UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q
|
(Mark
One)
|
|
x
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES
|
|
|
EXCHANGE
ACT OF 1934
|
|
For
the quarterly period ended
|
June
30, 2008
|
OR
|
o
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES
|
|
|
EXCHANGE
ACT OF 1934
|
|
For
the transition period from
|
_____________________
to ________________________
|
Commission
File Number
029276
FIRST
ROBINSON FINANCIAL CORPORATION
(Exact
name of registrant as specified in its charter)
|
DELAWARE
|
36-4145294
|
|
(State
or other jurisdiction of
|
(I.R.S.
Employer
|
|
incorporation
or organization)
|
Identification
Number)
|
|
|
|
|
501
East Main Street, Robinson, Illinois
|
62454
|
|
(Address
of principal executive offices)
|
(Zip
Code)
|
|
|
|
|
Registrant’s
telephone number, including area code
|
(618)
544-8621
|
(Former
name, former address and former fiscal year, if changed since last
report)
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
o
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting
company. See the definitions of “large accelerated filer,”
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act.
|
Larger Accelerated Filer
|
|
Accelerated Filer
|
o
|
|
Non-Accelerated Filer
|
o
(Do not check if a smaller reporting company)
|
Smaller Reporting Company
|
x
|
|
Indicate
by check mark whether the registrant is a shell company (as defined
in
Rule 12b-2 of the Exchange Act.) Yes
o
No
x
|
|
|
|
The
number of shares outstanding of each of the issuer’s classes of common
stock, as of the latest practicable date: 453,530 shares of
common stock, par value $.01 per share, as of August 11,
2008.
|
FIRST
ROBINSON FINANCIAL CORPORATION
Index
to
Form 10-Q
|
|
PAGE
|
|
PART
1. FINANCIAL INFORMATION
|
|
|
|
|
|
|
Item
1.
|
Financial
Statements
|
|
|
|
|
|
|
|
Condensed
Consolidated Balance Sheets as of June 30, 2008 And March 31,
2008
|
3
|
|
|
|
|
|
|
Condensed
Consolidated Statements of Income for the Three-Month Periods Ended
June
30, 2008 and June 30, 2007
|
4
|
|
|
|
|
|
|
Condensed
Consolidated Statements of Changes in Stockholders’ Equity For the Three
Month Periods ended June 30, 2008 and June 30, 2007
|
5
|
|
|
|
|
|
|
Condensed
Consolidated Statements of Cash Flows for the Three-Month Periods
Ended
June 30, 2008 and June 30, 2007
|
6
|
|
|
|
|
|
|
Notes
to Condensed Consolidated Financial Statements
|
8
|
|
|
|
|
|
Item
2.
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
13
|
|
|
|
|
|
Item
3.
|
Quantitative
and Qualitative Disclosures about Market Risk
|
25
|
|
|
|
|
|
Item
4.
|
Controls
and Procedures
|
25
|
|
|
|
|
|
PART
II. OTHER INFORMATION
|
|
|
|
|
|
|
Item
1.
|
Legal
Proceedings
|
26
|
|
|
|
|
|
Item
1.A.
|
Risk
Factors
|
26
|
|
|
|
|
|
Item
2.
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
26
|
|
|
|
|
|
Item
3.
|
Defaults
Upon Senior Executives
|
26
|
|
|
|
|
|
Item
4.
|
Submission
of Matters to a Vote of Security Holders
|
26
|
|
|
|
|
|
Item
5.
|
Other
Information
|
26
|
|
|
|
|
|
Item
6.
|
Exhibits
|
26
|
|
|
|
|
|
SIGNATURES
|
27
|
|
|
|
|
CERTIFICATIONS
|
28
|
Item
1:
FIRST
ROBINSON FINANCIAL CORPORATION
CONDENSED
CONSOLIDATED BALANCE SHEETS
(In
thousands, except share data)
|
|
|
(Unaudited)
June 30, 2008
|
|
March 31, 2008
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
11,519
|
|
$
|
19,528
|
|
|
Available-for-sale
securities
|
|
|
43,013
|
|
|
31,535
|
|
|
Loans,
held for sale
|
|
|
—
|
|
|
101
|
|
|
Loans,
net of allowance for loan losses of $757 and $727 at June 30, 2008
and
March 31, 2008, respectively
|
|
|
74,980
|
|
|
76,145
|
|
|
Federal
Reserve and Federal Home Loan Bank stock
|
|
|
808
|
|
|
808
|
|
|
Premises
and equipment, net
|
|
|
2,843
|
|
|
2,851
|
|
|
Foreclosed
assets held for sale, net
|
|
|
90
|
|
|
16
|
|
|
Interest
receivable
|
|
|
781
|
|
|
758
|
|
|
Deferred
income taxes
|
|
|
326
|
|
|
—
|
|
|
Cash
surrender value of life insurance
|
|
|
1,412
|
|
|
1,396
|
|
|
Other
assets
|
|
|
741
|
|
|
671
|
|
|
|
|
|
|
|
|
|
|
|
Total
Assets
|
|
$
|
136,513
|
|
$
|
133,809
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
104,536
|
|
|
103,898
|
|
|
Other
borrowings
|
|
|
18,761
|
|
|
16,253
|
|
|
Advances
from borrowers for taxes and insurance
|
|
|
201
|
|
|
149
|
|
|
Accrued
income taxes
|
|
|
198
|
|
|
159
|
|
|
Deferred
income taxes
|
|
|
—
|
|
|
2
|
|
|
Interest
payable
|
|
|
236
|
|
|
262
|
|
|
Other
liabilities
|
|
|
1,100
|
|
|
1,210
|
|
|
Total
Liabilities
|
|
|
125,032
|
|
|
121,933
|
|
|
|
|
|
|
|
|
|
|
|
Commitments
and Contingencies
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’
Equity
|
|
|
|
|
|
|
|
|
Preferred
stock, $.01 par value; authorized 500,000 shares,
|
|
|
|
|
|
|
|
|
no
shares issued and outstanding
|
|
|
—
|
|
|
—
|
|
|
Common
stock, $ .01 par value; authorized 2,000,000 shares; 859,625 shares
issued; outstanding June 30, 2008– 459,730 shares; March 31, 2008 –
451,464 shares
|
|
|
9
|
|
|
9
|
|
|
Additional
paid-in capital: 7,231 shares
|
|
|
8,659
|
|
|
8,491
|
|
|
Retained
earnings
|
|
|
9,942
|
|
|
10,114
|
|
|
Accumulated
other comprehensive income (loss)
|
|
|
(267
|
)
|
|
247
|
|
|
Treasury
stock, at cost
|
|
|
|
|
|
|
|
|
Common:
June 30, 2008 – 392,664 shares; March 31, 2008 – 400,930
shares
|
|
|
(6,862
|
)
|
|
(6,985
|
)
|
|
|
|
|
|
|
|
|
|
|
Total
Stockholders’ Equity
|
|
|
11,481
|
|
|
11,876
|
|
|
|
|
|
|
|
|
|
|
|
Total
Liabilities and Stockholders’ Equity
|
|
$
|
136,513
|
|
$
|
133,809
|
|
See
Notes
to Condensed Consolidated Financial Statements.
FIRST
ROBINSON FINANCIAL CORPORATION
CONDENSED
CONSOLIDATED STATEMENTS OF INCOME
For
the
Three-Months Ended June 30, 2008 and 2007
(In
thousands, except per share data)
(Unaudited)
|
|
|
2008
|
|
2007
|
|
|
Interest
and Dividend Income:
|
|
|
|
|
|
|
|
|
Loans
|
|
$
|
1,313
|
|
$
|
1,372
|
|
|
Securities:
|
|
|
|
|
|
|
|
|
Taxable
|
|
|
409
|
|
|
338
|
|
|
Tax-exempt
|
|
|
21
|
|
|
24
|
|
|
Other
interest income
|
|
|
77
|
|
|
19
|
|
|
Dividends
on Federal Reserve Bank stock
|
|
|
3
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
|
Total
Interest and Dividend Income
|
|
|
1,823
|
|
|
1,760
|
|
|
Interest
Expense:
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
684
|
|
|
617
|
|
|
Other
borrowings
|
|
|
50
|
|
|
117
|
|
|
Total
Interest Expense
|
|
|
734
|
|
|
734
|
|
|
|
|
|
|
|
|
|
|
|
Net
Interest Income
|
|
|
1,089
|
|
|
1,026
|
|
|
|
|
|
|
|
|
|
|
|
Provision
for Loan Losses
|
|
|
30
|
|
|
15
|
|
|
|
|
|
|
|
|
|
|
|
Net
Interest Income After Provision for Loan Losses
|
|
|
1,059
|
|
|
1,011
|
|
|
|
|
|
|
|
|
|
|
|
Non-Interest
Income:
|
|
|
|
|
|
|
|
|
Charges
and fees on deposit accounts
|
|
|
217
|
|
|
217
|
|
|
Charges
and other fees on loans
|
|
|
44
|
|
|
38
|
|
|
Net
gain on sale of loans
|
|
|
42
|
|
|
31
|
|
|
Other
|
|
|
130
|
|
|
98
|
|
|
|
|
|
|
|
|
|
|
|
Total
Non-Interest Income
|
|
|
433
|
|
|
384
|
|
|
|
|
|
|
|
|
|
|
|
Non-Interest
Expense:
|
|
|
|
|
|
|
|
|
Compensation
and employee benefits
|
|
|
732
|
|
|
592
|
|
|
Occupancy
and equipment
|
|
|
175
|
|
|
150
|
|
|
Data
processing
|
|
|
59
|
|
|
51
|
|
|
Audit,
legal and other professional
|
|
|
50
|
|
|
38
|
|
|
Advertising
|
|
|
45
|
|
|
33
|
|
|
Telephone
and postage
|
|
|
25
|
|
|
25
|
|
|
Net
loss on sale of foreclosed assets
|
|
|
4
|
|
|
—
|
|
|
Other
|
|
|
143
|
|
|
123
|
|
|
|
|
|
|
|
|
|
|
|
Total
Non-Interest Expense
|
|
|
1,233
|
|
|
1,012
|
|
|
|
|
|
|
|
|
|
|
|
Income
before income taxes
|
|
|
259
|
|
|
383
|
|
|
|
|
|
|
|
|
|
|
|
Provision
for income taxes
|
|
|
85
|
|
|
110
|
|
|
|
|
|
|
|
|
|
|
|
Net
Income
|
|
$
|
174
|
|
$
|
273
|
|
|
|
|
|
|
|
|
|
|
|
Basic
Earnings Per Share
|
|
$
|
0.40
|
|
$
|
0.58
|
|
|
Diluted
Earnings Per Share
|
|
$
|
0.38
|
|
$
|
0.56
|
|
See
Notes
to Condensed Consolidated Financial Statements.
FIRST
ROBINSON FINANCIAL CORPORATION
CONDENSED
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
For
the
Three-Months Ended June 30, 2008 and 2007
(In
thousands, except per share data)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
Paid-in
|
|
Retained
|
|
Comprehensive
|
|
Treasury
|
|
|
|
Comprehensive
|
|
|
|
|
Shares
|
|
Amount
|
|
Capital
|
|
Earnings
|
|
Income (Loss)
|
|
Stock
|
|
Total
|
|
Loss
|
|
|
Balance,
April 1, 2007
|
|
|
484,908
|
|
$
|
9
|
|
$
|
8,406
|
|
$
|
9,459
|
|
$
|
(199
|
)
|
$
|
(5,785
|
)
|
$
|
11,890
|
|
|
|
|
|
Comprehensive
loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
|
|
|
|
|
|
|
|
|
|
273
|
|
|
|
|
|
|
|
|
273
|
|
|
273
|
|
|
Change
in unrealized (depreciation) on available-for-sale securities, net
of
taxes of $(176)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(293
|
)
|
|
|
|
|
(293
|
)
|
|
(293
|
)
|
|
Total
comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(20
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Treasury
shares purchased
|
|
|
(10,712
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(350
|
)
|
|
(350
|
)
|
|
|
|
|
Dividends
on common stock, $0.65 per share
|
|
|
|
|
|
|
|
|
|
|
|
(316
|
)
|
|
|
|
|
|
|
|
(316
|
)
|
|
|
|
|
Stock
options exercised
|
|
|
3,000
|
|
|
|
|
|
49
|
|
|
|
|
|
|
|
|
52
|
|
|
101
|
|
|
|
|
|
Incentive
compensation
|
|
|
|
|
|
|
|
|
(10
|
)
|
|
|
|
|
|
|
|
|
|
|
(10
|
)
|
|
|
|
|
Rounding
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
Balance,
June 30, 2007
|
|
|
477,196
|
|
$
|
9
|
|
$
|
8,445
|
|
$
|
9,417
|
|
$
|
(492
|
)
|
$
|
(6,083
|
)
|
$
|
11,296
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
April 1, 2008
|
|
|
451,464
|
|
$
|
9
|
|
$
|
8,491
|
|
$
|
10,114
|
|
$
|
247
|
|
$
|
(6,985
|
)
|
$
|
11,876
|
|
|
|
|
|
Comprehensive
loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
|
|
|
|
|
|
|
|
|
|
174
|
|
|
|
|
|
|
|
|
174
|
|
|
174
|
|
|
Change
in unrealized (depreciation) on available-for-sale securities, net
of
taxes of $(308)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(514
|
)
|
|
|
|
|
(514
|
)
|
|
(514
|
)
|
|
Total
comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(340
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Treasury
shares purchased
|
|
|
(1,186
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(41
|
)
|
|
(41
|
)
|
|
|
|
|
Dividends
on common stock, $0.75 per share
|
|
|
|
|
|
|
|
|
|
|
|
(346
|
)
|
|
|
|
|
|
|
|
(346
|
)
|
|
|
|
|
Stock
options exercised
|
|
|
9,452
|
|
|
|
|
|
168
|
|
|
|
|
|
|
|
|
164
|
|
|
332
|
|
|
|
|
|
Balance,
June 30, 2008
|
|
|
459,730
|
|
$
|
9
|
|
$
|
8,659
|
|
$
|
9,942
|
|
$
|
(267
|
)
|
$
|
(6,862
|
)
|
$
|
11,481
|
|
|
|
|
See
Notes
to Condensed Consolidated Financial Statements
FIRST
ROBINSON FINANCIAL CORPORATION
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
For
the
Three-Months Ended June 30, 2008 and 2007
(In
thousands)
(Unaudited)
|
|
|
2008
|
|
2007
|
|
|
Cash
flows from operating activities:
|
|
|
|
|
|
|
|
|
Net
income
|
|
$
|
174
|
|
$
|
273
|
|
|
Items
not requiring (providing) cash
|
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
74
|
|
|
72
|
|
|
Provision
for loan losses
|
|
|
30
|
|
|
15
|
|
|
Amortization
of premiums and discounts on securities
|
|
|
(16
|
)
|
|
(11
|
)
|
|
Amortization
of loan servicing rights
|
|
|
16
|
|
|
11
|
|
|
Compensation
related to the exercise of options
|
|
|
182
|
|
|
69
|
|
|
Deferred
income taxes
|
|
|
(20
|
)
|
|
3
|
|
|
Originations
of mortgage loans held for sale
|
|
|
(2,654
|
)
|
|
(2,009
|
)
|
|
Proceeds
from the sale of mortgage loans
|
|
|
2,797
|
|
|
1,941
|
|
|
Net
gain on loans sold
|
|
|
(42
|
)
|
|
(31
|
)
|
|
Net
loss on sale of foreclosed property
|
|
|
4
|
|
|
—
|
|
|
Changes
in:
|
|
|
|
|
|
|
|
|
Interest
receivable
|
|
|
(23
|
)
|
|
46
|
|
|
Cash
surrender value of life insurance
|
|
|
(16
|
)
|
|
(12
|
)
|
|
Other
assets
|
|
|
(95
|
)
|
|
(79
|
)
|
|
Accrued
income taxes
|
|
|
39
|
|
|
(43
|
)
|
|
Interest
payable
|
|
|
(26
|
)
|
|
3
|
|
|
Other
liabilities
|
|
|
(110
|
)
|
|
(51
|
)
|
|
|
|
|
|
|
|
|
|
|
Net
cash provided by operating activities
|
|
|
314
|
|
|
197
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities:
|
|
|
|
|
|
|
|
|
Purchase
of securities available for sale
|
|
|
(14,224
|
)
|
|
—
|
|
|
Repayment
of principal on mortgage-backed securities
|
|
|
1,940
|
|
|
1,285
|
|
|
Net
change in loans
|
|
|
1,045
|
|
|
(3,178
|
)
|
|
Proceeds
from sale of foreclosed assets
|
|
|
12
|
|
|
—
|
|
|
Purchase
of premises and equipment
|
|
|
(57
|
)
|
|
(37
|
)
|
|
|
|
|
|
|
|
|
|
|
Net
cash used in investing activities
|
|
|
(11,284
|
)
|
|
(1,930
|
)
|
See
Notes
to Condensed Consolidated Financial Statements.
FIRST
ROBINSON FINANCIAL CORPORATION
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
For
The
Three-Months Ended June 30, 2008 and 2007
(In
thousands)
(Unaudited)
|
|
|
2008
|
|
2007
|
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities:
|
|
|
|
|
|
|
|
|
Net
increase in deposits
|
|
$
|
638
|
|
$
|
3,394
|
|
|
Proceeds
from other borrowings
|
|
|
37,988
|
|
|
28,854
|
|
|
Repayment
of other borrowings
|
|
|
(35,480
|
)
|
|
(27,342
|
)
|
|
Proceeds
from federal funds purchased
|
|
|
—
|
|
|
5,381
|
|
|
Repayment
of federal funds purchased
|
|
|
—
|
|
|
(5,381
|
)
|
|
Purchase
of incentive plan shares
|
|
|
—
|
|
|
(10
|
)
|
|
Proceeds
received from exercise of stock options
|
|
|
150
|
|
|
32
|
|
|
Purchase
of treasury stock
|
|
|
(41
|
)
|
|
(349
|
)
|
|
Dividends
paid
|
|
|
(346
|
)
|
|
(316
|
)
|
|
Net
increase in advances from borrowers for taxes and
insurance
|
|
|
52
|
|
|
41
|
|
|
|
|
|
|
|
|
|
|
|
Net
cash provided by financing activities
|
|
|
2,961
|
|
|
4,304
|
|
|
(Decrease)
increase in cash and cash equivalents
|
|
|
(8,009
|
)
|
|
2,571
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents at beginning of period
|
|
|
19,528
|
|
|
4,049
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents at end of period
|
|
$
|
11,519
|
|
$
|
6,620
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental
Cash Flows Information:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
paid
|
|
$
|
760
|
|
$
|
731
|
|
|
|
|
|
|
|
|
|
|
|
Income
taxes paid (net of refunds)
|
|
|
65
|
|
|
150
|
|
|
|
|
|
|
|
|
|
|
|
Real
estate acquired in settlement of loans
|
|
|
90
|
|
|
24
|
|
See
Notes
to Condensed Consolidated Financial Statements.
FIRST
ROBINSON FINANCIAL CORPORATION
NOTES
TO
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The
condensed 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 condensed consolidated financial statements are unaudited
and
should be read in conjunction with the consolidated financial statements and
notes thereto included in the Company’s Form 10-KSB filed with the Securities
and Exchange Commission. The accompanying unaudited interim condensed
consolidated financial statements have been prepared in accordance with the
rules and regulations for reporting on Form 10-Q and Article 8-03 of Regulation
of S-X. Accordingly, they do not include information or footnotes necessary
for
a complete presentation of financial condition, results of operations, changes
in stockholders’ equity, and cash flows in conformity with accounting principles
generally accepted in the United States of America. In the opinion of management
of the Company, the unaudited condensed consolidated financial statements
reflect all adjustments (consisting of normal recurring adjustments) necessary
to present fairly the financial position of the Company at June 30, 2008, the
results of its operations for the three month periods ended June 30, 2008 and
2007, the changes in stockholders’ equity for the three month periods ended June
30, 2008 and 2007, and cash flows for three month periods ended June 30, 2008
and 2007. The results of operations for those months ended June 30, 2008 are
not
necessarily indicative of the results to be expected for the full
year.
The
Condensed Consolidated Balance Sheet of the Company, as of March 31, 2008,
has
been derived from the audited Consolidated Balance Sheet for the Company as
of
that date.
|
2.
|
Newly
Adopted Accounting
Pronouncements
|
Effective
April 1, 2008, the Company adopted Statement of Financial Standards
No. 157,
Fair
Value Measurements
(FAS
157). FAS 157 defines fair value, establishes a framework for measuring fair
value and expands disclosures about fair value measurements. FAS 157 has been
applied prospectively as of the beginning of the year.
FAS
157
defines fair value as the price that would be received to sell an asset or
paid
to transfer a liability in an orderly transaction between market participants
at
the measurement date. FAS 157 also establishes a fair value hierarchy which
requires an entity to maximize the use of observable inputs and minimize the
use
of unobservable inputs when measuring fair value. The standard describes three
levels of inputs that may be used to measure fair value:
|
|
|
|
|
|
|
|
|
Level
1
|
|
Quoted
prices in active markets for identical assets or
liabilities
|
|
|
|
|
|
|
|
|
|
Level
2
|
|
Observable
inputs other than Level 1 prices, such as quoted prices for similar
assets
or liabilities; quoted prices in markets that are not active; or
other
inputs that are observable or can be corroborated by observable market
data for substantially the full term of the assets or
liabilities
|
|
|
|
|
|
|
|
|
|
Level
3
|
|
Unobservable
inputs that are supported by little or no market activity and that
are
significant to the fair value of the assets or
liabilities
|
Following
is a description of the valuation methodologies used for instruments measured
at
fair value on a recurring basis and recognized in the accompanying balance
sheet.
Available-for-Sale
Securities
The
fair
value of available-for-sale securities are determined by various valuation
methodologies. Where quoted market prices are available in an active market,
securities are classified within Level 1. The Company has no Level 1 securities.
If quoted market prices are not available, then fair values are estimated using
pricing models or quoted prices of securities with similar characteristics.
Level 2 securities include Obligations of U.S. government corporations and
agencies, Obligations of states and political subdivisions, mortgage-backed
securities, and collateralized mortgage obligations. In certain cases where
Level 1 or Level 2 inputs are not available, securities are classified within
Level 3 of the hierarchy. The Company has no Level 3 available-for-sale
securities.
FIRST
ROBINSON FINANCIAL CORPORATION
NOTES
TO
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The
following table presents the Company’s assets that are measured at fair value on
a recurring basis and the level within the FAS 157 hierarchy in which the fair
value measurements fall as of June 30, 2008 (in thousands):
|
|
|
Carrying value at June 30, 2008
|
|
|
Description
|
|
Fair Value
|
|
Quoted Prices
in
Active Markets
for Identical
Assets
(Level 1)
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale
securities
|
|
$
|
43,013
|
|
|
|
|
$
|
43,013
|
|
|
|
|
The
Company may be required, from time to time, to measure certain other financial
assets and liabilities on a nonrecurring basis. These adjustments to fair value
usually result from application of lower-of-cost-or-market accounting or
write-downs of individual assets. For assets measured at fair value on a
nonrecurring basis in the first three months of fiscal 2009 that were still
held
on the balance sheet at June 30, 2008, the following table provides the level
of
valuation assumptions used to determine each adjustment and the fair value
of
the assets at June 30, 2008 (in thousands).
|
|
|
|
|
Carrying value at June 30, 2008
|
|
|
|
|
|
|
Quoted Prices in
|
|
Significant
|
|
|
|
|
|
|
|
|
Active Markets
|
|
Other
|
|
Significant
|
|
|
|
|
|
|
for Identical
|
|
Observable
|
|
Unobservable
|
|
|
|
|
|
|
Assets
|
|
Inputs
|
|
Inputs
|
|
|
Description
|
|
Fair Value
|
|
(Level 1)
|
|
(Level 2)
|
|
(Level 3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired
loans
|
|
$
|
164
|
|
|
|
|
|
|
|
$
|
164
|
|
Impaired
Loans
Loans
for
which it is probable that the Company will not collect all principal and
interest due according to contractual terms are measured for impairment in
accordance with the provisions of Financial Accounting Standard No. 114
(“FAS 114”) “Accounting by Creditors for Impairment of a Loan.” Allowable
methods for estimating fair value include using the fair value of the collateral
or collateral dependent loans or, where a loan is determined not to be
collateral dependent, using the discounted cash flow method.
If
the
impaired loan is identified as collateral dependent, then the fair value method
of measuring the amount of the impairment is utilized. This method requires
reviewing an independent appraisal of the collateral and applying a discount
factor to the value based on management’s estimation process.
In
February 2007, the FASB issued SFAS No. 159,
The
Fair Value Option for Financial Assets and Financial Liabilities – Including an
Amendment of FASB Statement No. 115
. This
Statement permits entities to choose to measure many financial instruments
and
certain other items at fair value. Unrealized gains and losses on
items for which the fair value option has been elected will be reported in
earnings. The objective is to improve financial reporting by
providing entities with the opportunity to mitigate volatility in reported
earnings caused by measuring related assets and liabilities differently without
having to apply complex hedge accounting provisions. This Statement
is expected to expand the use of fair value measurement, which is consistent
with the FASB’s long-term measurement objectives for accounting for financial
instruments. SFAS No. 159 is effective for fiscal years beginning
after November 15, 2007. The Company has not elected the fair value
option for any financial assets or liabilities as of June 30,
2008.
FIRST
ROBINSON FINANCIAL CORPORATION
NOTES
TO
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
|
3.
|
Federal
Home Loan Bank Stock
|
The
Company owns approximately $642,000 of Federal Home Loan Bank
stock. During the third quarter of 2007, the Federal Home Loan Bank
of Chicago received a Cease and Desist Order from their regulator, the Federal
Housing Finance Board. The order prohibits capital stock repurchases
and redemptions until a time to be determined by the Federal Housing Finance
Board. With regards to dividends, the Federal Home Loan Bank will
continue to assess their dividend capacity each quarter and make appropriate
requests for approval. Management performed an analysis and deemed
the investment in FHLB stock was not impaired as of June 30,
2008. During the second quarter of 2008, the Federal Home Loan Bank
reported that they will no longer enter into new master commitments or renew
existing master commitments to purchase mortgage loans from participating
financial institutions under the Mortgage Partnership Finance (MPF)
program. They will continue to fund new loans under existing master
commitments through October 31, 2008. While the Company is currently
participating in the MPF program, the Company has applied to Freddie Mac as
an
avenue for selling loans in the secondary market.
|
4.
|
Authorized
Share Repurchase Program
|
On
July
24, 2008, the Board of Directors of First Robinson Financial Corporation voted
to approve the extension and expansion of the repurchase program of its equity
stock approved on September 18, 2007. The Company may repurchase up to 22,000
additional shares of the Company’s outstanding common stock in the open market
or in negotiated private transactions from time to time when deemed appropriate
by management. The increase represents approximately 5% of the Company’s issued
and outstanding shares. As of July 24, 2008, the Company had
repurchased 20,108 shares of its common stock out of the 25,000 shares that
had
been previously authorized for repurchase. As a result of these
actions, the Company is currently authorized to repurchase 26,892 shares of
common stock. The Program, with an original expiration date of September 17,
2008, has been extended to August 1, 2009 or the earlier of the completion
of
the repurchase of the 26,892 shares.
|
5.
|
Stock-based
Compensation
|
On
July
29, 1998, the stockholders of the Company approved a Stock Option Plan (“SOP”)
and a Recognition and Retention Plan (“RRP”). Options and restricted shares were
granted to directors, officers and employees at the fair value of the shares
as
of that date. The plans were for a period of ten (10) years with a five year
vesting period for both plans from the date of the grant. Prior to April 1,
2006
the Company accounted for the Plan under the recognition and measurement
provisions of Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees," and related Interpretations.
In
December 2004, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 123 (revised 2004),
"Share Based Payment," which established standards for the accounting for
transactions in which an entity exchanges its equity instruments for goods
or
services, and focuses primarily on accounting for transactions in which an
entity obtains employee services. The SFAS requires a public entity to measure
the cost of employee services received in exchange for its equity instruments
based on the fair value at the grant date (with limited exceptions) and
recognize that cost over the service period. This statement revises SFAS No.
123, "Accounting for Stock-Based Compensation," and supersedes APB Opinion
No.
25, "Accounting for Stock Issued to Employees." Effective April 1, 2006, the
Company adopted the provisions of SFAS No. 123 (revised 2004). As a result
of
adopting SFAS No. 123R on April 1, 2006, the Company did not record any
additional compensation expense, as no stock options had been granted in recent
years and options granted were fully vested prior to adoption. However, on
April
1, 2006, the Company reclassified $125,000 of unearned compensation, or 7,231
shares, related to previously recognized compensation for restricted share
awards that had been vested as of that date to additional paid-in capital as
these awards represent equity awards as defined in SFAS No. 123R. The RRP will
expire July 29, 2008 and the unallocated 7,231 shares will transfer to Treasury
Stock at that time.
FIRST
ROBINSON FINANCIAL CORPORATION
NOTES
TO
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
|
6.
|
Earnings
Per Share for the Three-Month
Period
|
Basic
earnings per share is calculated by dividing net income by the weighted average
number of common shares outstanding during the period. Diluted earnings per
share gives effect to the increase in the average shares outstanding which
would
have resulted from the exercise of dilutive stock options. As of June 30, 2008,
all outstanding options had been exercised. Therefore, there is no dilutive
effect with regards to options for the earnings per share calculation for the
three month period ended June 30, 2008. The components of basic and diluted
earnings per share for the three months ended June 30, 2008 and 2007 were
computed as follows (dollar amounts in thousands except share
data):
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
Average
|
|
Per
Share
|
|
|
|
|
Income
|
|
Shares
|
|
Amount
|
|
|
|
|
|
|
|
|
|
|
|
For
the Quarter Ended June 30, 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
Earnings per Share:
|
|
|
|
|
|
|
|
|
|
|
|
Income
available to common stockholders
|
|
$
|
174
|
|
|
439,605
|
|
$
|
0.40
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect
of Dilutive Securities:
|
|
|
|
|
|
|
|
|
|
|
|
Incentive
plan shares
|
|
|
|
|
|
15,968
|
|
|
|
|
|
Stock
options
|
|
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
Earnings per Share:
|
|
|
|
|
|
|
|
|
|
|
|
Income
available to common stockholders
|
|
$
|
174
|
|
|
455,573
|
|
$
|
0.38
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For
the Quarter Ended June 30, 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
Earnings per Share:
|
|
|
|
|
|
|
|
|
|
|
|
Income
available to common stockholders
|
|
$
|
273
|
|
|
468,262
|
|
$
|
0.58
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect
of Dilutive Securities:
|
|
|
|
|
|
|
|
|
|
|
|
Incentive
plan shares
|
|
|
|
|
|
16,004
|
|
|
|
|
|
Stock
options
|
|
|
|
|
|
6,653
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
Earnings per Share:
|
|
|
|
|
|
|
|
|
|
|
|
Income
available for common stockholders
|
|
$
|
273
|
|
|
490,919
|
|
$
|
0.56
|
|
|
7.
|
FDIC
One-time Assessment Credit
|
Effective
November 17, 2006, the FDIC implemented a one-time credit of $4.7 billion to
eligible institutions. The purpose of the credit is to recognize contributions
made by certain institutions to capitalize the Bank Insurance Fund and Savings
Association Insurance Fund, which have now been merged into the Deposit
Insurance Fund. The Bank is an eligible institution and received notice from
the
FDIC that its share of the credit was $83,000. As of June 30, 2008, the Bank’s
remaining credit was $25,000. This amount is not reflected in the accompanying
financial statements as it represents contingent future credits against future
insurance assessment payments. As such, the timing and ultimate recoverability
of the one-time credit may change.
FIRST
ROBINSON FINANCIAL CORPORATION
NOTES
TO
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
|
8.
|
Recent
Accounting Pronouncements
|
In
March 2008, the Financial Accounting Standards Board (“FASB”) issued
Statement of Financial Accounting Standards No. 161 (FAS 161), “Disclosures
about Derivative Instruments and Hedging Activities — an amendment of FASB
Statement No. 133.” FAS 161 requires qualitative disclosures about
objectives and strategies for using derivatives, quantitative disclosures about
fair value amounts of gain and losses on derivative instruments, and disclosures
about credit-risk-related contingent features in derivative agreements. FAS
161
is effective for fiscal years beginning after November 15, 2008. The
Company does not expect the implementation of FAS 161 to have a material impact
on its consolidated financial statements.
In
December, 2007, the FASB issued Statement of Financial Standards No. 160
(FAS 160), “Noncontrolling Interests in Consolidated Financial Statements — an
amendment of ARB No. 51.” FAS 160 requires that a noncontrolling interest
in a subsidiary be reported separately within equity and the amount of
consolidated net income specifically attributable to the noncontrolling interest
be identified in the consolidated financial statements. It also calls for
consistency in the manner of reporting changes in the parent’s ownership
interest and requires fair value measurement of any noncontrolling equity
investment retained in deconsolidation. FAS 160 is effective for fiscal years
beginning after December 15, 2008. The Company does not expect the
implementation of FAS 160 to have a material impact on its consolidated
financial statements.
In
December 2007, the FASB issued Statement of Financial Accounting Standards
No. 141(R) (FAS 141(R)), “Business Combinations.” FAS 141(R) will
significantly change the financial accounting and reporting of business
combination transactions. FAS 141(R) establishes principles for how an acquirer
recognizes and measures the identifiable assets acquired, liabilities assumed,
and any noncontrolling interest in the acquiree; recognizes and measures
goodwill acquired in the business combination or a gain from a bargain purchase;
and determines what information to disclose to enable users of the financial
statements to evaluate the nature and financial effects of the business
combination. FAS 141(R) is effective for acquisition dates in fiscal years
beginning after December 15, 2008. The Company does not expect the
implementation of FAS 141(R) to have a material impact on its consolidated
financial statements.
FIRST
ROBINSON FINANCIAL CORPORATION
Management’s
Discussion and Analysis of Financial Condition
And
Results of Operations
Item
2:
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 “believe,” “expect,” “should,” “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. Examples of forward-looking statements include,
but are not limited to, estimates with respect to our financial condition,
results of operations and business that are subject to various factors that
could cause actual results to differ materially from these estimates and most
other statements that are not historical in nature. Such statements are subject
to risks and uncertainties, including but not limited to changes in economic
conditions in the Company’s market area; legislative/regulatory provisions;
monetary and fiscal policies of the U.S. Government, including policies of
the
U.S. Treasury and the Federal Reserve Board; the quality of composition of
the
loan or investment portfolios; changes in accounting principles, policies,
or
guidelines; fluctuations in interest rates; deposit flows; demand for loans
in
the Company’s market area; real estate values; credit quality and adequacy of
reserves; competition; customer growth and retention; earnings growth and
expectations; new products and services; technological factors affecting
operations, pricing of products and services; 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 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.
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 $174,000 for the
three month period ending June 30, 2008, versus $273,000 in the same period
of
2007, a decrease of 36.3%. Earnings were positively impacted by a $48,000,
or
4.7%, increase in net interest income after provision for loan losses and a
$49,000, or 12.8%, increase in non-interest income offset by an increase of
$221,000, or 21.8%, in non-interest expense. Basic earnings per share for the
June 30, 2008 three month period were $0.40 per share versus $0.58 per share
for
the same period of 2007. Diluted earnings per share reflect incentive plan
shares and the potential dilutive impact of stock options granted under the
stock option plan. Diluted earnings per share for the three months ending June
30, 2008 were $0.38 per share, versus $0.56 per share for the three months
ending June 30, 2007.
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.
FIRST
ROBINSON FINANCIAL CORPORATION
Management’s
Discussion and Analysis of Financial Condition
And
Results of Operations
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.
Business
Strategy and Recent Events
First
Robinson Savings Bank, National Association (the “Bank”), the Company’s
operating subsidiary,
is a
community-oriented, locally owned financial institution offering
community-banking services to residents and businesses of Crawford County,
Illinois, our primary market area. O
n
February 29, 2008, the Bank acquired a commercial building on Kimmel Road near
the junction of U.S. Route 41 and Hart Street in Vincennes, Indiana. Our goal
is
to establish a full service branch office in that location by the fourth quarter
of calendar 2008, and we recently received regulatory approval to do so. This
will allow the Bank to move into an area with a population that is nearly double
that of our current market in Crawford County. We are still committed to growing
our institution in Crawford County and gaining a larger share of the market,
however this new location will provide additional opportunities that are still
within 40 miles of our home office.
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. The
Board of
Directors approved the submission of an application to the OCC for fiduciary
powers and on July 1, 2008, approval of fudiciary powers was received. A trust
officer will begin employment with the Bank in the later part of July and we
will begin offering trust services shortly thereafter.
We
also
monitor any and all 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 economic trends in the area
also appear stable, although such trends are inherently difficult to predict.
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 (“FHLB”) and USDA
Rural Development. However, the FHLB originally stated, per Exhibit 99.1 on
Form
8-K as furnished with the Securities and Exchange Commission on April 28, 2008,
that as of July 31, 2008, they would no longer be purchasing residential real
estate mortgages as they are discontinuing their fixed rate program. On June
10,
2008, the FHLB furnished to the Securities and Exchange Commission a Report
on
Form 8-K indicating they are extending the purchasing of residential real estate
loans until October 31, 2008. Because of their decision to discontinue the
program, we are in the process of applying with the Federal Home Loan Mortgage
Corporation as a conduit for the secondary market for fixed rate residential
real estate loans.
Our
Internet banking service, “Netteller” remains 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. In January 2007, we began offering “Reward Checking”. The
deposit product has been very successful, growing to over 1,000 accounts with
a
total balance of approximately $11.0 million. 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 our
internet-based services and technology.
Another
factor in maintaining consistent earnings is the continued growth in our
investment brokerage service provided to our customers through PrimeVest
Financial Services. With the investment brokerage products offered by PrimeVest
and the investment products the Bank offers, we are able to serve the investment
needs of our customers and the community.
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
.
FIRST
ROBINSON FINANCIAL CORPORATION
Management’s
Discussion and Analysis of Financial Condition
And
Results of Operations
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 between 60-90 days delinquent, the loan will
generally be referred to the Bank’s legal counsel for collection.
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 June 30, 2008.
|
|
|
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
|
|
|
9
|
|
$
|
232
|
|
|
0.60
|
%
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3
|
|
$
|
115
|
|
|
0.30
|
%
|
|
12
|
|
$
|
347
|
|
|
0.90
|
%
|
|
Commercial
and agricultural real estate
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
123
|
|
|
0.84
|
|
|
1
|
|
|
123
|
|
|
0.84
|
%
|
|
Consumer
and other loans
|
|
|
7
|
|
|
31
|
|
|
0.52
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
9
|
|
|
0.15
|
|
|
8
|
|
|
40
|
|
|
0.67
|
%
|
|
State
& Municipal Gov’t.
|
|
|
1
|
|
|
51
|
|
|
2.18
|
|
|
1
|
|
|
91
|
|
|
3.90
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2
|
|
|
142
|
|
|
6.08
|
%
|
|
Commercial
business and agricultural finance
|
|
|
1
|
|
|
14
|
|
|
0.13
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
21
|
|
|
0.19
|
|
|
2
|
|
|
35
|
|
|
0.32
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
18
|
|
$
|
328
|
|
|
0.43
|
%
|
|
1
|
|
|
91
|
|
|
0.12
|
%
|
|
6
|
|
$
|
268
|
|
|
0.35
|
%
|
|
25
|
|
$
|
687
|
|
|
0.90
|
%
|
|
(1)
|
Loans
are still accruing.
|
FIRST
ROBINSON FINANCIAL CORPORATION
Management’s
Discussion and Analysis of Financial Condition
And
Results of Operations
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.
|
|
|
June 30,
|
|
March 31,
|
|
June 30,
|
|
|
|
|
2008
|
|
2008
|
|
2007
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
Non-accruing
loans:
|
|
|
|
|
|
|
|
|
|
|
|
One-
to four-family
|
|
$
|
115
|
|
$
|
143
|
|
$
|
87
|
|
|
Commercial
and agriculture real estate
|
|
|
123
|
|
|
126
|
|
|
—
|
|
|
Consumer
and other loans
|
|
|
9
|
|
|
—
|
|
|
4
|
|
|
Commercial
business and agricultural finance
|
|
|
21
|
|
|
23
|
|
|
65
|
|
|
Total
|
|
|
268
|
|
|
292
|
|
|
156
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreclosed
assets:
|
|
|
|
|
|
|
|
|
|
|
|
One-
to four-family
|
|
|
90
|
|
|
16
|
|
|
24
|
|
|
Total
|
|
|
90
|
|
|
16
|
|
|
24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
non-performing assets
|
|
$
|
358
|
|
$
|
308
|
|
$
|
180
|
|
|
Total
as a percentage of total assets
|
|
|
0.26
|
%
|
|
0.23
|
%
|
|
0.15
|
%
|
Gross
interest income which would have been recorded had the non-accruing loans been
current in accordance with their original terms amounted to approximately $5,000
for the three months ended June 30, 2008 and $3,000 for the three months ended
June 30, 2007.
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 June 30, 2008, the Bank had classified a total of $428,000
of
its assets as substandard and $164,000 as doubtful. At June 30, 2008, total
classified assets comprised $592,000, or 5.1% of the Bank’s capital, and 0.4% of
the Bank’s total assets.
FIRST
ROBINSON FINANCIAL CORPORATION
Management’s
Discussion and Analysis of Financial Condition
And
Results of Operations
Other
Loans of Concern
.
As of
June 30, 2008, 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 June 30, 2008, the Bank had one real estate property
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 June 30,
2008, the Bank had a total allowance for loan losses of $757,000, representing
1.01% of the Bank’s loans, net. At March 31, 2008, the Bank’s total allowance
for loan losses to the Bank’s loans, net was at 0.95%.
FIRST
ROBINSON FINANCIAL CORPORATION
Management’s
Discussion and Analysis of Financial Condition
And
Results of Operations
The
distribution of the Bank’s allowance for losses on loans at the dates indicated
is summarized as follows:
|
|
|
June 30, 2008
|
|
March 31, 2008
|
|
|
|
|
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
|
|
$
|
51
|
|
$
|
38,715
|
|
|
50.60
|
%
|
$
|
62
|
|
$
|
39,024
|
|
|
50.21
|
%
|
|
Multi-family
|
|
|
—
|
|
|
619
|
|
|
0.81
|
|
|
—
|
|
|
618
|
|
|
0.80
|
|
|
Commercial
and agricultural real estate
|
|
|
471
|
|
|
14,593
|
|
|
19.07
|
|
|
481
|
|
|
14,527
|
|
|
18.69
|
|
|
Construction
or
development
|
|
|
—
|
|
|
3,471
|
|
|
4.53
|
|
|
—
|
|
|
2,909
|
|
|
3.74
|
|
|
Consumer
and other loans
|
|
|
32
|
|
|
6,014
|
|
|
7.86
|
|
|
27
|
|
|
6,221
|
|
|
8.00
|
|
|
State
and Municipal
Governments
|
|
|
—
|
|
|
2,334
|
|
|
3.05
|
|
|
—
|
|
|
2,720
|
|
|
3.50
|
|
|
Commercial
business and agricultural finance
|
|
|
203
|
|
|
10,771
|
|
|
14.08
|
|
|
157
|
|
|
11,710
|
|
|
15.06
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
Loans
|
|
|
|
|
|
76,517
|
|
|
100.00
|
%
|
|
|
|
|
77,729
|
|
|
100.00
|
%
|
|
Unallocated
|
|
|
—
|
|
|
|
|
|
|
|
|
—
|
|
|
|
|
|
|
|
|
Deferred
loan fees
|
|
|
|
|
|
(6
|
)
|
|
|
|
|
|
|
|
(6
|
)
|
|
|
|
|
Undisbursed
portion of loans
|
|
|
|
|
|
(774
|
)
|
|
|
|
|
|
|
|
(750
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
757
|
|
$
|
75,737
|
|
|
|
|
$
|
727
|
|
$
|
76,973
|
|
|
|
|
The
following table sets forth an analysis of the Bank’s allowance for loan
losses.
|
|
|
Three
Months Ended
June
30,
|
|
|
|
|
2008
|
|
2007
|
|
|
|
|
(In
thousands)
|
|
|
Balance
at beginning of period
|
|
$
|
727
|
|
$
|
729
|
|
|
|
|
|
|
|
|
|
|
|
Charge-offs:
|
|
|
|
|
|
|
|
|
One-
to four-family
|
|
|
—
|
|
|
4
|
|
|
Consumer
and other loans
|
|
|
4
|
|
|
4
|
|
|
Total
|
|
|
4
|
|
|
8
|
|
|
|
|
|
|
|
|
|
|
|
Recoveries:
|
|
|
|
|
|
|
|
|
One-
to four-family
|
|
|
1
|
|
|
—
|
|
|
Consumer
and other loans
|
|
|
3
|
|
|
4
|
|
|
Total
|
|
|
4
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
Net
charge-offs
|
|
|
—
|
|
|
4
|
|
|
Additions
charged to operations
|
|
|
30
|
|
|
15
|
|
|
Transfer
for off-balance sheet credit exposure
|
|
|
—
|
|
|
(20
|
)
|
|
Balance
at end of period
|
|
$
|
757
|
|
$
|
720
|
|
|
|
|
|
|
|
|
|
|
|
Ratio
of net charge-offs during the period to
average
loans outstanding during the period
|
|
|
0.00
|
%
|
|
0.01
|
%
|
|
|
|
|
|
|
|
|
|
|
Ratio
of net charge-offs during the period to average non-performing
assets
|
|
|
0.00
|
%
|
|
2.23
|
%
|
FIRST
ROBINSON FINANCIAL CORPORATION
Management’s
Discussion and Analysis of Financial Condition
And
Results of Operations
Financial
Condition
Total
assets of the Company increased by $2.7 million, or 2.0%, to $136.5 million
at
June 30, 2008 from $133.8 million at March 31, 2008. The increase in assets
was
primarily due to an increase of $11.5 million, or 36.4%, in available for sale
securities and an increase of $326,000 in deferred income taxes offset, in
part,
by an $8.0 million, or 41.0%, decrease in cash and cash equivalents and a
decrease of $1.1 million, or 1.5%, loans receivable, net.
The
total
decrease in cash and cash equivalents was derived substantially from federal
funds sold decreasing by $10.3 million, or 59.1%, to $7.1 million at June 30,
2008 from $17.4 million at March 31, 2007. The decrease resulted from the funds
being used to purchase additional available-for-sale securities.
Available-for-sale
investment securities increased to $43.0 million at June 30, 2008 compared
to
$31.5 million at March 31, 2008, an $11.5 million increase. The increase
resulted from the purchase of $14.2 million in mortgage-backed securities and
the amortization of $16,000 of premiums and discounts on investments offset
by
$1.9 million in repayments on mortgage-backed securities and the $822,000
decrease 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 decreased by $1.1 million to $75.0 million at
June
30, 2008 from $76.1 million at March 31, 2008. Loans on one to four-family
real
estate decreased by $208,000, or 0.5%; commercial business and agricultural
finance loans decreased $939,000, or 8.0%; consumer and other loans decreased
$207,000, or 3.3%; and loans to state and municpal governments decreased
$386,000, or 14.2%. These decreases were offset, in part, by increases in
construction and development loans of $562,000, or 19.3%; in commercial
nonresidential real estate and farmland loans of $66,000, or 0.5%; and an
increase of $1,000, or 0.2% in loans on multi-family properties.
At
June
30, 2008, the allowance for loan losses was $757,000, or 1.01%, of the net
loan
portfolio, which increased $30,000 from the allowance for loan losses at March
31, 2008 at $727,000, or 0.95%, of the net loan portfolio. During the first
three-months of fiscal 2009, the Company charged off $4,000 of loan losses,
all
in consumer and other loans. The chargeoffs of $4,000 were offset by $4,000
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 one foreclosed real estate property held for sale at June 30, 2008
and March 31, 2008. Foreclosed assets are carried at lower of cost or net
realizable value. The real estate property held March 31, 2008, with a fair
value of $16,000, was sold for $12,000 during the quarter ended June 30, 2008.
Also during the quarter, one loan was transferred to other real estate owned
at
a fair value of $90,000. The property is being prepared for sale and will be
listed soon.
Total
deposits increased by $638,000, or 0.6%, to $104.5 million at June 30, 2008
from
$103.9 million at March 31, 2008. The increase in total deposits was due to
an
increase of $1.3 million in certificates of deposit and an increase of $487,000
in savings, NOW, and money market accounts, offset by a decrease of $1.1 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.
Other
borrowings consisting entirely of repurchase agreements, increased $2.5 million,
or 15.4% from $16.3 million at March 31, 2008 to $18.8 million at June 30,
2008.
The obligations are secured by mortgage-backed securities and US Government
agency obligations held in safekeeping at Independent Bankers Bank in
Springfield, Illinois. At June 30, 2008, the average rate on the repurchase
agreements was 1.17% compared to 1.37% at March 31, 2008. The rate on
approximately $17.9 million of the repurchase agreements reprice daily. These
agreements mature periodically within 24 months.
Advances
from borrowers for taxes and insurance increased by $52,000 from $149,000 at
March 31, 2008 to $201,000 at June 30, 2007. Accrued income taxes payable
increased $39,000. Accrued interest payable decreased by $26,000 and other
liabilities decreased $110,000 from $1.2 million at March 31, 2008 to $1.1
million at June 30, 2008.
Stockholders'
equity at June 30, 2008 was $11.5 million compared to $11.9 million at March
31,
2008, a decrease of $395,000, or 3.3%. Factors relating to the reduction in
stockholders’ equity can be attributed to $346,000 in dividends declared and
paid, offset by the addition of $174,000 in net income and the decrease of
$514,000 in accumulated other comprehensive income due to the decline in the
fair value of securities available for sale. The decreases are partially offset
by the issuance of $164,000 in shares of First Robinson Financial stock relating
to the exercise of stock options offset by the repurchase of $41,000 in shares
and the increase in additional paid-in-capital of $168,000 relating to the
options exercised during the period.
FIRST
ROBINSON FINANCIAL CORPORATION
Management’s
Discussion and Analysis of Financial Condition
And
Results of Operations
Results
of Operations
Net
Interest Income
For
the
three-month period June 30, 2008 net income was $174,000 compared to $273,000
for the prior comparable period in fiscal 2008. The decrease in income was
primarily attributed to increases in non-interest expense, as explained below.
For the three-month period ended June 30, 2008, net interest income totaled
$1,089,000, an increase of 6.1%, or $63,000, from the same period of 2007.
Net
interest income increased in the three-month period ended June 30, 2008 versus
the comparable period of 2007 primarily due to an increase of $71,000, or 21.0%,
in interest income from taxable securities and the $58,000, or 305.3%, increase
in other interest income offset, in part, by the decrease of $59,000, or 4.3%,
in interest income from loans, the decrease of $3,000, or 12.5%, in tax-exempt
securities interest income and the decrease of $4,000, or 57.1%, in dividends
from Federal Home Loan Bank and Federal Reserve Bank stocks. Total interest
expense had no change from the three months ended June 30, 2008 to June 30,
2007
at $734,000. Interest expense on deposits increased $67,000, or 10.9%, for
the
three months ended June 30, 2008 to $684,000 from $617,000 for the three months
ended June 30, 2007. Interest expense on other borrowings decreased by $67,000,
or 57.3% to $50,000 for the three months ended June 30, 2008 from $117,000
for
the same comparible period in 2007.
Total
average interest earning assets increased by $20.1 million, or 20.0%, to $126.3
million as of June 30, 2008 from $106.2 million as of June 30, 2007. However,
the yield on the earning assets decreased by 86 basis points when comparing
the
three months ended June 30, 2008 to the same period in 2007. Total average
interest bearing liabilities for the three months ended June 30, 2008 were
$108.9 million compared to $88.7 million as of June 30, 2007, an increase of
$20.2 million, or 22.8%. As was the case with the yield on assets, the cost
on
the average interest bearing liabilities decreased by 62 basis points. For
the
three-month period ended June 30, 2008, the net interest spread decreased 24
basis points to 3.08% versus 3.32% in the comparable period of
2007.
The
average daily loan balances for the quarter ended June 30, 2008 increased $2.4
million, or 3.3%, to $75.4 million versus $73.3 million for the same period
of
2007. During the same period, loan interest income decreased by $59,000, or
4.3%, to $1.3 million versus $1.4 million during the quarter ended June 30,
2007. The yield on loans decreased 55 basis points to 6.97% from 7.52% when
comparing the June 30, 2008 quarter to the June 2007 quarter.
Other
interest income and income from investment securities increased $126,000, or
33.1%, from $381,000 in the first quarter of fiscal year 2008 to $507,000 in
the
first quarter of fiscal year 2009. The increase can be primarily attributed
to
an increase of $4.4 million in the average balance of investment securities
and
an increase of $13.3 million in interest-earning deposits and federal funds
sold
for a total increase of $17.7 million, or 54.8%, from $32.3 million as of June
30, 2007 to $50.1 million as of June 30, 2008. The rate of return on investment
securities and interest-earning deposits declined 66 basis points from 4.71%
during the three months ended June 30, 2007 to 4.05% for the three months ended
June 30, 2008.
Dividends
received from Federal Home Loan Bank (“FHLB”) and Federal Reserve Bank (“FRB”)
stocks decreased by $4,000, or 57.1%, when comparing the June 2008 quarter
to
the June 2007 quarter. The rate of return on the FRB stock increased 13 basis
points to 6.13% for June 2008 quarter to compared to the June 2007 quarter
due
to the increase of $3,000 in the average balance of FRB stock. The FHLB Chicago
paid no dividends during the quarter ended June 30, 2008. 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.
FIRST
ROBINSON FINANCIAL CORPORATION
Management’s
Discussion and Analysis of Financial Condition
And
Results of Operations
On
an
average daily basis, total interest-bearing deposits increased $15.4 million,
or
19.8%, to $93.1 million for the three-month period ended June 30, 2008, versus
$77.7 million in the same period in 2007. The average cost of funds decreased
24
basis points to 2.94% for the June 2008 quarter versus the June 2007 quarter
at
3.18%. Interest expense on deposits could continue to increase due to the
popularity of our new checking account product, “Reward Checking” and our
27-month and 54-month step-up CD’s introduced in February 2007.
There
were no long-term nor overnight Federal Home Loan Bank (“FHLB”) borrowings for
the June 2008 quarter nor the June 2007 quarter. The Company had a decrease
of
$67,000, or 57.3%, in short-term other borrowings interest expense from $117,000
during the June 2007 quarter to $50,000 in the June 2008 quarter. The short-term
other borrowings consist of securities sold under agreements to repurchase.
These agreements mature periodically within 24 months. The average daily balance
of short-term other borrowings increased $5.0 million, or 45.5%, to $15.9
million during the June 2008 quarter from $10.9 million during the June 2007
quarter. The average cost of funds decreased by 299 basis points to 1.26% for
the June 2008 quarter from 4.25% for the June 2007 quarter.
Provision
for Loan Losses
The
provision for loan losses was $30,000 for the quarter ended June 30, 2008
compared to $15,000 for the same period in 2007. The provision for both 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 June 30, 2008,
its allowance for loan losses was adequate.
Non-Interest
Income
Non-interest
income categories for the three-month periods ended June 30, 2008 and 2007
are
shown in the following table:
|
|
|
Three
Months Ended
|
|
|
|
|
June
30,
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
%
Change
|
|
|
|
|
(In
thousands)
|
|
Non-interest
income:
|
|
|
|
Charges
and fees on deposit accounts
|
|
$
|
217
|
|
$
|
217
|
|
|
—
|
%
|
|
Charges
and other fees on loans
|
|
|
44
|
|
|
38
|
|
|
15.8
|
|
|
Net
gain on sale of loans
|
|
|
42
|
|
|
31
|
|
|
35.5
|
|
|
Other
|
|
|
130
|
|
|
98
|
|
|
32.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Non-Interest Income
|
|
$
|
433
|
|
$
|
384
|
|
|
12.8
|
%
|
The
increase in gains on the sale of mortgages resulted primarily from an increase
in the dollar volume of mortgages sold during the three-month period ended
June
30, 2008 versus the same period in 2007. During the first quarter of fiscal
year
2009, the Company sold $2.7 million in mortgages versus $2.0 million in the
same
quarter of fiscal year 2008.
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 recognized, 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 $32,000 in the three-month period ended
June 30, 2008 versus the same period of 2007. The primary reason for the
increase can be attributed to the increase in commissions received from the
investment brokerage service and the increase in ATM/debit card interchange
income resulting from the promotion of the use of debit cards in relation to
“Reward Checking”.
FIRST
ROBINSON FINANCIAL CORPORATION
Management’s
Discussion and Analysis of Financial Condition
And
Results of Operations
Non-Interest
Expense
Non-interest
expense categories for the three-month periods ended June 30, 2008, and 2007
are
shown in the following table:
|
|
|
Three
Months Ended
|
|
|
|
|
June
30,
|
|
|
|
|
2008
|
|
2007
|
|
%
Change
|
|
|
|
|
(In
thousands)
|
|
|
Non-interest
expense:
|
|
|
|
Compensation
and employee benefits
|
|
$
|
732
|
|
$
|
592
|
|
|
23.6
|
%
|
|
Occupancy
and equipment
|
|
|
175
|
|
|
150
|
|
|
16.7
|
|
|
Data
processing
|
|
|
59
|
|
|
51
|
|
|
15.7
|
|
|
Audit,
legal and other professional
|
|
|
50
|
|
|
38
|
|
|
31.6
|
|
|
Advertising
|
|
|
45
|
|
|
33
|
|
|
36.4
|
|
|
Telephone
and postage
|
|
|
25
|
|
|
25
|
|
|
—
|
|
|
Loss
on sale of foreclosed property
|
|
|
4
|
|
|
—
|
|
|
—
|
|
|
Other
|
|
|
143
|
|
|
123
|
|
|
16.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Non-Interest Expense
|
|
$
|
1,233
|
|
$
|
1,012
|
|
|
21.8
|
%
|
Salaries
and employee benefits increased $140,000 when comparing the June 2008 and 2007
quarters primarily due to a $98,000 increase in options exercised, a $19,000
increase in salaries, an $18,000 increase in market value of the shares held
in
the Directors Retirement Plan and an $11,000 increase in costs associated with
insurance benefits paid by the Company for employees offset, in part, by a
$3,000 decrease in retirement administrative expenses and a $3,000 decrease
in
directors fees. With a trust officer beginning employment in July 2008 and
the
establishment of the branch in Vincennes, Indiana, this year, salary and
employee benefits may increase in the near future. However, as all options
have
now been exercised and the option plan is set to expire on July 29th of this
year, there should be no future expenses associated with options.
The
increase of $25,000 in occupancy and equipment expense for the three-month
period reflects an increase in the costs associated with updating and
maintaining the office buildings. Occupancy and equipment expense could increase
in the coming year due to the new branch in Vincennes, Indiana.
Data
processing expenses increased $8,000 due to the cost of keeping up with advances
in technology.
Audit,
legal and other professional fees increased primarily due to an increase of
$8,000 in audit and accounting expenses.
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.
The increase of $20,000 in other expenses can be attributed, in part, to the
increase of $17,000 in costs to a consulting company for ideas in improving
non-interest income and cutting non-interest expenses.
Income
Tax Expense
Income
tax expense decreased $25,000, or 22.7%, for the three-months ending June 30,
2008, compared to the same period in 2007. The combined state and federal income
tax expense as a percentage of income before income tax expense increased to
32.8% during the three-month period of 2008 compared to 28.7% during the same
period in 2007.
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
$381,000. 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.
FIRST
ROBINSON FINANCIAL CORPORATION
Management’s
Discussion and Analysis of Financial Condition
And
Results of Operations
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.
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
June
30, 2008, outstanding commitments to extend credit, amounted to $16.7 million
(including $7.7 million, in available revolving and closed-ended 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 $24.9 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 June 30, 2008, $5.7
million in FHLB letters of credit were pledged. The available line of credit
with the FHLB is also reduced by $1.5 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 of Financial Condition
And
Results of Operations
At
June
30, 2008 the Bank was in compliance with all of the aforementioned capital
requirements as summarized below:
|
|
|
|
|
|
|
|
|
|
|
To
be Well Capitalized
|
|
|
|
|
|
|
|
|
|
|
|
|
Under
the Prompt
|
|
|
|
|
|
|
|
|
For
Capital
|
|
Corrective
Action
|
|
|
|
|
Actual
|
|
Adequacy
Purposes
|
|
Provisions
|
|
|
|
|
Amount
|
|
Ratio
|
|
Amount
|
|
Ratio
|
|
Amount
|
|
Ratio
|
|
|
Total
Risk-Based Capital
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(to
Risk-Weighted Assets)
|
|
$
|
12,569
|
|
|
16.43
|
%
|
$
|
6,122
|
|
|
8.00
|
%
|
$
|
7,652
|
|
|
10.00
|
%
|
|
Tier
I Capital
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(to
Risk-Weighted Assets)
|
|
|
11,801
|
|
|
15.42
|
|
|
3,061
|
|
|
4.00
|
|
|
4,591
|
|
|
6.00
|
|
|
Tier
I Capital
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(to
Average Assets)
|
|
|
11,801
|
|
|
8.78
|
|
|
5,377
|
|
|
4.00
|
|
|
6,721
|
|
|
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
Quantitative
and Qualitative Disclosures about Market Risk
Not
applicable.
Item:
4
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 June
30, 2008, 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 been no 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.
PART
II
OTHER INFORMATION
|
Item
1.
|
Legal
Proceedings
|
None
There
have been no material changes in the Company’s risk factors from those disclosed
in its Annual Report on Form 10-KSB
|
Item
2.
|
Unregistered
Sales of Equity Securities and Use of
Proceeds
|
The
following table provides information about purchases by the Company for the
quarter ended June 30, 2008 regarding the Company’s common stock.
PURCHASES
OF EQUITY SECURITIES BY COMPANY (1)
|
Period
|
|
Total
Number of
Shares
Purchased
|
|
Average
Price Paid
per Share
|
|
Total
Number of
Shares Purchased as
Part of Publicly
Announced Plans
or
Programs
|
|
Maximum
Number of
Shares that May Yet
Be Purchased Under
the Plans or
Programs
|
|
|
4/1/2008
- 4/30/2008
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
7,878
|
|
|
5/1/2008
- 5/31/2008
|
|
|
260
|
|
$
|
35.10
|
|
|
260
|
|
|
7,618
|
|
|
6/1/2008-
6/30/2008
|
|
|
926
|
|
|
35.09
|
|
|
926
|
|
|
6,692
|
|
|
Total
|
|
|
1,186
|
|
$
|
35.09
|
|
|
1,186
|
|
|
6,692
|
|
(1)
On
July 24, 2008, the Board of Directors of First Robinson Financial Corporation
voted to approve the extension and expansion of the repurchase program of its
equity stock approved on September 18, 2007. The Company may repurchase up
to
22,000 additional shares of the Company’s outstanding common stock in the open
market or in negotiated private transactions from time to time when deemed
appropriate by management. The increase represents approximately 5% of the
Company’s issued and outstanding shares. As of July 24, 2008, the
Company had repurchased 20,108 shares of its common stock out of the 25,000
shares that had been previously authorized for repurchase. As a
result of these actions, the Company is currently authorized to repurchase
26,892 shares of common stock. The Program, with an original expiration date
of
September 17, 2008, has been extended to August 1, 2009 or the completion of
the
repurchase of the 26,892 shares.
|
Item
3.
|
Defaults
Upon Senior Executives
|
None
|
Item
4.
|
Submission
of Matters to a Vote of Security
Holders
|
None
|
Item
5.
|
Other
Information
|
None
|
|
1.
|
Exhibit
31: Section 302 Certifications
|
|
|
2.
|
Exhibit
32: Section 906 Certification
|
SIGNATURES
Pursuant
to the requirements of
the
Securities Exchange Act of 1934, the registrant has duly caused this report
to
be signed on its behalf by the undersigned thereunto duly
authorized.
|
|
|
|
FIRST
ROBINSON FINANCIAL
|
|
|
|
|
CORPORATION
|
|
|
|
|
|
|
Date:
|
August
13, 2008
|
|
/s/
Rick L. Catt
|
|
|
|
|
Rick
L. Catt
|
|
|
|
|
President
and Chief Executive Officer
|
|
|
|
|
|
|
Date:
|
August
13, 2008
|
|
/s/
Jamie E. McReynolds
|
|
|
|
|
Jamie
E. McReynolds
|
|
|
|
|
Chief
Financial Officer and Vice
President
|
EXHIBIT
INDEX
Exhibit
No.
|
31.1
|
Certification
by the CEO pursuant to Section 302 of the Sarbanes-Oxley Act
of
2002
|
|
|
|
|
31.2
|
Certification
by the CFO pursuant to Section 302 of the Sarbanes-Oxley Act
of
2002
|
|
|
|
|
32
|
Certifications
of the CEO and CFO pursuant to Section 906 of the Sarbanes-Oxley
Act of
2002
|
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