SECURITY AND EXCHANGE COMMSSION
WASHNGTON, D.C. 20549
FORM 10-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 SEPTEMBER 30, 1999
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 November 12, 1999, the Registrant had 752,972 shares of Common Stock, par
value $0.01, issued and outstanding.
Transitional Small Business Disclosure Format (check one):
YES NO X
<PAGE>
FIRST ROBINSON FINANCIAL CORPORATION
Index to Form 10-QSB
PART I. FINANCIAL INFORMATION PAGE
Item 1. Financial Statements
Consolidated Balance Sheet as of September 30, 1999
And March 31, 1999 3
Consolidated Statements of Income for the Three and
Six Month Periods Ended September 30, 1999 and
September 30, 1998 4
Consolidated Statements of Stockholders' Equity for
the Six Month Periods Ended September 30, 1999 and
September 30, 1998 5
Consolidated Statements of Cash Flows for the Three
and Six Month Periods Ended September 30, 1999 and
September 30, 1998 6
Notes to Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 11
PART II. OTHER INFORMATION
Item 1.Legal Proceedings 17
Item 2.Changes in Securities 17
Item 3.Defaults Upon Senior Securities 17
Item 4.Submission of Matters to a Vote of Security Holders 17
Item 5.Other Information 17
Item 6.Exhibits and Reports on Form 8-K 17
SIGNATURES 18
<PAGE>
Item I. Financial Statements
FIRST ROBINSON FINANCIAL CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
Unaudited Audited
9/30/99 3/31/99
--------- ---------
<S> <C> <C>
ASSETS
($1,000's)
Cash and Cash Equivalents:
Cash and due from banks $1,224 $1,007
Interest bearing deposits 3,226 4,268
----- -----
Total Cash and Cash Equivalents 4,450 5,275
Securities available for sale, amortized cost
of $16,249 and $11,942 at September 30, 1999
and March 31, 1999 respectively 15,752 11,919
Securities held to maturity, estimated market
value of $177 and $195 at September 30, 1999
and March 31, 1999, respectively 175 190
Loans receivable, net 62,519 62,593
Accrued interest receivable 821 698
Premises and equipment, net 2,911 2,918
Foreclosed real estate 30 0
Prepaid income tax 0 97
Deferred income tax 116 0
Other assets 133 107
--- ---
Total Assets $86,907 $83,797
------- -------
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits $69,554 $67,325
Advances from Federal Home Loan Bank 4,500 2,000
Repurchase agreements 1,558 2,206
Advances from Borrowers for taxes and insurance 40 98
Accrued interest payable 291 294
Accrued income taxes 95 0
Deferred income taxes 0 69
Accrued expenses 92 243
-- ---
Total Liabilities 76,130 72,235
------ ------
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
Additional paid-in capital 8,290 8,277
Retained earnings 5,254 5,175
Treasury stock, at cost (1,498) (747)
Accumulated other comprehensive income (303) (14)
Common stock acquired by ESOP/RRP (975) (1,138)
----- -------
Total Stockholders' Equity 10,777 11,562
------ ------
Total Liabilities and Stockholders'
Equity $86,907 $83,797
------- -------
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
3
<PAGE>
FIRST ROBINSON FINANCIAL CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME For the Three and
Six Month Periods Ended September 30, 1999 and 1998
(Unaudited)
<TABLE>
<CAPTION>
Three Month Period Six Month Period
---------------------- --------------------
($1,000's)
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Interest income:
Interest on Loans $1,370 $1,480 $2,736 $2,951
Interest and dividends
on securities 282 182 526 339
--- --- --- ---
Total interest income 1,652 1,662 3,262 3,290
------ ----- ------ -----
Interest expense:
Interest on deposits 710 769 1,425 1,506
Interest on FHLB advances 38 26 63 51
Interest on repurchase
agreements 24 31 54 60
-- -- -- --
Total interest expense 772 826 1,542 1,617
--- --- ----- -----
Net interest income 880 836 1,720 1,673
Provision for loan losses 30 45 90 115
--- -- -- ---
Net interest income after
provision 850 791 1,630 1,558
Non-interest income:
Service charges 97 70 196 135
Loan fees 20 15 44 32
Other non-interest income 33 14 66 31
-- -- -- --
Total other income 150 99 306 198
Non-interest expense:
Compensation and employee
benefits 414 564 825 886
Occupancy and equipment 121 113 234 222
Foreclosed property expense 0 15 0 29
Data Processing 22 22 41 41
Audit, legal and other
professional 28 50 50 76
SAIF deposit insurance 10 15 25 25
Advertising 22 16 42 31
Telephone and postage 25 23 48 45
Other 82 98 164 183
--- -- --- ---
Total other expenses 724 916 1,429 1,538
---- --- ----- -----
Income (Loss) before income tax 276 (26) 507 218
Provision for (benefit from)
income taxes 99 (16) 182 79
--- ---- --- --
Net Income (Loss) $177 $(10) $325 $139
---- ----- ----- ----
Earnings Per Share-Basic $0.25 $(0.01) $0.44 $0.18
Earnings Per Share-Diluted $0.25 $(0.01) $0.44 $0.18
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
4
<PAGE>
FIRST ROBINSON FINANCIAL CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
For The Six Month Periods Ended September 30, 1999 and 1998
(Unaudited)
<TABLE>
<CAPTION>
Unallocated Accumulated
ESOP Other Compre-
Common Paid-in Retained Treasury and Comprehensive hensive
Stock Capital Earnings Stock RRP Income Total Income
------ --------- --------- -------- ------- -------------- ------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
($1,000's)
Balance at March 31, 1999 $9 $8,277 $5,175 $(747) $(1,138) $(14) $11,562
Net Income 325 325 $325
----
Other Comprehensive Income
Unrealized gain (loss) on
Securities, net of related tax (474)
effects of 185
----
Total other comprehensive income (289) (289) (289)
----
Total comprehensive income $36
---
Rounding 1 1
Allocation of ESOP shares 13 40 53
Allocation of RRP Shares 123 123
Treasury Stock at cost (751) (751)
Dividends paid (247) (247)
-------------------------------------------------------------------------------
Balance at September 30, 1999 $9 $8,290 $5,254 $(1,498) $(975) $(303) $10,777
-- ------ ------ ------- ----- ----- -------
</TABLE>
<TABLE>
<CAPTION>
Unallocated Accumulated
ESOP Other Compre-
Common Paid-in Retained Treasury and Comprehensive hensive
Stock Capital Earnings Stock RRP Income Total Income
------ --------- --------- -------- ------- -------------- ------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
($1,000's)
Balance at March 31, 1998 $9 $8,232 $5,223 $0 $(602) $33 $12,895
Net Income 139 139 $139
----
Other Comprehensive Income
Unrealized gain (loss) on
Securities, net of related tax 68
effects of (27)
---
Total other comprehensive income 41 41 41
--
Total comprehensive income $180
----
Allocation of ESOP shares 24 35 59
Recognition & Retention Plan (623) (623)
Treasury Stock at cost (747) (747)
Dividends paid (258) (258)
-------------------------------------------------------------------------------
Balance at September 30, 1998 $9 $8,256 $5,104 $(747) $(1,190) $74 $11,506
-- ------ ------ ----- ------- --- -------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
5
<PAGE>
FIRST ROBINSON FINANCIAL CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS For the Three
and Six Month Periods Ended September 30, 1999 and 1998
(UNAUDITED)
<TABLE>
<CAPTION>
Three Month Period Six Month Period
-------------------- -------------------
($1,000's)
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income $177 $ (10) $325 $139
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities
Provision for depreciation 70 57 134 113
Provision for loan losses 30 45 90 115
Net amortization and accretion
on investments 4 7 15 13
ESOP shares allocated 27 28 53 59
Decrease (increase) in accrued
interest receivable (101) (33) (123) (9)
Decrease (increase) decrease in
prepaid income taxes 18 (86) 97 (57)
Decrease (increase) in other assets (23) (58) (26) 36
(Decrease) increase in accrued
interest payable (6) 64 (3) 13
(Decrease) increase in accrued
income taxes 95 (67) 95 0
(Decrease) increase in deferred
income taxes 0 0 0 0
Increase (decrease) in accrue (235) (7) (151) (121)
Gain on sale of loans 0 0 0 0
Gain on sale of premises and
equipment 0 0 0 0
Loss on sale of mortgage-backed
securities 0 0 0 0
----- ---- ---- ----
Net cash provided by operating
activities 56 (60) 506 301
----- ---- ---- ----
Cash flows from investing
activities:
Proceeds from sale of securities
available for sale 0 0 0 0
Proceeds from maturities of
securities available for sale 0 0 0 0
Proceeds from sale of mortgage
-backed securities
available for sale 0 0 0 0
Proceeds from maturities of
securities held to maturity 0 0 15 15
Purchase of securities held to
maturity 0 0 0 (35)
Purchase of securities available
for sale (1,000) 0 (1,000) (741)
Purchase of mortgage-backed
securities available for sale 0 (2,216) (4,498) (6,112)
FHLB Stock purchased 0 0 (45) (16)
Repayment of principal- mortgage
-backed securities 516 405 1,220 712
Decrease (increase) in loans
receivable (1,029) 321 (1,073) (978)
Purchase of loans and
participations 0 0 0 0
Sale or participation of
originated loans 35 0 1,059 1,431
Decrease (increase) in
foreclosed real estate (30) 136 (30) 197
Purchase of premises and
equipment (62) (71) (127) (167)
----- ---- ---- ----
Net cash used in investing
activities (1,570) (1,425) (4,479) (5,694)
------ ------ ------ ------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
6
<PAGE>
FIRST ROBINSON FINANCIAL CORP. AND SUBSIDIARY
CONSOLDIATED STATEMENT OF CASH FLOWS For The Three
and Six Month Periods Ended September 30, 1999 and 1998
(Unaudited)
<TABLE>
<CAPTION>
Three Month Period Six Month Period
-------------------- -------------------
($1,000's)
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Cash flows from financing activities:
Net increase (decrease) in deposits $(1,279) $5,493 $2,229 $5,882
Increase (decrease) in repurchase
agreements (488) (50) (648) 377
Advances from Federal Home Loan
Bank 4,000 0 4,000 0
Repayment of FHLB advances (1,500) 0 (1,500) 0
Increase in advances from borrowers
for taxes and insurance (77) (54) (58) (27)
Proceeds from issuance of common
stock 0 0 0 0
Purchase of employee stock ownership
plan 0 0 0 0
Dividends paid 0 0 (247) (258)
Purchase of stock for Recognition &
Retention Plan 0 (746) 0 (746)
Funding of Recognition & Retention
Plan 123 123 123 123
Purchase of treasury stock (482) (747) (751) (747)
----- ----- ----- ------
Net cash provided by financing
activities 297 4,019 3,148 4,604
----- ----- ----- ------
Increase (decrease) in cash and
cash equivalents (1,217) 2,534 (825) (789)
Cash and cash equivalents at
beginning of period 5,667 3,251 5,275 6,574
----- ----- ----- ------
Cash and cash equivalents at end
of period $4,450 $5,785 $4,450 $5,785
----- ----- ----- ------
Supplemental Disclosures:
Additional Cash Flows Information:
Cash paid for:
Interest on deposits, advances
and repurchase agreements $771 $762 $1,539 $1,604
Income taxes:
Federal 29 72 29 128
State 12 4 22 17
Schedule of Non-Cash Investing
Activities:
Change in unrealized gain on
securities available for sale (109) 142 (474) 68
Change in deferred income taxes
attributed to unrealized gain
on securities available for sale 43 (56) 185 (27)
</TABLE>
The accompanying notes are an integral part of those consolidated financial
statements.
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 21, 1999. The accompanying
unaudited consolidated financial statements have been prepared in accordance
with the instructions for the Quarterly Repont on 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 September 30, 1999 and the results of its
operations and cash flows for the three month and six month periods ended
September 30, 1999 and 1998. The results of operations for those months ended
September 30, 1999 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
were 719,741 and 778,510 for the three month periods and 733,988 and 789,410 for
the six month periods ending September 30, 1999 and 1998, respectively. The
Company approved a stock option plan during the quarter ended September 30,
1998. This plan had no dilutive effect on the earnings per share since current
stock price was less than option price.
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 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.
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 was $27,000 each for the three months ended September 30,
1999 and 1998. For the six month periods ESOP compensation expense amounted to
$53,000 for the period ended September 30, 1999 and $58,000 for the period ended
September 30, 1998.
The ESOP shares at September 30, 1999 and 1998 were as follows:
1999 1998
---- ----
Allocated shares 15,197 6,877
Shares released for allocation 5,978 5,158
Unallocated shares 47,595 56,735
------ ------
Total ESOP shares 68,770 68,770
Fair value of unallocated shares $657,406 $936,144
(5) DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION
In June, 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information". SFAS 131 establishes standards for the way
that public business enterprises report information about opening segments in
financial statements and requires that those enterprises report selective
information about operating segments in interim financial reports issued to
shareholders. It also establishes standards for related disclosures about
products and services, geographic areas, and major customers. This statement is
effective for financial statements for periods beginning after December 15,
1997. The Company has adopted the appropriate provisions of the statement for
the period ended September 30, 1999. The Company's management believes that the
Company is comprised of only one reportable operating segment, and that the
consolidated financial statements adequately reflect the financial condition and
operations of that segment. The principal business of the Company is overseeing
the business of the Bank and investing the portion of the net proceeds from its
initial public offering retained by it. The Company has no significant assets
other than its investment in the Bank, a loan to the ESOP, and certain
investment securities and cash and cash equivalents. The Bank's principle
business consists of attracting deposits from the general public and investing
these deposits in loans to its customers. The Bank's operating facilities are
contained in Crawford County, Illinois, and its lending is concentrated within
Crawford and contiguous counties. The Bank has no customers from which it
derives 10% or more of its revenue.
9
<PAGE>
FIRST ROBINSON FINANCIAL CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(6) 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, for which the Company includes unrealized gains and losses
on securities available for sale. Comprehensive income, unaudited, for the three
and six month periods ended September 30, 1999 and 1998 are as follows:
THREE MONTH PERIOD SIX MONTH PERIOD
1999 1998 1999 1998
---- ---- ---- ----
($1,000)
Net Income (Loss) $177 $(10) $325 $139
---- ---- ---- ----
Other Comprehensive Income
Unrealized gains (losses) on
securities (109) 142 (474) 68
Related tax effects 43 (56) 185 (27)
-- --- ---- ----
Other Comprehensive Income (Losses) (66) 86 (289) 41
---- -- ---- ----
Comprehensive Income $111 $76 $36 $180
10
<PAGE>
FIRST ROBINSON FINANCIAL CORP. AND SUBSIDIARY
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
FORWARD-LOOKING STATEMENTS
When used in this filing and in future filings by First Robinson Financial
Corp. (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. References in this filing to "we", "us" , and "our"
refer to the Company and/or First Robinson Savings Bank, Nationa Association
(the "Bank"), as the content requires.
We wish 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 our financial performance and could cause our actual
results for future periods to differ materially from those anticipated or
projected.
We do not undertake, and specifically disclaim any obligation, to update
any forward-looking statements to reflect occurrences or unanticipated events or
circumstances after the date of such statements.
GENERAL
Our principal business, through our operating subsidiary, the Bank,
consists of accepting deposits from the general public and investing these funds
primarily in loans, mortgage-backed securities and other securities. Our loans
consist primarily of loans secured by residential real estate located in its
market area, consumer loans, commercial loans, and agricultural loans.
Our net income is dependent primarily on our 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 our "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, our 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.
Our operations 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 our market area.
Historically, our mission has been to originate loans on a profitable basis
to the communities we serve. In seeking to accomplish our 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 asset quality, (iii) to maintain, and if possible, increase our
earnings; and (iv) to manage our exposure to changes in interest rates.
11
<PAGE>
FIRST ROBINSON FINANCIAL CORP. AND SUBSIDIARY
Management's Discussion and Analysis of Financial
Condition and Results of Operations
IMPACT OF THE YEAR 2000
We have completed testing of our computer systems which were conducted for
the purpose of identifying applications that could be affected by the Year 2000
issue. Our data processing is performed primarily in-house; however software and
hardware utilized is under maintenance agreements with third party vendors.
Consequently, we are very dependent on those vendors to conduct our business. We
have already contacted each vendor to request time tables for Year 2000
compliance and expected costs, if any, to be passed along to us. To date, and
while we cannot offer assurance with respect to their efforts, we have been
informed that our primary service providers have completed all reprogramming
efforts. Review and testing of core systems has been completed. Management does
not expect any additional costs to have a significant impact on our financial
position or results of continuing operations. There can be no assurance,
however, that the vendors' systems will be Year 2000 compliant. Consequently, we
could incur incremental costs to convert to another vendor. We anticipate that
expenses should not exceed $78,000 for the fiscal year ending March 31, 2000. We
are expensing all costs associated with Year 2000 required system changes as
costs are incurred, and such costs are being funded through operating cash
flows. The cost of internal resources for compliance has not been estimated.
While we cannot guarantee it, we do not expect significant increases in future
data processing costs or other expenses related to Year 2000 compliance. For the
six months ended September 30, 1999, we have expended less than $1,000 related
to Year 2000 compliance.
BUSINESS STRATEGY
We continue to be a community-oriented, locally-owned financial institution
offering services to residents and businesses of Crawford County, Illinois, our
primary market area. New products and services are continually discussed and
reviewed for their effect on profitability and customer service. The Bank
recently began offering check cards and now credit cards are available to our
customers with our Bank's name on the card. Although the Bank assumes no
liability for the credit cards, we receive some income from the issuance of the
cards. The fixed rate mortgage program through Federal Home Loan Bank of Chicago
continues to grow and has produced additional non-interest income for the Bank.
Our Internet service now covers all of Crawford County and serves over 1,100
customers. PrimeVest Financial Services was added in April 1999 to provide
investment brokerage services to our customers. As of September 1999, the
service had provided an addition of approximately $18,000 net, to non-interest
income. Management and the Board of Directors anticipate offering Internet
banking services sometime during the 2000 calendar year. We intend to stay
focused on providing excellent customer service and maintaining a strong
presence in our community. We are still the only independent community bank in
Robinson, Oblong, and Palestine, Illinois.
FINANCIAL CONDITION
COMPARISON AT SEPTEMBER 30, 1999 AND MARCH 31, 1999
Our total assets increased by approximately $3.1 million or 3.7%, to $86.9
million at September 30, 1999 from $83.8 million at March 31, 1999. This
increase in total assets was primarily the result of a $3.8 million or 32.2%
increase in securities available for sale offset by an $825,000 or 15.6%
decrease in cash and cash equivalents. Loans receivable, net decreased by
$74,000 from March 31, 1999 to the current quarter, September 30, 1999. In an
effort to better manage the risk in our balance sheet, we are shifting the
make-up of our assets, and have reduced our loan to deposit ratio from 93.0% as
of September 30, 1998 to 89.9% for this quarter while increasing our investment
securities.
Liabilities increased approximately $3.9 million or 5.4% to $76.1 million
at September 30, 1999 from $72.2 million at March 31, 1999. A $2.2 million or
3.3% increase, for the same period, in deposits and a $2.5 million or 125%
increase in Federal Home Loan Bank advances was the primary reason for the
increase in our liabilities. Federal Home Loan Bank advances increased due to
the decrease in deposits and repurchase agreements. The advances were needed to
fund loans and to fund investments. The increase in deposits and advances was
partially offset by a decrease of $648,000 or 29.4% in repurchase agreements.
Due to FASB 115 and the valuation of our securities held available for sale,
deferred income tax decreased $185,000. At March 31, 1999, deferred income taxes
were recorded on the balance sheet as a liability of $69,000 and as of September
30, 1999 deferred income taxes are being carried on the balance sheet as an
asset of $116,000.
12
<PAGE>
FIRST ROBINSON FINANCIAL CORP. AND SUBSIDIARY
Management's Discussion and Analysis of Financial
Condition and Results of Operations
FINANCIAL CONDITION - CONTINUED
Stockholders' equity decreased $785,000 or 6.8% to $10.8 million as of
September 30, 1999 from $11.6 million on March 31, 1999. The decrease was
primarily attributed to three major factors. First, as of September 30, 1999,
compared to March 31, 1999, we had purchased an additional $751,000 at cost of
treasury stock, bringing the total amount of treasury stock to $1.5 million, at
cost as of September 30, 1999. Second, the payment of a $0.31 per share dividend
to stockholders of record as of June 2, 1999 amounted to a total of $247,000
being paid from retained earnings. Finally, there was a $289,000 decrease after
tax in the valuation of our securities held available for sale. The decrease in
stockholders' equity for the quarter ended September 30, 1999, however, was
offset in part by the addition of six months of earnings of $325,000 to retained
earnings.
RESULTS OF OPERATIONS
COMPARISON OF THE THREE MONTH PERIODS ENDED SEPTEMBER 30, 1999 AND 1998
PERFORMANCE SUMMARY
We are reporting net earnings of $177,000 for the second quarter of the
fiscal year. For the quarter ended September 30, 1998, we reported a loss of
$10,000. The reported loss of $10,000 for the three month period ended September
30, 1998 was after the benefit from income tax of $16,000. The loss before tax
was actually $26,000. In comparison, the income before tax for the three month
period ended September 30, 1999 was $276,000 with a provision for tax of $99,000
resulting in earnings of $177,000.
The $187,000 or 187.0% increase in net income was attributed to an increase
of $59,000 or 7.5% in net interest income after provision for loan losses, an
increase of $51,000 or 51.5% in non-interest income and a decrease of $192,000
or 21.0% in non-interest expense offset by a $115,000 increase in provision for
taxes for the three month period ended September 30, 1999 as compared to the
same period in 1998.
NET INTEREST INCOME
Net interest income increased by $44,000 or 5.3% to $880,000 during the
three month period ended September 30, 1999, as compared to $836,000 during the
same period in the prior year. Interest expense decreased by $54,000 or 6.5%
from $826,000 for the quarter ended September 30, 1998 to $772,000 in comparison
to the quarter ended September 30, 1999. The average rate on interest bearing
liabilities for the quarter ended September 30, 1999 was 4.40% as compared to
4.97% for the quarter ended September 30, 1998. However, the decrease in
interest expense was offset in part by a decrease in interest income of $10,000,
or 0.6% for the quarter ended September 30, 1999 as compared to the quarter
ended September 30, 1998. This decrease is primarily the result of the shift in
the assets from higher risk, higher yielding loans to lower risk, lower yielding
investment securities. Decreasing our total amount of loans, however, allowed us
to decrease our provision for loan losses.
NON-INTEREST INCOME
Total non-interest income increased by $51,000 or 51.5% to $150,000 during
the three months ended September 30, 1999, as compared to $99,000 during the
same period in last year. The increase in total non-interest income was
primarily caused by across- the- board increases of $27,000 or 38.6% in service
charges, $19,000 or 135.7% in other non-interest income, and $5,000 or 33.3 % in
loan fees.
13
<PAGE>
FIRST ROBINSON FINANCIAL CORP. AND SUBSIDIARY
Management's Discussion and Analysis of Financial
Condition and Results of Operations
NON-INTEREST EXPENSE
Total non-interest expense decreased by $192,000 or 21.0% to $724,000
during the three months ended September 30, 1999, as compared to $916,000 during
the same period in the prior year. This decrease was due primarily from a
decrease of $150,000 or 26.6% in compensation and employee benefits, a decrease
of $15,000 in foreclosed property expense, a decrease of $22,000 or 44.0% in
audit, legal and other professional fees, a decrease of $5,000 or 33.3% in
Savings Association Insurance Fund deposit insurance premiums, and a decrease of
$16,000 or 16.3% in other non-interest expense offset by an increase of $8,000
or 7.1% in occupancy and equipment expense, an increase of $6,000 or 37.5% in
advertising expense and an increase of $2,000 or 8.7% in telephone and postage
expense. Compensation expense and audit, legal and professional fees were higher
in the three months ended September 30, 1998 than for the three months ended
September 30, 1999 due to the funding of and the origination costs associated
with the Recognition and Retention Plan and the Stock Option Plan which were
approved by shareholders during the quarter ended September 30, 1999. The three
months ended September 30, 1998 included a year's expense for the immediate
allocation of the first year of the Recognition and Retention Plan and two
months of accrual toward the allocation for the second year on July 29, 1999.
The three months ended September 30, 1999 represent three months of accrual
toward the allocation for the third year as of July 29, 2000.
PROVISION FOR LOAN LOSSES
During the three months ended September 30, 1999, we recorded provision for
loan losses of $30,000 as compared to $45,000 for the same period of the prior
year, a decrease of $15,000 or 33.3%. We recorded such provisions to adjust our
allowance for loan losses to a level deemed appropriate based on an assessment
of the volume and lending presently being conducted by the Bank, industry
standards, past due loans, economic conditions in our market area generally and
other factors related to the collectability of the loan portfolio. Our
non-performing assets as a percentage of total assets was 0.27% at September 30,
1999, as compared to 0.20% at June 30, 1999.
PROVISION FOR INCOME TAXES
We recognized a provision for federal and state income taxes of $99,000 for
the three months ended September 30, 1999 as compared to a benefit from income
taxes of $16,000 for the same period in the prior year. The effective tax rate
during the three months ended September 30, 1999 was 35.9% as compared to
receiving a benefit from taxes of 61.6% for the three months ended September 30,
1998. The effective tax rate for the three months ended September 30, 1998 was
affected by annualized taxable income at the various federal income tax rates
based on the operating results for that quarter.
COMPARISON OF THE SIX MONTH PERIODS ENDED SEPTEMBER 30, 1999 AND 1998
NET INCOME
We reported a net income of $325,000 during the six months ended September
30, 1999 as compared to $139,000 for the same period in the prior year. The
$186,000 or 133.8% increase in net income was primarily attributed to an
increase of $72,000 or 4.6% in net interest income after provision for loan
losses, an increase of $108,000 or 54.5% in non-interest income and a decrease
of $109,000 or 7.1% in non-interest expense offset by an increase of $103,000 or
130.4% in the provision for income taxes.
NET INTEREST INCOME
Net interest income increased by $47,000 or 2.8% for the six month period
ended September 30, 1999 as compared to the same period in the previous year.
For the six months ended September 30, 1999, interest expense decreased by
$75,000 or 4.6% from the six months ended September 30, 1998. However, the
decrease in interest expense was partially offset by a decrease in interest
income of $28,000 or 0.85% from the September 30, 1998 period. The interest rate
spread for the six months ended September 30, 1999 was 3.65% compared to 3.45%
for the same period in the prior year.
<PAGE>
NON-INTEREST INCOME
Our non-interest income increased by $108,000 or 54.5% to $306,000 for the
six month period in this fiscal year as compared to $198,000 for the six month
period in the prior year. The increase was a direct result of increases in
service charges, loan fees and other non-interest income. Service charges on
deposit accounts increased by $61,000 or 45.2% for the six month period ended
September 30, 1999 as compared to the six months ended September 30, 1998.
Non-interest income from loan fees resulted in a $12,000 or 37.5% increase over
the same period in the prior year and income from other sources increased by
$35,000 or 112.9% from the six month period ended September 30, 1998.
14
<PAGE>
FIRST ROBINSON FINANCIAL CORP. AND SUBSIDIARY
Management's Discussion and Analysis of Financial
Condition and Results of Operations
NON-INTEREST EXPENSE
We have made a concentrated effort to decrease non-interest expenses.
Non-interest expense for the six month period ended September 30, 1999 was
$109,000 or 7.1% below that of the same six month period ended September 30,
1998. The decrease was the result of a $61,000 or 6.9% decrease in compensation
and employee benefits, a decrease of $29,000 or 100% in foreclosed property
expense, a decrease of $26,000 or 34.2% in audit, legal and other professional
fees and a $19,000 or 10.4% decrease in other non-interest expense offset by an
increase of $12,000 or 5.4% in occupancy and equipment, an increase of $11,000
or 35.5% in advertising expense and a $3,000 6.7% increase in telephone and
postage expense.
PROVISION FOR LOAN LOSSES
The provision for loan losses for the six month period ended September 30,
1999 decreased by $25,000 or 21.7% from the six months ended September 30, 1998.
We recorded a provision for loan losses of $90,000 for this six month period in
comparison to $115,000 for the six months in the previous year. We adjusted our
provision for loan losses to an appropriate level after assessing the volume and
types of lending we are presently conducting. Also influencing the provision
for loan losses was the economic conditions of our market area, industry
standards, past due loans and any other factors related to the collection of our
loan portfolio. Our non-performing assets as a percentage of total assets was
0.27% at September 30, 1999 as compared to 0.18% at March 31, 1999.
PROVISION FOR INCOME TAXES
We recognized provision for income taxes of $182,000 for the six months
ended September 30, 1999 as compared to $79,000 for the six months in the prior
year. The effective tax rate for this six month period was 35.9% and 36.2% for
the six months ended September 30, 1998.
LIQUIDITY AND CAPITAL RESOURCES
Our 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, we may borrow funds from the
FHLB of Chicago, our correspondent bank, Cole Taylor Bank located in Chicago and
the Discount Window of the Federal Reserve of St. Louis or utilize other
borrowings of funds based on need, comparative costs and availability at the
time.
At September 30, 1999 we had $4.5 million in advances from the FHLB of
Chicago outstanding resulting in an increase of $2.5 million in advances from
the amount as of March 31, 1999. We use our liquidity resources principally to
meet outstanding commitments on loans, to fund maturing certificates of deposit
and deposit withdrawals and to meet operating expenses. At September 30, 1999,
we had outstanding commitments to extend credit, which amounted to $4.6 million
(including $2.7 million, in available revolving commercial and agricultural
lines of credit). Management believes that loan repayments and other sources of
funds will be adequate to meet any foreseeable liquidity needs.
Liquidity management is both a daily and long-term responsibility of
management. We adjust our 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.
15
<PAGE>
FIRST ROBINSON FINANCIAL CORP. AND SUBSIDIARY
Management's Discussion and Analysis of Financial
Condition and Results of Operations
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 September 30, 1999, the Bank was in compliance with all of the
aforementioned capital requirements as summarized below:
<TABLE>
<CAPTION>
September 30, 1999
------------------
(1,000'S)
<S> <C>
Tier I Capital:
Common stockholders' equity 9,766
Unrealized loss (gain) on securities available for sale 303
Total Tier I Capital 10,069
Tier II Capital:
Total Tier I capital 10,069
Qualifying allowance for loan losses 631
Total capital 10,700
Risk-weighted assets 55,265
Quarter average assets 85,901
</TABLE>
<TABLE>
<CAPTION>
To be Well Capitalized
Under the Prompt
For Capital Corrective Action
Actual Adequacy Purposes Provisions
-------- ------------------ ----------------------
Amount Ratio Amount Ratio Amount Ratio
------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
As of September 30, 1999:
Total Risk-Based Capital
(to Risk-Weighted Assets) 10,700 19.36% 4,421 8.00% 5,527 10.00%
Tier I Capital
(to Risk-Weighted Assets) 10,069 18.22% 2,211 4.00% 3,316 6.00%
Tier I Capital
(to Average Assets) 10,069 11.72% 3,436 4.00% 4,295 5.00%
</TABLE>
At the time of the conversion of the Bank to a stock organization, a special
liquidation account was established for the benefit of eligible account holders
and the supplemental account holders in an amount equal to the net worth of the
Bank. This account, which is expected to decrease over time, will be maintained
for the benefit of eligible account holders and the supplemental account holders
pursuant to the plan of conversion. In the event of a complete liquidation, each
eligible and the supplemental eligible account holders will be entitled to
receive a liquidation distribution from the liquidation account in an amount
proportionate to the current adjusted qualifying balances for accounts then
held. With the reorganization completed on June 27, 1997, this liquidation
account became part of stockholders' equity for the Company under the same terms
and conditions as if the reorganization had not occurred. The Bank may not
declare or pay cash dividends on or repurchase any of its common stock if
stockholders' equity would be reduced below applicable regulatory capital
requirements or below the liquidation account.
16
<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
(a) On July 28, 1999, the Company held its Annual Meeting of
Stockholders.
(b) Stockholders voted on and approved the following matters:
(i) The election of the following two directors of the
Company;
<TABLE>
<CAPTION>
Broker
Votes: For Withheld Abstain Non-Votes
------ --- -------- ------- ---------
<S> <C> <C> <C> <C>
Rick L. Catt 618,523 7,650 0 0
Donald K. Inboden 614,873 11,300 0 0
</TABLE>
(ii) The ratification of the appointment of Larsson, Woodyard
& Henson, LLP as auditors for the Company for the fiscal
year ending March 31, 2000.
<TABLE>
<CAPTION>
Broker
Votes: For Withheld Abstain Non-Votes
------ --- -------- ------- ---------
<S> <C> <C> <C> <C>
618,023 6,600 1,500 0
</TABLE>
Item 5. OTHER INFORMATION
None
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibits are filed herewith:
1. Exhibit 11: Statement Regarding Computation of Earnings.
2. Exhibit 27: Financial Data Schedule.
(b) Reports Form 8-K:
The Company filed a Current Report on Form 8-K dated August
19, 1999 with the SEC announcing its intention to repurchase
up to 5% of its outstanding shares. The stock repurchase
began on August 16, 1999 and is to conclude on February 16,
2000. In addition, the Registrant announced the completion
of a stock repurchase program that began April 1, 1999.
17
<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: NOVEMBER 15, 1999 /S/ RICK L. CATT
----------------- ----------------
Rick L. Catt
President and Chief Executive Officer
Date: NOVEMBER 15, 1999 /S/ JAMIE E. MCREYNOLDS
----------------- -----------------------
Jamie E. McReynolds
Chief Financial Officer and Vice
President
18
STATEMENT REGARDING COMPUTATION OF EARNINGS PER SHARE
AS OF SEPTEMBER 30, 1999 AND 1998
<TABLE>
<CAPTION>
Three Month Period Six Month Period
-------------------- -------------------
($1,000's)
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Earnings (in thousands) $177 $(10) $325 $139
Basic earnings per share:
Weighted average shares outstanding 859,625 859,625 859,625 859,625
Less unearned employee stock
ownership plan shares (48,591) (57,308) (49,587) (58,311)
Less shares repurchased (91,293) (23,807) (76,050) (11,904)
Average option shares granted 0 0 0 0
Less assumed purchase of shares
using treasury method 0 0 0 0
--------- -------- ------- -------
Common and common equivalent shares
outstanding 719,741 778,510 733,988 789,410
--------- -------- ------- -------
Earnings per common share - basic $0.25 $(0.01) $0.44 $0.18
--------- -------- ------- -------
Diluted earnings per share:
Weighted average shares outstanding 859,625 859,625 859,625 859,625
Less unearned employee stock
ownership plan shares (48,591) (57,308) (49,587) (58,311)
Less shares repurchased (91,293) (23,807) (76,050) (11,904)
Average option shares granted (2) 35,075 17,538 35,075 17,538
Less assumed purchase of shares
using treasury method (35,075) (17,538) (35,075) (17,538)
--------- -------- ------- -------
Common and common equivalent shares
outstanding 719,741 778,510 733,988 789,410
--------- -------- ------- -------
Earnings per common share - diluted $0.25 $(0.01) $0.44 $0.18
--------- -------- ------- -------
</TABLE>
(1) See page 8 for Earnings per Share
(2) Option price exceeds market price
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 period ended September 30, 1999 and is qualified in its entirety
by reference to such financial statements.
amounts)
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-mos
<FISCAL-YEAR-END> Mar-31-1999
<PERIOD-END> Sep-30-1999
<CASH> 1,224
<INT-BEARING-DEPOSITS> 3,226
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 15,752
<INVESTMENTS-CARRYING> 175
<INVESTMENTS-MARKET> 177
<LOANS> 63,150
<ALLOWANCE> (631)
<TOTAL-ASSETS> 86,907
<DEPOSITS> 69,554
<SHORT-TERM> 6,058
<LIABILITIES-OTHER> 518
<LONG-TERM> 0
0
0
<COMMON> 9
<OTHER-SE> 10,768
<TOTAL-LIABILITIES-AND-EQUITY> 86,907
<INTEREST-LOAN> 1,370
<INTEREST-INVEST> 282
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 1,652
<INTEREST-DEPOSIT> 710
<INTEREST-EXPENSE> 772
<INTEREST-INCOME-NET> 880
<LOAN-LOSSES> 30
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 724
<INCOME-PRETAX> 276
<INCOME-PRE-EXTRAORDINARY> 276
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 177
<EPS-BASIC> 0.25
<EPS-DILUTED> 0.25
<YIELD-ACTUAL> 4.25
<LOANS-NON> 206
<LOANS-PAST> 2
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 49
<ALLOWANCE-OPEN> 656
<CHARGE-OFFS> (61)
<RECOVERIES> 6
<ALLOWANCE-CLOSE> 631
<ALLOWANCE-DOMESTIC> 631
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
