Management’s
Discussion and Analysis or Plan of Operation
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; changes in accounting principles, policies, or
guidelines; fluctuations in interest rates; demand for loans in the Company’s
market area; competition; customer growth and retention; earnings growth and
expectations; new products and services; credit quality and adequacy of
reserves; technology; and employees; 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.
The
Company wishes 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.
The
Company does 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
The
Company’s principal business, through its 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. Loans consist primarily of
loans secured by residential real estate located in our market area, consumer
loans, commercial loans, and agricultural loans.
The
Company’s results of operations are dependent primarily on net interest income,
which is the difference between interest earned on interest-earning assets
and
the interest paid on interest-bearing liabilities. Net interest income is a
function of “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, the results of operations are
also
affected by other income, and general, administrative and other expense, the
provision for losses on loans and income tax expense. Other income consists
primarily of service charges and gains (losses) on sales of loans. General,
administrative and other expense consists primarily of salaries and employee
benefits, occupancy and office expenses, advertising, data processing expenses
and the costs associated with being a publicly held company.
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 the Company’s market area.
Historically,
the Company’s mission has been to originate loans on a profitable basis to the
communities served. In seeking to accomplish this 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 earnings;
and (iv) to manage exposure to changes in interest rates.
FIRST
ROBINSON FINANCIAL CORPORATION
Management’s
Discussion and Analysis or Plan of Operation
Overview
First
Robinson Financial Corporation (the “Company”) is the holding company for First
Robinson Savings Bank, National Association (the “Bank”). The Company is
headquartered in Robinson, Illinois and operates three full service offices
and
one drive-up facility in Crawford County. The Company earned $826,000 for the
first nine months of the fiscal year 2008 versus $906,000 in the same period
of
fiscal year 2007, a decrease of 8.8%. Earnings were positively impacted by
a
$225,000 increase in non-interest income offset by an increase of $314,000
in
non-interest expense, and a $53,000 decrease in net interest income after
provision. Basic earnings per share for the 2008 nine month fiscal period were
$1.82 per share versus $1.91 per share for the same period of fiscal year 2007.
Diluted earnings per share reflect the potential dilutive impact of stock
options granted under the stock option plan. Diluted earnings per share for
the
nine months of fiscal 2008 were $1.73 per share, versus $1.83 per share for
the
nine months of fiscal year 2007.
Net
income for the three month period ending December 31, 2007 was $261,000, versus
$292,000 in the same period of 2006, a decrease of 10.6%. The decrease in
earnings were a result of a $52,000 decline in net interest income after
provision and an increase of $58,000 in non-interest expense, offset in part,
by
a $68,000 increase in non-interest income and a decrease of $11,000 in provision
for income taxes. Basic earnings per share for the December 31, 2007 three
month
period were $0.60 per share versus $0.62 per share for the same period of 2006.
Diluted earnings per share reflect the potential dilutive impact of stock
options granted under the stock option plan. Diluted earnings per share for
the
three months ending December 31, 2007 were $0.57 per share, versus $0.59 per
share for the three months ending December 31, 2006.
Business
Strategy
First
Robinson Savings Bank, National Association is a community-oriented, locally
owned financial institution offering community-banking services to residents
and
businesses of Crawford County, Illinois, our primary market area. Periodically,
the Board of Directors and management meet to strategically plan for the future.
We review and discuss both current and new products and services to determine
their effect on our profitability and customer service. We also monitor current
events and economic trends in our local area that could materially impact the
Bank’s earnings. At the present time, the employment market has remained stable
in Crawford County and we anticipate no major events or economic trends that
could negatively affect the Bank. However, in the month of October a super
department store, that leases space to a commercial bank, opened in the Robinson
market. The addition of a new bank in the market will increase the competition
in attracting new and retaining current customers.
The
strategic plan identifies the most critical issue to our success as consistent
earnings. Net earnings have remained relatively consistent. A positive factor
in
maintaining consistent earnings is the Bank’s overall asset quality, which is
strong. The Bank continues to offer fixed rate residential real estate mortgages
through programs with the Federal Home Loan Bank of Chicago and USDA Rural
Development. Our Internet banking service, “Netteller” is very popular and the
number of customers actively using the service is increasing. It has allowed
us
to offer bill paying, cash management and also direct deposit and payroll
services to our business customers. “Reward Checking,” which was introduced in
January 2007, is continuing to increase in popularity as none of the competitors
in our market offer any type of similar account. The product offers
higher-than-market interest rates, which can be earned by customers if they
meet
specific transaction-based criteria. Our criteria promote the use of debit
cards
and our internet-based services and technology which in turn will decrease
non-interest expenses associated with processing paper checks. We also provide
investment brokerage services to our customers through PrimeVest Financial
Services. The service continues to grow and is also providing non-interest
income. We plan to revisit the viability of implementing an internal trust
department during the fourth quarter of fiscal year 2008.
We
continue to maintain a strong presence in the community and are pleased to
be
the only independent community bank in Robinson, Palestine and Oblong, Illinois.
To visit First Robinson Savings Bank on the web go to www.frsb.net.
Asset
Quality
Delinquencies
.
When a
borrower fails to make a required payment on a loan, the Bank attempts to cause
the delinquency to be cured by contacting the borrower. In the case of loans
secured by real estate, reminder notices are sent to borrowers. If payment
is
late, appropriate late charges are assessed and a notice of late charges is
sent
to the borrower. If the loan is in excess of 60 days delinquent, the loan will
generally be referred to the Bank’s legal counsel for collection.
FIRST
ROBINSON FINANCIAL CORPORATION
Management’s
Discussion and Analysis or Plan of Operation
When
a
loan becomes more than 90 days delinquent and collection of principal and
interest is considered doubtful, or is otherwise impaired, the Bank will
generally place the loan on non-accrual status and previously accrued interest
income on the loan is charged against current income.Delinquent consumer loans
are handled in a similar manner as to those described above. The Bank’s
procedures for repossession and sale of consumer collateral are subject to
various requirements under applicable consumer protection laws.
The
following table sets forth the Bank’s loan delinquencies by type, by amount and
by percentage of type at December 31, 2007.
|
|
|
Loans
Delinquent For:
|
|
|
|
|
|
|
|
|
30-89
Days
(1)
|
|
90
Days and Over
(1)
|
|
Nonaccrual
|
|
Total
Delinquent Loans
|
|
|
|
|
Number
|
|
Amount
|
|
Percent
of
Loan Category
|
|
Number
|
|
Amount
|
|
Percent
of
Loan Category
|
|
Number
|
|
Amount
|
|
Percent of
Loan Category
|
|
Number
|
|
Amount
|
|
Percent
of
Loan Category
|
|
|
|
|
(Dollars
in thousands)
|
|
|
Real
Estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One-
to
four-family
|
|
|
4
|
|
$
|
93
|
|
|
0.23
|
%
|
|
—
|
|
|
|
|
|
|
|
|
5
|
|
$
|
127
|
|
|
0.33
|
%
|
|
9
|
|
$
|
220
|
|
|
0.56
|
%
|
|
Commercial
and
agricultural
real
estate
|
|
|
1
|
|
|
2
|
|
|
0.01
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
227
|
|
|
1.38
|
|
|
2
|
|
|
229
|
|
|
1.39
|
%
|
|
Consumer
and other loans
|
|
|
3
|
|
|
11
|
|
|
0.17
|
|
|
|
|
|
|
|
|
|
|
|
3
|
|
|
7
|
|
|
0.11
|
|
|
6
|
|
|
18
|
|
|
0.28
|
%
|
|
Commercial
business
and
agricultural
finance
|
|
|
2
|
|
|
31
|
|
|
0.27
|
|
|
|
|
|
|
|
|
|
|
|
2
|
|
|
66
|
|
|
0.56
|
|
|
4
|
|
|
97
|
|
|
0.83
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
10
|
|
$
|
137
|
|
|
0.17
|
%
|
|
|
|
|
|
|
|
|
|
|
11
|
|
$
|
427
|
|
|
0.53
|
%
|
|
21
|
|
$
|
564
|
|
|
0.70
|
%
|
|
(1)
|
Loans
are still accruing.
|
Non-Performing
Assets
.
The
table below sets forth the amounts and categories of non-performing assets
in
the Bank’s loan portfolio. Loans are placed on non-accrual status when the
collection of principal and/or interest become doubtful. Foreclosed assets
include assets acquired in settlement of loans.
|
|
|
December
31,
|
|
March
31,
|
|
December
31,
|
|
|
|
|
2007
|
|
2007
|
|
2006
|
|
|
Non-accruing
loans:
|
|
|
|
|
|
|
|
|
One-
to four-family
|
|
$
|
127
|
|
$
|
119
|
|
$
|
111
|
|
|
Commercial
and agricultural
real
estate
|
|
|
227
|
|
|
—
|
|
|
|
|
|
Consumer
and other loans
|
|
|
7
|
|
|
4
|
|
|
31
|
|
|
Commercial
business and agricultural finance
|
|
|
66
|
|
|
32
|
|
|
45
|
|
|
Total
non-performing assets
|
|
$
|
427
|
|
$
|
155
|
|
$
|
187
|
|
|
Total
as a percentage of total
assets
|
|
|
0.34
|
%
|
|
0.14
|
%
|
|
0.16
|
%
|
FIRST
ROBINSON FINANCIAL CORPORATION
Management’s
Discussion and Analysis or Plan of Operation
Gross
interest income which would have been recorded had the non-accruing loans been
current in accordance with their original terms amounted to approximately
$17,000 for the three months and $22,000 for the nine months ended December
31,
2007 and $4,000 for the three months and $12,000 for the nine months ended
December 31, 2006.
Classified
Assets
.
Federal
regulations provide for the classification of loans and other assets, such
as
debt and equity securities, considered by the Office of the Comptroller of
the
Currency (“OCC”) to be of lesser quality, as “substandard,” “doubtful” or
“loss.” An asset is considered “substandard” if it is inadequately protected by
the current net worth and paying capacity of the obligor or the collateral
pledged, if any. “Substandard” assets include those characterized by the
“distinct possibility” that the insured institution will sustain “some loss” if
the deficiencies are not corrected. Assets classified as “doubtful” have all of
the weaknesses inherent in those classified “substandard” with the added
characteristic that the weaknesses present make “collection or liquidation in
full” on the basis of currently existing facts, conditions and values, “highly
questionable and improbable.” Assets classified as “loss” are those considered
“uncollectible” and of such little value that their continuance as assets
without the establishment of a specific loss reserve is not
warranted.
When
an
insured institution classifies problem assets as either substandard or doubtful,
it may establish general allowances for losses in an amount deemed prudent
by
management. General allowances represent loss allowances which have been
established to recognize the inherent risk associated with lending activities,
but which, unlike specific allowances, have not been allocated to particular
problem assets. When an insured institution classifies problem assets as “loss,”
it is required either to establish a specific allowance for losses equal to
100%
of that portion of the asset so classified or to charge-off such amount. An
institution’s determination as to the classification of its assets and the
amount of its valuation allowances is subject to review by the regulatory
authorities, who may order the establishment of additional general or specific
loss allowances.
In
connection with the filing of its periodic reports with the OCC and in
accordance with its classification of assets policy, the Bank regularly reviews
loans in its portfolio to determine whether such assets require classification
in accordance with applicable regulations. On the basis of management’s review
of its assets, at December 31, 2007, the Bank had classified a total of $708,000
of its assets as substandard and $146,000 as doubtful. At December 31, 2007,
total classified assets comprised $854,000, or 7.6% of the Bank’s capital, and
0.7% of the Bank’s total assets.
Other
Loans of Concern
.
As of
December 31, 2007, there were $3.9 million in loans identified, but not
classified, by the Bank with respect to which known information about the
possible credit problems of the borrowers or the cash flows of the business
have
caused management to have some doubts as to the ability of the borrowers to
comply with present loan repayment terms and which may result in the future
inclusion of such items in the non-performing asset categories.
Allowance
for Loan Losses
.
The
allowance for loan losses is maintained at a level which, in management’s
judgment, is adequate to absorb credit losses inherent in the loan portfolio.
The amount of the allowance is based on management’s evaluation of the
collectibility of the loan portfolio, including the nature of the portfolio,
credit concentrations, trends in historical loss experience, specific impaired
loans and economic conditions. Allowances for impaired loans are generally
determined based on collateral values. The allowance is increased by a provision
for loan losses, which is charged to expense and reduced by charge-offs, net
of
recoveries.
Real
estate properties acquired through foreclosure are recorded at the fair market
value minus 20% of the fair market value if the property is appraised at $50,000
or less. If the property is appraised at greater than $50,000, then the property
is recorded at the fair market value less 10% of the market fair value. If
fair
value at the date of foreclosure is lower than the balance of the related loan,
the difference will be charged-off to the allowance for loan losses at the
time
of transfer. Valuations are periodically updated by management and if the value
declines, a specific provision for losses on such property is established by
a
charge to operations. At December 31, 2007, the Bank had no real estate
properties acquired through foreclosure.
Although
management believes that it uses the best information available to determine
the
allowance, unforeseen market conditions could result in adjustments and net
earnings could be significantly affected if circumstances differ substantially
from the assumptions used in making the final determination. Future additions
to
the Bank’s allowance for loan losses will be the result of periodic loan,
property and collateral reviews and thus cannot be predicted in advance. In
addition, federal regulatory agencies, as an integral part of the examination
process, periodically review the Bank’s allowance for loan losses. Such agencies
may require the Bank to increase the allowance based upon their judgment of
the
information available to them at the time of their examination. At December
31,
2007, the Bank had a total allowance for loan losses of $760,000, representing
0.95% of the Bank’s loans, net. At March 31, 2007, the Bank’s total allowance
for loan losses to the Bank’s loans, net was at 1.03%.
FIRST
ROBINSON FINANCIAL CORPORATION
Management’s
Discussion and Analysis or Plan of Operation
The
distribution of the Bank’s allowance for losses on loans at the dates indicated
is summarized as follows:
|
|
|
December
31, 2007
|
|
March
31, 2007
|
|
|
|
|
Amount of
Loan Loss
Allowance
|
|
Loan
Amounts by
Category
|
|
Percent of
Loans in Each
Category to
Total Loans
|
|
Amount of
Loan Loss
Allowance
|
|
Loan
Amounts by
Category
|
|
Percent of
Loans in
Each
Category to
Total Loans
|
|
|
|
|
|
(Dollars
in thousands)
|
|
|
One-
to four-family
|
|
$
|
88
|
|
$
|
39,597
|
|
|
48.88
|
%
|
$
|
101
|
|
$
|
36,214
|
|
|
49.84
|
%
|
|
Multi-family
|
|
|
—
|
|
|
625
|
|
|
0.77
|
|
|
|
|
|
591
|
|
|
0.81
|
|
|
Commercial
and
agricultural
real estate
|
|
|
395
|
|
|
16,516
|
|
|
20.39
|
|
|
346
|
|
|
14,815
|
|
|
20.39
|
|
|
Construction
or
development
|
|
|
12
|
|
|
2,656
|
|
|
3.28
|
|
|
8
|
|
|
2,556
|
|
|
3.52
|
|
|
Consumer
and other loans
|
|
|
38
|
|
|
6,372
|
|
|
7.86
|
|
|
41
|
|
|
6,168
|
|
|
8.49
|
|
|
State
and Municipal
Governments
|
|
|
|
|
|
3,536
|
|
|
4.37
|
|
|
|
|
|
3,265
|
|
|
4.50
|
|
|
Commercial
business
and
agricultural
finance
|
|
|
227
|
|
|
11,706
|
|
|
14.45
|
|
|
233
|
|
|
9,048
|
|
|
12.45
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
Loans
|
|
|
|
|
|
81,008
|
|
|
100.00
|
%
|
|
|
|
|
72,657
|
|
|
100.00
|
%
|
|
Undisbursed
portion of loans
|
|
|
|
|
|
(673
|
)
|
|
|
|
|
|
|
|
(858
|
)
|
|
|
|
|
Unallocated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
760
|
|
$
|
80,335
|
|
|
|
|
$
|
729
|
|
$
|
71,799
|
|
|
|
|
The
following table sets forth an analysis of the Bank’s allowance for loan
losses.
|
|
|
Three Months Ended
December 31,
|
|
Nine Months Ended
December 31,
|
|
|
|
|
2007
|
|
2006
|
|
2007
|
|
2006
|
|
|
|
|
(Dollars
in thousands)
|
|
|
Balance
at beginning of period
|
|
$
|
732
|
|
$
|
770
|
|
$
|
729
|
|
$
|
753
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charge-offs:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One-
to four-family
|
|
|
—
|
|
|
28
|
|
|
4
|
|
|
35
|
|
|
Consumer
and other loans
|
|
|
10
|
|
|
8
|
|
|
22
|
|
|
23
|
|
|
Total
charge-offs
|
|
|
10
|
|
|
36
|
|
|
26
|
|
|
58
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recoveries:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One-
to four-family
|
|
|
|
|
|
|
|
|
|
|
|
3
|
|
|
Consumer
and other loans
|
|
|
5
|
|
|
6
|
|
|
13
|
|
|
12
|
|
|
Total
recoveries
|
|
|
5
|
|
|
6
|
|
|
13
|
|
|
15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
charge-offs
|
|
|
5
|
|
|
30
|
|
|
13
|
|
|
43
|
|
|
Additions
charged to operations
|
|
|
30
|
|
|
15
|
|
|
60
|
|
|
45
|
|
|
Transfer
for off-balance sheet credit exposure
|
|
|
3
|
|
|
|
|
|
(16
|
)
|
|
|
|
|
Balance
at end of period
|
|
$
|
760
|
|
$
|
755
|
|
$
|
760
|
|
$
|
755
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratio
of net charge-offs during the period to
average
loans outstanding during the period
|
|
|
0.01
|
%
|
|
0.04
|
%
|
|
0.02
|
%
|
|
0.06
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratio
of net charge-offs during the period to
average
non-performing assets
|
|
|
1.28
|
%
|
|
14.01
|
%
|
|
4.68
|
%
|
|
13.22
|
%
|
FIRST
ROBINSON FINANCIAL CORPORATION
Management’s
Discussion and Analysis or Plan of Operation
Results
of Operations
Net
Interest Income
For
the
three-month period ended December 31, 2007, net interest income totaled
$1,037,000, a decrease of 3.4%, or $37,000, compared to the same period of
2006.
The decrease in net interest income is primarily due to an increase of $7.7
million in average interest bearing liabilities compared to a $5.4 million
increase in interest earning assets. For the nine-month period ended December
31, 2007, net interest income totaled $3,123,000, compared to $3,161,000 in
net
interest income for the nine-month period ended December 31, 2006. This $38,000,
or 1.2%, decrease is the result of a 39 basis point increase in the cost of
funds on interest bearing liabilities compared to only a 9 basis point increase
on interest earning assets when comparing the nine-month period ending December
31, 2007 to the same period in 2006.
During
the December 2007 quarter, total interest and dividend income increased $72,000,
or 4.0%, to $1.9 million, versus $1.8 million during the same quarter of 2006
due to an increase in interest bearing assets which was offset by a decrease
in
yields. For the three-month period ended December 31, 2007, the yield on
average-earning assets decreased 7 basis points to 6.56% from a yield of 6.63%
for the three-month period ended December 31, 2006. During the first nine months
of fiscal 2008, total interest and dividend income increased by $382,000, or
7.5%, to $5.5 million, versus $5.1 million during the first nine months of
fiscal 2007. The yield on average earning assets increased by 9 basis points
to
6.58% for the nine-month period ended December 31, 2007 versus 6.49% in the
same
period of 2006.
The
average daily loan balances for the quarter ended December 31, 2007 increased
$6.6 million, or 9.3%, to $77.8 million, versus $71.2 million for the same
period of 2006. During the same period, loan interest income increased by
$88,000, or 6.5%, to $1,448,000 versus $1,360,000 during the quarter ended
December 31, 2006. The yield on loans decreased 19 basis points to 7.45% from
7.64% for the December 31, 2007 quarter compared to the December 2006 quarter.
The average daily loan balances for the nine-month period ending December 31,
2007 increased 10.3% to $75.3 million, versus the average daily loan balances
of
$68.3 million for the same period of 2006. This increase in average loan
balances contributed to an increase in loan interest income by $391,000, or
10.2%, to $4.2 million. The yield on loans, for the nine-months ended December
31, 2007, declined by 1 basis point to 7.51% from 7.52% in the same nine-month
period of 2006.
The
average daily securities balances, the Company’s interest-earning demand
deposits and the federal funds sold balances for the third quarter of fiscal
year 2008 decreased $1.2 million, or 3.3%, to $34.9 million, versus $36.1
million for the same period of fiscal year 2007. During the same period, income
from these sources decreased by $11,000, or 2.6%, to $412,000 versus $423,000
during the third quarter of fiscal year 2007. The average daily balances of
securities, interest-earning demand deposits and federal funds sold for the
first nine months of fiscal 2008 decreased $680,000, or 1.9%, to $35.1 million,
versus $35.8 million for the same period of fiscal year 2007. During the same
periods, income from securities, interest-earning demand deposits and federal
funds sold decreased by $3,000, or 0.2%, to $1,233,000 versus $1,236,000 during
the nine months of fiscal 2007.
Dividends
received from Federal Home Loan Bank (“FHLB”) and Federal Reserve Bank (“FRB”)
stocks decreased by $5,000, or 71.4%, when comparing the December 2007 quarter
to the December 2006 quarter. The rate of return on the FRB stock remained
steady at 6.0% for each quarter when comparing December 2007 to 2006. For the
December 2007 quarter no dividends were earned on the FHLB stock as the FHLB
Chicago did not pay any dividends. On September 26, 2007, the Company received
a
letter from the FHLB of Chicago regarding a Consent Cease and Desist Order
they
were issued from their regulator, the Federal Housing Finance Board. The Order
prohibits the FHLB of Chicago from repurchasing or redeeming any of its capital
stock without prior approval from their regulator. The Order also proposes
that
the declaration of a dividend by the FHLB of Chicago on its capital stock be
subject to prior written approval. The Company can make no prediction as to
if
or when the FHLB will resume dividend payments. For the nine months ended
December 2007, dividends received from FHLB and FRB stock also decreased. Income
from dividends decreased by $6,000, or 27.3% from $22,000 as of December 31,
2006 to $16,000 as of December 31, 2007. The decrease is a result of no
dividends being paid by the FHLB Chicago during the quarter ending December
31,
2007.
Total
interest expense increased $109,000, or 15.2%, to $825,000 for the three-month
period ended December 31, 2007, from $716,000 for the comparable period in
2006.
The increase resulted from a 20 basis point increase in the Company's daily
cost
of funds to 3.37%, versus 3.17% for the same period of 2006 and the increase
of
$7.7 million in the average balance of interest bearing liabilities from $90.3
million at December 31, 2006 to $98.0 million at December 31, 2007. Total
interest expense also increased $420,000, or 21.6%, to $2.4 million for the
nine-month period ended December 31, 2007, from $1.9 million for the comparable
period in 2006. The increase was primarily the result of a $6.3 million, or
7.2%, increase in the Company's average balance in interest bearing liabilities
to $93.8 million at December 31, 2007 from $87.5 million as of December 31,
2006
and a 39 basis point increase in the daily cost of funds to 3.36%, versus 2.97%
for the same period of 2006.
FIRST
ROBINSON FINANCIAL CORPORATION
Management’s
Discussion and Analysis or Plan of Operation
On
an
average daily basis, total interest-bearing deposits increased $8.8 million,
or
12.0%, to $82.4 million for the three-month period ended December 31, 2007,
versus $73.6 million in the same period in 2006. The average cost of funds
increased by 46 basis points to 3.34% for the December 2007 quarter versus
the
December 2006 quarter at 2.88%. The average daily balance of interest-bearing
deposits for the nine-month period ended December 2007 also increased by $5.9
million, or 8.0%, to $79.4 million from $73.5 million. When comparing the
average cost of funds for the December 2007 nine-month period to the same period
ending December 31, 2006 there was an increase of 59 basis points from 2.69%
to
3.28%.
For
the
three-months ended December 31, 2007 versus the same period of 2006, the average
daily balance of short-term borrowings and federal funds purchased decreased
$1.2 million, or 7.1%, from $16.8 million to $15.6 million. In addition, the
average cost of funds decreased for the December 2007 quarter by 97 basis points
from 4.47% to 3.50%. The average daily balance of short-term borrowings and
federal funds purchased for the nine-months ended December 31, 2007 increased
by
$410,000, or 2.9%, to $14.4 million from $14.0 million for the nine-month period
ending December 31, 2006 while the average cost of funds decreased by 60 basis
points to 3.80% from 4.40% when comparing the nine-months of fiscal year 2008
to
fiscal year 2007.
Provision
for Loan Losses
The
provision for loan losses for the quarter ended December 31, 2007 was $30,000
compared to $15,000 for the quarter ended December 31, 2006. The loan loss
provision for the nine-month period ending December 30, 2007 was $60,000
compared to $45,000 for the prior comparable period, representing a 33.3%
increase. The provision for all periods reflects management's analysis of the
Company's loan portfolio based on the information which was available to the
Company. Management meets on a quarterly basis to review the adequacy of the
allowance for loan losses based on Company guidelines. Classified loans are
reviewed by the loan officers to arrive at specific reserve levels for those
loans. Once the specific reserve for each loan is calculated, management
calculates general reserves for each loan category based on a combination of
loss history adjusted for current national and local economic conditions, trends
in delinquencies and charge-offs, trends in volume and term of loans, changes
in
underwriting standards, and industry conditions. While the Company cannot assure
that future chargeoffs and/or provisions will not be necessary, the Company's
management believes that, as of December 31, 2007, its allowance for loan losses
was adequate.
FIRST
ROBINSON FINANCIAL CORPORATION
Management’s
Discussion and Analysis or Plan of Operation
Non-interest
Income
Non-interest
income categories for the three and nine-month periods ended December 31, 2007
and 2006 are shown in the following table:
|
|
|
Three Months Ended
|
|
|
|
|
December 31,
|
|
|
|
|
2007
|
|
200
6
|
|
% Change
|
|
|
|
|
(In
thousands)
|
|
|
Non-interest
income:
|
|
|
|
|
|
|
|
|
|
|
|
Charges
and fees on deposit accounts
|
|
$
|
226
|
|
$
|
221
|
|
|
2.3
|
%
|
|
Charges
and other fees on loans
|
|
|
34
|
|
|
7
|
|
|
385.7
|
|
|
Net
gain on sale of loans
|
|
|
37
|
|
|
26
|
|
|
42.3
|
|
|
Other
|
|
|
97
|
|
|
72
|
|
|
34.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Non-Interest Income
|
|
$
|
394
|
|
$
|
326
|
|
|
20.9
|
%
|
|
|
|
Nine Months Ended
|
|
|
|
|
December 31,
|
|
|
|
|
|
2007
|
|
|
2006
|
|
|
% Change
|
|
|
|
|
(In thousands)
|
|
|
Non-interest
income:
|
|
|
|
|
|
|
|
|
|
|
|
Charges
and fees on deposit accounts
|
|
$
|
688
|
|
$
|
640
|
|
|
7.5
|
%
|
|
Charges
and other fees on loans
|
|
|
91
|
|
|
20
|
|
|
355.0
|
|
|
Net
gain on sale of loans
|
|
|
92
|
|
|
73
|
|
|
26.0
|
|
|
Net
gain on sale of foreclosed property
|
|
|
3
|
|
|
—
|
|
|
—
|
|
|
Other
|
|
|
298
|
|
|
214
|
|
|
39.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Non-Interest Income
|
|
$
|
1,172
|
|
$
|
947
|
|
|
23.8
|
%
|
Charges
and fees on deposit accounts increased $5,000 for the three-month and $48,000
for the nine-month periods ended December 31, 2007 versus the same periods
in
2006. This increase is primarily from overdraft and insufficient funds fees.
Charges and other fees on loans increased in both the three and nine-month
periods ending December 31, 2007, by $27,000 and $71,000, respectivley, when
compared to the same periods in 2006 due to an increase in the commissions
received on the sale of credit life and accident and health insurance.
The
increase of $11,000 for the quarter ended December 31, 2007 and $19,000 for
the
nine-months ended December 31, 2007, in gains on the sale of loans, resulted
primarily from an increase in the amount of loans sold when comparing 2007
to
2006. For the three-months ended December 31, 2007, the Company sold $2.3
million in mortgage loans versus $1.3 million in the comparable period of 2006.
The Company sold $2.4 million, or 68.3%, more in loans for the nine-month period
ending Decmeber 31, 2007 when compared to the same period in 2006.
Other
income consists of normal recurring fee income such as commissions from
PrimeVest Investment Services, our investment brokerage service, the cash value
of life insurance, ATM/Debit card interchange income and fees, and safe deposit
box rent, as well as other income that management classifies as non-recurring.
Other income increased $25,000 and $84,000, respectively, in the three and
nine-month periods ended December 31, 2007 versus the same period of 2006.
The
primary driver behind the increases in the three and nine-month periods can
be
attributed to the increase in commission received from the sale of annuities
and
other investments by our PrimeVest bokerage service.
FIRST
ROBINSON FINANCIAL CORPORATION
Management’s
Discussion and Analysis or Plan of Operation
Non-interest
Expense
Non-interest
expense categories for the three and nine-month periods ended December 31,
2007,
and 2006 are shown in the following table:
|
|
|
Three Months Ended
|
|
|
|
|
December 31,
|
|
|
|
|
2007
|
|
2006
|
|
% Change
|
|
|
|
|
(In thousands)
|
|
|
Non-interest
expense:
|
|
|
|
|
|
|
|
|
Compensation
and employee benefits
|
|
$
|
537
|
|
$
|
529
|
|
|
1.5
|
%
|
|
Occupancy
and equipment
|
|
|
157
|
|
|
138
|
|
|
13.8
|
|
|
Data
processing
|
|
|
59
|
|
|
64
|
|
|
(7.8
|
)
|
|
Audit,
legal and other professional
|
|
|
51
|
|
|
37
|
|
|
37.8
|
|
|
Advertising
|
|
|
26
|
|
|
32
|
|
|
(18.8
|
)
|
|
Telephone
and postage
|
|
|
24
|
|
|
23
|
|
|
4.3
|
|
|
Other
|
|
|
153
|
|
|
126
|
|
|
21.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Non-Interest Expense
|
|
$
|
1,007
|
|
$
|
949
|
|
|
6.1
|
%
|
|
|
|
Nine Months Ended
|
|
|
|
|
December 31,
|
|
|
|
|
2007
|
|
2006
|
|
% Change
|
|
|
|
|
(In thousands)
|
|
|
Non-interest
expense:
|
|
|
|
|
|
|
|
|
Compensation
and employee benefits
|
|
$
|
1,637
|
|
$
|
1,474
|
|
|
11.1
|
%
|
|
Occupancy
and equipment
|
|
|
461
|
|
|
404
|
|
|
14.1
|
|
|
Foreclosed
property expense
|
|
|
2
|
|
|
1
|
|
|
100.0
|
|
|
Data
processing
|
|
|
161
|
|
|
161
|
|
|
—
|
|
|
Audit,
legal and other professional
|
|
|
141
|
|
|
106
|
|
|
33.0
|
|
|
Advertising
|
|
|
89
|
|
|
91
|
|
|
(2.2
|
)
|
|
Telephone
and postage
|
|
|
71
|
|
|
69
|
|
|
2.9
|
|
|
Net
loss on sale of foreclosed property
|
|
|
—
|
|
|
2
|
|
|
(100.0
|
)
|
|
Net
loss on disposal of fixed assets
|
|
|
4
|
|
|
—
|
|
|
—
|
|
|
Other
|
|
|
450
|
|
|
394
|
|
|
14.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Non-Interest Expense
|
|
$
|
3,016
|
|
$
|
2,702
|
|
|
11.6
|
%
|
Compensation
and employee benefits increased by $8,000 when comparing the December 2007
and
2006 quarters primarily due to a $49,000 increase in salaries and a $34,000
increase in contributions to the 401(k) plan offset by a $31,000 decrease
relating to the Employee Stock Ownership Plan (“ESOP”), a $31,000 decrease in
options exercised and a $20,000 decrease in expense relating to the director
retirement plan. When comparing the nine months ended December 31, 2007 to
the
same period in 2006, there was a $163,000 increase in compensation and employee
benefits. The largest contributing factors were a $124,000, or 12.0%, increase
in salaries, a $27,000 increase in expense related to options exercised, and
a
$100,000 increase in contributions to the 401(k) plan. These increases are
offset, in part, by a $99,000 decrease in expense related to the ESOP. As all
shares are now allocated, the expense related to the ESOP should be minimal
in
the future. The increase in salaries can be attributed to an increase in
miscellaneous raises and a 35% increase in the base pay of the PrimeVest
representative.
FIRST
ROBINSON FINANCIAL CORPORATION
Management’s
Discussion and Analysis or Plan of Operation
Occupancy
and equipment expense increased by $19,000 for the three-month period ending
December 31, 2007 compared to December 31, 2006 and increased by $57,000 when
comparing the nine-month periods ending December 31, 2007 to December 31,
2006.
The
largest contributing factor to the increase in occupancy and equipment expense
is an increase in depreciation expense of $6,000 for the three-month period
and
$28,000 for the nine-month period.
Audit,
legal and other professional fees increased primarily due to an increase in
audit expense of $14,000 for the three-month period and $37,000 for the
nine-month period. The previous three year engagement with the auditors expired
and a new engagement letter was negotiated with a 28.2% annual increase plus
charges for travel and other items not covered under the engagement.
Other
expense includes miscellaneous operating expenses such as office supplies,
ATM/Debit card interchange fees, check processing fees, loan expenses, federal
deposit insurance premiums and assessments by the bank regulators among others.
When comparing the December 31, 2007 quarter to the December 31, 2006 quarter,
the increase of $27,000 in other expenses can be attributed, in part, to
increases in expenses related to check processing costs, business entertainment
expense and expenses associated with the new checking program, Reward Checking.
The increase of $56,000 in other expenses in the nine-month period ending
December 31, 2007 versus the same period in 2006 is, in part, the result of
increases in expenses associated with the new checking program, Reward Checking,
check processing costs, bounce protection program expenses and business
entertainment expense.
Income
Tax Expense
Income
tax expense decreased $11,000, or 7.6%, for the three-month ending December
31,
2007, compared to the same period in 2006. Income tax expense for the nine-moth
period decreased $62,000, or 13.6%, compared to the same period of 2006. Both
decreases were attributed in part to decreased profitability. The combined
state
and federal income tax expense as a percentage of income before income tax
expense increased to 33.8% during the three-month period of 2007 compared to
33.0% during the same period in 2006. It decreased to 32.2% for the nine-months
ended December 31, 2007 compared to 33.4% for the nine-month period ending
December 31, 2006.
Financial
Condition
Total
assets of the Company increased by $15.1 million, or 13.5%, to $127.4 million
at
December 31, 2007 from $112.3 million at March 31, 2007. The increase in assets
was primarily due to an increase of $8.5 million, or 12.0%, in loans, net,
and
an increase of $8.4 million, or 208.1%, in cash and cash equivalents offset,
in
part, by a $1.6 million, or 5.3%, decrease in available for sale
securities.
The
total
increase in cash and cash equivalents was derived substantially from federal
funds sold increasing by $6.7 million, or 600.3%, to $7.8 million at December
31, 2007 from $1.1 million at March 31, 2007. This increase was primarily funded
from increases in deposits and other borrowings.
Available-for-sale
investment securities amounted to $29.5 million at December 31, 2007 compared
to
$31.1 million at March 31, 2007, a $1.6 million decrease. The decrease resulted
from $3.8 million in repayments on mortgage-backed securities and the calling
of
$300,000 in municipals bonds partially offset by the purchase of $2.1 million
in
mortgage-backed securities, amortization of $31,000 of premiums and discounts
on
investments, and the $309,000 increase in the market valuation of the
available-for-sale portfolio. The investment portfolio is managed to limit
the
Company's exposure to risk by investing primarily in mortgage-backed securities
and other securities which are either directly or indirectly backed by the
federal government or a local municipal government.
The
Company's net loan portfolio increased by $8.5 million to $79.6 million at
December 31, 2007 from $71.1 million at March 31, 2007. Gross loans increased
by
$8.4 million while undisbursed loan proceeds of closed–end lines of credit
decreased by $185,000 and the allowance for loan losses increased by $31,000.
Balances in all catagories of loans increased. Loans on one to four-family
real
estate increased by $3.4 million, or 9.3%; commercial business and agricultural
finance loans increased $2.7 million, or 29.4%; commercial nonresidential real
estate and farmland loans increased $1.7 million, or 11.5%; consumer and other
loans increased $204,000, or 3.3%; construction and development loans increased
$100,000, or 4.0%; loans to state and municpal governments increased $271,000,
or 8.3%, and loans on multi-family properties increased $34,000, or 5.8%.
FIRST
ROBINSON FINANCIAL CORPORATION
Management’s
Discussion and Analysis or Plan of Operation
At
December 31, 2007 the allowance for loan losses was $760,000, or 0.95%, of
the
net loan portfolio, which increased $31,000 from the allowance for loan losses
at March 31, 2007 at $729,000, or 1.03%, of the net loan portfolio. During
the
first nine-months of fiscal 2008, the Company charged off $26,000 of loan
losses, $22,000 of which were in consumer and other loans, and $4,000 pertained
to one loan secured by a 1-4 family residential property. The chargeoffs of
$22,000 were partially offset by $13,000 in recoveries, all in consumer and
other loans. Management reviews the adequacy of the allowance for loan losses
quarterly, and believes that its allowance is adequate; however, the Company
cannot assure that future chargeoffs and/or provisions will not be necessary.
See “Asset Quality” for further information on delinquencies.
The
Company had no real estate properties held for sale as of December 31, 2007
nor
March 31, 2007. Foreclosed assets are carried at lower of cost or net realizable
value.
Total
deposits increased by $9.3 million, or 10.7%, to $96.0 million at December
31,
2007 from $86.8 million at March 31, 2007. The increase in total deposits was
due to an increase of $5.5 million in savings, NOW, and money market accounts,
an increase of $4.7 million in certificates of deposit offset by a decrease
of
$1.0 million in non-interest bearing demand deposits. The growth in certificates
of deposit can be linked to two new types of certificates being offered, one
for
27 months and one for 54 months. The customer has one opportunity to adjust
the
rate being paid on their certificate during the term of the certificate to
the
current rate being offered. The increase in savings, NOW, and money markets
can
be primarily attributed to the popularity of the Company’s new checking account
product “Reward Checking”. See “Business Strategy” for further information on
“Reward Checking”.
Other
borrowings consisting entirely of repurchase agreements, increased $6.1 million,
or 50.8% from $12.1 million at March 31, 2007 to $18.2 million at December
31,
2007. The obligations are secured by mortgage-backed securities and US
Government agency obligations held in safekeeping at Independent Bankers Bank
in
Springfield, Illinois. At December 31, 2007, the average rate on the repurchase
agreements was 3.14% compared to 4.34% at March 31, 2007. The rate on
approximately $16.6 million of the repurchase agreements reprice daily. These
agreements mature periodically within 24 months.
Advances
from borrowers for taxes and insurance decreased by $48,000 from $129,000 at
March 31, 2007 to $81,000 at December 31, 2007. Accrued income taxes payable
increased $54,000. Accrued interest payable increased by $36,000 due to the
rise
in the outstanding balances of deposit accounts.
Stockholders'
equity at December 31, 2007 was $11.6 million compared to $11.9 million at
March
31, 2007, a decrease of $332,000, or 2.8%. Factors relating to the reduction
in
stockholders’ equity are the repurchase of shares of First Robinson Financial
stock in the amount of $1.2 million offset, by the issuance of $68,000 in shares
due to the exercise of stock options. These decreases were offset, in part,
by
the increase of $510,000 in retained earnings relating to the addition of
$826,000 in net income, offset by $316,000 in dividends declared and paid,
an
increase in additional paid-in-capital of $62,000 relating to the options
exercised during the period and the increase of $193,000 in accumulated other
comprehensive income due to the increase in the fair value of securities
available for sale.
Off-Balance
Sheet Arrangements
The
Company has entered into performance standby and financial standby letters
of
credit with various local commercial businesses in the aggregate amount of
$356,000. The letters of credit are collateralized and underwritten, as
currently required by loan policy, in the same manner as any commercial loan.
The advancement of any funds on these letters of credit is not
anticipated.
Liquidity
and Capital Resources
The
Company’s 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.
FIRST
ROBINSON FINANCIAL CORPORATION
Management’s
Discussion and Analysis or Plan of Operation
Liquidity
resources are used principally to meet outstanding commitments on loans, to
fund
maturing certificates of deposit and deposit withdrawals and to meet operating
expenses. The Company anticipates no foreseeable problems in meeting current
loan commitments
.
At
December 31, 2007, outstanding commitments to extend credit, amounted to $14.1
million (including $7.2 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.
The
Company maintains a $26.0 million line of credit with the FHLB, which can be
accessed immediately. The Company regularly uses FHLB Letters of Credit as
security for public unit deposits. The available line of credit with the FHLB
is
reduced by the amount of these letters of credit. As of December 31, 2007,
$5.9
million in FHLB letters of credit were pledged. The available line of credit
with the FHLB is also reduced by $1.4 million for the credit enhancement reserve
established as a result of the participation in the FHLB Mortgage Partnership
Finance (“MPF”) program. The Company also maintains a $5.0 million revolving
line of credit and a $600,000 revolving line of credit with Independent Banker’s
Bank located in Springfield, Illinois. The Company has also established
borrowing capabilities at the discount window with the Federal Reserve Bank
of
St. Louis.
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.
The
Company and the Bank are subject to capital requirements of the federal bank
regulatory agencies which require 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. Both the Bank and the Company are
considered well-capitalized under federal regulations.
FIRST
ROBINSON FINANCIAL CORPORATION
Management’s
Discussion and Analysis or Plan of Operation
Regulatory
Capital
At
December 31, 2007, the Bank was in compliance with all of the aforementioned
capital requirements as summarized below:
|
|
|
December 31, 2007
|
|
|
|
|
(In
thousands)
|
|
|
Tier
I Capital:
|
|
|
|
|
Common
stockholders’ equity
|
|
$
|
11,274
|
|
|
Unrealized
loss (gain) on securities available for sale
|
|
|
6
|
|
|
Less
disallowed intangible assets
|
|
|
(18
|
)
|
|
|
|
|
|
|
|
Total
Tier I Capital
|
|
|
11,262
|
|
|
|
|
|
|
|
|
Tier
II Capital:
|
|
|
|
|
|
Total
Tier I Capital
|
|
|
11,262
|
|
|
Qualifying
allowance for loan losses and off-balance sheet credit
exposure
|
|
|
776
|
|
|
|
|
|
|
|
|
Total
Risk-Based Capital
|
|
|
12,038
|
|
|
|
|
|
|
|
|
Risk-weighted
assets
|
|
|
76,566
|
|
|
Quarter
average assets
|
|
|
121,999
|
|
|
|
|
|
|
|
|
|
|
|
|
To be Well Capitalized
|
|
|
|
|
|
|
|
|
|
|
|
|
Under the Prompt
|
|
|
|
|
|
|
|
|
For Capital
|
|
Corrective Action
|
|
|
|
|
Actual
|
|
Adequacy Purposes
|
|
Provisions
|
|
|
|
|
Amount
|
|
Ratio
|
|
Amount
|
|
Ratio
|
|
Amount
|
|
Ratio
|
|
|
As
of December 31, 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Risk-Based Capital
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(to
Risk-Weighted Assets)
|
|
$
|
12,038
|
|
|
15.72
|
%
|
$
|
6,125
|
|
|
8.00
|
%
|
$
|
7,657
|
|
|
10.00
|
%
|
|
Tier
I Capital
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(to
Risk-Weighted Assets)
|
|
|
11,262
|
|
|
14.71
|
|
|
3,063
|
|
|
4.00
|
|
|
4,594
|
|
|
6.00
|
|
|
Tier
I Capital
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(to
Average Assets)
|
|
|
11,262
|
|
|
9.23
|
|
|
4,880
|
|
|
4.00
|
|
|
6,100
|
|
|
5.00
|
|
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 June 27, 1997. In the unlikely 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. 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.
FIRST
ROBINSON FINANCIAL CORPORATION
Item:
3
Controls
and Procedures
Any
control system, no matter how well designed and operated, can provide only
reasonable (not absolute) assurance that its objectives will be met.
Furthermore, no evaluation of controls can provide absolute assurance that
all
control issues and instances of fraud, if any, have been detected.
Disclosure
Controls and Procedures
The
Company’s management, with the participation of the Company’s Chief Executive
Officer and Chief Financial Officer, has evaluated the effectiveness of the
Company’s disclosure controls and procedures (as such term is defined in Rules
13a-15(e) and 15d-15(e) under the Exchange Act as of the end of the period
covered by this report. Based upon that evaluation, the Company’s Chief
Executive Officer and Chief Financial Officer have concluded that, as of
December 31, 2007, the Company’s disclosure controls and procedures were
effective to provide reasonable assurance that (i) the information required
to
be disclosed in this Report was recorded, processed, summarized and reported
within the time periods specified in the SEC’s rules and forms, and (ii)
information required to be disclosed by the Company in the reports that it
files
or submits under the Exchange Act is accumulated and communicated to Company’s
management, including its principal executive and principal financial officers,
or persons performing similar functions, as appropriate to allow timely
decisions regarding disclosure.
Internal
Control Over Financial Reporting
There
have not been any changes in the Company’s internal control over financial
reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the
Exchange Act) during the fiscal quarter to which this report relates that have
materially affected, or are reasonably likely to materially affect, the
Company’s internal control over financial reporting.
Section
404 of the Sarbanes-Oxley Act of 2002 requires that companies evaluate and
annually report on their systems of internal control over financial reporting.
The Company will begin the process of evaluating, documenting and testing their
system of internal control over financial reporting to provide the basis for
its
report that is anticipated, for the first time, will be a required part of
our
annual report on Form 10-KSB for the fiscal year ending March 31, 2008. Due
to
the ongoing evaluation and testing of our internal controls, there can be no
assurance that if any control deficiencies are identified they will be corrected
before the end of the 2008 fiscal year, or that there may not be significant
deficiencies or material weaknesses that would be required to be reported.
In
addition, the Company expects the evaluation process and any required
remediation, if applicable, to increase accounting, legal and other costs and
divert management resources from core business operations.