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 June 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 August 12, 1999, the Registrant had 768,391 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 June 30, 1999
And March 31, 1999.................................................... 3
Consolidated Statements of Income for the Quarters Ended
June 30, 1999 and June 30, 1998....................................... 4
Consolidated Statements of Stockholders' Equity for the Quarters
Ended June 30, 1999 and June 30, 1998................................. 5
Consolidated Statements of Cash Flows for the Quarters
Ended June 30, 1999 and June 30, 1998................................. 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............................................. 16
Item 2. Changes in Securities......................................... 16
Item 3. Defaults Upon Senior Securities............................... 16
Item 4. Submission of Matters to a Vote of Security Holders........... 16
Item 5. Other Information............................................. 16
Item 6. Exhibits and Reports on Form 8-K.............................. 16
SIGNATURES.............................................................. 17
<PAGE>
Item 1. Financial Statements
FIRST ROBINSON FINANCIAL CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
Unaudited Audited
6/30/99 3/31/99
---------- ---------
ASSETS ($1,000's)
<S> <C> <C>
Cash and Cash Equivalents:
Cash and due from banks $1,075 $1,007
Interest bearing deposits 4,592 4,268
----- -----
Total Cash and Cash Equivalents 5,667 5,275
Securities available for sale, amortized cost of $15,769 and $11,942
at June 30, 1999 and March 31, 1999, respectively 15,381 11,919
Securities held to maturity, estimated market value of $175 and
$195 at June 30, 1999 and March 31, 1999, respectively 175 190
Loans receivable, net 61,555 62,593
Accrued interest receivable 720 698
Premises and equipment, net 2,919 2,918
Foreclosed real estate 0 0
Prepaid income tax 18 97
Deferred income tax 73 0
Other assets 110 107
------- -------
Total Assets $86,618 $83,797
------- -------
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits $70,833 $67,325
Advances from Federal Home Loan Bank 2,000 2,000
Repurchase agreements 2,046 2,206
Advances from Borrowers for taxes and insurance 117 98
Accrued interest payable 297 294
Deferred income taxes 0 69
Accrued expenses 327 243
------- ------
Total Liabilities 75,620 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 8,283 8,277
Retained earnings 5,077 5,175
Treasury stock, at cost (1,016) (747)
Accumulated other comprehensive income (237) (14)
Common stock acquired by ESOP/RRP (1,118) (1,138)
------- -------
Total Stockholders' Equity 10,998 11,562
------- -------
Total Liabilities and Stockholders' Equity $86,618 $83,797
------- -------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
3
<PAGE>
FIRST ROBINSON FINANCIAL CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
For the Quarters Ended June 30, 1999 and 1998
<TABLE>
<CAPTION>
June 30,
-------------------------
1999 1998
------- --------
Unaudited Unaudited
($1,000's)
<S> <C> <C>
Interest Income:
Interest on Loans $1,366 $1,471
Interest and dividends on securities 244 157
------ ------
Total interest income 1,610 1,628
------ ------
Interest expense:
Interest on deposits 715 737
Interest on FHLB advances 25 25
Interest on repurchase agreements 30 29
------ ------
Total interest expense 770 791
------ ------
Net interest income 840 837
Provision for loan losses 60 70
------ ------
Net interest income after provision 780 767
Non-interest income:
Service charges 99 65
Loan fees 24 17
Other non-interest income 33 17
------ ------
Total other income 156 99
Non-interest expense:
Compensation and employee benefits 411 322
Occupancy and equipment 113 109
Foreclosed property expense 0 14
Data Processing 19 19
Audit, legal and other professional 22 26
SAIF deposit insurance 15 10
Advertising 20 15
Telephone and postage 23 22
Other 82 85
------ ------
Total other expenses 705 622
------ ------
Income before income tax 231 244
Provision for income taxes 83 95
------ ------
Net Income $148 $149
-
Earnings Per Share-Basic $0.20 $0.19
Earnings Per Share-Diluted $0.20 $0.19
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
4
<PAGE>
FIRST ROBINSON FINANCIAL CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
For The Quarters Ended June 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
------------------------------------------------------------------------------------------------------
($1,000's)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at March 31, 1999 $9 $8,277 $5,175 $(747) $(1,138) $(14) $11,562
Net Income 148 148 $148
----
Other Comprehensive Income
Unrealized gain (loss) on
Securities, net of related tax (365)
effects of 142
Total other comprehensive income (223) (223) (223)
-----
Total comprehensive income $75
---
Rounding 1 1
Allocation of ESOP shares 6 20 26
Treasury Stock at cost (269) (269)
Dividends paid (247) (247)
--------------------------------------------------------------------------------------------
Balance at June 30, 1999 $9 $8,283 $5,077 $(1,016) $(1,118) $(237) $10,998
-- ------ ------ -------- -------- ------ -------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<TABLE>
<CAPTION>
Accumulated
Other Compre-
Common Paid-in Retained Unallocated Comprehensive hensive
Stock Capital Earnings ESOP 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 gain (loss) on
Securities, net of related (74)
tax effects of 29
-----
Total other comprehensive income (45) (45) (45)
-----
Total 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
-- ------ ------ ------ ---- -------
</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 Quarters Ended June 30, 1999 and June 30, 1998
(Unaudited)
<TABLE>
<CAPTION>
June 30,
1999 1998
-------- ---------
($1,000's)
<S> <C> <C>
Cash flows from operating activities:
Net income $148 $149
Adjustments to reconcile net income to net cash
provided by (used in) operating activities
Provision for depreciation 64 56
Provision for loan losses 60 70
Net amortization and accretion on investments 11 6
ESOP shares allocated 26 31
Decrease (increase) in accrued interest receivable (22) 24
Decrease (increase) decrease in prepaid income taxes 79 29
Decrease (increase) in other assets (3) 94
(Decrease) increase in accrued interest payable 3 (51)
(Decrease) increase in accrued income taxes 0 67
(Decrease) increase in deferred income taxes 0 0
Increase (decrease) in accrued expenses 84 (114)
Gain on sale of loans 0 0
Gain on sale of premises and equipment 0 0
Loss on sale of mortgage-backed securities 0 0
---- ---- -
Net cash provided by operating activities 450 361
---- ----
Cash flows from investing activities:
Proceeds from sale of securities available for sale 0 0
Proceeds from maturities of securities available for sale 0 0
Proceeds from sale of mortgage-backed securities0
available for sale 0 0
Proceeds from maturities of securities held to maturity 15 15
Purchase of securities held to maturity 0 (35)
Purchase of securities available for sale 0 (741)
Purchase of mortgage-backed securities available for sale (4,498) (3,896)
FHLB Stock purchased (45) (16)
Repayment of principal on mortgage-backed securities 704 307
Decrease (increase) in loans receivable (44) (1,299)
Purchase of loans and participations 0 0
Sale or participation of originated loans 1,024 1,431
Decrease (increase) in foreclosed real estate 0 61
Purchase of premises and equipment (65) (96)
------ -----
Net cash used in investing activities (2,909) (4,269)
-------- -------
</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 Quarters Ended June 30, 1999
and 1998
(Unaudited)
<TABLE>
<CAPTION>
June 30,
1999 1998
------------- ------------
($1,000's)
<S> <C> <C>
Cash flows from financing activities:
Net increase (decrease) in deposits $3,508 $389
Increase (decrease) in repurchase agreements (160) 427
Advances from Federal Home Loan Bank 0 0
Repayment of FHLB advances 0 0
Increase in advances from borrowers
for taxes and insurance 19 27
Proceeds from issuance of common stock 0 0
Purchase of employee stock ownership plan 0 0
Dividends paid (247) (258)
Purchase of stock for Recognition & Retention Plan 0 0
Purchase of treasury stock (269) 0
----- -----
Net cash provided by financing activities 2,851 585
----- -----
Increase (decrease) in cash and cash equivalents 392 3,323
Cash and cash equivalents at beginning of period 5,275 6,574
----- ------
Cash and cash equivalents at end of period $5,667 $3,251
----- -----
Supplemental Disclosures:
Additional Cash Flows Information:
Cash paid for:
Interest on deposits, advances and
repurchase agreements $768 $842
Income taxes:
Federal 0 56
State 10 13
Schedule of Non-Cash Investing Activities:
Change in unrealized gain on securities available for sale (365) (74)
Change in deferred income taxes attributed to
Unrealized gain on securities available for sale 142 29
</TABLE>
The accompanying notes are an integral part of these 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 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, 1999 and the results of its operations and cash flows
for the three months ended June 30, 1999 and 1998. The results of operations for
those months ended June 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 748,234 and 800,311 for the quarters ending June 30, 1999 and 1998. 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 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. 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, 1999 and 1998 were $26,000 and $31,000,
respectively.
The ESOP shares at June 30, 1999 and 1998 were as follows:
1999 1998
-------- --------
Allocated shares 15,197 6,877
Shares released for allocation 3,985 3,438
Unallocated shares 49,588 58,455
------ ------
Total ESOP shares 68,770 68,770
Fair value of unallocated shares $653,942 $1,008,349
(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 quarter ended June 30, 1999. 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
plan, 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. With these facts in
mind, 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.
9
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
FIRST ROBINSON FINANCIAL CORP. AND SUBSIDIARY
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
Corporation(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 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, 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. Our loans consist primarily of
loans secured by residential real estate located in our 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.
10
<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. 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.
Business Strategy
We continue to be a community-oriented, locally-owned financial institution
offering financial services to residents and businesses of Crawford County,
Illinois, our primary market area. The Board of Directors and management are
strategically planning our future. New products and services are continually
discussed and reviewed for their effect on profitability and customer service.
This past year, the Bank began a fixed rate mortgage program through the Federal
Home Loan Bank of Chicago. We also revised our checking and savings products to
take advantage of account changes made by some of our competitors. In addition,
we have expanded our Internet provider to service all of Crawford County. This
service has grown to over 1,000 subscribers. Although we delayed the
installation of a new ATM location in Robinson, the idea is still being
considered. During April of this year we signed a contract with PrimeVest
Financial to provide investment brokerage service to our customers. As of June
1999, the service had provided an addition of approximately $7,000 net, to
non-interest income. 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 June 30, 1999 and March 31, 1999
Our total assets increased by approximately $2.8 million or 3.4%, to $86.6
million at June 30, 1999 from $83.8 million at March 31, 1999. This increase in
total assets was primarily the result of a $3.5 million or 29.0% increase in
securities available for sale and a $392,000 or 7.4% increase in cash and cash
equivalents offset primarily by a $1.0 million or 1.7% decrease in loans
receivable, net. In an effort to better manage the risk in our balance sheet, we
are shifting the make-up of our assets. We have reduced our loan to deposit
ratio from 92.9% for the quarter ended June 30, 1998 to 86.7% for the quarter
ended June 30, 1999 while increasing our investment securities. Although this
strategy has reduced our risk, it has also had a negative impact on earnings.
11
<PAGE>
FIRST ROBINSON FINANCIAL CORP. AND SUBSIDIARY
Management's Discussion and Analysis of Financial
Condition and Results of Operations
Financial Condition - Continued
Liabilities increased approximately $3.4 million or 4.7% to $75.6 million
at June 30, 1999 from $72.2 million at March 31, 1999. A $3.5 million or 5.2%
increase, for the same period, in deposits was the primary reason for the
increase in our liabilities. This increase in deposits was offset by a decrease
of $160,000 or 7.3% in repurchase agreements. Due to FASB 115 and the valuation
of our securities held available for sale, deferred income tax decreased
$142,000. At March 31, 1999 deferred income taxes were recorded on the balance
sheet as a liability of $69,000 and as of June 30, 1999 deferred income taxes
were being carried on the balance sheet as an asset of $73,000.
Stockholders' equity decreased $564,000 or 4.9% to $11.0 million as of June
30, 1999 from $11.6 million on March 31, 1999. The decrease was attributed to
three major factors. First, we are currently in the process of completing a
stock repurchase program which commenced April 1, 1999. As of June 30, 1999,
compared to March 31, 1999, we had purchased an additional $269,000 at cost of
treasury stock, bringing the total amount of treasury stock to be $1.0 million,
at cost as of June 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 $223,000 decrease after
tax in the valuation of our securities held available for sale. The decrease in
stockholders' equity for the quarter ended June 30, 1999, however, was offset by
the addition of $148,000 to retained earnings.
Results of Operation
Comparison of the Quarters ended June 30, 1999 and 1998
Performance Summary
We are reporting net earnings of $148,000 for the first quarter of the new
fiscal year. Earnings for the quarter ended June 30, 1998 were $149,000. The
$1,000 decrease in net income was primarily due to an increase of $57,000 or
57.6% in non-interest income, an increase of $13,000 or 1.7% in net interest
income after provision and a reduction of provision for income tax of $12,000 or
12.6% offset by an increase of $83,000 or 13.3% in non-interest expense.
Net Interest Income
Net interest income increased by $3,000 or 0.4% to $840,000 during the
three months ended June 30, 1999, as compared to $837,000 during the same period
in the prior year. Interest expense dropped by $21,000 or 2.7% from $791,000 for
the quarter ended June 30, 1998 to $770,000 in comparison of the quarter ended
June 30, 1999. The average rate on interest bearing liabilities for the quarter
ended June 30, 1999 was 4.46% compared to 4.94% for the quarter ended June 30,
1998. However, the decrease in interest expense was offset by a decrease in
interest income. Interest income decreased by $18,000 or 1.1% for the quarter
ended June 30, 1999 as compared to the quarter ended June 30, 1998. This
decrease was a direct 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, did decrease our provision for loan losses.
12
<PAGE>
FIRST ROBINSON FINANCIAL CORP. AND SUBSIDIARY
Management's Discussion and Analysis of Financial
Condition and Results of Operations
Non-Interest Income
Total non-interest income increased by $57,000 or 57.6% to $156,000 during
the three months ended June 30, 1999, as compared to $99,000 during the same
period in the prior year. The increase in total non-interest income was
primarily caused by an increase of $34,000 or 52.3% in service charges, an
increase of $16,000 or 94.1% in other non-interest income and an increase of
$7,000 or 41.2% in loan fees.
Non-Interest Expense
Total non-interest expense increased by $83,000 or 13.3% to $705,000 during
the three months ended June 30, 1999, as compared to $622,000 during the same
period in the prior year. This increase was due primarily to an increase of
$89,000 or 27.6% in compensation and employee benefits, an increase of $4,000 or
3.7% in occupancy and equipment expense, an increase of $5,000 or 50.0% in
Savings Association Insurance Fund deposit insurance premiums, and an increase
of $5,000 or 33.3% in advertising expense partially offset by a decrease of
$14,000 or 100% in foreclosed property expense, a decrease of $4,000 or 15.4% in
audit, legal and other professional fees and a decrease of $3,000 or 3.5% in
other expenses. The increase in compensation expense is a result of the addition
of staff to provide better customer service and to help better manage the
existing and future loan portfolio underwriting. We have seen a growth of over
1,000 new accounts or 14.1% of non-certificate of deposit accounts from June 30,
1998 to June 30, 1999. Although these high volume transaction accounts require
more handling which in turn results in the need for additional staff, they are
typically lower or no interest bearing accounts. It is our beleif that our
current staff will be capable of handling additional increases in the number of
accounts. The increase in compensation expenses is also due to the expenses
incurred in connection with the Recognition and Retention Plan which was
approved by shareholders in July 1998.
Provision for Loan Losses
During the three months ended June 30, 1999, we recorded provision for loan
losses of $60,000 as compared to $70,000 for the same period of the prior year,
a decrease of $10,000 or 14.3%. 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 0.20% at June 30,
1999, as compared to 0.18% at March 31, 1999.
Provision for Income Taxes
We recognized a provision for federal and state income taxes of $83,000 for
the three months ended June 30, 1999 as compared to a provision for income taxes
of $95,000 for the same period in the prior year. The effective tax rate during
the three months ended June 30, 1999 was 35.9% as compared to 38.9% during the
quarter ended June 30, 1998.
13
<PAGE>
FIRST ROBINSON FINANCIAL CORP. AND SUBSIDIARY
Management's Discussion and Analysis of Financial
Condition and Results of Operations
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 June 30, 1999 we had $2.0 million in advances from the FHLB of Chicago
outstanding with no change from the amount of advances 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. We anticipate no foreseeable problems in meeting
current loan commitments. At June 30, 1999, we had outstanding commitments to
extend credit, which amounted to $3.3 million (including $2.9 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 future 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.
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.
14
<PAGE>
FIRST ROBINSON FINANCIAL CORP. AND SUBSIDIARY
Management's Discussion and Analysis of Financial
Condition and Results of Operations
Regulatory Capital
At June 30, 1999, the Bank was in compliance with all of the aforementioned
capital requirements as summarized below:
<TABLE>
<CAPTION>
June 30, 1999
---------------
(1,000's)
<S> <C>
Tier I Capital:
Common stockholders' equity 9,630
Unrealized loss (gain) on securities available for sale 237
Deferred tax asset disallowed for regulatory capital (73)
Total Tier I Capital 9,794
Tier II Capital:
Total Tier I capital 9,794
Qualifying allowance for loan losses 656
Total capital 10,450
Risk-weighted assets 54,502
Quarter average assets 84,943
</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 June 30, 1999:
Total Risk-Based Capital
(to Risk-Weighted Assets) 10,450 19.17% 4,360 8.00% 5,450 10.00%
Tier I Capital
(to Risk-Weighted Assets) 9,794 17.97% 2,180 4.00% 3,270 6.00%
Tier I Capital
(to Average Assets) 9,794 11.53% 3,398 4.00% 4,247 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 special liquidation account will be maintained for the benefit of
eligible account holders and the supplemental account holders who continue to
maintain their accounts in the Bank after the conversion on June 27, 1997. 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 special liquidation account.
15
<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
---------------------------------------------------
None.
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 Forms 8-K:
On May 20, 1999, the Registrant filed a press release
announcing a cash dividend of $0.31 per share and the
approval of a stock repurchase program. In addition,
the Registrant announced its year-end earnings for the
fiscal year ended March 31, 1999.
16
<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 16, 1999 /s/ Rick L. Catt
--------------- ------------------------------------------
Rick L. Catt
President and Chief Executive Officer
(Duly Authorized Representative)
Date: August 16, 1999 /s/ Jamie E. McReynolds
--------------- ------------------------------------------
Jamie E. McReynolds
Chief Financial Officer and Vice President
(Principal Financial Officer)
17
STATEMENT REGARDING COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
June 30,
-----------------------------------
1999 1998(1)
-------- --------
<S> <C> <C>
Net Earnings (in thousands) $148 $149
Basic earnings per share:
Weighted average shares outstanding 859,625 859,625
Less unearned employee stock ownership plan shares (50,585) (59,413)
Less shares repurchased (60,806) 0
Average option shares granted 0 0
Less assumed purchase of shares using treasury method 0 0
-------- --------
Common and common equivalent shares outstanding 748,234 800,311
-------- --------
Earnings per common share - basic $0.20 $0.19
-------- -------
Diluted earnings per share:
Weighted average shares outstanding 859,625 859,625
Less unearned employee stock ownership plan shares (50,585) (59,413)
Less shares repurchased (60,806) 0
Average option shares granted (2) 0 0
Less assumed purchase of shares using treasury method 0 0
-------- -------
Common and common equivalent shares outstanding 748,234 800,311
-------- --------
Earnings per common share - diluted $0.20 $0.19
----- ------
</TABLE>
- ----------------------
(1) See page 8 for Earnings per Share
(2) Option price exceeds market price
<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 June 30, 1999 and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 1,075
<INT-BEARING-DEPOSITS> 4,592
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 15,381
<INVESTMENTS-CARRYING> 175
<INVESTMENTS-MARKET> 175
<LOANS> 62,211
<ALLOWANCE> (656)
<TOTAL-ASSETS> 86,618
<DEPOSITS> 70,833
<SHORT-TERM> 4,046
<LIABILITIES-OTHER> 741
<LONG-TERM> 0
0
0
<COMMON> 9
<OTHER-SE> 10,989
<TOTAL-LIABILITIES-AND-EQUITY> 86,618
<INTEREST-LOAN> 1,366
<INTEREST-INVEST> 244
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 1,610
<INTEREST-DEPOSIT> 715
<INTEREST-EXPENSE> 770
<INTEREST-INCOME-NET> 840
<LOAN-LOSSES> 60
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 705
<INCOME-PRETAX> 231
<INCOME-PRE-EXTRAORDINARY> 231
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 148
<EPS-BASIC> 0.20
<EPS-DILUTED> 0.20
<YIELD-ACTUAL> 4.09
<LOANS-NON> 175
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 634
<CHARGE-OFFS> (51)
<RECOVERIES> 13
<ALLOWANCE-CLOSE> 656
<ALLOWANCE-DOMESTIC> 656
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
