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 DECEMBER 31, 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 in 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 February 8, 1999, the Registrant had 635,077 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
PAGE
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheet as of December 31, 1999
And March 31, 1999 3
Consolidated Statements of Income for the Three and
Nine Month Periods Ended December 31, 1999 and
December 31, 1998 4
Consolidated Statements of Stockholders' Equity for
the Nine Month Periods Ended December 31, 1999 and
December 31, 1998 5
Consolidated Statements of Cash Flows for the Three and
Nine Month Periods Ended December 31, 1999 and
December 31, 1998 6
Notes to Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 11
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 17
Item 2. Changes in Securities 17
Item 3. Defaults Upon Senior Securities 17
Item 4. Submission of Matters to a Vote of Security Holders 17
Item 5. Other Information 17
Item 6. Exhibits and Reports on Form 8-K 17
SIGNATURES 18
<PAGE>
FIRST ROBINSON FINANCIAL CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
Unaudited Audited
12/31/99 3/31/99
--------- -------
ASSETS ($1,000's)
Cash and Cash Equivalents:
<S> <C> <C>
Cash and due from banks $1,646 $1,007
Interest bearing deposits 1,322 4,268
----- -----
Total Cash and Cash Equivalents 2,968 5,275
Securities available for sale, amortized cost of $16,107 and $11,942
at December 31, 1999 and March 31, 1999 respectively 15,441 11,919
Securities held to maturity, estimated market value of $149 and
$195 at December 31, 1999 and March 31, 1999, respectively 148 190
Loans receivable, net 63,272 62,593
Accrued interest receivable 742 698
Premises and equipment, net 2,926 2,918
Foreclosed real estate 24 0
Prepaid income tax 0 97
Deferred income tax 182 0
Other assets 123 107
--- ---
Total Assets $85,826 $83,797
------- -------
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits $73,259 $67,325
Advances from Federal Home Loan Bank 1,000 2,000
Repurchase agreements 1,580 2,206
Advances from Borrowers for taxes and insurance 66 98
Accrued interest payable 269 294
Accrued income taxes 113 0
Deferred income taxes 0 69
Accrued expenses 179 243
------ ------
Total Liabilities 76,466 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 8,297 8,277
Retained earnings 5,459 5,175
Treasury stock, at cost (3,044) (747)
Accumulated other comprehensive income (406) (14)
Common stock acquired by ESOP/RRP (955) (1,138)
------- -------
Total Stockholders' Equity 9,360 11,562
------- -------
Total Liabilities and Stockholders' Equity $85,826 $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 Three and Nine Month Periods
Ended December 31, 1999 and 1998
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTH PERIOD NINE MONTH PERIOD
----------------------- -------------------------
($1,000's)
1999 1998 1999 1998
------ ------ ------ ------
Interest income:
<S> <C> <C> <C> <C>
Interest on Loans $1,395 $1,445 $4,131 $4,396
Interest and dividends on securities 267 212 793 551
------ ------ ------ ------
Total interest income 1,662 1,657 4,924 4,947
------ ------ ------ ------
Interest expense:
Interest on deposits 720 788 2,145 2,294
Interest on FHLB advances 33 26 96 77
Interest on repurchase agreements 19 32 73 92
--- --- ----- -----
Total interest expense 772 846 2,314 2,463
--- --- ----- -----
Net interest income 890 811 2,610 2,484
Provision for loan losses 24 30 114 145
--- --- ----- -----
Net interest income after provision 866 781 2,496 2,339
--- --- ----- -----
Non-interest income:
Service charges 107 70 303 205
Loan fees 28 14 72 46
Other non-interest income 37 14 103 45
--- -- --- ---
Total other income 172 98 478 296
Non-interest expense:
Compensation and employee benefits 400 373 1,225 1,259
Occupancy and equipment 114 108 348 330
Foreclosed property expense 0 6 0 35
Data Processing 23 25 64 66
Audit, legal and other professional 24 33 74 109
SAIF deposit insurance 11 14 36 39
Advertising 36 19 78 50
Telephone and postage 22 22 70 67
Other 87 90 251 273
--- --- ----- -----
Total other expenses 717 690 2,146 2,228
--- --- ----- -----
Income (Loss) before income tax 321 189 828 407
Provision for (benefit from) income taxes 116 74 298 153
---- ---- ---- ----
Net Income (Loss) $205 $115 $530 $254
---- ---- ---- ----
Earnings Per Share-Basic $0.30 $0.15 $0.74 $0.33
Earnings Per Share-Diluted $0.30 $0.15 $0.74 $0.33
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
4
<PAGE>
<TABLE>
<CAPTION>
FIRST ROBINSON FINANCIAL CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
For The Nine Month Periods Ended December 31, 1999 and 1998
(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> <C>
Balance at March 31, 1999 $9 $8,277 $5,175 $(747) $(1,138) $(14) $11,562
Net Income 530 530 $530
----
Other Comprehensive Income
Unrealized gain (loss) on
Securities, net of related tax (643)
effects of 251
Total other comprehensive income (392) (392) (392)
----
Total comprehensive income $138
----
Rounding 1 1
Allocation of ESOP shares 20 60 80
Allocation of RRP Shares 123 123
Treasury Stock at cost (2,297) (2,297)
Dividends paid (247) (247)
------------------------------------------------------------------------------------------
Balance at December 31, 1999 $9 $8,297 $5,459 $(3,044) $(955) $(406) $9,360
-- ------ ------ -------- ------ ------ ------
Unallocated Accumulated
ESOP Other Compre-
Common Paid-in Retained Treasury and Comprehensive hensive
Stock Capital Earnings Stock RRP Income Total Income
-------------------------------------------------------------------------------------------------
($1,000's)
Balance at March 31, 1998 $9 $8,232 $5,223 $0 $(602) $33 $12,895
Net Income 254 254 $254
----
Other Comprehensive Income
Unrealized gain (loss) on
Securities, net of related tax (19)
effects of 7
Total other comprehensive income (12) (12) (12)
----
Total comprehensive income $242
----
Rounding 1 1
Allocation of ESOP shares 32 52 84
Recognition & Retention Plan (623) (623)
Treasury Stock at cost (747) (747)
Dividends paid (258) (258)
------------------------------------------------------------------------------------------
Balance at December 31, 1998 $9 $8,264 $5,220 $(747) $(1,173) $21 $11,594
-- ------ ------ ------ -------- --- -------
</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 Nine Month Periods
Ended December 31, 1999 and 1998
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTH PERIOD NINE MONTH PERIOD
------------------------ ------------------------
($1,000's)
1999 1998 1999 1998
---- ---- ---- ----
Cash flows from operating activities:
<S> <C> <C> <C> <C>
Net income $205 $ 115 $530 $254
Adjustments to reconcile net income to net cash
provided by (used in) operating activities
Provision for depreciation 69 61 203 174
Provision for loan losses 24 30 114 145
Net amortization and accretion on investments 6 14 21 27
ESOP shares allocated 27 25 80 84
Decrease (increase) in accrued interest receivable 79 68 (44) 59
Decrease (increase) decrease in prepaid income taxes 0 19 97 (38)
Decrease (increase) in other assets 10 14 (16) 50
(Decrease) increase in accrued interest payable (22) (56) (25) (43)
(Decrease) increase in accrued income taxes 18 0 113 0
(Decrease) increase in deferred income taxes 0 0 0 0
Increase (decrease) in accrued expenses 87 85 (64) (36)
Gain on sale of loans 0 0 0 0
Gain on sale of premises and equipment 0 0 0 0
Loss on sale of mortgage-backed securities 0 0 0 0
--- --- ----- ---
Net cash provided by operating activities 503 375 1,009 676
--- --- ----- ---
Cash flows from investing activities:
Proceeds from sale of securities available for sale 0 0 0 0
Proceeds from maturities of securities available for sale 0 500 0 500
Proceeds from sale of mortgage-backed securities
available for sale 0 0 0 0
Proceeds from maturities of securities held to maturity 27 20 42 35
Purchase of securities held to maturity 0 0 0 (35)
Purchase of securities available for sale (231) 0 (1,231) (741)
Purchase of mortgage-backed securities
available for sale 0 (2,056) (4,498) (8,168)
FHLB Stock purchased 0 (19) (45) (35)
Repayment of principal- mortgage-backed securities 367 614 1,587 1,326
Decrease (increase) in loans receivable (2,187) 396 (3,260) (582)
Purchase of loans and participations 0 (678) 0 (678)
Sale or participation of originated loans 1,410 508 2,469 1,939
Decrease (increase) in foreclosed real estate 6 24 (24) 221
Purchase of premises and equipment (84) (46) (211) (213)
----- ------ ------- -------
Net cash used in investing activities (692) (737) (5,171) (6,431)
----- ------ ------- -------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
6
<PAGE>
<TABLE>
<CAPTION>
FIRST ROBINSON FINANCIAL CORP. AND SUBSIDIARY
CONSOLDIATED STATEMENT OF CASH FLOWS
For The Three and Nine Month Periods Ended December 31, 1999 and 1998
(Unaudited)
Three Month Period Nine Month Period
------------------ -----------------
($1,000's)
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Cash flows from financing activities:
Net increase (decrease) in deposits $ 3,705 $ 154 $ 5,934 $ 6,036
Increase (decrease) in repurchase agreements 22 283 (626) 660
Advances from Federal Home Loan Bank 9,100 1,500 13,100 1,500
Repayment of FHLB advances (12,600) (1,500) (14,100) (1,500)
Increase in advances from borrowers
for taxes and insurance 26 18 (32) (9)
Proceeds from issuance of common stock 0 0 0 0
Purchase of employee stock ownership plan 0 0 0 0
Dividends paid 0 0 (247) (258)
Purchase of stock for Recognition & Retention Plan 0 0 0 (746)
Funding of Recognition & Retention Plan 0 0 123 123
Purchase of treasury stock (1,546) 0 (2,297) (747)
-------- -------- -------- --------
Net cash (used) provided by financing activities (1,293) 455 1,855 5,059
-------- -------- -------- --------
Increase (decrease) in cash and cash equivalents (1,482) 93 (2,307) (696)
Cash and cash equivalents at beginning of period 4,450 5,785 5,275 6,574
-------- -------- -------- --------
Cash and cash equivalents at end of period $ 2,968 $ 5,878 $ 2,968 $ 5,878
-------- -------- -------- --------
Supplemental Disclosures:
Additional Cash Flows Information:
Cash paid for:
Interest on deposits, advances and
repurchase agreements $ 794 $ 902 $ 2,339 $ 2,506
Income taxes:
Federal 39 52 68 180
State 6 5 22 22
Schedule of Non-Cash Investing Activities:
Change in unrealized gain on securities
available for sale (169) (87) (643) (19)
Change in deferred income taxes attributed to
unrealized gain on securities available for sale 66 34 251 7
</TABLE>
The accompanying notes are an integral part of those consolidated financial
statements.
7
<PAGE>
FIRST ROBINSON FINANCIAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) BASIS OF PRESENTATION
The consolidated financial statements include the accounts of First Robinson
Financial Corporation (the "Company") and its wholly owned subsidiary, First
Robinson Savings Bank, National Association (the "Bank"). All significant
intercompany accounts and transactions have been eliminated in consolidation.
The accompanying consolidated financial statements are unaudited and should be
read in conjunction with the consolidated financial statements and notes thereto
included in the Company's annual report dated April 21, 1999. The accompanying
unaudited consolidated financial statements have been prepared in accordance
with the instructions for 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 December 31, 1999 and the results of its operations and cash
flows for the three month and nine month periods ended December 31, 1999 and
1998. The results of operations for those months ended December 31, 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 682,290 and 760,768 for the three month periods and 716,756 and 779,864 for
the nine month periods ending December 31, 1999 and 1998 respectively. The
Company approved a stock option plan during the quarter ended September 30,
1998. This plan had no dilutive effect on the earnings per share since current
stock price was less than option price.
8
<PAGE>
FIRST ROBINSON FINANCIAL CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(4) EMPLOYEE STOCK OWNERSHIP PLAN
In connection with the conversion to the stock form of ownership, the Board of
Directors established an employee stock ownership plan (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 $11,000 for the three months ended December 31, 1999
and $7,000 for the three months ended December 31, 1998. For the nine month
periods ESOP compensation expense amounted to $64,000 for the period ended
December 31, 1999 and $65,000 for the period ended December 31, 1998.
The ESOP shares at December 31, 1999 and 1998 were as follows:
1999 1998
------ ------
Allocated shares 23,168 15,197
Shares released for allocation 0 0
Unallocated shares 45,602 53,573
------ ------
Total ESOP shares 68,770 68,770
Fair value of unallocated shares $607,077 $622,786
(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 year ended March 31, 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>
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 nine month periods ended December 31, 1999 and 1998 are as follows:
Three Month Period Nine Month Period
------------------ -----------------
1999 1998 1999 1998
($1,000's)
Net Income (Loss) $ 205 $ 115 $ 530 $ 254
----- ----- ----- -----
Other Comprehensive Income
Unrealized gains (losses) on securities (169) (87) (643) (19)
Related tax effects 66 34 251 7
----- ----- ----- -----
Other Comprehensive Income (Losses) (103) (53) (392) (12)
----- ----- ----- -----
Comprehensive Income $ 102 $ 62 $ 138 $ 242
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 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 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.
11
<PAGE>
FIRST ROBINSON FINANCIAL CORP. AND SUBSIDIARY
Management Discussion and Analysis of Financial
Condition and Results of Operations
IMPACT OF THE YEAR 2000
Prior to December 31, 1999, we had completed testing of our computer
systems, which were conducted for the purpose of identifying applications that
could be affected by the Year 2000 issue. To date, no problems were incurred
with equipment or data before, during or after the century date change.
Regulators have identified two more dates to monitor; February 29, 2000, leap
year and March 31, 2000, the first quarter-end date. We do not expect
significant increases in future data processing costs or other expenses related
to Year 2000 compliance. For the nine months ended December 31, 1999, we have
expended $2,000 related to Year 2000 compliance.
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. The Board of Directors and management meet periodically to
strategically plan for our future. We review and discuss new products and
services to determine their effect on our profitability and customer service.
Our fixed rate mortgage program through Federal Home Loan Bank of Chicago
continues to grow and has produced additional non-interest income for the Bank.
We continue to emphasize our checking and savings accounts in our marketing
area. The excellent growth in the number of new checking and savings accounts
has helped reduce our cost of funds. Our Internet service, which covers all of
Crawford County, now serves over 1,350 customers. PrimeVest Financial Services
was added in April 1999 to provide investment brokerage services to our
customers. As of December 1999, the service has provided an additional $23,000
net, to non-interest income. The Board of Directors has approved the purchase of
Internet banking services and management anticipates those services will be
operational by the end of September 2000. We intend to stay focused on providing
excellent customer service and maintaining a strong presence in our community.
We are the only independent community bank in Robinson, Oblong, and Palestine,
Illinois.
FINANCIAL CONDITION
COMPARISON AT DECEMBER 31, 1999 AND MARCH 31, 1999
Our total assets increased by approximately $2.0 million or 2.4%, to
$85.8 million at December 31, 1999 from $83.8 million at March 31, 1999. This
increase in total assets was primarily the result of a $3.5 million or 29.6%
increase in securities available for sale and an increase of $679,000 or 1.1% in
loans receivable, net offset by a $2.3 million or 43.7% decrease in cash and
cash equivalents. Foreclosed real estate increased to $24,000 as of December 31,
1999 from a zero balance at the end of March 31, 1999. Another factor relating
to the increase in total assets is FASB 115 and the valuation of our securities
held available for sale, deferred income tax decreased $251,000. At March 31,
1999 deferred income taxes were recorded on the balance sheet as a liability of
$69,000 and as of December 31, 1999 deferred income taxes are being carried on
the balance sheet as an asset of $182,000.
Liabilities increased approximately $4.2 million or 5.9% to $76.5 million
at December 31, 1999 from $72.2 million at March 31, 1999. A $5.9 million or
8.8% increase, for the same period, in deposits was the primary reason for the
increase in our liabilities. The significant increase in deposits was derived
from an increase in the amount of certificates of deposit of $100,000 or more
invested with us. Total certificates of deposit of $100,000 or more as of March
31, 1999 were $11.0 million and $15.3 million as of December 31, 1999. This
represents an increase of $4.3 million or 39.1%. The increase in deposits was
used to repay Federal Home Loan Bank advances, to fund loans and to fund
investments. The deposit total increase was offset by a decrease of $1.0 million
or 50.0% in Federal Home Loan Bank advances and a $626,000 or 28.4% decrease in
repurchase agreements.
12
<PAGE>
FIRST ROBINSON FINANCIAL CORP. AND SUBSIDIARY
Management Discussion and Analysis of Financial
Condition and Results of Operations
FINANCIAL CONDITION - CONTINUED
Stockholders' equity decreased $2.2 million or 19.0% to $9.4 million as
of December 31, 1999 from $11.6 million on March 31, 1999. The decrease was
primarily attributed to three major factors. First, as of December 31, 1999,
compared to March 31, 1999, we had purchased an additional $2.3 million of
treasury stock, bringing the total amount of treasury stock to be $3.0 million
as of December 31, 1999. This represents the purchase of 167,000 additional
shares of treasury stock since March 31, 1999 for a total amount of treasury
shares held to 210,000 as of December 31, 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. Finally, there was a $392,000 decrease after tax in the
valuation of our securities held available for sale. The decrease in
stockholders' equity for the quarter ended December 31, 1999, however, was
offset by the addition of nine months of earnings of $530,000.
RESULTS OF OPERATIONS
COMPARISON OF THE THREE MONTH PERIODS ENDED DECEMBER 31, 1999 AND 1998
PERFORMANCE SUMMARY
We are reporting net income of $205,000 for the third quarter of the
fiscal year. For the quarter ended December 31, 1998, we reported net income of
$115,000. The $90,000 or 78.3% increase in net income was attributed to an
increase of $85,000 or 10.9% in net interest income after provision for loan
losses and an increase of $74,000 or 75.5% in non-interest income offset by a
$27,000 or 3.9% increase in non-interest expense and a $42,000 or 56.8% increase
in provision for taxes for the three month period ended December 31, 1999
compared to the same period in 1998.
NET INTEREST INCOME
Net interest income increased by $79,000 or 9.7% to $890,000 during the
three month period ended December 31, 1999, as compared to $811,000 during the
same period in the prior year. Interest expense decreased by $74,000 or 8.7%
from $846,000 for the quarter ended December 31, 1998 to $772,000 in comparison
of the quarter ended December 31, 1999. The average rate on interest bearing
liabilities for the quarter ended December 31, 1999 was 4.26% compared to 4.78%
for the December 31, 1998 quarter. Interest income increased by $5,000 or 0.3%
for the quarter ended December 31, 1999 as compared to the quarter ended
December 31, 1998.
NON-INTEREST INCOME
Total non-interest income increased by $74,000 or 75.5% to $172,000
during the three months ended December 31, 1999, as compared to $98,000 during
the same period in the prior year. The increase in total non-interest income was
the result of an increase of $37,000 or 52.9% in service charges, an increase of
$23,000 or 164.3% in income from other sources and an increase of $14,000 or
100.0 % in loan fees.
13
<PAGE>
FIRST ROBINSON FINANCIAL CORP. AND SUBSIDIARY
Management Discussion and Analysis of Financial
Condition and Results of Operations
NON-INTEREST EXPENSE
Total non-interest expense increased by $27,000 or 3.9% to $717,000
during the three months ended December 31, 1999, as compared to $690,000 during
the same period in the prior year. This increase was due primarily from an
increase of $27,000 or 7.2% in compensation and employee benefits, an increase
of $17,000 or 89.5% in advertising expense and a $6,000 or 5.6% increase in
occupancy and equipment expense. These increases were offset by decreases of
$9,000 or 27.3% in audit, legal and other professional fees, $6,000 or 100.0% in
foreclosed property expense, $3,000 or 21.4% in Savings Association Insurance
Fund deposit insurance premiums, $3,000 or 3.3% in other non-interest expense
and $2,000 or 8.0% in data processing expenses. The increase in compensation
expense is the result of the addition of staff to provide better customer
service and to help better manage the existing and future loan portfolio
underwriting.
PROVISION FOR LOAN LOSSES
During the three months ended December 31, 1999, we recorded provision
for loan losses of $24,000 as compared to $30,000 for the same period of the
prior year, a decrease of $6,000 or 20.0%. 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 0.70% at December
31, 1999, as compared to 0.56% at December 31, 1998.
PROVISION FOR INCOME TAXES
We recognized a provision for federal and state income taxes of $116,000
for the three months ended December 31, 1999 as compared to a provision for
income taxes of $74,000 for the same period in the prior year. The effective tax
rate during the three months ended December 31, 1999 was 36.1% as compared to
39.2% during the quarter ended December 31, 1998.
COMPARISON OF THE NINE MONTH PERIODS ENDED DECEMBER 31, 1999 AND 1998
NET INCOME
We reported a net income of $530,000 during the nine months ended
December 31, 1999 as compared to $254,000 for the same period in the prior year.
The $276,000 or 108.7% increase in net income was primarily attributed to an
increase of $157,000 or 6.7% in net interest income after provision for loan
losses, an increase of $182,000 or 61.5% in non-interest income and a decrease
of $82,000 or 3.7% in non-interest expense offset by an increase of $145,000 or
94.8% in the provision for income taxes.
NET INTEREST INCOME
Net interest income increased by $126,000 or 5.1% for the nine month
period ended December 31, 1999 as compared to the same period in the previous
year. For the nine months ended December 31, 1999, interest expense had
decreased by $149,000 or 6.0% from the nine months ended December 31, 1998.
However, the decrease in interest expense was partially offset by a decrease in
interest income of $23,000 or 0.5% from the December 31, 1998 period. The
interest rate spread for the nine months ended December 31, 1999 was 3.70%
compared to 3.36% for the same period in the prior year.
NON-INTEREST INCOME
Our non-interest income increased by $182,000 or 61.5% to $478,000 for
the nine month period in this fiscal year as compared to $296,000 for the nine
month period in the prior year. The increase was a direct result of increases in
service charges, loan fees and other non-interest income. Service charges on
deposit accounts increased by $98,000 or 47.8% for this nine month period
compared to the nine months ending December 31, 1998. Non-interest income from
loan fees resulted in a $26,000 or 56.5% increase over the same period in the
prior year and income from other sources increased by $58,000 or 128.9% from the
nine month period ended December 31, 1998.
14
<PAGE>
FIRST ROBINSON FINANCIAL CORP. AND SUBSIDIARY
Management Discussion and Analysis of Financial
Condition and Results of Operations
NON-INTEREST EXPENSE
Non-interest expense for this nine month period ended December 31, 1999
was $82,000 or 3.7% below that of the same nine month period in the prior year.
The decrease was the result of a $34,000 or 2.7% decrease in compensation and
employee benefits, a decrease of $35,000 or 100.0%in foreclosed property
expense, a decrease of $35,000 or 32.1% in audit, legal and other professional
fees, a $22,000 or 8.1% decrease in other non-interest expense, a decrease of
$3,000 or 7.7% in Savings Association Insurance Fund deposit insurance premiums,
and a decrease of $2,000 or 3.0% in data processing expenses offset by an
increase of $18,000 or 5.5% in occupancy and equipment, an increase of $28,000
or 56.0% in advertising expense and a $3,000 or 4.5% increase in telephone and
postage expense.
PROVISION FOR LOAN LOSSES
The provision for loan losses for the nine month period ending December
31, 1999 decreased by $31,000 or 21.4% from the nine months ended December 31,
1998. We recorded a provision for loan losses of $114,000 for this nine month
period in comparison to $145,000 for the nine months in the previous year. We
adjusted our provision for loan losses to an appropriate level after assessing
the volume and types of lending we were presently conducting. Also influencing
the provision for loan losses was the economic conditions of our market area,
industry standards, past due loans and any other factors related to the
collection of our loan portfolio. Our non-performing assets as a percentage of
total assets was 0.70% at December 31, 1999 as compared to 0.18% at March 31,
1999.
PROVISION FOR INCOME TAXES
We recognized provision for income taxes of $298,000 for the nine months
ended December 31, 1999 as compared to $153,000 for the nine months in the prior
year. The effective tax rate for this nine month period was 36.0% and 37.6% for
the nine months ended December 31, 1998.
LIQUIDITY AND CAPITAL RESOURCES
Our principal sources of funds are deposits and principal and interest
payments collected on loans, investments and related securities. While scheduled
loan repayments and maturing investments are relatively predictable, deposit
flows and early loan prepayments are more influenced by interest rates, general
economic conditions and competition. Additionally, we may borrow funds from the
FHLB of Chicago, our correspondent bank, Cole Taylor Bank located in Chicago and
the Discount Window of the Federal Reserve of St. Louis or utilize other
borrowings of funds based on need, comparative costs and availability at the
time.
At December 31, 1999 we had $1.0 million in advances from the FHLB of
Chicago outstanding resulting in a decrease of $1.0 million in advances from the
amount as of March 31, 1999. We use our liquidity resources principally to meet
outstanding commitments on loans, to fund maturing certificates of deposit and
deposit withdrawals and to meet operating expenses. We anticipate no foreseeable
problems in meeting current loan commitments. At December 31, 1999, we had
outstanding commitments to extend credit, which amounted to $4.6 million
(including $2.1 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 December 31, 1999, the Bank was in compliance with all of the
aforementioned capital requirements as summarized below:
<TABLE>
<CAPTION>
DECEMBER 31, 1999
(1,000'S)
<S> <C>
Tier I Capital:
Common stockholders' equity 8,221
Unrealized loss (gain) on securities available for sale 407
Total Tier I Capital 8,628
Tier II Capital:
Total Tier I capital 8,628
Qualifying allowance for loan losses 625
Total capital 9,253
Risk-weighted assets 54,103
Quarter average assets 85,916
</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 December 31, 1999:
Total Risk-Based Capital
(to Risk-Weighted Assets) 9,253 17.10% 4,328 8.00% 5,410 10.00%
Tier I Capital
(to Risk-Weighted Assets) 8,628 15.95% 2,164 4.00% 3,246 6.00%
Tier I Capital
(to Average Assets) 8,628 10.04% 3,437 4.00% 4,296 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
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 Form 8-K:
The Company filed a Current Report on Form
8-K dated December 6, 1999 with the SEC
announcing its intention to repurchase up to
5% of its outstanding shares. The stock
repurchase began on December 6, 1999 and is
to conclude on June 6, 2000. In addition,
the Registrant announced the completion of a
stock repurchase program began August 16,
1999.
The Company also filed a Current Report on
Form 8-K dated December 23, 1999 with the
SEC announcing its intention to repurchase
up to 5% of its outstanding shares. The
stock repurchase began on December 20, 1999
and is to conclude on June 20, 2000. In
addition, The Registrant announced the
completion of a stock repurchase program
began December 6, 1999.
17
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FIRST ROBINSON FINANCIAL
CORPORATION
Date: February 14, 2000 /s/ Rick L. Catt
----------------- ----------------
Rick L. Catt
President and Chief Executive Officer
Date: February 14, 2000 /s/ Jamie E. Mcreynolds
----------------- -----------------------
Jamie E. McReynolds
Chief Financial Officer and Vice President
<TABLE>
<CAPTION>
EXHIBIT 11
Statement Regarding Computation of Earnings per Share
As of December 31, 1999 and 1998
Three Month Period Nine Month Period
------------------ -----------------
1999 1998 1999 1998(1)
---- ---- ---- -----
<S> <C> <C> <C> <C>
Net Earnings (in thousands) $ 205 $ 115 $ 530 $ 254
Basic earnings per share:
Weighted average shares outstanding 859,625 859,625 859,625 859,625
Less unearned employee stock ownership plan shares (46,599) (55,876) (48,591) (57,499)
Less shares repurchased (130,736) (42,981) (94,278) (22,262)
Average option shares granted 0 0 0 0
Less assumed purchase of shares using treasury method 0 0 0 0
--------- --------- --------- ---------
Common and common equivalent shares outstanding 682,290 760,768 716,756 779,864
--------- --------- --------- ---------
Earnings per common share - basic $ 0.30 $ 0.15 $ 0.74 $ 0.33
--------- --------- --------- ---------
Diluted earnings per share:
Weighted average shares outstanding 859,625 859,625 859,625 859,625
Less unearned employee stock ownership plan shares (46,599) (55,876) (48,591) (57,499)
Less shares repurchased (130,736) (42,981) (94,278) (22,262)
Average option shares granted(2) 0 0 35,075 17,538
Less assumed purchase of shares using treasury method 0 0 (35,075) (17,538)
--------- --------- --------- ---------
Common and common equivalent shares outstanding 682,290 760,768 716,756 779,864
--------- --------- --------- ---------
Earnings per common share - diluted $ 0.30 $ 0.15 $ 0.74 $ 0.33
--------- --------- --------- ---------
</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 December 31, 1999 and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 1,646
<INT-BEARING-DEPOSITS> 1,322
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 15,441
<INVESTMENTS-CARRYING> 148
<INVESTMENTS-MARKET> 149
<LOANS> 63,897
<ALLOWANCE> (625)
<TOTAL-ASSETS> 85,826
<DEPOSITS> 73,259
<SHORT-TERM> 2,580
<LIABILITIES-OTHER> 627
<LONG-TERM> 0
0
0
<COMMON> 9
<OTHER-SE> 9,351
<TOTAL-LIABILITIES-AND-EQUITY> 85,826
<INTEREST-LOAN> 1,395
<INTEREST-INVEST> 267
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 1,662
<INTEREST-DEPOSIT> 720
<INTEREST-EXPENSE> 772
<INTEREST-INCOME-NET> 890
<LOAN-LOSSES> 24
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 717
<INCOME-PRETAX> 321
<INCOME-PRE-EXTRAORDINARY> 321
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 205
<EPS-BASIC> 0.30
<EPS-DILUTED> 0.30
<YIELD-ACTUAL> 4.37
<LOANS-NON> 597
<LOANS-PAST> 0
<LOANS-TROUBLED> 90
<LOANS-PROBLEM> 563
<ALLOWANCE-OPEN> 631
<CHARGE-OFFS> (51)
<RECOVERIES> 21
<ALLOWANCE-CLOSE> 625
<ALLOWANCE-DOMESTIC> 625
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
