FIRST ROBINSON FINANCIAL CORP - FORM 10-Q

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EX-32 - FIRST ROBINSON FINANCIAL CORP	v166173_ex32.htm
EX-31.2 - FIRST ROBINSON FINANCIAL CORP	v166173_ex31-2.htm
EX-31.1 - FIRST ROBINSON FINANCIAL CORP	v166173_ex31-1.htm

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

September 30, 2009

¨	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

None

(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 has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File requested to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that registrant was required to submit and post such files). Yes o 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	o	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: 433,198 shares of common stock, par value $.01 per share, as of November 12, 2009.

FIRST ROBINSON FINANCIAL CORPORATION

Index to Form 10-Q

		PAGE

PART 1. FINANCIAL INFORMATION

Item 1.	Financial Statements

	Condensed Consolidated Balance Sheets as of September 30, 2009 And March 31, 2009	3

	Condensed Consolidated Statements of Operations for the Three-Month and Six-Month Periods Ended September 30, 2009 and 2008	4

	Condensed Consolidated Statements of Changes in Stockholders’ Equity For the Six-Month Periods ended September 30, 2009 and 2008	6

	Condensed Consolidated Statements of Cash Flows for the Six-Month Periods Ended September 30, 2009 and 2008	7

	Notes to Condensed Consolidated Financial Statements	9

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	33

Item 4T.	Controls and Procedures	33

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	34

Item 1A.	Risk Factors	34

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	34

Item 3.	Defaults Upon Senior Executives	34

Item 4.	Submission of Matters to a Vote of Security Holders	34

Item 5.	Other Information	35

Item 6.	Exhibits	35

SIGNATURES		36

CERTIFICATIONS

Item 1:

FIRST ROBINSON FINANCIAL CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

	(Unaudited)
	September 30, 2009			March 31, 2009
ASSETS

Cash and cash equivalents	$	6,186		$	5,424
Interest-bearing deposits		3,156			713
Federal funds sold		3,872			7,572
Available-for-sale securities		60,774			55,925
Loans, held for sale		419			392
Loans, net of allowance for loan losses of $893 and $780 at September 30, 2009 and March 31, 2009, respectively		94,759			86,365
Federal Reserve and Federal Home Loan Bank stock		1,006			811
Premises and equipment, net		3,903			3,940
Foreclosed assets held for sale, net		30			46
Interest receivable		999			824
Prepaid income taxes		—			81
Cash surrender value of life insurance		1,477			1,453
Other assets		880			873

Total Assets	$	177,461		$	164,419

LIABILITIES AND STOCKHOLDERS’ EQUITY

Liabilities
Deposits	$	148,263		$	140,088
Other borrowings		12,387			9,914
Short-term borrowings		2,500			—
Advances from borrowers for taxes and insurance		66			166
Deferred income taxes		525			452
Accrued income taxes		28			—
Interest payable		300			330
Other liabilities		1,256			1,162
Total Liabilities		165,325			152,112

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 September 30, 2009– 433,198 shares; March 31, 2009 – 435,232 shares		9			9
Additional paid-in capital		8,777			8,791
Retained earnings		10,341			10,560
Accumulated other comprehensive income		914			782
Treasury stock, at cost
Common: September 30, 2009 – 426,427 shares; March 31, 2009 – 424,393 shares		(7,905	)		(7,835	)

Total Stockholders’ Equity		12,136			12,307

Total Liabilities and Stockholders’ Equity	$	177,461		$	164,419

See Notes to Condensed Consolidated Financial Statements

FIRST ROBINSON FINANCIAL CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

For the Three and Six-Month Periods Ended September 30, 2009 and 2008

(In thousands, except per share data)

(Unaudited)

	Three-Month Period				Six-Month Period

	2009		2008		2009		2008

Interest and Dividend Income:
Loans	$	1,414	$	1,343	$	2,761	$	2,656
Securities:
Taxable		518		519		1,085		929
Tax-exempt		37		21		75		42
Other interest income		1		32		5		109
Dividends on Federal Reserve Bank stock		2		3		5		5

Total Interest and Dividend Income		1,972		1,918		3,931		3,741

Interest Expense:
Deposits		823		710		1,745		1,394
Other borrowings		18		57		28		106

Total Interest Expense		841		767		1,773		1,500

Net Interest Income		1,131		1,151		2,158		2,241

Provision for Loan Losses		135		130		180		160

Net Interest Income After Provision for Loan Losses		996		1,021		1,978		2,081

Non-interest income:
Charges and fees on deposit accounts		256		231		476		448
Charges and other fees on loans		78		40		178		84
Net gain on sale of loans		55		30		182		72
Net realized gain on sale of available-for-sale investments		5		2		106		2
Other		121		105		239		234

Total Non-Interest Income		515		408		1,181		840

Non-interest expense:
Compensation and employee benefits		690		569		1,340		1,301
Occupancy and equipment		176		158		360		333
Data processing		66		60		126		119
Audit, legal and other professional		107		49		192		99
Advertising		75		52		177		97
Telephone and postage		50		33		104		59
Net loss on sale of foreclosed property		—		—		—		4
FDIC insurance		50		4		181		10
Loss on cost basis equity investment		137		—		137		—
Other		183		137		341		273

Total Non-Interest Expense		1,534		1,062		2,958		2,295

See Notes to Condensed Consolidated Financial Statements.

FIRST ROBINSON FINANCIAL CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (CONTINUED)

For the Three and Six-Month Periods Ended September 30, 2009 and 2008

(In thousands, except per share data)

(Unaudited)

	Three-Month Period					Six-Month Period

	2009			2008		2009		2008

Income (loss) before income taxes		(23	)		367		201		626

Provision for income taxes		11			123		72		208

Net Income (Loss)	$	(34	)	$	244	$	129	$	418

Earnings (Loss) Per Share-Basic	$	(0.08	)	$	0.56	$	0.31	$	0.95
Earnings (Loss) Per Share-Diluted	$	(0.08	)	$	0.54	$	0.30	$	0.92

See Notes to Condensed Consolidated Financial Statements

FIRST ROBINSON FINANCIAL CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

For the Six-Months Ended September 30, 2009 and 2008

(In thousands, except share data)

(Unaudited)

												Accumulated
						Additional						Other
	Common Stock					Paid-in			Retained			Comprehensive			Treasury						Comprehensive
	Shares			Amount		Capital			Earnings			Income			Stock			Total			Loss
Balance, April 1, 2008		451,464		$	9	$	8,491		$	10,114		$	247		$	(6,985	)	$	11,876

Comprehensive loss
Net income										418									418			418
Change in unrealized (depreciation) on available-for-sale securities, net of taxes of $(7)													(13	)					(13	)		(13	)
Total comprehensive income																						405

Treasury shares purchased		(7,936	)													(282	)		(282	)
Transfer of Unallocated Recognition and Retention Shares to Treasury Shares							125									(125	)		—
Dividends on common stock, $0.75 per share										(345	)								(345	)
Incentive compensation							(12	)											(12	)
Stock options exercised		9,452					168									164			332
Balance, September 30, 2008		452,980		$	9	$	8,772		$	10,187		$	234		$	(7,228	)	$	11,974

Balance, April 1, 2009		435,232		$	9	$	8,791		$	10,560		$	782		$	(7,835	)	$	12,307

Comprehensive loss
Net income										129									129			129
Unrealized appreciation (depreciation) on available-for-sale securities:
Unrealized appreciation (depreciation) on available-for-sale securities, net of taxes of $146																						203
Less reclassification adjustment for realized gains included in income net of taxes $35																						71
Total unrealized depreciation on available-for-sale securities, net of taxes of $111													132						132			132
Total comprehensive income																						261

Treasury shares purchased		(2,034	)													(70	)		(70	)
Dividends on common stock, $0.80 per share										(348	)								(348	)
Incentive compensation							(14	)											(14	)
Balance, September 30, 2009		433,198		$	9	$	8,777		$	10,341		$	914		$	(7,905	)	$	12,136

See Notes to Condensed Consolidated Financial Statements

FIRST ROBINSON FINANCIAL CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Six-Months Ended September 30, 2009 and 2008

(In thousands)

(Unaudited)

	2009			2008
Cash flows from operating activities:
Net income	$	129		$	418
Items not requiring (providing) cash
Depreciation and amortization		150			147
Provision for loan losses		180			160
Amortization of premiums and discounts on securities		126			(16	)
Amortization of loan servicing rights		57			25
Compensation related to options exercised		—			182
Deferred income taxes		(38	)		(39	)
Originations of mortgage loans held for sale		(18,555	)		(4,531	)
Proceeds from the sale of mortgage loans		18,710			4,704
Net gain on loans sold		(182	)		(72	)
Net loss on sale of foreclosed property		—			4
Loss on cost basis equity investment		137			—
Net realized gain on sale of securities		(106	)		(2	)
Cash surrender value of life insurance		(24	)		(31	)
Changes in:
Interest receivable		(175	)		(151	)
Other assets		(211	)		(76	)
Interest payable		(30	)		(10	)
Other liabilities		94			(98	)
Income taxes, prepaid/accrued		109			(134	)

Net cash provided by operating activities		371			480

Cash flows from investing activities:
Purchase of available-for-sale securities		(26,983	)		(21,062	)
Proceeds from maturities of available-for-sale securities		330			1,000
Proceeds from sales of available-for-sale securities		15,448			953
Repayment of principal on mortgage-backed securities		6,579			3,790
Purchase of Federal Home Loan Bank stock		(195	)		—
Net change in loans		(8,574	)		(3,991	)
Purchase of premises and equipment		(103	)		(585	)
Proceeds from sale of foreclosed assets		16			12

Net cash used in investing activities		(13,482	)		(19,883	)

See Notes to Condensed Consolidated Financial Statements.

FIRST ROBINSON FINANCIAL CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

For The Six-Months Ended September 30, 2009 and 2008

(In thousands)

(Unaudited)

	2009			2008

Cash flows from financing activities:
Net increase in deposits	$	8,175		$	11,661
Proceeds from other borrowings		54,591			79,294
Repayment of other borrowings		(52,118	)		(77,960	)
Advances from Federal Home Loan Bank		5,500			—
Repayment of advances from Federal Home Loan Bank		(5,500	)		—
Proceeds from short-term borrowings		3,100			—
Repayment of short-term borrowings		(600	)
Purchase of incentive plan shares		(14	)		(12	)
Proceeds received from exercise of stock options		—			150
Purchase of treasury stock		(70	)		(282	)
Dividends paid		(348	)		(345	)
Net increase in advances from borrowers for taxes and insurance		(100	)		(72	)

Net cash provided by financing activities		12,616			12,434

Decrease in cash and cash equivalents		(495	)		(6,969	)

Cash and cash equivalents at beginning of period		13,709			19,528

Cash and cash equivalents at end of period	$	13,214		$	12,559

Supplemental Cash Flows Information:

Interest paid	$	1,803		$	1,510

Income taxes paid (net of refunds)		—			380

Real estate acquired in settlement of loans		—			90

See Notes to Condensed Consolidated Financial Statements.

FIRST ROBINSON FINANCIAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1.	Basis of Presentation

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-K 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 September 30, 2009, the results of its operations for the three and six month periods ended September 30, 2009 and 2008, the changes in stockholders’ equity for the six month periods ended September 30, 2009 and 2008, and cash flows for the six month periods ended September 30, 2009 and 2008. The results of operations for those months ended September 30, 2009 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, 2009, has been derived from the audited Consolidated Balance Sheet for the Company as of that date.

2.	Newly Adopted and Recent Accounting Pronouncements

Effective September 15, 2009, Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) No. 815-10-65-1, formerly Statement No. 161, “Disclosures about Derivative Instruments and Hedging Activities—An Amendment of FASB Statement No. 133”, which was orignally issued in March 2008, requires enhanced qualitative disclosures about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts of and gains and losses on derivative instruments, and disclosures about credit-risk-related contingent features in derivative agreements. FASB ASC No. 815-10-65-1 was effective for the Company for the interim period beginning April 1, 2009, and did not have an effect on the Company’s condensed consolidated financial statements.

In April 2009, the FASB issued FASB ASC No. 820, formerly FASB Staff Position FAS 157-4,“Determining Fair Value When the Volume and Level of Activity For the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly”. FASB ASC No. 820 provides additional guidance for estimating fair value when the volume and level of activity for the asset or liability have decreased significantly. FASB ASC No. 820 also provides guidance on identifying circumstances that indicate a transaction is not orderly. The provisions of FASB ASC No. 820 were effective for the Company’s interim period ended June 30, 2009 and did not have a material effect on the Company’s condensed consolidated financial statements.

In April 2009, FASB ASC No. 320-10 and FASB ASC No. 958-320, formerly FASB Staff Positions FAS 115-2 and FAS 124-2, “Recognition and Presentation of Other-Than-Temporary Impairments” were issued. FASB ASC No. 320-10 and FASB ASC No. 958-320 establish methodologies of determining and recording other-than-temporary impairments of debt securities and expands disclosures about fair value measurements. The provisions were effective for the Company’s interim period ended June 30, 2009 and are reflected in the Company’s condensed consolidated financial statements.

In April 2009, the FASB issued FASB ASC No. 825-10-50 and FASB ASC No. 270-10, formerly FASB Staff Position on FAS 107-1 and APB 28-1, “Interim Disclosures About Fair Value of Financial Instruments”. FASB ASC No. 825-10-50 and FASB ASC No. 270-10 require disclosures about fair value of financial instruments in interim reporting periods of publicly-traded companies that were previously only required to be disclosed in annual financial statements. The provisions of the ASC’s were effective for the Company for the interim period ended June 30, 2009. The disclosure provisions of these ASC’s are reflected in the Company’s condensed consolidated financial statements.

In May 2009, the FASB issued FASB ASC No. 855-10, (the ASC), formerly Statement No. 165, “Subsequent Events”. FASB ASC No. 855-10 establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or available to be issued. The ASC does not apply to subsequent events or transactions that are within the scope of other generally accepted accounting principles (GAAP) that provide different guidance on the accounting treatment for subsequent events or transactions. FASB ASC No. 855-10 was effective for interim or annual financial periods after June 15, 2009. The Company adopted the provisions of FASB ASC No 855-10 for the quarter ended June 30, 2009, as required, and adoption did not have a material impact on the Company’s condensed consolidated financial statements.

FIRST ROBINSON FINANCIAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

On June 12, 2009, the FASB issued SFAS No. 166, “Accounting for Transfers of Financial Assets”, (“SFAS 166”). SFAS 166 is a revision to FAS 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities”, and will require more information about transfers of financial assets, including securitization transactions, and where companies have continuing exposure to the risks related to transferred financial assets. SFAS 166 also eliminates the concept of a “qualifying special-purpose entity”, changes the requirements for derecognizing financial assets and requires additional disclosures. SFAS 166 will be effective as of the beginning of the Company’s first annual reporting period that begins after November 15, 2009, for interim periods within that first annual reporting period and for interim and annual reporting periods thereafter. Earlier application is prohibited. The recognition and measurement provisions of SFAS 166 shall be applied to transfers that occur on or after the effective date. The Company will adopt SFAS 166 on April 1, 2010, as required. Management has not determined the impact adoption may have on the Company’s consolidated financial statements.

On June 12, 2009, the FASB issued Statement of Financial Accounting Standards No. 167, “Amendments to FASB Interpretation No. 46(R)” (“SFAS167”). SFAS 167 is a revision to FASB Interpretation No. 46(R), “Consolidation of Variable Interest Entities,” and changes how a company determines when an entity that is insufficiently capitalized or is not controlled through voting (or similar rights) should be consolidated. The determination of whether a company is required to consolidate an entity is based on, among other things, an entity’s purpose and design and a company’s ability to direct the activities of the entity that most significantly impact the entity’s economic performance. SFAS 167 will be effective as of the Company’s first annual reporting period that begins after November 15, 2009, for interim periods within that first annual reporting period and for interim and annual reporting periods thereafter. Earlier adoption is prohibited. The Company will adopt SFAS 167 on April 1, 2010, as required. Management has not determined the impact adoption may have on the Company’s consolidated financial statements.

On June 29, 2009, the FASB issued FASB ASC No. 105, formerly Statement of Financial Accounting Standards No. 168 (“SFAS 168”) “Accounting Standards Codification™ and the Hierarchy of Generally Accepted Accounting Principles” – a replacement of FASB Statement No. 162. FASB ASC No. 105 establishes the FASB Accounting Standards Codification™as a source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in conformity with US GAAP. FASB ASC No. 105 was effective for financial statements issued for interim and annual reporting periods ending after September 15, 2009, for most entities. On the effective date, all non-SEC accounting and reporting standards will be superceded. The Company adopted FASB ASC No. 105 for the quarterly period ended September 30, 2009, as required, and adoption did not have a material impact on the Company’s consolidated financial statements.

3.	Fair Value Measurements

In accordance with FASB ASC No. 820, formerly Statement of Financial Standards No. 157, Fair Value Measurements (“FAS 157”), which was effective April 1, 2008, the Company adopted FASB ASC No. 820. FASB ASC No. 820 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements and has been applied prospectively as of the beginning of the year.

FASB ASC No. 820 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. FASB ASC No. 820 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:

FIRST ROBINSON FINANCIAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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 condensed consolidated balance sheet at September 30, 2009 and March 31, 2009.

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, and mortgage-backed securities. The value of the Company’s Level 2 securities is set forth below. 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.

The following table presents the Company’s assets that are measured at fair value on a recurring basis and the level within the FASB ASC No. 820 hierarchy in which the fair value measurements fall as of September 30, 2009 and March 31, 2009 (in thousands):

	Carrying value at September 30, 2009
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	$	60,774	$	—	$	60,774	$	—

	Carrying value at March 31, 2009
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	$	55,925	$	—	$	55,925	$	—

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. Following is a description of the valuation methodologies for assets and liabilities measured at fair value on a non-recurring basis and recognized in the accompanying balance sheets, as well as the general classification of such assets and liabilities pursuant to the valuation hierarchy.

FIRST ROBINSON FINANCIAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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 FASB ASC No. 310-10-45 (“ASC 310-45”) “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.

Impaired loans are classified within Level 3 of the fair value hierarchy.

Mortgage Servicing Rights

The fair value used to determine the valuation allowance is estimated using discounted cash flow models. Due to the nature of the valuation inputs, mortgage servicing rights are classified within Level 3 of the hierarchy.

Cost Method Investments

Cost method investments do not trade in an active, open market with readibly observable prices. The cost method invesments are peridoically reviewed for impairment based on each investee’s earning performance, asset quality, changes in the economic environment, and current and projected future cash flows. Due to the nature of the valuation inputs, cost method investments are classified within Level 3 of the hierarchy.

The following table presents the fair value measurement of assets measured at fair value on a nonrecurring basis and the level within the FASB ASC No. 820 fair value hierarchy in which the fair value measurements fall at September 30, 2009 and March 31, 2009:

Carrying value at September 30, 2009

Quoted Prices in

Significant

Active Markets

Other

Significant

for Identical

Observable

Unobservable

Assets

Inputs

Description

Fair Value

(Level 1)

(Level 2)

(Level 3)

Impaired loans

121

—

121

Cost method investments

—

			Carrying value at March 31, 2009
			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	$	154	$	—	$	—	$	154
Motgage servicing rights		243		—		—	$	243

FIRST ROBINSON FINANCIAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The following methods were used to estimate fair values of the Company’s financial instruments. The fair values of certain of these instruments were calculated by discounting expected cash flows, which involves significant judgments by management and uncertainties. Fair value is the estimated amount at which financial assets or liabilities could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. Because no market exists for certain of these financial instruments and because management does not intend to sell these financial instruments, the Company does not know whether the fair values shown below represent values at which the respective financial instruments could be sold individually or in the aggregate.

Carrying amount is the estimated fair value for cash and cash equivalents, interest-bearing deposits, loans held for sale, federal funds sold, Federal Reserve and Federal Home Loan Bank stocks, accrued interest receivable and payable, and advances from borrowers for taxes and insurance. Security fair values equal quoted market prices, if available. If quoted market prices are not available, fair value is estimated based on quoted market prices of similar securities. The fair value of loans is estimated by discounting the future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities. Loans with similar characteristics were aggregated for purposes of the calculations. On demand deposits, savings accounts, NOW accounts, and certain money market deposits the carrying amount approximates fair value. The fair value of fixed-maturity time deposits is estimated using a discounted cash flow calculation that applies the rates currently offered for deposits of similar remaining maturities. On other borrowings and short-term borrowings, rates currently available to the Company for debt with similar terms and remaining maturities are used to estimate the fair value of existing debt.

The fair value of commitments to originate loans is estimated using the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the present creditworthiness of the counterparties. For fixed-rate loan commitments, fair value also considers the difference between current levels of interest rates and the committed rates. The fair value of forward sale commitments is estimated based on current market prices for loans of similar terms and credit quality. The fair values of letters of credit and lines of credit are based on fees currently charged for similar agreements or on the estimated cost to terminate or otherwise settle the obligations with the counterparties at the reporting date.

FIRST ROBINSON FINANCIAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

	September 30, 2009				March 31, 2009
	Carrying				Carrying
	Amount		Fair Value		Amount		Fair Value
	(In thousands)
Financial assets
Cash and cash equivalents	$	6,186	$	6,186	$	5,424	$	5,424
Interest-bearing deposits		3,156		3,156		713		713
Federal funds sold		3,872		3,872		7,572		7,572
Available-for-sale securities		60,774		60,774		55,925		55,925
Loans held for sale		419		419		392		392
Loans, net of allowance for loan losses		94,759		95,757		86,365		87,092
Federal Reserve and Federal Home Loan Bank stock		1,006		1,006		811		811
Interest receivable		999		999		824		824

Financial liabilities
Deposits		148,263		140,887		140,088		135,883
Other borrowings		12,387		12,387		9,914		9,927
Short-term borrowings		2,500		2,500		—		—
Advances from borrowers for taxes and insurance		66		66		166		166
Interest payable		300		300		330		330

Unrecognized financial instruments (net of contract amount)
Commitments to originate loans		—		—		—		—
Letters of credit		—		—		—		—
Lines of credit		—		—		—		—

4.	Federal Home Loan Bank Stock

The Company owns approximately $836,000 of Federal Home Loan Bank of Chicago (“FHLB”) stock. During the third quarter of 2007, the FHLB of Chicago received a Cease and Desist Order from its regulator, the Federal Housing Finance Board. The order generally prohibits capital stock repurchases and redemptions until a time to be determined by the Federal Housing Finance Board. The FHLB will continue to provide liquidity and funding through advances. With regard to dividends, which have not been declared since July 24, 2007, the FHLB will continue to assess its dividend capacity each quarter and make appropriate requests for approval. Management performed an analysis and deemed the Company’s investment in FHLB stock to be not impaired as of September 30, 2009.

5.	Authorized Share Repurchase Program

On July 23, 2009, the Board of Directors of the Company voted to approve the extension and expansion of the repurchase program of its equity stock approved on July 24, 2008. The Company may repurchase up to 10,000 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 2.5% of the Company’s issued and outstanding shares. As of July 22, 2009, the Company had repurchased 22,782 shares of its common stock out of the 26,892 shares that had been previously authorized for repurchase leaving 4,110 remaining to be purchased. As a result of these combined actions, the Company is currently authorized to repurchase 14,110 shares of common stock. The program has been extended to August 2, 2010 or the earlier of the completion of the repurchase of the 14,110 shares. As of November 10, 2009, 1,950 shares of the 14,110 have been purchased in the expanded program leaving 12,160 remaining to be purchased pursuant to this share repurchase program.

FIRST ROBINSON FINANCIAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

6.	Investment Securities

The amortized cost and approximate fair values of available-for-sale securities are as follows:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Approximate Fair Value
			(In thousands)
September 30, 2009
U.S. government agencies	$	17,416	$	339	$	—	$	17,755
Mortgage-backed securities		37,216		1,092		33		38,275
State and political subdivisions		4,647		98		1		4,744

	$	59,279	$	1,529	$	34	$	60,774
March 31, 2009
U.S. government agencies	$	9,793	$	199	$	—	$	9,992
Mortgage-backed securities		39,878		1,045		22		40,901
State and political subdivisions		5,002		52		22		5,032

	$	54,673	$	1,296	$	44	$	55,925

The amortized cost and fair value of available-for-sale securities at September 30, 2009, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

	Amortized Cost		Fair Value
	(In thousands)

Within one year	$	4,641	$	4,698
One to five years		16,255		16,606
Five to ten years		1,167		1,195

Investment securities		22,063		22,499
Mortgage-backed securities		37,216		38,275

Totals	$	59,279	$	60,774

Proceeds from the sale of investment securities available-for-sale during the three months and six-months ended September 30, 2009 were $2,508,000 and $15,408,000, respectively. Gross gains from the sale of investment securities available-for-sale for the three months ended September 30, 2009 were $5,000 with no gross losses. Gross gains of $113,000 and gross losses of $7,000 were realized on the sales for the six-months ended September 30, 2009.

FIRST ROBINSON FINANCIAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The following table shows our investments’ gross unrealized losses and fair value (in thousands), aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at September 30, 2009 and March 31, 2009. At September 30, 2009, the Company does not hold any security that it considers other-than-temporarily impaired.

Description of Securities	Less than 12 Months				More than 12 Months				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
As of September 30, 2009
Mortgage-backed securities	$	3,505	$	32	$	78	$	1	$	3,583	$	33
State and political subdivisions		—		—		228		1		228		1

Total temporarily impaired securities	$	3,505	$	32	$	306	$	2	$	3,811	$	34

As of March 31, 2009
Mortgage-backed securities	$	6,307	$	20	$	125	$	2	$	6,432	$	22
State and political subdivisions		290		16		225		6		515		22

Total temporarily impaired securities	$	6,597	$	36	$	350	$	8	$	6,947	$	44

There are 8 securities in an unrealized loss position in the investment portfolio at September 30, 2009, all due to interest rate changes and not credit events. These unrealized losses are considered temporary and, therefore, have not been recognized into income, because the issuers are of high credit quality and management has the ability and intent to hold for the foreseeable future. The fair value is expected to recover as the investments approach their maturity date or there is a downward shift in interest rates. All mortgage-backed securities in the portfolio are residential properties.

7.	Lines of Credit

The Company’s revolving line of credit note payable matured on July 31, 2009 but was extended to September 30, 2009. The revoloving line of credit renewed on September 17, 2009 and increased from $600,000 to $2,500,000 with the renewal. The balance of the revolving line of credit was $2,500,000 and $0 as of September 30, 2009 and March 31, 2009, respectively. The note bears interest at the prime commercial rate with a floor of 3.50% which was the rate on September 30, 2009, matures on September 16, 2010, and is secured by 100% stock of the Bank.

The Bank maintains a $5,000,000 revolving line of credit, of which none was outstanding at September 30, 2009 and March 31, 2009, with an unaffiliated financial institution. The line bears interest at the federal funds rate of the financial institution (1.0% at September 30, 2009), has an open-end maturity and is unsecured if used for less than fifteen (15) consecutive business days.

The Bank has also established borrowing capabilities at the Federal Reserve Bank of St. Louis discount window. Investment securities of $3,000,000 have been pledged as collateral. As of September 30, 2009 and March 31, 2009 no amounts were outstanding. The primary credit borrowing rate at September 30, 2009 was 0.50%, has a term of up to 90 days, and has no restrictions on use of the funds borrowed.

FIRST ROBINSON FINANCIAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

8.	Earnings (Loss) Per Share for the Three-Month Periods

Basic earnings (loss) per share is calculated by dividing net income (loss) by the weighted average number of common shares outstanding during the period. Diluted earnings (loss) per share gives effect to the increase in the average shares outstanding resulting from the exercise of dilutive stock options and the effect of the incentive plan shares. As of September 30, 2009 and 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 periods ended September 30, 2009 or 2008. The components of basic and diluted earnings (loss) per share for the three months ended September 30, 2009 and 2008 were computed as follows (dollar amounts in thousands except share data):

				Weighted
				Average		Per Share
	Income (Loss)			Shares		Amount

For the Three-Months Ended September 30, 2009:

Basic Earnings (Loss) per Share:
Income (loss) available to common stockholders	$	(34	)		417,916	$	(0.08	)

Effect of Dilutive Securities:
Incentive plan shares					15,996

Diluted Earnings (Loss) per Share:
Income (loss) available to common stockholders	$	(34	)		433,912	$	(0.08	)

For the Three-Months Ended September 30, 2008:

Basic Earnings per Share:
Income available to common stockholders	$	244			439,170	$	0.56

Effect of Dilutive Securities:
Incentive plan shares					16,148

Diluted Earnings per Share:
Income available for common stockholders	$	244			455,318	$	0.54

FIRST ROBINSON FINANCIAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

8. Earnings Per Share for the Six-Month Periods

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 September 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 six month periods ended September 30, 2009 and 2008. The components of basic and diluted earnings per share for the six months ended September 30, 2009 and 2008 were computed as follows (dollar amounts in thousands except share data):

			Weighted
			Average		Per Share
	Income		Shares		Amount

For the Six-Months Ended September 30, 2009:

Basic Earnings per Share:
Income available to common stockholders	$	129		418,586	$	0.31

Effect of Dilutive Securities:
Unearned incentive plan shares				15,947

Diluted Earnings per Share:
Income available to common stockholders	$	129		434,533	$	0.30

For the Six-Months Ended September 30, 2008:

Basic Earnings per Share:
Income available to common stockholders	$	418		439,386	$	0.95

Effect of Dilutive Securities:
Unearned incentive plan shares				16,058

Diluted Earnings per Share:
Income available for common stockholders	$	418		455,444	$	0.92

9.	Subsequent Events

Subsequent events have been evaluated through November 13, 2009, which is the date the financial statements were issued.

Item 2:

FIRST ROBINSON FINANCIAL CORPORATION

Management’s Discussion and Analysis of Financial Condition

And Results of Operations

Forward-Looking Statements

When used in this filing and in future filings by First Robinson Financial Corporation (the “Company”) with the Securities and Exchange Commission, in the Company’s press releases or other public or shareholder communications, or in oral statements made with the approval of an authorized executive officer, the words or phrases “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 nationally and 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; employees; unforseen difficulties and higher than expected costs associated with the implementation of our Strategic Plan; or failure to improve operating efficiencies through expense controls; 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.

Critical Accounting Policies

The accounting and reporting policies of the Company are in accordance with accounting principles generally accepted in the United States and conform to general practices within the banking industry. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions. The financial position and results of operations can be affected by these estimates and assumptions and are integral to the understanding of reported results. Critical accounting policies are those policies that management believes are the most important to the portrayal of the Company's financial condition and results, and they require management to make estimates that are difficult, subjective, or complex.

Allowance for Loan Losses - The allowance for loan losses provides coverage for probable losses inherent in the Company's loan portfolio. Management evaluates the adequacy of the allowance for credit losses each quarter based on changes, if any, in underwriting activities, the loan portfolio composition (including product mix and geographic, industry or customer-specific concentrations), trends in loan performance, regulatory guidance and economic factors. This evaluation is inherently subjective, as it requires the use of significant management estimates. Many factors can affect management's estimates of specific and expected losses, including volatility of default probabilities, rating migrations, loss severity and economic and political conditions. The allowance is increased through provisions charged to operating earnings and reduced by net charge-offs.

The Company determines the amount of the allowance based on relative risk characteristics of the loan portfolio. The allowance recorded for commercial loans is based on reviews of individual credit relationships and an analysis of the migration of commercial loans and actual loss experience. The allowance recorded for homogeneous consumer loans is based on an analysis of loan mix, risk characteristics of the portfolio, fraud loss and bankruptcy experiences, and historical losses, adjusted for current trends, for each homogenous category or group of loans. The allowance for credit losses relating to impaired loans is based on the loan's observable market price, the collateral for certain collateral-dependent loans, or the discounted cash flows using the loan's effective interest rate.

Regardless of the extent of the Company's analysis of customer performance, portfolio trends or risk management processes, certain inherent but undetected losses are probable within the loan portfolio. This is due to several factors including inherent delays in obtaining information regarding a customer's financial condition or changes in their unique business conditions, the judgmental nature of individual loan evaluations, regulatory input, collateral assessments and the interpretation of economic trends. Volatility of economic or customer-specific conditions affecting the identification and estimation of losses for larger non-homogeneous credits and the sensitivity of assumptions utilized to establish allowances for homogeneous groups of loans are among other factors. The Company estimates a range of inherent losses related to the existence of the exposures. The estimates are based upon the Company's evaluation of risk associated with the commercial and consumer allowance levels and the estimated impact of the current economic environment.

FIRST ROBINSON FINANCIAL CORPORATION

Management’s Discussion and Analysis of Financial Condition

And Results of Operations

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, Illinois and one full service office in Knox County, Indiana. Assets grew $13.1 million from $164.4 million at March 31, 2009 to $177.5 million at September 30, 2009. See “Financial Condition” for more information. The Company had a net loss of $34,000 for the three month period ending September 30, 2009, versus net income of $244,000 in the same period of 2008, a decrease of 113.9%. For the six months ended September 30, 2009, the Company earned $129,000 compared to $418,000 for the same period of 2008, a decrease of $289,000, or 69.1%. The primary reason for the decrease in earnings can be attributed to the increase in the FDIC insurance assessment in both the three-month and six-month periods and the recognized loss on a cost basis equity security investment owned by the Company. See “Results of Operations” for further information. Basic earnings (loss) per share for the three month period were $(0.08) per share and $0.31 for the six month period ended September 30, 2009 versus $0.56 per share for the three month period and $0.95 for the six month period ended September 30, 2008. Diluted earnings (loss) per share reflect incentive plan shares and the potential dilutive impact of stock options granted under the stock option plan and the effect of the incentive plan shares. Diluted earnings (loss) per share for the three months and six months ending September 30, 2009 were $(0.08) and $0.30 respectively. For the three months and six months ending September 30, 2008, diluted earnings per share were $0.54 per share and $0.92 per share, repsectively .

The Company’s principal business, through its operating subsidiary, the Bank, consists of accepting deposits from the general public in our market area 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. With the addition of a branch in Vincennes, Indiana, our market area has expanded to include Knox and surrounding counties in Indiana along with Crawford and contiguous counties in Illinois.

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.

In response to the current national and international economic recession, however, the U.S. government has taken a variety of actions intended to stimulate the national economy, including the passage of legislation, such as the Emergency Economic Stabilization Act of 2008 (the “EESA”), and the implementation of certain programs by federal agencies.

The first program put forth by the U.S. Treasury pursuant to its authority under the EESA was the Troubled Asset Relief Program’s Capital Purchase Program (the “CPP”). Pursuant to the CPP, the US Treasury, on behalf of the US government, intends to purchase up to $250 billion of preferred stock, along with warrants to purchase common stock, from certain financial institutions that applied to receive funds. The CPP is intended to shore up bank capital and to stimulate lending. Neither the Company nor the Bank has participated in the CPP.

FIRST ROBINSON FINANCIAL CORPORATION

Management’s Discussion and Analysis of Financial Condition

And Results of Operations

Another recently implemented program intended to stabilize the nation’s banking system is the Term Asset-Backed Securities Loan Facility (the “TALF”) promulgated by the Board of Governors of the Federal Reserve System (the “Federal Reserve”). The program, which became operational in March, 2009, is intended to increase credit availability and support economic activity by facilitating renewed issuance of consumer and small business asset-backed securities (“ABS”) and commercial mortgage-backed securities (“CMBS”). Under TALF, the Federal Reserve Bank of New York will finance the purchase of eligible ABS and CMBS by investors that own eligible collateral so long as such investor maintains an account relationship with a primary dealer. Generally, eligible ABS must be newly issued, highly rated ABS collateralized by student loans, auto loans, credit card loans, and loans guaranteed by the Small Business Administration. Eligible CMBS must also meet certain requirements, including: (i) it must entitle its holders to payments of principal and interest throughout its remaining term, (ii) it must bear interest at a fixed pass-through rate or at a rate based on the weighted average of the underlying fixed mortgage rates, and (iii) the CMBS must not be junior to other securities with claims on the same pool of loans. Minimum loan sizes under the TALF will be $10 million and TALF loans will generally have a three year maturity. The Federal Reserve has also determined that certain high-quality commercial mortgage-backed securities issued before January 1, 2009 will become eligible collateral under the TALF. Starting in June 2009, however, TALF loans secured by SBA Pool Certificates, SBA Development Company Participation Certificates, or ABS secured by student loans or commercial mortgages will have a five-year maturity if the borrower so elects. The facility will cease making TALF loans collateralized by newly issued CMBS on June 30, 2010, and TALF loans collateralized by other TALF-eligible newly issued and legacy ABS on March 31, 2010, unless the Board of Governors extends the facility.

In response to the current reserve ratios of the Deposit Insurance Fund, and the need to restore it to its statutory minimum, the Federal Deposit Insurance Corporation (the “FDIC”) announced on May 22, 2009, a final rule imposing a 5 basis point special assessment on each insured depository institution’s assets minus Tier 1 capital as of June 30, 2009 (although no institution’s special assessment exceeded 10 basis points times the institution’s assessment base for the second quarter of 2009). The Company’s special assessment of $81,000 was paid on September 30, 2009.

The FDIC has announced that a three year prepaid assessment will be collected December 30, 2009 from insured institutions. Under the rule, the prepaid amount will be based on an institution’s assessment rate and assessment base for the third quarter of 2009, assuming a 5% annual growth in deposits each year. While the FDIC plan will maintain current assessment rates through 2010, effective January 1, 2011, the rates will increase by three basis points across the board (e.g., Risk Catagory I banks paying 12-16 basis points for 2010 would pay 15-19 basis points). Additionally, the FDIC voted to extend the DIF restoration plan from seven to eight years, with a target of returning the fund to a 1.15% reserve ratio (the minimum required by law) by the first quarter of 2014. The total prepayment will be booked as a “prepaid expense” asset and will qualify as a zero risk weight under the risk-based capital requirements. Any prepayment amounts not exhausted after collection of the amount due on June 30, 2013, will be refunded to the institution, rather than on December 30, 2014, as originally proposed.

Finally, the FDIC promulgated a temporary liquidity guarantee program that had both a debt guarantee component, whereby the FDIC agreed to guarantee certain senior unsecured debt issued by eligible financial institutions between October 14, 2008 and October 31, 2009, and a transaction account guarantee component (TAG), whereby the FDIC agreed to insure 100% of non-interest bearing deposit transaction accounts held at eligible financial institutions, such as lawyers’ trust accounts, payment processing accounts, payroll accounts and working capital accounts through June 30, 2010. The FDIC has granted an extension of the transaction account guarantee component of this program. Institutions have until November 2, 2009 to opt-out of the TAG. The Bank opted out of participation in the debt guarantee program but does participate in the TAG program.

On May 22, 2009, President Obama signed into law the Credit Card Accountability, Responsibility and Disclosure Act of 2009 (the “Credit Card Act”). The law made significant changes to the Truth in Lending Act as implemented by the Federal Reserve’s Regulation Z. The Credit Card Act imposes a number of changes upon credit card issuers by February 2010, although a limited number of changes went into effect in August 2009. This has no impact on the Company as the Company does not issue credit cards.

The extent to which these programs and others like them will succeed in ameliorating tight credit conditions or otherwise result in an improvement in the national economy is uncertain. It is also likely, but not certain, that additional legislation affecting financial institutions (such as the Bank) and their holding companies (such as the Company) will be enacted.

Legislative and regulatory changes continue to be proposed with respect to consumer financial products and services. The most significant of these proposals was released by the U.S. Treasury in June 2009 and involves the creation of a new, independent federal agency to be called the Consumer Financial Protection Agency. The proposed agency would regulate consumer financial products and services and provide minimum, uniform rules with respect to such products, including products currently offered by the Bank. The proposal also includes a rollback of preemption for federally chartered banks (like the Bank) such that a broad category of state consumer law not currently applicable to the Bank would be applicable to the operations and product offerings of the Bank, its subsidiaries and its affiliates. In addition, the proposed agency would have sole rulemaking and interpretive authority. Debate continues with respect to the creation and powers of the proposed agency and there is no way to predict whether it will be created and, if it is, the authority it will possess.

FIRST ROBINSON FINANCIAL CORPORATION

Management’s Discussion and Analysis of Financial Condition

And Results of Operations

We continue to maintain a strong presence in the community and are pleased to be one of the few independent community banks in our primary market area. 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 between 60-90 days delinquent, the loan will generally be referred to the Company’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 Company 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 Company’s loan delinquencies by type, by amount and by percentage of type at September 30, 2009.

	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		7	$	158		0.35	%		—		—		—		7	$	170		0.37	%		14	$	328		0.72	%
Construction or development		2		160		4.01			—		—		—		—		—		—			2		160		4.01
Commercial and agriculture		1		38		0.23			—		—		—		—		—		—			1		38		0.23
State and municipal government		2		96		2.14			—		—		—		—		—		—			2		96		2.14	%
Consumer and other loans		5		15		0.15			—		—		—		1		7		0.07			6		22		0.22	%
Commercial business and agricultural finance		3		33		0.20			—		—		—		4		43		0.25			7		76		0.45	%

Total		20	$	500		0.51	%		—		—		—		12	$	220		0.22	%		32	$	720		0.73	%


(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.

	September 30,			March 31,			September 30,

	2009			2009			2008
				(In thousands)
Non-accruing loans:
One- to four-family	$	170		$	192		$	157
Consumer and other loans		7			14			—
Commercial business and agricultural finance		43			29			21
Total		220			235			178

Foreclosed/Repossessed assets:
One- to four-family		30			46			90
Total		30			46			90

Total non-performing assets	$	250		$	281		$	268
Total as a percentage of total assets		0.14	%		0.17	%		0.18	%

Gross interest income which would have been recorded had the non-accruing loans been current in accordance with their original terms amounted to approximately $4,000 for the three months and $6,000 for the six months ended September 30, 2009 and $6,000 for the three months and $10,000 for the six months ended September 30, 2008.

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 Company 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 September 30, 2009, the Company had classified a total of $400,000 of its assets as substandard and $195,000 as doubtful. At September 30, 2009, total classified assets comprised $595,000, or 4.9% of the Company’s capital, and 0.3% of the Company’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 September 30, 2009, there were $4.8 million in loans identified, but not classified, by the Company 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.

At September 30, 2009, the Company had a commercial loan in the amount of $1.0 million, secured by the common stock of a financial institution. The borrower is under formal enforcement action by its regulator with respect to its capital position due to the borrower’s deteriorating investment portfolio. The borrower is attempting to raise additional capital or negotiate a merger with another financial institution to address the regulatory concerns. The Company will continue to monitor and evaluate this loan as information and progress reports are received from the borrower. Due to the nature of the collateral and the economic stress on the financial industry, the Company could incur losses on this commercial loan.

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 value minus 20% of the fair 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 value less 10% of the 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 September 30, 2009, the Bank had one real estate property acquired through foreclosure. An offer has been accepted and the property will be sold in the coming quarter.

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 Company’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 operations. Such agencies may require the Bank to increase the Bank’s allowance for loan losses, increase classified assets, or take other actions that could significantly affect the Company’s earnings based upon their judgment of the information available to them at the time of their examination. At September 30, 2009, the Company had a total allowance for loan losses of $893,000, representing 0.94% of the Company’s loans, net. At March 31, 2009, the Company’s total allowance for loan losses to the Company’s loans, net was at 0.90%.

FIRST ROBINSON FINANCIAL CORPORATION

Management’s Discussion and Analysis of Financial Condition

And Results of Operations

The distribution of the Company’s allowance for losses on loans at the dates indicated is summarized as follows:

	September 30, 2009								March 31, 2009
	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 including loans held for sale	$	115	$	45,374			46.26	%	$	66	$	43,903			48.59	%
Multi-family		—		1,257			1.28			—		1,242			1.38
Commercial and agricultural real estate		505		16,200			16.52			458		14,793			16.37
Construction or development		—		3,989			4.07			—		2,624			2.90
Consumer and other loans		34		9,806			10.00			34		7,783			8.62
State and municipal governments		—		4,486			4.57			—		2,172			2.40
Commercial business and agricultural finance		239		16,964			17.30			222		17,835			19.74

Gross Loans				98,076			100.00	%				90,352			100.00	%
Unallocated		—								—
Deferred loan fees				(3	)							(4	)
Undisbursed portion of loans				(2,002	)							(2,811	)
Total	$	893	$	96,071					$	780	$	87,537

The following table sets forth an analysis of the Company’s allowance for loan losses.

	Three Months Ended September 30,						Six Months Ended September 30,
	2009			2008			2009			2008
	(Dollars in thousands)

Balance at beginning of period	$	825		$	757		$	780		$	727

Charge-offs:
One- to four-family		68			—			68			—
Commercial non-residential real estate		—			123			—			123
Consumer and other loans		6			20			12			24
Total charge-offs		74			143			80			147

Recoveries:
One- to four-family		—			—			—			1
Consumer and other loans		7			8			13			11
Total recoveries		7			8			13			12

Net charge-offs .		67			135			67			135
Additions charged to operations		135			130			180			160
Balance at end of period	$	893		$	752		$	893		$	752

Ratio of net charge-offs during the period to average loans outstanding during the period		0.07	%		0.17	%		0.07	%		0.18	%

Ratio of net charge-offs during the period to average non-performing assets		22.64	%		39.06	%		23.45	%		41.73	%

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 $13.1 million, or 7.9%, to $177.5 million at September 30, 2009 from $164.4 million at March 31, 2009. The increase in assets was primarily due to an increase of $8.4 million, or 9.7%, loans receivable, net, and an increase of $4.8 million, or 8.7%, in available for sale securities.

Cash and cash equivalents decreased by $495,000 from $13.7 million at March 31, 2009 to $13.2 million at September 30, 2009. The decrease resulted from the funds being used to purchase additional available-for-sale securities and to fund loan growth. The Company’s non-interest earning deposits are with Independent Bankers Bank (“IBB”) located in Springfield, Illinois. As IBB is a participant in the Transaction Account Guarantee Program, the Company’s deposits are insured.

Available-for-sale investment securities increased to $60.8 million at September 30, 2009 compared to $55.9 million at March 31, 2009, a $4.8 million increase. The increase resulted from the purchase of $27.0 million in available-for-sale securities and the realized net gain on sale of available-for-sale securities of $106,000, and the increase of $243,000 in the market valuation of the available-for-sale portfolio, offset by $6.6 million in repayments on mortgage-backed securities, by $330,000 in proceeds from the maturity of available-for-sale securities, and by $15.4 million in proceeds from the sale of available-for-sale securities, and the amortization of $126,000 of premiums and discounts on investments. 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.

During April 2009, the Company was required to purchase $195,000 in additional Federal Home Loan Bank (“FHLB”) stock which increased our holdings to $836,000. The amount of required investment in FHLB stock is calculated based on a formula which includes the amount of one- to- four family dwelling loans held in the Company’s loan portfolio and the amount of mortgage-backed securities held in the Company’s investment portfolio. Due to the increase in both of these factors on the balance sheet, we were required to purchase the additional shares.

The Company's net loan portfolio including loans held for sale increased by $8.4 million to $95.2 million at September 30, 2009 from $86.8 million at March 31, 2009. Loans on one- to four-family real estate, including one- to four-family loans held for sale, increased by $1.4 million, or 3.3%; commercial nonresidential real estate and farmland loans increased by $1.4 million, or 9.5%; construction and development loans increased by $1.4 million, or 52.0%; consumer and other loans increased by $2.0 million, or 26.0%; loans to state and municpal governments increased by $2.3 million, or 106.5%; and loans on multi-family properties increased $15,000, or 1.2%. These increases were offset, in part, by the decrease of $871,000, or 4.9%, in commercial business and agricultural finance loans. The total amount of undisbursed closed-ended lines of credit decreased by $809,000, or 28.8% from $2.8 million at March 31, 2009 to $2.0 million at September 30, 2009.

At September 30, 2009, the allowance for loan losses was $893,000, or 0.94% of the net loan portfolio, an increase of $113,000 from the allowance for loan losses at March 31, 2009 of $780,000, or 0.90% of the net loan portfolio. During the first six-months of fiscal 2010, the Company charged off $80,000 of loan losses, $68,000 on a one- to four- family property and the remaining $12,000 in consumer and other loans. The chargeoffs of $80,000 were 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 one foreclosed real estate property held for sale at September 30, 2009 with no change from March 31, 2009. Foreclosed assets are carried at lower of cost or fair value. When foreclosed assets are acquired, any required adjustment is charged to allowance for loan losses. All subsequent activity is included in current operations.

Total deposits increased by $8.2 million, or 5.8%, to $148.3 million at September 30, 2009 from $140.1 million at March 31, 2009. The increase in total deposits was due to an increase of $1.1 million in certificates of deposit, an increase of $6.2 million in savings, NOW, and money market accounts, and an increase of $918,000 in non-interest bearing demand deposits.

Other borrowings, consisting entirely of repurchase agreements, increased $2.5 million, or 24.9% from $9.9 million at March 31, 2009 to $12.4 million at September 30, 2009. The obligations are secured by mortgage-backed securities and US Government agency obligations. At September 30, 2009, the average rate on the repurchase agreements was 0.32% compared to 0.30% at March 31, 2009. The rate on approximately $10.7 million of the repurchase agreements reprice daily. All agreements mature periodically within 24 months.

FIRST ROBINSON FINANCIAL CORPORATION

Management’s Discussion and Analysis of Financial Condition

And Results of Operations

The short-term borrowing consists of the Company’s revolving line of credit note payable that matured on July 31, 2009 but was extended to September 30, 2009. The revoloving line of credit renewed on September 17, 2009 and increased from $600,000 to $2,500,000 with the renewal. The balance of the revolving line of credit was $2,500,000 and $0 as of September 30, 2009 and March 31, 2009, respectively. The note bears interest at the prime commercial rate with a floor of 3.50% which was the rate on September 30, 2009, matures on September 16, 2010, and is secured by the Bank.

Stockholders' equity at September 30, 2009 was $12.1 million compared to $12.3 million at March 31, 2009, a decrease of $171,000, or 1.4%. Factors relating to the decrease in stockholders’ equity can be attributed to the addition of $129,000 in net income offset by $348,000 in dividends declared and paid, the decrease in additional paid-in-capital of $14,000 due to the purchase of incentive plan shares related to the Directors Retirment Plan and the repurchase of $70,000 in treasury shares offset, in part, to the increase of $132,000 in accumulated other comprehensive income due to the increase in the fair value of securities available for sale.

Results of Operations

Net Income

The Company recorded a net loss of $34,000 for the three month period ending September 30, 2009, versus net income of $244,000 in the same period of 2008, a decrease of 113.9%. Earnings for the three months ended September 30, 2009 were positively impacted by a $107,000, or 26.2%, increase in non-interest income which was offset by an increase of $472,000, or 44.4%, in non-interest expense and a decrease of $25,000, or 2.4%, in net interest income after provision when compared to the prior year. Basic earnings (loss) per share for the September 30, 2009 three month period were $(0.08) per share versus $0.56 per share for the same period of 2008. Diluted earnings (loss) per share reflect incentive plan shares and the potential dilutive impact of stock options granted under the stock option plan. Diluted earnings (loss) per share for the three months ending September 30, 2009 were $(0.08) compared to $0.54 at September 30, 2008. For the six month period ended September 30, 2009, the Company earned $129,000, a decrease of $289,000, or 69.1%, from $418,000 for the six months ending September 30, 2008. Earnings for the six months ended September 30, 2009 were positively impacted by a $341,000, or 40.6%, increase in non-interest income which was offset by an increase of $663,000, or 28.9%, in non-interest expense and a decrease of $103,000, or 2.4%, in net interest income after provision when compared to the prior year. Basic earnings per share for the September 30, 2009 six month period were $0.31 per share versus $0.95 per share for the same period of 2008. 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 six months ending September 30, 2009 were $0.30 compared to $0.92 at September 30, 2008.

Net Interest Income

For the three-month period ended September 30, 2009, net interest income totaled $1,131,000, a decrease of 1.7%, or $20,000, compared to the same period of 2008. The decrease in net interest income can be attributed due to an increase of $74,000, or 9.6%, in total interest expense, offset by the increase of $54,000, or 2.8%, in total interest income. The increase in total interest expense is due to the increase of $113,000, or 15.9%, in interest expense on deposits, a $6,000 increase in interest expense on the short-term borrowing, a $1,000 increase on interest expense related to federal funds purchased and a $1,000 increase on advances from the Federal Home Loan Bank of Chicago, offset by the decrease of $47,000, or 82.5%, in interest expense on other borrowings for the three months ended September 30, 2009 compared to the three months ended September 30, 2008. The increase of $71,000, or 5.3%, from loans receivable and the increase of $16,000, or 76.2%, from tax-exempt securities offset by the decrease of $31,000, or 96.8%, in interest income on deposits and federal funds sold are the contributing factors to the increase of $54,000 in interest income.

For the six-month period ended September 30, 2009, net interest income totaled $2,158,000, a decrease of $83,000, or 3.7%, from the same period in the prior year. Contributing to the decrease was the increase of $273,000, or 18.2%, in total interest expense, offset by the increase of $190,000, or 5.1% in total interest income. The increase in total interest expense is due to interest expense on deposits increasing $351,000, or 25.2%, a $7,000 increase in interest expense on the short-term borrowing, a $1,000 increase on interest expense related to federal funds purchased and a $1,000 increase on advances from the Federal Home Loan Bank of Chicago, for the six months ended September 30, 2009 when compared to the same period in the prior year. These increases are offset, in part, by other borrowings decreasing by $87,000, or 82.1%. The increase in total interest income can be attributed to a $156,000, or 16.8%, increase in interest income from taxable securities, the increase of $105,000, or 4.0%, in interest income from loans receivable and a $33,000, or 78.6%, increase in tax-exempt securities interest income offset, in part, by the decrease of $104,000, or 95.4%, in other interest income.

FIRST ROBINSON FINANCIAL CORPORATION

Management’s Discussion and Analysis of Financial Condition

And Results of Operations

For the three-months ended September 30, 2009 total average interest earning assets increased by $31.8 million, or 24.5%, to $161.9 million as of September 30, 2009 from $130.1 million as of September 30, 2008. However, the yield on the earning assets decreased by 103 basis points when comparing the three months ended September 30, 2009 to the same period in 2008. Total average interest bearing liabilities for the three months ended September 30, 2009 were $149.1 million compared to $114.1 million as of September 30, 2008, an increase of $35.0 million, or 30.7%. The cost on the average interest bearing liabilities decreased by 43 basis points. For the three-month period ended September 30, 2009, the net interest spread decreased 60 basis points to 2.61% versus 3.21% in the comparable period of 2008. The decrease in the net interest spread can be partially attributed to market pressures pushing loan and investment rates down while still requiring the Bank to pay mid-market deposit rates. The six-month period ending September 30, 2009 is a copy of the three-months ended September 30, 2009, as far as the increase in both interest-earning assets and interest-bearing liabilities and the decrease in the yield earned and paid. Like the three-month period, the net interest rate spread for the six-months ended September 30, 2009 decreased 63 basis points to 2.51% from 3.14% for the six-months ended September 30, 2008.

The average daily loan balances for the quarter ended September 30, 2009 increased $15.6 million, or 20.0%, to $93.5 million, versus $77.9 million for the same period of 2008. During the same period, the yield on loans decreased 84 basis points to 6.05% from 6.89% for the September 30, 2009 quarter compared to the September 30, 2008 quarter. The average daily loan balances for the six-month period ending September 30, 2009 increased 17.5% to $90.1 million, versus the average daily loan balances of $76.7 million for the same period of 2008. The yield on loans, for the six-months ended September 30, 2009, declined by 80 basis points to 6.13% from 6.93% in the same six-month period of 2008.

The average daily securities balances, the Company’s interest-earning deposits and the federal funds sold balances for the second quarter of fiscal year 2010 increased $16.0 million, or 31.2%, to $67.4 million, versus $51.3 million for the same period of fiscal year 2009. However, the yield on available-for-sale securities, interest-earning deposits and federal funds sold decreased by 115 basis points to 3.31% for the three months ended September 30, 2009 compared to 4.46% for the three months ended September 30, 2008. The average daily balances of securities, interest-earning deposits and federal funds sold for the first six months of fiscal 2010 increased $18.1 million, or 35.7%, to $68.8 million, versus $50.7 million for the same period of fiscal year 2009. The yield on available-for-sale securities, interest-earning deposits and federal funds sold deceased 87 basis points for the six months ending September 30, 2009 to 3.39% from 4.26% as of September 30, 2008.

On an average daily basis, total interest-bearing deposits increased $37.6 million, or 39.3%, to $133.2 million for the three-month period ended September 30, 2009, versus $95.6 million in the same period in 2008. The average cost of funds on deposits decreased by 50 basis points to 2.47% for the September 2009 quarter versus the September 2008 quarter at 2.97%. The average daily balance of interest-bearing deposits for the six-month period ended September 2009 also increased by $37.6 million, or 39.7%, to $132.1 million from $94.5 million. When comparing the average cost of funds on deposits for the September 2009 six-month period to the same period ending September 30, 2008 there was a decrease of 31 basis points, from 2.95% to 2.64%.

For the three-months ended September 30, 2009 versus the same period of 2008, the average daily balance of short-term borrowings, federal funds purchased, Federal Home Loan Bank advances, and other borrowings decreased $2.5 million, or 13.6%, from $18.4 million to $15.9 million. The average cost of funds decreased for the September 2009 quarter by 78 basis points from 1.23% to 0.45%. The average daily balance of short-term borrowings, federal funds purchased, Federal Home Loan Bank advances, and other borrowings for the six-months ended September 30, 2009 decreased by $2.0 million, or 11.4%, to $15.2 million from $17.2 million for the six-month period ending September 30, 2008 while the average cost of funds decreased by 87 basis points to 0.37% from 1.24% when comparing the six-months of fiscal year 2010 to fiscal year 2009.

Provision for Loan Losses

The provision for loan losses for the quarter ended September 30, 2009 was $135,000 with a 3.8% increase over the provision of $130,000 for the September 30, 2008 quarter. 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 September 30, 2009, its allowance for loan losses was adequate.

N FIRST ROBINSON FINANCIAL CORPORATION

Management’s Discussion and Analysis of Financial Condition

And Results of Operations

Non-Interest Income

Non-interest income categories for the three-month and six-month periods ended September 30, 2009 and 2008 are shown in the following table:

	Three Months Ended
	September 30,

	2009		2008		% Change
	(In thousands)
Non-interest income:
Charges and fees on deposit accounts	$	256	$	231		10.8	%
Charges and other fees on loans		78		40		95.0
Net gain on sale of loans		55		30		83.3
Net realized gain on sale of available-for-sale securities		5		2		150.0
Other		121		105		15.2

Total non-interest income	$	515	$	408		26.2	%

	Six Months Ended
	September 30,

	2009		2008		% Change
	(In thousands)
Non-interest income:
Charges and fees on deposit accounts	$	476	$	448		6.3	%
Charges and other fees on loans		178		84		111.9
Net gain on sale of loans		182		72		152.8
Net realized gain on sale of available for sale securities		106		2		5,200.0
Other		239		234		2.1

Total Non-Interest Income	$	1,181	$	840		40.6	%

Non-interest income increased $107,000 when comparing the three-months ended September 30, 2009 to September 30, 2008. The largest contributing factors to the increase were the increase in gain on sale of loans and the fees related to the servicing of loans. The gain on sale of loans is due to the sale of $4.9 million in loans for the three-months ended September 30, 2009 compared to $1.9 million in loans sold during the three months ended September 30, 2008. For the six-months ended September 30, 2009, non-interest income increased $341,000 over the six-months ended September 30, 2008. The increase can be primarily attributed to the net realized gain on the sale of available for sale securities due to the sale of $15.4 million in mortgage-backed and agency securities; and the net gain from the sale of loans. During the six-months ended September 30, 2009, the Company sold $18.7 million in loans into the secondary market compared to $4.7 million during the six-months ended September 30, 2008.

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 and six-month periods ended September 30, 2009 and 2008 are shown in the following table:

	Three Months Ended
	September 30,

	2009		2008		% Change
	(In thousands)
Non-interest expense:
Compensation and employee benefits	$	690	$	569		21.3	%
Occupancy and equipment		176		158		11.4
Data processing		66		60		10.0
Audit, legal and other professional		107		49		118.4
Advertising		75		52		44.2
Telephone and postage		50		33		51.5
FDIC Insurance		50		4		1,150.0
Loss on cost basis equity security		137		—		—
Other		183		137		33.6

Total non-interest expense	$	1,534	$	1,062		44.4	%

	Six Months Ended
	September 30,

	2009		2008		% Change
	(In thousands)
Non-interest expense:
Compensation and employee benefits	$	1,340	$	1,301		3.0	%
Occupancy and equipment		360		333		8.1
Data processing		126		119		5.9
Audit, legal and other professional		192		99		93.9
Advertising		177		97		82.5
Telephone and postage		104		59		76.3
Net loss on sale of foreclosed property		—		4		(100.0	)
FDIC insurance		181		10		1,710.0
Loss on cost basis equity security		137		—		—
Other		341		273		24.9

Total Non-Interest Expense	$	2,958	$	2,295		28.9	%

Compensation and employee benefits increased by $121,000 when comparing the September 2009 and 2008 quarters primarily due to the $90,000 increase in salaries and the increase of $8,000 in payroll taxes. The increase in salaries and payroll taxes can be attributed to the hiring of a trust officer in July 2008 and the hiring, during the second quarter of fiscal 2009, of full-time employees for the Vincennes, Indiana branch. Another factor contributing the the increase is due to the $20,000 increase associated with the market value of the shares held in the Directors Retirement Plan. For the six-months ended September 30, 2009, compensation expense increased $39,000 over the six-months ended September 30, 2008. Salaries and payroll taxes increased by $225,000 due to the additional employees but this increase was offset, in part, by the decrease of $182,000 in expense related to options exercised and the decrease of $13,000 in the market value of the shares held in the Directors Retirement Plan.

Advertising expense increased $23,000 and $80,000 for the three- and six- months ended September 30, 2009, respectively, when compared to the same period of the prior year due to increased advertising in a new market area: Vincennes, Indiana. On May 1st, 2009, in response to a marketing program to promote branding, our deposit product called “Reward Checking” was renamed Kasasa ™ Cash. This promotion has also led to the increase in advertising.

FIRST ROBINSON FINANCIAL CORPORATION

Management’s Discussion and Analysis of Financial Condition

And Results of Operations

Telephone and postage expense increased by $17,000 for the three-months ended September 30, 2009 when compared to the same period in 2008 and $45,000 for the six-months ended September 30, 2009 over the six-months ended September 30, 2008. During August 2008, the Company signed with a company that would supply all lines necessary for integrated technologies, secure networking, and communicating with branches and ATMs. The addition of phones and lines at the new branch in Vincennes also contributed to the increases.

The Company recognized a loss of $137,000 during the three-months ended September 30, 2009 related to a cost basis equity security investment in a financial institution. The investment was written down to approximately $60,000 and additional losses on this investment may be required to be recognized in future periods. No loss was recognized on this investment in prior year periods.

The increase of $171,000 in Federal Deposit Insurance Corporation (“FDIC”) insurance when comparing the six-months ended September 30, 2009 to the same period in the prior year was due to the increase in the assessment from 5 basis points to 12 basis points paid on deposits and the additional 5 basis point special assessment on each insured depository institution's assets minus Tier 1 capital as of June 30, 2009. The amount of the special assessment for any institution was not to exceed 10 basis points times the institution's assessment base for the second quarter 2009. The special assessment was collected on September 30, 2009. An additional special assessment of up to 5 basis points later in 2009 is probable, but the amount is uncertain. The additional amount imposed on the Company, as a result of the June 30, 2009 final rule, was $81,359. During the three-months and six-months ended September 30, 2008, the Company still had a credit balance from the one-time assessment credit which decreased the expense associated with FDIC insurance.

Income Tax Expense

The provision in income tax expense decreased $112,000, or 91.1%, for the three-months ending September 30, 2009, compared to the same period in 2008. The decreases can be attributed in part to decreased profitability. For the six-months ended September 30, 2009, the provision for income tax expense decreased $136,000, or 65.4%, from the six-months ended September 30, 2008 due to decreased profitability and the increase in non-taxable income.

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 $395,000. The letters of credit are collateralized and underwritten, as currently required by our 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.

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 September 30, 2009, outstanding commitments to extend credit amounted to $20.7 million (including $12.6 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 $24.5 million line of credit with the FHLB, which can be accessed immediately. As of September 30, 2009 and 2008, there were no advances outstanding for either period. However, the available line of credit with the FHLB was reduced by $1.2 million for the credit enhancement reserve established as a result of the participation in the FHLB Mortgage Partnership Finance (“MPF”) program. At September 30, 2009, the Company also maintained a $5.0 million revolving line of credit and a $2.5 million revolving line of credit with Independent Banker’s Bank located in Springfield, Illinois. The Company borrowed $2.5 million of the $2.5 million revolving line in September 2009. The Company has also established borrowing capabilities at the discount window with the Federal Reserve Bank of St. Louis. Investment securities of $3,000,000 have been pledged as collateral. As of September 30, 2009 and 2008, no amounts were outstanding at the Federal Reserve discount window.

FIRST ROBINSON FINANCIAL CORPORATION

Management’s Discussion and Analysis of Financial Condition

And Results of Operations

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 adjusted assets and to risk-weighted assets of 4%, and total capital to risk-weighted assets of 8% respectively. Generally, 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.

At September 30, 2009, the Bank’s compliance with all of the aforementioned capital requirements is 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)	$	12,983		13.35	%	$	7,778		8.00	%	$	9,723		10.00	%
Tier I Capital
(to Risk-Weighted Assets)		12,075		12.42			3,889		4.00			5,834		6.00
Tier I Capital
(to Average Assets)		12,075		6.95			6,951		4.00			8,689		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: 4T 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 September 30, 2009 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

Item 1A. Risk Factors

None

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 September 30, 2009 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
7/1/2009 – 7/30/2009		950	$	34.50		950		13,160
8/1/2009 – 8/31/2009		1,177		34.34		1,000		12,160
9/1/2009– 9/30/2009		70		35.00		—		12,160
Total		2,197	$	34.43		1,950		12,160

(1) On July 23, 2009, the Board of Directors of the Company voted to approve the extension and expansion of the repurchase program of its equity stock approved on July 24, 2008. The Company may repurchase up to 10,000 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 2.5% of the Company’s issued and outstanding shares. As of July 22, 2009, the Company had repurchased 22,782 shares of its common stock out of the 26,892 shares that had been previously authorized for repurchase leaving 4,110 remaining to be purchased. As a result of these actions, the Company is currently authorized to repurchase 14,110 shares of common stock. The program has been extended to August 2, 2010 or the earlier of the completion of the repurchase of the 14,110 shares. As of November 10, 2009, 1,950 shares of the 14,110 have been purchased in the expanded program leaving 12,160 remaining to be purchased pursuant to this share repurchase program.

Item 3. Defaults Upon Senior Executives

None

Item 4. Submission of Matters to a Vote of Security Holders

On July 23, 2009, the Company held its Annual Meeting of Stockholders.

(a)

At the meeting, J. Douglas Goodwine and Robin E. Guyer were elected as directors for terms to expire in 2012. Those directors continuing in office are Rick L. Catt, Steven E. Neeley, Scott F. Pulliam, and William K. Thomas.

(b)

Stockholders voted on the following matters:

(i) The election of the following two directors of the Corporation:

				BROKER
VOTES:	FOR	WITHHELD	ABSTAIN	NON-VOTES

J. Douglas Goodwine	330,447	400	—	—
Robin E. Guyer	328,892	1,955	—	—

PART II OTHER INFORMATION

(ii) The ratification of the appointment of BKD, LLP as auditors for the Company for the fiscal year ending March 31, 2010:

				BROKER
VOTES:	FOR	WITHHELD	ABSTAIN	NON-VOTES
	329,851	796	200	—

Item 5.

Other Information

None

Item 6.

Exhibits

1.	Exhibit 31: Section 302 Certifications

2.	Exhibit 32: Section 906 Certifications

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	FIRST ROBINSON FINANCIAL
	CORPORATION

Date: November 13, 2009	/s/ Rick L. Catt
	Rick L. Catt
	President and Chief Executive Officer

Date: November 13, 2009	/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

Attached files

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FIRST ROBINSON FINANCIAL CORP Reports