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, 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 November 13, 2000, the Registrant had 582,757 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 September 30, 2000
And March 31, 2000 3
Consolidated Statements of Income for the Three and Six
Month Periods Ended September 30, 2000 and
September 30, 1999 4
Consolidated Statements of Stockholders' Equity for the
Six Month Periods Ended September 30, 2000 and
September 30, 1999 5
Consolidated Statements of Cash Flows for the Three and
Six Month Periods Ended September 30, 2000 and
September 30, 1999 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>
FIRST ROBINSON FINANCIAL CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
Unaudited Audited
9/30/00 3/31/00
-------- --------
ASSETS ($1,000's)
<S> <C> <C>
Cash and Cash Equivalents:
Cash and due from banks $ 1,070 $ 1,269
Interest bearing deposits 2,145 1,390
-------- --------
Total Cash and Cash Equivalents 3,215 2,659
Securities available for sale, amortized cost of $15,223 and $16,234
at September 30, 2000 and March 31, 2000, respectively 14,796 15,554
Securities held to maturity, estimated market value of $128 and
$914 at September 30, 2000 and March 31, 2000, respectively 128 895
Loans receivable, net 63,655 63,982
Accrued interest receivable 745 698
Premises and equipment, net 3,128 2,994
Foreclosed real estate 273 79
Prepaid income tax 139 0
Deferred income tax 137 242
Other assets 518 152
-------- --------
Total Assets $ 86,734 $ 87,255
-------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits $ 70,722 $ 71,960
Advances from Federal Home Loan Bank 3,200 3,600
Repurchase agreements 3,184 1,490
Advances from Borrowers for taxes and insurance 133 112
Accrued interest payable 309 308
Accrued income taxes 0 228
Accrued expenses 169 251
-------- --------
Total Liabilities 77,717 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 8,321 8,305
Retained earnings 5,626 5,585
Treasury stock, at cost (3,898) (3,243)
Accumulated other comprehensive income (267) (414)
Common stock acquired by ESOP/RRP (774) (936)
-------- --------
Total Stockholders' Equity 9,017 9,306
-------- --------
Total Liabilities and Stockholders' Equity $ 86,734 $ 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 Three and Six Month Periods Ended September 30, 2000 and 1999
(Unaudited)
Three Month Period Six Month Period
------------------ ----------------
($1,000's)
2000 1999 2000 1999
------ ------ ------ ------
Interest income:
Interest on Loans $1,399 $1,370 $2,831 $2,736
Interest and dividends on securities 261 282 545 526
------ ------ ------ ------
Total interest income 1,660 1,652 3,376 3,262
------ ------ ------ ------
Interest expense:
Interest on deposits 743 710 1,485 1,425
Interest on FHLB advances 59 38 129 63
Interest on repurchase agreements 56 24 80 54
------ ------ ------ ------
Total interest expense 858 772 1,694 1,542
------ ------ ------ ------
Net interest income 802 880 1,682 1,720
Provision for loan losses 115 30 130 90
------ ------ ------ ------
Net interest income after provision 687 850 1,552 1,630
Non-interest income:
Service charges 123 97 225 196
Loan fees 27 20 47 44
Other non-interest income 44 33 79 66
Net gain on sale of loans 0 0 2 0
Net gain on sale of investments 2 0 2 0
------ ------ ------ ------
Total other income 196 150 355 306
Non-interest expense:
Compensation and employee benefits 438 414 865 825
Occupancy and equipment 143 121 265 234
Foreclosed property expense 0 0 2 0
Data Processing 28 22 53 41
Audit, legal and other professional 21 28 42 50
SAIF deposit insurance 4 10 8 25
Advertising 23 22 55 42
Telephone and postage 27 25 51 48
Other 94 82 188 164
------ ------ ------ ------
Total other expenses 778 724 1,529 1,429
------ ------ ------ ------
Income (Loss) before income tax 105 276 378 507
Provision for (benefit from) income taxes 40 99 142 182
------ ------ ------ ------
Net Income (Loss) $ 65 $ 177 $ 236 $ 325
------ ------ ------ ------
Earnings Per Share-Basic $ 0.12 $ 0.25 $ 0.42 $ 0.44
Earnings Per Share-Diluted $ 0.12 $ 0.25 $ 0.42 $ 0.44
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, 2000 and 1999
(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, 2000 $9 $8,305 $5,585 $(3,243) $(936) $(414) $9,306
Net Income 236 236 $236
----
Other Comprehensive Income
Unrealized gain (loss) on securities 254
Realized (gain) loss on sale (2)
Related tax effects (105)
----
Total other comprehensive income 147 147 147
----
Total comprehensive income $383
----
Rounding 1 1
Allocation of ESOP shares 16 38 54
Allocation of RRP Shares 124 124
Treasury Stock (45,269 shares) (655) (655)
Dividends paid (196) (196)
---------------------------------------------------------------------------------------
Balance at September 30, 2000 $9 $8,321 $5,626 $(3,898) $(774) $(267) $9,017
-- ------ ------ ------- ----- ----- ------
</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> <C>
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 (56,251 shares) (751) (751)
Dividends paid (247) (247)
----------------------------------------------------------------------------------------
Balance at September 30, 1999 $9 $8,290 $5,254 $(1,498) $ (975) $(303) $10,777
-- ------ ------ ------- ------- ----- -------
</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, 2000 and 1999
(Unaudited)
<TABLE>
<CAPTION>
Three Month Period Six Month Period
------------------ ------------------
($1,000's)
2000 1999 2000 1999
------- ------- ------- -------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income $ 65 $ 177 $ 236 $ 325
Adjustments to reconcile net income to net cash
provided by (used in) operating activities
Provision for depreciation 91 70 163 134
Provision for loan losses 115 30 130 90
Net amortization and accretion on investments 2 4 6 15
ESOP shares allocated 27 27 54 53
Decrease (increase) in accrued interest receivable (6) (101) (47) (123)
Decrease (increase) in prepaid income taxes (139) 18 (139) 97
Decrease (increase) in other assets (383) (23) (366) (26)
(Decrease) increase in accrued interest payable 14 (6) 1 (3)
(Decrease) increase in accrued income taxes (62) 95 (228) 95
Increase (decrease) in accrued expenses (166) (235) (82) (151)
Stock dividends on FHLB stock (8) 0 (15) 0
Gain on sale of loans 0 0 2 0
Gain on sale of mtg-backed securities and investments 2 0 2 0
------- ------- ------- -------
Net cash provided by (used in) operating activities (448) 56 (283) 506
------- ------- ------- -------
Cash flows from investing activities:
Proceeds from sale of securities available for sale 502 0 502 0
Proceeds from sale of mortgage-backed securities
available for sale 1,204 0 1,204 0
Proceeds from maturities of securities held to maturity 0 0 20 15
Purchase of securities available for sale 0 (1,000) 0 (1,000)
Purchase of mortgage-backed securities
available for sale 0 0 (468) (4,498)
FHLB Stock purchased 0 0 (76) (45)
Federal Reserve Bank Stock purchased 0 0 (140) 0
Repayment of principal- mortgage-backed securities 391 516 745 1,220
Decrease (increase) in loans receivable (1,056) (1,059) (2,741) (1,103)
Sale or participation of originated loans 2,419 35 2,740 1,059
Purchase of premises and equipment (65) (62) (297) (127)
------- ------- ------- -------
Net cash provided by (used in) investing activities 3,395 (1,570) 1,489 (4,479)
------- ------- ------- -------
</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, 2000 and 1999
(Unaudited)
<TABLE>
<CAPTION>
Three Month Period Six Month Period
------------------- -------------------
($1,000's)
2000 1999 2000 1999
-------- ------- -------- -------
<S> <C> <C> <C> <C>
Cash flows from financing activities:
Net increase (decrease) in deposits $ 1,130 $(1,279) $ (1,238) $ 2,229
Increase (decrease) in repurchase agreements (451) (488) 1,694 (648)
Advances from Federal Home Loan Bank 11,500 4,000 28,700 4,000
Repayment of FHLB advances (15,500) (1,500) (29,100) (1,500)
Increase in advances from borrowers
for taxes and insurance (2) (77) 21 (58)
Dividends paid 0 0 (196) (247)
Funding of Recognition & Retention Plan 124 123 124 123
Purchase of treasury stock (364) (482) (655) (751)
-------- ------- -------- -------
Net cash provided by (used in) financing activities (3,563) 297 (650) 3,148
-------- ------- -------- -------
Increase (decrease) in cash and cash equivalents (616) (1,217) 556 (825)
Cash and cash equivalents at beginning of period 3,831 5,667 2,659 5,275
-------- ------- -------- -------
Cash and cash equivalents at end of period $ 3,215 $ 4,450 $ 3,215 $ 4,450
-------- ------- -------- -------
Supplemental Disclosures:
Additional Cash Flows Information:
Cash paid for:
Interest on deposits, advances and
repurchase agreements $ 843 $ 771 $ 1,692 $ 1,539
Income taxes:
Federal 221 29 437 29
State 19 12 72 22
Schedule of Non-Cash Investing Activities:
Transfers to foreclosed real estate 250 30 250 30
Refinanced other real estate owned 56 0 56 0
Held to maturity securities transferred
to available for sale 767 0 767 0
</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 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 September 30, 2000 and the results of its operations and cash
flows for the three month and six month periods ended September 30, 2000 and
1999. The results of operations for those months ended September 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 555,440 and 719,741 for the three-month periods and 564,838 and 733,988 for
the six-month periods ending September 30, 2000 and 1999 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 (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 was $28,000 for the three months ended September 30, 2000
and $27,000 for the three months ended September 30, 1999. For the six- month
periods ESOP compensation expense amounted to $55,000 for the period ended
September 30, 2000 and $53,000 for the period ended September 30, 1999.
The ESOP shares at September 30, 2000 and 1999 were as follows:
2000 1999
-------- --------
Allocated shares 23,168 15,197
Shares released for allocation 5,710 5,978
Unallocated shares 39,892 47,595
-------- --------
Total ESOP shares 68,770 68,770
Fair value of unallocated shares $580,927 $657,406
(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. The Company has
completed its evaluation of SFAS No. 133, as amended, the adoption of the
statement did not have a material effect on the consolidated financial
statements.
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, which for 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, 2000 and 1999 are as follows:
Three Month Period Six Month Period
------------------ ----------------
2000 1999 2000 1998
----- ----- ----- -----
($1,000)
--------
Net Income (Loss) $ 65 $ 177 $ 236 $ 325
----- ----- ----- -----
Other Comprehensive Income
Unrealized gains (losses) on securities 132 (109) 254 (474)
Realized (gains) losses on securities (2) 0 (2) 0
Related tax effects (48) 43 (105) 185
----- ----- ----- -----
Other Comprehensive Income (Losses) 82 66 147 (289
----- ----- ----- -----
Comprehensive Income $ 147 $ 111 $ 383 $ 36
10
<PAGE>
FIRST ROBINSON FINANCIAL CORP. AND SUBSIDIARY
Management Discussion and Analysis of Financial
Condition and Results of Operations
Forward-Looking Statements
When used in this filing and in future filings by the Company with the
Securities and Exchange Commission, in the Company's press releases or other
public or shareholder communications, or in oral statements made with the
approval of an authorized executive officer, the words or phrases "would be,"
"will allow," "intends to," "will likely result," "are expected to," "will
continue," "is anticipated," "estimate," "project" or similar expressions are
intended to identify "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. Such statements are subject to
risks and uncertainties, including but not limited to changes in economic
conditions in the Company's market area, changes in policies by regulatory
agencies, fluctuations in interest rates, demand for loans in the Company's
market area and competition, all or some of which could cause actual results to
differ materially from historical earnings and those presently anticipated or
projected. 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, ("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 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 which help us serve our customers and
add non-interest income to our bottom line. Our bank is the leader in real
estate lenders in Crawford County. We are now offering direct deposit for
business customers. This along with new checking products and services has
helped us 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 approximately 1,500 customers throughout Crawford County. We offer
Internet banking to customers and will soon add a bill paying service. 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 September 30, 2000 and March 31, 2000
Our total assets decreased by approximately $521,000 or 0.6% to $86.7
million at September 30, 2000 from $87.3 million at March 31, 2000. This
decrease in total assets was primarily the result of a $758,000 or 4.9% decrease
in securities available for sale and $767,000 or 85.7% decrease in securities
held to maturity. The decrease in securities held to maturity was the
reclassification of a security to available for sale by implementing the
Statement of Financial Accounting Standards No. 133. The overall decrease in
securities was due to the sale of three investments. Deferred income taxes had a
decrease of $105,000 or 43.4% for this quarter in comparison to March 31, 2000.
Loans receivable, net also decreased by $327,000 from March 31, 2000 to the
current quarter, September 30, 2000. These decreases are offset by a $556,000 or
20.9% increase in cash and cash equivalents, an increase of $366,000 or 240.8%
in other assets, an increase of $194,000 or 245.6% in foreclosed real estate, an
increase of $134,000 or 4.5% in premises and equipment, an increase of $139,000
in prepaid tax and a $47,000 or 6.7% in accrued interest receivable..
Liabilities decreased approximately $232,000 or 0.3% to $77.7 million at
September 30, 2000 from $77.9 million at March 31, 2000. A $1.2 million or 1.7%
decrease, for the same period, in deposits and a $400,000 or 11.1% decrease in
Federal Home Loan Bank Advances was the primary reason for the decrease in our
liabilities. Accrued income taxes also decreased by $228,000 or 100.0%. The
decrease in deposits, advances and accrued income taxes was offset by an
increase of $1.7 million or 113.7% in repurchase agreements.
Stockholders' equity decreased $289,000 or 3.1% to $9.0 million as of
September 30, 2000 from $9.3 million on March 31, 2000. The primary factor
associated with the decrease in stockholders' equity was the purchase an
additional $655,000 of treasury stock or 45,269 shares, bringing the total
amount of treasury stock to $3.9 million, as of September 30, 2000. The payment
of a $0.32 per share dividend to stockholders of record as of June 2, 2000
amounted to a total of $196,000 being paid from retained earnings. However, this
payment was offset by the addition of six months of earnings of $236,000 to
retained earnings. The release for allocation of $54,000 in Employee Stock
Ownership Plan shares, the allocation of $124,000 in Recognition and Retention
Plan shares and the increase of $147,000 in accumulated other comprehensive
income offset the decrease of stockholders' equity due to the purchase of
treasury shares.
12
<PAGE>
FIRST ROBINSON FINANCIAL CORP. AND SUBSIDIARY
Management Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations
Comparison of the Three Month Periods ended September 30, 2000 and 1999
Performance Summary
We are reporting net income of $65,000 for the second quarter of the
fiscal year. For the quarter ended September 30, 1999, we reported net income of
$177,000. The $112,000 or 63.3% decrease in net income was primarily from a
decrease of $163,000 or 19.2% in net interest income after provision for loan
losses and an increase of $54,000 or 7.5% in non-interest expense offset by an
increase of $46,000 or 30.7% in non-interest income and a decrease of $59,000 in
provision for income taxes.
Net Interest Income
Net interest income decreased by $78,000 or 8.9% to $802,000 during the
three months ended September 30, 2000, as compared to $880,000 during the same
period in the prior year. Interest income increased by $8,000 or 0.5%. However,
interest expense increased by $86,000 or 11.1% from $772,000 for the quarter
ended September 30, 1999 to $858,000 in comparison for the quarter ended
September 30, 2000. In order to attract and retain deposits, we had to increase
interest rates causing interest expense to increase.
Non-Interest Income
Total non-interest income increased by $46,000 or 30.7% to $196,000 during
the three months ended September 30, 2000, as compared to $150,000 during the
same period in the prior year. The increase in total non-interest income was
from an increase of $26,000 or 26.8% in service charges, an increase of $11,000
in other non-interest income, an increase of $7,000 in loan fees and an increase
of $2,000 in gain on investments sold.
Non-Interest Expense
Total non-interest expense increased by $54,000 or 7.5% to $778,000 during
the three months ended September 30, 2000, as compared to $724,000 during the
same period in the prior year. This increase was due primarily from an increase
of $24,000 or 5.8% in compensation and employee benefits, an increase of $22,000
or 18.2% in occupancy and equipment expense, an increase of $6,000 or 27.3% in
data processing expense, an increase of $1,000 or 4.6% in advertising expense,
an increase of $2,000 or 8.0% in postage and telephone expense and an increase
of $12,000 or 14.6% in other operating expenses. These increases are offset by a
decrease of $6,000 or 60.0% in Savings Association Insurance Fund deposit
insurance premiums, a decrease of $7,000 or 25.0% 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 add additional 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
September 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 September 30, 2000, we recorded provision
for loan losses of $115,000 as compared to $30,000 for the same period of the
prior year. This represents an increase of $85,000 or 283.3%. 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 1.95%
at September 30, 2000, as compared to 0.27% at September 30, 1999.
13
<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
$40,000 for the three months ended September 30, 2000 as compared to a provision
for income taxes of $99,000 for the same period in the prior year. The effective
tax rate during the three months ended September 30, 2000 was 38.1% as compared
to 35.9% during the quarter ended September 30, 1999.
Comparison of the Six Month Periods ended September 30, 2000 and 1999
Net Income
We reported a net income of $236,000 during the six months ended September
30, 2000 as compared to $325,000 for the same period in the prior year. The
$89,000 or 27.4% decrease in net income was primarily attributed to a decrease
of $78,000 or 4.8% in net interest income after provision for loan losses, an
increase of $100,000 or 7.0% in non-interest expense offset by an increase of
$49,000 or 16.0% in other non-interest income and a decrease of $40,000 in
provision for income taxes.
Net Interest Income
Net interest income decreased by $38,000 or 2.2% for the six-month period
ended September 30, 2000 as compared to the same period in the previous year.
For the six-months ended September 30, 2000, interest expense had increased by
$152,000 or 9.9% from the six months ended September 30, 1999. However, the
increase in interest expense was partially offset by an increase in interest
income of $114,000 or 3.5% from the September 30, 1999 period.
Non-Interest Income
Our non-interest income increased by $49,000 or 16.0% to $355,000 for the
six month period in this fiscal year as compared to $306,000 for the six month
period in the prior year. The increase was a direct result of increases in
service charges, loan fees, other non-interest income and gains from the sale of
investments and loans. Service charges on deposit accounts increased by $29,000
or 14.8% for this six-month period compared to the six months ending September
30, 1999. Non-interest income from loan fees resulted in a $3,000 or 6.8%
increase over the same period in the prior year, income from other sources
increased by $13,000 or 19.7% and we had a gain of $4,000 from the sale of
investments and loans when compared to the six-month period ended September 30,
1999.
Non-Interest Expense
Non-interest expense increased by $100,000 from $1.4 million for September
30, 1999 to $1.5 million as of September 30, 2000. The increase in non-interest
expense is primarily from a $40,000 or 4.9% increase in compensation and
employee benefits, a $31,000 or 13.2% increase in occupancy and equipment
expense, a $2,000 increase in foreclosed property expense, a $12,000 increase or
29.3% in data processing expenses, a $13,000 or 31.0% increase in advertising, a
$3,000 or 6.3% increase in telephone and postage expense and a $24,000 or 14.5%
increase in other expenses. The increases are offset by decreases of $8,000 or
16.0% in audit, legal and other professional fees and $17,000 or 68.0% in
Savings Associations Insurance Fund fees.
Provision for Loan Losses
The provision for loan losses for the six-month period ending September
30, 2000 increased by $40,000 or 44.4% from the six months ended September 30,
1999. We recorded a provision for loan losses of $130,000 for this six-month
period in comparison to $90,000 for the six months in the previous year. We
adjusted our provision for loan losses to an appropriate level after assessing
the situation involving one large agricultural borrower who has filed bankruptcy
and been placed on non-accrual. 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 1.95% at September 30,
2000 as compared to 1.31% at March 31, 2000.
14
<PAGE>
FIRST ROBINSON FINANCIAL CORP. AND SUBSIDIARY
Management Discussion and Analysis of Financial
Condition and Results of Operations
Provision for Income Taxes
We recognized provision for income taxes of $142,000 for the six months
ended September 30, 2000 as compared to $182,000 for the six months in the prior
year. The effective tax rate for this six-month period was 37.6% and 35.9% for
the six months ended September 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 September 30, 2000 we had $3.2 million in advances from the FHLB of
Chicago outstanding resulting in a decrease of $0.4 million or 11.1% in advances
from the amount as of March 31, 2000. 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 September 30, 2000,
we had outstanding commitments to extend credit, which amounted to $3.0 million
(including $2.5 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 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, 2000, the Bank was in compliance with all of the
aforementioned capital requirements as summarized below:
<TABLE>
<CAPTION>
September 30, 2000
------------------
(1,000's)
---------
<S> <C>
Tier I Capital:
Common stockholders' equity 8,813
Unrealized loss (gain) on securities available for sale 267
Less disallowed intangible assets (2)
Total Tier I Capital 9,078
Tier II Capital:
Total Tier I capital 9,078
Qualifying allowance for loan losses 686
Total capital 9,764
Risk-weighted assets 54,862
Quarter average assets 86,981
</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, 2000:
Total Risk-Based Capital
(to Risk-Weighted Assets) 9,764 17.80% 4,389 8.00% 5,486 10.00%
Tier I Capital
(to Risk-Weighted Assets) 9,078 16.55% 2,194 4.00% 3,292 6.00%
Tier I Capital
(to Average Assets) 9,078 10.44% 3,479 4.00% 4,349 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.
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 27, 2000, the Company held its Annual Meeting of
Stockholders.
(b) At the meeting, James D. Goodwine and Clell T. Keller were elected
as directors for terms to expire in 2003.
(c) Stockholders voted on the following matters:
(i) The election of the following three directors of the
Corporation;
BROKER
VOTES: FOR WITHHELD ABSTAIN NON-VOTES
------ --- -------- ------- ---------
James D. Goodwine 432,178 4,250 0 0
Clell T. Keller 430,678 5,750 0 0
(ii) The ratification of the appointment of Larsson, Woodyard
& Henson, LLP as auditors for the Company for the fiscal
year ending March 31, 2001.
BROKER
VOTES: FOR AGAINST ABSTAIN NON-VOTES
------ --- ------- ------- ---------
434,648 1,100 680 0
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:
No reports on Form 8-K were filed during the quarter ended September
30, 2000
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 13, 2000 /s/ Rick L. Catt
-----------------
Rick L. Catt
President and Chief Executive Officer
Date: November 13, 2000 /s/ Jamie E. McReynolds
-----------------------
Jamie E. McReynolds
Chief Financial Officer and Vice President
18
