30,

Balance at beginning of period

17 unchanged sentences

Three months ended

Six months ended

Gross reserves - beginning of period

10 unchanged sentences

Gross reserves - end of period

Net losses and LAE was $ 18.0 million for the three months ended March 31, 2022.

Adverse development contributed $ 5.5 million to the total incurred losses in the first quarter of 2022, of which $ 1.5 million was related to 2017 and prior accident years, $ 1.3 million was related to the 2018 accident year, $ 1.3 million was related to the 2019 accident year, and $ 1.5 million was related to the 2020 accident year.

In the first quarter of 2022, $ 5.7 million of the adverse development came from the commercial lines of business, mostly from liability lines, while our personal lines of business had $ 219,000 favorable development.

The Company’s incurred losses during the three months ended March 31, 2021 included prior-year adverse reserve development of $ 5.8 million.

Of the $ 5.8 million of adverse development, $ 5.2 million was related to the Company’s commercial lines of business, while $ 612,000 was related to the Company’s personal lines of business.

Of the $ 5.2 million of adverse development in the Company’s commercial lines of business, $ 2.7 million was experienced in the Company’s hospitality lines of business, while $ 2.5 million was experienced in the company’s small business lines of business.

The Company’s incurred losses during the three and six months ended June 30, 2022 included prior-year adverse reserve development of $ 9.5 million and $ 15.0 million, respectively.

Of the $9.5 million of adverse development, $ 4.3 million was related to 2018 and prior accident years, $ 3.6 million was related to the 2019 accident year, and $ 1.6 million was related to the 2020 accident year, substantially all attributable to the commercial lines of business.

Of the $15.0 million of adverse development for the six months ended June 30, 2022, $ 7.1 million was related to 2018 and prior accident years, $ 4.9 million was related to 2019 accident year, and $ 3.1 million was related to the 2020 accident year, substantially all attributable to the commercial lines of business.

The Company’s incurred losses during the three and six months ended June 30, 2021 included prior-year adverse reserve development of $6.2 million and $ 12.0 million, respectively.

Of the $ 6.2 million of adverse development, $ 1.9 million was related 2017 and prior accident years, $ 2.4 million was related to the 2018 accident year, and $ 1.9 million was related to the 2019 and 2020 accident years.

Substantially all of the development was from the Company’s commercial lines of business.

Of the $12.0 million of adverse development for the six months ended June 30, 2021, $ 11.4 million was related to commercial lines, while $ 636,000 was related to personal lines.

The adverse development was mostly attributable to the 2018 and 2017 and prior accident years.

In the normal course of business, the Company participates in reinsurance agreements in order to limit losses that may arise from catastrophes or other individually severe events.

The Company ceded 40 % of specific commercial liability risks in excess of $ 400,000 , and 60 % in excess of $ 300,000 in 2022.

The Company primarily ceded all specific commercial liability risks in excess of $ 400,000 in 2021 and 2020.

The Company primarily ceded all specific commercial liability risks in excess of $ 400,000 in 2021.

The Company ceded specific commercial property risks in excess of $ 300,000 in 2022.

The Company ceded specific commercial property risks in excess of $ 200,000 in 2021.

The Company ceded 40 % of specific commercial property risks in excess of $ 400,000 , and 60 % in excess of $ 300,000 in 2020.

The Company ceded homeowners specific risks in excess of $ 300,000 in both 2022 and 2021.

11 unchanged sentences

Three Months Ended

Six months ended

Written premiums:

5 unchanged sentences

Some of the excess of loss treaties that renewed on December 31, 2021 and January 1, 2022, included ceding commissions equal to 40 % of the ceded premiums.

The ceding commission is reflected as a reduction in acquisition costs and amounted to $ 2.2 million for the three months ended March 31, 2022.

The ceding commission is reflected as a reduction in acquisition costs and amounted to $ 2.1 million and $ 4.3 million for the three and six months ended June 30, 2022.

There were no ceding commissions on the excess of loss treaties during 2021.

As of March 31, 2022, the Company's debt is comprised of three instruments:

As of June 30, 2022, the Company's debt is comprised of three instruments:

$ 24.4 million of publicly traded senior unsecured notes which were issued in 2018, a $ 10.0 million line of credit which commenced in June 2018, and $ 10.5 million of privately placed subordinated notes.

2 unchanged sentences

Subordinated notes

Line of credit

Paycheck Protection Program loan *

The PPP loan was embedded into the line of credit facility.

Senior unsecured notes

2 unchanged sentences

The Company may redeem the Notes, in whole or in part, at face value at any time after September 30, 2021.

The Company did no t repurchase any of the Notes for the three months ended March 31, 2022 and 2021.

The Company did no t repurchase any of the Notes for the three and six months ended June 30, 2022 and 2021.

Subordinated notes

4 unchanged sentences

The call premium escalates each quarter to ultimately $ 1.75 million on September 30, 2023, then steps up to $ 3.05 million on December 31, 2023, and increases quarterly at a 12.5 % per annum rate thereafter.

As of March 31, 2022, the carrying value of the Notes and Subordinated Notes are offset by $ 390,000 and $ 849,000 of debt issuance costs, respectively.

As of June 30, 2022, the carrying value of the Notes and Subordinated Notes are offset by $ 325,000 and $ 836,000 of debt issuance costs, respectively.

The debt issuance costs will be amortized through interest expense over the life of the loans.

The Subordinated Notes contain restrictive financial debt covenants that relate to the Company’s minimum tangible net worth, minimum fixed-charge coverage ratios, dividend paying capacity, reinsurance retentions, risk-based capital ratios, and debt-to-total capital.

As of March 31, 2022, the Company was not in compliance with the tangible net worth and the debt-to-total capital financial covenants, principally due to changes in unrealized fair values of the bond portfolio resulting from the significant increase in the interest rate environment.

On May 9, 2022, the holders of the Subordinated Notes waived the March 31, 2022 tangible net worth and debt-to-total capital requirements and the agreement was amended to exclude changes in unrealized gains or losses in the debt securities investment portfolio of the Company subsequent to December 31, 2021, when calculating the debt covenant ratios.

As of June 30, 2022, the Company was not in compliance on the tangible net worth covenant of the Subordinated Notes.

On August 8, 2022, the holders of the Subordinated Notes waived the June 30, 2022 tangible net worth requirement.

The $ 5.0 million contribution to the Company on August 10, 2022 (see Note 14 ~ Subsequent Events ), increased the net worth sufficiently to bring the Company back into compliance.

Management expects to be in compliance with all debt covenants in future periods.

Line of credit

1 unchanged sentence

The line of credit bears interest at the London Interbank rate ("LIBOR") plus 2.75 % per annum, payable monthly.

The agreement includes several financial debt covenants, including a minimum tangible net worth, a minimum fixed-charge coverage ratio, and minimum statutory risk-based capital levels.

As of March 31, 2022, the Company had $ 5.0 million outstanding on the line of credit.

On June 18, 2021, the line of credit was renewed with a maturity of December 1, 2022.

Financial debt covenants

The Subordinated Notes and the line of credit contain identical restrictive financial debt covenants that relate to the Company’s minimum tangible net worth, minimum fixed-charge coverage ratios, dividend paying capacity, reinsurance retentions, risk-based capital ratios, and debt to total capital.

As of March 31, 2022, the Company was not in compliance with the tangible net worth and the debt to total capital financial covenants.

On May 9, 2022, the holders of the Subordinated Notes waived the March 31, 2022 tangible net worth and debt to total capital requirements.

The line of credit contains restrictive financial debt covenants that relate to the Company’s minimum tangible net worth, minimum fixed-charge coverage ratios, dividend paying capacity, reinsurance retentions, risk-based capital ratios, and debt-to-total capital.

As of March 31, 2022, the Company was not in compliance with the tangible net worth and the debt-to-total capital financial covenants of the line of credit.

On May 11, 2022, the holders of the line of credit waived the March 31, 2022 tangible net worth and total debt to capital requirements.

As of June 30, 2022, the Company had no balance outstanding on the line of credit but was not in compliance with the tangible net worth and debt-to-total capital debt covenants.

On August 8, 2022, the Company entered into an amendment with the Lender which waived the June 30, 2022 debt covenant requirements, eliminated the financial debt covenant requirements going forward and requires prior bank approval for any future draws on the line of credit.

Management expects to be in compliance with all debt covenants in future periods.

On May 9, 2022, the Subordinated Notes agreement was amended to exclude changes in unrealized gains or losses in the debt securities investment portfolio of the Company subsequent to December 31, 2021, when calculating the debt covenant ratios.

With this amendment, the Company would not have breached the Subordinated Notes covenants at March 31, 2022.

Paycheck Protection Program loan

4 unchanged sentences

Shareholder’s Equity

As of March 31, 2022 and December 31, 2021, the Company had 9,707,817 issued and outstanding shares of common stock, respectively.

On May 11, 2022, the Company entered into a subscription agreement to issue $ 5.0 million of equity.

The Company received the $5.0 million of cash in the second quarter of 2022, however, pricing and terms were pending as of June 30, 2022.

The $5.0 million of cash was converted into 2,500,000 shares of common stock, at a price of $ 2.00 per share in August 2022.

See Note 14 ~ Subsequent Events , for further details.

Accordingly, the Company’s total equity is higher by $ 5.0 million as of the date of the filing of this Form 10-Q.

For the three months ended June 30, 2022, and 2021, the Company repurchased 1,493 and 2,307 shares of stock valued at approximately $ 3,000 and $ 7,000 , respectively, related to the vesting of the Company’s restricted stock units.

The Company made no repurchases of stock relating to the vesting of restricted stock units during the first quarters of 2022 and 2021.

Upon the repurchase of the Company’s shares, the shares remain authorized, but not issued or outstanding.

As of June 30, 2022 and December 31, 2021, the Company had 9,715,324 and 9,707,817 issued and outstanding shares of common stock, respectively.

Holders of common stock are entitled to one vote per share and to receive dividends only when and if declared by the board of directors.

3 unchanged sentences

Three months ended

Six months ended

Balance at beginning of period

7 unchanged sentences

Three Months Ended

Six months ended

Net income (loss)

1 unchanged sentence

Earnings (loss) per common share, basic and diluted

The non-vested shares of the restricted stock units and stock options were anti-dilutive as of March 31, 2022 and 2021.

Therefore, the basic and diluted weighted average common shares are equal for the three months ended March 31, 2022 and 2021 .

The non-vested shares of the restricted stock units and stock options were anti-dilutive as of June 30, 2022 and 2021.

Therefore, the basic and diluted weighted average common shares are equal for the three months and six months ended June 30, 2022 and 2021 .

Stock-based Compensation

8 unchanged sentences

In 2015, 2016, and 2018, the Company issued 390,352 , 111,281 , and 70,000 , respectively, of restricted stock units (“RSUs”) to various employees to be settled in shares of common stock, which were valued at $ 4.1 million, $ 909,000 , and $ 404,000 , respectively, on the dates of grant.

The Company recorded $ 14,000 and $ 54,000 of compensation expense related to the RSUs for the three months ended March 31, 2022 and 2021, respectively.

There were 19,000 unvested RSUs as of March 31, 2022, which will generate an estimated future expense of $ 59,000 .

The Company recorded $ 24,000 and $ 12,000 of compensation expense related to the stock options for the three months ended March 31, 2022 and 2021, respectively.

There were 834,000 unvested options as of March 31, 2022, which will generate an estimated future expense of $ 773,000 .

The Company recorded $ 29,000 and $ 108,000 of compensation expense related to the RSUs for the six months ended June 30, 2022 and 2021, respectively.

There were 10,000 unvested RSUs as of June 30, 2022, which will generate an estimated future expense of $ 44,000 .

The Company recorded $ 67,000 and $ 25,000 of compensation expense related to the stock options for the six months ended June 30, 2022 and 2021, respectively.

There were 783,000 unvested options as of June 30, 2022, which will generate an estimated future expense of $ 729,000 .

Commitments and Contingencies

23 unchanged sentences

All of the Company’s insurance activities are conducted in the United States with a concentration of activity in Michigan, Florida, Texas and California.

For the three months ended March 31, 2022 and 2021, gross written premiums attributable to these four states were 59.2 % and 53.5 %, respectively, of the Company’s total gross written premiums.

For the six months ended June 30, 2022 and 2021, gross written premiums attributable to these four states were 57.0 % and 51.7 %, respectively, of the Company’s total gross written premiums.

The Wholesale Agency business sells insurance products on behalf of the Company’s commercial and personal lines businesses as well as to third-party insurers.

8 unchanged sentences

Three months ended

March 31, 2022

June 30, 2022

Commercial Lines

15 unchanged sentences

Three months ended

March 31, 2021

June 30, 2021

Gross written premiums

12 unchanged sentences

Income (loss) before equity earnings in Affiliate and income taxes

Six months ended

June 30, 2022

Gross written premiums

Net written premiums

Net earned premiums

Segment revenue

Losses and LAE, net

Policy acquisition costs

Operating expenses

Segment expenses

Segment gain (loss)

Investment income

Net realized investment gains

Change in fair value of equity securities

Interest expense

Income (loss) before equity earnings in Affiliate and income taxes

Six months ended

June 30, 2021

Gross written premiums

Net written premiums

Net earned premiums

Segment revenue

Losses and LAE, net

Policy acquisition costs

Operating expenses

Segment expenses

Segment gain (loss)

Investment income

Net realized investment gains

Change in fair value of equity securities

Interest expense

Income (loss) before equity earnings in Affiliate and income taxes

Subsequent Events

On May 11, 2022, the Company entered into a subscription agreement to issue $ 5.0 million of equity.

Pricing terms are still pending.

Related to this subscription agreement, the Company received $ 1.5 million of equity and paid down the line of credit by $ 1.5 million.

This remediated the March 31, 2022 debt covenant breaches described in the Financial debt covenants section of Note 7 ~ Debt .

As discussed in Note 7, with this amendment the Company would not have breached the Subordinated Notes covenants at March 31, 2022.

While the cash was received by June 30, 2022, pricing and terms were still pending.

On August 10, 2022, the terms were finalized and the Company issued 2,500,000 shares of common stock at $ 2.00 per share.

The additional equity will increase the June 30, 2022 total shareholders’ equity from $ 17.0 million to $ 22.0 million.

One of the Company’s Insurance Company Subsidiaries borrowed $ 14.5 million from the Federal Home Loan Bank of Indiana on July 7, 2022.

It matures on January 9, 2023 , and has a floating interest rate that was initially 1.93 % per annum.

This fully-collateralized loan was drawn for short-term cash needs to avoid realized losses on a statutory accounting basis due to temporary market-timing issues caused by the recent fluctuations in the interest rate markets.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements