SECURITY AND EXCHANGE COMMSSION
WASHNGTON, D.C. 20549
FORM IO-QSB
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number: 0-29276
FIRST ROBINSON FINANCIAL CORPORATION
(Exact name of registrant as specified its charter)
DELAWARE 36-4145294
(State or other jurisdiction I.R.S. Employer ID Number
of incorporation or organization)
501 EAST MAIN STREET, ROBINSON. ILLINOIS 62454
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (618) 544-8621
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES _X_ NO ___
As of June 30, 1998, the Registrant had 859,625 shares of Common Stock, par
value $0.01, issued and outstanding.
FIRST ROBINSON FINANCIAL CORPORATION
<PAGE>
Index to Form 10QSB
PART 1. FINANCIAL INFORMATION PAGE
Item 1. Financial Statements
Consolidated Balance Sheets as of June 30, 1998
And March 31, 1998 3
Consolidated Statements of Income for the Three-Month
Periods Ended June 30, 1998 and 1997 4
Consolidated Statements of Stockholders' Equity for the
Three-Month Periods Ended June 30, 1998 and 1997 5
Consolidated Statements of Cash Flows for the Three-Month
Periods Ended June 30, 1998 and 1997 6
Notes to Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 10
PART II OTHER INFORMATION
Item 1. Legal Proceedings 14
Item 2. Changes in Securities 14
Item 3. Defaults Upon Senior Securities 14
Item 4. Submission of Matters to a Vote of Security Holders 14
Item 5. Other Information 14
Item 6. Exhibits and Reports on Form 8-K 14
SIGNATURES 15
Exhibit 11 Statement Regarding Computation of Earnings 16
Exhibit 27 Financial Data Schedule 17
<PAGE>
FIRST ROBINSON FINANCIAL CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
Unaudited Audited
June 30, March 31,
1998 1998
-------- ---------
(1,000's)
<S> <C> <C>
ASSETS
Cash and Cash Equivalents:
Cash and due from banks $ 506 $ 609
Interest bearing deposits 2,745 5,965
-------- --------
Total Cash and Cash Equivalents 3,251 6,574
Securities available for sale, amortized cost of $8,414 and $4,065
at June 30, 1998 and March 31, 1998 respectively 8,394 4,119
Securities held to maturity, estimated market value of $981 and
$967 at June 30, 1998 and March 31, 1998, respectively 966 955
Loans receivable, net 64,032 64,234
Accrued interest receivable 691 715
Premises and equipment, net 2,937 2,897
Foreclosed real estate 160 221
Prepaid income tax 0 29
Other assets 130 224
-------- --------
Total Assets $ 80,561 $ 79,968
-------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits $ 63,019 $ 62,630
Advances from Federal Home Loan Bank 2,000 2,000
Repurchase agreements 2,071 1,644
Advances from Borrowers for taxes and insurance 102 75
Accrued interest payable 297 348
Accrued income taxes 67 0
Deferred income taxes 128 157
Other liabilities 105 219
-------- --------
Total Liabilities 67,789 67,073
-------- --------
Commitments and Contingencies
Stockholders' Equity
Common stock, $ .01 par value; authorized 2,000,000 shares
859,625 shares issued and outstanding 9 9
Preferred stock, $.01 par value; authorized 500,000 shares,
No shares issued and outstanding
Paid-in capital 8,245 8,232
Retained earnings 5,114 5,223
Accumulated other comprehensive income, net of related tax
Of ($8) and $19 at June 30, 1998 and March 31, 1998, respectively (12) 33
Unearned employee stock ownership plan (584) (602)
-------- --------
Total Stockholders' Equity 12,772 12,895
-------- --------
Total Liabilities and Stockholders' Equity $ 80,561 $ 79,968
-------- --------
</TABLE>
3
<PAGE>
FIRST ROBINSON FINANCIAL CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
For the Quarters Ended June 30, 1998 and 1997
(Unaudited)
1998 1997
------ ------
(1,000's)
Interest Income:
Interest on Loans $1,457 $1,401
Interest and dividends on securities 157 124
------ ------
Total interest income 1,614 1,525
------ ------
Interest expense:
Interest on deposits 737 760
Interest on FHLB advances 25 57
Interest on repurchase agreements 29 1
------ ------
Total interest expense 791 818
------ ------
Net interest income 823 707
Provision for loan losses 70 18
------ ------
Net interest income after provision for loan losses 753 689
------ ------
Non-interest income:
Service charges 65 47
Loan fees 31 46
Gain on sale of loans 0 113
Other non-interest income 41 29
------ ------
Total other income 137 235
------ ------
Non-interest expense:
Compensation and employee benefits 322 305
Occupancy and equipment 109 88
Foreclosed property expense 14 14
Data Processing 19 15
Audit, legal and other professional 26 7
SAIF deposit insurance 10 10
Advertising 15 16
Telephone and postage 22 22
Other 109 86
------ ------
Total other expenses 646 563
------ ------
Income before income tax 244 361
Provision for income taxes 95 141
------ ------
Net Income $ 149 $ 220
------ ------
Earnings Per Share-Basic $ .19 N/A
Earnings Per Share-Diluted $ .19 N/A
4
<PAGE>
FIRST ROBINSON FINANCIAL CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
For The Quarters Ended June 30, 1998 and 1997
(Unaudited)
<TABLE>
<CAPTION>
Unallocated
Employee Accumulated
Stock Other
Common Paid-in Retained Ownership Comprehensive Comprehensive
Stock Capital Earnings Plan Income Total Income
------------------------------------------------------------------------------------------
(1,000's)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at March 31, 1998 $ 9 $ 8,232 $ 5,223 $ (602) $ 33 $12,895
Comprehensive Income
Net Income 149 149 $ 149
-------
Other Comprehensive Income
Unrealized gains (loss) on securities (74)
Related tax effects 29
-------
Other Comprehensive Income (45) (45) (45)
-------
Comprehensive Income $ 104
-------
Allocation of ESOP shares 13 18 31
Dividends Paid (258) (258)
---------------------------------------------------------------------------------------
Balance at June 30, 1998 $ 9 $ 8,245 $ 5,114 $ (584) $ (12) $12,772
------- ------- ------- ------- ------- -------
<CAPTION>
Unallocated
Employee Accumulated
Stock Other
Common Paid-in Retained Ownership Comprehensive Comprehensive
Stock Capital Earnings Plan Income Total Income
------------------------------------------------------------------------------------------
(1,000's)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at March 31, 1997 $ 4,851 $ 30 $ 4,880
Issuance of Common Stock 9 8,178 (688) 7,499
Comprehensive Income
Net Income 220 220 $ 220
-------
Other Comprehensive Income
Unrealized gains (loss) on securities (7)
Related tax effects 3
-------
Other Comprehensive Income (4) (4) (4)
-------
Comprehensive Income $ 216
---------------------------------------------------------------------------------------
Balance at June 30, 1997 $ 9 $ 8,178 $ 5,071 $ (688) $ 26 $12,595
------- ------- ------- ------- ------- -------
</TABLE>
5
<PAGE>
FIRST ROBINSON FINANCIAL CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Quarters Ended June 30, 1998 and 1997
(Unaudited)
1998 1997
------ ------
(1,000's)
Cash flows from operating activities:
Net income 149 220
Adjustments to reconcile net income to net cash
provided by (used in) operating activities
Provision for depreciation 56 44
Provision for loan losses 70 18
Net amortization and accretion on investments 6 2
(Increase) decrease in accrued interest receivable 24 (64)
(Increase) decrease in prepaid income taxes 29 0
Decrease (Increase) in other assets 94 123
(Decrease) increase in accrued interest payable (51) (12)
(Decrease) increase in accrued income taxes 67 96
(Decrease) increase in deferred income taxes 0 0
Increase (decrease)in accrued expenses (114) 88
Gain on sale of loans 0 (113)
Gain on sale of premises and equipment 0 0
Loss on sale of mortgage-backed securities 0 0
------ ------
Net cash provided by operating activities 330 402
------ ------
Cash flows from investing activities:
Proceeds for sale of securities available for sale 0 0
Proceeds from maturities of securities available for sale 0 0
Proceeds from sale of mortgage-backed securities
Available for sale 0 0
Proceeds from maturities of securities held to maturity 15 15
Purchase of securities held to maturity (35) (176)
Purchase of securities available for sale (4,653) 0
Repayment of principal on mortgage-backed securities 307 103
Increase in loans receivable (1,299) (2,320)
Purchase of loans and participations 0 0
Sale or participation of originated loans 1,431 1,180
Decrease (increase) in foreclosed real estate 61 21
Purchase of premises and equipment (96) (88)
------ ------
Net cash used in investing activities (4,269) (1,265)
------ ------
6
<PAGE>
FIRST ROBINSON FINANCIAL CORP. AND SUBSIDIARY
CONSOLDIATED STATEMENT OF CASH FLOWS
For the Quarters Ended June 30, 1998 and 1997
(Unaudited)
1998 1997
------ ------
(1,000's)
Cash flows from financing activities:
Net increase (decrease) in deposits 389 461
Increase (decrease) in repurchase agreements 427 (414)
Advances from Federal Home Loan Bank 0 1,750
Repayment of FHLB advances 0 (5,500)
Increase in advances from borrowers
for taxes and insurance 27 8
Proceeds from issuance of common stock 0 8,187
Purchase of employee stock ownership plan (688)
ESOP shares released 31 0
Dividends paid (258) 0
------ ------
Net cash provided by financing activities 616 3,804
------ ------
Increase (decrease) in cash and cash equivalents 3,323 2,941
Cash and cash equivalents at beginning of period 6,574 4,169
------ ------
Cash and cash equivalents at end of period 3,251 7,110
------ ------
Supplemental Disclosures:
Additional Cash Flows Information:
Cash paid for:
Interest on deposits, advances and other borrowings 842 830
Income taxes:
Federal 56 37
State 13 7
Schedule of Non-Cash Investing Activities:
Change in unrealized gain on securities available for sale (74) (7)
Change in deferred income taxes attributed to
Unrealized gain on securities available for sale 29 3
7
<PAGE>
FIRST ROBINSON FINANCIAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) Basis of Presentation
The consolidated financial statements include the accounts of First Robinson
Financial Corporation (the Company) and its wholly owned subsidiary, First
Robinson Savings Bank, National Association (the Bank). All significant
intercompany accounts and transactions have been eliminated in consolidation.
The accompanying consolidated financial statements are unaudited and should be
read in conjunction with the consolidated financial statements and notes thereto
included in the Company's annual report dated April 22, 1998. The accompanying
unaudited consolidated financial statements have been prepared in accordance
with the instructions for Form 10-QSB and, therefore, do not include information
or footnotes necessary for a complete presentation of financial condition,
results of operations, and cash flows in conformity with generally accepted
accounting principles. In the opinion of management of the Company the unaudited
consolidated financial statements reflect all adjustments (consisting of normal
recurring accruals) necessary to present fairly the financial position of the
Company at June 30, 1998 and the results of its operations and cash flows for
the three months ended June 30, 1998 and 1997. The results of operations for
those months ended June 30, 1998 are not necessarily indicative of the results
to be expected for the full year.
(2) Stock Conversion
On June 27, 1997, the predecessor of the Bank, First Robinson Savings and Loan,
F.A. completed its conversion from a Federally chartered mutual savings and loan
to a National Bank and was simultaneously acquired by the Company, which was
formed to act as the holding company of the Bank. At the date of the conversion,
the Company completed the sale of 859,625 shares of common stock $.01 par value,
to its Eligible Account Holders and Employee Stock Ownership Plan (ESOP), at
$10.00 per share. Net proceeds from the above transactions, after deducting
offering expenses, underwriting fees, and amounts retained to fund the ESOP,
totaled $7,504,657.
(3) Earnings Per Share
The Company has adopted Statement of Financial Accounting Standards ("SFAS") No.
128, "Earnings per Share," which requires entities with complex capital
structures to present both basic earnings per share ("EPS") and diluted EPS.
Basic EPS excludes dilution and is computed by dividing income available to
common shareholders by the weighted average number of common shares outstanding
for the period. Diluted EPS reflects the potential dilution that could occur if
securities of other contracts to issue common stock (such as stock options) were
exercised or converted into common stock or resulted in the issuance of common
stock that would then share in the earnings of the entity. Diluted EPS is
computed by dividing net income by the weighted average number of common shares
outstanding for the period, plus common-equivalent shares computed using the
treasury stock method. The Company's weighted average common shares outstanding
at June 30, 1998 was 800,311 for both basic and diluted.
8
<PAGE>
FIRST ROBINSON FINANCIAL CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(4) Employee Stock Ownership Plan
In connection with the conversion to the stock form of ownership, the Board of
Directors established an employee stock ownership plan (ESOP) for the exclusive
benefit of participating employees. Employees age 21 or older who have completed
one year of service are eligible to participate. Upon the issuance of the common
stock, the ESOP acquired 68,770 shares of $0.01 par value common stock at the
subscription price of $10.00 per share. The Bank makes contributions to the ESOP
equal to the ESOP's debt service less dividends received by the ESOP. All
dividends received by the ESOP are used to pay debt service. As the debt is
repaid, shares are released from collateral and allocated to active employees,
based on the proportion of debt service paid in the year. The Bank accounts for
its ESOP in accordance with Statement of Position 93-6. Accordingly, the debt of
the ESOP is recorded as debt and the shares pledged as collateral are reported
as unearned ESOP shares in the consolidated balance sheets. As shares are
released from collateral, the Bank reports compensation expense equal to the
current market price of the shares, and the shares become outstanding for
earnings-per-share calculations. Dividends on allocated shares are recorded as a
reduction of retained earnings; dividends on unallocated ESOP shares are
recorded as a reduction of debt or accrued interest. ESOP compensation expense
for the three months ended June 30, 1998 was $42,000.
The ESOP shares at June 30, 1998 were as follows:
Allocated shares 6,877
Shares released for allocation 3,438
Unallocated shares 58,455
Total ESOP shares 68,770
Fair value of unallocated shares $1,008,349
(5) Comprehensive Income
The company has adopted FASB Statement No. 130, Reporting Comprehensive Income.
The statement establishes standards for reporting and display of comprehensive
income and its components. Comprehensive income includes net income and other
comprehensive income, which for the Company includes unrealized gains and losses
on securities available for sale.
9
<PAGE>
FIRST ROBINSON FINANCIAL CORP. AND SUBSIDIARY
Management Discussion and Analysis of Financial
Condition and Results of Operations
General
The principal business of First Robinson Financial Corporation (the
"Company"), through its wholly-owned subsidiary, First Robinson Savings Bank,
National Association (the "Bank"), consists of accepting deposits from the
general public and investing these funds primarily in loans, mortgage-backed
securities and other securities. The Company's loans consist primarily of loans
secured by residential real estate located in its market area, consumer loans
and commercial loans.
The Company's net income is dependent primarily on its net interest income,
which is the difference between interest earned on interest-eaming assets and
the interest paid on interest-bearing liabilities. Net interest income is a
function of the Company's "interest rate spread," which is the difference
between the average yield earned on interest-earning assets and the average rate
paid on interest-bearing liabilities. The interest rate spread is affected by
regulatory, economic and competitive factors that influence interest rates, loan
demand and deposit flows. To a lesser extent, the Company's net income also is
affected by the level of general and administrative expenses and the level of
other income, which primarily consists of service charges and other fees.
The operations of the Company are significantly affected by prevailing
economic conditions, competition and the monetary, fiscal and regulatory
policies of government agencies. Lending activities are influenced by the demand
for and supply of housing, competition among lenders, the level of interest
rates and the availability of funds. Deposit flows and costs of funds are
influenced by prevailing market rates of interest, competing investments,
account maturities and the levels of personal income and savings in the
Company's market area.
Historically, the Company's mission has been to originate loans on a
profitable basis to the communities it serves. In seeking to accomplish its
mission, the Board of Directors and management have adopted a business strategy
designed (i) to maintain the Bank's capital level in excess of regulatory
requirements; (ii) to maintain the Company's asset quality, (iii) to maintain,
and if possible, increase the Company's earnings; and (iv) to manage the
Company's exposure to changes in interest rates.
Forward-Looking Statements
When used in this filing and in future filings by the Company with the
Securities and Exchange Commission, in the Company's press releases or other
public or shareholder communications, or in oral statements made with the
approval of an authorized executive officer, the words or phrases "would be,"
"will allow," "intends to," "will likely result," "are expected to," "will
continue," "is anticipated," "estimate," "project" or similar expressions are
intended to identify "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. Such statements are subject to
risks and uncertainties, including but not limited to changes in economic
conditions in the Company's market area, changes in policies by regulatory
agencies, fluctuations in interest rates, demand for loans in the Company's
market area and competition, all or some of which could cause actual results to
differ materially from historical earnings and those presently anticipated or
projected.
The Company wishes to caution readers not to place undue reliance on any
such forward-looking statements, which speak only as of the date made, and
advises readers that various factors, including regional and national economic
conditions, substantial changes in levels of market interest rates, credit and
other risks of lending and investment activities and competitive and regulatory
factors, could affect the Company's financial performance and could cause the
Company's actual results for future periods to differ materially from those
anticipated or projected.
The Company does not undertake, and specifically disclaims any obligation,
to update any forward-looking statements to reflect occurrences or unanticipated
events or circumstances after the date of such statements.
10
<PAGE>
FIRST ROBINSON FINANCIAL CORP. AND SUBSIDIARY
Management Discussion and Analysis of Financial
Condition and Results of Operations
Impact of the Year 2000
The Company has conducted a comprehensive review of its computer systems to
identify applications that could be affected by the "Year 2000" issue, and has
developed an implementation plan to address the issue. The Company's data
processing is performed primarily in-house; however software and hardware
utilized is under maintenance agreements with third party vendors, consequently
the Company is very dependent on those vendors to conduct its business. The
Company has already contacted each vendor to request time tables for year 2000
compliance and expected costs, if any, to be passed along to the Company. To
date, the Company has been informed that its primary service providers
anticipate that all reprogramming efforts will be completed by December 31,
1999, allowing the Company adequate time for testing. Certain other vendors have
not yet responded, however, the Company will pursue other options if it appears
that these vendors will be unable to comply. Management does not expect these
costs to have a significant impact on its financial position or results of
operations however, there can be no assurance that the vendors systems will be
2000 compliant, consequently the Company could incur incremental costs to
convert to another vendor. The Company identified certain of its hardware and
software equipment that was not Year 2000 compliant. The Company purchased new
equipment and software totaling approximately $90,000. However the Company has
budgeted an additional $140,000 for capital expenditures as a safeguard for
future contingencies. The Company projects that expenses should not exceed
$50,000 for the fiscal year ending March 31, 1999. The Company has also
contacted its commercial borrowers, with indebtedness to the Company of $100,000
or more concerning their compliance with the "Year 2000" issue.
Business Strategy
The Company's business strategy is to continue to be a community-oriented
locally-owned financial institution offering financial services to residents and
businesses of Crawford County, Illinois (the primary market area). The Board of
Directors and management are strategically planning the Company's future. New
products and services are being discussed and reviewed for their effect on
profitability and customer service. The Board of Directors intends to maintain a
strong presence in the one- to four- family real estate market and plans are to
institute new programs to increase the Bank's market share.
Financial Condition - Comparison at June 30, 1998 and March 31, 1998
The Company's total assets increased by approximately $593,000 or 0.8%, to
$80.6 million at June 30, 1998 from $80.0 million at March 31, 1998. This
increase in total assets was primarily the result of a $4.3 million increase in
securities available for sale offset by a $3.3 million decrease in cash and cash
equivalents and a $202,000 decrease in loans receivable, net and a $94,000
decrease in other assets. The overall increase in assets was primarily due to
the purchase of additional securities, and the attraction of new customer
relationships. This increase was primarily funded by increases in deposits and
repurchase agreements.
Liabilities increased approximately $716,000 or 1.1% to $67.8 million at
June 30, 1998 from $67.1 million at March 31, 1998. This increase in liabilities
was primarily the result of a $389,000 increase in deposits, a $427,000 increase
in repurchase agreements and a $67,000 increase in accrued income taxes offset
by a $51,000 decrease in accrued interest payable and a $114,000 decrease in
other liabilities.
Stockholders' equity decreased $123,000 or 1.0% to $12.8 million as of June
30, 1998 from $12.9 million as of March 31, 1998. This decrease was primarily
from the payment of $258,000 in dividends offset by earnings for the quarter.
11
<PAGE>
FIRST ROBINSON FINANCIAL CORP. AND SUBSIDIARY
Management Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations - Comparison at June 30, 1998 and 1997
Net Income
The Company reported net income of $149,000 during the three months ended
June 30, 1998 as compared to $220,000 during the three months ended June 30,
1997. The $71,000 or 32.3% decrease in net income during the three months ended
June 30, 1998, as compared to the same period in the prior year, was primarily
attributable to an increase of $64,000 or 9.3% in net interest income after
provision for loan losses and a decrease of $46,000 or 32.6% in provision for
income taxes offset by a decrease of $98,000 or 41.7% in non-interest income and
an increase of $83,000 or 14.7% in non-interest expense.
Net Interest Income
Net interest income increased by $116, 000 or 16.4% during the three months
ended June 30, 1998, as compared to the same period in the prior year. The
increase was caused by an increase of $89,000 or 5.8% in total interest income
and a decrease of $27,000 or 3.3% in total interest expense. The increase in
interest income was from a $56,000 or 4.0% increase in loan interest income and
a $33,000 or 26.6% increase in investment interest income. The decrease in total
interest expense was due primarily from a decrease of $32,000 or 56.1% on FHLB
advances and a decrease of $23,000 or 3.0% on interest on deposits offset by an
increase of $28,000 or 2800% on interest on repurchase agreements. These changes
were the result of the use of the proceeds of the stock conversion. Interest
rate spread for the three months ended June 30, 1998 was 3.46% compared to 3.67%
for the same period in 1997.
Non-Interest Income
Total non-interest income decreased by $98,000 or 41.7% during the three
months ended June 30, 1998, as compared to the same period in the prior year.
The decrease in other non-interest income was primarily the result of a one-time
sale of the government guaranteed portion of commercial loans in the quarter
ending June 30, 1997at a $113,000 gain. Total non-interest income was also
affected by an increase of $18,000 or 38.3% in service charge income and an
increase of $12,000 or 41.4% in other non-interest income offset by a decrease
of $15,000 or 32.6% in loan fees.
Non-Interest Expense
Total non-interest expense increased by $83,000 or 14.7% during the three
months ended June 30, 1998, as compared to the same period in the prior year.
This increase was due primarily from an increase of $17,000 or 5.6% in
compensation and employee benefits, an increase of $21,000 or 23.9% in occupancy
and equipment and an increase of $23,000 or 26.7% in operating expenses and the
costs of being a publicly traded company.
Provision for Loan Losses
During the three months ended June 30, 1998, the Company recorded provision
for loan losses of $70,000 as compared to $18,000 for the same period of the
prior year. The Company recorded such provisions to adjust the Company's
allowance for loan losses to a level deemed appropriate based on an assessment
of the volume and lending presently being conducted by the Company, industry
standards, past due loans, economic conditions in the Company's market area
generally and other factors related to the collectibihty of the Company's loan
portfolio. The Company intends to take a more conservative approach to its
provision for loan losses in the coming months. The Company's non-performing
assets as a percentage of total assets was 0.51 % at June 30, 1998, as compared
to 0.55% at March 31, 1998.
12
<PAGE>
FIRST ROBINSON FINANCIAL CORP. AND SUBSIDIARY
Management Discussion and Analysis of Financial
Condition and Results of Operations
Provision for Income Taxes
The Company recognized provision for income taxes of $95,000 for the three
months ended June 30, 1998 as compared to $141,000 for the same period in the
prior year. The effective tax rate during the three months ended June 30, 1998
was 38.9% (federal and state) as compared to 39% during the same period in the
prior year.
Regulatory Capital
The Bank is subject to capital requirements of the Office of the
Comptroller of the Currency ("OCC"). The OCC requires the Bank to maintain
minimum ratios of Tier I capital to total risk-weighted assets and total capital
to risk-weighted assets of 4% and 8% respectively. Tier I capital consists of
total stockholders' equity calculated in accordance with generally accepted
accounting principals less intangible assets, and total capital is comprised of
Tier I capital plus certain adjustments, the only one of which is applicable to
the Bank is the allowance for loan losses. Risk- weighted assets refer to the
on- and off-balance sheet exposures of the Bank adjusted for relative risk
levels using formulas set forth by OCC regulations. The Bank is also subject to
an OCC leverage capital requirement, which calls for a minimum ratio of Tier I
capital to quarterly average total assets of 3% to 5%, depending on the
institution's composite ratings as determined by its regulators.
At June 3 0, 1998 the Bank's Tier I capital was $9.4 million and total
capital was $10.1 million. The risk-weighted assets were $55.9 million and the
quarterly average assets were $80.9 million. Tier I capital to risk-weighted
assets was 16.8% and total capital to risk-weighted assets was 18.1%. Tier I
capital to average assets for the quarter was 11.6%. The Bank exceeds the OCC's
capital requirements.
Liquidity and Capital Resources
The Company's principal sources of funds are deposits and principal and
interest payments collected on loans, investments and related securities. While
scheduled loan repayments and maturing investments are relatively predictable,
deposit flows and early loan prepayments are more influenced by interest rates,
general economic conditions and competition. Additionally, the Company may
borrow funds from the FHLB of Chicago or utilize other borrowings of funds based
on need, comparative costs and availability at the time. The Company has
developed a correspondent relationship and has borrowing capabilities with Cole
Taylor Bank in Chicago.
At June 30, 1998 the Company had $2.0 million in advances from the FHLB of
Chicago outstanding with no change from the amount of advances as of March 31,
1998. The Company uses its liquidity resources principally to meet outstanding
commitments on loans, to fund maturing certificates of deposit and deposit
withdrawals and to meet operating expenses. The Company anticipates that it will
have sufficient funds available to meet current loan commitments. At June 30,
1998, the Company had outstanding commitments to extend credit which amounted to
$2.9 million (including $2.0 million, in available revolving commercial lines of
credit). Management believes that loan repayments and other sources of funds
will be adequate to meet the Company's foreseeable liquidity needs.
Liquidity management is both a daily and long-term responsibility of
management. The Company adjusts its investments in liquid assets based upon
management's assessment of (i) expected loan demand, (ii) expected deposit
flows, (iii) yields available on interest-bearing investments and (iv) the
objectives of its asset/liability management program. Excess liquidity generally
is invested in interest-earning overnight deposits and other short-term
government and agency obligations.
13
<PAGE>
PART II OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None.
Item 3. Defaults Upon Senior Executives
None.
Item 4. Submission of Matters to a Vote of Security Holders
Not Applicable
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
Exhibits: I. Statement Regarding Computation of Earnings
II. Financial Data Schedule
Reports on Form 8-K
None
14
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FIRST ROBINSON FINANCIAL CORPORATION
Date: August 13, 1998 /s/ Rick L. Catt
------------------------------------------
Rick L. Catt
President and Chief Executive Officer
Date: August 13, 1998 /s/ Jamie E. McReynolds
------------------------------------------
Jamie E. McReynolds
Chief Financial Officer and Vice President
15
Exhibit 11
Statement Regarding Computation of Earnings per Share
Three
Months
Ended
June 30,
1998
---------
Net Earnings (in thousands) $ 149
Basic earnings per share:
Weighted average shares outstanding 859,625
Less unearned employee stock ownership plan shares (59,413)
Average option shares granted 0
Less assumed purchase of shares using treasury method 0
Common and common equivalent shares outstanding 800,311
---------
Earnings per common share - basic $ 0.19
---------
Diluted earnings per share:
Weighted average shares outstanding 859,625
Less unearned employee stock ownership plan shares (59,413)
Average option shares granted 0
Less assumed purchase of shares using treasury method 0
Common and common equivalent shares outstanding 800,311
---------
Earnings per common share - diluted $ 0.19
---------
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated financial statements of First Robinson Financial Corporation for
the quarterly report on form 10-QSB for the period ended June 30, 1998 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 506
<INT-BEARING-DEPOSITS> 2,745
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 8,394
<INVESTMENTS-CARRYING> 966
<INVESTMENTS-MARKET> 981
<LOANS> 64,717
<ALLOWANCE> (685)
<TOTAL-ASSETS> 80,561
<DEPOSITS> 63,019
<SHORT-TERM> 4,071
<LIABILITIES-OTHER> 699
<LONG-TERM> 0
0
0
<COMMON> 9
<OTHER-SE> 12,763
<TOTAL-LIABILITIES-AND-EQUITY> 80,561
<INTEREST-LOAN> 1,457
<INTEREST-INVEST> 157
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 1,614
<INTEREST-DEPOSIT> 737
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<INCOME-PRE-EXTRAORDINARY> 244
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<EPS-PRIMARY> 0.19
<EPS-DILUTED> 0.19
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<RECOVERIES> (99)
<ALLOWANCE-CLOSE> (685)
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</TABLE>
