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, 2000
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 11, 2000, the Registrant had 598,357 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 1. FINANCIAL INFORMATION PAGE
Item 1. Financial Statements
Consolidated Balance Sheet as of June 30, 2000
And March 31, 2000 3
Consolidated Statements of Income for the Quarters Ended
June 30, 2000 and June 30, 1999 4
Consolidated Statements of Stockholders' Equity for the Quarters
Ended June 30, 2000 and June 30, 1999 5
Consolidated Statements of Cash Flows for the Quarters
Ended June 30, 2000 and June 30, 1999 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 15
Item 2. Changes in Securities 15
Item 3. Defaults Upon Senior Securities 15
Item 4. Submission of Matters to a Vote of Security Holders 15
Item 5. Other Information 15
Item 6. Exhibits and Reports on Form 8-K 15
SIGNATURES 16
<PAGE>
<TABLE>
<CAPTION>
FIRST ROBINSON FINANCIAL CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
Unaudited Audited
6/30/00 3/31/00
------- -------
ASSETS ($1,000's)
<S> <C> <C>
Cash and Cash Equivalents:
Cash and due from banks $ 915 $ 1,269
Interest bearing deposits 2,916 1,390
-------- --------
Total Cash and Cash Equivalents 3,831 2,659
Securities available for sale, amortized cost of $16,575 and $16,234
at June 30, 2000 and March 31, 2000 respectively 16,017 15,554
Securities held to maturity, estimated market value of $870 and
$914 at June 30, 2000 and March 31, 2000, respectively 867 895
Loans receivable, net 65,328 63,982
Accrued interest receivable 739 698
Premises and equipment, net 3,154 2,994
Foreclosed real estate 79 79
Deferred income tax 186 242
Other assets 135 152
-------- --------
Total Assets $ 90,336 $ 87,255
-------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits $ 69,592 $ 71,960
Advances from Federal Home Loan Bank 7,200 3,600
Repurchase agreements 3,635 1,490
Advances from Borrowers for taxes and insurance 135 112
Accrued interest payable 295 308
Accrued income taxes 62 228
Accrued expenses 335 251
-------- --------
Total Liabilities 81,254 77,949
-------- --------
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 8,313 8,305
Retained earnings 5,560 5,585
Treasury stock, at cost (3,534) (3,243)
Accumulated other comprehensive income (349) (414)
Common stock acquired by ESOP/RRP (917) (936)
-------- --------
Total Stockholders' Equity 9,082 9,306
-------- --------
Total Liabilities and Stockholders' Equity $ 90,336 $ 87,255
-------- --------
</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, 2000 and 1999
June 30,
--------
2000 1999
---- ----
Unaudited Unaudited
Interest Income: ($1,000's)
Interest on Loans $1,432 $1,366
Interest and dividends on securities 284 244
------ ------
Total interest income 1,716 1,610
------ ------
Interest expense:
Interest on deposits 742 715
Interest on FHLB advances 70 25
Interest on repurchase agreements 24 30
------ ------
Total interest expense 836 770
------ ------
Net interest income 880 840
Provision for loan losses 15 60
------ ------
Net interest income after provision 865 780
Non-interest income:
Service charges 102 99
Loan fees 20 24
Other non-interest income 35 33
Gain on sale of loans 2 0
------ ------
Total other income 159 156
Non-interest expense:
Compensation and employee benefits 427 411
Occupancy and equipment 122 113
Foreclosed property expense 2 0
Data Processing 25 19
Audit, legal and other professional 21 22
SAIF deposit insurance 4 15
Advertising 32 20
Telephone and postage 24 23
Other 94 82
------ ------
Total other expenses 751 705
------ ------
Income before income tax 273 231
Provision for income taxes 102 83
------ ------
Net Income $ 171 $ 148
Earnings Per Share-Basic $ 0.30 $ 0.20
Earnings Per Share-Diluted $ 0.30 $ 0.20
The accompanying notes are an integral part of these consolidated financial
statements.
4
<PAGE>
<TABLE>
<CAPTION>
FIRST ROBINSON FINANCIAL CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
For The Quarters Ended June 30, 2000 and 1999
(Unaudited)
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>
Balance at March 31, 2000 $9 $8,305 $5,585 $(3,243) $(936) $(414) $9,306
Net Income 171 171 $171
----
Other Comprehensive Income
Unrealized gain (loss) on
Securities, net of related tax 122
effects of (57)
Total other comprehensive income 65 65 65
--
Total comprehensive income $236
----
Allocation of ESOP shares 8 19 27
Treasury Stock at cost (20,433 shares) (291) (291)
Dividends paid (196) (196)
-----------------------------------------------------------------------------------------------------
Balance at June 30, 2000 $9 $8,313 $5,560 $(3,534) $(917) $(349) $9,082
-- ------ ------ -------- ------ ------ ------
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
<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>
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 (20,900shares) (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.
5
<PAGE>
<TABLE>
<CAPTION>
FIRST ROBINSON FINANCIAL CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Quarters Ended June 30, 2000 and June 30, 1999
(Unaudited)
June 30,
2000 1999
---- ----
($1,000's)
<S> <C> <C>
Cash flows from operating activities:
Net income $ 171 $ 148
Adjustments to reconcile net income to net cash
provided by (used in) operating activities
Provision for depreciation 72 64
Provision for loan losses 15 60
Net amortization and accretion on investments 4 11
ESOP shares allocated 27 26
Decrease (increase) in accrued interest receivable (41) (22)
Decrease (increase) decrease in prepaid income taxes 0 79
Decrease (increase) in other assets 17 (3)
(Decrease) increase in accrued interest payable (13) 3
(Decrease) increase in accrued income taxes (166) 0
Increase (decrease) in accrued expenses 84 84
Gain on sale of loans 2 0
------- -------
Net cash provided by operating activities 172 450
------- -------
Cash flows from investing activities:
Proceeds from maturities of securities held to maturity 20 15
Purchase of mortgage-backed securities available for sale (468) (4,498)
FHLB Stock purchased (83) (45)
Federal Reserve Bank Stock purchased (140) 0
Repayment of principal on mortgage-backed securities 354 704
Decrease (increase) in loans receivable (1,685) (44)
Sale or participation of originated loans 321 1,024
Purchase of premises and equipment (232) (65)
------- -------
Net cash used in investing activities (1,913) (2,909)
------- -------
</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, 2000 and 1999
(Unaudited)
June 30,
--------
2000 1999
---- ----
($1,000's)
Cash flows from financing activities:
Net increase (decrease) in deposits $ (2,368) $ 3,508
Increase (decrease) in repurchase agreements 2,145 (160)
Advances from Federal Home Loan Bank 17,200 0
Repayment of FHLB advances (13,600) 0
Increase in advances from borrowers
for taxes and insurance 23 19
Dividends paid (196) (247)
Purchase of stock for Recognition & Retention Plan 0 0
Purchase of treasury stock (291) (269)
-------- --------
Net cash provided by financing activities 2,913 2,851
-------- --------
Increase (decrease) in cash and cash equivalents 1,172 392
Cash and cash equivalents at beginning of period 2,659 5,275
-------- --------
Cash and cash equivalents at end of period $ 3,831 $ 5,667
-------- --------
Supplemental Disclosures:
Additional Cash Flows Information:
Cash paid for:
Interest on deposits, advances and
repurchase agreements $ 849 $ 767
Income taxes:
Federal 216 0
State 53 4
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 20, 2000. 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, 2000 and the results
of its operations and cash flows for the three months ended June 30, 2000 and
1999. The results of operations for those months ended June 30, 2000 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 574,348 and 748,234 for the quarters
ending June 30, 2000 and 1999. 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 (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, 2000 and 1999 were
$27,000 and $26,000 respectively.
The ESOP shares at June 30, 2000 and 1999 were as follows:
2000 1999
---- ----
Allocated shares 23,168 15,197
Shares released for allocation 3,806 3,985
Unallocated shares 41,796 49,588
------ ------
Total ESOP shares 68,770 68,770
Fair value of unallocated shares $600,818 $653,942
(5) Accounting for Derivative Instruments and Hedging Activities
In June 1998, The FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," establishes accounting and reporting
standards for derivative instruments and hedging activities and requires
recognition of all derivatives as either assets or liabilities measured at fair
value. The accounting for changes in the fair value of a derivative depends on
the intended use of the derivative and the resulting designation. SFAS No. 137,
"Accounting for Derivative Instruments and Hedging Activities Deferral of the
Effective Date of FASB Statement No. 133," amended Statement No. 133 to be
effective for all fiscal years beginning after June 15, 2000. Although the
Company has not formally completed its evaluation of SFAS No. 133, as amended,
the adoption of the statement is not expected to have a material effect on the
consolidated financial statements.
9
<PAGE>
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 disclaims 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 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.
10
<PAGE>
FIRST ROBINSON FINANCIAL CORP. AND SUBSIDIARY
Management Discussion and Analysis of Financial
Condition and Results of Operations
BUSINESS STRATEGY
We are a community-oriented, locally owned financial institution offering
services to residents and businesses of Crawford County, Illinois, our primary
market area. We offer fixed rate mortgage products through the Federal Home Loan
Bank of Chicago and USDA Rural Development. These programs continue to grow and
have provided additional non-interest income to our Bank. We have developed new
checking account products and revised existing accounts as we continue to see
excellent growth in the number of new checking and savings accounts. The growth
and push for new low interest bearing accounts fits well within our strategic
plan of lowering our overall cost of funds. Our Internet service continues to be
a good producer of non-interest income, as we provide service to over 1,450
customers throughout Crawford County. We will be introducing a new wireless
Internet service to our customers within the coming months. We are also now
offering Internet banking to customers and will soon add a bill paying service
and a cash management package. PrimeVest Financial Services provides investment
brokerage services to our customers. We continue to see growth in that service.
We maintain a strong presence in the community and are the only independent
community bank in Robinson, Palestine and Oblong, Illinois.
FINANCIAL CONDITION
COMPARISON AT JUNE 30, 2000 AND MARCH 31, 2000
Our total assets increased by approximately $3.1 million or 3.5%, to
$90.3 million at June 30, 2000 from $87.3 million at March 31, 2000. This
increase in total assets was from an increase in securities available for sale,
cash and cash equivalents and loans. Securities available for sale increased by
$463,000 or 3.0% to $16.0 million as of June 30, 2000 from $15.6 million at
March 31, 2000. Total cash and cash equivalents increased by $1.2 million or
44.1% from $2.7 million at March 31, 2000 to $3.8 million as of June 30, 2000.
Loans receivable, net increased by $1.3 million or 2.1% to $65.3 million at June
30, 2000 from $64.0 million as of March 31, 2000.
Liabilities increased approximately $3.3 million or 4.2% to $81.3 million
at June 30, 2000 from $77.9 million at March 31, 2000. A $3.6 million or 100.0%
increase, for the same period, in Federal Home Loan Bank advances was one of the
primary reasons for the increase in our liabilities. Repurchase agreements also
increased during this three month period. At March 31, 2000, repurchase
agreements were $1.5 million. They increased by $2.1 million or 144.0% to $3.6
million at June 30, 2000. These increases in FHLB advances and repurchase
agreements were offset by a decrease of $2.4 million or 3.3% in deposits. Total
deposits for June 30, 2000 were $69.6 million. This is down from $72.0 million
at March 31, 2000.
Stockholders' equity decreased $224,000 or 2.4% to $9.1 million as of
June 30, 2000 from $9.3 million on March 31, 2000. The primary factor associated
with this decrease is the stock repurchase program that was completed June 20,
2000. As of June 30, 2000, compared to March 31, 2000, we had purchased an
additional 20,433 shares of treasury stock at a cost of $291,000 bringing the
total amount of treasury stock to be $3.5 million as of June 30, 2000. A $0.32
per share dividend paid to stockholders of record as of June 2, 2000 amounted to
a total of $196,000 being paid from retained earnings. However, the overall
decrease in retained earnings was $25,000 due to the addition of $171,000 in
quarterly earnings. These decreases were offset by the increase of $65,000 after
tax in the valuation of our securities.
11
<PAGE>
FIRST ROBINSON FINANCIAL CORP. AND SUBSIDIARY
Management Discussion and Analysis of Financial
Condition and Results of Operations
RESULTS OF OPERATION
COMPARISON OF THE QUARTERS ENDED JUNE 30, 2000 AND 1999
PERFORMANCE SUMMARY
We are reporting net earnings of $171,000 for the first quarter of the
new fiscal year. Earnings for the quarter ended June 30, 1999 were $148,000. The
$23,000 or 15.5% increase in net income was primarily from an increase of
$85,000 or 10.9% in net interest income after provision offset by an increase of
$46,000 or 6.5% in non-interest expense and an increase of $19,000 in provision
for income taxes.
NET INTEREST INCOME
Net interest income increased by $40,000 or 4.8% to $880,000 during the
three months ended June 30, 2000, as compared to $840,000 during the same period
in the prior year. Interest income increased by $106,000 or 6.6%. However,
interest expense increased by $66,000 or 8.6% from $770,000 for the quarter
ended June 30, 1999 to $836,000 in comparison of the quarter ended June 30,
2000.
NON-INTEREST INCOME
Total non-interest income increased by $3,000 or 1.9% to $159,000 during
the three months ended June 30, 2000, as compared to $156,000 during the same
period in the prior year. The increase in total non-interest income was from an
increase of $3,000 or 3.0% in service charges, an increase of $2,000 in other
non-interest income and an increase of $2,000 in gain on loans sold, offset by a
decrease of $4,000 in loan fees.
NON-INTEREST EXPENSE
Total non-interest expense increased by $46,000 or 6.5% to $751,000
during the three months ended June 30, 2000, as compared to $705,000 during the
same period in the prior year. This increase was due primarily from an increase
of $16,000 or 3.9% in compensation and employee benefits, an increase of $9,000
or 8.0% in occupancy and equipment expense, an increase of $2,000 in foreclosed
property expense, an increase of $6,000 or 31.6% in data processing expense, an
increase of $12,000 or 60.0% in advertising expense, an increase of $1,000 in
postage and telephone expense and an increase of $12,000 in other operating
expenses. These increases are offset by a decrease of $11,000 or 73.3% in
Savings Association Insurance Fund deposit insurance premiums, a decrease of
$1,000 or 4.5% in audit, legal and other professional fees. The increase in
compensation expense is primarily from cost of living adjustments to current
staff. Occupancy and equipment expense increased this quarter in comparison to
the same quarter in the previous year due to the remodeling of our Robinson
facility. In order to offer internet banking to our customers and to add teller
terminals to our current system, we had to increase the capacity of our in-house
computer system. A larger computer system requires a more extensive service
contract which in turn increased our data processing expenses when comparing
this quarter ended June 30, 2000 to the same quarter in the prior year. The
increase in advertising expense is a result of our intent for name recognition
and push for growing our customer base. It is our belief the more involved we
are in the community, the rewards will outweigh the costs. Other operating
expenses increased this quarter compared to the same quarter in the prior year
due to an increase in check processing costs and training costs.
PROVISION FOR LOAN LOSSES
During the three months ended June 30, 2000, we recorded provision for
loan losses of $15,000 as compared to $60,000 for the same period of the prior
year. This represents a decrease of $45,000 or 75.0%. 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 1.48%
at June 30, 2000, as compared to 0.20% at June 30, 1999.
12
<PAGE>
FIRST ROBINSON FINANCIAL CORP. AND SUBSIDIARY
Management Discussion and Analysis of Financial
Condition and Results of Operations
PROVISION FOR INCOME TAXES
The Company recognized a provision for federal and state income taxes of
$102,000 for the three months ended June 30, 2000 as compared to a provision for
income taxes of $83,000 for the same period in the prior year. The effective tax
rate during the three months ended June 30, 2000 was 37.4% as compared to 35.9%
during the quarter ended June 30, 1999.
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 banks, Cole Taylor Bank located in Chicago
and Independent Bankers Bank located in Springfield, Illinois 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, 2000 we had $7.2 million in advances from the FHLB of Chicago
outstanding with a $3.6 million or 100.0% change from the amount of advances as
of March 31, 2000. This increase in advances was due to a temporary shortfall of
liquidity. 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, 2000, we had
outstanding commitments to extend credit, which amounted to $6.7 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 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.
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.
13
<PAGE>
FIRST ROBINSON FINANCIAL CORP. AND SUBSIDIARY
Management Discussion and Analysis of Financial
Condition and Results of Operations
REGULATORY CAPITAL
At June 30, 2000, the Bank was in compliance with all of the aforementioned
capital requirements as summarized below:
June 30, 2000
-------------
(1,000's)
Tier I Capital:
Common stockholders' equity 8,632
Unrealized loss (gain) on securities available for sale 349
Less disallowed intangible assets (2)
Total Tier I Capital 8,979
Tier II Capital:
Total Tier I capital 8,979
Qualifying allowance for loan losses 647
Total capital 9,626
Risk-weighted assets 55,720
Quarter average assets 88,421
<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, 2000:
Total Risk-Based Capital
(to Risk-Weighted Assets) 9,626 17.28% 4,458 8.00% 5,572 10.00%
Tier I Capital
(to Risk-Weighted Assets) 8,979 16.11% 2,229 4.00% 3,343 6.00%
Tier I Capital
(to Average Assets) 8,979 10.15% 3,537 4.00% 4,421 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.
14
<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 on Forms 8-K
On June 19, 2000, the Registrant filed a press release
announcing a stock repurchase program to purchase up to 5%
of the Company's outstanding stock commencing June 20,
2000 and concluding December 20, 2000.
15
<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 11, 2000 /s/ Rick L. Catt
--------------- ----------------
Rick L. Catt
President and Chief Executive Officer
Date: August 11, 2000 /s/ Jamie E. McReynolds
--------------- -----------------------
Jamie E. McReynolds
Chief Financial Officer and Vice President
16
