10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

þ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED MARCH 31, 2012

¨   Transition Report Pursuant to Section 13 or 15(d) of the

Securities Exchange Act Of 1934

Commission File Number: 001-12969

FIRST ROBINSON FINANCIAL CORPORATION

(Exact Name of Registrant as specified in its Charter)

Delaware	36-4145294
(State or other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification Nos.)

501 East Main Street, Robinson, Illinois	62454
(Address of Principal Executive Offices)	(Zip code)

Registrants’ telephone number, including area code: 618-544-8621

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, Par Value $0.01 per share

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    ¨  Yes    þ  No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    ¨  Yes    þ  No

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.    þ  Yes    ¨  No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interaction Data file required 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 the registrant was required to submit and post such files).    þ  Yes    ¨  No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.    þ

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 definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act). (Check one):

Large Accelerated Filer    ¨ Accelerated Filer ¨ Non-Accelerated Filer  ¨ Smaller Reporting Company  þ

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    ¨  Yes    þ  No

The aggregate market value of the voting and non-voting common equity of the Registrant held by non-affiliates as of September 30, 2011 was $9.2 million.

As of June 8, 2012, there were 426,744 shares issued and outstanding of the Registrant’s common stock.

DOCUMENTS INCORPORATED BY REFERENCE

Part II of Form 10-K - Portions of the Annual Report to Stockholders for the fiscal year ended March 31, 2012.

Part III of Form 10-K - Portions of Proxy Statement for the 2012 Annual Meeting of Stockholders.

FORWARD-LOOKING STATEMENTS

This document, including information incorporated by reference, contains “forward-looking statements” (as that term is defined in the Private Securities Litigation Reform Act of 1995). When used in this Form 10-K or future filings by First Robinson Financial Corporation (the "Company") in the Company's press releases or in other public communications, these forward-looking statements may be identified by the use of such words as: “believe”, “expect”, “anticipate”, “intend”, “plan”, “estimate”, or words of similar meaning, or future or conditional verbs such as “will,” “would,” “should,” “could,” or “may.”

Examples of forward-looking statements include, but are not limited to, estimates or projections with respect to our future financial condition, results of operations or business, such as: projections of revenues, income, earnings per share, capital expenditures, assets, liabilities, dividends, capital structure, or other financial items; descriptions of plans or objectives of management for future operations, products, or services, including acquisition transactions; forecasts of future economic performance; and descriptions of assumptions underlying or relating to any of the foregoing. By their nature, forward-looking statements are subject to risks and uncertainties. There are a number of factors, many of which are beyond our control, that could cause actual conditions, events, or results to differ significantly from those described herein.

Factors which could cause or contribute to such differences include but are not limited to: general business and economic conditions on local regional, national levels; political and social unrest, including acts of war and terrorism; increased competition in the products and services we offer and the markets in which we conduct our business; the interest rate environment; fluctuations in the capital markets, which may directly or indirectly affect our asset portfolio; legislative or regulatory developments, including changes in laws concerning taxes, banking, securities, insurance and other aspects of the financial services industry; technological changes, including the impact of the Internet; monetary and fiscal policies of the U.S. Government, including policies of the U.S. Treasury and the Federal Reserve Board; accounting principles, policies, practices or guidelines; deposit attrition, operating costs, customer loss and business disruption; and the occurrence of any event, change or other circumstance that could result in the Company’s failure to develop and implement successful capital raising and debt restructuring plans.

Any forward-looking statements made in this report or incorporated by reference in this report are made as of the date of this report, and, except as required by applicable law, we assume no obligation to update the forward-looking statements or to update the reasons why actual results could differ from those projected in the forward-looking statements. You should consider these risks and uncertainties in evaluating forward-looking statements and you should not place undue reliance on these statements. We decline any obligation to publicly announce future events or developments that may affect the forward-looking statements herein.

The Company wishes to caution readers not to place undue reliance on any such “forward-looking statements,” which speak only as of the date made, and represent the Company’s expectations of future conditions or results and are not guarantees of future performance. The Company advises readers that various factors could cause actual results to differ materially from those contained in any “forward-looking statement.”

TABLE OF CONTENTS

		Page
PART I		1
ITEM 1.	BUSINESS	1
General		1
Significant Events in Fiscal 2012		1
Recent Developments		2
Market Area		3
Lending Activities		3
Asset Quality		12
Investment Activities		17
Trust Services		20
Sources of Funds		20
Subsidiary Activities		24
Code of Ethics		24
Competition		24
Regulation		25
Federal and State Taxation		39
Employees		40
ITEM 1A.	RISK FACTORS	40
ITEM 1B.	UNRESOLVED STAFF COMMENTS	52
ITEM 2.	PROPERTIES	52
ITEM 3.	LEGAL PROCEEDINGS	53
ITEM 4.	MINE SAFETY DISCLOSURES	53
PART II		54
ITEM 5.	MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES	54
ITEM 6.	SELECTED FINANCIAL DATA	54
ITEM 7.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	54
ITEM 7A.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	54
ITEM 8.	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA	55
ITEM 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE	55
ITEM 9A.	CONTROLS AND PROCEDURES	55
Evaluation of Disclosure Controls and Procedures		55
Management’s Annual Report On Internal Control Over Financial Reporting		56
ITEM 9B.	OTHER INFORMATION	56
PART III		57
ITEM 10.	DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE	57
Directors		57
Executive Officers		57
Compliance with Section 16(a)		57
ITEM 11.	EXECUTIVE COMPENSATION	57
ITEM 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS	57
ITEM 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE	58
ITEM 14.	PRINCIPAL ACCOUNTING FEES AND SERVICES	58
ITEM 15.	EXHIBITS AND FINANCIAL STATEMENT SCHEDULES	59
SIGNATURES		60

PART I

ITEM 1. BUSINESS

General

The Company. First Robinson Financial Corporation (the “Company”) was incorporated under the laws of the State of Delaware in March 1997, at the direction of the Board of Directors of First Robinson Savings and Loan Association (the “Association”), the predecessor institution to First Robinson Savings Bank, National Association (the “Bank”), for the purpose of serving as a holding company of the Bank. The Company’s principal asset is the stock of the Bank. Unless otherwise indicated, all activities discussed below are of the Bank.

The Bank. The Bank is a national bank, the deposits of which are insured up to applicable limits by the Federal Deposit Insurance Corporation (“FDIC”). The Bank is a community-oriented financial institution that seeks to serve the financial needs of the residents and businesses in its market area. The Bank considers Crawford County, surrounding counties in Illinois and Knox County, and surrounding counties in Indiana as its market area. The principal business of the Bank has historically consisted of attracting retail deposits from the general public and primarily investing those funds in one- to four-family residential real estate loans and, to a lesser extent, consumer loans, commercial and agricultural real estate loans and commercial business and agricultural finance loans. At March 31, 2012, substantially all of the Bank’s real estate mortgage loans were secured by properties located in the Bank’s market area. The Bank also invests in securities issued by U.S. government sponsored enterprises (“GSE”), equity securities and other permissible investments.

The Bank currently offers a variety of deposit accounts having a wide range of interest rates and terms. The Bank’s deposit offerings include statement savings, NOW accounts, health savings accounts, certificate accounts, IRA accounts, money market accounts and interest-bearing and non-interest bearing demand accounts. The Bank generally solicits deposits in its primary market area. The Bank typically does not utilize brokered deposits, and at March 31, 2012 had no brokered deposits.

The Bank’s revenues are derived principally from interest income, including interest on loans, deposits in other banks and mortgage-backed securities and other investments.

Significant Events in Fiscal 2012

On August 23, 2011, in connection with its participation in the Small Business Lending Fund (“SBLF”) program of the United States Department of the Treasury (“Treasury”), the Company entered into a Small Business Lending Fund - Securities Purchase Agreement (the “Purchase Agreement”) with the Secretary of the Treasury, pursuant to which the Company sold 4,900 shares of the Company’s Senior Non-Cumulative Perpetual Preferred Stock, Series A, par value $0.01 per share (the “SBLF Preferred Stock”) to the Secretary of the Treasury for a purchase price of $4,900,000. The SBLF program is a $30 billion fund established under the Small Business Jobs Act of 2010 that was created to encourage lending to small business by providing capital to qualified community banks with assets of less than $10 billion. The SBLF Preferred Stock was issued under a Certificate of Designations to the Company’s Certificate of Incorporation.

1

The SBLF Preferred Stock qualifies as Tier 1 capital. The holders of SBLF Preferred Stock are entitled to receive non-cumulative dividends, payable quarterly, on each January 1, April 1, July 1 and October 1, with the first dividend being paid on October 1, 2011. The dividend rate, as a percentage of the liquidation amount, can fluctuate on a quarterly basis during the first 10 quarters during which the SBLF Preferred Stock is outstanding, based upon changes in the amount of “Qualified Small Business Lending” or “QSBL” (as defined in the Certificate of Designations) by the Bank.  Based upon the increase in the Bank’s amount of QSBL over the baseline amount calculated under the terms of the Certificate of Designations, the dividend rate for the initial dividend period has been set at one percent (1%). For the second through ninth calendar quarters, the dividend rate may be adjusted to between one percent (1%) and five percent (5%) per annum, to reflect the change in the Bank’s amount of QSBL. If the amount of the Bank’s qualified small business loans declines so that the percentage increase in QSBL as compared to the baseline amount is less than 10%, then the dividend rate payable on the SBLF Preferred Stock would increase. For the tenth calendar quarter through four and one half years after issuance, the dividend rate will be fixed at between one percent (1%) and seven percent (7%) based upon the increase in QSBL as compared to the baseline. After four and one half years from issuance, the dividend rate will increase to 9%, including a quarterly lending incentive fee of one half of one percent (0.5%).

The holders of the SBLF Preferred Stock have the right to vote as a separate class on certain matters relating to the rights of holders of SBLF Preferred Stock and on certain corporate transactions. Except with respect to such matters, holders of the SBLF Preferred Stock do not have voting rights.  In the event that the Company misses five dividend payments, whether or not consecutive, the holders of the SBLF Preferred Stock will have the right, but not the obligation, to appoint a representative as a non-voting observer on the Company’s Board of Directors. The Company is current on all dividend payments

The SBLF Preferred Stock may be redeemed at any time at the Company’s option, at a redemption price of 100% of the liquidation amount plus unpaid dividends to the date of redemption for the current period (regardless of whether any dividends are actually declared for that current period), subject to the approval of the Company’s federal banking regulator.

The SBLF Preferred Stock was issued in a private placement exempt from registration pursuant to Section 4(2) of the Securities Act of 1933, as amended (the “Securities Act”). The Company agreed to register the SBLF Preferred Stock under the Securities Act pursuant to certain circumstances set forth in Annex E to the Purchase Agreement. The SBLF Preferred Stock is not subject to any restrictions on transfer.

Recent Developments

Pursuant to the provisions of the Jumpstart Our Business Startups Act (the “JOBS Act”), the Board of Directors of the Company voted, on May 8, 2012, to deregister the Company’s common stock under the Securities Exchange Act of 1934 (the “Exchange Act”). The JOBS Act, which was signed into law on April 5, 2012, raises the threshold for requiring banks and bank holding companies to register with the Securities and Exchange Commission under the Exchange Act to 2,000 record holders, and also increases the threshold under which banks and bank holding companies are permitted to deregister from the Exchange Act from 300 record stockholders to 1,200 record stockholders. The Company currently has approximately 439 stockholders of record, and therefore qualifies for deregistration.

2

The Company will remain quoted on the OTCQB tier of the OTC Market. By deregistering under the Exchange Act, the Company expects to realize substantial cost-savings in reduced legal and audit expenses, filing fees and other related costs of compliance with the Exchange Act.

The deregistration will be effective on August 8, 2012, 90 days from the Company’s filing date of May 10, 2012 of its Form 15. After that date, the Company’s quarterly and annual reports, proxy statements and current reports will no longer be filed with the SEC, although the Company will continue to provide certain annual information and proxy statements to its stockholders. The Company will also post certain quarterly and annual information on its website.

Market Area

The Bank currently has four offices in Crawford County, Illinois, consisting of three full service offices and one drive-up facility, located in Robinson, Palestine and Oblong, Illinois and one full service office located in Vincennes, Indiana. The Bank considers Crawford County and contiguous counties in Illinois and Knox County and contiguous counties in Indiana as its primary market area.

Robinson, Palestine and Oblong, Illinois are located in Crawford County, Illinois, approximately 150 miles east of St. Louis, Missouri and 35 miles northwest of Vincennes, Indiana. Crawford County has a population of approximately 20,000 people. Vincennes is located in southwestern Indiana and is the county seat of Knox County. Knox County has a population of approximately 38,500 people. The major employers in the Crawford County, Illinois area include Marathon Petroleum Company LLC, The Hershey Company, Robinson Correctional Facility, Dana Corporation, Crawford Memorial Hospital and E.H. Baare Corporation. The major employers in the Knox County, Indiana area include Good Samaritan Hospital, Vincennes University, Vincennes Community School Corporation, Fubota Indiana of America Corporation, Gemtron Corporation and Packaging Corporation of America.

The Bank, and therefore the Company, is dependent upon the economy of its market area for continued success, since the vast majority of its loans are concentrated in the Bank’s market area. See Note 4 of Notes to Consolidated Financial Statements.

Lending Activities

General. Our principal lending activity is the origination of conventional first mortgage loans for the purpose of purchasing, refinancing, or constructing one- to four-family residential real estate located in our primary market area.  We also originate commercial, multi-family and agricultural real estate loans, commercial business and agricultural finance loans, loans to state and municipal governments and consumer loans.

We originate both adjustable rate loans and fixed rate loans.  We generally originate adjustable rate loans for retention in our portfolio in an effort to increase the percentage of loans with more frequent repricing than traditional long-term fixed rate loans.  As a result of continued consumer demand for long-term fixed rate loans, however, we have continued to originate such loans.  We underwrite these mortgages utilizing secondary market guidelines allowing them to be salable without recourse.  The sale of these loans results in additional short-term income and improves our interest-rate risk position.  We generally retain servicing rights on loans sold.  Furthermore, in order to limit our potential exposure to increasing interest rates caused by our traditional emphasis on originating single-family mortgage loans, we have diversified our portfolio by increasing our emphasis on the origination of short-term or adjustable rate commercial, multi-family and farmland real estate loans and commercial business and consumer loans. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Asset and Liability Management” in the Annual Report to Stockholders filed as Exhibit 13 to this Form 10-K.

3

At March 31, 2012, the Bank’s gross loans outstanding totaled $128.4 million, of which $47.4 million, or 36.9%, were one- to four-family residential mortgage loans. This amount also includes one- to four-family loans held for sale of $509,000 and $1.3 million second mortgage loans on one- to four-family dwellings. Of the one- to four-family mortgage loans outstanding at that date, 19.3% were fixed-rate loans, and 80.7% were adjustable-rate loans. At that same date, the Bank also had home equity loans totaling $4.0 million, or 3.1% of the total gross loans outstanding, all of which were adjustable, and construction loans totaling $5.0 million, or 3.9% of the Bank’s total loan portfolio. Also at that date, the Bank’s commercial real estate loans, consisting of multi-family, commercial and agricultural real estate loans, totaled $36.4 million, or 28.4% of the Bank’s total loan portfolio of which 87.7% were adjustable-rate loans and 12.3% were fixed-rate loans. Loans to state and municipal governments totaled $1.5 million, or 1.2% of the Bank’s total loan portfolio as of March 31, 2012. At that same date, consumer and other loans totaled $16.6 million, or 12.9% of the Bank’s total loan portfolio. At March 31, 2012, commercial business, which also includes agricultural finance loans, totaled $17.5 million, or 13.6% of the Bank’s total loan portfolio, of which 40.3% were fixed-rate loans and 59.7% adjustable-rate loans. See Note 4 of Notes to Consolidated Financial Statements.

The Bank's board of directors has established individual lending authorities for each loan officer by loan type. Loans in excess of an individual officer’s lending limits must be approved by a loan officer with a higher lending limit, with the highest being that of the president and senior loan officer who have a combined lending authority up to $500,000. Loans with a principal balance over this limit must be approved by the directors’ loan committee, which meets weekly and consists of the chairman of the board, all outside directors, and the president. The senior loan officer and loan officers attend the directors’ loan committee meetings but do not vote on the loans presented.

The Bank’s lending limit is generally limited to the greater of 15% of unimpaired capital and surplus or, if a bank’s lending limit would be less than $500,000, the bank may make loans and extensions of credit to one borrower at one time in an amount not to exceed $500,000. See “Regulation -- Federal Regulation of National Banks.” Pursuant to certain lending provisions in the regulations of the Bank’s primary federal regulator, the Office of the Comptroller of the Currency (“OCC”), however, the Bank may lend up to 25% of its unimpaired capital and surplus to one borrower for loans secured by one-to-four family residential real estate, loans secured by small businesses or small farm loans. The total outstanding amount of the Bank’s loans or extensions of credit made to all of its borrowers under the special limits in these regulations may not exceed 100% of the Bank’s unimpaired capital and surplus. At March 31, 2012, the maximum amount which the bank could have lent under its standard 15% lending limit to any one borrower and the borrower’s related interests was approximately $2.9 million. At March 31, 2012, the Bank had 2 borrowers with outstanding balances and available lines of credit that exceeded the 15% legal lending limit but was within the 25% special legal lending limit for eligible banks. At March 31, 2012, the Bank had no loans or groups of loans to related borrowers with outstanding balances in excess of $3.7 million, the 25% special legal lending limit for eligible banks.

4

The Bank’s five largest lending relationships at March 31, 2012 were as follows: (i) $9.0 million in loans and available lines of credit, of which $6.0 million was participated with other lenders, to a commercial business secured by inventory and accounts receivables; (ii) $4.8 million in loans and available lines of credit, of which $2.2 million were participated to other lenders, to a corporation secured by farmland, equipment, and personal guarantees; (iii) $3.5 million in an available line of credit, of which $1.5 million was participated to another lender, to a commercial business secured by real estate, oil production and leaseholds, inventory, equipment, and personal guarantees; (iv) $3.4 million in loans and available lines of credit to a commercial business secured by real estate, equipment, inventory, accounts receivable and personal guarantees; and (v) $2.7 million in loans and available lines of credit to an individual and his closely held entities secured by inventory, equipment, government payments, deposit accounts and personal guarantees. At March 31, 2012, all of these loans, which totaled $23.4 million in the aggregate, of which $9.7 million was participated to other lenders, were performing in accordance with their terms.

Loan Portfolio Composition. The following information concerning the composition of the Bank’s loan portfolios in dollar amounts and in percentages (before deductions for loans in process, deferred fees and discounts and allowances for losses) as of the dates indicated.

	March 31,
	2012					2011
	Amount		Percent			Amount		Percent
	(Dollars in Thousands)
Real Estate Loans:
Residential:
One- to four-family.	$	46,095		35.89	%	$	41,954		34.30	%
Second Mortgages		1,326		1.03			1,542		1.26
Construction.		5,009		3.90			5,362		4.39
Equity lines of credit		3,973		3.10			3,761		3.08
Commercial		36,421		28.36			33,898		27.73
Total mortgage loans on real estate		92,824		72.28			86,517		70.76
Other Loans:
Commercial loans		17,470		13.60			19,132		15.65
Consumer/other loans		16,594		12.92			15,852		12.97
States and municipal government loans		1,543		1.20			764		0.62
Total loans		128,431		100.00	%		122,265		100.00	%
Less:
Net deferred loan fees, premiums and discounts		21					12
Undisbursed portion of loans		766					590
Allowance for losses		1,383					1,145
Net loans	$	126,261				$	120,518

5

The following schedule illustrates the interest rate sensitivity of the Bank’s loan portfolio at March 31, 2012. Loans which have adjustable or renegotiable interest rates are shown as maturing in the period during which the contract reprices; however, $61.9 million in adjustable rate loans have reached their contractual floor rate. These loans then report at their maturity date. The schedule does not reflect the effects of possible prepayments or enforcement of due-on-sale clauses.

	Real Estate
	Residential					Commercial					Obligations of State & Municipal Governments					Consumer and Other					Commercial Business					Total
Due During Years Ending March 31,	Amount		Weighted Average Rate			Amount		Weighted Average Rate			Amount		Weighted Average Rate			Amount		Weighted Average Rate			Amount		Weighted Average Rate			Amount		Weighted Average Rate
	(Dollars in Thousands)
2013(1)	$	6,196		5.54	%	$	5,917		4.13	%	$	1,028		3.57	%	$	717		6.33	%	$	9,026		4.13	%	$	22,884		4.56	%
2014 and 2015		2,945		6.10			2,568		5.05			332		4.18			3,407		7.26			2,781		4.58			12,033		5.80
2016 and 2017		1,932		5.34			8,843		4.87			66		4.57			9,283		6.54			3,675		4.91			23,799		5.56
After 2017		45,330		5.49			19,093		5.14			117		2.94			3,187		5.68			1,988		5.58			69,715		5.40
Total	$	56,403		5.53	%	$	36,421		4.90	%	$	1,543		3.70	%	$	16,594		6.51	%	$	17,470		4.53	%	$	128,431		5.32	%

⁽¹⁾ Includes demand loans, loans having no stated maturity and overdraft loans.

6

The total amount of loans due after March 31, 2012 which have predetermined interest rates is $42.2 million, while the total amount of loans due after such dates which have floating or adjustable interest rates is $86.2 million, a portion of which have reached their contractual floor rate and are shown in the preceding table at their contractual maturity.

Underwriting Standards. The Bank’s lending is subject to written underwriting standards and loan origination procedures. Decisions on loan applications are made on the basis of applications and, if applicable, property valuations. Properties securing real estate loans made by the Bank are generally appraised by independent appraisers the qualifications of which have been reviewed by the Bank. In the loan approval process, the Bank assesses the borrower’s ability to repay the loan, the adequacy of the proposed security, the employment stability of the borrower, and the general credit-worthiness of the borrower.

The Bank requires evidence of marketable title and lien position or appropriate title insurance on all loans secured by real property. The Bank also requires fire and extended coverage casualty insurance in amounts at least equal to the lesser of the principal amount of the loan or the value of improvements on the property, depending on the type of loan. As required by federal regulations, the Bank also requires flood insurance to protect the property securing its interest if such property is located in a designated flood area.

Management reserves the right to change the amount or type of lending in which it engages to adjust to market or other factors and can offer no assurance that loans will be fully collectable.

Residential Mortgage Lending. Residential mortgages include first liens on one-to four-family properties, second mortgages, home equity lines of credit and construction loans to individuals for the construction of one- to four-family residences. Residential loan originations are generated by the Bank’s marketing efforts, its present customers, walk-in customers, and referrals from real estate brokers. Historically, the Bank has focused its lending efforts primarily on the origination of loans secured by one- to four-family residential mortgages in its market area. At March 31, 2012, the Bank’s one- to four-family residential mortgage loans, including loans held for sale and second mortgage loans on one- to four-family dwellings totaled $47.4 million, or 36.9%, of the Bank’s gross loan portfolio, of which $467,000 was non-performing at that date.

The Bank offers both adjustable and fixed rate mortgage loans. For the year ended March 31, 2012, the Bank originated $73.7 million in real estate loans; $56.3 million was secured by one- to four-family residential real estate, of which $41.6 million was sold in the secondary market, $5.7 million was secured by one- to four-family construction and land loans, and $11.7 million was secured by multi-family, commercial or agricultural real estate. Substantially all of the Bank’s one- to four-family residential mortgage originations are secured by properties located in its market area.

7

The Bank offers adjustable-rate mortgage loans at rates and on terms determined in accordance with market and competitive factors. The Bank currently originates adjustable-rate mortgage loans with a term of up to 30 years. The Bank offers six-month and one-year adjustable-rate mortgage loans, and residential mortgage loans that are fixed for three years or five years, then adjustable annually after that with a stated interest rate margin generally over the one-year Treasury Bill Index. Increases or decreases in the interest rate of the Bank’s adjustable-rate loans is generally limited to 200 basis points at any adjustment date and 600 basis points over the life of the loan. As a consequence of using caps, the interest rates on these loans may not be as rate sensitive as the Bank’s liabilities. The Bank qualifies borrowers for adjustable-rate loans based on the initial interest rate of the loan and by reviewing the highest possible payment in the first seven years of the loan. As a result, the risk of default on these loans may increase as interest rates increase. See “Asset Quality -- Non-Performing Assets.” At March 31, 2012, the total balance of one-to four-family adjustable-rate loans was $38.3 million, or 29.8%, of the Bank’s gross loan portfolio. See “-- Originations, Purchases and Sales of Loans.”

The Bank offers fixed-rate mortgage loans with a term of up to 30 years. At March 31, 2012, the total balance of one- to four-family fixed-rate loans was $9.1 million, or 7.1%, of the Bank’s gross loan portfolio. The majority of the fixed rate real estate loans currently originated by the Bank are underwritten pursuant to the secondary mortgage market guidelines of the Federal Home Loan Bank of Chicago’s (the “FHLB”) Mortgage Partnership Finance (“MPF”) program. Effective January 1, 1999, the Bank joined the MPF program offered by the FHLB. This program is a secondary mortgage market structure under which the FHLB purchased and funded eligible mortgage loans from participating banks. In 2008, the FHLB announced that it would no longer enter into new master commitments except for immaterial amounts of MPF loans that primarily support affordable housing and are guaranteed by a federal government entity. MPF loans are now concurrently sold to Fannie Mae as a third-party investor pursuant to a program whereby Fannie Mae will purchase 30- 20- and 15-year fixed rate mortgage loans from the FHLB. During the fiscal year ended March 31, 2012, the Bank sold $36.9 million in one- to four-family fixed-rate loans. Participating banks generally retain the right to service these loans. The Bank currently provides servicing on $84.4 million of these sold fixed-rate loans

The Bank also offers with minimal to no down payment U.S. Department of Agriculture (“USDA”) Guaranteed Rural Housing Loans through the FHLB MPF program to borrowers that meet certain income limitations. These loans are 30-year fixed rate loans with a 90% guarantee from USDA. During the fiscal year ended March 31, 2012, the Bank sold $4.7 million in USDA Guaranteed Rural Housing Loans. The Bank provides servicing on $14.3 million of these Rural Housing Loans. See “-- Originations, Purchases and Sales of Loans.”

The Bank will generally lend up to 80% of the lesser of the appraised value or purchase price of the security property on owner occupied one- to four-family loans. Residential loans do not include prepayment penalties, are non-assumable (other than government-insured or guaranteed loans), and do not produce negative amortization. Real estate loans originated by the Bank contain a “due on sale” clause allowing the Bank to declare the unpaid principal balance due and payable upon the sale of the security property. The Bank utilizes private mortgage insurance.

At March 31, 2012, the Company’s home equity loans amounted to $4.0 million, or 3.1%, of the total loan portfolio, of which $8,000 was non-performing. These loans are secured by the underlying equity in the borrower’s residence, and accordingly, are reported with the one-to-four family real estate loans. As a result, the Company generally requires loan-to-value ratios of 90% or less after taking into consideration the first mortgage held by the Company. These loans typically have fifteen-year terms with an interest rate adjustment monthly.

8

The Bank had $5.0 million in construction loans for one- to four- family residences and land loans, or 3.9%, of the total loan portfolio at March 31, 2012. Of the $5.0 million in construction loans, approximately $3.9 million, or 78.7%, were at a fixed rate of interest and approximately $1.1 million, or 21.3%, were at an adjustable rate of interest. All of Bank’s construction loans were performing at March 31, 2012. The Bank offers construction loans for the construction of one- to four-family residences or commercial buildings. Following the construction period, these loans may become permanent loans.

Construction lending is generally considered to involve a higher level of credit risk since the risk of loss on construction loans is dependent largely upon the accuracy of the initial estimate of the individual property’s value upon completion of the project and the estimated cost (including interest) of the project. If the cost estimate proves to be inaccurate, the Bank may be required to advance funds beyond the amount originally committed to permit completion of the project. The Bank conducts periodic inspections of the construction project to help mitigate this risk.

Commercial Real Estate Lending. The Bank also originates commercial, multi-family, and agricultural real estate loans. At March 31, 2012, approximately $36.4 million, or 28.4%, of the Bank’s gross loan portfolio, was comprised of commercial, multi-family, and agricultural real estate loans. Of this amount, approximately $4.5 million, or 12.3%, of these loans were fixed-rate commercial, multi-family and agricultural real estate loans and approximately $31.9 million, or 87.7%, were adjustable-rate loans. At March 31, 2012, all of these loans were performing. The largest commercial real estate loan was a $3.5 million line of credit of which $1.5 million was participated to another institution.

The Bank will generally lend up to 80% of the value of the collateral securing the loan with varying maturities up to 20 years with re-pricing periods ranging from daily to one year. In underwriting these loans, the Bank currently analyzes the financial condition of the borrower, the borrower’s credit history, and the reliability and predictability of the cash flow generated by the business. The Bank generally requires personal guaranties on corporate borrowers. Appraisals on properties securing commercial, multi-family, and agricultural real estate loans originated by the Bank are primarily performed by independent appraisers. The Bank also offers small business loans, which are generally guaranteed up to 90% by various governmental agencies.

Commercial real estate loans generally present a higher level of risk than loans secured by one- to four-family residences. This greater risk is due to several factors, including the concentration of principal in a limited number of loans and borrowers, the effect of general economic conditions on income and the increased difficulty of evaluating and monitoring these types of loans. Furthermore, the repayment of loans secured by commercial, multi-family, and agricultural real estate is typically dependent upon the successful operation of the business. If the cash flow from the project is reduced, the borrower’s ability to repay the loan may be impaired.

9

State and Municipal Government Loans. The Bank originates both fixed and adjustable loans for state and municipal governments. At March 31, 2012, the Bank’s loans to state and municipal governments totaled $1.5 million, or 1.2% of the total loan portfolio, of which 28.9% were fixed and 71.1% were adjustable. All of these loans were performing at March 31, 2012. Loans to state and municipal governments are generally at a lower rate than consumer or commercial loans due to the tax-free nature of municipal loans.

For underwriting purposes, the Bank does not require financial documentation as long as the loan is to the general obligation of the local entity. However, proper documentation in the entity’s minutes, from a board meeting when a quorum was present, that indicates the approval to seek a loan and for the authorized individuals to sign for the loan, is required.

Consumer and Other Lending. The Bank offers secured and unsecured consumer and other loans. Secured loans may be collateralized by a variety of asset types, including automobiles, mobile homes, equity securities, and deposits. The Bank currently originates substantially all of its consumer and other loans in its primary market area. At March 31, 2012, the Bank’s consumer and other loan portfolio totaled $16.6 million, or 12.9%, of its gross loan portfolio, of which approximately 99.6% were fixed-rate loans.

A significant component of the Bank’s consumer loan portfolio consists of new and used automobile loans. These loans generally have terms that do not exceed six years. Generally, loans on vehicles are made in amounts up to 105% of the sales price or the value as quoted in BlackBook USA, whichever is least. At March 31, 2012, the Bank’s automobile loans totaled $14.1 million, or 11.0%, of the Bank’s gross loan portfolio. These loans were originated predominately on a direct and indirect lending basis. At March 31, 2012, indirect automobile loans totaled $3.7 million of the $14.1 million automobile loans.

Consumer and other loan terms vary according to the type and value of collateral, length of contract and creditworthiness of the borrower. The underwriting standards employed by the Bank for consumer loans include an application, a determination of the applicant’s payment history on other debts and an assessment of ability to meet existing obligations and payments on the proposed loan. Although creditworthiness of the applicant is a primary consideration, the underwriting process also includes a comparison of the value of the security, if any, in relation to the proposed loan amount.

Consumer and other loans may entail greater credit risk than do residential mortgage loans, particularly in the case of consumer loans which are unsecured or are secured by rapidly depreciable assets, such as automobiles. Indirect auto lending presents additional underwriting and credit risks. Further, any repossessed collateral for a defaulted consumer loan may not provide an adequate source of repayment of the outstanding loan balance as a result of the greater likelihood of damage, loss or depreciation. In addition, consumer loan collections are dependent on the borrower’s continuing financial stability, and thus are more likely to be affected by adverse personal circumstances. Furthermore, the application of various federal and state laws, including bankruptcy and insolvency laws, may limit the amount which can be recovered on such loans. At March 31, 2012, $24,000 of the Bank’s consumer and other loans were non-performing. There can be no assurances that additional delinquencies will not occur in the future.

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Commercial Business. The Bank also originates commercial business and agricultural finance loans. At March 31, 2012, approximately $17.5 million, or 13.6% of the Bank’s gross loan portfolio, was comprised of commercial business and agricultural finance loans. Of the $17.5 million, approximately $7.0 million, or 40.3%, were fixed-rate loans and approximately $10.5 million, or 59.7%, were adjustable-rate loans. At March 31, 2012, $632,000 of the Bank’s commercial business and agricultural finance loans were non-performing. The largest commercial business or agricultural finance loan was a $9.0 million line of credit of which $6.0 million was participated to other financial institutions.

Unlike residential mortgage loans, which generally are made on the basis of the borrower’s ability to make repayment from his or her employment and other income and which are secured by real property whose value tends to be more easily ascertainable, commercial business and agricultural finance loans typically are made on the basis of the borrower’s ability to make repayment from the cash flow of the borrower’s business. As a result, the availability of funds for the repayment of commercial business and agricultural finance loans may be substantially dependent on the success of the business itself (which, in turn, is likely to be dependent upon the general economic environment). The Bank’s commercial business and agricultural finance loans are usually, but not always, secured by business or personal assets. However, the collateral securing the loans may depreciate over time, may be difficult to appraise and may fluctuate in value based on the success of the business. At March 31, 2012, $39,000 of the Bank’s commercial business and agricultural finance loans were unsecured.

The Bank’s commercial business and agricultural finance lending policy includes credit file documentation and analysis of the borrower’s character, capacity to repay the loan, the adequacy of the borrower’s capital and collateral as well as an evaluation of conditions affecting the borrower. Analysis of the borrower’s past, present and future cash flows is also an important aspect of the Bank’s current credit analysis. Nonetheless, such loans are believed to carry higher credit risk than more traditional investments.

Originations, Purchases and Sales of Loans.

Loan originations are developed from continuing business with (i) depositors and borrowers, (ii) soliciting realtors, (iii) auto dealers, and (iv) walk-in customers.

While the Bank currently originates adjustable-rate and fixed-rate loans, its ability to originate loans to a certain extent is dependent upon the relative customer demand for loans in its market, which is affected by the interest rate environment, among other factors. For the year ended March 31, 2012, the Bank had total originations of $ 97.0 million in loans, of which $71.5 million were fixed-rate loans and $25.5 million were adjustable-rate loans, compared to total originations of $122.2 million in loans, of which $68.1 million were fixed rate loans and $54.1 million were adjustable rate loans for the year ended March 31, 2011. The decrease in total loan originations from 2012 to 2011 is a result of a slow-down in commercial real estate and commercial loan demand.

The Bank sold $41.6 million in one- to four-family loans through market programs during the year ended March 31, 2012. Sales of these loans generally are beneficial to the Bank since these sales may produce future servicing income, provide funds for additional lending and other investments, and increase liquidity. The Bank sells loans pursuant to forward sales commitments and, therefore, an increase in interest rates after loan origination and prior to sale should not adversely affect the Bank’s income at the time of sale.

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The following table shows the loan origination, purchase, sale and repayment activities of the Bank for the periods indicated.

	Year Ended March 31,
	2012		2011
	(Dollars in Thousands)
Originations By Type:
Real estate:
Residential	$	62,010	$	59,121
Commercial		11,718		17,630
Other:
Consumer and other loans		11,414		14,481
State & Municipal Government		1,575		252
Commercial business		10,293		30,683
Total loans originated		97,010		122,167
Purchases:
Real estate:
Commercial		---		---
Other:
Commercial business and		---		---
Other loan		---		---
Total loan purchases		---		---
Sales And Repayments:
Real estate:
Residential		41,592		39,480
Commercial		2,200		1,100
Other:
Commercial business		---		7,000
Total sales		43,792		47,580
Principal reductions		46,458		54,599
Decreases in other items, net		594		944
Net increase in gross loans	$	6,166	$	19,044

Asset Quality

Delinquencies. When a borrower fails to make a required payment on a loan, the Bank attempts to cause the delinquency to be cured by contacting the borrower. In the case of loans secured by real estate, reminder notices are sent to borrowers. If payment is late, appropriate late charges are assessed and a notice of late charges is sent to the borrower. If the loan is between 60-90 days delinquent, the loan will generally be referred to the Bank’s legal counsel for collection.

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When a loan becomes more than 90 days delinquent and collection of principal and interest is considered doubtful, or is otherwise impaired, the Bank will generally place the loan on non-accrual status and previously accrued interest income on the loan is charged against current income. Delinquent consumer loans are handled in a manner similar to that described above. The Bank’s procedures for repossession and sale of consumer collateral are subject to various requirements under applicable consumer protection laws.

The following table sets forth the Bank’s loan delinquencies by type, by amount and by percentage of type at March 31, 2012.

	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		3	$	126		0.27	%		---	$	---		---	%		7	$	467		1.01	%		10	$	593		1.28	%
Home equity		---		---		---			---		---		---			1		8		0.20			1		8		0.20
Commercial		1		28		0.08			---		---		---			---		---		---			1		28		0.08
Consumer and others		6		46		0.28			---		---		---			2		24		0.14			8		70		0.42
State & municipal gov’t		1		8		0.52			---		---		---			---		---		---			1		8		0.52
Commercial business		---		---		---			---		---		---			2		632		3.62			2		632		3.62
Total		11	$	208		0.16	%		---	$	---		---	%		12	$	1,131		0.88	%		23	$	1,339		1.04	%

⁽¹⁾ Loans are still accruing.

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Non-Performing Assets. The table below sets forth the amounts and the two 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 becomes doubtful. Foreclosed assets include assets acquired in settlement of loans.

	Year Ended March 31,
	2012			2011
	(Dollars in thousands)
Non-accruing loans:
One- to four-family	$	467		$	52
Home equity line of credit		8
Commercial real estate		---			239
Consumer and other		24			40
Commercial business		632			6
Total		1,131			337
Foreclosed assets:
One- to four-family		86			203
Commercial real estate		---			15
Total		86			218
Total non-performing assets	$	1,217		$	555
Total as a percentage of total assets		0.56	%		0.27	%

For the year ended March 31, 2012, gross interest income which would have been recorded had the non-accruing loans been current in accordance with their original terms amounted to approximately $56,000. This represents $56,000 that would have been included in interest income on such loans for the year ended March 31, 2012 had such loans performed as expected.

Classified Assets. Federal regulations provide for the classification of loans and other assets, such as debt and equity securities, considered by the 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, which may order the establishment of additional general or specific loss allowances.

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In connection with the filing of its periodic reports with the OCC and in accordance with its classification of assets policy, the Bank regularly reviews loans in its portfolio to determine whether such assets require classification in accordance with applicable regulations. On the basis of management’s review of its assets, at March 31, 2012, the Bank had classified a total of $939,000 of its assets as substandard and $1.2 million as doubtful. At March 31, 2012, total classified assets comprised $2.3 million, or 11.9%, of the Company’s capital, and 1.1% of the Company’s total assets.

Other Loans of Concern. As of March 31, 2012, there were $7.0 million in loans identified, but not classified, by the Bank with respect to which known information about the possible credit problems of the borrowers or the cash flows of the business have caused management to have some doubts as to the ability of the borrowers to comply with present loan repayment terms and which may result in the future inclusion of such items in the non-performing asset categories.

Allowance For Loan Losses. The allowance for loan losses is maintained at a level which, in management’s judgment, is adequate to absorb credit losses inherent in the loan portfolio. The amount of the allowance is based on management’s evaluation of the collectibility of the loan portfolio, including the nature of the portfolio, credit concentrations, trends in historical loss experience, specific impaired loans and economic conditions. Allowances for impaired loans are generally determined based on collateral values. The allowance is increased by a provision for loan losses, which is charged to expense and reduced by charge-offs, net of recoveries.

Real estate properties acquired through foreclosure are recorded at the fair 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 March 31, 2012, the Bank had two real estate properties acquired through foreclosure. Although management believes that it uses the best information available to determine the allowance, unforeseen market conditions could result in adjustments and net earnings could be significantly affected if circumstances differ substantially from the assumptions used in making the final determination. Future additions to the Bank’s allowance for loan losses will be the result of periodic loan, property and collateral reviews and thus cannot be predicted in advance. In addition, the OCC, as an integral part of the examination process, periodically reviews the Bank’s allowance for loan losses. The OCC may require the Bank to increase the allowance, or change the classification that the Bank has assigned to various assets, based upon its judgment of the information available to it at the time of its examination. At March 31, 2012, the Bank had a total allowance for loan losses of $1.4 million, representing 1.1% of the Bank’s loans, net. See Note 4 of Notes to Consolidated Financial Statements.

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

	March 31,
	2012							2011
	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)
Residential real estate	$	382	$	56,403		43.92	%	$	581	$	52,619		43.04	%
Commercial real estate		198		36,421		28.36			365		33,898		27.72
State & municipal government loans		---		1,543		1.20			---		764		0.62
Consumer and other loans		142		16,594		12.92			31		15,852		12.97
Commercial business		661		17,470		13.60			168		19,132		15.65
Unallocated		---		---		---			---		---		---
Total	$	1,383	$	128,431		100.00	%	$	1,145	$	122,265		100.00	%

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

	Year Ended March 31,
	2012			2011
	(Dollars in thousands)
Balance at beginning of year	$	1,145		$	973
Charge-offs:
Residential real estate		30			333
Commercial real estate		87			169
Consumer and other loans		91			54
Commercial business		297			69
Total:		505			625
Recoveries:
Commercial real estate		---			24
Consumer and other loans		45			38
Total:		45			62
Net charge-offs		460			563
Additions charged to operations		698			735
Balance at end of year	$	1,383		$	1,145
Ratio of net charge-offs during the year to average loans outstanding during the year		0.37	%		0.49	%
Ratio of net charge-offs during the year to average non-performing assets		77.37	%		163.35	%

Investment Activities

General. The Bank also invests in GSE issued residential and commercial mortgage-backed securities (“mortgage-backed securities”), GSE securities, obligations of states or political subdivisions and other debt securities. At March 31, 2012, residential mortgage-backed securities totaled approximately $32.6 million, or 63.6%, of the Bank’s total available-for-sale and held-to-maturity investment and mortgage-backed securities portfolio, while commercial mortgage-backed securities totaled approximately $1.0 million, or 1.9%, of the Bank’s total available-for-sale and held-to-maturity investment and mortgage-backed securities portfolio. Government securities, obligations of state and political subdivisions and other debt securities totaled $17.7 million, or 34.5%, of the Bank’s total investment and mortgage-backed securities portfolio.

While neither national banks nor their holding companies are subject to a minimum prescribed requirement, historically, the Bank and the Company have generally maintained liquid assets at levels believed adequate by management to meet the requirements of normal operations, including repayments of maturing debt and potential deposit outflows. Cash flow projections are regularly reviewed and updated to assure that adequate liquidity is maintained. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources.”

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National banking associations have the authority to invest in various types of liquid assets, including U.S. Treasury obligations, securities of various federal agencies, certain certificates of deposit of insured banks and savings institutions, certain bankers’ acceptances, repurchase agreements and federal funds. Subject to various restrictions, national banks may also invest their assets in commercial paper, investment grade corporate debt securities and mutual funds whose assets conform to the investments that a national banking association is otherwise authorized to make directly.

Generally, the investment policy of the Bank, as established by the Board of Directors, is to invest funds among various categories of investments and maturities based upon the Bank’s liquidity needs, asset/liability management policies, investment quality, marketability and performance objectives. As with all the Bank's operations, the Bank's investment policy is subject to review and comment by our regulators.

Investment Securities. At March 31, 2012, the Bank’s investment securities, excluding mortgage-backed securities, totaled $17.7 million, or 8.2% of its total assets. It has been the Bank’s general policy to invest in obligations of state and political subdivisions, federal agency obligations and other investment securities. At March 31, 2012, the Bank classified $16.5 million of its investment securities, excluding mortgage-backed securities, as available for sale and $1.2 million as held-to-maturity.

National banks are restricted in investments in corporate debt and equity securities. These restrictions include prohibitions against investments in the debt securities of any one issuer in excess of 15% of the Bank’s unimpaired capital and unimpaired surplus as defined by federal regulations, which totaled approximately $18.0 million as of March 31, 2012, plus an additional 10% if the investments are fully secured by readily marketable collateral. At March 31, 2012, the Bank was in compliance with this regulation. See “Regulation -- Federal Regulation of National Banks” for a discussion of additional restrictions on the Bank’s investment activities. See Note 3 of Notes to Consolidated Financial Statements.

The following table sets forth the composition of the Bank’s held-to-maturity securities.

	March 31,
	2012				2011
	Amortized Cost		Market Value		Amortized Cost		Market Value
	(Dollars in thousands)
State and political subdivisions	$	1,225	$	1,342	$	---	$	---
Total held-to-maturity securities	$	1,225	$	1.342	$	---	$	---

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The following table sets forth the composition of the Bank’s available-for-sale securities.

	March 31,
	2012					2011
	Market Value		% of Total			Market Value		% of Total
	(Dollars in thousands)
U.S. Government sponsored enterprises (“GSE”)	$	14,877		29.69	%	$	12,345		23.89	%
Mortgage-backed securities, GSE, residential		32,631		65.13			33,995		65.78
Mortgage-backed securities, GSE, commercial		996		1.99			1,455		2.82
State and political subdivisions		1,596		3.19			3,882		7.51
Total available for sale	$	50,100		100.00	%	$	51,677		100.00	%
Average remaining life of total available-for-sale and held-to-maturity securities		27.04 Years					15.38 Years
Other interest-earning assets:
Interest-bearing deposits with banks		20,551		100.00			17,813		100.00
Total other interest earnings investments	$	20,551		100.00	%		17,813		100.00	%

The Bank’s investment securities portfolio at March 31, 2012, contained no securities of any issuer with an aggregate book value in excess of 10% of the Bank’s retained earnings, excluding those issued by the U.S. government, or its agencies.

OCC guidelines, as well as those of the other federal banking regulators, regarding investment portfolio policy and accounting require banks to categorize securities and certain other assets as held for “investment,” “sale,” or “trading.” In addition, the Bank has adopted ASC 320 which states that securities available for sale are accounted for at fair value and securities which management has the intent and the Bank has the ability to hold to maturity are accounted for on an amortized cost basis. The Bank’s investment policy has strategies for each type of security.

Mortgage-Backed Securities. The Bank invests in U.S. government sponsored enterprise obligations secured by residential properties. At March 31, 2012, the Bank’s investment in mortgage-backed securities totaled $33.6 million, or 15.6%, of its total assets. All of the mortgage-backed securities are classified as available for sale. At March 31, 2012, the Bank did not have a trading portfolio.

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The following table sets forth the maturities of the Bank’s mortgage-backed securities at March 31, 2012.

	Due in
	1 Year or Less			1 to 5 Years			5 to 10 Years			10 Years or More			Total
Federal Home Loan Mortgage Corporation	$	---		$	298		$	1,615		$	3,040		$	4,953
Weighted Average Rate		---			4.92	%		4.84	%		3.76	%		4.18	%
Federal National Mortgage Company		---			360			1,703			9,524			11,587
Weighted Average Rate		---			4.03			4.57			4.41			4.42
Government National Mortgage Company		---			---			202			16,885			17,087
Weighted Average Rate		---			---			3.79			2.45			2.47
Total	$	---		$	658		$	3,520		$	29,449		$	33,627
Weighted Average Rate		---	%		4.44	%		4.65	%		3.22	%		3.39	%

Trust Services

The Bank offers wealth management and trust services to its higher net worth customers to assist them in investment, tax and estate planning. The Bank earns fees for managing client’s assets and providing trust services. Revenues from wealth management and trust services comprised less than one percent of the Bank’s revenue for the period during which such services have been offered. Total assets held in trust at March 31, 2012 were $8.6 million.

Sources of Funds

General. The Bank’s primary sources of funds are deposits, receipt of principal and interest on loans and securities, interest earned on deposits with other banks, and other funds provided from operations. When additional funds are required, beyond the primary sources of funds, the Bank utilizes federal funds purchased, advances from the FHLB of Chicago, borrowings from the discount window of the Federal Reserve and a line of credit from an unaffiliated financial institution.

Borrowings. The Bank has used FHLB advances to support lending activities and to assist in the Bank’s asset/liability management strategy. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Asset and Liability Management.” The Bank maintains a $17.6 million line of credit with the FHLB, of which no funds were advanced at March 31, 2012. This line can be accessed immediately and is secured by a blanket lien on qualifying one- to four-family residential loans held by the Bank. The available line of credit with the FHLB was reduced, at March 31, 2012, by $943,000 for the credit enhancement reserve established as a result of the participation in the FHLB MPF program resulting in an available balance of $16.6 million. See Note 10 of Notes to Consolidated Financial Statements.

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The Company maintains a $6.7 million revolving federal funds line of credit with a correspondent financial institution and has also established borrowing capabilities of up to $3.0 million at the discount window with the Federal Reserve Bank of St. Louis. No funds were borrowed on either line at March 31, 2012.

The Company also maintains a $2.5 million revolving line of credit, of which no funds were outstanding at March 31, 2012, with an unaffiliated financial institution. The interest rate on the line of credit is tied to the prime commercial rate. The rate on the note at March 31, 2012 was 3.50%. The note matures on September 30, 2012 and is secured by 100% stock of the Bank. The Company plans to renew the line of credit at maturity. See Note 9 of Notes to Consolidated Financial Statements.

Securities sold under agreements to repurchase (“repurchase agreements”) are also used by the Bank for funding sources. At March 31, 2012, the Company had $12.9 million in repurchase agreements which are secured by investment securities owned by the Company and held in safekeeping at The Independent BankersBank (“TIB”). The agreements have an average rate of 0.14% at March 31, 2012 and mature periodically within 12 months. See Note 8 of Notes to Consolidated Financial Statements.

Deposits. The Bank offers a variety of deposit accounts having a wide range of interest rates and terms. The Bank’s deposits consist of demand accounts, both interest-bearing and non-interest bearing, statement savings accounts, health savings accounts, money market deposit accounts, NOW accounts, IRA accounts, and certificate accounts. The certificate accounts typically range in terms from 90 days to 54 months. The Bank also offers a variable rate certificate for children that matures on the child’s 18th birthday. The Bank has a significant amount of deposits that will mature within one year. However, management expects that substantially all of the deposits will be renewed.

The Bank relies primarily on advertising, competitive pricing policies and customer service to attract and retain these deposits. Currently, the Bank solicits deposits from its market area only, and generally does not utilize brokered deposits. The flow of deposits is influenced significantly by general economic conditions, changes in money market and prevailing interest rates and competition.

The Bank remains susceptible to short-term fluctuations in deposit flows as customers have become more interest rate conscious. The Bank endeavors to manage the pricing of its deposits in keeping with its profitability objectives giving consideration to its asset/liability management. The ability of the Bank to attract and maintain deposit accounts and certificates of deposit, and the rates paid on these deposits, has been and will continue to be significantly affected by market conditions.

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The following table sets forth the deposit flows at the Bank during the periods indicated.

	Year Ended March 31,
	2012			2011
	(Dollars in thousands)
Opening balance	$	176,352		$	149,312
Deposits		1,408,006			1,301,993
Withdrawals		(1,404,274	)		(1,276,826	)
Interest credited		1,204			1,873
Ending balance		181,288			176,352
Net increase	$	4,936		$	27,040
Percent increase		2.80	%		18.11	%

The following table sets forth the dollar amount of deposits in the various types of deposit programs offered by the Bank for the periods indicated.

	March 31,
	2012					2011
	Amount		Percent of Total			Amount		Percent of Total
	(Dollars in thousands)
Transactions and Savings Deposits:
Non-interest bearing demand (0.00%)	$	29,968		16.53	%	$	23,490		13.32	%
Statement savings and money market accounts (0.15%)		32,880		18.14			28,130		15.95
Interest-bearing checking and NOW accounts (0.77%)		71,241		39.30			68,991		39.12
Total non-certificates		134,089		73.97			120,611		68.39
Certificates:
0.05  – 1.99%		33,558		18.51	%		24,242		13.75	%
2.00  – 3.99%		10,749		5.93			26,753		15.17
4.00  – 5.99%		2,892		1.59			4,746		2.69
Total certificates		47,199		26.03			55,741		31.61
Total deposits	$	181,288		100.00	%	$	176,352		100.00	%

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The following table shows rate and maturity information for the Bank’s certificates of deposit as of March 31, 2012.

	0.05 - 1.99%			2.00 - 3.99%			4.00 - 5.99%			Total			Percent of Total			Weighted Average Rate
(Dollars in thousands)
Certificate accounts maturing
In quarter ending:
June 30, 2012	$	5,114		$	3,246		$	946		$	9,306			19.72	%		1.61	%
September 30, 2012		3,454			2,855			793			7,102			15.04			2.71
December 31, 2012		4,648			848			---			5,496			11.64			1.46
March 31, 2013		5,519			301			---			5,820			12.33			1.52
June 30, 2013		4,024			56			327			4,407			9.34			1.96
September 30, 2013		3,187			108			826			4,121			8.73			1.75
December 31, 2013		1,404			66			---			1,470			3.11			1.75
March 31, 2014		2,568			126			---			2,694			5.71			1.74
June 30, 2014		1,779			590			---			2,369			5.02			1.40
September 30, 2014		424			558			---			982			2.08			2.02
December 31, 2014		387			192			---			579			1.23			1.65
March 31, 2015		170			394			---			564			1.20			2.64
Thereafter		880			1,409			---			2,289			4.85			2.55
Total	$	33,558		$	10,749		$	2,892		$	47,199			100.00	%		1.86	%
Percent of total		71.10	%		22.77	%		6.13	%		100.00	%

The following table indicates the amount of the Bank’s certificates of deposit and other deposits by time remaining until maturity as of March 31, 2012.

	Maturity
	3 Months or Less		Over 3 to 6 Months		Over 6 to 12 Months		Over 12 months		Total
Certificates of deposit less than $100,000	$	5,365	$	4,913	$	7,432	$	13,213	$	30,923
Certificates of deposit of $100,000 or more		1,958		1,528		3,488		6,262		13,236
Public funds of $100,000 or more (1)		1,983		661		396		---		3,040
Total certificates of deposit	$	9,306	$	7,102	$	11,316	$	19,475	$	47,199

⁽¹⁾ Deposits from governmental and other public entities.

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Subsidiary Activities

As a national bank, the Bank is able to invest unlimited amounts in subsidiaries that are engaged in activities in which the Bank itself may engage. In addition, a national bank may invest limited amounts in subsidiaries that provide banking services, such as data processing, to other financial institutions. At March 31, 2012, the Bank had no subsidiaries.

Code of Ethics

A copy of the Company’s Code of Ethics may be obtained, without charge, by any stockholder upon written request to Secretary, c/o First Robinson Financial Corporation, 501 East Main Street, Robinson, Illinois 62454, or it can be found at www.frsb.net in the Investor Relations section under the About Us tab.

Competition

The Bank faces rigorous competition, both in originating real estate, commercial and consumer loans, and in attracting deposits. Competition in originating loans comes primarily from commercial banks and credit unions located in the Bank’s market area. The Bank competes for real estate and other loans principally on the basis of the quality of services it provides to borrowers, the interest rates and loan processing fees it charges, and the types of loans it originates. See “-- Lending Activities.”

The Bank attracts its deposits through its retail banking offices and through its internet site at www.frsb.net. Direct competition for those deposits is principally from retail brokerage offices, commercial banks and credit unions located in their market area. The Bank competes for these deposits by offering a variety of account alternatives at competitive rates and by providing convenient business hours. The Bank experiences indirect competition for deposits from other financial intermediaries, such as money market mutual funds.

The Bank primarily serves Crawford County, surrounding counties in Illinois and Knox County, and surrounding counties in Indiana. There are six commercial banks and one credit union, other than the Bank, which compete for deposits and loans in Crawford County. In Vincennes, Indiana, there are seven commercial banks and one credit union, other than the Bank, competing for deposits and loans.

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Regulation

General. The Company is a registered bank holding company, subject to broad federal regulation and oversight by the Board of Governors of the Federal Reserve Bank (“FRB” or "Federal Reserve"). The Bank is a national bank, subject to broad financial regulation and oversight by the OCC. The Bank is a member of the Deposit Insurance Fund (the “DIF”) and the deposits of the Bank are insured up to applicable regulating limits by the FDIC.  Accordingly, the Bank and the Company are subject to extensive supervision as to all their operations by the OCC, the Federal Deposit Insurance Corporation (“FDIC”), and the FRB. The Bank is also a member of the FHLB of Chicago.

Certain of these regulatory requirements and restrictions are discussed below or elsewhere in this document. See Note 14 of Notes to Consolidated Financial Statements.

Federal Regulation of National Banks. The OCC has extensive authority over the operations of national banks. As part of this authority, the Bank is required to file periodic reports with the OCC and is subject to periodic examination by the OCC. All national banks are subject to a semi-annual assessment, based upon the bank’s total assets, to fund the operations of the OCC.

The OCC also has extensive enforcement authority over all national banks, including the Bank. This enforcement authority includes, among other things, the ability to assess civil money penalties, to issue cease-and-desist or removal orders and to initiate injunctive actions. In general, these enforcement actions may be initiated for violations of laws and regulations as well as unsafe or unsound practices. Other actions or inactions may provide the basis for enforcement action, including misleading or untimely reports filed with the OCC. Except under certain circumstances, public disclosure of final enforcement actions by the OCC is required.

The Bank’s lending limit is generally limited to the greater of 15% of unimpaired capital and surplus or, if a bank’s lending limit under this calculation would be less than $500,000, a bank may make loans and extensions of credit to one borrower at one time in an amount not to exceed $500,000. However, the Bank is allowed to utilize a program offered by the OCC that permits it to exceed the 15% lending limit under certain circumstances. The Bank may lend up to 25% of its unimpaired capital and surplus to one borrower for loans secured by one-to-four family residential real estate, loans secured by small businesses or small farm loans. The total outstanding amount of the Bank’s loans or extensions of credit made to all of its borrowers under the special limits of this program may not exceed 100% of the Bank’s unimpaired capital and surplus. Loans to affiliates and their related interests are not eligible for this program. See “Lending Activities – General.”

The OCC, as well as the other federal banking agencies, have adopted regulations and guidelines establishing safety and soundness standards on such matters as loan underwriting and documentation, internal controls and audit systems, interest rate risk exposure, asset quality and earnings, and compensation and other employee benefits. Any institution which fails to comply with these standards must submit a compliance plan. A failure to submit a plan or to comply with an approved plan will subject the institution to further enforcement action.

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Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (“the Dodd-Frank Act”) . In response to the current national and international economic recession and to strengthen supervision of financial institutions and systemically important nonbank financial institutions, Congress and the U.S. government have taken a variety of actions, including the enactment of the Dodd-Frank Act on July 21, 2010. The Dodd-Frank Act represents the most comprehensive change to banking laws since the Great Depression of the 1930s and mandates changes in several key areas: regulation and compliance (both with respect to financial institutions and systemically important nonbank financial companies), securities regulation, executive compensation, regulation of derivatives, corporate governance, transactions with affiliates, deposit insurance assessments, source of strength requirements and consumer protection. While the changes in the law required by the Dodd-Frank Act have had and will continue to have a major impact on large institutions, even relatively small institutions such as ours are affected. Pursuant to the Dodd-Frank Act, the Bank will be subject to regulations promulgated by a new consumer protection bureau housed within the Federal Reserve, known as the Consumer Financial Protection Bureau (the “Bureau” or “CFPB”). The Bureau is in the process of consolidating rules and orders with respect to consumer financial products and services and will have substantial power to define the rights of consumers and responsibilities of lending institutions, such as the Bank. The Bureau will not, however, examine or supervise the Bank for compliance with such regulations; rather, based on its size, enforcement authority will remain with the Bank’s primary federal regulator, the OCC, although the Bank may be required to submit reports or other materials to the Bureau upon its request.

In addition, the Dodd-Frank Act, among other things, imposes new capital requirements on bank holding companies; provides that a bank holding company must serve as a source of financial and managerial strength to each of its subsidiary banks and stand ready to commit resources to support each of them, changes the base for FDIC insurance assessments to a bank’s average consolidated total assets minus average tangible equity, rather than upon its deposit base, and permanently raises the current standard deposit insurance limit to $250,000; it also extends unlimited insurance for noninterest-bearing transaction accounts through 2012 and expands the FDIC’s authority to raise insurance premiums. The legislation also calls for the FDIC to raise the ratio of reserves to deposits from 1.15% to 1.35% for deposit insurance purposes by September 30, 2020 and to “offset the effect” of increased assessments on insured depository institutions with assets of less than $10 billion. The Dodd-Frank Act also limits interchange fees payable on debit card transactions, establishes the CFPB, which has broad rulemaking, supervisory and enforcement authority over consumer financial products and services, including deposit products, residential mortgages, home-equity loans and credit cards, and contains provisions on mortgage-related matters such as steering incentives, and determinations as to a borrower’s ability to repay and prepayment penalties.

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On June 28, 2011, the Federal Reserve Board approved a final debit card interchange rule that caps a debit card issuer’s base fee at 21 cents per transaction and allows an additional 5 basis-point charge per transaction to help cover fraud losses. The Federal Reserve Board issued an interim final rule that also allows a fraud-prevention adjustment of 1 cent per transaction conditioned upon a credit card issuer adopting effective fraud prevention policies and procedures. The Federal Reserve Board also adopted requirements that issuers include two unaffiliated networks for routing debit transactions. Compliance for most types of debit cards was required by April 1, 2012. The effective date for the pricing restrictions was October 1, 2011. The new pricing restriction has not had and is not expected to have a material impact on the Company.

The Dodd-Frank Act also includes provisions that affect corporate governance and executive compensation at all publicly-traded companies and allows financial institutions to pay interest on business checking accounts. The legislation also restricts proprietary trading, places restrictions on the owning or sponsoring of hedge and private equity funds, and regulates the derivatives activities of banks and their affiliates. The Dodd-Frank Act establishes the Financial Stability Oversight Council, which is to identify threats to the financial stability of the U.S., promote market discipline, and respond to emerging threats to the stability of the U.S. financial system.

The Collins Amendment to the Dodd-Frank Act, among other things, eliminates certain trust preferred securities from Tier I capital. Preferred securities issued under the U.S. Treasury’s Troubled Asset Relief Program (“TARP”) are exempted from this treatment. In the case of certain trust preferred securities issued prior to May 19, 2010 by bank holding companies with total consolidated assets of $15 billion or more as of December 31, 2009, these “regulatory capital deductions” are to be phased in incrementally over a period of three years beginning on January 1, 2013. This provision also requires the federal banking agencies to establish minimum leverage and risk-based capital requirements that will apply to both insured banks and their holding companies. Regulations implementing the Collins Amendment became effective on July 28, 2011, and set as a floor for the capital requirements of the holding company and the Company a minimum capital requirement computed using the Federal Reserve’s risk-based capital rules. Additional rulemaking as to the Collins Amendment is expected.

A separate legislative proposal would impose a new fee or tax on U.S. financial institutions as part of the 2010 budget plans in an effort to reduce the anticipated budget deficit and to recoup losses anticipated from the TARP. Such an assessment is estimated to be 15-basis points, levied against bank assets minus Tier 1 capital and domestic deposits. It appears that this fee or tax would be assessed only against the 50 or so largest financial institutions in the U.S., which are those with more than $50 billion in assets, and therefore would not directly affect us. However, the large banks that are affected by the tax may choose to seek additional deposit funding in the marketplace, driving up the cost of deposits for all banks. The administration has also considered a transaction tax on trades of stock in financial institutions and a tax on executive bonuses.

The U.S. Congress has also recently adopted additional consumer protection laws such as the Credit Card Accountability Responsibility and Disclosure Act of 2009, and the Federal Reserve has adopted numerous new regulations addressing banks’ credit card, overdraft and mortgage lending practices. The CFPB, which now has primary authority with respect to implementing most consumer financial protection laws and related regulations, has also indicated that additional regulations and guidance will be forthcoming that affects these areas of the Bank's operations. Additional consumer protection legislation and regulatory activity is anticipated in the near future.

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Internationally, both the Basel Committee on Banking Supervision and the Financial Stability Board (established in April 2009 by the Group of Twenty (“G-20”) Finance Ministers and Central Bank Governors to take action to strengthen regulation and supervision of the financial system with greater international consistency, cooperation and transparency) have committed to raise capital standards and liquidity buffers within the banking system (“Basel III”). On September 12, 2010, the Group of Governors and Heads of Supervision agreed to the calibration and phase-in of the Basel III minimum capital requirements (raising the minimum Tier 1 equity ratio to 6.0%, with full implementation by January 2015) and introducing a capital conservation buffer of common equity of an additional 2.5% with implementation by January 2019. The U.S. federal banking agencies have yet to propose regulations for implementing Basel III. On September 28, 2011, the Basel Committee announced plans to consider adjustments to the first liquidity change to be imposed under Basel III, which change would take effect on January 1, 2015. The liquidity coverage ratio being considered would require banks to maintain an adequate level of unencumbered high-quality liquid assets sufficient to meet liquidity needs for a 30 calendar day time horizon.

Bank Holding Company Activities and Other Limitations.

The Company is subject to ongoing regulation, supervision, and examination by the Federal Reserve Board, and is required to file with the Federal Reserve Board periodic and annual reports and other information concerning its own business operations and those of its subsidiaries. In addition, the Company is subject to regulation under the Bank Holding Company Act of 1956, as amended (“Bank Holding Company Act”). Under the provisions of the Bank Holding Company Act, a bank holding company must obtain Federal Reserve Board approval before it acquires direct or indirect ownership or control of more than 5% of the voting shares of another bank, or merges or consolidates with another bank holding company. The Federal Reserve Board also has authority under certain circumstances to issue cease and desist orders against bank holding companies and their non-bank subsidiaries.

A bank holding company is prohibited under the Bank Holding Company Act, with limited exceptions, from engaging, directly or indirectly, in any business unrelated to the businesses of banking or managing or controlling banks. One of the exceptions to these prohibitions permits ownership by a bank holding company of the shares of any corporation if the Federal Reserve Board, after due notice and opportunity for hearing, by regulation or order has determined that the activities of the corporation in question are so closely related to the businesses of banking or managing or controlling banks as to be a proper incident thereto.

Under provisions in the Dodd-Frank Act and Federal Reserve Board policy, a bank holding company such as the Company is expected to act as a source of financial strength to its banking subsidiaries and to commit support to them. This support may be required at times when, absent such policy, the bank holding company might not otherwise provide such support. In the event of a bank holding company’s bankruptcy, any commitment by the bank holding company to a federal bank regulatory agency to maintain capital of a subsidiary bank will be assumed by the bankruptcy trustee and be entitled to a priority of payment. In addition, any capital loans by a bank holding company to any of its subsidiary banks must be subordinated in right of payment to deposits and to certain other indebtedness of such subsidiary bank. As of March 31, 2012, the Bank was the only depository institution subsidiary of the Company.

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The Homeowners Affordability and Stability Plan (“HASP”) . Announced in February, 2009, the HASP is a $75.0 billion dollar federal program providing for loan modifications targeted at borrowers who are at risk of foreclosure because their incomes are not sufficient to meet their mortgage payments. The program is scheduled to run through December 31, 2013. It is anticipated that this program will have minimal impact on the Company.

USA Patriot Act of 2001. In October 2001, the USA Patriot Act of 2001 (the “Patriot Act”) was enacted in response to the terrorist attacks in New York, Pennsylvania and Washington, D.C. which occurred on September 11, 2001. The Patriot Act strengthens U.S. law enforcement’s and the intelligence communities’ abilities to work cohesively to combat terrorism on a variety of fronts. The impact of the Patriot Act on financial institutions of all kinds is significant and wide-ranging. The Patriot Act contains sweeping anti-money laundering and financial transparency laws and imposes various regulations, including standards for verifying client identification at account opening, and rules to promote cooperation among financial institutions, regulators and law enforcement entities in identifying parties that may be involved in terrorism or money laundering. Among other provisions, the Patriot Act requires financial institutions to have anti-money laundering programs in place and requires banking regulators to consider a holding company’s effectiveness in combating money laundering when ruling on certain merger or acquisition applications. The Patriot Act was reauthorized by Congress in May 2011.

S.A.F.E. Act Requirements . On July 28, 2010, the OCC issued final rules requiring residential mortgage loan originators who are employees of national banks to meet the registration requirements of the Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (the “S.A.F.E. Act”). The S.A.F.E. Act requires residential mortgage loan originators who are employees of regulated financial institutions to be registered with the Nationwide Mortgage Licensing System and Registry, a database created by the Conference of State Bank Supervisors and the American Association of Residential Mortgage Regulators to support the licensing of mortgage loan originators by the states (the “Registry”). The CFPB has rulemaking authority with respect to the S.A.F.E. Act, and published a new Regulation G to implement this act on December 19, 2011. Employees of regulated financial institutions are generally prohibited from originating residential mortgage loans unless they are registered.

Incentive Compensation Guidance. On June 21, 2010, the federal financial banking agencies released joint guidance on incentive compensation. The guidance applies to national banks and their holding companies and generally requires such entities to ensure that incentive compensation arrangements appropriately tie rewards to longer-term performance and that such arrangements are conducted in accordance with safety and soundness principles.

Interagency Appraisal and Evaluation Guidelines. The federal financial banking agencies, including the OCC, issued final supervisory guidance in December, 2010, related to sound practices for financial institutions with respect to real estate appraisals and evaluations. The guidelines emphasize that financial institutions are responsible for selecting appraisers and people performing evaluations based on their competence, experience and knowledge of the market and type of property being valued. It also requires banks to demonstrate the independence of their processes for obtaining property values and to adopt standards for appropriate communications and information-sharing with appraisers and people performing evaluations.

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Privacy. The Bank is required by statute and regulation to disclose privacy policies to the individuals requesting information about the Bank’s products and services (the Bank’s consumers) and, on an annual basis, to their customers. The privacy notices provided with respect to this requirement provide Bank customers with the ability to opt out of the sharing of their nonpublic personal information with non-affiliated third parties. Information safeguards are also required with respect to the Bank’s protection of non-public personal information.

Other Regulations. The Bank is also subject to numerous other regulations with respect to its operation, including, but not limited to, the Truth in Lending Act, the Truth in Savings Act, the Equal Credit Opportunity Act, the Electronic Funds Transfer Act, the Fair Housing Act, the Home Mortgage Disclosure Act, the Fair Debt Collection Practices Act, and the Fair Credit Reporting Act. Changes in any regulation applicable to the operation of the Bank are not predictable and could affect the Bank’s operations and profitability.

Insurance of Accounts and Regulation by the FDIC.

The Bank is a member of the DIF, which is administered by the FDIC. Deposits are insured up to applicable limits by the FDIC and such insurance is backed by the full faith and credit of the U.S. Government. As insurer, the FDIC imposes deposit insurance premiums and is authorized to conduct examinations of and to require reporting by FDIC-insured institutions. It also may prohibit any FDIC-insured institution from engaging in any activity the FDIC determines by regulation or order to pose a serious risk to the FDIC. The FDIC also has the authority to initiate enforcement actions against banks after giving the OCC an opportunity to take such action, and may terminate the deposit insurance if it determines that the institution has engaged in unsafe or unsound practices or is in an unsafe or unsound condition.

Deposit Insurance. As an FDIC-insured institution, the Bank is required to pay deposit insurance premium assessments to the FDIC based upon a classification system. Assessments are collected on a quarterly basis.

The increase in deposit insurance coverage to up to $250,000 per customer, the FDIC’s expanded authority to increase insurance premiums, as well as the recent increase and anticipated additional increase in the number of bank failures have resulted in an increase in deposit insurance assessments for banks. The FDIC, absent extraordinary circumstances, is required by law to return the insurance reserve ratio to a 1.15 percent ratio no later than the end of 2013, and to 1.35% by September 30, 2020. Citing extraordinary circumstances, the FDIC has extended the time within which the reserve ratio must be restored to 1.15 percent from five to eight years.

Non-interest bearing transaction accounts are fully insured by the FDIC through December 31, 2012. This coverage is separate from the coverage provided by other accounts maintained at the same depository institution. This coverage is available to all depositors, including consumer businesses and governmental entities.

On February 7, 2011, the FDIC adopted a rule which redefines the assessment base for deposit insurance as required by the Dodd-Frank Act, makes changes to assessment rates, implements the Dodd-Frank Act’s Deposit Insurance Fund dividend provisions, and revises the risk-based assessment system for large insured depository institutions (institutions with at least $10 billion in total assets).

If the FDIC is appointed conservator or receiver of a bank upon the bank’s insolvency or the occurrence of other events, the FDIC may sell some, part or all of a bank’s assets and liabilities to another bank or repudiate or disaffirm most types of contracts to which the bank was a party if the FDIC believes such contract is burdensome. In resolving the estate of a failed bank, the FDIC as receiver will first satisfy its own administrative expenses, and the claims of holders of U.S. deposit liabilities also have priority over those of other general unsecured creditors.

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The FDIC rules also provide the FDIC’s board with the flexibility to adopt actual rates that are higher or lower than the total base assessment rates adopted without notice and comment if certain restrictions are met.

Under the Dodd-Frank Act, a permanent increase in deposit insurance was authorized to $250,000 (insurance coverage had previously been temporarily raised to that level until December 13, 2013). The coverage limit is per depositor, per insured depository institution for each account ownership category.

FICO Assessments . DIF-insured institutions are required to pay a quarterly Financing Corporation (FICO) assessment in order to fund the interest on bonds issued to resolve thrift failures in the 1980s. These FICO assessments are in addition to amounts assessed by the FDIC for deposit insurance. During the quarter ended March 31, 2012, the FICO assessment rate for the Bank was 1.65 basis points per $100 of assessable assets less tangible capital. The Bank’s FICO assessment expense for fiscal year ended March 31, 2012 was $13,800. Management believes this expense will be comparable for the fiscal year ending March 31, 2013.

National Banks. The Bank is subject to, and in compliance with, the capital regulations of the OCC. The OCC’s regulations establish two capital standards for national banks: a leverage requirement and a risk-based capital requirement. In addition, the OCC may, on a case-by-case basis, establish individual minimum capital requirements for a national bank that vary from the requirements which would otherwise apply under OCC regulations. A national bank that fails to satisfy the capital requirements established under the OCC’s regulations will be subject to such administrative action or sanctions as the OCC deems appropriate.

The leverage ratio adopted by the OCC requires a minimum ratio of “Tier 1 capital” to adjusted total assets of 3% for national banks rated composite 1 under the CAMELS rating system for banks. National banks not rated composite 1 under the CAMELS rating system for banks are required to maintain a minimum ratio of Tier 1 capital to adjusted total assets of 4% to 5%, depending upon the level and nature of risks of their operations. For purposes of the OCC’s leverage requirement, Tier 1 capital generally consists of common stockholders’ equity and retained income and certain non-cumulative perpetual preferred stock and related income, except that no intangibles and certain purchased mortgage servicing rights and purchased credit card relationships may be included in capital.

The risk-based capital requirements established by the OCC’s regulations require national banks to maintain “total capital” equal to at least 8% of total risk-weighted assets. For purposes of the risk-based capital requirement, “total capital” means Tier 1 capital (as described above) plus “Tier 2 capital,” provided that the amount of Tier 2 capital may not exceed the amount of Tier 1 capital, less certain assets. The components of Tier 2 capital include certain permanent and maturing capital instruments that do not qualify as core capital and general valuation loan and lease loss allowances up to a maximum of 1.25% of risk-weighted assets.

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In recent OCC guidance, the OCC stated its expectation that every national bank, regardless of size, have an effective internal process to (1) assess its capital adequacy in relation to its overall risks, and (2) plan for maintaining appropriate capital levels. National banks were further advised to maintain capital well above regulatory minimum capital ratios. Under this current regulatory scheme, Bank management believes that it will meet the capital requirements set forth above. Economic downturns in the Bank’s market, and other local and national events, however, could adversely affect the Bank’s earnings, thereby affecting its ability to meet its capital requirements.

Federal Reserve Board Capital Requirements.

The Federal Reserve Board has adopted capital adequacy guidelines pursuant to which it assesses the adequacy of capital in examining and supervising a bank holding company and in analyzing applications to it under the Bank Holding Company Act. The Federal Reserve Board capital adequacy guidelines generally require bank holding companies to maintain total capital equal to 8% of total risk-adjusted assets, with at least one-half of that amount consisting of Tier I or core capital and up to one-half of that amount consisting of Tier II or supplementary capital. Tier I capital for bank holding companies generally consists of the sum of common stockholders’ equity and perpetual preferred stock, subject in the case of the latter to limitations on the kind and amount of such perpetual preferred stock that may be included as Tier I capital, less goodwill and, with certain exceptions, other intangibles. Tier II capital generally consists of hybrid capital instruments, perpetual preferred stock that is not eligible to be included as Tier I capital, term subordinated debt and intermediate-term preferred stock and, subject to limitations, allowances for loan losses. Assets are adjusted under the risk-based guidelines to take into account different risk characteristics, with the categories ranging from 0% (requiring no additional capital) for assets such as cash to 100% for the bulk of assets, which are typically held by a bank holding company, including multi-family residential and commercial real estate loans, commercial business loans and commercial loans. Off-balance sheet items also are adjusted to take into account certain risk characteristics.

The federal bank regulatory agencies’ risk-based capital guidelines for years have been based upon the 1988 capital accord (“Basel I”) of the Basel Committee, a committee of central bankers and bank supervisors from the major industrialized countries. This body develops broad policy guidelines for use by each country’s supervisors in determining the supervisory policies they apply. In 2004, it proposed a new capital adequacy framework (“Basel II”) for large, internationally active banking organizations to replace Basel I. Basel II was designed to produce a more risk-sensitive result than its predecessor. However, certain portions of Basel II entail complexities and costs that were expected to preclude their practical application to the majority of U.S. banking organizations that lack the economies of scale needed to absorb the associated expenses.

Effective April 1, 2008, the U.S. federal bank regulatory agencies adopted Basel II for application to certain banking organizations in the United States. The new capital adequacy framework applies to organizations that: (i) have consolidated assets of at least $250 billion; or (ii) have consolidated total on-balance sheet foreign exposures of at least $10 billion; or (iii) are eligible to, and elect to, opt-in to the new framework even though not required to do so under clause (i) or (ii) above; or (iv) as a general matter, are subsidiaries of a bank or bank holding company that uses the new rule. During a two-year phase in period, organizations required or electing to apply Basel II will report their capital adequacy calculations separately under both Basel I and Basel II on a “parallel run” basis. Given the high thresholds noted above, the Company is not required to apply Basel II and does not expect to apply it in the foreseeable future.

In early June 2012, the federal banking regulators, including the Federal Reserve and the OCC, issued proposed rules to implement Basel III. The proposal, which reworks the "standardized approach," sets forth new requirements related to the quality and quantity of capital insured depository institutions must hold, includes requirements that increase the quantity and quality of capital required and revises the definition of "capital" to improve the ability of regulatory capital instruments to absorb losses. In addition, the Basel III proposal would revise the prompt corrective action framework by incorporating the new regulatory capital minimums and updating the definition of “tangible common equity”. Additional provisions relate to the calculations for risk-weighted assets. The proposal, which has been described as "extremely complex," was required to ensure that the way banks measure risk weights was more updated and risk-sensitive and to ensure compliance with provisions in the Dodd-Frank Act that bars regulators from issuing rules that reference external credit ratings. Comments on these proposed rules are due September 7, 2012 and it cannot be determined when the final rules will be published. Nonetheless, it is expected that the Bank's and the Company's capital requirements will increase. As a result, notwithstanding the Bank's status as "well-capitalized," Management is exploring alternatives to raise additional capital to support its operations.

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Source of Strength Doctrine.

Under provisions in the Dodd-Frank Act, as well as Federal Reserve Board policy and regulation, a bank holding company must serve as a source of financial and managerial strength to each of its subsidiary banks and is expected to stand prepared to commit resources to support each of them. Consistent with this, the Federal Reserve Board has stated that, as a matter of prudent banking, a bank holding company should generally not maintain a given rate of cash dividends unless its net income available to common shareholders has been sufficient to fully fund the dividends and the prospective rate of earnings retention appears to be consistent with the organization’s capital needs, asset quality, and overall financial condition.

Prompt Corrective Action. Federal banking regulators are authorized and, under certain circumstances, required to take certain actions against banks that fail to meet their capital requirements. Under the regulations, an institution is deemed to be (a) “well capitalized” if it has total risk-based capital of 10.0% or more, has a Tier 1 risk-based capital ratio of 6.0% or more, has a Tier 1 leverage capital ratio of 5.0% or more and is not subject to any order or final capital directive to meet and maintain a specific capital level for any capital measure; (b) “adequately capitalized” if it has a total risk-based capital ratio of 8.0% or more, a Tier 1 risk-based capital ratio of 4.0% or more and a Tier 1 leverage capital ratio of 4.0% or more (3.0% under certain circumstances) and does not meet the definition of well capitalized; (c) “undercapitalized” if it has a total risk-based capital ratio that is less than 8.0%, a tier 1 risk-based capital ratio that is less than 4.0% or a Tier 1 leverage capital ratio that is less than 4.0% (3.0% under certain circumstances); (d) “significantly undercapitalized” if it has a total risk-based capital ratio that is less than 6.0%, a Tier 1 risk-based capital ratio that is less than 3.0% or a Tier 1 leverage capital ratio that is less than 3.0%; and (e) “critically undercapitalized” if it has a ratio of tangible equity to total assets that is equal to or less than 2.0%. In certain situations, a federal banking agency may reclassify a well capitalized institution as adequately capitalized and may require an adequately capitalized or undercapitalized institution to comply with supervisory actions as if the institution were in the next lower category.

Adequately capitalized banks cannot normally pay dividends or make any capital contributions that would leave it undercapitalized; they cannot pay a management fee to a controlling person if, after paying the fee, it would be undercapitalized; and they cannot accept, renew or roll over any brokered deposit unless the bank has applied for and been granted a waiver by the FDIC. Under an interest rate restriction rule that became effective in January 2010, the FDIC has defined the “national rate” for all interest-bearing deposits held by less-than-well capitalized institutions as “a simple average of rates paid by all insured depository institutions and branches for which data are available” and has stated that its presumption is that this national rate is the prevailing rate in any market. As such, less-than-well capitalized institutions generally may not pay an interest rate in excess of the national rate plus 75 basis points.

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The federal banking agencies are generally required to take action to restrict the activities of an “undercapitalized,” “significantly undercapitalized” or “critically undercapitalized” bank. Any such bank must submit a capital restoration plan that is guaranteed by the parent holding company. Until such plan is approved, it may not increase its assets, acquire another institution, establish a branch or engage in any new activities, and generally may not make capital distributions. The banking regulators are authorized to impose additional restrictions, discussed below, that are applicable to significantly undercapitalized institutions.

Any institution that fails to comply with its capital plan or is “significantly undercapitalized” (i.e., Tier 1 risk-based or core capital ratios of less than 3% or a risk-based capital ratio of less than 6%) must be made subject to one or more of additional specified actions and operating restrictions mandated by the Federal Deposit Insurance Corporation Improvement Act of 1991 (“FDICIA”). These actions and restrictions include requiring the issuance of additional voting securities; limitations on asset growth; mandated asset reduction; changes in senior management; divestiture, merger or acquisition of the association; restrictions on executive compensation; and any other action the OCC deems appropriate. An institution that becomes “critically undercapitalized” is subject to further mandatory restrictions on its activities in addition to those applicable to significantly undercapitalized associations. In addition, the appropriate banking regulator must appoint a receiver (or conservator with the FDIC’s concurrence) for an institution, with certain limited exceptions, within 90 days after it becomes critically undercapitalized. Any undercapitalized institution is also subject to other possible enforcement actions, including the appointment of a receiver or conservator. The appropriate regulator is also generally authorized to reclassify an institution into a lower capital category and impose restrictions applicable to such category if the institution is engaged in unsafe or unsound practices or is in an unsafe or unsound condition.

Institutions must file a capital restoration plan with the OCC within 45 days of the date it receives a notice from the OCC that it is “undercapitalized,” “significantly undercapitalized,” or “critically undercapitalized.” Compliance with a capital restoration plan must be guaranteed by a parent holding company. In addition, the OCC is permitted to take any one of a number of discretionary supervisory actions, including but not limited to the issuance of a capital directive and the replacement of senior executive officers and directors.

The imposition of any of these measures on the Bank may have a substantial adverse effect on it and on the Company’s operations and profitability. First Robinson stockholders do not have preemptive rights and, therefore, if First Robinson Financial is directed by the OCC or the FDIC to issue additional shares of Common Stock, such issuance may result in the dilution in stockholders’ percentage of ownership of First Robinson.

The OCC is also generally authorized to reclassify a bank into a lower capital category and impose the restrictions applicable to such category if the institution is engaged in unsafe or unsound practices or is in an unsafe or unsound condition. The imposition by the OCC of any of these measures on the Bank may have a substantial adverse effect on the Bank’s operations and profitability and the value of the Company’s common stock.

At March 31, 2012, the Bank was categorized as well capitalized under the OCC’s prompt corrective action regulations.

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Limitations on Dividends and Other Capital Distributions.

The Bank’s ability to pay dividends is governed by the National Bank Act and OCC regulations. Under such statute and regulations, all dividends by a national bank must be paid out of current or retained net profits, after deducting reserves for losses and bad debts. The National Bank Act further restricts the payment of dividends out of net profits by prohibiting a national bank from declaring a cash dividend on its shares of common stock until the surplus fund equals the amount of capital stock or, if the surplus fund does not equal the amount of capital stock, until one-tenth of the bank’s net profits for the preceding half year in the case of quarterly or semi-annual dividends, or the preceding two half-year periods in the case of annual dividends, are transferred to the surplus fund. In addition, the prior approval of the OCC is required for the payment of a dividend if the total of all dividends declared by a national bank in any calendar year would exceed the total of its net profits for the year combined with its net profits for the two preceding years, less any required transfers to surplus or a fund for the retirement of any preferred stock.

The OCC has the authority to prohibit the payment of dividends by a national bank when it determines such payment to be an unsafe and unsound banking practice. In addition, the bank would be prohibited by federal statute and the OCC’s prompt corrective action regulations from making any capital distribution if, after giving effect to the distribution, the bank would be classified as “undercapitalized” under OCC regulations. See “-- Prompt Corrective Action.” Finally, the Bank would not be able to pay dividends on its capital stock if its capital would thereby be reduced below the remaining balance of the liquidation account established in connection with the Bank’s conversion from mutual to stock form.

Accounting.

The OCC requires that investment activities of a national bank be in compliance with approved and documented investment policies and strategies, and must be accounted for in accordance with accounting principles generally accepted in the United States of America (“GAAP”). Accordingly, management must support its classification of and accounting for loans and securities (i.e., whether held for investment, sale or trading) with appropriate documentation. The Bank is in compliance with these requirements.

Community Reinvestment Act.

Under the Community Reinvestment Act (“CRA”), every FDIC-insured institution has a continuing and affirmative obligation consistent with safe and sound banking practices to help meet the credit needs of its entire community, including low- and moderate-income neighborhoods. The CRA does not establish specific lending requirements or programs for financial institutions nor does it limit an institution’s discretion to develop the types of products and services that it believes are best suited to its particular community, consistent with the CRA.

The CRA requires the OCC, in connection with the examination of the institution, to assess the institution’s record of meeting the credit needs of its community and to take such record into account in its evaluation of certain applications, such as a merger or the establishment of a branch, by the institution. An unsatisfactory rating may be used as the basis for the denial of an application by the OCC. The Bank’s CRA rating is “satisfactory.”

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Transactions with Affiliates.

Generally, transactions between a national bank or its subsidiaries and its affiliates are required to be on terms as favorable to the bank as transactions with non-affiliates. In addition, certain of these transactions, such as loans to an affiliate, are restricted to a percentage of the bank’s capital. Affiliates of the bank include any company which is under common control with the bank. In addition, the bank may not acquire the securities of most affiliates. Subsidiaries of the bank are not deemed affiliates. However, the Federal Reserve Board (the “FRB”) has the discretion to treat subsidiaries of national banks as affiliates on a case-by-case basis.

Certain transactions with directors, officers or controlling persons (“insiders”) are also subject to conflict of interest rules enforced by the OCC. These conflict of interest regulations and other statutes also impose restrictions on loans to such persons and their related interests. Among other things, as a general matter, loans to insiders must be made on terms substantially the same as for loans to unaffiliated individuals.

Federal Reserve System.

The FRB requires all depository institutions to maintain reserves at specified levels against their transaction accounts (primarily checking and NOW checking accounts). At March 31, 2012, the Bank had $3.0 million in reserve and had $309,400 in FRB stock, which was in compliance with these reserve requirements.

Holding Company Regulation.

General. The Company is a bank holding company registered with the FRB. Bank holding companies are subject to comprehensive regulation by the FRB under the Banking Holding Company Act (the “BHCA”), and the regulations of the FRB. As a bank holding company, the Company is required to file reports with the FRB and such additional information as the FRB may require, and will be subject to regular examinations by the FRB. The FRB also has extensive enforcement authority over bank holding companies, including, among other things, the ability to assess civil money penalties, to issue cease and desist or removal orders and to require that a holding company divest subsidiaries (including its bank subsidiaries). In general, enforcement actions may be initiated for violations of law and regulations and unsafe or unsound practices.

Under FRB policy, a bank holding company must serve as a source of financial and managerial strength for its subsidiary banks. Under this policy the FRB may require, and has required in the past, a holding company to contribute additional capital to an undercapitalized subsidiary bank. Failure by a bank holding company to act as a “source of strength” to its subsidiary bank could be deemed by the FRB to be an unsafe and unsound banking practice, a violation of FRB regulation, or both.

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Under the BHCA, a bank holding company must obtain FRB approval before: (i) acquiring, directly or indirectly, ownership or control of any voting shares of another bank or bank holding company if, after such acquisition, it would own or control more than 5% of such shares (unless it already owns or controls the majority of such shares); (ii) acquiring all or substantially all of the assets of another bank or bank holding company; or (iii) merging or consolidating with another bank holding company.

The BHCA also prohibits a bank holding company, with certain exceptions, from acquiring direct or indirect ownership or control of more than 5% of the voting shares of any company which is not a bank or bank holding company, or from engaging directly or indirectly in activities other than those of banking, managing or controlling banks, or providing services for its subsidiaries. The principal exceptions to these prohibitions involve certain non-bank activities which, by statute or by FRB regulation or order, have been identified as activities closely related to the business of banking or managing or controlling banks. The list of activities permitted by the FRB includes, among other things, operating a savings institution, mortgage company, finance company, credit card company or factoring company; performing certain data processing operations; providing certain investment and financial advice; underwriting and acting as an insurance agent for certain types of credit-related insurance; leasing property on a full-payout, non-operating basis; selling money orders, travelers’ checks and U.S. Savings Bonds; real estate and personal property appraising; providing tax planning and preparation services; and, subject to certain limitations, providing securities brokerage services for customers.

Regulations pursuant to the BHCA generally require prior Federal Reserve Board approval for an acquisition of control of an insured institution (as defined in the Act) or holding company thereof by any person (or persons acting in concert). Control is deemed to exist if, among other things, a person (or persons acting in concert) acquires more than 25% of any class of voting stock of an insured institution or holding company thereof. Under the Change in Bank Control Act ("CBCA"), control is presumed to exist subject to rebuttal if a person (or persons acting in concert) acquires more than 10% of any class of voting stock and either (i) the corporation has registered securities under Section 12 of the Securities Exchange Act of 1934, or (ii) no person will own, control or hold the power to vote a greater percentage of that class of voting securities immediately after the transaction. The concept of acting in concert is very broad and also is subject to certain rebuttable presumptions, including among others, that relatives, business partners, management officials, affiliates and others are presumed to be acting in concert with each other and their businesses.

Dividends. The FRB previously issued a policy statement, with which the Company is in compliance, on the payment of cash dividends by bank holding companies, which expresses the FRB’s view that a bank holding company should pay cash dividends only to the extent that the Company’s net income for the past year is sufficient to cover both the cash dividends and a rate of earning retention that is consistent with the Company’s capital needs, asset quality and overall financial condition. The FRB also indicated that it would be inappropriate for a company experiencing serious financial problems to borrow funds to pay dividends. Furthermore, under the prompt corrective action regulations adopted by the FRB, the FRB may prohibit a bank holding company from paying any dividends if the holding company’s bank subsidiary is classified as “undercapitalized.” See “Regulation -- Prompt Corrective Action.”

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Importantly, in 2009, the FRB issued a set of specific factors the board of directors of a bank holding company should consider before declaring a dividend. Those factors include the following:

• Overall asset quality, potential need to increase reserves and write down assets, and concentrations of credit;

• Potential for unanticipated losses and declines in asset values;

• Implicit and explicit liquidity and credit commitments, including off-balance sheet and contingent liabilities;

• Quality and level of current and prospective earnings, including earnings capacity under a number of plausible economic scenarios;

• Current and prospective cash flow and liquidity;

• Ability to serve as an ongoing source of financial and managerial strength to depository institution subsidiaries insured by the Federal Deposit Insurance Corporation, including the extent of double leverage and the condition of subsidiary depository institutions;

• Other risks that affect the bank holding company’s financial condition and are not fully captured in regulatory capital calculations;

• Level, composition, and quality of capital; and

• Ability to raise additional equity capital in prevailing market and economic conditions.

Redemption. Bank holding companies are required to give the FRB prior written notice of any purchase or redemption of its outstanding equity securities if the gross consideration for the purchase or redemption, when combined with the net consideration paid for all such purchases or redemptions during the preceding 12 months, is equal to 10% or more of their consolidated net worth. The FRB may disapprove such a purchase or redemption if it determines that the proposal would constitute an unsafe or unsound practice or would violate any law, regulation, FRB order, or any condition imposed by, or written agreement with, the FRB. This notification requirement does not apply to any company that meets the well-capitalized standard for commercial banks, is well managed and is not subject to any unresolved supervisory issues.

Capital Requirements . The FRB has established capital requirements for bank holding companies that generally parallel the capital requirements for national banks. For bank holding companies with consolidated assets of less than $500 million, such as the Company, compliance is measured on a case-by-case basis. See “Regulation -- National Banks” and “Capital Requirements.” The Company’s capital exceeds such requirements.

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Federal Home Loan Bank System.

The Bank is a member of the FHLB of Chicago, which is one of 12 regional FHLBs, that administers the home financing credit function of savings institutions. Each FHLB serves as a reserve or central bank for its members within its assigned region. It is funded primarily from proceeds derived from the sale of consolidated obligations of the FHLB System. It makes loans to members (i.e., advances) in accordance with policies and procedures, established by the board of directors of the FHLB, which are subject to the oversight of the Federal Housing Finance Agency (“FHFA”), an agency of the United States government. All advances from the FHLB are required to be fully secured by sufficient collateral as determined by the FHLB. In addition, all long-term advances are required to provide funds for residential home financing.

As a member, the Bank is required to purchase and maintain stock in the FHLB of Chicago. At March 31, 2012, the Bank had $879,400 in FHLB stock.

The FHLB of Chicago entered into a cease-and-desist order (“Order”) with the Federal Housing Finance Board (“FHFB”), the predecessor to the FHFA, its regulator, on October 10, 2007. The order prohibited capital stock repurchases and redemptions and the payments of dividends without regulatory approval. Dividends were suspended by the FHLB of Chicago at the end of the third quarter in 2007. On July 23, 2008, the FHFB amended this cease-and-desist order to permit the FHLB of Chicago to repurchase or redeem newly-issued capital stock to support new advances, subject to certain conditions set forth in the Order. The FHFB permitted this modification because it determined that permitting the FHLB of Chicago to do this would help it to grow its advances business, and thereby, improve its financial condition while preserving the stability of its existing capital stock.

The FHLB paid quarterly dividends at the annualized rate of 10 basis points in calendar year 2011 and the first quarter of 2012. The payment of this dividend was approved by the FHFB, which is required by a specific provision in the Order. The cease-and-desist order was terminated as of April 18, 2012. As such, the FHLB can now declare quarterly dividends without the consent of the regulator, subject to the dividend payment being at or below the average of the three-month LIBOR for that quarter and the payment of the dividend will not result in the FHLB’s retain earnings falling below the level at the previous year-end.

Under federal law, the FHLBs are required to provide funds for the resolution of troubled savings institutions and to contribute to low- and moderately priced housing programs through direct loans or interest subsidies on advances targeted for community investment and low- and moderate-income housing projects. These contributions could have an adverse effect on the value of FHLB stock in the future. A reduction in value of the Bank’s FHLB stock may result in a corresponding reduction in the Bank’s capital.

Federal and State Taxation

Federal Taxation. In addition to the regular income tax, corporations generally are subject to a minimum tax. An alternative minimum tax is imposed at a minimum tax rate of 20% on alternative minimum taxable income, which is the sum of a corporation’s regular taxable income (with certain adjustments) and tax preference items, less any available exemption. The alternative minimum tax is imposed to the extent it exceeds the corporation’s regular income tax and net operating losses can offset no more than 90% of alternative minimum taxable income.

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The Company and the Bank file a consolidated income tax return on the accrual basis of accounting. Neither the Company nor the Bank have been audited by the IRS with respect to federal income tax returns.

State Taxation. The Company also is subject to various forms of state taxation under the laws of Illinois as a result of the business it conducts in Illinois, and under the laws of Indiana as a result of the business it conducts in Indiana.

Employees

At March 31, 2012, the Company and the Bank had a total of 57 full-time and 17 part-time employees. The Company’s and the Bank’s employees are not represented by any collective bargaining group. Management considers its employee relations to be good.

ITEM 1A. RISK FACTORS

The Company’s business could be harmed by any of the risks noted below, or by other risks not noted because they were not apparent to management. Similarly, the trading price of the Company’s common stock could decline, and stockholders may lose all or part of their investment. In assessing these risks, you should also refer to the other information contained in this annual report on Form 10-K, including the Company’s financial statements and related notes.

Risks Related to Recent Developments and the Banking Industry Generally

Recent negative developments in the financial services industry and U.S. and global credit markets may adversely impact the Company’s operations and results.

Despite signs that the nation as a whole is emerging from a recession environment, the national and global economic downturn has resulted in extreme levels of market volatility locally, nationally and internationally. Factors such as consumer spending, business investment, government spending and inflation all affect the business and economic environment and, ultimately, the profitability of the Company. In an economic downturn characterized by higher unemployment, lower family income, lower corporate earnings, lower business investment and lower consumer spending, stock prices of financial institutions, like ours, have been negatively affected, as has our ability, if needed, to raise capital or borrow in the debt markets. Dramatic declines in the housing market over the past three years, with falling home prices and increasing foreclosures, unemployment and under-employment, have negatively impacted the credit performance of real estate related loans and resulted in significant write-downs of asset values by financial institutions. These write-downs have caused many financial institutions to seek additional capital, to reduce or eliminate dividends, to merge with larger and stronger institutions and, in some cases, to fail. This market turmoil and tightening of credit have led to an increased level of commercial and consumer delinquencies, lack of consumer confidence, increased market volatility and reduction of business activity generally. The resulting economic pressure on consumers and lack of confidence in the financial markets may cause adverse changes in payment patterns, causing increases in delinquencies and default rates, which may impact our charge-offs and provision for loan losses.

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As a result of the economic slowdown, financial institution regulatory agencies have been and are expected to continue to be aggressive in responding to concerns and trends identified in examinations. A continued weak economy, negative developments in the financial services industry and the impact of recently passed legislation could adversely impact our operations, including our ability to originate or sell loans, and adversely impact our financial performance.

The full impact of the Dodd-Frank Act is currently unknown given that much of the details and substance of the new laws will be determined through agency rulemaking.

The compliance burden and impact on our operations and profitability related to the Dodd-Frank Act are still unknown, as the Dodd-Frank Act delegates to various federal agencies the task of implementing its many provisions through regulation. Hundreds of new federal regulations, studies and reports addressing all of the major areas of the new law, including the regulation of national banks and their holding companies, are required, ensuring that federal rules and policies in this area will be further developing for months and years to come. Based on the provisions of the Dodd-Frank Act and related implementing regulations, it is highly likely that banks and their holding companies will be subject to significantly increased regulation and compliance obligations that expose us to noncompliance risk and consequences as well as significant compliance costs increases. To date, Dodd-Frank related regulations have had only a marginal impact on the Bank and the Company, though no guarantees may be given that this will remain the case.

Moreover, there can be no assurance that the Dodd-Frank Act will stabilize financial markets. The continuation or worsening of current financial market conditions could materially and adversely affect the Company's business, financial condition, results of operation, access to credit or the trading price of the Company's common stock.

The BASEL III proposal, if implemented as proposed, would require significant changes to capital calculations.

If adopted as proposed, Basel III and regulations proposed by the Federal Reserve, the OCC and the FDIC will require bank holding companies and banks to undertake significant activities to demonstrate compliance with the new and higher capital standards. Compliance with these rules, which are still being analyzed, will impose additional costs on banking entities and their holding companies. Management is evaluating the new proposed standards and is exploring methods of obtaining additional capital, notwithstanding the Bank's status as well-capitalized.

The CFPB may reshape the consumer financial laws through rulemaking and enforcement of unfair, deceptive or abusive practices, which may directly impact the business operations of depository institutions offering consumer financial products or services including the Bank.

The CFPB has broad rulemaking authority to administer and carry out the purposes and objectives of the “Federal consumer financial laws, and to prevent evasions thereof,” with respect to all financial institutions that offer financial products and services to consumers. The CFPB is also authorized to prescribe rules, applicable to any covered person or service provider, identifying and prohibiting acts or practices that are “unfair, deceptive, or abusive” in connection with any transaction with a consumer for a consumer financial product or service, or the offering of a consumer financial product or service (“UDAP authority”). The full reach and impact of the CFPB’s broad new rulemaking powers and UDAP authority on the operations of financial institutions offering consumer financial products or services is currently unknown. Notwithstanding, insured depository institutions with assets of $10 billion or less will continue to be supervised and examined by their primary federal regulators, rather than the CFPB, with respect to compliance with the federal consumer protection laws.

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The soundness of other financial institutions could adversely affect us.

The Company’s ability to engage in routine funding transactions could be adversely affected by the actions and commercial soundness of other financial institutions. Financial services institutions are interrelated as a result of trading, clearing, counterparty or other relationships. As a result, defaults by, or even rumors or questions about, one or more financial services institutions, or the financial services industry generally, have led to market-wide liquidity problems and could lead to losses or defaults by us or by other institutions. Many of these transactions expose the Company to credit risk in the event of default of a counterparty or client. In addition, the Company’s credit risk may be exacerbated when the collateral held by the Company cannot be realized upon or is liquidated at prices not sufficient to recover the full amount of the financial instrument exposure. There is no assurance that any such losses would not materially and adversely affect the Company’s results of operations.

The Federal Reserve's "ability to pay" proposed rule will have a significant impact on our mortgage underwriting processes if adopted largely as proposed.

The “ability to pay” proposed rule will make it difficult for community based financial institutions to lend to small businesses and self-employed individuals. This will limit the ability of the Company to reinvest in our communities by restricting loans to those small businesses and the self-employed. These limitations will further negatively impact the Company’s earnings on mortgage loans.

Changes in economic and political conditions could adversely affect the Company’s earnings, as the Company’s borrowers’ ability to repay loans and the value of the collateral securing the Company’s loans decline.

The Company’s success depends, to a certain extent, upon economic and political conditions, local and national, as well as governmental monetary policies. Conditions such as inflation, recession, unemployment, changes in interest rates, money supply and other factors beyond the Company’s control may adversely affect the Company’s asset quality, deposit levels and loan demand and, therefore, the Company’s earnings. Because we have a significant amount of real estate loans, decreases in real estate values could adversely affect the value of property used as collateral. Adverse changes in the economy may also have a negative effect on the ability of the Company’s borrowers to make timely repayments of their loans, which would have an adverse impact on the Company’s earnings. In addition, substantially all of the Company’s loans are to individuals and businesses in the Company’s market area. Consequently, any economic decline in the Company’s market area could have an adverse impact on the Company’s earnings.

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Changes in interest rates could adversely affect the Company’s results of operations and financial condition.

The Company’s earnings depend substantially on the Company’s interest rate spread, which is the difference between (i) the rates we earn on loans, securities and other earning assets, and (ii) the interest rates we pay on deposits and other borrowings. These rates are highly sensitive to many factors beyond the Company’s control, including general economic conditions and the policies of various governmental and regulatory authorities. For additional information, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

The failure of the European Union to stabilize the fiscal condition and creditworthiness of its weaker member economies could have international implication potentially impacting global financial institutions, the financial markets, and the economic recovery underway in the United States .

Investors have great concern with respect to certain European Union member countries and their related fiscal obligations (including but not limited to Greece, Spain, Portugal and Ireland). It is unclear how these countries will be able to continue to service their debt and foster economic growth. It is possible that a weak European economy will directly impact the U.S. economy as investors lose confidence in the European market. This would clearly hamper the limited economic recovery apparently underway in the United States and would likely have a material adverse effect on us indirectly through its effect on the U.S.economy.

We operate in a highly regulated environment, and changes in laws and regulations to which we are subject may adversely affect the Company’s results of operations.

The Company and the Bank operate in a highly regulated environment and are subject to extensive regulation, supervision and examination by the Board of Governors of the Federal Reserve System and the OCC, respectively. See “Business -- Regulation” herein. In addition to the myriad changes as a result of the Dodd-Frank Act, other applicable laws and regulations may change, and there is no assurance that such changes will not adversely affect the Company’s business. Such regulation and supervision govern the activities in which an institution may engage, and are intended primarily for the protection of banks and their depositors. Regulatory authorities have extensive discretion in connection with their supervisory and enforcement activities. Any change in such regulation and oversight, whether in the form of restrictions on activities, regulatory policy, regulations, or legislation, including but not limited to changes in the regulations governing national banks, could have a material impact on the bank and the Company’s operations.

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Changes in technology could be costly.

The banking industry is undergoing technological innovation at a fast pace. To keep up with its competition, the Company needs to stay abreast of innovations and evaluate those technologies that will enable it to compete on a cost-effective basis. The cost of such technology, including personnel, can be high in both absolute and relative terms. There can be no assurance, given the fast pace of change and innovation, that the Company’s technology, either purchased or developed internally, will meet or continue to meet the needs of the Company. Moreover, these changes may be more difficult or expensive than we anticipate.

Risks Related to the Company’s Business

We operate in an extremely competitive market, and the Company’s business will suffer if we are unable to compete effectively.

In the Company’s market area, the Bank encounters significant competition from other commercial banks, a credit union, consumer finance companies, securities brokerage firms, insurance companies, money market mutual funds and other financial intermediaries. Many of the Bank’s competitors have substantially greater resources and lending limits than we do and may offer services that we do not or cannot provide. The Company’s profitability depends upon the Company’s continued ability to compete successfully in the Company’s market area.

The loss of key members of the Company’s senior management team could adversely affect the Company’s business.

We believe that the Company’s success depends largely on the efforts and abilities of the Company’s senior management. Their experience and industry contacts significantly benefit us. The competition for qualified personnel in the financial services industry is intense, and the loss of any of the Company’s key personnel or an inability to continue to attract, retain and motivate key personnel could adversely affect the Company’s business.

Our business may be adversely affected by litigation.

Although historically we have not experienced material difficulties in this regard, from time to time, our customers, or the government on their behalf, may make claims and take legal action relating to our performance of fiduciary or contractual responsibilities. We may also face employment lawsuits or other legal claims. In any such claims or actions, demands for substantial monetary damages may be asserted against us resulting in financial liability or an adverse effect on our reputation among investors or on customer demand for our products and services. We may be unable to accurately estimate our exposure to litigation risk when we record balance sheet reserves for probable loss contingencies. As a result, any reserves we establish to cover any settlements or judgments may not be sufficient to cover our actual financial exposure, which may have a material impact on our consolidated results of operations or financial condition.

The resolution of legal actions or regulatory matters, if unfavorable, could have a material adverse effect on our consolidated results of operations for the quarter in which such actions or matters are resolved or a reserve is established. 

Ethics or conflict of interest issues could damage our reputation.

We have established a Code of Conduct and related policies and procedures to address the ethical conduct of our business and to avoid potential conflicts of interest. We have made certain assumptions in connection with these policies but there are no firm assurances that these policies will be effective. Any failure or circumvention of our related controls and procedures or failure to comply with the established Code of Conduct and related policies could have a material adverse effect on our reputation, business, results of operations, and/or financial condition.

44

Our businesses may be negatively affected by adverse publicity or other reputational harm.

Our relationships with many of our customers are predicated upon our reputation as a fiduciary and a service provider that adheres to the highest standards of ethics, service quality and regulatory compliance. Adverse publicity, regulatory actions, like the Agreements, litigation, operational failures, the failure to meet customer expectations and other issues with respect to one or more of our businesses could materially and adversely affect our reputation, ability to attract and retain customers or obtain sources of funding for the same or other businesses. Preserving and enhancing our reputation also depends on maintaining systems and procedures that address known risks and regulatory requirements, as well as our ability to identify and mitigate additional risks that arise due to changes in our businesses, the market places in which we operate, the regulatory environment and customer expectations. If any of these developments has a material adverse effect on our reputation, our business will suffer.

Lack of system integrity or credit quality related to funds settlement could result in a financial loss.

We settle funds on behalf of our customers and other consumers and receive funds from clients, card issuers, payment networks and consumers on a daily basis for many different transaction types, including but not limited to wire transfers and debit card, credit card and electronic bill payment transactions. These payment activities rely upon the technology infrastructure that facilitates the verification of activity with counterparties and the facilitation of the payment. If the continuity of operations or integrity of processing were compromised, the Bank could experience a financial loss due to a failure in payment facilitation. In addition, we may issue credit to customers as part of the funds settlement. A default on this credit could result in a financial loss to us.

Changes in accounting standards issued by the Financial Accounting Standards Board or other standard-setting bodies may adversely affect our financial statements.

Our financial statements are subject to the application of U.S. Generally Accepted Accounting Principles (“GAAP”), which is periodically revised and expanded. Accordingly, from time to time, we are required to adopt new or revised accounting standards issued by the Financial Accounting Standards Board. Market conditions have prompted accounting standard setters to promulgate new requirements that further interpret or seek to revise accounting pronouncements related to financial instruments, structures or transactions as well as to revise standards to expand disclosures. The impact of accounting pronouncements that have been issued but not yet implemented is disclosed in footnotes to our financial statements, which are incorporated herein by reference. An assessment of proposed standards is not provided as such proposals are subject to change through the exposure process and, therefore, the effects on our financial statements cannot be meaningfully assessed. It is possible that future accounting standards that we are required to adopt could change the current accounting treatment that we apply to our consolidated financial statements and that such changes could have a material adverse effect on our financial condition and results of operations.

Changes in economic and political conditions could adversely affect the Company’s earnings, as the Company’s borrowers’ ability to repay loans and the value of the collateral securing the Company’s loans decline.

The Company’s success depends, to a certain extent, upon economic and political conditions, local and national, as well as governmental monetary policies. Conditions such as inflation, recession, unemployment, changes in interest rates, money supply and other factors beyond the Company’s control may adversely affect the Company’s asset quality, deposit levels and loan demand and, therefore, the Company’s earnings. Because the Company has a significant amount of real estate loans, decreases in real estate values could adversely affect the value of property used as collateral.  Among other things, adverse changes in the economy, including but not limited to the current economic downturn, may also have a negative effect on the ability of the Company’s borrowers to make timely repayments of their loans, which would have an adverse impact on the Company’s earnings.  In addition, the vast majority of the Company’s loans are to individuals and businesses in the Company’s market area.  Consequently, any economic decline in the Company’s market area could have an adverse impact on the Company’s earnings.

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The Company’s loan portfolio includes loans with a higher risk of loss.

The Bank originates commercial loans, commercial real estate loans, consumer loans, and residential mortgage loans primarily within the Company’s market areas. Commercial mortgage, commercial, and consumer loans may expose a lender to greater credit risk than loans secured by residential real estate because the collateral securing these loans may not be sold as easily as residential real estate. These loans also have greater credit risk than residential real estate for the following reasons:

· Commercial Loans. Repayment is dependent upon the successful operation of the borrower’s business which is greatly dependent on many things outside the control of either the Bank or the borrowers. These factors include but not limited to adverse conditions in the local economy, weather, commodity prices, and interest rates, among others.

· Consumer Loans. Consumer loans (such as personal lines of credit) are collateralized, if at all, with assets that may not provide an adequate source of payment of the loan due to depreciation, damage, or loss.

· Commercial Real Estate Loans. The repayment of commercial and agriculture real estate loans depends on the successful management and operation of the borrower’s properties. Appraised values for agricultural real estate in the Company’s market area are at record highs. If the Company follows current underwriting practices and agricultural real estate prices decline in future years, this may leave the Company with loan balances in excess of collateral values.

If the Company’s actual loan losses exceed the Company’s allowance for loan losses, the Company’s net income will decrease.

The Company makes various assumptions and judgments about the collectibility of the Company’s loan portfolio, including the creditworthiness of the Company’s borrowers and the value of the real estate and other assets serving as collateral for the repayment of the Company’s loans. Despite the Company’s underwriting and monitoring practices, the Company’s loan customers may not repay their loans according to their terms, and the collateral securing the payment of these loans may be insufficient to pay any remaining loan balance. We may experience significant loan losses, which could have a material adverse effect on the Company’s operating results. Because we must use assumptions regarding individual loans and the economy, the Company’s current allowance for loan losses may not be sufficient to cover actual loan losses, and increases in the allowance may be necessary. We may need to significantly increase the Company’s provision for losses on loans if one or more of the Company’s larger loans or credit relationships becomes delinquent or if we continue to expand the Company’s commercial real estate and commercial lending. In addition, federal regulators periodically review the Company’s allowance for loan losses and may require us to increase the Company’s provision for loan losses or recognize loan charge-offs. Material additions to the Company’s allowance would materially decrease the Company’s net income. We cannot assure you that the Company’s monitoring procedures and policies will reduce certain lending risks or that the Company’s allowance for loan losses will be adequate to cover actual losses.

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If the Company’s non-performing assets increase, net income could decrease.

Non-performing assets, which include non-accrual loans and foreclosed real estate, adversely affect net income in various ways. Interest income on non-performing assets is not recognized, additional provision for probable losses on problem loans may need recorded, and associated costs, such as legal fees, due to collection efforts of problem assets could be increased. Additional costs such as taxes, insurance and maintenance of foreclosed real estate are also increased. The Company must also write down the value of properties in foreclosed real estate to reflect market value changes.

If we foreclose on collateral property and own the underlying real estate, we may be subject to the increased costs associated with the ownership of real property, resulting in reduced revenues.

We may have to foreclose on collateral property to protect the Company’s investment and may thereafter own and operate such property, in which case we will be exposed to the risks inherent in the ownership of real estate. The amount that we, as a mortgagee, may realize after a default is dependent upon factors outside of the Company’s control, including, but not limited to: (i) general or local economic conditions; (ii) neighborhood values; (iii) interest rates; (iv) real estate tax rates; (v) operating expenses of the mortgaged properties; (vi) supply of and demand for rental units or properties; (vii) ability to obtain and maintain adequate occupancy of the properties; (viii) zoning laws; (ix) governmental rules, regulations and fiscal policies; and (x) acts of God. Certain expenditures associated with the ownership of real estate, principally real estate taxes and maintenance costs, may adversely affect the income from the real estate. Therefore, the cost of operating a real property may exceed the rental income earned from such property, and we may have to advance funds in order to protect the Company’s investment, or we may be required to dispose of the real property at a loss. The foregoing expenditures and costs could adversely affect the Company’s ability to generate revenues, resulting in reduced levels of profitability.

The accuracy and completeness of information about customers and counterparties is relied upon in the business decisions the Bank makes.

In deciding whether to extend credit or participate in other transactions, the Bank often relies on information furnished by or on behalf of customers and counterparties, including credit reports and financial materials. We may also rely on representations of those customers, counterparties, or other third parties, such as appraisers or independent auditors, as to the accuracy and completeness of that information. Reliance on inaccurate or misleading third-party financial information could cause us to enter into transactions that lack the criteria we believed to be present in such transactions, which could have a material adverse effect on our financial condition and results of operations.

Changes in interest rates could adversely affect the Company’s results of operations and financial condition.

The Company’s earnings depend substantially on the Company’s interest rate spread, which is the difference between (i) the rates we earn on loans, securities and other earning assets, and (ii) the interest rates we pay on deposits and other borrowings.  These rates are highly sensitive to many factors beyond the Company’s control, including general economic conditions and the policies of various governmental and regulatory authorities.  As market interest rates rise, we will have competitive pressures to increase the rates we pay on deposits, which may result in a decrease of the Company’s net interest income.  Conversely, if interest rates fall, yields on loans and investments may fall.  Because a significant portion of the Company’s deposit portfolio is in non-interest bearing accounts, a change in rates would likely result in a decrease in the Company’s net interest income.  For additional information, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

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The Company could experience further impairment losses on the value of the mortgage servicing rights.

Fair values related to mortgage servicing rights are sensitive to movements in interest rates as expected future net servicing income depends on the projected outstanding principal balances of the underlying loans, which can be greatly reduced by prepayments. Prepayments usually increase when mortgage rates decline and decrease when mortgage interest rates rise. If the fair value of the Company’s mortgage servicing rights is less than the carrying value of such rights, then an impairment loss may need to be recognized. Such impairment can occur due to changes in interest rates, loan performance or prepayment of the underlying mortgage.

Further increases in the FDIC deposit insurance premium or in FDIC required reserves may have a significant financial impact on us.

The FDIC insures deposits at FDIC-insured depository institutions up to certain limits. The FDIC charges insured depository institutions premiums to maintain the Deposit Insurance Fund (the “DIF”). Current economic conditions during the last few years have resulted in higher bank failures and expectations of future bank failures. In the event of a bank failure, the FDIC takes control of a failed bank and ensures payment of deposits up to insured limits (which have recently been increased) using the resources of the DIF. The FDIC is required by law to maintain adequate funding of the DIF, and the FDIC may increase premium assessments to maintain such funding.

The Dodd-Frank Act requires the FDIC to increase the DIF’s reserves against future losses, which will necessitate increased deposit insurance premiums that are to be borne primarily by institutions with assets of greater than $10 billion. On October 19, 2010, the FDIC addressed plans to bolster the DIF by increasing the required reserve ratio for the industry to 1.35 percent (ratio of reserves to insured deposits) by September 30, 2020, as required by the Dodd-Frank Act. The FDIC also proposed to raise its industry target ratio of reserves to insured deposits to 2 percent, 65 basis points above the statutory minimum, but the FDIC does not project that goal to be met until 2027.

The FDIC has recently approved two rules that amend its deposit insurance assessment regulations. The first rule implements a provision in the Dodd-Frank Act that changes the assessment base for deposit insurance premiums from one based on domestic deposits to one based on average consolidated total assets minus average Tier 1 capital. The rule also changes the assessment rate schedules for insured depository institutions so that approximately the same amount of revenue would be collected under the new assessment base as would be collected under the current rate schedule and the schedules previously proposed by the FDIC. The second rule revises the risk-based assessment system for all large insured depository institutions (generally, institutions, not including the Bank. Under the rule, the FDIC uses a scorecard method to calculate assessment rates for all such institutions.

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The FDIC may further increase the Bank’s premiums or impose additional assessments or prepayment requirements in the future. The Dodd-Frank Act has removed the statutory cap for the reserve ratio, leaving the FDIC free to set this cap going forward.

Environmental liability associated with commercial lending could have a material adverse effect on the Company’s business, financial condition and results of operations.

In the course of the Company’s business, we may acquire, through foreclosure, commercial properties securing loans that are in default. There is a risk that hazardous substances could be discovered on those properties. In this event, we could be required to remove the substances from and remediate the properties at the Company’s cost and expense. The cost of removal and environmental remediation could be substantial. We may not have adequate remedies against the owners of the properties or other responsible parties and could find it difficult or impossible to sell the affected properties. These events could have a material adverse effect on the Company’s business, financial condition and operating results.

Severe weather, natural disasters, acts of war or terrorism, and other external events could significantly impact our business.

Severe weather, natural disasters, acts of war or terrorism, and other adverse external events could have a significant impact on our ability to conduct business. Such events could affect the stability of our deposit base, impair the ability of borrowers to repay outstanding loans, impair the value of collateral securing loans, cause significant property damage, result in loss of revenue and/or cause us to incur additional expenses. Disaster recovery policies and procedures implemented by the Bank and the Company mitigate these risks but do not terminate them.

If the Company fails to maintain an effective system of internal control over financial reporting, it may not be able to accurately report the Company’s financial results or prevent fraud, and, as a result, investors and depositors could lose confidence in the Company’s financial reporting, which could adversely affect the Company’s business, the trading price of the Company’s stock and the Company’s ability to attract additional deposits.

If we fail to identify and correct any significant deficiencies or material weaknesses in the design or operating effectiveness of the Company’s internal control over financial reporting or fail to prevent fraud, current and potential stockholders and depositors could lose confidence in the Company’s financial reporting, which could adversely affect the Company’s business, financial condition and results of operations, the trading price of the Company’s stock and the Company’s ability to attract additional deposits.

A breach of information security or compliance breach could negatively affect the Company’s reputation and business.

The Bank depends on data processing, communication and information exchange on a variety of computing platforms and networks and over the internet. None of the Company’s systems are entirely free from vulnerability to attack, despite safeguards we have installed. Additionally, we rely on and do business with a variety of third-party service providers, agents and vendors with respect to the Company’s business, data and communications needs. If information security is breached, or one of our agents or vendors breaches compliance procedures, information could be lost or misappropriated, resulting in financial loss or costs to us or damages to others. These costs or losses could materially exceed the Company’s amount of insurance coverage, if any, which would adversely affect the Company’s business.

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The Bank has not been examined for mortgage-related issues, including mortgage servicing issues and fair lending issues, but such examination could occur.

Federal and state banking regulators are closely examining the mortgage and mortgage servicing activities of depository institutions like the Bank. Although such reviews are now occurring at the largest depository institutions, it is possible that our mortgage practices and policies will be examined. Should the OCC or the Federal Reserve have serious concerns with respect to our operations in this regard, the effect of such concerns could have a material adverse effect on our profits.

We depend on cash dividends from the Bank to meet our cash obligations.

As a holding company, dividends from the Bank have provided a substantial portion of our cash flow used to service the interest payments on our obligations. The Bank is limited by law and OCC policy in its ability to make dividend payments and other distributions to us based on its earnings and capital position.  Should the Bank experience losses or other difficulties, it may adversely affect our ability to meet all projected cash needs in the ordinary course of business and may have a detrimental impact on our financial condition.

Risks Related to the Company’s Stock

The price of the Company’s common stock may be volatile, which may result in losses for investors.

The market price for shares of the Company’s common stock has been volatile in the past, and several factors could cause the price to fluctuate substantially in the future. These factors include:

•               announcements of developments related to the Company’s business,

•               fluctuations in the Company’s results of operations,

•               sales of substantial amounts of the Company’s securities into the marketplace,

•               general conditions in the Company’s banking niche or the worldwide economy,

•               a shortfall in revenues or earnings compared to securities analysts’ expectations,

•               lack of an active trading market for the common stock,

•               commencement of, or changes in analysts’ recommendations or projections, and

•               the Company’s announcement of new acquisitions or other projects.

The market price of the Company’s common stock may fluctuate significantly in the future, and these fluctuations may be unrelated to the Company’s performance. General market price declines or market volatility in the future could adversely affect the price of the Company’s common stock, and the current market price may not be indicative of future market prices.

The Company’s common stock is thinly traded, and thus a stockholder's ability to sell shares or purchase additional shares of the Company’s common stock will be limited, and the market price at any time may not reflect true value.

A stockholder's ability to sell shares of the Company’s common stock or purchase additional shares largely depends upon the existence of an active market for the common stock. The Company’s common stock is quoted on the OTCQB tier of the OTC Market. The volume of trades on any given day is light, and you may be unable to find a buyer for shares you wish to sell or a seller of additional shares you wish to purchase. In addition, a fair valuation of the purchase or sales price of a share of common stock also depends upon active trading, and thus the price you receive for a thinly traded stock, such as the Company’s common stock, may not reflect its true value.

The Company has deregistered with the SEC. Information reported in the past to stockholders may not be available to the same extent or frequency, which could result in a decline in our stock price or limit investors' ability to trade in our stock.  

The Company has filed a Form 15 to voluntarily terminate its registration under the Exchange Act, which deregistration will be effective on August 8, 2012.  The Company has determined that deregistering under the Exchange Act would result in significant time and cost savings to the Company. This will result in less information about the Company being available to stockholders and investors immediately following the effective date of our deregistration. The Company is presently traded and is expected to continue to trade on the OTCQB tier of the OTC Markets, which does not require Exchange Act registration or the Company to meet the reporting requirements of the Exchange Act. The Company's and the Bank's bank regulatory filings are available at http://www.ffiec.gov and https://cdr/ffiec.gov, respectively, and the Company expects to make available any such additional information as required for its common stock to continue to be traded on the OTCQB tier of the OTC Markets, but there is no assurance the Company will do so or that market makers on the OTCQB will continue to make a market in the Company's common stock.

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Risks Related to the Rights of Holders of Our Common Stock Compared to the Rights of Holders of Our Preferred Stock

The holders of our shares of preferred stock still outstanding will have priority over our Common Stock with respect to payment in the event of liquidation, dissolution or winding up and with respect to the payment of dividends.

In any liquidation, dissolution or winding up of the Company, our Common Stock would rank below all debt claims against us and claims of all of our outstanding shares of Preferred Stock, which have a liquidation preference of approximately $5 million.

As a result, holders of our Common Stock will not be entitled to receive any payment or other distribution of assets upon the liquidation, dissolution or winding up of the Company until after all our obligations to our debt holders and holders of preferred shares have been satisfied.

In addition, we are required to pay dividends on our preferred stock before we pay any dividends on our Common Stock. For further information see "Item 1. Business-Significant Events in Fiscal 2012."

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Federal regulations may inhibit a takeover, prevent a transaction you may favor or limit the Company’s growth opportunities, which could cause the market price of the Company’s common stock to decline.

Certain provisions of the Company’s charter documents and federal regulations could have the effect of making it more difficult for a third party to acquire, or of discouraging a third party from attempting to acquire, control of the Company. In addition, we must obtain approval from regulatory authorities before acquiring control of any other company.

We may not be able to pay dividends in the future in accordance with past practice.

We pay an annual dividend to stockholders. The payment of dividends is subject to legal and regulatory restrictions. Any payment of dividends in the future will depend, in large part, on the Bank’s earnings, capital requirements, financial condition and other factors considered relevant by the Company’s Board of Directors.

ITEM 1B.       UNRESOLVED STAFF COMMENTS

Not applicable.

ITEM 2.          PROPERTIES

The Bank conducts its business through its main office and four branch offices, three of which are located in Crawford County, Illinois, and one of which is located in Knox County, Indiana. The Bank owns its main office and branch offices. The total net book value of the Bank’s premises and equipment (including land, buildings and leasehold improvements and furniture, fixtures and equipment) at March 31, 2012 was approximately $4.2 million. The following table sets forth information relating to the Bank’s offices as of March 31, 2012.

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Location	Date Acquired	Total Approximate Square Footage	Net Book Value of Buildings and Improvements at March 31, 2012
Main Office: 501 East Main Street Robinson, Illinois	1985	12,420	$1.3 million
Branch Offices: 119 East Grand Prairie Palestine, Illinois	1995	1,800	234,000
102 West Main Street Oblong, Illinois	1995	2,260	64,000
Outer East Main Street Oblong, Illinois	1997	1,000	67,000
615 Kimmel Road Vincennes, Indiana	2008	2,612	493,000

The Company and the Bank believe that current facilities are adequate to meet the present and foreseeable needs and are adequately covered by insurance. See Note 5 of Notes to Consolidated Financial Statements.

ITEM 3.         LEGAL PROCEEDINGS

The Company and the Bank are involved, from time to time, as plaintiff or defendant in various legal actions arising in the normal course of its businesses. While the ultimate outcome of these proceedings cannot be predicted with certainty, it is the opinion of management, after consultation with counsel representing the Company and the Bank in the proceedings, that the resolution of these proceedings should not have a material effect on the Company’s results of operations on a consolidated basis.

ITEM 4.          MINE SAFETY DISCLOSURES

Not applicable.

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PART II

ITEM 5.          MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Pages 76 and 77 of the attached 2012 Annual Report to Stockholders are incorporated herein by reference.

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
1/1/2012 – 1/31/2012		375	$	33.25		---		4,595
2/1/2012 – 2/28/2012		---		---		---		4,595
3/1/2012 – 3/31/2012		---		---		---		4,595
Total		375	$	33.25		---		4,595

⁽¹⁾         On September 20, 2011, the Board of Directors voted to approve an additional stock repurchase program of 5,000 shares, or approximately 1.2%, of the Company’s issued and outstanding shares.  The repurchase program will expire upon the earlier of the completion of the purchase of an aggregate of shares or September 19, 2012. As of March 31, 2012, there have been 405 shares purchased in the current program.

ITEM 6.          SELECTED FINANCIAL DATA

Pages 3 and 4 of the attached 2012 Annual Report to Stockholders are incorporated herein by reference.

ITEM 7.         MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Pages 5 through 16 of the attached 2012 Annual Report to Stockholders are incorporated herein by reference.

ITEM 7A.      QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Pages 16 through 18 of the attached 2012 Annual Report to Stockholders are incorporated herein by reference.

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ITEM 8.          FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The following information appearing in the Company’s Annual Report to Stockholders for the year ended March 31, 2012, is incorporated by reference in this Annual Report on Form 10-K as Exhibit 13.

Annual Report Section	Pages in Annual Report
Report of Independent Registered Public Accounting Firm	26
Consolidated Balance Sheets for the Fiscal Years Ended March 31, 2012 and 2011	27
Consolidated Statements of Income and Comprehensive Income for the Years Ended March 31, 2012 and 2011	28-29
Consolidated Statements of Stockholders’ Equity for Years Ended March 31, 2012 and 2011	30
Consolidated Statements of Cash Flows for the Years Ended March 31, 2012 and 2011	31-32
Notes to Consolidated Financial Statements	33-75

With the exception of the aforementioned information, the Company’s Annual Report to Stockholders for the year ended March 31, 2012 is not deemed filed as part of this Annual Report on Form 10-K.

ITEM 9.          CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A.        CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures.

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as 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 Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective in timely alerting them to the material information relating to us required to be included in our periodic SEC filings. No change in our internal control over financial reporting occurred during the fourth quarter of our fiscal year that has materially affected, or is reasonably likely to materially affect our internal control over financial reporting.

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Management’s Annual Report On Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. The Company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Our internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management assessed the effectiveness of the Company’s internal control over financial reporting as of March 31, 2012, based on the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in “Internal Control-Integrated Framework.” Based on the assessment, management determined that, as of March 31, 2012, the Company’s internal control over financial reporting is effective, based on those criteria.

This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting because the Company, as a smaller reporting company, is permanently exempt from providing such attestation report pursuant to the Dodd-Frank Act.

ITEM 9B.           OTHER INFORMATION

Not applicable.

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PART III

ITEM 10.         DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Directors

Information concerning Directors of the Company, including the Company’s audit committee and audit committee financial experts, is incorporated herein by reference from the definitive Proxy Statement for the Annual Meeting of Stockholders to be held on July 26, 2012, a copy of which was filed with the SEC on June 27, 2012.

Executive Officers

Information concerning Executive Officers of the Company and the Bank is incorporated herein by reference from the definitive Proxy Statement for the Annual Meeting of Stockholders to be held on July 26, 2012, a copy of which was filed with the SEC on June 27, 2012.

Compliance with Section 16(a)

Information concerning compliance with Section 16(a) of the Exchange Act is incorporated herein by reference from the definitive Proxy Statement for the Annual Meeting of Stockholders to be held on July 26, 2012, a copy of which was filed with the SEC on June 27, 2012.

Code of Ethics

Information concerning the Company’s Code of Ethics is included in Part I of this Form 10-K.

ITEM 11.         EXECUTIVE COMPENSATION

Information concerning executive officer and director compensation and the Compensation Committee of the Company’s board of directors is incorporated herein by reference from the definitive Proxy Statement for the Annual Meeting of Stockholders to be held on July 26, 2012, a copy of which was filed with the SEC on June 27, 2012.

ITEM 12.         SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

Equity Compensation Plan Information

The Company does not currently maintain any equity compensation plans.

Security Ownership of Certain Beneficial Owners and Management

Additional information concerning security ownership of certain beneficial owners and management is incorporated herein by reference from the definitive Proxy Statement for the Annual Meeting of Stockholders to be held on July 26, 2012, a copy of which was filed with the SEC on June 27, 2012.

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ITEM 13.         CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Information concerning certain relationships and related transactions and director independence is incorporated herein by reference from the definitive Proxy Statement for the Annual Meeting of Stockholders to be held on July 26, 2012, a copy of which was filed with the SEC on June 27, 2012.

ITEM 14.         PRINCIPAL ACCOUNTING FEES AND SERVICES

Information concerning principal accounting fees and services is incorporated herein by reference from the definitive Proxy Statement for the Annual Meeting of Stockholders to be held on July 26, 2012, a copy of which was filed with the SEC on June 27, 2012.

58

ITEM 15.         EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a)          Exhibits

Exhibit Number	Document	Reference to Prior Filing or Exhibit Number Attached Hereto
3(i)	Certificate of Incorporation	*
3(ii)	By-Laws	**
4	Instruments defining the rights of security holders, including debentures	*
10	Small Business Lending Fund – Securities Purchase Agreement, dated August 23, 2011	***
13	Annual Report to Stockholders	13
21	Subsidiaries of Registrant	21
31.1	Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	31.1
31.2	Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	31.2
32	Certification of CEO and CFO pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	32
101.INS	XBRL Instance Document (furnished herewith)	101.INS
101.SCH	XBRL Taxonomy Extension Schema Document (furnished herewith)	101.SCH
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document (furnished herewith)	101.CAL
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document (furnished herewith)	101.DEF
101.LAB	XBRL Taxonomy Extension Label Linkbase Document (furnished herewith)	101.LAB
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document (furnished herewith)	101.PRE

______________

*	Incorporated by reference to the Company’s Registration Statement on Form S-1 filed with the SEC on March 19, 1997 (File No. 333-23625).
**	Incorporated by reference to the Company’s Form 10-KSB for the fiscal year ended March 31, 2008 filed with the SEC on June 30, 2008 (File No. 001-12969; Film No. 08924531).
***	Incorporated by reference to the Company's Form 8-K filed with the SEC on August 24, 2011 (File No. 001-12969).

59

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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:  June 27, 2012	By:	/s/ Rick L. Catt
		Rick L. Catt, Director,
		President and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

By:	/s/ Rick L. Catt	By:	/s/ Jamie E. McReynolds
	Rick L. Catt, Director, President and Chief Executive Officer (Principal Executive and Operating Officer)		Jamie E. McReynolds, Vice President, Chief Financial Officer and Secretary (Chief Financial and Accounting Officer)
Date:	June 27, 2012	Date:	June 27, 2012
By:	/s/ Scott F. Pulliam	By:	/s/ J. Douglas Goodwine
	Scott F. Pulliam, Director		J. Douglas Goodwine, Director
Date:	June 27, 2012	Date:	June 27, 2012
By:	/s/ Robin E. Guyer	By:	/s/ Steven E. Neeley
	Robin E. Guyer, Director		Steven E. Neeley, Director
Date:	June 27, 2012	Date:	June 27, 2012
By:	/s/ William K. Thomas
	William K. Thomas, Director
Date:	June 27, 2012

60

EX-13

EXHIBIT 13

ANNUAL REPORT TO STOCKHOLDERS

2012 ANNUAL REPORT

FIRST ROBINSON FINANCIAL CORPORATION

TABLE OF CONTENTS

	Page No.
President’s Message	1
Selected Consolidated Financial Information	3
Management’s Discussion and Analysis of Financial Condition and Results of Operations	5
Report of Independent Registered Public Accounting Firm	26
Consolidated Financial Statements	27
Notes to Consolidated Financial Statements	33
Stockholder Information	76
Corporate Information	78

i

FIRST ROBINSON FINANCIAL CORPORATION

Dear Fellow Stockholder,

The Board of Directors and management would like to share with you the Annual Report of First Robinson Financial Corporation (the “Company”) for our fiscal year ended March 31, 2012. In spite of the economic challenges our nation has recently endured, we are pleased to announce record earnings for the Company of $1,916,000 for our fiscal year ending March 31, 2012, up more than half a million dollars from last year’s earnings of $1,395,000.

Our commitment to being a conservatively managed community bank has served us well. Our communities have rewarded us with steady core deposit and loan growth, and our stock price has consistently traded from $30.30 to $33.75 per share. Both deposits and loans grew by approximately $5.0million during the past fiscal year. We believe our consistent growth is a reflection of customer confidence and preference for a community bank staffed by local people. The quality of our loan portfolio continues to be a source of strength as we maintain asset quality ratios well above peer group numbers. Our growth positioned the Company to increase its net interest income after provision for loan losses to $6,126,000, an increase of $969,000, or 18.8%. Our branch office in Vincennes, Indiana has performed very well in its first three years of operation and has exceeded expectations. Our capable trust department continues to have modest growth and is positioned to help us increase our earnings in the future. All of these factors contributed to a return on average stockholders’ equity of 11.74% for this fiscal year, up from the previous year’s return of 11.24%.

In recognition of the Company’s strength, the Board of Directors was pleased to increase your dividend from $0.90 per share paid in June 2011, to a record $0.95 per share as of June 2012. The Company continues to support a stock repurchase plan that allows it, within limitations, to repurchase our outstanding shares. The primary focus of our employees, management and the Board of Directors is to increase the value of your Company, while providing outstanding customer service and quality banking products to our customers.

We believe your Company is positioned for continued success in the future. We know there will always be challenges and obstacles. However, with the loyalty of our shareholders and customers and the hard work of our employees and directors, we believe that we can succeed. Our bank has been serving this area since 1883 and will continue to do so. I would encourage you to read the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section herein for more detailed financial information.

In closing, we believe we are unmatched in supporting our communities, not only with monetary donations, but just as importantly, hours upon hours of volunteer service. We thank you for your patronage and support. This IS your Company and we want you to have confidence and pride in it; therefore we would encourage your questions, suggestions, and, of course, your continued patronage and support.

Sincerely,

Rick L. Catt, President/CEO

Any forward-looking statements made in this report or incorporated by reference in this report are made as of the date of this report, and, except as required by applicable law, we assume no obligation to update the forward-looking statements or to update the reasons why actual results could differ from those projected in the forward-looking statements. You should consider these risks and uncertainties in evaluating forward-looking statements and you should not place undue reliance on these statements. We decline any obligation to publicly announce future events or developments that may affect the forward-looking statements herein.

1

Overview of the Company

First Robinson Financial Corporation (the “Company”) is a bank holding company that was chartered under the laws of the State of Delaware in March 1997. Its primary business is the ownership of First Robinson Savings Bank, National Association (the “Bank”), a national bank that was also chartered in 1997 and whose predecessor was First Robinson Savings & Loan which had been serving the financial needs of Crawford County since 1883. The Company is headquartered in Robinson, Illinois and currently operates three full service banking offices and one drive-up facility in Crawford County, Illinois and one full service banking office in Vincennes, Indiana. The branch in Vincennes goes by the popular name of First Vincennes Savings Bank. We utilize the “Company” and the “Bank” interchangeably herein when describing the Bank’s assets and liabilities.

We are a community-oriented financial institution whose primary business consists of accepting deposits from the general public in our market area, Crawford County and contiguous counties in Illinois and Knox County and contiguous counties in Indiana, and investing these funds primarily in loans, mortgage-backed securities and other securities issued by U.S. Government sponsored enterprises, and bonds issued by states and political subdivisions. Loans consist primarily of loans secured by residential real estate located in the Company’s market areas, non-residential and agriculture real estate loans, consumer loans, loans to municipalities, commercial loans, and agricultural loans. In an effort to meet the financial needs of our market area, the Bank operates a full service Trust department and provides investment services through PrimeVest Financial Services.

The Company’s primary sources of funds are deposits, proceeds from the sale of mortgage loans, repayments and prepayments of loans and mortgage-backed securities, and the sale, call or maturity of investment securities. Although maturity and scheduled amortization of loans are relatively predictable sources of funds, deposit flows and prepayments on loans and mortgage-backed securities are influenced significantly by general interest rates, economic conditions and competition.

The Company’s results of operations depend primarily on net interest income, which is the difference between interest earned on our loan and investment portfolios and the interest paid on deposits or other borrowings. 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 non-interest income, non-interest expense, the provision for losses on loans and income tax expense. Non-interest income consists primarily of service charges and gains on sales of loans. The Company’s non-interest expense consists primarily of salaries and employee benefits, occupancy and office expenses, advertising, data processing and telecommunications 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. The demand for and supply of housing, competition among lenders, the level of interest rates and the availability of funds influence lending activities. 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.

2

SELECTED CONSOLIDATED FINANCIAL INFORMATION

The following table sets forth selected consolidated financial data of First Robinson Financial Corporation (the “Company”) and its subsidiary First Robinson Savings Bank, National Association (the “Bank”) at and for the periods indicated. In the opinion of management, all adjustments (consisting only of normal recurring accruals) necessary for a fair presentation have been included. The consolidated financial data is derived in part from, and should be read in conjunction with, the Financial Statements and Notes thereto presented elsewhere in this Annual Report.

	At March 31,
	2012		2011
	(in thousands)
Selected Financial Condition Data:
Total assets	$	215,494	$	208,831
Loans, held for sale		509		354
Loans receivable, net		125,752		120,164
Mortgage-backed securities		33,627		35,450
Interest bearing deposits		20,551		17,813
Available-for-sale investment securities		16,473		16,227
Held-to-maturity investment securities		1,225		—
Deposits		181,288		176,352
Total borrowings		12,920		17,420
Stockholders’ equity		18,923		12,765

	Year Ended at March 31,
	2012			2011
	(in thousands)
Selected Operations Data:
Total interest income	$	8,390		$	8,309
Total interest expense		(1,566	)		(2,417	)
Net interest income		6,824			5,892
Provision for loan losses		(698	)		(735	)
Net interest income after provision for loan losses		6,126			5,157
Fees and service charges		977			943
Net gain on sales of loans		793			680
Other non-interest income		921			946
Total non-interest income		2,691			2,569
Total non-interest expense		(5,760	)		(5,630	)
Income before taxes		3,057			2,096
Income tax provision (benefit)		1,111			701
Net income	$	1,946		$	1,395
Preferred stock dividends		30			—
Net income available to common stockholders	$	1,916		$	1,395
Earnings per common share:
Basic	$	4.67		$	3.38
Diluted	$	4.49		$	3.25
Dividends per share	$	0.90		$	0.85

3

	Year Ended at March 31,
	2012			2011
	(in thousands)
Selected Financial Ratios And Other Data:
Performance Ratios:
Return on average assets (ratio of net income to average total assets)		0.92	%		0.71	%
Return on average equity (ratio of net income to average equity)		11.74			11.24
Interest rate spread during period(1)		3.42			3.15
Net interest margin(2)		3.57			3.30
Efficiency ratio(3)		60.59			66.54
Ratio of non-interest expense to average total assets		2.78			2.89
Ratio of average interest-earning assets to average interest-bearing liabilities		117.89			111.18
Average equity to average total assets		7.87			6.36
Quality Ratios:
Non-performing assets to total assets at end of period		0.57			0.27
Allowance for loan losses to non-performing loans		122.26			339.37
Allowance for loan losses to loans receivable, net		1.10			0.95
Capital Ratios:
Total capital (to risk-weighted assets)		16.47			12.40
Tier I capital (to risk-weighted assets)		15.25			11.41
Tier I capital (to average assets)		8.50			6.64
Other Data:
Number of full-service offices		4			4
Number of full-time employees		57			54
Number of deposit accounts		13,717			14,093
Number of loan accounts		4,730			4,323

⁽¹⁾ Interest rate spread represents the difference between the weighted-average yield on interest-earning assets and the weighted-average cost of interest-bearing liabilities for the period.

⁽²⁾ Net interest margin represents income divided by average interest-earning assets.

⁽³⁾ Efficiency ratio represents non-interest expense divided by the sum of net-interest income and non-interest income.

4

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

Management’s discussion and analysis of financial condition and results of operations is intended to assist in understanding our financial condition and results of operations. This information contained in this section should be read in conjunction with our consolidated financial statements and accompanying notes.

Forward-Looking Statements

This document, including information incorporated by reference, contains “forward-looking statements” (as that term is defined in the Private Securities Litigation Reform Act of 1995). These forward-looking statements may be identified by the use of such words as: “believe”, “expect”, “anticipate”, “intend”, “plan”, “estimate”, or words of similar meaning, or future or conditional verbs such as “will,” “would,” “should,” “could,” or “may.”

Examples of forward-looking statements include, but are not limited to, estimates or projections with respect to our future financial condition, results of operations or business, such as: projections of revenues, income, earnings per share, capital expenditures, assets, liabilities, dividends, capital structure, or other financial items; descriptions of plans or objectives of management for future operations, products, or services, including pending acquisition transactions; forecasts of future economic performance; and descriptions of assumptions underlying or relating to any of the foregoing.    

By their nature, forward-looking statements are subject to risks and uncertainties. There are a number of factors, many of which are beyond our control, that could cause actual conditions, events, or results to differ significantly from those described in the forward-looking statements.

Factors which could cause or contribute to such differences include but are not limited to: general business and economic conditions on both a regional and national level; worldwide political and social unrest, including acts of war and terrorism; increased competition in the products and services we offer and the markets in which we conduct our business; the interest rate environment; fluctuations in the capital markets, which may directly or indirectly affect our asset portfolio; legislative or regulatory developments, including changes in laws concerning taxes, banking, securities, insurance and other aspects of the financial services industry; technological changes, including the impact of the Internet; monetary and fiscal policies of the U.S. Government, including policies of the U.S. Treasury and the Federal Reserve Board; accounting principles, policies, practices or guidelines; deposit attrition, operating costs, customer loss and business disruption greater than the Company expects; and the occurrence of any event, change or other circumstance that could result in the Company’s failure to develop and implement successful capital raising and debt restructuring plans.

Any forward-looking statements made in this report or incorporated by reference in this report are made as of the date of this report, and, except as required by applicable law, we assume no obligation to update the forward-looking statements or to update the reasons why actual results could differ from those projected in the forward-looking statements. You should consider these risks and uncertainties in evaluating forward-looking statements and you should not place undue reliance on these statements. We decline any obligation to publicly announce future events or developments that may affect the forward-looking statements herein.

5

Business Strategy

Periodically, the Board of Directors and management meet to plan for the future. We review and discuss both current and new products and services to determine their effect on our profitability and customer service. Staying abreast of technology and offering products and services that appeal to the younger generation, such as internet banking, the ability to open accounts online, and a social networking site are important parts of our strategic plan. We also monitor current events and economic trends in our local area that could materially impact the Bank’s earnings. The Board has identified issues which are critical to the continued success of the Bank and the Holding Company. These goals are: (1) strengthen the capital position to a level that will support the strategic direction and future operations of the Bank, (2) improve and sustain the performance of net interest income at an optimal level, and (3) ensure that the Bank retains and attracts a talented and motivated management team and staff.

In seeking to enhance the Company’s profitability, 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 increase earnings; and (iv) to manage exposure to changes in interest rates. Accomplishing these goals will aid in increasing shareholder value.

The Bank is maintaining its capital level above regulatory requirements. The Bank’s Tier I capital to average assets as of March 31, 2012 was 8.5%, up from 6.6% in the previous fiscal year. The increase in the Tier I capital ratio, when comparing the fiscal year ending March 2012 to 2011, is a result of a 37.3% increase in earnings, a controlled increase in asset growth of 3.2%, and the influx in capital of $4.9 million for the sale of 4,900 preferred shares to the US Treasury.

On August 23, 2011, the Company entered into a Securities Purchase Agreement with the Secretary of the Treasury, pursuant to which the Company issued and sold to the Treasury 4,900 shares of its Senior Non-Cumulative Perpetual Preferred Stock, Series A, having a liquidation preference of $1,000 per share (the “Series A Preferred Stock”), for aggregate proceeds of $4,900,000.  The issuance was pursuant to the Treasury’s Small Business Lending Fund program, established under the Small Business Jobs Act of 2010, which encourages lending to small businesses by providing capital to qualified community banks with assets of less than $10 billion.  See Note 13 of Notes to Consolidated Financial Statements.

The nationwide mortgage crisis which began in 2008 had minimal impact on the Company. We have never offered and do not offer now a subprime mortgage product. The mortgage-backed securities, residential and commercial, held in our investment portfolio have all been issued by the U.S. Government or U.S. Government sponsored enterprises. Our local real estate market did not realize the significant growth in market values over the past decade as experienced nationally in larger metropolitan areas; therefore we have not seen a material decline in housing prices. Overall, the Company’s asset quality is strong. One key to maintaining strong asset quality is the Company’s loan policy which we believe has comparatively strict underwriting guidelines, specific documentation, borrower information verification and credit administration requirements. The loan policy also includes specific processes to use in dealing with problem loans. While we cannot guarantee that our policy will always safeguard us against losses, we continue to service our existing borrowers and originate new loans to borrowers we believe to be creditworthy in an effort to meet the credit needs of our community.

6

The Company also intends to stay focused on technology as customer use of our internet banking products is on the increase. We realize the risks involved with promoting internet-based transactions; and while we cannot be entirely free from vulnerability to risks associated from this line of products, the Company has incorporated additional security features to mitigate the possibility of security data breaches. Additionally, we rely on and do business with, a variety of third-party service providers, agents and vendors with respect to the Company’s business, data security and communications needs.  If information security is breached, or one of our agents or vendors breaches compliance procedures, information could be lost or misappropriated, resulting in financial loss or costs to us or damages to others.  These costs or losses could materially exceed the Company’s amount of insurance coverage which would adversely affect the Company’s business.

Managing exposure to interest rate risk is also an important portion of the business strategy of the Company. We offer both adjustable and fixed rate one- to four- family loans and hold the adjustable loans for investment and when prudent may retain some of the fixed rate loans if they fit within our policy targets for rate sensitivity. The overall majority of loans secured by one- to four- family residential properties retained on our balance sheet are adjustable with floors in order to manage exposure to falling rates. However, these loan products also have ceilings of approximately 6.0% above their initial rate and could be a detriment if rates should increase dramatically. The majority of the fixed rate loans are sold into the secondary market through programs with the Federal Home Loan Bank of Chicago (“FHLB”). During the fiscal year ending March 31, 2012, we originated to be sold $41.7 million in fixed rate loans to the FHLB compared to $39.7 million in fixed rate loans sold in the fiscal year ending March 31, 2011. The increase in sales resulted in an increase of $113,000, or 16.6%, in gains on loans sold when comparing the periods ended March 31, 2012 and 2011.

Expanding our market into Indiana by opening a branch in Vincennes has had a positive impact on the Company. Deposits of the branch make up almost 11.6% of the Company’s total deposits and its loans account for 28.5% of the Company’s loans at March 31, 2012.

 We continue to maintain a strong presence in the communities we serve and are pleased to be one of the few independent community banks in our primary market area. Go to www.frsb.net on the web to visit our subsidiary, First Robinson Savings Bank, National Association. To research additional information concerning the Company, use the “About Us” tab.

COMPARISON OF OPERATING RESULTS FOR THE YEARS ENDED MARCH 31, 2012 AND 2011

Summary

For the year ended March 31, 2012, the Company is reporting net income of $1,946,000 compared to net income of $1,395,000 for the fiscal year ended March 31, 2011. Net income available to common stockholders was $1,916,000 or basic earnings per common share of $4.67 and diluted earnings per common share of $4.49, for the fiscal year ended March 31, 2012 compared to a net income of $1,395,000 or basic earnings per common share of $3.38 and diluted earnings per common share of $3.25 for the fiscal year ended March 31, 2011. The difference between net income and income available to common stockholders reflects dividend expense on the Company’s outstanding preferred stock. Preferred stock dividends of $30,000 were recorded for the year ended March 31, 2012 compared to no preferred stock dividends being paid during the fiscal year ended March 31, 2011. These preferred stock dividends relate to the shares of preferred stock issued to the United States Treasury under its Small Business Lending Fund programs, as discussed in Note 13 of the Notes to Consolidated Financial Statements contained in this report.

7

When comparing net income available to common stockholders for the fiscal years ended March 31, 2012 to March 31, 2011, there is an increase of $521,000, or 37.3%. The increase is a result of the increase of $932,000, or 15.8%, in net interest income and the decrease of $37,000, or 5.0%, in provision for loan losses. Also contributing to the increase in net income for the fiscal year ended March 31, 2012, was the increase of $122,000, or 4.7%, in non-interest income, offset by the increase, in part, of $130,000, or 2.3%, in non-interest expense, the increase of $410,000, or 58.5%, in income tax expense and the increase of $30,000 in dividend payments on preferred shares.

Net Interest Income

For the year ended March 31, 2012, net interest income totaled $6.8 million, an increase of 15.8%, or $932,000, over the year ended March 31, 2011. The increase in net interest income is largely due, in part, to the decrease of $851,000 in total interest expense and to a lesser extent the increase of $81,000 in total interest and dividend income. The lower market interest rates have resulted in our cost of funds decreasing by a larger margin than the yields on our loans. The net interest margin increased by 27 basis points from 3.30% for the year ended March 31, 2011 to 3.57% for the year ended March 31, 2012.

Total average interest-earning assets increased to $191.2 million for the fiscal year ending March 31, 2012 from $178.5 million for the fiscal year ending March 31, 2011. The average interest rate earned on interest-earning assets edged downward from 4.66% in 2011 to 4.39% in 2012. The average balance of interest-bearing liabilities increased $1.6 million from $160.5 million in 2011 to $162.1 million in 2012. The average rate paid on interest-bearing liabilities decreased 54 basis points from 1.51% in 2011 to 0.97% in 2012. The interest rate spread for 2012 increased by 27 basis points to 3.42% for 2012 from 3.15% in 2011.

Interest income from loans increased by $331,000, or 5.1%, from $6.5 million for the fiscal year ending March 31, 2011 to $6.8 million for the fiscal year ending March 31, 2012. The increase in loan interest income reflects an increase in the average balance of loans outstanding offset by a decrease in the average yield on loans. The average balance in loans outstanding increased $8.8 million, or 7.7%, while the average yield on loans receivable decreased 14 basis points from 5.74% in 2011 to 5.60% in 2012.

Interest income from mortgage-backed securities amounted to $967,000 for the fiscal year ending March 31, 2012, a decrease of $301,000, or 23.7%, from $1.3 million for the fiscal year ending March 31, 2011. The decrease is a result of the combined decrease in both the average balance outstanding and the average rate earned on mortgage-backed securities. The total average balance of mortgage-backed securities decreased by $1.4 million, or 4.2%, from $31.9 million for 2011 compared to $30.5 million for 2012. The average rate earned on mortgage-backed securities for the year ended March 31, 2012 was 3.17% down from 3.97% in 2011.

Interest income from investment securities, which includes investments in US government agencies or US government sponsored agencies, investments in state and municipalities, and investments in Federal Reserve and Federal Home Loan Bank stocks, increased by $37,000, or 8.0%, to $501,000 for the fiscal year ended March 31, 2012 compared to $464,000 for the same period for the prior year. The increase in income came from a 28 basis point increase in the yield on investment securities to 2.74% for the fiscal year ended March 31, 2012 from 2.46% for the March 31, 2011 fiscal year, offset by the decrease in the average balance of investment securities to $18.3 million during the March 2012 fiscal year from $18.8 million for the March 2011 fiscal year. The average yield on municipal securities does not reflect the benefit of the higher tax-equivalent yield on municipal bonds, which was reflected as a reduction to income tax expense.

8

Interest income from interest-bearing deposit accounts increased $14,000 to $44,000 for the March 31, 2012 fiscal year from $30,000 for the fiscal year ended March 31, 2011. The average balance of these assets increased 42.4% from $13.7 million for the fiscal year ended March 31, 2011 to $19.5 million for the fiscal year ended March 31, 2012. The average rate earned was 0.23% during the March 31, 2012 fiscal year compared to 0.22% during the same period in the previous year. Excess funds received from an increase in deposits were invested with our correspondent bank utilizing the Federal Reserve Excess Balance Account program.

Total interest expense decreased $851,000, or 35.2%, in 2012 from 2011. Interest expense on deposits fell by $828,000, or 35.8%, from $2.3 million in 2011 to $1.5 million in 2012. Interest expense from other borrowings decreased by $23,000, or 21.9%, from $105,000 in 2011 to $82,000 in 2012.

Interest expense on savings and money market accounts decreased $24,000, or 35.3%, from $68,000 in 2011 to $44,000 in 2012 primarily due to a decrease of 12 basis points in the average cost of funds offset by an increase of $4.6 million, or 18.0%, in the average balance outstanding. The average cost of funds on savings and money market accounts was 0.15% during the fiscal year ending March 31, 2012 compared to an average cost of 0.27% during the March 31, 2011 fiscal year.

Interest expense on NOW and interest-bearing demand deposit accounts decreased by $341,000, or 40.1%, to $509,000 for the fiscal year ending March 31, 2012 from $850,000 for the year ending March 31, 2011. The average balance increased 13.6%, or $7.9 million, from an average balance of $58.2 million in 2011 to an average balance of $66.1 million in 2012. The average cost of funds on NOW and interest-bearing demand deposit accounts decreased 69 basis points to 0.77% in 2012 from 1.46% in 2011. The increase in the average balance can be attributed to the popularity of “Kasasa™ Cash”. Kasasa pays an attractive rate of interest to customers that meet electronic banking requirements, such as using a check card a certain number of times throughout the month, using the bank’s internet banking and bill pay system, receiving a direct deposit or paying a direct debit through the ACH network, and agreeing to receive an electronic statement. This account is designed to reduce costs associated with maintaining checking accounts. If customers do not meet the requirements, they still receive a minimal rate of interest.

Interest expense on time deposits decreased $463,000, or 33.2%, from $1.4 million for the fiscal year ending March 31, 2011 to $931,000 for the fiscal year ending March 31, 2012 as a result of a decrease in the average balance and a decrease in the cost of funds. The average balance of time deposits decreased $7.5 million, or 13.0%, from $57.6 million in 2011 to $50.2 million in 2012. The average cost of funds on time deposits, as of March 31, 2012, was 1.86% compared to the average cost of funds for the fiscal year ending March 31, 2011, of 2.42%, a decrease of 56 basis points.

9

For the fiscal year ending March 31, 2012 versus the same period of 2011, the average balance of short-term borrowings decreased $3.4 million, or 17.4%, from $19.4 million to $16.0 million. The average cost of funds for 2012 decreased slightly to 0.51% from 0.54%. The decrease in the average balance and the cost of funds contributed to the decrease of $23,000, or 21.9%, in other borrowings interest expense to $82,000 for 2012 from $105,000 for 2011. The short-term borrowings consist of repurchase agreements with customers that are secured by investment securities of the Company and an open-end line of credit obtained by the Company. The Company’s open-end line of credit is secured by 100% of the stock of the Bank.

Provision for Loan Losses

The allowance for loan losses is established through provisions for loan losses charged against income. Loans deemed to be uncollectible are charged against the allowance for loan losses, and subsequent recoveries, if any, are credited to the allowance.

The allowance for loan losses is maintained at a level considered adequate to provide for losses that can be reasonably anticipated. The provision reflects management's analysis of the Company's loan portfolio based on information, such as known and inherent risks in the portfolio, adverse situations that may affect the borrower’s ability to repay, the estimated value of any underlying collateral, composition of the loan portfolio, current economic conditions and other relevant factors. This evaluation is inherently subjective as it requires material estimates that may be susceptible to significant revisions as more information becomes available.

Management meets on a quarterly basis to review the adequacy of the allowance for loan losses based on Company guidelines and in accordance with accounting principles generally accepted in the United States. 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.

The provision for loan losses for the year ended March 31, 2012 was $698,000 compared to $735,000 for the year ended March 31, 2011, a decrease of $37,000 or 5.0%. The decrease in the provision reflects the lower charge-offs for the fiscal year ending March 31, 2012 compared to the same period in the prior year. Total charge-offs for 2012 were $505,000 compared to $625,000 for 2011, which were partially offset by recoveries of $45,000 in 2012 compared to recoveries of $62,000 in 2011. The charge-offs in 2012 were derived from $297,000 in commercial loans, $30,000 in residential real estate loans, $87,000 in commercial real estate, and $91,000 in consumer and other loans. The charge-offs were partially offset by $45,000 in recoveries in consumer and other loans. Although the Company’s management believes that the allowance for loan losses is sufficient based on information currently available and that its lending policies are conservative, there can be no assurances that future events, conditions, or regulatory directives will not result in adverse, loan classifications, increased provisions for loan losses or additional charge-offs which may adversely affect net income. See Note 4 of the Notes to Consolidated Financial Statements for more information on loans.

10

Non-interest Income

Non-interest income categories for the fiscal years ended March 31, 2012 and 2011 are shown in the following table:

	March 31,
	2012			2011		% Change
	(In thousands)
Non-interest income:
Charges and other fees on loans	$	346		$	360		(3.9	)%
Charges and fees on deposit accounts		977			943		3.6
Net gain on sale of loans		793			680		16.6
Net gain (loss) on sale of foreclosed property		(12	)		15		(180.0	)
Net gain on sale of property and equipment		—			4		(100.0	)
Other		587			567		3.5
Total Non-interest income	$	2,691		$	2,569		4.7	%

The increase in net gain on the sale of loans is partially the result of the increase in the volume of mortgage loans sold into the secondary market during the year ended March 31, 2012 versus the same period in 2011. During fiscal year ending 2012, the Company sold $39.7 million in mortgages versus $41.7 million in the prior fiscal year. All loans sold into the secondary market during this fiscal year end were one- to four-family residential property loans. The high volume of loan sales has been a result of the historically low mortgage interest rates. We expect the mortgage loan sales to level off during the fiscal year ending March 31, 2013.

Other income consists of normal recurring fee income such as commissions from PrimeVest Financial Services, the Company’s investment brokerage service, increases in the cash value of life insurance, ATM/Debit card interchange income and fees, and safe deposit box revenue, as well as other income that management classifies as non-recurring. Other income increased $20,000 when comparing March 31, 2012 with 2011. The increase between the fiscal years can be partially attributed to a $30,000 increase in debit/ATM card transaction fees and a $13,000 increase in fees earned from the Company’s Trust services, offset in part, by a $21,000 decrease in commissions received from the sale of annuities and other investments by our PrimeVest representative.

Non-interest Expense

Non-interest expense categories for the fiscal years ended March 31, 2012, and 2011 are shown in the following table:

	March 31,
	2012		2011		% Change
	(In thousands)
Non-interest expense:
Compensation and employee benefits	$	3,123	$	3,002		4.0	%
Occupancy and equipment		754		717		5.2
Data processing and telecommunications		488		430		13.5
Audit, legal and other professional		247		265		(6.8	)
Advertising		285		258		10.5
Postage expense		73		69		5.8
FDIC insurance		110		236		(53.4	)
Foreclosed property expense		18		14		28.6
Other		662		639		3.6
Total Non-interest expense	$	5,760	$	5,630		2.3	%

11

Compensation and employee benefits increased $121,000 when comparing March 2012 fiscal year with March 2011 fiscal year. The increase is primarily the result of an increase of $185,000 in salaries and payroll taxes as a result of two additional full-time employees and normal salary increases, offset in part by the decrease of $80,000 in the market valuation of the shares held in the Directors Retirement Plan.

Data processing and telecommunication expense increased $58,000 as a result of the continued upgrading of our network and communication systems and due to the increase in the usage of our bill pay product through internet banking.

The decrease of $126,000 in Federal Deposit Insurance Corporation (“FDIC”) insurance, in response to the Dodd-Frank Act, is a result of our assessment decreasing from approximately 12 basis points annually on deposits to approximately 5 basis points on average assets less average tangible equity capital.

Income Tax Expense

The provision for income tax increased $410,000, or 58.5%, for the fiscal year ended March 31, 2012, compared to the same period in 2011. The provision reflected the increase in taxable income, partially offset by the increase in the benefit of tax-exempt investment securities. The effective tax rate for the fiscal year ended March 31, 2012 was 36.3%.

FINANCIAL CONDITION

Total assets of the Company increased $6.7 million, or 3.2%, to $215.5 million at March 31, 2012 from $208.8 million at March 31, 2011. The increase in assets was primarily due to an increase of $5.7 million, or 4.8%, in loans receivable, net, an increase of $1.2 million or 100.0% in held-to-maturity securities, and a $969,000, or 3.5%, increase in cash and cash equivalents, offset, in part, by a decrease of $1.6 million, or 3.1%, in available-for-sale securities.

The increase of $969,000 in cash and cash equivalents can be attributed, in part, to an increase of $4.9 million in total deposits and the increase of $6.1 million in capital as a result of the receipt of SBLF proceeds and net income after preferred stock dividends, offset in part, by the increase in loans receivable, net of $5.7 million.

Available-for-sale securities decreased to $50.1 million at March 31, 2012 compared to $51.7 million at March 31, 2011, a $1.6 million decrease. The decrease resulted from the maturity of $7.6 million in available-for-sale securities, the repayment of $8.1 million in mortgage-backed and agency securities, the amortization of $265,000 of premiums and discounts on investments, and the decrease of $143,000 in the market valuation of the available-for-sale portfolio, offset by the purchase of $14.5 million of available-for-sale securities. For the most part, the Company purchases residential US government sponsored enterprises mortgage backed securities. During the fiscal year ending March 31, 2011, the Company purchased a mortgage backed security collateralized by multi-family properties. The bond offered an attractive rate and has the same risk weighting as a residential mortgage-backed security. The investment portfolio is managed to limit the Company's exposure to credit risk by investing primarily in mortgage-backed securities and other securities which are either directly or indirectly backed by the federal government or a municipal government. Securities backed by a municipal government make up 3.2% of the outstanding available-for-sale securities portfolio.

In June 2011, we purchased $1.4 million in held-to-maturity securities. On November 1, 2011, $155,000 in held-to-maturity securities matured. The securities were issued by a local municipality. We had no held-to-maturity securities at March 31, 2011.

12

Each quarter, management assesses whether there have been events or economic circumstances indicating that a security on which there is an unrealized loss is other-than-temporarily impaired.  Management considers several factors, including the amount and duration of the impairment; the intent and ability of the Company to hold the security for a period sufficient for a recovery in value; and known recent events specific to the issuer or its industry.  In analyzing an issuer’s financial condition, management considers whether the securities are issued by agencies of the federal government, whether downgrades by bond rating agencies have occurred, and industry analysts’ reports, among other things. As we currently do not have the intent to sell these securities and it is unlikely that we will be required to sell these securities before recovery of their amortized cost basis, which may be maturity, no declines are deemed to be other than temporary.  We will continue to evaluate our investment securities for possible other-than-temporary impairment, which could result in non-cash charges to earnings in one or more future periods. See Note 3 of Notes to Condensed Consolidated Financial Statements.

At March 31, 2012, the Company held approximately $879,000 of Federal Home Loan Bank (“FHLB”) of Chicago stock. 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. Management performs an analysis of this investment on a quarterly basis to determine impairment, in light of the FHLB Chicago’s financial performance. At March 31, 2012, management determined that the cost method investment in FHLB Chicago stock was ultimately recoverable and therefore not impaired.

The Company's net loan portfolio including loans held for sale increased by $5.7 million to $126.3 million at March 31, 2012 from $120.5 million at March 31, 2011. The increase can be attributed to an increase of $3.8 million, or 7.2%, in loans on residential real estate, which includes one- to four-family loans, equity lines of credit, second mortgages and residential construction loans; an increase of $2.5 million, or 7.4%, in commercial real estate loans; an increase in loans to state and municipal governments by $779,000, or 102.0%; and an increase of $742,000, or 4.7%, in consumer and other loans; offset by a decrease of $1.7 million, or 8.7%, in commercial business and agricultural finance loans. The increase in commercial real estate can be attributed to the Vincennes market where there are more opportunities for this type of lending.

At March 31, 2012, the allowance for loan losses was $1,383,000, or 1.10% of the net loan portfolio, an increase of $238,000 from the allowance for loan losses at March 31, 2011 of $1,145,000, or 0.95% of the net loan portfolio. 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 Note 4 of the Notes to Consolidated Financial Statements for further information on delinquencies and the allowance for loan losses.

The Company had two foreclosed residential real estate properties held for sale at March 31, 2012 at a value of $86,000 compared to four residential properties and one commercial building at March 31, 2011 at a value of $218,000. The commercial building was sold for an approximate loss of $2,000 and three of the residential properties were sold at a net loss of approximately $4,000. One of the residential real estate properties held for sale at March 31, 2012 was also held for sale at March 31, 2011. During the fiscal year ended March 31, 2012, an updated evaluation of that residential property held was obtained and a valuation allowance of $6,000 was established. Subsequent to March 31, 2012, the property was sold and an additional loss of approximately $6,000 was recorded. 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. The other residential property is guaranteed by the Rural Housing Association and is listed for sale.

13

Total deposits increased $4.9 million, or 2.8%, to $181.3 million at March 31, 2012 from $176.4 million at March 31, 2011. The increase in total deposits was due to an increase of $8.3 million in demand deposits, and a $5.1 million increase in savings, now and money market accounts, offset in part by a decrease of $8.5 million in certificates of deposit. In response to the continued low interest rate environment, customers have chosen short-term transaction accounts in place of longer-term certificates of deposit.

Other borrowings, consisting of repurchase agreements, decreased $2.7 million, or 17.3%, when comparing the balance at March 31, 2011 of $15.6 million to $12.9 million at March 31, 2012. The obligations are secured by mortgage-backed securities and US government agency obligations. At March 31, 2012, the average rate on the repurchase agreements was 0.14% compared to 0.25% at March 31, 2011. The rate on approximately $12.8 million of the repurchase agreements reprice daily. All agreements mature periodically within 12 months.

Other borrowings, which is the Company’s revolving line of credit note payable with an unaffiliated financial institution, matures September 30, 2012. The Company had paid the line to zero in January 2012. As such, there was no balance outstanding at March 31, 2012 compared to an outstanding balance of $1.8 million at March 31, 2011. The note bears interest at the prime commercial rate with a floor of 3.50% which was the rate on March 31, 2012 and is secured by 100% of the stock of the Bank.

Stockholders' equity at March 31, 2012 was $18.9 million compared to $12.8 million at March 31, 2011, an increase of $6.1 million, or 48.2%. The increase in stockholders’ equity can be attributed primarily to the net receipt of $4.8 million from the sale of 4,900 shares of Senior Non-Cumulative Perpetual Preferred Stock, Series A for participation in the US Treasury’s Small Business Lending Fund program and the addition of $1,946,000 of net income; offset by the payment of $384,000 in common stock dividends and the payment of $30,000 in preferred stock dividends. These increases were offset by the decrease in additional paid-in-capital due to the purchase of $26,000 in shares associated with an incentive plan, by the decrease of $106,000 in accumulated other comprehensive income related to the decrease in the fair value of securities available for sale, and the increase of treasury shares due to the purchase of First Robinson Financial Corporation shares in the amount of $14,000.

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 $528,000. The letters of credit are collateralized and underwritten, as required by the loan policy, in the same manner as any commercial loan. The Company does not anticipate the advancement of any funds on these letters of credit.

14

Average Balances/Interest Rates and Yields

The following table presents for the years indicated the total dollar amount of interest income from average interest earning assets and the resultant yields, as well as the interest expense on average interest bearing liabilities, expressed both in dollars and rates. No tax equivalent adjustments were made. All average balances are monthly average balances. Non-accruing loans have been included in the table as loans carrying a zero yield.

	Year Ended March 31,
	2012							2011
	Average Outstanding Balance		Interest Earned Paid		Yield/ Rate			Average Outstanding Balance		Interest Earned Paid		Yield/ Rate
Interest-earning assets:
Loans receivable(1)	$	122,860	$	6,878		5.60	%	$	114,073	$	6,547		5.74	%
Mortgage-backed securities		30,544		967		3.17			31,896		1,268		3.97
Investment securities(2)(3)		18,278		501		2.74			18,835		464		2.46
Interest-bearing deposits		19,490		44		0.23			13,691		30		0.22
Total interest-earning assets		191,172		8,390		4.39			178,495		8,309		4.66
Noninterest-earning assets		16,389							16,571
Total assets	$	207,561						$	195,066
Interest-bearing liabilities:
Savings deposits and MMDA		29,909		44		0.15			25,347		68		0.27
NOW and interest-bearing demand deposits		66,082		509		0.77			58,188		850		1.46
Certificates of deposit		50,163		931		1.86			57,641		1,394		2.42
Borrowings		16,002		82		0.51			19,370		105		0.54
Total interest-bearing liabilities		162,156		1,566		0.97			160,546		2,417		1.51
Noninterest-bearing liabilities		29,078							22,109
Total liabilities		191,234							182,655
Stockholders’ equity		16,327							12,411
Total liabilities and capital	$	207,561						$	195,066
Net interest income			$	6,824						$	5,892
Net interest spread						3.42	%						3.15	%
Net average earning assets	$	29,016						$	17,949
Net yield on average earning assets						3.57	%						3.30	%
Average interest-earning assets to average interest-bearing liabilities		1.179							1.112

(1) Calculated net of deferred loan fees, loan discounts, loans in process and loss reserves.

(2) The tax-exempt income for state and political subdivisions is not recorded on a tax equivalent basis.

(3) Includes Federal Reserve Bank and Federal Home Loan Bank Stocks and US Agency securities.

15

Rate/Volume Analysis of Net Interest Income

The following schedule presents the dollar amount of changes in interest income and interest expense for major components of interest-earning assets and interest-bearing liabilities. It distinguishes between the changes related to outstanding balances and in interest rates. For each category of interest-earning assets and interest-bearing liabilities, information is provided on changes attributable to (i) changes in volume (i.e., changes in volume multiplied by old rate) and (ii) changes in rate (i.e., changes in rate multiplied by old volume). For purposes of this table, changes attributable to both rate and volume, which cannot be segregated, have been allocated proportionately to the change due to rate.

	Year Ended March 31,
	2012 vs. 2011									2011 vs. 2010
	Increase (Decrease) Due to									Increase (Decrease) Due to
	Volume			Rate			Total Increase (Decrease)			Volume			Rate			Total Increase (Decrease)
Interest-earning assets:
Loans receivable	$	504		$	(173	)	$	331		$	1,232		$	(311	)	$	921
Mortgage-backed securities		(54	)		(247	)		(301	)		(264	)		(73	)		(337	)
Investments securities		(14	)		51			37			(84	)		(15	)		(99	)
Other		13			1			14			9			13			22
Total interest-earning assets	$	449		$	(368	)	$	81		$	893		$	(386	)	$	507
Interest-bearing liabilities:
Savings deposits and MMDA		12			(36	)		(24	)		16			(62	)		(46	)
NOW and interest-bearing checking accounts		115			(456	)		(341	)		194			(449	)		(255	)
Certificate accounts		(181	)		(282	)		(463	)		(85	)		(449	)		(534	)
Borrowings		(18	)		(5	)		(23	)		13			8			21
Total interest-bearing liabilities	$	(72	)	$	(779	)	$	(851	)	$	138		$	(952	)	$	(814	)
Net interest income	$	521		$	411		$	932		$	755		$	566		$	1,321

Asset and Liability Management

Qualitative Analysis. A principal financial objective of the Company is to achieve long-term profitability while reducing exposure to fluctuations in interest rates. The Company has sought to reduce exposure of earnings to changes in market interest rates by managing the mismatch between asset and liability maturities and interest rates. The Board of Directors has formulated an Interest Rate Management Policy designed to achieve this objective and has established an Asset/Liability Committee, which consists primarily of the management team of the Bank, to manage the risks associated with changes in market interest rates. This committee meets periodically and reports to the Board of Directors monthly concerning asset/liability policies, strategies and current interest rate risk position. The committee’s first priority is to structure and price assets and liabilities to maintain an acceptable interest spread while reducing the net effects of changes in interest rates.

16

We use a comprehensive asset/liability software package provided by a third-party vendor to perform interest rate sensitivity analysis for all product categories.  The primary focus of our analysis is on the effect of interest rate increases and decreases on net interest income.  Management believes that this analysis reflects the potential effects on current earnings of interest rate changes.  Call criteria and prepayment assumptions are taken into consideration for investment securities and loans.  All of our interest sensitive assets and liabilities are analyzed by product type and repriced based upon current offering rates.  The software performs interest rate sensitivity analysis by performing rate shocks of plus or minus 200 basis points in 100 basis point increments.

 Principal elements to promoting long-term profitability while managing interest rate risk has been to (i) emphasize the attraction and retention of core deposits, which tend to be a more stable source of funding; (ii) emphasize the origination of adjustable rate mortgage loan products and relatively short-term and medium-term commercial and consumer loans for the in-house portfolio, although this is dependent largely on the market for such loans; (iii) sell longer-term fixed-rate one-to four family residential mortgage loans into the secondary market; and (iv) invest primarily in U.S. government agency investments and mortgage-backed securities.

The principal strategy in managing interest rate risk is to analyze all assets based on rate, rate adjustment and maturity versus liabilities and equity with a resulting matrix, (using a 1 month to greater than 1 year time frames) being prepared and a net interest income change computed and compared to capital. All asset and liability sales strategies are priced on the need of volume in a particular time frame. The Company does not engage in hedging activities.

Notwithstanding efforts in this area, no interest rate risk (“IRR”) policy is foolproof, and the Company expects that rising rates could still adversely affect interest income.

Quantitative Analysis. The Company voluntarily measures IRR and incorporates this measure into the internal risk based capital calculation. The IRR component is a dollar amount that measures the terms of the sensitivity of the net portfolio value (“NPV”) to changes in interest rates. NPV is the difference between incoming and outgoing discounted cash flows from assets, liabilities, and off-balance sheet contracts. The Company measures the change to NPV as a result of a hypothetical and permanent 100 and 200 basis point (“bp”) change in market interest rates. The Company reviews the IRR measurements on a monthly basis. The Company also monitors effects on net interest income resulting from increases and decreases in rates. The following table presents the NPV at March 31, 2012, as calculated by the Company.

17

	At March 31, 2012
Change in Rate	Net Portfolio Value								NPV as % PV of Assets
(Basis Points)	$ Amount		$ Change			% Change			NPV Ratio %		BP Change
(Dollars in thousands)
+200 bp		25,302		(836	)		(3.20	)		12.12		10
100		25,590		(548	)		(2.10	)		12.00		(2	)
0		26,138		—			—			12.02		—
-100		24,697		(1,441	)		(5.51	)		11.24		(78	)
-200		20,151		(5,987	)		(22.91	)		9.14		(288	)

In the above table, the first column on the left presents the basis point increments of yield curve shifts. The second column presents the overall dollar amount of NPV at each basis point increment. The third and forth columns present our actual position in dollar change and percentage change in NPV at each basis point increment. The remaining columns present our percentage change and basis point change in the NPV as a percentage of portfolio value of assets.

Certain shortcomings are inherent in the method of analysis presented in the computation of NPV. Although certain assets and liabilities may have similar maturities or periods within which they will reprice, they may react differently to changes in market interest rates. The interest rates on certain types of assets and liabilities may fluctuate in advance of changes in market interest rates, while interest rates on other types may lag behind changes in market rates.

The Board of Directors is responsible for reviewing asset and liability policies and meets monthly to review interest rate risk and trends, as well as liquidity and capital ratios and requirements. The Board of Directors has established policy limits for changes in NPV. Management is responsible for administering the policies and determinations of the Board of Directors with respect to asset and liability goals and strategies.

Liquidity and Capital Resources

Liquidity management is both an ongoing and long-term function of asset/liability management strategy. Excess funds, when applicable, generally are invested with the Federal Reserve Bank in its Excess Balance Account program. Currently, when funds are required, beyond the ability to generate deposits, additional sources of funds are available through federal funds purchased, advances from the FHLB of Chicago, and borrowings from the discount window of the Federal Reserve. The Company may also use these funding sources to fund loan demand in excess of the available funds.

The Company’s primary sources of funds are deposits, proceeds from loan sales, repayments and prepayments of loans and mortgage-backed securities and interest income. Although maturity and scheduled amortization of loans are relatively predictable sources of funds, deposit flows and prepayments on loans are influenced significantly by general interest rates, economic conditions and competition.

18

The Company’s most liquid assets are cash and cash equivalents, which include short-term investments. For the years ended March 31, 2012 and 2011, cash and cash equivalents were $28.3 million and $27.4 million, respectively. In addition, the Company has used jumbo certificates of deposits, those with a balance of $100,000 or more, as a source of funds. Jumbo certificates of deposits represented $16.3 million and $19.3 million for the years ended March 31, 2012 and March 31, 2011, respectively, or 9.0% of total deposits for March 31, 2012 and 10.9% of total deposits for March 31, 2011. The Company also uses securities sold under agreements to repurchase as additional funding sources. The agreements represent the Company’s obligation to third parties and are secured by investments which we pledge as collateral. At March 31, 2012 and 2011, the balances outstanding in repurchase agreements were $12.9 million and $15.6 million, respectively.

The Bank maintains a $17.6 million line of credit with the FHLB, of which no funds were advanced at March 31, 2012 or 2011. This line can be accessed immediately and is secured by a blanket lien on qualifying one- to four-family residential loans held by the Bank. The available line of credit with the FHLB was reduced, at March 31, 2012, by $943,000 for the credit enhancement reserve established as a result of the participation in the FHLB MPF resulting in an available balance of $16.6 million. The Bank also maintains a $6.7 million revolving federal funds line of credit with a correspondent financial institution and has also established borrowing capabilities of up to $3.0 million at the discount window with the Federal Reserve Bank of St. Louis of which no funds were borrowed on either line at March 31, 2012 and 2011. In addition to these lines the Company also maintains a $2.5 million revolving line of credit, of which no balance was outstanding at March 31, 2012, and $1.8 million was outstanding at March 31, 2011, with an unaffiliated financial institution. The interest rate on the line of credit is tied to the prime commercial rate. The rate on the note at March 31, 2012 was 3.50%. It matures on September 30, 2012 and is secured by 100% stock of the Bank.

The Company’s primary investment activity is originating one-to four-family residential mortgages, farmland and other non-residential real estate loans, commercial business and agricultural finance loans, and consumer loans. For the year ended March 31, 2012 the Company originated loans for the portfolio in the amount of $97.0 million. During the year ended March 31, 2011, the Company originated loans for the portfolio in the amount of $122.2 million. For the years ended March 31, 2012 and 2011, these activities were primarily funded from repayments of $46.5 million and $54.6 million, respectively and sales and participations of $43.8 million and $47.6 million, respectively.

We must maintain adequate levels of liquidity to ensure the availability of funds to satisfy loan commitments. The Company had granted unused lines of credit to borrowers aggregating approximately $28.3 million and $25.0 million in commercial lines and open-end consumer lines at March 31, 2012 and 2011, respectively. Loans committed to but not yet funded as of March 31, 2012 and 2011 amounted to $7.8 million and $7.5 million, respectively, with $1.7 million at March 31, 2012 and $3.8 million at March 31, 2011 scheduled to be sold in the secondary market. The Company anticipates that we will have sufficient funds available to meet our current commitments through the use of liquid assets and through our borrowing capacity at the FHLB and other available lines of credit to the Company, due to the significant amounts of mortgage-backed securities that could be sold.

19

On August 23, 2011, the Company entered into a Securities Purchase Agreement with the Secretary of the Treasury of the United States (“Treasury”) pursuant to which the Company issued and sold to the Treasury 4,900 shares of its Senior Non-Cumulative Perpetual Preferred Stock, Series A, having a liquidation preference of $1,000 per share (the “Series A Preferred Stock”), for aggregate proceeds of $4,900,000.  The issuance was pursuant to the Treasury’s Small Business Lending Fund program, established under the Small Business Jobs Act of 2010, which encourages lending to small businesses by providing capital to qualified community banks with assets of less than $10 billion.  The Series A Preferred Stock is entitled to receive non-cumulative dividends payable quarterly on each January 1, April 1, July 1 and October 1, commencing October 1, 2011.  The dividend rate, which is calculated on the aggregate Liquidation Amount, has been initially set at 1% per annum based upon the current level of “Qualified Small Business Lending” (“QSBL”) by the Bank.  The dividend rate for future dividend periods will be set based upon the percentage change in qualified lending between each dividend period and the baseline QSBL level established at the time the Agreement was entered into.  The dividend rate may vary from 1% per annum to 5% per annum for the second through tenth dividend periods, and from 1% per annum to 7% per annum for the eleventh through the first half of the nineteenth dividend periods.  If the Series A Preferred Stock remains outstanding for more than four-and-one-half years, the dividend rate will be fixed at 9%.  It is anticipated that the Company will redeem the Series A Preferred Stock prior to such time, although the Company has not decided how to fund the redemption at this time. Funding could occur though retained earnings, or debt, or securities offerings, or a combination thereof. Prior to that time, in general, the dividend rate decreases as the level of the Bank’s QSBL increases.  Such dividends are not cumulative, but the Company may only declare and pay dividends on its common stock (or any other equity securities junior to the Series A Preferred Stock) if it has declared and paid dividends for the current dividend period on the Series A Preferred Stock, and is subject to other restrictions on its ability to repurchase or redeem other securities.  In addition, if (i) the Company has not timely declared and paid dividends on the Series A Preferred Stock for six dividend periods or more, whether or not consecutive, and (ii) shares of Series A Preferred Stock with an aggregate liquidation preference of at least $25,000,000 are still outstanding, the Treasury (or any successor holder of Series A Preferred Stock) may designate two additional directors to be elected to the Company’s Board of Directors.

As is more completely described in the Company’s Certificate of Designation, holders of the Series A Preferred Stock have the right to vote as a separate class on certain matters relating to the rights of holders of Series A Preferred Stock and on certain corporate transactions.  Except with respect to such matters and, if applicable, the election of the additional directors, the Series A Preferred Stock does not have voting rights.

The Company may redeem the shares of Series A Preferred Stock, in whole or in part, at any time at a redemption price equal to the sum of the Liquidation Amount per share and the per-share amount of any unpaid dividends for the then-current period, subject to any required prior approval by the Company’s primary federal banking regulator, the Office of the Comptroller of the Currency.

The Company and the Bank are required to maintain regulatory capital sufficient to meet minimal Tier I leverage, Tier I risk-based and Total risk-based capital ratios of at least 4.0%, 4.0% and 8.0%, respectively. At March 31, 2012, the Bank exceeded each of its capital requirements with ratios of 8.5%, 15.3% and 16.5%, respectively. The Bank’s ratios also exceed those required in order to be considered “well capitalized” under federal banking regulations. See Note 14 of Notes to Consolidated Financial Statements.

20

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 Company's significant accounting policies are described in detail in the notes to the Company's consolidated financial statements for the year ended March 31, 2012. 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.

21

Other Real Estate Owned - Other real estate owned acquired through loan foreclosures are initially recorded at fair value less costs to sell when acquired, establishing a new cost basis. The adjustment at the time of foreclosure is recorded through the allowance for loan losses. Due to the subjective nature of establishing fair value when the asset is acquired, the actual fair value of the other real estate owned could differ from the original estimate. If it is determined that fair value declines subsequent to foreclosure, the asset is written down through a charge to non-interest expense. Operating costs associated with the assets after acquisition are also recorded as non-interest expense. Gains and losses on the disposition of other real estate owned are netted and posted to non-interest expense.

Mortgage Servicing Rights - Mortgage servicing rights are very sensitive to movements in interest rates as expected future net servicing income depends on the projected outstanding principal balances of the underlying loans, which can be greatly reduced by prepayments. Prepayments usually increase when mortgage interest rates decline and decrease when mortgage interest rates rise.

Fair Value Measurements - The fair value of a financial instrument is defined as the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. We estimate the fair value of financial instruments using a variety of valuation methods. Where financial instruments are actively traded and have quoted market prices, quoted market prices are used for fair value. When the financial instruments are not actively traded, other observable market inputs, such as quoted prices of securities with similar characteristics, may be used, if available, to determine fair value. When observable market prices do not exist, we estimate fair value. Other factors such as model assumptions and market dislocations can affect estimates of fair value.

Recent Accounting Pronouncements

In April 2011, the FASB issued ASU 2011-03, Reconsideration of Effective Control for Repurchase Agreements, which updates ASC 860, Transfers and Servicing. The ASU removes from the assessment of effective control the criterion requiring the transferor to have the ability to repurchase or redeem the financial assets on substantially the agreed terms, even in the event of default by the transferee. Accordingly, upon the adoption of the ASU’s guidance, a transferor in a repurchase transaction is deemed to have effective control if the following three conditions in ASC 860-10-40-24 are met: 1) The financial assets to be repurchased or redeemed are the same or substantially the same as those transferred, 2) The agreement is to repurchase or redeem them before maturity, at a fixed or determinable price, and 3) The agreement is entered into contemporaneously with, or in contemplation of, the transfer. The guidance in the ASU is effective prospectively for transactions or modifications of existing transactions that occur on or after the first interim or annual period beginning on or after December 15, 2011. The adoption of ASU 2011-03 is not expected to have a significant impact on the Company’s financial position or results of operations.

22

In May 2011, the FASB issued ASU No. 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs. This update amends FASB ASC Topic 820, Fair Value Measurements, to bring U.S. GAAP for fair value measurements in line with International Accounting Standards. The Update clarifies existing guidance for items such as: the application of the highest and best use concept to non-financial assets and liabilities; the application of fair value measurement to financial instruments classified in a reporting entity’s stockholder’s equity; and disclosure requirements regarding quantitative information about unobservable inputs used in the fair value measurements of level 3 assets. The Update also creates an exception to Topic 820 for entities which carry financial instruments within a portfolio or group, under which the entity is now permitted to base the price used for fair valuation upon a price that would be received to sell the net asset position or transfer a net liability position in an orderly transaction. The Update also allows for the application of premiums and discounts in a fair value measurement if the financial instrument is categorized in level 2 or 3 of the fair value hierarchy. Lastly, the ASU contains new disclosure requirements regarding fair value amounts categorized as level 3 in the fair value hierarchy such as: disclosure of the valuation process used; effects of and relationships between unobservable inputs; usage of nonfinancial assets for purposes other than their highest and best use when that is the basis of the disclosed fair value; and categorization by level of items disclosed at fair value, but not measured at fair value for financial statement purposes. For public entities, this Update is effective for interim and annual periods beginning after December 15, 2011. The adoption of ASU 2011-04 is not expected to have an impact on the Company’s financial position or results of operations and will only affect disclosure in the Notes to Financial Statements.

In June 2011, the FASB issued ASU No. 2011-05, Comprehensive Income (Topic 220): Presentation of Comprehensive Income. The provisions of this update amend FASB ASC Topic 220, Comprehensive Income, to facilitate the continued alignment of U.S. GAAP with International Accounting Standards. The Update prohibits the presentation of the components of comprehensive income in the statement of stockholder’s equity. Reporting entities are allowed to present either: a statement of comprehensive income, which reports both net income and other comprehensive income; or separate statements of net income and other comprehensive income. Under previous GAAP, all 3 presentations were acceptable. Regardless of the presentation selected, the Reporting Entity is required to present all reclassifications between other comprehensive and net income on the face of the new statement or statements. The provisions of this Update are effective for fiscal years and interim periods beginning after December 31, 2011 for public entities. The adoption of ASU No. 2011-05 did not have a financial impact on the Company’s financial position or results of operations. The Company included the presentation in its Consolidated Statements of Income and Comprehensive Income as a result of the adoption of this ASU.

In December, 2011, the FASB issued ASU 2011-11, Disclosures about Offsetting Assets and Liabilities, in an effort to improve comparability between U.S. GAAP and IFRS financial statements with regard to the presentation of offsetting assets and liabilities on the statement of financial position arising from financial and derivative instruments, and repurchase agreements. The ASU establishes additional disclosures presenting the gross amounts of recognized assets and liabilities, offsetting amounts, and the net balance reflected in the statement of financial position. Descriptive information regarding the nature and rights of the offset must also be disclosed. The adoption of ASU 2011-11 will not have a significant impact on the Company’s financial position or results of operations.

In December, 2011, the FASB issued ASU 2011-12, Deferral of the Effective Date to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update 2011-05. In response to stakeholder concerns regarding the operational ramifications of the presentation of these reclassifications for current and previous years, the FASB has deferred the implementation date of this provision to allow time for further consideration. The requirement in ASU 2011-05, Presentation of Comprehensive Income, for the presentation of a combined statement of comprehensive income or separate, but consecutive, statements of net income and other comprehensive income is still effective for fiscal years and interim periods beginning after December 15, 2011 for public companies. The adoption of ASU 2011-12 is not expected to have an impact on the Company’s financial position or results of operations.

23

Federal Deposit Insurance Corporation Insurance Coverage

As with all banks insured by the FDIC, the Company’s depositors are protected against the loss of their insured deposits by the FDIC. The FDIC recently made two changes to the rules that broadened the FDIC insurance. On July 21, 2010, basic FDIC insurance coverage was permanently increased to $250,000 per depositor. In addition, the FDIC had instituted a Temporary Liquidity Guaranty Program (TLGP) which provided full deposit insurance coverage for non-interest bearing transaction deposit accounts, regardless of dollar amount, until December 31, 2010. The Bank opted into the TLGP. On November 9, 2010, the FDIC issued a final rule to provide separate unlimited deposit insurance coverage for non-interest bearing transaction accounts effective December 31, 2010 until December 31, 2012. The FDIC defines a non-interest bearing transaction account as a transaction account on which the insured depository institution neither accrues nor pays interest, does not reserve the right to require advance notice of intended withdrawals, and allows depositors to make an unlimited amount of transfers or withdrawals. This coverage is over and above the $250,000 in deposit insurance otherwise provided to a customer.

Recent Developments

Pursuant to the provisions of the Jumpstart Our Business Startups Act (the “JOBS Act”), the Board of Directors of the Company voted, on May 8, 2012, to deregister the Company’s common stock under the Securities Exchange Act of 1934 (the “Exchange Act”). The JOBS Act, which was signed into law on April 5, 2012, raises the threshold for requiring banks and bank holding companies to register with the Securities and Exchange Commission under the Exchange Act to 2,000 record holders, and also increases the threshold under which banks and bank holding companies are permitted to deregister from the Exchange Act from 300 record shareholders to 1,200 record shareholders. The Company currently has approximately 439 shareholders of record, and therefore qualifies for deregistration.

The Company will remain quoted on the OTCQB tier of the OTC Market. By deregistering under the Exchange Act, the Company expects to realize substantial cost-savings in reduced legal and audit expenses, filing fees and other related costs of compliance with the Exchange Act.

The deregistration will be effective on August 8, 2012, ninety (90) days from the Company’s filing date of May 10, 2012 of its Form 15. After that date, the Company’s quarterly and annual reports, proxy statements and current reports will no longer be filed with the SEC or posted on its website, although the Company will continue to provide certain annual information and proxy statements to its shareholders. The Company will also post certain quarterly and annual information on its website.

24

Internal Control Over Financial Reporting

Section 404 of the Sarbanes-Oxley Act of 2002 requires us to perform an evaluation of our internal control over financial reporting. The Company is not subject to the auditor attestation requirement pursuant to the amendment of Section 404 (b) under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. While our management has not identified any material weaknesses relating to our internal controls at March 31, 2012, we cannot make any assurance that material weaknesses in our internal control over financial reporting will not be identified in the future.

Impact of Inflation and Changing Prices

The financial statements and related data presented in this Annual Report have been prepared in accordance with generally accepted accounting principles accepted in the United States of America which require the measurement of financial position and operating results in terms of historical dollars without considering changes in relative purchasing power of money over time due to inflation. The primary impact of inflation on operations is reflected in increased operating costs. Unlike most industrial companies, virtually all of the assets and liabilities of a financial institution are monetary in nature. As a result, interest rates generally have a more significant impact on a financial institution’s performance than does inflation. Interest rates do not necessarily move in the same direction or to the same extent as the prices of goods and services.

25

Report of Independent Registered Public Accounting Firm

Audit Committee, Board of Directors

and Stockholders

First Robinson Financial Corporation

Robinson, Illinois

We have audited the accompanying consolidated balance sheets of First Robinson Financial Corporation (“Company”) as of March 31, 2012 and 2011, and the related consolidated statements of income and comprehensive income, stockholders’ equity and cash flows for the years then ended. The Company’s management is responsible for these financial statements. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing auditing procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits also included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of First Robinson Financial Corporation as of March 31, 2012 and 2011, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

/sig/ BKD, LLP

Decatur, Illinois

June 27, 2012

26

First Robinson Financial Corporation

Consolidated Balance Sheets

March 31, 2012 and 2011

(In Thousands, Except Share Data)

	2012			2011
Assets
Cash and due from banks	$	7,777		$	9,546
Interest-bearing demand deposits		20,551			17,813
Cash and cash equivalents		28,328			27,359
Held-to-maturity securities (fair values of $1,342 and $0 at March 31, 2012 and 2011)		1,225			—
Available-for-sale securities		50,100			51,677
Loans, held for sale		509			354
Loans, net of allowance for loan losses of $1,383 and $1,145 at March 31, 2012 and 2011		125,752			120,164
Premises and equipment, net of accumulated depreciation of $4,044 and $3,684 at March 31, 2012 and 2011		4,150			3,848
Federal Reserve and Federal Home Loan Bank stock		1,189			1,056
Foreclosed assets held for sale, net		86			218
Interest receivable		966			914
Prepaid income taxes		96			249
Cash surrender value of life insurance		1,608			1,556
Other assets		1,485			1,436
Total assets	$	215,494		$	208,831
Liabilities and Stockholders’ Equity
Liabilities
Deposits
Demand	$	31,831		$	23,490
Savings, NOW and money market		102,258			97,121
Time deposits		47,199			55,741
Total deposits		181,288			176,352
Other borrowings		12,920			15,620
Short-term borrowings		—			1,800
Advances from borrowers for taxes and insurance		336			274
Deferred income taxes		547			512
Interest payable		120			183
Other liabilities		1,360			1,325
Total liabilities		196,571			196,066
Commitments and Contingencies
Stockholders’ Equity
Preferred stock, $.01 par value,$1,000 liquidation value; authorized 500,000 shares, 4,900 shares and 0 shares issued and outstanding at March 31, 2012 and 2011		4,900			—
Common stock, $.01 par value; authorized 2,000,000 shares; issued – 859,625 shares; outstanding - 2012 – 426,744 shares, 2011 – 427,149 shares		9			9
Additional paid-in capital		8,627			8,781
Retained earnings		12,744			11,212
Accumulated other comprehensive income		755			861
Treasury stock, at cost Common; 2012 – 432,881 shares, 2011 – 432,476 shares		(8,112	)		(8,098	)
Total stockholders’ equity		18,923			12,765
Total liabilities and stockholders’ equity	$	215,494		$	208,831

See Notes to Consolidated Financial Statements

27

First Robinson Financial Corporation

Consolidated Statements of Income and Comprehensive Income

Years Ended March 31, 2012 and 2011

(In Thousands, Except Per Share Data)

	2012			2011
Interest and Dividend Income
Loans	$	6,878		$	6,547
Securities
Taxable		1,337			1,607
Tax-exempt		116			115
Other interest income		44			30
Dividends on Federal Reserve Bank and Federal Home Loan Bank stocks		15			10
Total interest and dividend income		8,390			8,309
Interest Expense
Deposits		1,484			2,312
Other borrowings		82			105
Total interest expense		1,566			2,417
Net Interest Income		6,824			5,892
Provision for Loan Losses		698			735
Net Interest Income After Provision for Loan Losses		6,126			5,157
Non-Interest Income
Charges and other fees on loans		346			360
Charges and fees on deposit accounts		977			943
Net gain on sale of loans		793			680
Net gain on sale of equipment		—			4
Net gain (loss) on sale of foreclosed property		(12	)		15
Other		587			567
Total non-interest income		2,691			2,569
Non-Interest Expense
Compensation and employee benefits		3,123			3,002
Occupancy and equipment		754			717
Data processing and telecommunications		488			430
Audit, legal and other professional services		247			265
Advertising		285			258
Postage		73			69
FDIC Insurance		110			236
Foreclosed property expense		18			14
Other		662			639
Total non-interest expense		5,760			5,630

See Notes to Consolidated Financial Statements

28

First Robinson Financial Corporation 

Consolidated Statements of Income and Comprehensive Income (Continued) 

Years Ended March 31, 2012 and 2011 

(In Thousands, Except Per Share Data)

	2012			2011
Income Before Income Taxes	$	3,057		$	2,096
Provision for Income Taxes		1,111			701
Net Income		1,946			1,395
Preferred Stock Dividends		30			—
Net Income Available to Common Stockholders	$	1,916		$	1,395
Basic Earnings Per Common Share	$	4.67		$	3.38
Diluted Earnings Per Common Share	$	4.49		$	3.25
Common Dividends Paid Per Share	$	0.90		$	0.85
Comprehensive Income:
Net income available to common stockholders	$	1,916		$	1,395
Other comprehensive income, net of tax:
Change in unrealized appreciation on securities available for sale, net of tax of $(37) and $(73) for the years ended March 31, 2012 and 2011, respectively		(106	)		(115	)
Total Comprehensive Income	$	1,810		$	1,280

See Notes to Consolidated Financial Statements

29

First Robinson Financial Corporation 

Consolidated Statements of Stockholders’ Equity 

Years Ended March 31, 2012 and 2011 

(In Thousands, Except Share Data)

																Accumulated
										Additional						Other
	Preferred Stock				Common Stock					Paid-in			Retained			Comprehensive			Treasury
	Shares		Amount		Shares			Amount		Capital			Earnings			Income			Stock			Total
Balance April 1, 2010		0	$	0		433,198		$	9	$	8,783		$	10,182		$	976		$	(7,905	)	$	12,045
Net income														1,395									1,395
Change in unrealized appreciation on available-for-sale securities, net of taxes of $(73)																	(115	)					(115	)
Treasury shares purchased						(6,049	)													(193	)		(193	)
Dividends on common stock, $0.85 per share														(365	)								(365	)
Purchase of incentive shares											(26	)											(26	)
Incentive shares issued											24												24
Balance, March 31, 2011		0		0		427,149			9		8,781			11,212			861			(8,098	)		12,765
Net income														1,946									1,946
Change in  unrealized appreciation on available-for-sale securities, net of taxes of $(37)																	(106	)					(106	)
Series A preferred shares issued		4,900		4,900							(128	)											4,772
Treasury shares purchased						(405	)													(14	)		(14	)
Dividends on common stock, $0.90 per share														(384	)								(384	)
Dividends on preferred stock, $6.12 per share														(30	)								(30	)
Purchase of incentive shares											(26	)											(26	)
Balance, March 31, 2012		4.900	$	4,900		426,744		$	9	$	8,627		$	12,744		$	755		$	(8,112	)	$	18,923

See Notes to Consolidated Financial Statements

30

First Robinson Financial Corporation 

Consolidated Statements of Cash Flows 

Years Ended March 31, 2012 and 2011 

(In Thousands)

	2012			2011
Operating Activities
Net income	$	1,946		$	1,395
Items not requiring (providing) cash
Depreciation and amortization		369			311
Provision for loan losses		698			735
Amortization of premiums and discounts on securities		265			258
Amortization of loan-servicing rights		250			244
Recovery (impairment) of loan servicing rights		(71	)		16
Compensation related to incentive plan		—			24
Deferred income taxes		110			(194	)
Originations of mortgage loans held for sale		(41,747	)		(39,746	)
Proceeds from the sale of mortgage loans		42,385			40,160
Net gain on sale of loans		(793	)		(680	)
Net loss (gain) on sale of foreclosed property		12			(15	)
Net gain on sale of equipment		—			(4	)
Cash surrender value of life insurance		(52	)		(52	)
Changes in
Interest receivable		(52	)		(8	)
Other assets		(275	)		(26	)
Interest payable		(63	)		(68	)
Other liabilities		35			240
Prepaid income taxes		153			131
Net cash provided by operating activities		3,170			2,721
Investing Activities
Purchases of available-for-sale securities		(14,464	)		(10,281	)
Purchase of held-to-maturity securities		(1,380	)		—
Proceeds from maturities of available-for-sale securities		7,560			3,710
Proceeds from maturities of held to maturity securities		155			—
Repayment of principal on mortgage-backed securities		8,073			9,847
Purchase of Federal Reserve Bank and Federal Home Loan Bank stocks		(133	)		(48	)
Net change in loans		(6,375	)		(21,054	)
Purchase of premises and equipment		(662	)		(149	)
Proceeds from sale of equipment		—			24
Proceeds from sale of foreclosed assets		209			67
Net cash used in investing activities		(7,017	)		(17,884	)

31

First Robinson Financial Corporation 

Consolidated Statements of Cash Flows (Continued) 

Years Ended March 31, 2012 and 2011 

(In Thousands)

	2012			2011
Financing Activities
Net increase in demand deposits, money market, NOW and savings accounts	$	13,478		$	28,988
Net decrease in time deposits		(8,542	)		(1,948	)
Proceeds from other borrowings		154,349			140,750
Repayment of other borrowings		(157,049	)		(142,751	)
Net change in short-term borrowings		(1,800	)		100
Purchase of incentive plan shares		(26	)		(26	)
Purchase of treasury shares		(14	)		(193	)
Proceeds from sale of preferred stock, net		4,772			—
Dividends paid on common shares		(384	)		(365	)
Dividends paid on preferred shares		(30	)		—
Net increase in advances from borrowers for taxes and insurance		62			78
Net cash provided by financing activities		4,816			24,633
Increase in Cash and Cash Equivalents		969			9,470
Cash and Cash Equivalents, Beginning of Year		27,359			17,889
Cash and Cash Equivalents, End of Year	$	28,328		$	27,359
Supplemental Cash Flows Information
Interest paid	$	1,629		$	2,485
Income taxes paid (net of refunds)		851			772
Real estate acquired in settlement of loans		89			218
Internally financed sales of real estate		21			—

 See Notes to Consolidated Financial Statements

32

First Robinson Financial Corporation 

Notes to Consolidated Financial Statements 

March 31, 2012 and 2011

Note 1: Nature of Operations and Summary of Significant Accounting Policies

Nature of Operations

First Robinson Financial Corporation (the “Company”) is a bank holding company whose principal activity is the ownership and management of its wholly-owned subsidiary, First Robinson Savings Bank, N.A. (the “Bank”). The Bank is primarily engaged in providing a full range of banking and financial services to individual and corporate customers in Crawford and surrounding counties in Illinois and Knox and surrounding counties in Indiana. The Bank is subject to competition from other financial institutions. The Company and the Bank are subject to the regulation of certain federal and state agencies and undergo periodic examinations by those regulatory authorities.

Principles of Consolidation and Financial Statement Presentation

The consolidated financial statements include the accounts of the Company and the Bank. All significant inter-company accounts and transactions have been eliminated in consolidation.

Use of Estimates

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 that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Material estimates that are particularly susceptible to significant change relate to the determination of the allowance for loan losses, the valuation of real estate acquired in connection with foreclosures or in satisfaction of loans, Federal Home Loan Bank stock impairment, valuation of deferred tax assets and loan servicing rights.

Cash Equivalents

The Company considers all liquid investments with original maturities of three months or less to be cash equivalents. At March 31, 2012 and 2011, cash equivalents consisted primarily of interest-earning and non-interest earning demand deposits in banks.

Effective July 21, 2010, the FDIC’s insurance limits were permanently increased to $250,000. At March 31, 2012, the Company’s interest-bearing cash accounts did not exceed federally insured limits.

Pursuant to legislation enacted in 2010, the FDIC will fully insure all noninterest-bearing transaction accounts beginning December 31, 2010 through December 31, 2012, at all FDIC insured institutions.

33

First Robinson Financial Corporation 

Notes to Consolidated Financial Statements 

March 31, 2012 and 2011 

Securities

Certain debt securities that management has the positive intent and ability to hold to maturity are classified as “held-to-maturity” and recorded at amortized cost. Securities not classified as held-to-maturity are classified as “available-for-sale” securities and recorded at fair value with unrealized gains and losses excluded from earnings and reported in other comprehensive income. Purchase premiums and discounts are recognized in interest income using the interest method over the terms of the securities. Gains and losses on the sale of securities are recorded on the trade date and are determined using the specific identification method.

For debt securities with fair value below amortized costs when the Company does not intend to sell a debt security, and it is more-likely-than-not, the Company will not have to sell the security before recovery of its cost basis, it recognizes the credit component of an other-than-temporary impairment of a debt security in earnings and the remaining portion in other comprehensive income. For held-to-maturity debt securities, the amount of an other-than-temporary impairment recorded in other comprehensive income for the noncredit portion of a previous other-than-temporary impairment is amortized prospectively over the remaining life of the security on the basis of the timing of future estimated cash flows of the security. The Company did not recognize any other-than-temporary impairment during the fiscal years ended March 31, 2012 and 2011.

Loans Held for Sale

Mortgage loans originated and intended for sale on the secondary market are carried at the lower of cost or fair value in the aggregate. Net realized losses, if any, are recognized through a valuation allowance by charges to income. Gains and losses on loan sales are recorded in non-interest income, and direct loan origination costs and fees are recognized at origination of the loan and are recognized in non-interest income upon sale of the loan.

Loans

Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoffs are reported at their outstanding principal balances adjusted for charge-offs, the allowance for loan losses, and any unamortized deferred fees or costs on originated loans.

For loans amortized at cost, interest income is accrued based on the unpaid principal balance. Loan origination fees, net of certain direct origination costs, as well as premiums and discounts, are deferred and amortized as a level yield adjustment over the respective term of the loan.

The accrual of interest on mortgage and commercial loans is discontinued at the time the loan is 90 days past due unless the credit is well-secured and in process of collection. Past due status is passed on contractual terms of the loan. In all cases, loans are placed on nonaccrual or charged off at an earlier date if collection of principal or interest is considered doubtful.

All interest accrued but not collected for loans that are placed on nonaccrual or charged off are reversed against interest income. The interest on these loans is accounted for on the cash-basis or cost-recovery method, until qualifying for return to accrual. Loans are returned to accrual basis when all the principal and interest amounts contractually due are brought current and future payments are reasonable assured.

34

First Robinson Financial Corporation 

Notes to Consolidated Financial Statements 

March 31, 2012 and 2011

Allowance for Loan Losses

The allowance for loan losses is established as losses are estimated to have occurred through a provision for loan losses charged to income. Loan losses are charged against the allowance when management believes the uncollectability of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance.

The allowance for loan losses is evaluated on a regular basis by management and is based upon management’s periodic review of the collectability of the loans in light of historical experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral, and prevailing economic conditions. This evaluation is inherently subjective, as it requires estimates that are susceptible to significant revision as more information becomes available. Management’s evaluation is also subject to review and potential change, by bank regulatory authorities.

The allowance consists of allocated and general components. The allocated component relates to loans that are classified as impaired. For those loans that are classified as impaired, an allowance is established when the discounted cash flows (or collateral value or observable market price) of the impaired loan is lower than the carrying value of that loan. The general component covers nonclassified loans and is based on historical charge-off experience and expected loss given default derived from the Company’s internal risk rating process. Other adjustments may be made to the allowance for pools of loans after an assessment of internal and external influences on credit quality that are not fully reflected in the historical loss or risk rating data.

A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due, according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed. Impairment is measured on a loan-by-loan basis for commercial and construction loans by either the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s obtainable market price, or the fair value of the collateral if the loan is collateral dependent.

Groups of loans with similar risk characteristics, including individually evaluated loans not determined to be impaired, are collectively evaluated for impairment based on the group’s historical loss experience adjusted for changes in trends, conditions and other relevant factors that affect repayment of the loans. Accordingly, the Company does not separately identify individual consumer and residential loans for impairment measurements, unless such loans are the subject of a restructuring agreement due to financial difficulties of the borrower.

35

First Robinson Financial Corporation 

Notes to Consolidated Financial Statements 

March 31, 2012 and 2011 

Premises and Equipment

Depreciable assets are stated at cost less accumulated depreciation. Depreciation is charged to expense using the straight-line method over the estimated useful lives of the assets. Estimated lives are generally 30 to 40 years for premises and 3 to 5 years for equipment.

Federal Reserve Bank Stock

Federal Reserve Bank stock is a required investment for institutions that are members of the Federal Reserve Bank systems. The required investment in the common stock is based on a predetermined formula, carried at cost and evaluated for impairment.

Federal Home Loan Bank Stock

Federal Home Loan Bank stock is stated at cost and is a required investment for institutions that are members of the Federal Home Loan Bank system. The required investment in the common stock is based on a predetermined formula, carried at cost and evaluated for impairment.

The Company owned approximately $879,000 of Federal Home Loan Bank of Chicago (“FHLB”) stock as of March 31, 2012 and 2011. During the third quarter of 2007, FHLB received a Cease and Desist Order from their regulator, the Federal Housing Finance Board. The Cease and Desist Order was terminated as of April 18, 2012. The order prohibited capital stock repurchases and redemptions and the payment of a dividend without regulatory approval. With regard to dividends, the FHLB can now declare quarterly dividends without the consent of the regulator subject to the dividend payment being at or below the average of three-month LIBOR for that quarter and the payment of the dividend will not result in the FHLB’s retain earnings falling below the level at the previous year-end. The FHLB did not pay a dividend during the fourth quarter of 2007 or the calendar years of 2008, 2009 and 2010; however, the FHLB declared and paid quarterly dividends at the annualized rate of 10 basis points in calendar year 2011 and the first quarter of calendar 2012. Management performed an analysis and determined the cost method investment in FHLB stock is ultimately recoverable and therefore not impaired for the years ended March 31, 2012 and 2011.

Foreclosed Assets Held for Sale

Assets acquired through, or in lieu of, loan foreclosure are held for sale and are initially recorded at the lower of the carrying value of the loan or fair value at the date of foreclosure, establishing a new cost basis. Subsequent to foreclosure, management periodically performs valuations and the assets are carried at the lower of carrying amount or fair value less cost to sell. Revenue and expenses from operations and changes in the valuation allowance are included in net income or expense from foreclosed assets.

36

First Robinson Financial Corporation 

Notes to Consolidated Financial Statements 

March 31, 2012 and 2011 

Mortgage Servicing Rights

Mortgage servicing assets are recognized separately when rights are acquired through purchase or through sale of financial assets. Under the servicing assets and liabilities accounting guidance (ASC 860-50), servicing rights resulting from the sale or securitization of loans originated by the Company are initially measured at fair value at the date of transfer. The Company subsequently measures each class of servicing asset using the amortization method. Under the amortization method, servicing rights are amortized in proportion to and over the period of estimated net servicing income. The amortized assets are assessed for impairment or increased obligation based on fair value at each reporting date.

Fair value is based on market prices for comparable mortgage servicing contracts, when available, or alternatively, is based on a valuation model that calculates the present value of estimated future net servicing income. The valuation model incorporates assumptions that market participants would use in estimating future net servicing income, such as the cost to service, the discount rate, the custodial earnings rate, an inflation rate, ancillary income, prepayment speeds and default rates and losses. These variables change from quarter to quarter as market conditions and projected interest rates change, and may have an adverse impact on the value of the mortgage servicing right and may result in a reduction to noninterest income.

Each class of separately recognized servicing assets subsequently measured using the amortization method are evaluated and measured for impairment. Impairment is determined by stratifying rights into tranches based on predominant characteristics, such as interest rate, loan type and investor type. Impairment is recognized through a valuation allowance for an individual tranche, to the extent that fair value is less than the carrying amount of the servicing assets for that tranche. The valuation allowance is adjusted to reflect changes in measurement of impairment after the initial measurement of impairment. Changes in valuation allowances are reported with charges and other fees on loans on the income statement. Fair value in excess of the carrying amount of servicing assets for that stratum is not recognized.

Servicing fee income is recorded for fees earned for servicing loans. The fees are based on a contractual percentage of the outstanding principal or a fixed amount per loan and are recorded as income when earned. The amortization of mortgage servicing rights is netted against loan servicing fee income.

Incentive Plans

The Company has a Director’s Retirement Plan (DRP) deferred compensation plan where certain directors’ fees earned are deferred and placed in a “Rabbi Trust”. The DRP purchases stock of the Company with the funds. The deferred liability is equal to the shares owned multiplied by the market value at year-end. The deferred value of the shares purchased is netted from additional paid in capital. The change in share price is reflected as compensation expense subject to the transitional provisions for shares held by the Rabbi Trust at September 30, 1998.

Treasury Stock

Treasury stock is stated at cost. Cost is determined by the first-in, first-out method.

37

First Robinson Financial Corporation 

Notes to Consolidated Financial Statements 

March 31, 2012 and 2011

Transfer of Financial Assets

Transfers of financial assets are accounted for as sales, when control over the assets has been surrendered. Control over transferred assets is deemed to be surrendered when (1) the assets have been isolated from the Company – but presumptively beyond the reach of the transferor and its creditors, even in bankruptcy or other receivership, (2) the transferee obtains the right (free of convictions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets and (3) the Company does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity or the ability to unilaterally cause the holder to return specific assets.

Income Taxes

The Company accounts for income taxes in accordance with income tax accounting guidance (ASC 740, Income Taxes). The income tax accounting guidance results in two components of income tax expense: current and deferred. Current income tax expense reflects taxes to be paid or refunded for the current year by applying the provisions of the enacted tax law to the taxable income or excess of deductions over revenues. The Company determines deferred income taxes using the balance sheet method. Under this method, the net deferred tax asset or liability is based on the tax effects of the differences between the book and tax bases of assets and liabilities, and enacted changes in tax rates and laws are recognized in the period in which they occur. Deferred income tax expense results from changes in deferred tax asses and liabilities between periods. Deferred tax assets are reduced by a valuation allowance if, based on the weight of evidence available, it is more likely than not that some portion or all of a deferred tax asset will not be realized.

Uncertain tax positions are recognized if it is more likely than not, based on the technical merits, that the tax position will be realized or sustained upon examination. The term more likely than not means a likelihood of more than 50 percent; the terms examined and upon examination also include resolution of the related appeals or litigation processes, if any. A tax position that meets the more-likely-than-not recognition threshold is initially and subsequently measured as the largest amount of tax benefit that has a greater than 50 percent likelihood of being realized upon settlement with a taxing authority that has full knowledge of all relevant information. The determination of whether or not a tax position has met the more-likely-than-not recognition threshold considers the facts, circumstances and information available at the reporting date is subject to management’s judgment.

The Company files consolidated income tax returns with its subsidiary.

Earnings Per Common Share

Basic earnings per common share represent income available to common stockholders divided by the weighted-average number of common shares outstanding during each period. Diluted earnings per common share reflect additional potential common shares that would have been outstanding if dilutive potential common shares had been issued, as well as any adjustment to income that would result from the assumed issuance. Potential common shares that may be issued by the Company relate solely to outstanding incentive plan shares and are determined using the treasury stock method.

38

First Robinson Financial Corporation

Notes to Consolidated Financial Statements

March 31, 2012 and 2011

Treasury stock shares are not deemed outstanding for earnings per share calculations.

Comprehensive Income

Comprehensive income consists of net income and other comprehensive income, net of applicable income taxes. Other comprehensive income includes unrealized appreciation (depreciation) on available for sale securities.

Reclassifications

Certain reclassifications have been made to the 2011 consolidated financial statements to conform to the 2012 financial statement presentation. These reclassifications had no effect on net income.

Note 2:     Restriction on Cash and Due From Banks

The Company is required to maintain reserve funds in cash and/or on deposit with the Federal Reserve Bank. The reserve required at March 31, 2012, was $3,010,000 and $2,804,000 for March 31, 2011.

39

First Robinson Financial Corporation

Notes to Consolidated Financial Statements

March 31, 2012 and 2011

Note 3:     Investment Securities

The amortized cost and approximate fair values, together with gross unrealized gains and losses, of securities are as follows:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
			(In thousands)
Available-For-Sale Securities:
March 31, 2012
U.S. government sponsored enterprises (GSE)	$	14,836	$	91	$	50	$	14,877
Mortgage-backed securities, GSE, residential		31,431		1,200		—		32,631
Mortgage-backed securities, GSE, commercial		1,014		—		18		996
State and political subdivisions		1,555		41		—		1,596
	$	48,836	$	1,332	$	68	$	50,100
March 31, 2011
U.S. government sponsored enterprises (GSE)	$	12,082	$	263	$	—	$	12,345
Mortgage-backed securities, GSE, residential		32,868		1,127		—		33,995
Mortgage-backed securities, GSE, commercial		1,491		—		36		1,455
State and political subdivisions		3,829		54		1		3,882
	$	50,270	$	1,444	$	37	$	51,677

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
			(In thousands)
Held-to-Maturity Securities:
March 31, 2012
State and political subdivisions	$	1,225	$	117	$	—	$	1,342

40

First Robinson Financial Corporation

Notes to Consolidated Financial Statements

March 31, 2012 and 2011

The amortized cost and fair value of available-for-sale and held-to-maturity securities at March 31, 2012, 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.

	Available-for-sale				Held-to-maturity
	Amortized Cost		Fair  Value		Amortized cost		Maturity fair value
	(In thousands)
Within one year	$	6,402	$	6,446	$	205	$	206
One to five years		6,903		6,981		215		221
Five to ten years		3,086		3,046		515		577
Over ten years		—		—		290		338
		16,391		16,473		1,225		1,342
Mortgage-backed securities, GSE’s		32,445		33,627		—		—
Totals	$	48,836	$	50,100	$	1,225	$	1,342

The carrying value of securities pledged as collateral, to secure public deposits and for other purposes, was $16,796,000 at March 31, 2012, and $19,258,000 at March 31, 2011.

The book value of securities sold under agreements to repurchase amounted to $17,144,000 and $18,590,000 at March 31, 2012 and 2011, respectively.

During the fiscal years ended March 31, 2012, and 2011 the Company did not sell any available-for-sale securities.

Certain investments in debt securities are reported in the consolidated financial statements at an amount less than their historical cost. Total fair value of these investments at March 31, 2012 and 2011, was $7,597,000 and $1,681,000, respectively, which is approximately 14.8% and 3.3%, respectively, of the Company’s available-for-sale and held-to-maturity investment portfolio. These declines primarily resulted from recent changes in market interest rates.

Management believes the declines in fair value for these securities are temporary. The following table shows our investments’ gross unrealized losses and fair value of the Company’s investments with unrealized losses that are not deemed to be other-than-temporarily impaired, (in thousands), aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at March 31, 2012 and 2011.

41

First Robinson Financial Corporation

Notes to Consolidated Financial Statements

March 31, 2012 and 2011

Description of Securities	Less than 12 Months				More than 12 Months				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
					(In Thousands)
As of March 31, 2012
Mortgage-backed securities, GSE, commercial	$	—	$	—	$	996	$	18	$	996	$	18
US government sponsored enterprises, GSE		6,601		50		—		—		6,601		50
Total temporarily impaired securities	$	6,601	$	50	$	996	$	18	$	7,597	$	68
As of March 31, 2011
Mortgage-backed securities, GSE, residential	$	1,455	$	36	$	—	$	—	$	1,455	$	36
State and political subdivisions		226		1		—		—		226		1
Total temporarily impaired securities	$	1,681	$	37	$	—	$	—	$	1,681	$	37

Note 4:     Loans and Allowance for Loan Losses

Categories of loans, including loans held for sale, at March 31 include:

	2012		2011
	(In thousands)
Mortgage loans on real estate:
Residential:
1-4 Family	$	46,095	$	41,954
Second mortgages		1,326		1,542
Construction		5,009		5,362
Equity lines of credit		3,973		3,761
Commercial		36,421		33,898
Total mortgage loans on real estate		92,824		86,517
Commercial loans		17,470		19,132
Consumer/other loans		16,594		15,852
States and municipal government loans		1,543		764
Total Loans		128,431		122,265
Less
Net deferred loan fees, premiums and discounts		21		12
Undisbursed portion of loans		766		590
Allowance for loan losses		1,383		1,145
Net loans	$	126,261	$	120,518

42

First Robinson Financial Corporation

Notes to Consolidated Financial Statements

March 31, 2012 and 2011

The Company is a community-oriented financial institution that seeks to serve the financial needs of the residents and businesses in its market area. The Company considers Crawford County and surrounding counties in Illinois and Knox County and surrounding counties in Indiana as its market area. The principal business of the Company has historically consisted of attracting retail deposits from the general public and primarily investing those funds in one- to four-family residential real estate loans, commercial, multi-family and agricultural real estate loans, consumer loans, and commercial business and agricultural finance loans. For the most part, loans are collateralized by assets, primarily real estate, of the borrowers and guaranteed by individuals. Repayment of the loans is expected to come from cash flows of the borrowers or from proceeds from the sale of selected assets of the borrowers.

Loan originations are developed from continuing business with (i) depositors and borrowers, (ii) real estate broker referrals, (iii) auto dealer referrals, and (iv) walk-in customers. All of the Company’s lending is subject to its written underwriting standards and loan origination procedures. Upon receipt of a loan application, it is first reviewed by a loan officer in the loan department who checks applications for accuracy and completeness. The Company’s underwriting department then gathers the required information to assess the borrower’s ability to repay the loan, the adequacy of the proposed collateral, the employment stability and the credit-worthiness of the borrower. The financial resources of the borrower and the borrower’s credit history, as well as the collateral securing the loan, are considered an integral part of each risk evaluation prior to approval. A credit report is obtained to verify specific information relating to the applicant’s employment and credit standing. Income is verified using W-2 information, tax returns or pay-stubs of the potential borrower. In the case of a real estate loan, an appraisal of the real estate intended to secure the proposed loan is undertaken by an independent appraiser approved by the Company. The board of directors has established individual lending authorities for each loan officer by loan type. Loans over an individual officer’s lending limits must be approved by a loan officer with a higher lending limit, with the highest being that of the president and senior loan officer who have a combined lending authority up to $500,000. Loans with a principal balance over this limit must be approved by the directors’ loan committee, which meets weekly and consists of the chairman of the board, all outside directors, the president, the senior loan officer and loan officers. The senior loan officer and loan officers do not vote on the loans presented. The board of directors ratifies all loans that are originated. Once the loan is approved, the applicant is informed and a closing date is scheduled. Loan commitments are typically funded within 30 days.

The Company requires evidence of marketable title and lien position or appropriate title insurance on all loans secured by real property. The Company also requires fire and extended coverage casualty insurance in amounts at least equal to the lesser of the principal amount of the loan or the value of improvements on the property, depending on the type of loan. As required by federal regulations, the Company also requires flood insurance to protect the property securing its interest if such property is located in a designated flood area.

Management reserves the right to change the amount or type of lending in which it engages to adjust to market or other factors.

Residential Real Estate Lending. Residential mortgages include first liens on one- to- four-family properties, second mortgages, home equity lines of credit and construction loans to individuals for the construction of one- to- four-family residences. Residential loan originations are generated by the Company’s marketing efforts, its present customers, walk-in customers, and referrals from real estate brokers. Historically, the Company has focused its lending efforts primarily on the origination of loans secured by one- to four-family residential mortgages in its market area. The Company offers both adjustable and fixed rate mortgage loans. Substantially all of the Company’s one- to four-family residential mortgage originations are secured by properties located in its market area.

43

First Robinson Financial Corporation

Notes to Consolidated Financial Statements

March 31, 2012 and 2011

The Company offers adjustable-rate mortgage loans at rates and on terms determined in accordance with market and competitive factors. The Company currently originates adjustable-rate mortgage loans with a term of up to 30 years. The Company offers six-month and one-year adjustable-rate mortgage loans, and residential mortgage loans that are fixed for three years or five years, then adjustable annually after that with a stated interest rate margin generally over the one-year Treasury Bill Index. Increases or decreases in the interest rate of the Company’s adjustable-rate loans is generally limited to 200 basis points at any adjustment date and 600 basis points over the life of the loan. As a consequence of using caps, the interest rates on these loans may not be as rate sensitive as the Company’s liabilities. The Company qualifies borrowers for adjustable-rate loans based on the initial interest rate of the loan and by reviewing the highest possible payment in the first seven years of the loan. As a result, the risk of default on these loans may increase as interest rates increase.

The Company offers fixed-rate mortgage loans with a term of up to 30 years. The majority of the fixed rate loans currently originated by the Company are underwritten and documented pursuant to the guidelines of the Federal Home Loan Bank of Chicago’s (the “FHLB”) Mortgage Partnership Finance (“MPF”) program.

The Company will generally lend up to 80% of the lesser of the appraised value or purchase price of the security property on owner occupied one- to four-family loans. Residential loans do not include prepayment penalties, are non-assumable (other than government-insured or guaranteed loans), and do not produce negative amortization. Real estate loans originated by the Company contain a “due on sale” clause allowing the Company to declare the unpaid principal balance due and payable upon the sale of the security property. The Company utilizes private mortgage insurance.

The Company also offers home equity loans that are secured by the underlying equity in the borrower’s residence, and accordingly, are reported with the one- to- four- family real estate loans. As a result, the Company generally requires loan-to-value ratios of 90% or less after taking into consideration the first mortgage held by the Company. These loans typically have fifteen-year terms with an interest rate adjustment monthly.

The Company offers construction loans to individuals for the construction of one- to- four-family residences. Following the construction period, these loans may become permanent loans. Construction lending is generally considered to involve a higher level of credit risk since the risk of loss on construction loans is dependent largely upon the accuracy of the initial estimate of the individual property’s value upon completion of the project and the estimated cost (including interest) of the project. If the cost estimate proves to be inaccurate, the Company may be required to advance funds beyond the amount originally committed to permit completion of the project. The Company conducts periodic inspections of the construction project to help mitigate this risk.

44

First Robinson Financial Corporation

Notes to Consolidated Financial Statements

March 31, 2012 and 2011

Commercial Real Estate Lending. The Company also originates commercial, multi-family and agricultural real estate loans. The Company will generally lend up to 80% of the value of the collateral securing the loan with varying maturities up to 20 years with re-pricing periods ranging from daily to one year. In underwriting these loans, the Company currently analyzes the financial condition of the borrower, the borrower’s credit history, and the reliability and predictability of the cash flow generated by the business. The Company generally requires personal guaranties on corporate borrowers. Appraisals on properties securing commercial and agricultural real estate loans originated by the Company are primarily performed by independent appraisers. The Company also offers small business loans, which are generally guaranteed up to 90% by various governmental agencies.

Commercial, multi-family and agricultural real estate loans generally present a higher level of risk than loans secured by one- to four-family residences. This greater risk is due to several factors, including the concentration of principal in a limited number of loans and borrowers, the effect of general economic conditions on income and the increased difficulty of evaluating and monitoring these types of loans. Furthermore, the repayment of loans secured by commercial, multi-family and agricultural real estate is typically dependent upon the successful operation of the business. If the cash flow from the project is reduced, the borrower’s ability to repay the loan may be impaired.

Commercial Lending. The Company also originates commercial and agricultural business loans. Unlike residential mortgage loans, which generally are made on the basis of the borrower’s ability to make repayment from his or her employment and other income and which are secured by real property whose value tends to be more easily ascertainable, commercial business and agricultural finance loans typically are made on the basis of the borrower’s ability to make repayment from the cash flow of the borrower’s business. As a result, the availability of funds for the repayment of commercial business and agricultural finance loans may be substantially dependent on the success of the business itself (which, in turn, is likely to be dependent upon the general economic environment). The Company’s commercial business and agricultural finance loans are usually secured by business or personal assets. However, the collateral securing the loans may depreciate over time, may be difficult to appraise and may fluctuate in value based on the success of the business.

The Company’s commercial business and agricultural finance lending policy includes credit file documentation and analysis of the borrower’s character, capacity to repay the loan, the adequacy of the borrower’s capital and collateral as well as an evaluation of conditions affecting the borrower. Analysis of the borrower’s past, present and future cash flows is also an important aspect of the Company’s current credit analysis. Nonetheless, such loans are believed to carry higher credit risk than more traditional investments.

Consumer and Other Lending. The Company offers secured and unsecured consumer and other loans. Secured loans may be collateralized by a variety of asset types, including automobiles, mobile homes, equity securities, and deposits. The Company currently originates substantially all of its consumer and other loans in its primary market area. A significant component of the Company’s consumer loan portfolio consists of new and used automobile loans. These loans generally have terms that do not exceed five years. Generally, loans on vehicles are made in amounts up to 105% of the sales price or the value as quoted in BlackBook USA, whichever is least.

45

First Robinson Financial Corporation

Notes to Consolidated Financial Statements

March 31, 2012 and 2011

Consumer and other loan terms vary according to the type and value of collateral, length of contract and creditworthiness of the borrower. The underwriting standards employed by the Bank for consumer loans include an application, a determination of the applicant’s payment history on other debts and an assessment of ability to meet existing obligations and payments on the proposed loan. Although creditworthiness of the applicant is a primary consideration, the underwriting process also includes a comparison of the value of the security, if any, in relation to the proposed loan amount.

Consumer and other loans may entail greater credit risk than do residential mortgage loans, particularly in the case of consumer loans which are unsecured or are secured by rapidly depreciable assets, such as automobiles. Indirect auto landing presents additional underwriting and credit risks. Further, any repossessed collateral for a defaulted consumer loan may not provide an adequate source of repayment of the outstanding loan balance as a result of the greater likelihood of damage, loss or depreciation. In addition, consumer loan collections are dependent on the borrower’s continuing financial stability, and thus are more likely to be affected by adverse personal circumstances. Furthermore, the application of various federal and state laws, including bankruptcy and insolvency laws, may limit the amount which can be recovered on such loans.

State and Municipal Government Lending. The Bank originates both fixed and adjustable loans for state and municipal governments. Loans to state and municipal governments are generally at a lower rate than consumer or commercial loans due to the tax-free nature of municipal loans. For underwriting purposes, the Bank does not require financial documentation as long as the loan is to the general obligation of the local entity. However, proper documentation in the entity’s minutes, from a board meeting when a quorum was present, that indicate the approval to seek a loan and for the authorized individuals to sign for the loan, is required.

The following tables present the balance in the allowance for loan losses and the recorded investment in loans based on portfolio segment and impairment method as of March 31, 2012 and 2011:

	2012
	Residential Real Estate			Commercial Real Estate			Commercial		Consumer/ Other Loans		State and Municipal Government		Total
	(In thousands)
Allowance for loan losses:
Balance, beginning of year	$	581		$	365		$	168	$	31	$	—	$	1,145
Provision charged to expense		(169	)		(80	)		790		157		—		698
Losses charged off		30			87			297		91		—		505
Recoveries		—			—			—		45		—		45
Balance, end of period	$	382		$	198		$	661	$	142	$	—	$	1,383
Ending balance:  individually evaluated for impairment	$	47		$	—		$	160	$	10	$	—	$	217
Ending balance:  collectively evaluated for impairment	$	335		$	198		$	501	$	132	$	—	$	1,166
Loans:
Ending balance	$	56,403		$	36,421		$	17,470	$	16,594	$	1,543	$	128,431
Ending balance:  individually evaluated for impairment	$	681		$	—		$	632	$	35	$	—	$	1,348
Ending balance:  collectively evaluated for impairment	$	55,722		$	36,421		$	16,838	$	16,559	$	1,543	$	127,083

46

First Robinson Financial Corporation

Notes to Consolidated Financial Statements

March 31, 2012 and 2011

	2011
	Residential Real Estate		Commercial Real Estate			Commercial			Consumer/ Other Loans		State and Municipal Government		Total
	(In thousands)
Allowance for loan losses:
Balance, beginning of year	$	72	$	593		$	279		$	29	$	—	$	973
Provision charged to expense		842		(83	)		(42	)		18		—		735
Losses charged off		333		169			69			54		—		625
Recoveries		—		24			—			38		—		62
Balance, end of period	$	581	$	365		$	168		$	31	$	—	$	1,145
Ending balance:  individually evaluated for impairment	$	27	$	—		$	3		$	9	$	—	$	39
Ending balance:  collectively evaluated for impairment	$	554	$	365		$	165		$	22	$	—	$	1,106
Loans:
Ending balance	$	52,619	$	33,898		$	19,132		$	15,852	$	764	$	122,265
Ending balance:  individually evaluated for impairment	$	315	$	239		$	10		$	61	$	—	$	625
Ending balance:  collectively evaluated for impairment	$	52,304	$	33,659		$	19,122		$	15,791	$	764	$	121,640

Management’s opinion as to the ultimate collectability of loans is subject to estimates regarding future cash flows from operations and the value of property, real and personal, pledged as collateral. These estimates are affected by changing economic conditions and the economic prospects of borrowers.

There have been no changes to the Company’s accounting policies or methodology from the prior periods.

47

First Robinson Financial Corporation

Notes to Consolidated Financial Statements

March 31, 2012 and 2011

Credit Quality Indicators

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends among other factors. The Company analyzes loans individually by classifying the loans as to credit risk. This analysis is performed on all loans at origination. In addition, commercial lending relationships over $100,000 are reviewed annually by the credit analyst or senior loan officer in our loan department in order to verify risk ratings. The Company uses the following definitions for risk ratings:

Watch – Loans classified as watch have minor weaknesses or negative trends. The is a possibility that some loss could be sustained

Special Mention – Loans classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution’s credit position at some future date.

Substandard – Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

Doubtful – Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be Pass rated loans.

48

First Robinson Financial Corporation

Notes to Consolidated Financial Statements

March 31, 2012 and 2011

The following tables present the credit risk profile of the Company’s loan portfolio based on rating category and payment activity as of March 31, 2012 and 2011:

	2012
	Residential Real Estate		Commercial Real Estate		Commercial		Consumer/ Other Loans		State and Municipal Government		Total
	(In thousands)
Rating:
Pass	$	54,462	$	31,127	$	15,900	$	16,345	$	1,418	$	119,252
Watch		922		4,406		345		184		125		5,982
Special Mention		131		419		478		9		—		1,037
Substandard		360		469		100		10		—		939
Doubtful		528		—		647		46		—		1,221
Total	$	56,403	$	36,421	$	17,470	$	16,594	$	1,543	$	128,431

	2011
	Residential Real Estate		Commercial Real Estate		Commercial		Consumer/ Other Loans		State and Municipal Government		Total
	(In thousands)
Rating:
Pass	$	51,798	$	31,664	$	17,767	$	15,703	$	634	$	117,566
Watch		296		1,627		423		65		130		2,541
Special Mention		146		287		677		—		—		1,110
Substandard		272		81		259		27		—		639
Doubtful		107		239		6		57		—		409
Total	$	52,619	$	33.898	$	19,132	$	15,852	$	764	$	122,265

The following tables present the Company’s loan portfolio aging analysis as of March 31, 2012 and 2011:

	2012
	30-59 Days Past Due		60-89 Days Past Due		Greater Than 90 Days		Non- accrual		Total Loans Past Due and Non-accrual		Current		Total Loans Receivable		Total Loans > 90 Days & Accruing
	(In thousands)
Real Estate:
Residential:
1-4 Family	$	126	$	—	$	—	$	467	$	593	$	45,502	$	46,095	$	—
Construction		—		—		—		—		—		5,009		5,009		—
Second mortgages		—		—		—		—		—		1,326		1,326		—
Equity lines of credit		—		—		—		8		8		3,965		3,973		—
Commercial real estate		28		—		—		—		28		36,393		36,421		—
Commercial		—		—		—		632		632		16,838		17,470		—
Consumer/other loans		35		11		—		24		70		16,524		16,594		—
State and municipal government		8		—		—		—		8		1,535		1,543		—
Total	$	197	$	11	$	—	$	1,131	$	1,339	$	127,092	$	128,431	$	—

49

First Robinson Financial Corporation

Notes to Consolidated Financial Statements

March 31, 2012 and 2011

	2011
	30-59 Days Past Due		60-89 Days Past Due		Greater Than 90 Days		Non- accrual		Total Loans Past Due and Non-accrual		Current		Total Loans Receivable		Total Loans > 90 Days & Accruing
	(In thousands)
Real Estate:
Residential:
1-4 Family	$	121	$	—	$	—	$	52	$	173	$	41,781	$	41,954	$	—
Construction		—		—		—		—		—		5,362		5,362		—
Second mortgages		—		—		—		—		—		1,542		1,542		—
Equity lines of credit		—		—		—		—		—		3,761		3,761		—
Commercial real estate		—		—		—		239		239		33,659		33,898		—
Commercial		—		333		—		6		339		18,793		19,132		—
Consumer/other loans		23		—		—		40		63		15,789		15,852		—
State and municipal government		—		—		—		—		—		764		764		—
Total	$	144	$	333	$	—	$	337	$	814	$	121,451	$	122,265	$	—

A loan is considered impaired, in accordance with the impairment accounting guidance (ASC 310-10-35-16), when based on current information and events, it is probable the Company will be unable to collect all amounts due from the borrower in accordance with the contractual terms of the loan. Impaired loans include nonperforming commercial loans but also include loans modified in troubled debt restructurings where concessions have been granted to borrowers experiencing financial difficulties. These concessions could include a reduction in the interest rate on the loan, payment extensions, forgiveness of principal, forbearance or other actions intended to maximize collection.

Impairment is measured on a loan-by-loan basis by either the present value of the expected future cash flows, the loan’s observable market value, or, for collateral-dependent loans, the fair value of the collateral adjusted for market conditions and selling expenses. Significant restructured loans are considered impaired in determining the adequacy of the allowance for loan losses.

The Company actively seeks to reduce its investment in impaired loans. The primary tools to work through impaired loans are settlement with the borrowers or guarantors, foreclosure of the underlying collateral, or restructuring.

The Company will restructure loans when the borrower demonstrates the inability to comply with the terms of the loan, but can demonstrate the ability to meet acceptable restructured terms. Restructurings generally include one or more of the following restructuring options; reduction in the interest rate on the loan, payment extensions, forgiveness of principal, forbearance, or other actions intended to maximize collection. Restructured loans in compliance with modified terms are classified as impaired.

50

First Robinson Financial Corporation

Notes to Consolidated Financial Statements

March 31, 2012 and 2011

The following tables present impaired loans for the years ended March 31, 2012 and 2011:

	2012
	Recorded Balance		Unpaid Principal Balance		Specific Allowance		Average Investment in Impaired Loans		Interest Income Recognized
Loans without a specific valuation allowance
Residential	$	462	$	462	$	—	$	122	$	11
Commercial real estate		—		—		—		165		—
Consumer		1		1		—		8		—
Commercial		—		—		—		51		—
Loans with a specific valuation allowance
Residential		219		219		47		218		11
Commercial real estate		—		—		—		14		—
Consumer		34		34		10		45		4
Commercial		632		632		160		382		28
Total:
Residential	$	681	$	681	$	47	$	340	$	22
Commercial real estate	$	—	$	—	$	—	$	179	$	—
Consumer	$	35	$	35	$	10	$	53	$	4
Commercial	$	632	$	632	$	160	$	433	$	28

	2011
	Recorded Balance		Unpaid Principal Balance		Specific Allowance		Average Investment in Impaired Loans		Interest Income Recognized
Loans without a specific valuation allowance
Residential	$	97	$	97	$	—	$	67	$	6
Commercial real estate		239		391		—		48		6
Consumer		40		40		—		13		1
Commercial		4		4		—		1		1
Loans with a specific valuation allowance
Residential		218		218		27		294		13
Commercial real estate		—		—		—		97		—
Consumer		21		21		9		17		1
Commercial		6		6		3		38		—
Total:
Residential	$	315	$	315	$	27	$	361	$	19
Commercial real estate	$	239	$	391	$	—	$	145	$	6
Consumer	$	61	$	61	$	9	$	30	$	2
Commercial	$	10	$	10	$	3	$	39	$	1

51

First Robinson Financial Corporation

Notes to Consolidated Financial Statements

March 31, 2012 and 2011

Included in certain loan categories in the impaired loans are troubled debt restructurings (TDR’s), where economic concession have been granted to borrowers who have experienced financial difficulties, that were classified as impaired. These concessions typically result from our loss mitigation activities and could include reductions in interest rate, payment extensions, forgiveness of principal, forbearance or other actions. TDR’s are considered impaired at the time of restructuring and typically are returned to accrual status after considering the borrower’s sustained repayment performance for a reasonable period of at least six months.

When loans are modified into a TDR, the Company evaluates any possible impairment similar to other impaired loans based on the present value of expected cash flows, discounted at the contractual interest rate of the original loan agreement, or based upon the current fair value of the collateral, less selling costs for collateral dependent loans. If the Company determined that the value of the modified loan is less than the recorded investment in the loan (net or previous charge-offs, deferred loan fees or costs, and unamortized premium or discount), impairment is recognized through an allowance estimate or a charge-off to the allowance. In periods subsequent to modification, the Company evaluates all TDR’s, including those that have payment defaults, for possible impairment and recognizes impairment through the allowance.

During the quarter ended September 30, 2011, the Company adopted ASU 2011-02. The amendments in ASU 2011-02 require prospective application of the impairment measurement guidance in ASC 310-10-35 for the receivables newly identified as impaired. As a result of adopting ASU 2011-02, the Company reassessed all restructurings that occurred on or after April 1, 2011, the beginning of the fiscal year, for identification of TDR’s. The Company identified no loans as troubled debt restructurings for which the allowance for loan losses had previously been measured under a general allowance for credit losses methodology. Thereafter, there was no additional impact to the allowance for loan losses as a result of the adoption.

The following table presents the recorded balance, at original cost, of troubled debt restructurings, as of March 31, 2012 and 2011.

	2012		2011
	(In thousands)
Residential	$	220	$	210
Commercial real estate		—		239
Commercial		146		11
Consumer		5		6
Total	$	371	$	466

52

First Robinson Financial Corporation

Notes to Consolidated Financial Statements

March 31, 2012 and 2011

The following table presents the recorded balance, at original cost, of troubled debt restructurings, which were performing according to the terms of the restructuring, as of March 31, 2012 and 2011.

	2012		2011
	(In thousands)
Residential	$	197	$	210
Commercial		—		4
Consumer		—		6
Total	$	197	$	220

The following table presents loans modified as troubled debt restructuring during the year ended March 31, 2012.

	Year Ended March 31, 2012
	Number of Modifications		Recorded Investment
	(In thousands)
1-4 family		1	$	25
Commercial		1		144
Consumer		—		—
Total		2	$	169

During the fiscal year ended March 31, 2012, the Company modified one one-to four-family residential real estate loan with a recorded investment of $25,000, which was deemed to be a TDR. The modification was made to lower the contractual interest rate and extend the amortization schedule by one month to lower the monthly payment. In addition, the Company modified one commercial loan with a total recorded investment of $144,000. The commercial loan was rewritten to alternate guarantors and the amortization schedule of the loan was extended by 18 months in order to lower the monthly payment.

53

First Robinson Financial Corporation

Notes to Consolidated Financial Statements

March 31, 2012 and 2011

The following table presents the Company’s nonaccrual loans at March 31, 2012 and 2011. This table excludes purchased impaired loans and performing troubled debt restructurings.

	2012		2011
	(In thousands)
Residential:
1-4 Family	$	467	$	52
Equity Lines of Credit		8		—
Commercial real estate		—		239
Commercial		632		6
Consumer/other loans		24		40
Total	$	1,131	$	337

Note 5:     Premises and Equipment

Major classifications of premises and equipment stated at cost, are as follows:

	2012		2011
	(In thousands)
Land	$	1,289	$	1,231
Buildings and improvements		3,710		3,478
Equipment		3,195		2,823
		8,194		7,532
Less accumulated depreciation		4,044		3,684
Net premises and equipment	$	4,150	$	3,848

Note 6:     Loan Servicing

Mortgage loans serviced for others are not included in the accompanying consolidated balance sheets. The unpaid principal balance of mortgage loans serviced for others was $98,699,000 and $77,388,000 at March 31, 2012 and 2011, respectively.

Custodial escrow balances maintained in connection with the foregoing loan servicing, and included in demand deposits, were approximately $1,656,000 and $823,000 at March 31, 2012 and 2011, respectively.

The aggregate fair value of capitalized mortgage servicing rights at March 31, 2012 and 2011 totaled $685,000 and $591,000, respectively, and are included in “other assets” on the consolidated balance sheets. Comparable market values and a valuation model that calculates the present value of future cash flows were used to estimate fair value. For purposes of measuring impairment, risk characteristics, including type of loan and origination date, were used to stratify the originated mortgage servicing rights.

54

First Robinson Financial Corporation

Notes to Consolidated Financial Statements

March 31, 2012 and 2011

	2012			2011
	(In thousands)
Mortgage servicing rights
Balance, beginning of year	$	621		$	468
Servicing rights capitalized		415			397
Amortization of servicing rights		(250	)		(244	)
Balance, end of year		786			621
Valuation allowances
Balance, beginning of year		30			46
Additions		71			—
Reduction due to payoff of loans		—			(16	)
Balance, end of year		101			30
Mortgage servicing assets, net	$	685		$	591

During the fiscal year ended March 31, 2012, a valuation allowance of $101,000 was necessary to adjust the aggregate cost basis of the mortgage servicing right asset to fair market value. The valuation allowance was adjusted during the year ended March 31, 2012 due to payments received on the related loans, as well as changes in the estimated market value on the mortgage servicing right asset.

For purposes of measuring impairment, risk characteristics (including product type, investor type, and interest rates) were used to stratify the originated mortgage servicing rights.

Note 7:    Interest-bearing Deposits

Interest-bearing time deposits in denominations of $100,000 or more were $16,276,000 on March 31, 2012, and $19,299,000 on March 31, 2011.

The following table represents deposit interest expense by deposit type:

	March 31,
	2012		2011
	(In thousands)
Savings, NOW, Money Market, Interest bearing demand	$	553	$	918
Certificates of deposit		931		1,394
Total	$	1,484	$	2,312

55

First Robinson Financial Corporation

Notes to Consolidated Financial Statements

March 31, 2012 and 2011

At March 31, 2012, the scheduled maturities (in thousands) of time deposits are as follows:

2013	$	27,724
2014		12,692
2015		4,494
2016		736
2017		467
Thereafter		1,086
	$	47,199

Note 8:     Other Borrowings

Other borrowings included the following at March 31:

	2012		2011
	(In thousands)
Securities sold under repurchase agreements	$	12,920	$	15,620

Securities sold under agreements to repurchase consist of obligations of the Company to other parties. The obligations are secured by investments and such collateral is held by the Company in safekeeping at The Independent Bankers Bank (TIB). The maximum amount of outstanding agreements at any month end during 2012 and 2011 totaled $17,810,000 and $20,388,000, respectively, and the monthly average of such agreements totaled $14,479,000 and $17,401,000 for 2012 and 2011, respectively. The average rates on the agreements during 2012 and 2011 were 0.19% and 0.21%, respectively. The average rate at March 31 2012 was 0.14% and 0.25% at March 31, 2011. The agreements at March 31, 2012 mature periodically within 12 months.

The Company has a repurchase agreement with one customer with an outstanding balance of $5.0 million at March 31, 2012. The repurchase agreement matures daily.

Note 9:   Lines of Credit

The Company maintains a $2,500,000 revolving line of credit note payable, of which no balance was outstanding at March 31, 2012 and $1,800,000 outstanding as of March 31, 2011, with an unaffiliated financial institution. The note payable bears interest tied to the prime commercial rate with a floor of 3.50%, the rate at March 31, 2012, matures on September 30, 2012, and is secured by the stock of the national bank owned by the Company.

The Company maintains a $6,700,000 revolving line of credit, of which none was outstanding at March 31, 2012 and 2011, with an unaffiliated financial institution. The line bears interest at the federal funds rate of the financial institution (1.25% at March 31, 2012), has an open-end maturity and is unsecured if used for less than thirty (30) consecutive business days.

The Company 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 March 31, 2012 and 2011, no amounts were outstanding. The primary credit borrowing rate at March 31, 2012 was 0.75%, has an overnight term, and has no restrictions on use of the funds borrowed.

56

First Robinson Financial Corporation

Notes to Consolidated Financial Statements

March 31, 2012 and 2011

Note 10:  Federal Home Loan Bank Advances and Deposits

The Company maintains a $17,588,000 line of credit with the Federal Home Loan Bank of Chicago (“FHLB”). No FHLB advances were outstanding as of the years ended March 31, 2012 and 2011. The line of credit is decreased by $943,000 in credit enhancements related to the Mortgage Partnership Program with the FHLB resulting in an available balance of $16,645,000. The line of credit is secured by one-to four-family and multi-family mortgage loans totaling $33,553,000 at March 31, 2012. The maximum amount available to borrow is 20 times the amount of FHLB Capital Stock of $879,400.

At March 31, 2012 and 2011, the amount of interest bearing deposits invested with the Federal Home Loan Bank of Chicago was $1,891,000 and $1,082,000, respectively.

Note 11:  Income Taxes

The Company files income tax returns in the U.S. federal, state of Illinois and state of Indiana jurisdictions. With a few exceptions, the Company is no longer subject to U.S. federal and Illinois income tax examinations by tax authorities for years before 2008. During the years ended March 31, 2012 and 2011, the Company did not recognize expense for interest or penalties, related to uncertain tax positions.

The provision for income taxes includes these components:

	2012		2011
	(In thousands)
Taxes currently payable	$	1,001	$	895
Deferred income taxes		110		(194	)
Income tax expense	$	1,111	$	701

A reconciliation of income tax expense at the statutory rate to the Company’s actual income tax expense is shown below:

	2012			2011
	(In thousands)
Computed at the statutory rate (34%)	$	1,039		$	713
Increase (decrease) resulting from
Tax exempt interest		(46	)		(54	)
State income taxes		189			18
Life insurance cash value		(18	)		(18	)
Other		(53	)		42
Actual tax expense	$	1,111		$	701

57

First Robinson Financial Corporation

Notes to Consolidated Financial Statements

March 31, 2012 and 2011

The tax effects of temporary differences related to deferred taxes shown on the consolidated balance sheets were:

	2012			2011
	(In thousands)
Deferred tax assets
Allowance for loan losses	$	579		$	445
Deferred compensation		208			200
Capital loss		76			76
Paid time off		108			80
Other		16			26
		987			827
Deferred tax liabilities
Unrealized gains on available-for-sale securities		(509	)		(546	)
Depreciation		(532	)		(378	)
Mortgage servicing rights		(256	)		(190	)
Prepaid assets		(53	)		(41	)
Federal Home Loan Bank Stock dividend		(108	)		(108	)
		(1,458	)		(1,263	)
Net deferred tax liability before valuation allowance		(471	)		(436	)
Valuation Allowance
Beginning balance		(76	)		(76	)
Change during the period		—			—
Ending balance		(76	)		(76	)
Net deferred tax liability	$	(547	)	$	(512	)

Note 12:  Comprehensive Income (Loss)

Other comprehensive income (loss) components and related taxes were as follows:

	2012			2011
	(In thousands)
Unrealized gains (losses) on available-for-sale securities	$	(143	)	$	(188	)
Less tax expense (benefit)		(37	)		(73	)
Other comprehensive income (losses) related to available-for-sale securities	$	(106	)	$	(115	)

58

First Robinson Financial Corporation

Notes to Consolidated Financial Statements

March 31, 2012 and 2011

The components of accumulated other comprehensive income, included in stockholders’ equity, are as follows:

	2012			2011
	(In thousands)
Net unrealized gain on securities available for sale	$	1,264		$	1,407
Tax effect		(509	)		(546	)
Net-of-tax amount	$	755		$	861

Note 13:  Preferred Stock

On August 23, 2011, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with the Secretary of the Treasury (the “Treasury”), pursuant to which the Company issued and sold to the Treasury 4,900 shares of its Senior Non-Cumulative Perpetual Preferred Stock, Series A (the “Series A Preferred Stock”), having a liquidation preference of $1,000 per share (the “Liquidation Amount”), for proceeds of $4,900,000. The Purchase Agreement was entered into, and the Series A Preferred Stock was issued, pursuant to the Treasury’s SBLF program, a $30 billion fund established under the Small Business Jobs Act of 2010 that encourages lending to small businesses by providing capital to qualified community banks with assets of less than $10 billion.

Non-cumulative dividends were payable quarterly on the Series A Preferred Stock, beginning October 1, 2011. The dividend rate is calculated as a percentage of the aggregate Liquidation Amount of the outstanding Series A Preferred Stock and is based on changes in the level of “Qualified Small Business Lending” of “QSBL” (as defined in the Purchase Agreement) by the Bank. Based upon the increase in the Bank’s level of QSBL over the baseline level calculated under the terms of the Purchase Agreement, the dividend rate for the initial period, which is from the date of issuance through March 31, 2012, has been set at 1%. For the 4^th through 10^th calendar quarters, the annual dividend rate may be adjusted to between 1% and 5%, to reflect the amount of change in the Bank’s level of QSBL. For the 11^th calendar quarter through 4.5 years after issuance, the dividend rate will be fixed at between 1% and 7% based upon the increase in QSBL as compared to the baseline. After 4.5 years from issuance, the dividend rate will increase to 9%. The Series A preferred shares are non-voting, other than class voting rights on matters that could adversely affect the shares. The preferred shares are redeemable at any time, with Treasury, Federal Reserve and Office of the Comptroller of the Commission approval. Apart from the Series A shares, no other shares of the Company’s preferred shares are currently outstanding.

59

First Robinson Financial Corporation

Notes to Consolidated Financial Statements

March 31, 2012 and 2011

Note 14:  Regulatory Matters

The Bank is subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s consolidated financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of the Bank’s assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. The Bank’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors. Furthermore, the Bank’s regulators could require adjustments to regulatory capital not reflected in the financial statements.

Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the table below) of total and Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined) and Tier 1 capital (as defined) to average assets (as defined). Management believes, as of March 31, 2012 and 2011, that the Bank met all capital adequacy requirements to which it is subject.

As of March 31, 2012, the most recent notification from the Comptroller of the Currency categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, the Bank must maintain minimum total risk-based, Tier I risk-based, and Tier I leverage ratios as set forth in the table. There are no conditions or events since that notification that management believes have changed the Bank’s category.

60

First Robinson Financial Corporation

Notes to Consolidated Financial Statements

March 31, 2012 and 2011

The Bank’s actual capital amounts and ratios are also presented in the table. A total of $69,000 and $59,000 were deducted from capital for interest-rate risk in 2012 and 2011, respectively.

	Actual					For Capital Adequacy Purposes					To Be Well Capitalized Under Prompt Corrective Action Provisions
	Amount		Ratio			Amount		Ratio			Amount		Ratio
	(Amounts In Thousands)
As of March 31, 2012
Total risk-based capital
(to risk-weighted assets)	$	19,405		16.5	%	$	9,428		8.0	%	$	11,786		10.0	%
Tier I capital
(to risk-weighted assets)	$	17,968		15.3	%	$	4,714		4.0	%	$	7,071		6.0	%
Tier I capital
(to average assets)	$	17,968		8.5	%	$	8,451		4.0	%	$	10,564		5.0	%
As of March 31, 2011
Total risk-based capital
(to risk-weighted assets)	$	14,632		12.4	%	$	9,443		8.0	%	$	11,804		10.0	%
Tier I capital
(to risk-weighted assets)	$	13,471		11.4	%	$	4,722		4.0	%	$	7,802		6.0	%
Tier I capital
(to average assets)	$	13,471		6.6	%	$	8,111		4.0	%	$	10,139		5.0	%

The Bank is subject to certain restrictions on the amount of dividends that it may declare without prior regulatory approval.

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 eligible account holders in an amount equal to the net worth of the Bank. The special liquidation account will be maintained for the benefit of eligible account holders and the supplemental eligible account holders who continue to maintain their accounts in the Bank after June 27, 1997. The special liquidation account was $5,070,000 as of that date. In the unlikely event of a complete liquidation, each eligible and supplemental eligible accounts holder 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.

Note 15:  Related Party Transactions

At March 31, 2012 and 2011, the Company had loans outstanding to executive officers, directors, and significant stockholders and their affiliates (related parties). Changes in loans to executive officers, directors, and significant stockholders and their affiliates are as follows:

61

 First Robinson Financial Corporation

Notes to Consolidated Financial Statements

March 31, 2012 and 2011

	2012			2011
	(In thousands)
Balance, beginning of year	$	2,020		$	2,293
Additions		76			2,594
Repayments		(1,614	)		(2,867	)
Change in related parties		—			—
	$	482		$	2,020

Deposits from related parties held by the Company at March 31, 2012 and 2011 totaled approximately $355,000, and $789,000 respectively. Repurchase agreements from related parties held by the Company at March 31, 2012 and 2011 totaled approximately $616,000 and $1.3 million, respectively.

In management’s opinion, such loans and other extensions of credit and deposits were made in the ordinary course of business and were made on substantially the same terms (including interest rates and collateral) as those prevailing at the time for comparable transactions with other persons. Further, in management’s opinion, these loans did not involve more than normal risk of collectability or present other unfavorable features.

Note 16:  Employee Benefits

The Company has a defined contribution pension plan covering all employees with six months of employment and minimum age of 21. Employees may contribute up to the maximum amount allowed by law annually with the Bank matching 2% of the employee’s contribution on the first 4% of the employee’s compensation. Employer contributions charged to expense for 2012 and 2011 were $37,000. The Company accrued for a profit sharing contribution that was paid at the end of fiscal year 2011 based on the employee’s compensation for the calendar year ended December 31, 2011. As of March 31, 2012 and 2011, the employer contribution charged to expense was $132,000.

Also, the Company has a deferred compensation agreement with active Directors. The agreement provides annual contributions of $2,000 per year per director to be paid on January 1^st of each year. The contributions are used to purchase shares of the Company’s stock which are held in trust for the Directors until retirement. The total number of shares in the plan as of March 31, 2012 and 2011 is 16,671 and 15,876 respectively. The difference between current year and prior year shares outstanding relate to awards of 795 shares. The cost of the shares held by the Trust is deducted from additional paid in capital on the consolidated balance sheets. The charge to expense for the annual contribution was $12,000 and $12,000 for 2012 and 2011, respectively. Contribution expense was adjusted to reflect the fair value of the shares to the current market price for the years ended March 31, 2012 and 2011. Contribution expense was decreased by $25,000 for the year ended March 31, 2012 and increased by $55,000 for the year ended March 31, 2011.

62

First Robinson Financial Corporation

Notes to Consolidated Financial Statements

March 31, 2012 and 2011

As part of the conversion in 1997, the Company established an ESOP covering substantially all employees of the Company. The ESOP acquired 68,770 shares of Company common stock at $10 per share in the conversion with funds provided by a loan from the Company. Accordingly, $688,000 of common stock acquired by the ESOP was shown as a reduction of stockholders’ equity. Shares were released to participants proportionately as the loan was repaid. The loan was repaid in full and all shares were allocated to participants as of December 31, 2006. Dividends on allocated shares are recorded as dividends and charged to retained earnings.

	2012		2011		2010
Remaining allocated ESOP shares after participant withdrawals		63,012		62,803		63,084

63

First Robinson Financial Corporation

Notes to Consolidated Financial Statements

March 31, 2012 and 2011

Note 17:  Earnings Per Common Share

Earnings per common share were computed as follows:

	Year Ended March 31, 2012
	Income		Weighted- Average Shares		Per Share Amount
	(In thousands)
Basic earnings per common share:
Income available to common stockholders	$	1,916		410,695	$	4.67
Effect of dilutive securities
Incentive shares		—		16,292
Diluted earnings per common share:
Income available to common stockholders and assumed conversions	$	1,916		426,987	$	4.49

	Year Ended March 31, 2011
	Income		Weighted- Average Shares		Per Share Amount
	(In thousands)
Basic earnings per common share:
Income available to common stockholders	$	1,395		412,456	$	3.38
Effect of dilutive securities
Incentive shares		—		16,243
Diluted earnings per common share:
Income available to common stockholders and assumed conversions	$	1,395		428,699	$	3.25

64

First Robinson Financial Corporation

Notes to Consolidated Financial Statements

March 31, 2012 and 2011

Note 18:  Disclosures about Fair Value of Financial Instruments

ASC Topic 820, Fair Value Measurements, describes 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. Topic 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:

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 and inputs used for assets measured at fair value on a recurring basis and recognized in the accompanying consolidated balance sheets, as well as the general classification of such assets pursuant to the valuation hierarchy. There have been no significant changes in the valuation techniques during the period ended March 31, 2012.

Available-for-Sale Securities

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 or discounted cash flows. For these investments, the inputs used by the pricing service to determine fair value may include one or a combination of observable inputs such as benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers and reference data market research publications and are classified within Level 2 of the valuation hierarchy. Level 2 securities include obligations of U.S. government sponsored enterprises, mortgage-backed securities (government-sponsored enterprises-residential and commercial) and obligations of states and political subdivisions. 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.

65

First Robinson Financial Corporation

Notes to Consolidated Financial Statements

March 31, 2012 and 2011

The following table presents the Company’s assets that are measured at fair value on a recurring basis and the level within the hierarchy in which the fair value measurements fall as of March 31, 2012 and 2011 (in thousands): 

	Carrying value at March 31, 2012
Description	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
U.S. government sponsored enterprises (GSE)	$	14,877	$	—	$	14,877	$	—
Mortgage-backed securities, GSE, residential		32,631		—		32,631		—
Mortgage-backed securities, GSE, commercial		996		—		996		—
State and political subdivisions		1,596		—		1,596		—
Total available-for-sale securities	$	50,100	$	—	$	50,100	$	—

	Carrying value at March 31, 2011
Description	Fair Value		Quoted  Prices in Active  Markets for  Identical  Assets (Level 1)		Significant  Other  Observable  Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
U.S. government sponsored enterprises (GSE)	$	12,345	$	—	$	12,345	$	—
Mortgage-backed securities, GSE, residential		33,995		—		33,995		—
Mortgage-backed securities, GSE, commercial		1,455		—		1,455		—
State and political subdivisions		3,882		—		3,882		—
Total available-for-sale securities	$	51,677	$	—	$	51,677	$	—

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

66

First Robinson Financial Corporation

Notes to Consolidated Financial Statements

March 31, 2012 and 2011

Impaired Loans (Collateral Dependent)

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. Allowable methods for determining the impairment include estimating fair value using the fair value of the collateral for collateral dependent loans.

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.

Impaired loans that are collateral dependent are classified within Level 3 of the fair value hierarchy. Fair value adjustments on impaired loans were $(456,000) at March 31, 2012 and $(146,000) at March 31, 2011.

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. Fair value adjustments on mortgage servicing rights were $(71,000) at March 31, 2012 and $0 at March 31, 2011.

Foreclosed Assets Held for Sale

Fair value of foreclosed assets held for sale is based on market prices determined by appraisals less discounts for costs to sell. Foreclosed assets held for sale are classified within Level 2 of the valuation hierarchy. Fair value adjustments on foreclosed assets held for sale were $(6,000) at March 31, 2012 and $0 at March 31, 2011.

The following table presents the fair value measurement of assets measured at fair value on a nonrecurring basis and the level within the fair value hierarchy in which the fair value measurements fall at March 31, 2012 and 2011 (in thousands):

			Carrying value at March 31, 2012
			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 (collateral dependent)	$	668	$	—	$	—	$	668
Mortgage servicing rights		685		—		—		685
Foreclosed assets held for sale, net		86		—		—		86

67

First Robinson Financial Corporation

Notes to Consolidated Financial Statements

March 31, 2012 and 2011

			Carrying value at March 31, 2011
			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 (collateral dependent)	$	212	$	—	$	—	$	212
Mortgage servicing rights		591		—		—		591
Foreclosed assets held for sale, net		218		—		—		218

The following methods were used to estimate fair values of the Company’s other financial instruments and the level within the fair value hierarchy in which the fair value measurements fall at March 31, 2012. 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 due from banks, interest-bearing demand deposits, Federal Reserve and Federal Home Loan Bank stocks, accrued interest receivable and payable, and advances from borrowers for taxes and insurance. 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 short-term and other 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.

68

First Robinson Financial Corporation

Notes to Consolidated Financial Statements

March 31, 2012 and 2011

The following table presents estimated fair values of the Company’s other financial instruments at March 31, 2012 and 2011:

	March 31, 2012				March 31, 2011
	Carrying				Carrying
	Amount		Fair Value		Amount		Fair Value
	(In thousands)
Financial assets
Cash and due from banks	$	7,777	$	7,777	$	9,546	$	9,546
Interest-bearing demand deposits		20,551		20,551		17,813		17,813
Held-to-maturity securities		1,225		1,342		—		—
Loans held for sale		509		509		354		354
Loans, net of allowance for loan losses		125,752		128,315		120,164		121,796
Federal Reserve and Federal Home Loan Bank stock		1,189		1,189		1,056		1,056
Interest receivable		966		966		914		914
Financial liabilities
Deposits		181,288		176,171		176,352		164,566
Other borrowings		12,920		12,919		15,620		15,623
Short-term borrowing		—		—		1,800		1,800
Advances from borrowers for taxes and insurance		336		336		274		274
Interest payable		120		120		183		183
Unrecognized financial instruments (net of contract amount)
Commitments to originate loans		—		—		—		—
Letters of credit		—		—		—		—
Lines of credit		—		—		—		—

Note 19:   Significant Estimates and Concentrations

Accounting principles generally accepted in the United States of America require disclosure of certain significant estimates and current vulnerabilities due to certain concentrations. Estimates related to the allowance for loan losses are reflected in the note regarding loans. Current vulnerabilities due to certain concentrations of credit risk are described in Note 20. Disclosures due to current economic conditions are described below.

Current Economic Conditions

The current protracted economic decline continues to present financial institutions with circumstances and challenges which in some cases resulted in large and unanticipated declines in the fair values of investments and other assets, constraints on liquidity and capital and significant credit quality problems including severe volatility in the valuation of real estate and other collateral supporting loans. The consolidated financial statements have been prepared using values and information currently available to the Company.

69

First Robinson Financial Corporation

Notes to Consolidated Financial Statements

March 31, 2012 and 2011

Given the volatility of current economic conditions, the values of assets and liabilities recorded in the consolidated financial statements could change rapidly, resulting in material future adjustments in asset values, the allowance for loan losses, and capital that could negatively impact the Company’s ability to meet regulatory capital requirements and maintain sufficient liquidity. Furthermore, the Company’s regulators could require material adjustments to asset values or the allowance for loan losses for regulatory capital purposes that could affect the Company’s measurement of regulatory capital and compliance with the capital adequacy guidelines under the regulatory framework for prompt corrective action.

Note 20:    Financial Instruments with Off-Balance Sheet Risk

Standby Letters of Credit

In the normal course of business, the Company issues various financial standby, performance standby, and commercial letters of credit for its customers. As consideration for the letters of credit, the institution charges letter of credit fees based on the face amount of the letters and the creditworthiness of the counterparties. These letters of credit are stand-alone agreements and are unrelated to any obligation the depositor has to the Company.

Standby letters of credit are irrevocable conditional commitments issued by the Company to guarantee the performance of a customer to a third party. Financial standby letters of credit are primarily issued to support public and private borrowing arrangements, including commercial paper, bond financing, and similar transactions. Performance standby letters of credit are issued to guarantee performance of certain customers under non-financial contractual obligations. The credit risk involved in issuing standby letters of credit is essentially the same as that involved in extending loans to customers.

The Company had total outstanding standby letters of credit amounting to $528,000 and $381,000 at March 31, 2012 and 2011, respectively, with terms ranging from 12 to 18 months. At March 31, 2012 and 2011, the Bank’s deferred revenue under standby letters of credit agreements was nominal.

Lines of Creditand Commitments to Fund Loans

Lines of credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Lines of credit generally have fixed expiration dates. Since a portion of the line may expire without being drawn upon, the total unused lines do not necessarily represent future cash requirements. Each customer’s creditworthiness is evaluated on a case-by-case basis. The amount of collateral obtained, if deemed necessary, is based on management’s credit evaluation of the counterparty. Collateral held varies but may include accounts receivable; inventory; property, plant, and equipment; commercial real estate; and residential real estate. Management uses the same credit policies in granting lines of credit as it does for on-balance-sheet instruments.

At March 31, 2012, the Company had granted unused lines of credit to borrowers aggregating approximately $19,215,000 and $9,066,000 for commercial lines and consumer lines, respectively. At March 31, 2011, unused lines of credit to borrowers aggregated approximately $17,121,000 for commercial lines and $7,929,000 for consumer lines.

70

First Robinson Financial Corporation

Notes to Consolidated Financial Statements

March 31, 2012 and 2011

Loans committed to but not yet funded as of March 31, 2012 and 2011 amounted to $7,797,000 and $7,532,000, respectively. As of March 31, 2012 and 2011, those loans at fixed rates amounted to $6,499,000 and $5,884,000, respectively, with $1,668,000 at March 31, 2012 and $3,806,000 at March 31, 2011 scheduled to be sold in the secondary market. The range of fixed rates was from 3.00% to 7.00% as of March 31, 2012. Commitments to fund loans with floating rates, to be held for investment, amounted to $1,298,000, and $1,648,000, at March 31, 2012 and 2011, respectively. Floating rates ranged from 3.25% to 6.00% as of March 31, 2012.

Note 21:   Recent and Future Change in Accounting Principles

In April 2011, the FASB issued ASU 2011-03, Reconsideration of Effective Control for Repurchase Agreements, which updates ASC 860, Transfers and Servicing. The ASU removes from the assessment of effective control the criterion requiring the transferor to have the ability to repurchase or redeem the financial assets on substantially the agreed terms, even in the event of default by the transferee. Accordingly, upon the adoption of the ASU’s guidance, a transferor in a repurchase transaction is deemed to have effective control if the following three conditions in ASC 860-10-40-24 are met: 1) The financial assets to be repurchased or redeemed are the same or substantially the same as those transferred, 2) The agreement is to repurchase or redeem them before maturity, at a fixed or determinable price, and 3) The agreement is entered into contemporaneously with, or in contemplation of, the transfer. The guidance in the ASU is effective prospectively for transactions or modifications of existing transactions that occur on or after the first interim or annual period beginning on or after December 15, 2011. The adoption of ASU 2011-03 is not expected to have a significant impact on the Company’s financial position or results of operations.

In May 2011, the FASB issued ASU No. 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs. This update amends FASB ASC Topic 820, Fair Value Measurements, to bring U.S. GAAP for fair value measurements in line with International Accounting Standards. The Update clarifies existing guidance for items such as: the application of the highest and best use concept to non-financial assets and liabilities; the application of fair value measurement to financial instruments classified in a reporting entity’s stockholder’s equity; and disclosure requirements regarding quantitative information about unobservable inputs used in the fair value measurements of level 3 assets. The Update also creates an exception to Topic 820 for entities which carry financial instruments within a portfolio or group, under which the entity is now permitted to base the price used for fair valuation upon a price that would be received to sell the net asset position or transfer a net liability position in an orderly transaction. The Update also allows for the application of premiums and discounts in a fair value measurement if the financial instrument is categorized in level 2 or 3 of the fair value hierarchy. Lastly, the ASU contains new disclosure requirements regarding fair value amounts categorized as level 3 in the fair value hierarchy such as: disclosure of the valuation process used; effects of and relationships between unobservable inputs; usage of nonfinancial assets for purposes other than their highest and best use when that is the basis of the disclosed fair value; and categorization by level of items disclosed at fair value, but not measured at fair value for financial statement purposes. For public entities, this Update is effective for interim and annual periods beginning after December 15, 2011. The adoption of ASU 2011-04 is not expected to have an impact on the Company’s financial position or results of operations and will only affect disclosure in the Notes to Financial Statements.

71

First Robinson Financial Corporation

Notes to Consolidated Financial Statements

March 31, 2012 and 2011

In June 2011, the FASB issued ASU No. 2011-05, Comprehensive Income (Topic 220): Presentation of Comprehensive Income. The provisions of this update amend FASB ASC Topic 220, Comprehensive Income, to facilitate the continued alignment of U.S. GAAP with International Accounting Standards. The Update prohibits the presentation of the components of comprehensive income in the statement of stockholder’s equity. Reporting entities are allowed to present either: a statement of comprehensive income, which reports both net income and other comprehensive income; or separate statements of net income and other comprehensive income. Under previous GAAP, all 3 presentations were acceptable. Regardless of the presentation selected, the Reporting Entity is required to present all reclassifications between other comprehensive and net income on the face of the new statement or statements. The provisions of this Update are effective for fiscal years and interim periods beginning after December 31, 2011 for public entities. The adoption of ASU No. 2011-05 did not have a financial impact on the Company’s financial position or results of operations. The Company included the presentation in its Consolidated Statements of Income and Comprehensive Income as a result of its adoption of this ASU.

In December, 2011, the FASB issued ASU 2011-11, Disclosures about Offsetting Assets and Liabilities, in an effort to improve comparability between U.S. GAAP and IFRS financial statements with regard to the presentation of offsetting assets and liabilities on the statement of financial position arising from financial and derivative instruments, and repurchase agreements. The ASU establishes additional disclosures presenting the gross amounts of recognized assets and liabilities, offsetting amounts, and the net balance reflected in the statement of financial position. Descriptive information regarding the nature and rights of the offset must also be disclosed. The adoption of ASU 2011-11 will not have a significant impact on the Company’s financial position or results of operations.

In December, 2011, the FASB issued ASU 2011-12, Deferral of the Effective Date to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update 2011-05. In response to stakeholder concerns regarding the operational ramifications of the presentation of these reclassifications for current and previous years, the FASB has deferred the implementation date of this provision to allow time for further consideration. The requirement in ASU 2011-05, Presentation of Comprehensive Income, for the presentation of a combined statement of comprehensive income or separate, but consecutive, statements of net income and other comprehensive income is still effective for fiscal years and interim periods beginning after December 15, 2011 for public companies. The adoption of ASU 2011-12 is not expected to have an impact on the Company’s financial position or results of operations.

72

First Robinson Financial Corporation

Notes to Consolidated Financial Statements

March 31, 2012 and 2011

Note 22:   Condensed Financial Information (Parent Company Only)

Presented below is condensed financial information as to financial position, results of operations, and cash flows of the Company:

Condensed Balance Sheets

	March 31,
	2012		2011
	(In Thousands)
Assets
Cash and due from banks	$	57	$	143
Investment in common stock of subsidiaries		18,792		14,391
Other assets		738		643
Total assets	$	19,587	$	15,177
Liabilities
Short-term borrowings	$	—	$	1,800
Other liabilities		664		612
Total liabilities		664		2,412
Stockholders' Equity		18,923		12,765
Total liabilities and stockholders' equity	$	19,587	$	15,177

73

First Robinson Financial Corporation

Notes to Consolidated Financial Statements

March 31, 2012 and 2011

Condensed Results of Operations

	Year Ended March 31,
	2012			2011
	(In Thousands)
Income
Dividends from subsidiary	$	2,000		$	650
Other income		7			2
Total income		2,007			652
Expenses
Provision (benefit) for loan and lease losses		(7	)		—
Other expenses		266			352
Total expenses		259			352
Income Before Income Tax and Equity in Undistributed Income of Subsidiary		1,748			300
Income Tax Benefit		(101	)		(139	)
Income Before Equity in Undistributed Income of Subsidiary		1,849			439
Equity in Undistributed Income of Subsidiary		97			956
Net Income	$	1,946		$	1,395
Preferred Stock Dividends		30			—
Net income available to common stockholders	$	1,916		$	1,395

74

First Robinson Financial Corporation

Notes to Consolidated Financial Statements

March 31, 2012 and 2011

Condensed Statements of Cash Flows

	Year Ended March 31,
	2012			2011
	(In Thousands)
Operating Activities
Net income	$	1,946		$	1,395
Items not requiring (providing) cash
Deferred income taxes		(8	)		(34	)
Prepaid income taxes		(86	)		23
Equity in undistributed earnings of subsidiary		(97	)		(956	)
Compensation related to incentive plans		—			24
Changes in
Other assets		(1	)		—
Other liabilities		52			67
Net cash provided by operating activities		1,806			519
Investing Activity
Investment in subsidiary		(4,410	)		—
Net cash used in investing activity		(4,410	)		—
Financing Activities
Dividends paid on common shares		(384	)		(365	)
Dividends paid on preferred shares		(30	)		—
Purchase of incentive plan shares		(26	)		(26	)
Purchase of treasury shares		(14	)		(193	)
Proceeds from sale of preferred stock		4,772			—
Proceeds from other borrowings		400			600
Repayment of other borrowings		(2,200	)		(500	)
Net cash provided by (used in) financing activities		2,518			(484	)
Increase (Decrease) in Cash and Cash Equivalents		(86	)		35
Cash and Cash Equivalents at Beginning of Year		143			108
Cash and Cash Equivalents at End of Year	$	57		$	143

Note 23:   Subsequent Events

On May 10, 2012, the Company filed Form 15 with the Securities and Exchange Commission to announce its deregistration under the Securities Act of 1934. The deregistration will be effective 90 days or such shorter period as the Securities and Exchange Commission may determine, after the date of filing the Form 15.

75

FIRST ROBINSON FINANCIAL CORPORATION AND SUBSIDIARY

STOCKHOLDER INFORMATION

ANNUAL MEETING

The annual meeting of stockholders will be held at 9:00 a.m., central time, Thursday, July 26, 2012, at the Company’s office located at 501 East Main Street, Robinson, Illinois.

STOCK LISTING

The Company’s stock is traded on the over-the-counter market with quotations available through the OTCQB tier of the OTC Market under the symbol “FRFC.”

PRICE RANGE OF COMMON STOCK

The following table sets forth the high and low bid prices of the Company’s Common Stock for the periods indicated. The information set forth in the table below was provided by the OTCQB tier of the OTC Market. The information reflects interdealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions.

	Fiscal 2012						Fiscal 2011
	High		Low		Dividends		High		Low		Dividends
First Quarter	$	33.50	$	32.36	$	0.90	$	34.00	$	28.10	$	0.85
Second Quarter		33.50		32.30		-		35.00		30.75		-
Third Quarter		33.50		30.30		-		35.50		32.30		-
Fourth Quarter		33.25		32.31		-		33.05		32.35		-

The Company declared and paid a dividend of $0.90 per share in fiscal 2012. Dividend payment decisions are made with consideration of a variety of factors including earnings, financial condition, market considerations and regulatory restrictions. Restrictions on dividend payments are described in Note 14 of the Notes to Financial Statements included in this Annual Report.

As of June 15, 2012, the Company had approximately 439 registered stockholders of record and 426,744 outstanding shares of Common Stock.

76

SHAREHOLDERS AND GENERAL INQUIRIES	TRANSFER AGENT
Rick L. Catt
President and Chief Executive Officer
First Robinson Financial Corporation	Register and Transfer Company
501 East Main Street	10 Commerce Drive
Robinson, Illinois 62454	Cranford, New Jersey 07016
(618) 544-8621	(908) 272-8511

ANNUAL AND OTHER REPORTS

The Company is required to file an Annual Report on Form 10-K for its fiscal year ended March 31, 2012, with the Securities and Exchange Commission. Copies of the Annual Report on Form 10-K and the Company’s Quarterly Reports on Form 10-Q may be obtained without charge by contacting:

Jamie E. McReynolds

Chief Financial Officer

First Robinson Financial Corporation

501 East Main Street

Robinson, Illinois 62454

(618) 544-8621

77

FIRST ROBINSON FINANCIAL CORPORATION AND SUBSIDIARY CORPORATE INFORMATION

COMPANY AND BANK ADDRESS
501 East Main Street	Telephone:	(618) 544-8621
Robinson, Illinois 62454	Fax:	(618) 544-7506
www.frsb.net
DIRECTORS OF THE BOARD
SCOTT F. PULLIAM	ROBIN E. GUYER
Chairman of the Board of First Robinson	Chairman of the Board of First Robinson Savings
Financial Corporation	Bank, National Association
Public Accountant	President - Agricultural Services Company
Robinson, Illinois	Hutsonville, Illinois
STEVEN E. NEELEY	J. DOUGLAS GOODWINE
Owner - Industrial Equipment Company	Funeral Director
Robinson, Illinois	Robinson, Illinois
WILLIAM K. THOMAS	RICK L. CATT
Attorney	President and Chief Executive Officer
Robinson, Illinois	First Robinson Financial Corporation
	Robinson, Illinois
EXECUTIVE OFFICERS
RICK L. CATT	W.E. HOLT
President and Chief Executive Officer	Vice President and Senior Loan Officer
LESLIE TROTTER, III	WILLIAM D. SANDIFORD
Vice President	Vice President
MARK W. HILL	JAMIE E. McREYNOLDS
Vice President	Vice President, Chief Financial Officer and Secretary
STACIE D. OGLE
Vice President
INDEPENDENT AUDITORS	SPECIAL COUNSEL
BKD, LLP	Katten Muchin Rosenman LLP
225 N. Water Street	2900 K Street, NW
Suite 400	North Tower, Suite 200
Decatur, IL 62525-1580	Washington, D.C.  20007-5118

78

EX-21

EXHIBIT 21

SUBSIDIARIES OF REGISTRANT

Exhibit 21

SUBSIDIARIES OF THE REGISTRANT

Parent	Subsidiary or Organization	Percent of Ownership	State of Incorporation
First Robinson Financial Corporation	First Robinson Savings Bank, National Association	100%	Federal

EX-31.1

EXHIBIT 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

 Exhibit 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Rick L. Catt, certify that:

1. I have reviewed this annual report on Form 10-K of First Robinson Financial Corporation (the “registrant”);

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any changes in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: June 27, 2012

/s/ Rick L. Catt

Rick L. Catt,

President and Chief Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

Exhibit 31.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Jamie E. McReynolds, certify that:

1. I have reviewed this annual report on Form 10-K of First Robinson Financial Corporation (the “registrant”);

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any changes in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: June 27, 2012

/s/ Jamie E. McReynolds

Jamie E. McReynolds

Chief Financial Officer

EX-32

EXHIBIT 32

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

AND CHIEF FINANCIAL OFFICER

PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Exhibit 32

CERTIFICATION PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report on Form 10-K of First Robinson Financial Corporation (the “Company”) for the year ended March 31, 2012 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Rick L. Catt, President and Chief Executive Officer of the Company, and I, Jamie E. McReynolds, Chief Financial Officer of the Company, certify, pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) the Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: June 27 , 2012	/s/ Rick L. Catt
	Rick L. Catt, President
	and Chief Executive Officer
Date: June 27, 2012	/s/ Jamie E. McReynolds
	Jamie E. McReynolds, Chief Financial Officer

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Earnings Per Common Share

12 Months Ended

Mar. 31, 2012

Earnings Per Share [Abstract]

Earnings Per Share [Text Block]

Note 17:  Earnings Per Common Share

Earnings per common share were computed as follows:

	Year Ended March 31, 2012
	Income		Weighted- Average Shares		Per Share Amount
	(In thousands)
Basic earnings per common share:
Income available to common stockholders	$	1,916		410,695	$	4.67
Effect of dilutive securities
Incentive shares		—		16,292
Diluted earnings per common share:
Income available to common stockholders and assumed conversions	$	1,916		426,987	$	4.49

	Year Ended March 31, 2011
	Income		Weighted- Average Shares		Per Share Amount
	(In thousands)
Basic earnings per common share:
Income available to common stockholders	$	1,395		412,456	$	3.38
Effect of dilutive securities
Incentive shares		—		16,243
Diluted earnings per common share:
Income available to common stockholders and assumed conversions	$	1,395		428,699	$	3.25

XML

Nature of Operations and Summary of Significant Accounting Policies

12 Months Ended

Mar. 31, 2012

Accounting Policies [Abstract]

Nature Of Operations and Summary Of Significant Accounting Policies [Text Block]

Note 1: Nature of Operations and Summary of Significant Accounting Policies

Nature of Operations

First Robinson Financial Corporation (the “Company”) is a bank holding company whose principal activity is the ownership and management of its wholly-owned subsidiary, First Robinson Savings Bank, N.A. (the “Bank”). The Bank is primarily engaged in providing a full range of banking and financial services to individual and corporate customers in Crawford and surrounding counties in Illinois and Knox and surrounding counties in Indiana. The Bank is subject to competition from other financial institutions. The Company and the Bank are subject to the regulation of certain federal and state agencies and undergo periodic examinations by those regulatory authorities.

Principles of Consolidation and Financial Statement Presentation

The consolidated financial statements include the accounts of the Company and the Bank. All significant inter-company accounts and transactions have been eliminated in consolidation.

Use of Estimates

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 that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Material estimates that are particularly susceptible to significant change relate to the determination of the allowance for loan losses, the valuation of real estate acquired in connection with foreclosures or in satisfaction of loans, Federal Home Loan Bank stock impairment, valuation of deferred tax assets and loan servicing rights.

Cash Equivalents

The Company considers all liquid investments with original maturities of three months or less to be cash equivalents. At March 31, 2012 and 2011, cash equivalents consisted primarily of interest-earning and non-interest earning demand deposits in banks.

Effective July 21, 2010, the FDIC’s insurance limits were permanently increased to $250,000. At March 31, 2012, the Company’s interest-bearing cash accounts did not exceed federally insured limits.

Pursuant to legislation enacted in 2010, the FDIC will fully insure all noninterest-bearing transaction accounts beginning December 31, 2010 through December 31, 2012, at all FDIC insured institutions.

Securities

Certain debt securities that management has the positive intent and ability to hold to maturity are classified as “held-to-maturity” and recorded at amortized cost. Securities not classified as held-to-maturity are classified as “available-for-sale” securities and recorded at fair value with unrealized gains and losses excluded from earnings and reported in other comprehensive income. Purchase premiums and discounts are recognized in interest income using the interest method over the terms of the securities. Gains and losses on the sale of securities are recorded on the trade date and are determined using the specific identification method.

For debt securities with fair value below amortized costs when the Company does not intend to sell a debt security, and it is more-likely-than-not, the Company will not have to sell the security before recovery of its cost basis, it recognizes the credit component of an other-than-temporary impairment of a debt security in earnings and the remaining portion in other comprehensive income. For held-to-maturity debt securities, the amount of an other-than-temporary impairment recorded in other comprehensive income for the noncredit portion of a previous other-than-temporary impairment is amortized prospectively over the remaining life of the security on the basis of the timing of future estimated cash flows of the security. The Company did not recognize any other-than-temporary impairment during the fiscal years ended March 31, 2012 and 2011.

Loans Held for Sale

Mortgage loans originated and intended for sale on the secondary market are carried at the lower of cost or fair value in the aggregate. Net realized losses, if any, are recognized through a valuation allowance by charges to income. Gains and losses on loan sales are recorded in non-interest income, and direct loan origination costs and fees are recognized at origination of the loan and are recognized in non-interest income upon sale of the loan.

Loans

Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoffs are reported at their outstanding principal balances adjusted for charge-offs, the allowance for loan losses, and any unamortized deferred fees or costs on originated loans.

For loans amortized at cost, interest income is accrued based on the unpaid principal balance. Loan origination fees, net of certain direct origination costs, as well as premiums and discounts, are deferred and amortized as a level yield adjustment over the respective term of the loan.

The accrual of interest on mortgage and commercial loans is discontinued at the time the loan is 90 days past due unless the credit is well-secured and in process of collection. Past due status is passed on contractual terms of the loan. In all cases, loans are placed on nonaccrual or charged off at an earlier date if collection of principal or interest is considered doubtful.

All interest accrued but not collected for loans that are placed on nonaccrual or charged off are reversed against interest income. The interest on these loans is accounted for on the cash-basis or cost-recovery method, until qualifying for return to accrual. Loans are returned to accrual basis when all the principal and interest amounts contractually due are brought current and future payments are reasonable assured.

Allowance for Loan Losses

The allowance for loan losses is established as losses are estimated to have occurred through a provision for loan losses charged to income. Loan losses are charged against the allowance when management believes the uncollectability of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance.

The allowance for loan losses is evaluated on a regular basis by management and is based upon management’s periodic review of the collectability of the loans in light of historical experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral, and prevailing economic conditions. This evaluation is inherently subjective, as it requires estimates that are susceptible to significant revision as more information becomes available. Management’s evaluation is also subject to review and potential change, by bank regulatory authorities.

The allowance consists of allocated and general components. The allocated component relates to loans that are classified as impaired. For those loans that are classified as impaired, an allowance is established when the discounted cash flows (or collateral value or observable market price) of the impaired loan is lower than the carrying value of that loan. The general component covers nonclassified loans and is based on historical charge-off experience and expected loss given default derived from the Company’s internal risk rating process. Other adjustments may be made to the allowance for pools of loans after an assessment of internal and external influences on credit quality that are not fully reflected in the historical loss or risk rating data.

A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due, according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed. Impairment is measured on a loan-by-loan basis for commercial and construction loans by either the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s obtainable market price, or the fair value of the collateral if the loan is collateral dependent.

Groups of loans with similar risk characteristics, including individually evaluated loans not determined to be impaired, are collectively evaluated for impairment based on the group’s historical loss experience adjusted for changes in trends, conditions and other relevant factors that affect repayment of the loans. Accordingly, the Company does not separately identify individual consumer and residential loans for impairment measurements, unless such loans are the subject of a restructuring agreement due to financial difficulties of the borrower.

Premises and Equipment

Depreciable assets are stated at cost less accumulated depreciation. Depreciation is charged to expense using the straight-line method over the estimated useful lives of the assets. Estimated lives are generally 30 to 40 years for premises and 3 to 5 years for equipment.

Federal Reserve Bank Stock

Federal Reserve Bank stock is a required investment for institutions that are members of the Federal Reserve Bank systems. The required investment in the common stock is based on a predetermined formula, carried at cost and evaluated for impairment.

Federal Home Loan Bank Stock

Federal Home Loan Bank stock is stated at cost and is a required investment for institutions that are members of the Federal Home Loan Bank system. The required investment in the common stock is based on a predetermined formula, carried at cost and evaluated for impairment.

The Company owned approximately $879,000 of Federal Home Loan Bank of Chicago (“FHLB”) stock as of March 31, 2012 and 2011. During the third quarter of 2007, FHLB received a Cease and Desist Order from their regulator, the Federal Housing Finance Board. The Cease and Desist Order was terminated as of April 18, 2012. The order prohibited capital stock repurchases and redemptions and the payment of a dividend without regulatory approval. With regard to dividends, the FHLB can now declare quarterly dividends without the consent of the regulator subject to the dividend payment being at or below the average of three-month LIBOR for that quarter and the payment of the dividend will not result in the FHLB’s retain earnings falling below the level at the previous year-end. The FHLB did not pay a dividend during the fourth quarter of 2007 or the calendar years of 2008, 2009 and 2010; however, the FHLB declared and paid quarterly dividends at the annualized rate of 10 basis points in calendar year 2011 and the first quarter of calendar 2012. Management performed an analysis and determined the cost method investment in FHLB stock is ultimately recoverable and therefore not impaired for the years ended March 31, 2012 and 2011.

Foreclosed Assets Held for Sale

Assets acquired through, or in lieu of, loan foreclosure are held for sale and are initially recorded at the lower of the carrying value of the loan or fair value at the date of foreclosure, establishing a new cost basis. Subsequent to foreclosure, management periodically performs valuations and the assets are carried at the lower of carrying amount or fair value less cost to sell. Revenue and expenses from operations and changes in the valuation allowance are included in net income or expense from foreclosed assets.

Mortgage Servicing Rights

Mortgage servicing assets are recognized separately when rights are acquired through purchase or through sale of financial assets. Under the servicing assets and liabilities accounting guidance (ASC 860-50), servicing rights resulting from the sale or securitization of loans originated by the Company are initially measured at fair value at the date of transfer. The Company subsequently measures each class of servicing asset using the amortization method. Under the amortization method, servicing rights are amortized in proportion to and over the period of estimated net servicing income. The amortized assets are assessed for impairment or increased obligation based on fair value at each reporting date.

Fair value is based on market prices for comparable mortgage servicing contracts, when available, or alternatively, is based on a valuation model that calculates the present value of estimated future net servicing income. The valuation model incorporates assumptions that market participants would use in estimating future net servicing income, such as the cost to service, the discount rate, the custodial earnings rate, an inflation rate, ancillary income, prepayment speeds and default rates and losses. These variables change from quarter to quarter as market conditions and projected interest rates change, and may have an adverse impact on the value of the mortgage servicing right and may result in a reduction to noninterest income.

Each class of separately recognized servicing assets subsequently measured using the amortization method are evaluated and measured for impairment. Impairment is determined by stratifying rights into tranches based on predominant characteristics, such as interest rate, loan type and investor type. Impairment is recognized through a valuation allowance for an individual tranche, to the extent that fair value is less than the carrying amount of the servicing assets for that tranche. The valuation allowance is adjusted to reflect changes in measurement of impairment after the initial measurement of impairment. Changes in valuation allowances are reported with charges and other fees on loans on the income statement. Fair value in excess of the carrying amount of servicing assets for that stratum is not recognized.

Servicing fee income is recorded for fees earned for servicing loans. The fees are based on a contractual percentage of the outstanding principal or a fixed amount per loan and are recorded as income when earned. The amortization of mortgage servicing rights is netted against loan servicing fee income.

Incentive Plans

The Company has a Director’s Retirement Plan (DRP) deferred compensation plan where certain directors’ fees earned are deferred and placed in a “Rabbi Trust”. The DRP purchases stock of the Company with the funds. The deferred liability is equal to the shares owned multiplied by the market value at year-end. The deferred value of the shares purchased is netted from additional paid in capital. The change in share price is reflected as compensation expense subject to the transitional provisions for shares held by the Rabbi Trust at September 30, 1998.

Treasury Stock

Treasury stock is stated at cost. Cost is determined by the first-in, first-out method.

Transfer of Financial Assets

Transfers of financial assets are accounted for as sales, when control over the assets has been surrendered. Control over transferred assets is deemed to be surrendered when (1) the assets have been isolated from the Company – but presumptively beyond the reach of the transferor and its creditors, even in bankruptcy or other receivership, (2) the transferee obtains the right (free of convictions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets and (3) the Company does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity or the ability to unilaterally cause the holder to return specific assets.

Income Taxes

The Company accounts for income taxes in accordance with income tax accounting guidance (ASC 740, Income Taxes). The income tax accounting guidance results in two components of income tax expense: current and deferred. Current income tax expense reflects taxes to be paid or refunded for the current year by applying the provisions of the enacted tax law to the taxable income or excess of deductions over revenues. The Company determines deferred income taxes using the balance sheet method. Under this method, the net deferred tax asset or liability is based on the tax effects of the differences between the book and tax bases of assets and liabilities, and enacted changes in tax rates and laws are recognized in the period in which they occur. Deferred income tax expense results from changes in deferred tax asses and liabilities between periods. Deferred tax assets are reduced by a valuation allowance if, based on the weight of evidence available, it is more likely than not that some portion or all of a deferred tax asset will not be realized.

Uncertain tax positions are recognized if it is more likely than not, based on the technical merits, that the tax position will be realized or sustained upon examination. The term more likely than not means a likelihood of more than 50 percent; the terms examined and upon examination also include resolution of the related appeals or litigation processes, if any. A tax position that meets the more-likely-than-not recognition threshold is initially and subsequently measured as the largest amount of tax benefit that has a greater than 50 percent likelihood of being realized upon settlement with a taxing authority that has full knowledge of all relevant information. The determination of whether or not a tax position has met the more-likely-than-not recognition threshold considers the facts, circumstances and information available at the reporting date is subject to management’s judgment.

The Company files consolidated income tax returns with its subsidiary.

Earnings Per Common Share

Basic earnings per common share represent income available to common stockholders divided by the weighted-average number of common shares outstanding during each period. Diluted earnings per common share reflect additional potential common shares that would have been outstanding if dilutive potential common shares had been issued, as well as any adjustment to income that would result from the assumed issuance. Potential common shares that may be issued by the Company relate solely to outstanding incentive plan shares and are determined using the treasury stock method.

Treasury stock shares are not deemed outstanding for earnings per share calculations.

Comprehensive Income

Comprehensive income consists of net income and other comprehensive income, net of applicable income taxes. Other comprehensive income includes unrealized appreciation (depreciation) on available for sale securities.

Reclassifications

Certain reclassifications have been made to the 2011 consolidated financial statements to conform to the 2012 financial statement presentation. These reclassifications had no effect on net income.

XML

Recent and Future Change in Accounting Principle

12 Months Ended

Mar. 31, 2012

Accounting Changes and Error Corrections [Abstract]

New Accounting Pronouncements and Changes In Accounting Principles [Text Block]

Note 21:   Recent and Future Change in Accounting Principles

In April 2011, the FASB issued ASU 2011-03, Reconsideration of Effective Control for Repurchase Agreements, which updates ASC 860, Transfers and Servicing. The ASU removes from the assessment of effective control the criterion requiring the transferor to have the ability to repurchase or redeem the financial assets on substantially the agreed terms, even in the event of default by the transferee. Accordingly, upon the adoption of the ASU’s guidance, a transferor in a repurchase transaction is deemed to have effective control if the following three conditions in ASC 860-10-40-24 are met: 1) The financial assets to be repurchased or redeemed are the same or substantially the same as those transferred, 2) The agreement is to repurchase or redeem them before maturity, at a fixed or determinable price, and 3) The agreement is entered into contemporaneously with, or in contemplation of, the transfer. The guidance in the ASU is effective prospectively for transactions or modifications of existing transactions that occur on or after the first interim or annual period beginning on or after December 15, 2011. The adoption of ASU 2011-03 is not expected to have a significant impact on the Company’s financial position or results of operations.

In May 2011, the FASB issued ASU No. 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs. This update amends FASB ASC Topic 820, Fair Value Measurements, to bring U.S. GAAP for fair value measurements in line with International Accounting Standards. The Update clarifies existing guidance for items such as: the application of the highest and best use concept to non-financial assets and liabilities; the application of fair value measurement to financial instruments classified in a reporting entity’s stockholder’s equity; and disclosure requirements regarding quantitative information about unobservable inputs used in the fair value measurements of level 3 assets. The Update also creates an exception to Topic 820 for entities which carry financial instruments within a portfolio or group, under which the entity is now permitted to base the price used for fair valuation upon a price that would be received to sell the net asset position or transfer a net liability position in an orderly transaction. The Update also allows for the application of premiums and discounts in a fair value measurement if the financial instrument is categorized in level 2 or 3 of the fair value hierarchy. Lastly, the ASU contains new disclosure requirements regarding fair value amounts categorized as level 3 in the fair value hierarchy such as: disclosure of the valuation process used; effects of and relationships between unobservable inputs; usage of nonfinancial assets for purposes other than their highest and best use when that is the basis of the disclosed fair value; and categorization by level of items disclosed at fair value, but not measured at fair value for financial statement purposes. For public entities, this Update is effective for interim and annual periods beginning after December 15, 2011. The adoption of ASU 2011-04 is not expected to have an impact on the Company’s financial position or results of operations and will only affect disclosure in the Notes to Financial Statements.

In June 2011, the FASB issued ASU No. 2011-05, Comprehensive Income (Topic 220): Presentation of Comprehensive Income. The provisions of this update amend FASB ASC Topic 220, Comprehensive Income, to facilitate the continued alignment of U.S. GAAP with International Accounting Standards. The Update prohibits the presentation of the components of comprehensive income in the statement of stockholder’s equity. Reporting entities are allowed to present either: a statement of comprehensive income, which reports both net income and other comprehensive income; or separate statements of net income and other comprehensive income. Under previous GAAP, all 3 presentations were acceptable. Regardless of the presentation selected, the Reporting Entity is required to present all reclassifications between other comprehensive and net income on the face of the new statement or statements. The provisions of this Update are effective for fiscal years and interim periods beginning after December 31, 2011 for public entities. The adoption of ASU No. 2011-05 did not have a financial impact on the Company’s financial position or results of operations. The Company included the presentation in its Consolidated Statements of Income and Comprehensive Income as a result of its adoption of this ASU.

In December, 2011, the FASB issued ASU 2011-11, Disclosures about Offsetting Assets and Liabilities, in an effort to improve comparability between U.S. GAAP and IFRS financial statements with regard to the presentation of offsetting assets and liabilities on the statement of financial position arising from financial and derivative instruments, and repurchase agreements. The ASU establishes additional disclosures presenting the gross amounts of recognized assets and liabilities, offsetting amounts, and the net balance reflected in the statement of financial position. Descriptive information regarding the nature and rights of the offset must also be disclosed. The adoption of ASU 2011-11 will not have a significant impact on the Company’s financial position or results of operations.

In December, 2011, the FASB issued ASU 2011-12, Deferral of the Effective Date to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update 2011-05. In response to stakeholder concerns regarding the operational ramifications of the presentation of these reclassifications for current and previous years, the FASB has deferred the implementation date of this provision to allow time for further consideration. The requirement in ASU 2011-05, Presentation of Comprehensive Income, for the presentation of a combined statement of comprehensive income or separate, but consecutive, statements of net income and other comprehensive income is still effective for fiscal years and interim periods beginning after December 15, 2011 for public companies. The adoption of ASU 2011-12 is not expected to have an impact on the Company’s financial position or results of operations.

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Financial Instruments with Off-Balance Sheet Risk

12 Months Ended

Mar. 31, 2012

Investments, All Other Investments [Abstract]

Financial Instruments Disclosure [Text Block]

Note 20:    Financial Instruments with Off-Balance Sheet Risk

Standby Letters of Credit

In the normal course of business, the Company issues various financial standby, performance standby, and commercial letters of credit for its customers. As consideration for the letters of credit, the institution charges letter of credit fees based on the face amount of the letters and the creditworthiness of the counterparties. These letters of credit are stand-alone agreements and are unrelated to any obligation the depositor has to the Company.

Standby letters of credit are irrevocable conditional commitments issued by the Company to guarantee the performance of a customer to a third party. Financial standby letters of credit are primarily issued to support public and private borrowing arrangements, including commercial paper, bond financing, and similar transactions. Performance standby letters of credit are issued to guarantee performance of certain customers under non-financial contractual obligations. The credit risk involved in issuing standby letters of credit is essentially the same as that involved in extending loans to customers.

The Company had total outstanding standby letters of credit amounting to $528,000 and $381,000 at March 31, 2012 and 2011, respectively, with terms ranging from 12 to 18 months. At March 31, 2012 and 2011, the Bank’s deferred revenue under standby letters of credit agreements was nominal.

Lines of Creditand Commitments to Fund Loans

Lines of credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Lines of credit generally have fixed expiration dates. Since a portion of the line may expire without being drawn upon, the total unused lines do not necessarily represent future cash requirements. Each customer’s creditworthiness is evaluated on a case-by-case basis. The amount of collateral obtained, if deemed necessary, is based on management’s credit evaluation of the counterparty. Collateral held varies but may include accounts receivable; inventory; property, plant, and equipment; commercial real estate; and residential real estate. Management uses the same credit policies in granting lines of credit as it does for on-balance-sheet instruments.

At March 31, 2012, the Company had granted unused lines of credit to borrowers aggregating approximately $19,215,000 and $9,066,000 for commercial lines and consumer lines, respectively. At March 31, 2011, unused lines of credit to borrowers aggregated approximately $17,121,000 for commercial lines and $7,929,000 for consumer lines.

      Loans committed to but not yet funded as of March 31, 2012 and 2011 amounted to $7,797,000 and $7,532,000, respectively. As of March 31, 2012 and 2011, those loans at fixed rates amounted to $6,499,000 and $5,884,000, respectively, with $1,668,000 at March 31, 2012 and $3,806,000 at March 31, 2011 scheduled to be sold in the secondary market. The range of fixed rates was from 3.00% to 7.00% as of March 31, 2012. Commitments to fund loans with floating rates, to be held for investment, amounted to $1,298,000, and $1,648,000, at March 31, 2012 and 2011, respectively. Floating rates ranged from 3.25% to 6.00% as of March 31, 2012.

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Condensed Financial Information (Parent Company Only)

12 Months Ended

Mar. 31, 2012

Condensed Financial Information Of Parent Company Only Disclosure [Abstract]

Condensed Financial Information of Parent Company Only Disclosure [Text Block]

Note 22:   Condensed Financial Information (Parent Company Only)

Presented below is condensed financial information as to financial position, results of operations, and cash flows of the Company:

Condensed Balance Sheets

	March 31,
	2012		2011
	(In Thousands)
Assets
Cash and due from banks	$	57	$	143
Investment in common stock of subsidiaries		18,792		14,391
Other assets		738		643
Total assets	$	19,587	$	15,177
Liabilities
Short-term borrowings	$	—	$	1,800
Other liabilities		664		612
Total liabilities		664		2,412
Stockholders' Equity		18,923		12,765
Total liabilities and stockholders' equity	$	19,587	$	15,177

Condensed Results of Operations

	Year Ended March 31,
	2012			2011
	(In Thousands)
Income
Dividends from subsidiary	$	2,000		$	650
Other income		7			2
Total income		2,007			652
Expenses
Provision (benefit) for loan and lease losses		(7	)		—
Other expenses		266			352
Total expenses		259			352
Income Before Income Tax and Equity in Undistributed Income of Subsidiary		1,748			300
Income Tax Benefit		(101	)		(139	)
Income Before Equity in Undistributed Income of Subsidiary		1,849			439
Equity in Undistributed Income of Subsidiary		97			956
Net Income	$	1,946		$	1,395
Preferred Stock Dividends		30			—
Net income available to common stockholders	$	1,916		$	1,395

Condensed Statements of Cash Flows

	Year Ended March 31,
	2012			2011
	(In Thousands)
Operating Activities
Net income	$	1,946		$	1,395
Items not requiring (providing) cash
Deferred income taxes		(8	)		(34	)
Prepaid income taxes		(86	)		23
Equity in undistributed earnings of subsidiary		(97	)		(956	)
Compensation related to incentive plans		—			24
Changes in
Other assets		(1	)		—
Other liabilities		52			67
Net cash provided by operating activities		1,806			519
Investing Activity
Investment in subsidiary		(4,410	)		—
Net cash used in investing activity		(4,410	)		—
Financing Activities
Dividends paid on common shares		(384	)		(365	)
Dividends paid on preferred shares		(30	)		—
Purchase of incentive plan shares		(26	)		(26	)
Purchase of treasury shares		(14	)		(193	)
Proceeds from sale of preferred stock		4,772			—
Proceeds from other borrowings		400			600
Repayment of other borrowings		(2,200	)		(500	)
Net cash provided by (used in) financing activities		2,518			(484	)
Increase (Decrease) in Cash and Cash Equivalents		(86	)		35
Cash and Cash Equivalents at Beginning of Year		143			108
Cash and Cash Equivalents at End of Year	$	57		$	143

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Subsequent Events

12 Months Ended

Mar. 31, 2012

Subsequent Events [Abstract]

Subsequent Events [Text Block]

Note 23:   Subsequent Events

On May 10, 2012, the Company filed Form 15 with the Securities and Exchange Commission to announce its deregistration under the Securities Act of 1934. The deregistration will be effective 90 days or such shorter period as the Securities and Exchange Commission may determine, after the date of filing the Form 15.

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Consolidated Statements of Cash Flows (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Mar. 31, 2012	Mar. 31, 2011
Operating Activities
Net income	$ 1,946	$ 1,395
Items not requiring (providing) cash
Depreciation and amortization	369	311
Provision for loan losses	698	735
Amortization of premiums and discounts on securities	265	258
Amortization of loan-servicing rights	250	244
Recovery (impairment) of loan servicing rights	(71)	16
Compensation related to incentive plan	0	24
Deferred income taxes	110	(194)
Originations of mortgage loans held for sale	(41,747)	(39,746)
Proceeds from the sale of mortgage loans	42,385	40,160
Net gain on sale of loans	(793)	(680)
Net loss (gain) on sale of foreclosed property	12	(15)
Net gain on sale of equipment	0	(4)
Cash surrender value of life insurance	(52)	(52)
Changes in
Interest receivable	(52)	(8)
Other assets	(275)	(26)
Interest payable	(63)	(68)
Other liabilities	35	240
Prepaid income taxes	153	131
Net cash provided by operating activities	3,170	2,721
Investing Activities
Purchases of available-for-sale securities	(14,464)	(10,281)
Purchase of held-to-maturity securities	(1,380)	0
Proceeds from maturities of available-for-sale securities	7,560	3,710
Proceeds from maturities of held to maturity securities	155	0
Repayment of principal on mortgage-backed securities	8,073	9,847
Purchase of Federal Reserve Bank and Federal Home Loan Bank stocks	(133)	(48)
Net change in loans	(6,375)	(21,054)
Purchase of premises and equipment	(662)	(149)
Proceeds from sale of equipment	0	24
Proceeds from sale of foreclosed assets	209	67
Net cash used in investing activities	(7,017)	(17,884)
Financing Activities
Net increase in demand deposits, money market, NOW and savings accounts	13,478	28,988
Net decrease in time deposits	(8,542)	(1,948)
Proceeds from other borrowings	154,349	140,750
Repayment of other borrowings	(157,049)	(142,751)
Net change in short-term borrowings	(1,800)	100
Purchase of incentive plan shares	(26)	(26)
Purchase of treasury shares	(14)	(193)
Proceeds from sale of preferred stock, net	4,772	0
Dividends paid on common shares	(384)	(365)
Dividends paid on preferred shares	(30)	0
Net increase in advances from borrowers for taxes and insurance	62	78
Net cash provided by financing activities	4,816	24,633
Increase in Cash and Cash Equivalents	969	9,470
Cash and Cash Equivalents, Beginning of Year	27,359	17,889
Cash and Cash Equivalents, End of Year	28,328	27,359
Supplemental Cash Flows Information
Interest paid	1,629	2,485
Income taxes paid (net of refunds)	851	772
Real estate acquired in settlement of loans	89	218
Internally financed sales of real estate	$ 21	$ 0

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Consolidated Balance Sheets (USD $) In Thousands, unless otherwise specified	Mar. 31, 2012	Mar. 31, 2011
Assets
Cash and due from banks	$ 7,777	$ 9,546
Interest-bearing demand deposits	20,551	17,813
Cash and cash equivalents	28,328	27,359
Held-to-maturity securities (fair values of $1,342 and $0 at March 31, 2012 and 2011)	1,225	0
Available-for-sale securities	50,100	51,677
Loans, held for sale	509	354
Loans, net of allowance for loan losses of $1,383 and $1,145 at March 31, 2012 and 2011	125,752	120,164
Premises and equipment, net of accumulated depreciation of $4,044 and $3,684 at March 31, 2012 and 2011	4,150	3,848
Federal Reserve and Federal Home Loan Bank stock	1,189	1,056
Foreclosed assets held for sale, net	86	218
Interest receivable	966	914
Prepaid income taxes	96	249
Cash surrender value of life insurance	1,608	1,556
Other assets	1,485	1,436
Total assets	215,494	208,831
Liabilities and Stockholders' Equity
Demand	31,831	23,490
Savings, NOW and money market	102,258	97,121
Time deposits	47,199	55,741
Total deposits	181,288	176,352
Other borrowings	12,920	15,620
Short-term borrowings	0	1,800
Advances from borrowers for taxes and insurance	336	274
Deferred income taxes	547	512
Interest payable	120	183
Other liabilities	1,360	1,325
Total liabilities	196,571	196,066
Commitments and Contingencies
Stockholders' Equity
Preferred stock, $.01 par value,$1,000 liquidation value; authorized 500,000 shares, 4,900 shares and 0 shares issued and outstanding at March 31, 2012 and 2011	4,900	0
Common stock, $.01 par value; authorized 2,000,000 shares; issued - 859,625 shares; outstanding - 2012 - 426,744 shares, 2011 - 427,149 shares	9	9
Additional paid-in capital	8,627	8,781
Retained earnings	12,744	11,212
Accumulated other comprehensive income	755	861
Treasury stock, at cost Common; 2012 - 432,881 shares, 2011 - 432,476 shares	(8,112)	(8,098)
Total stockholders' equity	18,923	12,765
Total liabilities and stockholders' equity	$ 215,494	$ 208,831

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Consolidated Statements of Stockholders' Equity (USD $) In Thousands, except Share data	Preferred Stock [Member]	Common Stock [Member]	Additional Paid-in Capital [Member]	Retained Earnings [Member]	Accumulated Other Comprehensive Income [Member]	Treasury Stock [Member]	Total
Balance at Mar. 31, 2010	$ 0	$ 9	$ 8,783	$ 10,182	$ 976	$ (7,905)	$ 12,045
Balance (in shares) at Mar. 31, 2010	0	433,198
Net income				1,395			1,395
Change in unrealized appreciation on available-for-sale securities					(115)		(115)
Treasury shares purchased						(193)	(193)
Treasury shares purchased (in shares)		(6,049)
Dividends on common stock				(365)			(365)
Dividends on preferred stock							0
Purchase of incentive shares			(26)				(26)
Incentive shares issued			24				24
Balance at Mar. 31, 2011	0	9	8,781	11,212	861	(8,098)	12,765
Balance (in shares) at Mar. 31, 2011	0	427,149
Net income				1,946			1,946
Change in unrealized appreciation on available-for-sale securities					(106)		(106)
Series A preferred shares issued	4,900		(128)				4,772
Series A preferred shares issued (in shares)	4,900
Treasury shares purchased						(14)	(14)
Treasury shares purchased (in shares)		(405)
Dividends on common stock				(384)			(384)
Dividends on preferred stock				(30)			(30)
Purchase of incentive shares			(26)				(26)
Balance at Mar. 31, 2012	$ 4,900	$ 9	$ 8,627	$ 12,744	$ 755	$ (8,112)	$ 18,923
Balance (in shares) at Mar. 31, 2012	4,900	426,744

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Regulatory Matters

12 Months Ended

Mar. 31, 2012

Banking and Thrift [Abstract]

Regulatory Capital Requirements under Banking Regulations [Text Block]

Note 14:  Regulatory Matters

The Bank is subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s consolidated financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of the Bank’s assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. The Bank’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors. Furthermore, the Bank’s regulators could require adjustments to regulatory capital not reflected in the financial statements.

Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the table below) of total and Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined) and Tier 1 capital (as defined) to average assets (as defined). Management believes, as of March 31, 2012 and 2011, that the Bank met all capital adequacy requirements to which it is subject.

As of March 31, 2012, the most recent notification from the Comptroller of the Currency categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, the Bank must maintain minimum total risk-based, Tier I risk-based, and Tier I leverage ratios as set forth in the table. There are no conditions or events since that notification that management believes have changed the Bank’s category.

The Bank’s actual capital amounts and ratios are also presented in the table. A total of $69,000 and $59,000 were deducted from capital for interest-rate risk in 2012 and 2011, respectively.

	Actual					For Capital Adequacy Purposes					To Be Well Capitalized Under Prompt Corrective Action Provisions
	Amount		Ratio			Amount		Ratio			Amount		Ratio
	(Amounts In Thousands)
As of March 31, 2012
Total risk-based capital
(to risk-weighted assets)	$	19,405		16.5	%	$	9,428		8.0	%	$	11,786		10.0	%
Tier I capital
(to risk-weighted assets)	$	17,968		15.3	%	$	4,714		4.0	%	$	7,071		6.0	%
Tier I capital
(to average assets)	$	17,968		8.5	%	$	8,451		4.0	%	$	10,564		5.0	%
As of March 31, 2011
Total risk-based capital
(to risk-weighted assets)	$	14,632		12.4	%	$	9,443		8.0	%	$	11,804		10.0	%
Tier I capital
(to risk-weighted assets)	$	13,471		11.4	%	$	4,722		4.0	%	$	7,802		6.0	%
Tier I capital
(to average assets)	$	13,471		6.6	%	$	8,111		4.0	%	$	10,139		5.0	%

The Bank is subject to certain restrictions on the amount of dividends that it may declare without prior regulatory approval.

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 eligible account holders in an amount equal to the net worth of the Bank. The special liquidation account will be maintained for the benefit of eligible account holders and the supplemental eligible account holders who continue to maintain their accounts in the Bank after June 27, 1997. The special liquidation account was $5,070,000 as of that date. In the unlikely event of a complete liquidation, each eligible and supplemental eligible accounts holder 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.

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Employee Benefits

12 Months Ended

Mar. 31, 2012

Compensation and Retirement Disclosure [Abstract]

Compensation and Employee Benefit Plans [Text Block]

Note 16:  Employee Benefits

The Company has a defined contribution pension plan covering all employees with six months of employment and minimum age of 21. Employees may contribute up to the maximum amount allowed by law annually with the Bank matching 2% of the employee’s contribution on the first 4% of the employee’s compensation. Employer contributions charged to expense for 2012 and 2011 were $37,000. The Company accrued for a profit sharing contribution that was paid at the end of fiscal year 2011 based on the employee’s compensation for the calendar year ended December 31, 2011. As of March 31, 2012 and 2011, the employer contribution charged to expense was $132,000.

Also, the Company has a deferred compensation agreement with active Directors. The agreement provides annual contributions of $2,000 per year per director to be paid on January 1^st of each year. The contributions are used to purchase shares of the Company’s stock which are held in trust for the Directors until retirement. The total number of shares in the plan as of March 31, 2012 and 2011 is 16,671 and 15,876 respectively. The difference between current year and prior year shares outstanding relate to awards of 795 shares. The cost of the shares held by the Trust is deducted from additional paid in capital on the consolidated balance sheets. The charge to expense for the annual contribution was $12,000 and $12,000 for 2012 and 2011, respectively. Contribution expense was adjusted to reflect the fair value of the shares to the current market price for the years ended March 31, 2012 and 2011. Contribution expense was decreased by $25,000 for the year ended March 31, 2012 and increased by $55,000 for the year ended March 31, 2011.

As part of the conversion in 1997, the Company established an ESOP covering substantially all employees of the Company. The ESOP acquired 68,770 shares of Company common stock at $10 per share in the conversion with funds provided by a loan from the Company. Accordingly, $688,000 of common stock acquired by the ESOP was shown as a reduction of stockholders’ equity. Shares were released to participants proportionately as the loan was repaid. The loan was repaid in full and all shares were allocated to participants as of December 31, 2006. Dividends on allocated shares are recorded as dividends and charged to retained earnings.

	2012		2011		2010
Remaining allocated ESOP shares after participant withdrawals		63,012		62,803		63,084

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Consolidated Statements of Stockholders' Equity [Parenthetical] (USD $) In Thousands, except Per Share data, unless otherwise specified	12 Months Ended
	Mar. 31, 2012	Mar. 31, 2011
Tax on unrealized (depreciation) appreciation on available-for-sale securities (in dollars)	$ (37)	$ (73)
Common Dividends Paid Per Share (in dollars per share)	$ 0.90	$ 0.85
Dividends on preferred stock per share (in dollars per share)	$ 6.12	$ 0

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Consolidated Balance Sheets [Parenthetical] (USD $)	Mar. 31, 2012	Mar. 31, 2011
Held-to maturity securities fair values (in dollars)	$ 1,342,000	$ 0
Allowance for loan losses (in dollars)	1,383,000	1,145,000
Accumulated depreciation (in dollars)	4,044,000	3,684,000
Preferred stock, par value (in dollars per share)	$ 0.01	$ 0.01
Preferred stock, liquidation preference value	$ 1,000	$ 1,000
Preferred stock, shares authorized	500,000	500,000
Preferred stock, shares issued	4,900	0
Preferred stock, shares outstanding	4,900	0
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized	2,000,000	2,000,000
Common stock, shares issued	859,625	859,625
Common stock, shares outstanding	426,744	427,149
Treasury stock, shares	432,881	432,476

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Lines Of Credit

12 Months Ended

Mar. 31, 2012

Lines Of Credit Disclosure [Abstract]

Lines Of Credit Disclosure [Text Block]

Note 9:   Lines of Credit

The Company maintains a $2,500,000 revolving line of credit note payable, of which no balance was outstanding at March 31, 2012 and $1,800,000 outstanding as of March 31, 2011, with an unaffiliated financial institution. The note payable bears interest tied to the prime commercial rate with a floor of 3.50%, the rate at March 31, 2012, matures on September 30, 2012, and is secured by the stock of the national bank owned by the Company.

The Company maintains a $6,700,000 revolving line of credit, of which none was outstanding at March 31, 2012 and 2011, with an unaffiliated financial institution. The line bears interest at the federal funds rate of the financial institution (1.25% at March 31, 2012), has an open-end maturity and is unsecured if used for less than thirty (30) consecutive business days.

The Company 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 March 31, 2012 and 2011, no amounts were outstanding. The primary credit borrowing rate at March 31, 2012 was 0.75%, has an overnight term, and has no restrictions on use of the funds borrowed.

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Document And Entity Information (USD $) In Millions, except Share data, unless otherwise specified	12 Months Ended
	Mar. 31, 2012	Jun. 08, 2012	Sep. 30, 2011
Entity Registrant Name	FIRST ROBINSON FINANCIAL CORP
Entity Central Index Key	0001035991
Current Fiscal Year End Date	--03-31
Entity Filer Category	Smaller Reporting Company
Trading Symbol	frfc
Entity Common Stock, Shares Outstanding		426,744
Document Type	10-K
Amendment Flag	false
Document Period End Date	Mar. 31, 2012
Document Fiscal Period Focus	FY
Document Fiscal Year Focus	2012
Entity Well-Known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Public Float			$ 9.2

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Federal Home Loan Bank Advances and Deposits

12 Months Ended

Mar. 31, 2012

Banking and Thrift [Abstract]

Federal Home Loan Bank Advances, Disclosure [Text Block]

Note 10:     Federal Home Loan Bank Advances and Deposits

The Company maintains a $17,588,000 line of credit with the Federal Home Loan Bank of Chicago (“FHLB”). No FHLB advances were outstanding as of the years ended March 31, 2012 and 2011. The line of credit is decreased by $943,000 in credit enhancements related to the Mortgage Partnership Program with the FHLB resulting in an available balance of $16,645,000. The line of credit is secured by one-to four-family and multi-family mortgage loans totaling $33,553,000 at March 31, 2012. The maximum amount available to borrow is 20 times the amount of FHLB Capital Stock of $879,400.

At March 31, 2012 and 2011, the amount of interest bearing deposits invested with the Federal Home Loan Bank of Chicago was $1,891,000 and $1,082,000, respectively.

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Consolidated Statements of Income and Comprehensive Income (USD $) In Thousands, except Per Share data, unless otherwise specified	12 Months Ended
	Mar. 31, 2012	Mar. 31, 2011
Interest and Dividend Income
Loans	$ 6,878	$ 6,547
Securities
Taxable	1,337	1,607
Tax-exempt	116	115
Other interest income	44	30
Dividends on Federal Reserve Bank and Federal Home Loan Bank stocks	15	10
Total interest and dividend income	8,390	8,309
Interest Expense
Deposits	1,484	2,312
Other borrowings	82	105
Total interest expense	1,566	2,417
Net Interest Income	6,824	5,892
Provision for Loan Losses	698	735
Net Interest Income After Provision for Loan Losses	6,126	5,157
Non-Interest Income
Charges and other fees on loans	346	360
Charges and fees on deposit accounts	977	943
Net gain on sale of loans	793	680
Net gain on sale of equipment	0	4
Net gain (loss) on sale of foreclosed property	(12)	15
Other	587	567
Total non-interest income	2,691	2,569
Non-Interest Expense
Compensation and employee benefits	3,123	3,002
Occupancy and equipment	754	717
Data processing and telecommunications	488	430
Audit, legal and other professional services	247	265
Advertising	285	258
Postage	73	69
FDIC Insurance	110	236
Foreclosed property expense	18	14
Other	662	639
Total non-interest expense	5,760	5,630
Income Before Income Taxes	3,057	2,096
Provision for Income Taxes	1,111	701
Net Income	1,946	1,395
Preferred Stock Dividends	30	0
Net Income Available to Common Stockholders	1,916	1,395
Basic Earnings Per Common Share (in dollars per share)	$ 4.67	$ 3.38
Diluted Earnings Per Common Share (in dollars per share)	$ 4.49	$ 3.25
Common Dividends Paid Per Share (in dollars per share)	$ 0.90	$ 0.85
Comprehensive Income:
Net income available to common stockholders	1,916	1,395
Other comprehensive income, net of tax:
Change in unrealized appreciation on securities available for sale, net of tax of $(37) and $(73) for the years ended March 31, 2012 and 2011, respectively	(106)	(115)
Total Comprehensive Income	$ 1,810	$ 1,280

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Loans and Allowance for Loan Losses

12 Months Ended

Mar. 31, 2012

Loans and Allowance For Loan Losses [Abstract]

Loans and Allowance For Loan Losses [Text Block]

Note 4:     Loans and Allowance for Loan Losses

Categories of loans, including loans held for sale, at March 31 include:

	2012		2011
	(In thousands)
Mortgage loans on real estate:
Residential:
1-4 Family	$	46,095	$	41,954
Second mortgages		1,326		1,542
Construction		5,009		5,362
Equity lines of credit		3,973		3,761
Commercial		36,421		33,898
Total mortgage loans on real estate		92,824		86,517
Commercial loans		17,470		19,132
Consumer/other loans		16,594		15,852
States and municipal government loans		1,543		764
Total Loans		128,431		122,265
Less
Net deferred loan fees, premiums and discounts		21		12
Undisbursed portion of loans		766		590
Allowance for loan losses		1,383		1,145
Net loans	$	126,261	$	120,518

The Company is a community-oriented financial institution that seeks to serve the financial needs of the residents and businesses in its market area. The Company considers Crawford County and surrounding counties in Illinois and Knox County and surrounding counties in Indiana as its market area. The principal business of the Company has historically consisted of attracting retail deposits from the general public and primarily investing those funds in one- to four-family residential real estate loans, commercial, multi-family and agricultural real estate loans, consumer loans, and commercial business and agricultural finance loans. For the most part, loans are collateralized by assets, primarily real estate, of the borrowers and guaranteed by individuals. Repayment of the loans is expected to come from cash flows of the borrowers or from proceeds from the sale of selected assets of the borrowers.

Loan originations are developed from continuing business with (i) depositors and borrowers, (ii) real estate broker referrals, (iii) auto dealer referrals, and (iv) walk-in customers. All of the Company’s lending is subject to its written underwriting standards and loan origination procedures. Upon receipt of a loan application, it is first reviewed by a loan officer in the loan department who checks applications for accuracy and completeness. The Company’s underwriting department then gathers the required information to assess the borrower’s ability to repay the loan, the adequacy of the proposed collateral, the employment stability and the credit-worthiness of the borrower. The financial resources of the borrower and the borrower’s credit history, as well as the collateral securing the loan, are considered an integral part of each risk evaluation prior to approval. A credit report is obtained to verify specific information relating to the applicant’s employment and credit standing. Income is verified using W-2 information, tax returns or pay-stubs of the potential borrower. In the case of a real estate loan, an appraisal of the real estate intended to secure the proposed loan is undertaken by an independent appraiser approved by the Company. The board of directors has established individual lending authorities for each loan officer by loan type. Loans over an individual officer’s lending limits must be approved by a loan officer with a higher lending limit, with the highest being that of the president and senior loan officer who have a combined lending authority up to $500,000. Loans with a principal balance over this limit must be approved by the directors’ loan committee, which meets weekly and consists of the chairman of the board, all outside directors, the president, the senior loan officer and loan officers. The senior loan officer and loan officers do not vote on the loans presented. The board of directors ratifies all loans that are originated. Once the loan is approved, the applicant is informed and a closing date is scheduled. Loan commitments are typically funded within 30 days.

The Company requires evidence of marketable title and lien position or appropriate title insurance on all loans secured by real property. The Company also requires fire and extended coverage casualty insurance in amounts at least equal to the lesser of the principal amount of the loan or the value of improvements on the property, depending on the type of loan. As required by federal regulations, the Company also requires flood insurance to protect the property securing its interest if such property is located in a designated flood area.

Management reserves the right to change the amount or type of lending in which it engages to adjust to market or other factors.

Residential Real Estate Lending. Residential mortgages include first liens on one- to- four-family properties, second mortgages, home equity lines of credit and construction loans to individuals for the construction of one- to- four-family residences. Residential loan originations are generated by the Company’s marketing efforts, its present customers, walk-in customers, and referrals from real estate brokers. Historically, the Company has focused its lending efforts primarily on the origination of loans secured by one- to four-family residential mortgages in its market area. The Company offers both adjustable and fixed rate mortgage loans. Substantially all of the Company’s one- to four-family residential mortgage originations are secured by properties located in its market area.

The Company offers adjustable-rate mortgage loans at rates and on terms determined in accordance with market and competitive factors. The Company currently originates adjustable-rate mortgage loans with a term of up to 30 years. The Company offers six-month and one-year adjustable-rate mortgage loans, and residential mortgage loans that are fixed for three years or five years, then adjustable annually after that with a stated interest rate margin generally over the one-year Treasury Bill Index. Increases or decreases in the interest rate of the Company’s adjustable-rate loans is generally limited to 200 basis points at any adjustment date and 600 basis points over the life of the loan. As a consequence of using caps, the interest rates on these loans may not be as rate sensitive as the Company’s liabilities. The Company qualifies borrowers for adjustable-rate loans based on the initial interest rate of the loan and by reviewing the highest possible payment in the first seven years of the loan. As a result, the risk of default on these loans may increase as interest rates increase.

The Company offers fixed-rate mortgage loans with a term of up to 30 years. The majority of the fixed rate loans currently originated by the Company are underwritten and documented pursuant to the guidelines of the Federal Home Loan Bank of Chicago’s (the “FHLB”) Mortgage Partnership Finance (“MPF”) program.

The Company will generally lend up to 80% of the lesser of the appraised value or purchase price of the security property on owner occupied one- to four-family loans. Residential loans do not include prepayment penalties, are non-assumable (other than government-insured or guaranteed loans), and do not produce negative amortization. Real estate loans originated by the Company contain a “due on sale” clause allowing the Company to declare the unpaid principal balance due and payable upon the sale of the security property. The Company utilizes private mortgage insurance.

The Company also offers home equity loans that are secured by the underlying equity in the borrower’s residence, and accordingly, are reported with the one- to- four- family real estate loans. As a result, the Company generally requires loan-to-value ratios of 90% or less after taking into consideration the first mortgage held by the Company. These loans typically have fifteen-year terms with an interest rate adjustment monthly.

The Company offers construction loans to individuals for the construction of one- to- four-family residences. Following the construction period, these loans may become permanent loans. Construction lending is generally considered to involve a higher level of credit risk since the risk of loss on construction loans is dependent largely upon the accuracy of the initial estimate of the individual property’s value upon completion of the project and the estimated cost (including interest) of the project. If the cost estimate proves to be inaccurate, the Company may be required to advance funds beyond the amount originally committed to permit completion of the project. The Company conducts periodic inspections of the construction project to help mitigate this risk.

Commercial Real Estate Lending. The Company also originates commercial, multi-family and agricultural real estate loans. The Company will generally lend up to 80% of the value of the collateral securing the loan with varying maturities up to 20 years with re-pricing periods ranging from daily to one year. In underwriting these loans, the Company currently analyzes the financial condition of the borrower, the borrower’s credit history, and the reliability and predictability of the cash flow generated by the business. The Company generally requires personal guaranties on corporate borrowers. Appraisals on properties securing commercial and agricultural real estate loans originated by the Company are primarily performed by independent appraisers. The Company also offers small business loans, which are generally guaranteed up to 90% by various governmental agencies.

Commercial, multi-family and agricultural real estate loans generally present a higher level of risk than loans secured by one- to four-family residences. This greater risk is due to several factors, including the concentration of principal in a limited number of loans and borrowers, the effect of general economic conditions on income and the increased difficulty of evaluating and monitoring these types of loans. Furthermore, the repayment of loans secured by commercial, multi-family and agricultural real estate is typically dependent upon the successful operation of the business. If the cash flow from the project is reduced, the borrower’s ability to repay the loan may be impaired.

Commercial Lending. The Company also originates commercial and agricultural business loans. Unlike residential mortgage loans, which generally are made on the basis of the borrower’s ability to make repayment from his or her employment and other income and which are secured by real property whose value tends to be more easily ascertainable, commercial business and agricultural finance loans typically are made on the basis of the borrower’s ability to make repayment from the cash flow of the borrower’s business. As a result, the availability of funds for the repayment of commercial business and agricultural finance loans may be substantially dependent on the success of the business itself (which, in turn, is likely to be dependent upon the general economic environment). The Company’s commercial business and agricultural finance loans are usually secured by business or personal assets. However, the collateral securing the loans may depreciate over time, may be difficult to appraise and may fluctuate in value based on the success of the business.

The Company’s commercial business and agricultural finance lending policy includes credit file documentation and analysis of the borrower’s character, capacity to repay the loan, the adequacy of the borrower’s capital and collateral as well as an evaluation of conditions affecting the borrower. Analysis of the borrower’s past, present and future cash flows is also an important aspect of the Company’s current credit analysis. Nonetheless, such loans are believed to carry higher credit risk than more traditional investments.

Consumer and Other Lending. The Company offers secured and unsecured consumer and other loans. Secured loans may be collateralized by a variety of asset types, including automobiles, mobile homes, equity securities, and deposits. The Company currently originates substantially all of its consumer and other loans in its primary market area. A significant component of the Company’s consumer loan portfolio consists of new and used automobile loans. These loans generally have terms that do not exceed five years. Generally, loans on vehicles are made in amounts up to 105% of the sales price or the value as quoted in BlackBook USA, whichever is least.

Consumer and other loan terms vary according to the type and value of collateral, length of contract and creditworthiness of the borrower. The underwriting standards employed by the Bank for consumer loans include an application, a determination of the applicant’s payment history on other debts and an assessment of ability to meet existing obligations and payments on the proposed loan. Although creditworthiness of the applicant is a primary consideration, the underwriting process also includes a comparison of the value of the security, if any, in relation to the proposed loan amount.

Consumer and other loans may entail greater credit risk than do residential mortgage loans, particularly in the case of consumer loans which are unsecured or are secured by rapidly depreciable assets, such as automobiles. Indirect auto landing presents additional underwriting and credit risks. Further, any repossessed collateral for a defaulted consumer loan may not provide an adequate source of repayment of the outstanding loan balance as a result of the greater likelihood of damage, loss or depreciation. In addition, consumer loan collections are dependent on the borrower’s continuing financial stability, and thus are more likely to be affected by adverse personal circumstances. Furthermore, the application of various federal and state laws, including bankruptcy and insolvency laws, may limit the amount which can be recovered on such loans.

State and Municipal Government Lending. The Bank originates both fixed and adjustable loans for state and municipal governments. Loans to state and municipal governments are generally at a lower rate than consumer or commercial loans due to the tax-free nature of municipal loans. For underwriting purposes, the Bank does not require financial documentation as long as the loan is to the general obligation of the local entity. However, proper documentation in the entity’s minutes, from a board meeting when a quorum was present, that indicate the approval to seek a loan and for the authorized individuals to sign for the loan, is required.

The following tables present the balance in the allowance for loan losses and the recorded investment in loans based on portfolio segment and impairment method as of March 31, 2012 and 2011:

	2012
	Residential Real Estate			Commercial Real Estate			Commercial		Consumer/ Other Loans		State and Municipal Government		Total
	(In thousands)
Allowance for loan losses:
Balance, beginning of year	$	581		$	365		$	168	$	31	$	—	$	1,145
Provision charged to expense		(169	)		(80	)		790		157		—		698
Losses charged off		30			87			297		91		—		505
Recoveries		—			—			—		45		—		45
Balance, end of period	$	382		$	198		$	661	$	142	$	—	$	1,383
Ending balance:  individually evaluated for impairment	$	47		$	—		$	160	$	10	$	—	$	217
Ending balance:  collectively evaluated for impairment	$	335		$	198		$	501	$	132	$	—	$	1,166
Loans:
Ending balance	$	56,403		$	36,421		$	17,470	$	16,594	$	1,543	$	128,431
Ending balance:  individually evaluated for impairment	$	681		$	—		$	632	$	35	$	—	$	1,348
Ending balance:  collectively evaluated for impairment	$	55,722		$	36,421		$	16,838	$	16,559	$	1,543	$	127,083

	2011
	Residential Real Estate		Commercial Real Estate			Commercial			Consumer/ Other Loans		State and Municipal Government		Total
	(In thousands)
Allowance for loan losses:
Balance, beginning of year	$	72	$	593		$	279		$	29	$	—	$	973
Provision charged to expense		842		(83	)		(42	)		18		—		735
Losses charged off		333		169			69			54		—		625
Recoveries		—		24			—			38		—		62
Balance, end of period	$	581	$	365		$	168		$	31	$	—	$	1,145
Ending balance:  individually evaluated for impairment	$	27	$	—		$	3		$	9	$	—	$	39
Ending balance:  collectively evaluated for impairment	$	554	$	365		$	165		$	22	$	—	$	1,106
Loans:
Ending balance	$	52,619	$	33,898		$	19,132		$	15,852	$	764	$	122,265
Ending balance:  individually evaluated for impairment	$	315	$	239		$	10		$	61	$	—	$	625
Ending balance:  collectively evaluated for impairment	$	52,304	$	33,659		$	19,122		$	15,791	$	764	$	121,640

Management’s opinion as to the ultimate collectability of loans is subject to estimates regarding future cash flows from operations and the value of property, real and personal, pledged as collateral. These estimates are affected by changing economic conditions and the economic prospects of borrowers.

There have been no changes to the Company’s accounting policies or methodology from the prior periods.

Credit Quality Indicators

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends among other factors. The Company analyzes loans individually by classifying the loans as to credit risk. This analysis is performed on all loans at origination. In addition, commercial lending relationships over $100,000 are reviewed annually by the credit analyst or senior loan officer in our loan department in order to verify risk ratings. The Company uses the following definitions for risk ratings:

Watch – Loans classified as watch have minor weaknesses or negative trends. The is a possibility that some loss could be sustained

Special Mention – Loans classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution’s credit position at some future date.

Substandard – Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

Doubtful – Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be Pass rated loans.

The following tables present the credit risk profile of the Company’s loan portfolio based on rating category and payment activity as of March 31, 2012 and 2011:

	2012
	Residential Real Estate		Commercial Real Estate		Commercial		Consumer/ Other Loans		State and Municipal Government		Total
	(In thousands)
Rating:
Pass	$	54,462	$	31,127	$	15,900	$	16,345	$	1,418	$	119,252
Watch		922		4,406		345		184		125		5,982
Special Mention		131		419		478		9		—		1,037
Substandard		360		469		100		10		—		939
Doubtful		528		—		647		46		—		1,221
Total	$	56,403	$	36,421	$	17,470	$	16,594	$	1,543	$	128,431

	2011
	Residential Real Estate		Commercial Real Estate		Commercial		Consumer/ Other Loans		State and Municipal Government		Total
	(In thousands)
Rating:
Pass	$	51,798	$	31,664	$	17,767	$	15,703	$	634	$	117,566
Watch		296		1,627		423		65		130		2,541
Special Mention		146		287		677		—		—		1,110
Substandard		272		81		259		27		—		639
Doubtful		107		239		6		57		—		409
Total	$	52,619	$	33.898	$	19,132	$	15,852	$	764	$	122,265

The following tables present the Company’s loan portfolio aging analysis as of March 31, 2012 and 2011:

	2012
	30-59 Days Past Due		60-89 Days Past Due		Greater Than 90 Days		Non- accrual		Total Loans Past Due and Non-accrual		Current		Total Loans Receivable		Total Loans > 90 Days & Accruing
	(In thousands)
Real Estate:
Residential:
1-4 Family	$	126	$	—	$	—	$	467	$	593	$	45,502	$	46,095	$	—
Construction		—		—		—		—		—		5,009		5,009		—
Second mortgages		—		—		—		—		—		1,326		1,326		—
Equity lines of credit		—		—		—		8		8		3,965		3,973		—
Commercial real estate		28		—		—		—		28		36,393		36,421		—
Commercial		—		—		—		632		632		16,838		17,470		—
Consumer/other loans		35		11		—		24		70		16,524		16,594		—
State and municipal government		8		—		—		—		8		1,535		1,543		—
Total	$	197	$	11	$	—	$	1,131	$	1,339	$	127,092	$	128,431	$	—

	2011
	30-59 Days Past Due		60-89 Days Past Due		Greater Than 90 Days		Non- accrual		Total Loans Past Due and Non-accrual		Current		Total Loans Receivable		Total Loans > 90 Days & Accruing
	(In thousands)
Real Estate:
Residential:
1-4 Family	$	121	$	—	$	—	$	52	$	173	$	41,781	$	41,954	$	—
Construction		—		—		—		—		—		5,362		5,362		—
Second mortgages		—		—		—		—		—		1,542		1,542		—
Equity lines of credit		—		—		—		—		—		3,761		3,761		—
Commercial real estate		—		—		—		239		239		33,659		33,898		—
Commercial		—		333		—		6		339		18,793		19,132		—
Consumer/other loans		23		—		—		40		63		15,789		15,852		—
State and municipal government		—		—		—		—		—		764		764		—
Total	$	144	$	333	$	—	$	337	$	814	$	121,451	$	122,265	$	—

A loan is considered impaired, in accordance with the impairment accounting guidance (ASC 310-10-35-16), when based on current information and events, it is probable the Company will be unable to collect all amounts due from the borrower in accordance with the contractual terms of the loan. Impaired loans include nonperforming commercial loans but also include loans modified in troubled debt restructurings where concessions have been granted to borrowers experiencing financial difficulties. These concessions could include a reduction in the interest rate on the loan, payment extensions, forgiveness of principal, forbearance or other actions intended to maximize collection.

Impairment is measured on a loan-by-loan basis by either the present value of the expected future cash flows, the loan’s observable market value, or, for collateral-dependent loans, the fair value of the collateral adjusted for market conditions and selling expenses. Significant restructured loans are considered impaired in determining the adequacy of the allowance for loan losses.

The Company actively seeks to reduce its investment in impaired loans. The primary tools to work through impaired loans are settlement with the borrowers or guarantors, foreclosure of the underlying collateral, or restructuring.

The Company will restructure loans when the borrower demonstrates the inability to comply with the terms of the loan, but can demonstrate the ability to meet acceptable restructured terms. Restructurings generally include one or more of the following restructuring options; reduction in the interest rate on the loan, payment extensions, forgiveness of principal, forbearance, or other actions intended to maximize collection. Restructured loans in compliance with modified terms are classified as impaired.

The following tables present impaired loans for the years ended March 31, 2012 and 2011:

	2012
	Recorded Balance		Unpaid Principal Balance		Specific Allowance		Average Investment in Impaired Loans		Interest Income Recognized
Loans without a specific valuation allowance
Residential	$	462	$	462	$	—	$	122	$	11
Commercial real estate		—		—		—		165		—
Consumer		1		1		—		8		—
Commercial		—		—		—		51		—
Loans with a specific valuation allowance
Residential		219		219		47		218		11
Commercial real estate		—		—		—		14		—
Consumer		34		34		10		45		4
Commercial		632		632		160		382		28
Total:
Residential	$	681	$	681	$	47	$	340	$	22
Commercial real estate	$	—	$	—	$	—	$	179	$	—
Consumer	$	35	$	35	$	10	$	53	$	4
Commercial	$	632	$	632	$	160	$	433	$	28

	2011
	Recorded Balance		Unpaid Principal Balance		Specific Allowance		Average Investment in Impaired Loans		Interest Income Recognized
Loans without a specific valuation allowance
Residential	$	97	$	97	$	—	$	67	$	6
Commercial real estate		239		391		—		48		6
Consumer		40		40		—		13		1
Commercial		4		4		—		1		1
Loans with a specific valuation allowance
Residential		218		218		27		294		13
Commercial real estate		—		—		—		97		—
Consumer		21		21		9		17		1
Commercial		6		6		3		38		—
Total:
Residential	$	315	$	315	$	27	$	361	$	19
Commercial real estate	$	239	$	391	$	—	$	145	$	6
Consumer	$	61	$	61	$	9	$	30	$	2
Commercial	$	10	$	10	$	3	$	39	$	1

Included in certain loan categories in the impaired loans are troubled debt restructurings (TDR’s), where economic concession have been granted to borrowers who have experienced financial difficulties, that were classified as impaired. These concessions typically result from our loss mitigation activities and could include reductions in interest rate, payment extensions, forgiveness of principal, forbearance or other actions. TDR’s are considered impaired at the time of restructuring and typically are returned to accrual status after considering the borrower’s sustained repayment performance for a reasonable period of at least six months.

When loans are modified into a TDR, the Company evaluates any possible impairment similar to other impaired loans based on the present value of expected cash flows, discounted at the contractual interest rate of the original loan agreement, or based upon the current fair value of the collateral, less selling costs for collateral dependent loans. If the Company determined that the value of the modified loan is less than the recorded investment in the loan (net or previous charge-offs, deferred loan fees or costs, and unamortized premium or discount), impairment is recognized through an allowance estimate or a charge-off to the allowance. In periods subsequent to modification, the Company evaluates all TDR’s, including those that have payment defaults, for possible impairment and recognizes impairment through the allowance.

During the quarter ended September 30, 2011, the Company adopted ASU 2011-02. The amendments in ASU 2011-02 require prospective application of the impairment measurement guidance in ASC 310-10-35 for the receivables newly identified as impaired. As a result of adopting ASU 2011-02, the Company reassessed all restructurings that occurred on or after April 1, 2011, the beginning of the fiscal year, for identification of TDR’s. The Company identified no loans as troubled debt restructurings for which the allowance for loan losses had previously been measured under a general allowance for credit losses methodology. Thereafter, there was no additional impact to the allowance for loan losses as a result of the adoption.

The following table presents the recorded balance, at original cost, of troubled debt restructurings, as of March 31, 2012 and 2011.

	2012		2011
	(In thousands)
Residential	$	220	$	210
Commercial real estate		—		239
Commercial		146		11
Consumer		5		6
Total	$	371	$	466

The following table presents the recorded balance, at original cost, of troubled debt restructurings, which were performing according to the terms of the restructuring, as of March 31, 2012 and 2011.

	2012		2011
	(In thousands)
Residential	$	197	$	210
Commercial		—		4
Consumer		—		6
Total	$	197	$	220

The following table presents loans modified as troubled debt restructuring during the year ended March 31, 2012.

	Year Ended March 31, 2012
	Number of Modifications		Recorded Investment
	(In thousands)
1-4 family		1	$	25
Commercial		1		144
Consumer		—		—
Total		2	$	169

During the fiscal year ended March 31, 2012, the Company modified one one-to four-family residential real estate loan with a recorded investment of $25,000, which was deemed to be a TDR. The modification was made to lower the contractual interest rate and extend the amortization schedule by one month to lower the monthly payment. In addition, the Company modified one commercial loan with a total recorded investment of $144,000. The commercial loan was rewritten to alternate guarantors and the amortization schedule of the loan was extended by 18 months in order to lower the monthly payment.

The following table presents the Company’s nonaccrual loans at March 31, 2012 and 2011. This table excludes purchased impaired loans and performing troubled debt restructurings.

	2012		2011
	(In thousands)
Residential:
1-4 Family	$	467	$	52
Equity Lines of Credit		8		—
Commercial real estate		—		239
Commercial		632		6
Consumer/other loans		24		40
Total	$	1,131	$	337

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Investment Securities

12 Months Ended

Mar. 31, 2012

Investments, Debt and Equity Securities [Abstract]

Investments in Debt and Marketable Equity Securities (and Certain Trading Assets) Disclosure [Text Block]

Note 3:     Investment Securities

The amortized cost and approximate fair values, together with gross unrealized gains and losses, of securities are as follows:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
			(In thousands)
Available-For-Sale Securities:
March 31, 2012
U.S. government sponsored enterprises (GSE)	$	14,836	$	91	$	50	$	14,877
Mortgage-backed securities, GSE, residential		31,431		1,200		—		32,631
Mortgage-backed securities, GSE, commercial		1,014		—		18		996
State and political subdivisions		1,555		41		—		1,596
	$	48,836	$	1,332	$	68	$	50,100
March 31, 2011
U.S. government sponsored enterprises (GSE)	$	12,082	$	263	$	—	$	12,345
Mortgage-backed securities, GSE, residential		32,868		1,127		—		33,995
Mortgage-backed securities, GSE, commercial		1,491		—		36		1,455
State and political subdivisions		3,829		54		1		3,882
	$	50,270	$	1,444	$	37	$	51,677

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
			(In thousands)
Held-to-Maturity Securities:
March 31, 2012
State and political subdivisions	$	1,225	$	117	$	—	$	1,342

The amortized cost and fair value of available-for-sale and held-to-maturity securities at March 31, 2012, 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.

	Available-for-sale				Held-to-maturity
	Amortized Cost		Fair  Value		Amortized cost		Maturity fair value
	(In thousands)
Within one year	$	6,402	$	6,446	$	205	$	206
One to five years		6,903		6,981		215		221
Five to ten years		3,086		3,046		515		577
Over ten years		—		—		290		338
		16,391		16,473		1,225		1,342
Mortgage-backed securities, GSE’s		32,445		33,627		—		—
Totals	$	48,836	$	50,100	$	1,225	$	1,342

The carrying value of securities pledged as collateral, to secure public deposits and for other purposes, was $16,796,000 at March 31, 2012, and $19,258,000 at March 31, 2011.

The book value of securities sold under agreements to repurchase amounted to $17,144,000 and $18,590,000 at March 31, 2012 and 2011, respectively.

During the fiscal years ended March 31, 2012, and 2011 the Company did not sell any available-for-sale securities.

Certain investments in debt securities are reported in the consolidated financial statements at an amount less than their historical cost. Total fair value of these investments at March 31, 2012 and 2011, was $7,597,000 and $1,681,000, respectively, which is approximately 14.8% and 3.3%, respectively, of the Company’s available-for-sale and held-to-maturity investment portfolio. These declines primarily resulted from recent changes in market interest rates.

Management believes the declines in fair value for these securities are temporary. The following table shows our investments’ gross unrealized losses and fair value of the Company’s investments with unrealized losses that are not deemed to be other-than-temporarily impaired, (in thousands), aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at March 31, 2012 and 2011.

Description of Securities	Less than 12 Months				More than 12 Months				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
					(In Thousands)
As of March 31, 2012
Mortgage-backed securities, GSE, commercial	$	—	$	—	$	996	$	18	$	996	$	18
US government sponsored enterprises, GSE		6,601		50		—		—		6,601		50
Total temporarily impaired securities	$	6,601	$	50	$	996	$	18	$	7,597	$	68
As of March 31, 2011
Mortgage-backed securities, GSE, residential	$	1,455	$	36	$	—	$	—	$	1,455	$	36
State and political subdivisions		226		1		—		—		226		1
Total temporarily impaired securities	$	1,681	$	37	$	—	$	—	$	1,681	$	37

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Related Party Transactions

12 Months Ended

Mar. 31, 2012

Related Party Transactions [Abstract]

Related Party Transactions Disclosure [Text Block]

Note 15:  Related Party Transactions

At March 31, 2012 and 2011, the Company had loans outstanding to executive officers, directors, and significant stockholders and their affiliates (related parties). Changes in loans to executive officers, directors, and significant stockholders and their affiliates are as follows:

	2012			2011
	(In thousands)
Balance, beginning of year	$	2,020		$	2,293
Additions		76			2,594
Repayments		(1,614	)		(2,867	)
Change in related parties		—			—
	$	482		$	2,020

Deposits from related parties held by the Company at March 31, 2012 and 2011 totaled approximately $355,000, and $789,000 respectively. Repurchase agreements from related parties held by the Company at March 31, 2012 and 2011 totaled approximately $616,000 and $1.3 million, respectively.

In management’s opinion, such loans and other extensions of credit and deposits were made in the ordinary course of business and were made on substantially the same terms (including interest rates and collateral) as those prevailing at the time for comparable transactions with other persons. Further, in management’s opinion, these loans did not involve more than normal risk of collectability or present other unfavorable features.

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Income Taxes

12 Months Ended

Mar. 31, 2012

Income Tax Disclosure [Abstract]

Income Tax Disclosure [Text Block]

Note 11:  Income Taxes

The Company files income tax returns in the U.S. federal, state of Illinois and state of Indiana jurisdictions. With a few exceptions, the Company is no longer subject to U.S. federal and Illinois income tax examinations by tax authorities for years before 2008. During the years ended March 31, 2012 and 2011, the Company did not recognize expense for interest or penalties, related to uncertain tax positions.

The provision for income taxes includes these components:

	2012		2011
	(In thousands)
Taxes currently payable	$	1,001	$	895
Deferred income taxes		110		(194	)
Income tax expense	$	1,111	$	701

A reconciliation of income tax expense at the statutory rate to the Company’s actual income tax expense is shown below:

	2012			2011
	(In thousands)
Computed at the statutory rate (34%)	$	1,039		$	713
Increase (decrease) resulting from
Tax exempt interest		(46	)		(54	)
State income taxes		189			18
Life insurance cash value		(18	)		(18	)
Other		(53	)		42
Actual tax expense	$	1,111		$	701

The tax effects of temporary differences related to deferred taxes shown on the consolidated balance sheets were:

	2012			2011
	(In thousands)
Deferred tax assets
Allowance for loan losses	$	579		$	445
Deferred compensation		208			200
Capital loss		76			76
Paid time off		108			80
Other		16			26
		987			827
Deferred tax liabilities
Unrealized gains on available-for-sale securities		(509	)		(546	)
Depreciation		(532	)		(378	)
Mortgage servicing rights		(256	)		(190	)
Prepaid assets		(53	)		(41	)
Federal Home Loan Bank Stock dividend		(108	)		(108	)
		(1,458	)		(1,263	)
Net deferred tax liability before valuation allowance		(471	)		(436	)
Valuation Allowance
Beginning balance		(76	)		(76	)
Change during the period		—			—
Ending balance		(76	)		(76	)
Net deferred tax liability	$	(547	)	$	(512	)

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Interest-bearing Deposits

12 Months Ended

Mar. 31, 2012

Banking and Thrift [Abstract]

Deposit Liabilities Disclosures [Text Block]

Note 7:    Interest-bearing Deposits

Interest-bearing time deposits in denominations of $100,000 or more were $16,276,000 on March 31, 2012, and $19,299,000 on March 31, 2011.

The following table represents deposit interest expense by deposit type:

	March 31,
	2012		2011
	(In thousands)
Savings, NOW, Money Market, Interest bearing demand	$	553	$	918
Certificates of deposit		931		1,394
Total	$	1,484	$	2,312

At March 31, 2012, the scheduled maturities (in thousands) of time deposits are as follows:

2013	$	27,723
2014		12,692
2015		4,494
2016		736
2017		467
Thereafter		1,087
	$	47,199

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Premises and Equipment

12 Months Ended

Mar. 31, 2012

Property, Plant and Equipment [Abstract]

Property, Plant and Equipment Disclosure [Text Block]

Note 5:     Premises and Equipment

Major classifications of premises and equipment stated at cost, are as follows:

	2012		2011
	(In thousands)
Land	$	1,289	$	1,231
Buildings and improvements		3,710		3,478
Equipment		3,195		2,823
		8,194		7,532
Less accumulated depreciation		4,044		3,684
Net premises and equipment	$	4,150	$	3,848

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Loan Servicing

12 Months Ended

Mar. 31, 2012

Loan Servicing [Abstract]

Loan Servicing [Text Block]

Note 6:     Loan Servicing

Mortgage loans serviced for others are not included in the accompanying consolidated balance sheets. The unpaid principal balance of mortgage loans serviced for others was $98,699,000 and $77,388,000 at March 31, 2012 and 2011, respectively.

Custodial escrow balances maintained in connection with the foregoing loan servicing, and included in demand deposits, were approximately $1,656,000 and $823,000 at March 31, 2012 and 2011, respectively.

The aggregate fair value of capitalized mortgage servicing rights at March 31, 2012 and 2011 totaled $685,000 and $591,000, respectively, and are included in “other assets” on the consolidated balance sheets. Comparable market values and a valuation model that calculates the present value of future cash flows were used to estimate fair value. For purposes of measuring impairment, risk characteristics, including type of loan and origination date, were used to stratify the originated mortgage servicing rights.

	2012			2011
	(In thousands)
Mortgage servicing rights
Balance, beginning of year	$	621		$	468
Servicing rights capitalized		415			397
Amortization of servicing rights		(250	)		(244	)
Balance, end of year		786			621
Valuation allowances
Balance, beginning of year		30			46
Additions		71			—
Reduction due to payoff of loans		—			(16	)
Balance, end of year		101			30
Mortgage servicing assets, net	$	685		$	591

During the fiscal year ended March 31, 2012, a valuation allowance of $101,000 was necessary to adjust the aggregate cost basis of the mortgage servicing right asset to fair market value. The valuation allowance was adjusted during the year ended March 31, 2012 due to payments received on the related loans, as well as changes in the estimated market value on the mortgage servicing right asset.

For purposes of measuring impairment, risk characteristics (including product type, investor type, and interest rates) were used to stratify the originated mortgage servicing rights.

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Other Borrowings

12 Months Ended

Mar. 31, 2012

Other Borrowings [Abstract]

Other Borrowings Disclosure [Text Block]

Note 8:     Other Borrowings

Other borrowings included the following at March 31:

	2012		2011
	(In thousands)
Securities sold under repurchase agreements	$	12,920	$	15,620

Securities sold under agreements to repurchase consist of obligations of the Company to other parties. The obligations are secured by investments and such collateral is held by the Company in safekeeping at The Independent Bankers Bank (TIB). The maximum amount of outstanding agreements at any month end during 2012 and 2011 totaled $17,810,000 and $20,388,000, respectively, and the monthly average of such agreements totaled $14,479,000 and $17,401,000 for 2012 and 2011, respectively. The average rates on the agreements during 2012 and 2011 were 0.19% and 0.21%, respectively. The average rate at March 31 2012 was 0.14% and 0.25% at March 31, 2011. The agreements at March 31, 2012 mature periodically within 12 months.

The Company has a repurchase agreement with one customer with an outstanding balance of $5.0 million at March 31, 2012. The repurchase agreement matures daily.

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Preferred Stock

12 Months Ended

Mar. 31, 2012

Equity [Abstract]

Preferred Stock [Text Block]

Note 13:  Preferred Stock

On August 23, 2011, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with the Secretary of the Treasury (the “Treasury”), pursuant to which the Company issued and sold to the Treasury 4,900 shares of its Senior Non-Cumulative Perpetual Preferred Stock, Series A (the “Series A Preferred Stock”), having a liquidation preference of $1,000 per share (the “Liquidation Amount”), for proceeds of $4,900,000. The Purchase Agreement was entered into, and the Series A Preferred Stock was issued, pursuant to the Treasury’s SBLF program, a $30 billion fund established under the Small Business Jobs Act of 2010 that encourages lending to small businesses by providing capital to qualified community banks with assets of less than $10 billion.

Non-cumulative dividends were payable quarterly on the Series A Preferred Stock, beginning October 1, 2011. The dividend rate is calculated as a percentage of the aggregate Liquidation Amount of the outstanding Series A Preferred Stock and is based on changes in the level of “Qualified Small Business Lending” of “QSBL” (as defined in the Purchase Agreement) by the Bank. Based upon the increase in the Bank’s level of QSBL over the baseline level calculated under the terms of the Purchase Agreement, the dividend rate for the initial period, which is from the date of issuance through March 31, 2012, has been set at 1%. For the 4^th through 10^th calendar quarters, the annual dividend rate may be adjusted to between 1% and 5%, to reflect the amount of change in the Bank’s level of QSBL. For the 11^th calendar quarter through 4.5 years after issuance, the dividend rate will be fixed at between 1% and 7% based upon the increase in QSBL as compared to the baseline. After 4.5 years from issuance, the dividend rate will increase to 9%. The Series A preferred shares are non-voting, other than class voting rights on matters that could adversely affect the shares. The preferred shares are redeemable at any time, with Treasury, Federal Reserve and Office of the Comptroller of the Commission approval. Apart from the Series A shares, no other shares of the Company’s preferred shares are currently outstanding.

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Disclosures about Fair Value of Financial Instruments

12 Months Ended

Mar. 31, 2012

Fair Value Disclosures [Abstract]

Fair Value, Measurement Inputs, Disclosure [Table Text Block]

Note 18:  Disclosures about Fair Value of Financial Instruments

ASC Topic 820, Fair Value Measurements, describes 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. Topic 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:

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 and inputs used for assets measured at fair value on a recurring basis and recognized in the accompanying consolidated balance sheets, as well as the general classification of such assets pursuant to the valuation hierarchy. There have been no significant changes in the valuation techniques during the period ended March 31, 2012.

Available-for-Sale Securities

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 or discounted cash flows. For these investments, the inputs used by the pricing service to determine fair value may include one or a combination of observable inputs such as benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers and reference data market research publications and are classified within Level 2 of the valuation hierarchy. Level 2 securities include obligations of U.S. government sponsored enterprises, mortgage-backed securities (government-sponsored enterprises-residential and commercial) and obligations of states and political subdivisions. 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 hierarchy in which the fair value measurements fall as of March 31, 2012 and 2011 (in thousands): 

	Carrying value at March 31, 2012
Description	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
U.S. government sponsored enterprises (GSE)	$	14,877	$	—	$	14,877	$	—
Mortgage-backed securities, GSE, residential		32,631		—		32,631		—
Mortgage-backed securities, GSE, commercial		996		—		996		—
State and political subdivisions		1,596		—		1,596		—
Total available-for-sale securities	$	50,100	$	—	$	50,100	$	—

	Carrying value at March 31, 2011
Description	Fair Value		Quoted  Prices in Active  Markets for  Identical  Assets (Level 1)		Significant  Other  Observable  Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
U.S. government sponsored enterprises (GSE)	$	12,345	$	—	$	12,345	$	—
Mortgage-backed securities, GSE, residential		33,995		—		33,995		—
Mortgage-backed securities, GSE, commercial		1,455		—		1,455		—
State and political subdivisions		3,882		—		3,882		—
Total available-for-sale securities	$	51,677	$	—	$	51,677	$	—

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

Impaired Loans (Collateral Dependent)

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. Allowable methods for determining the impairment include estimating fair value using the fair value of the collateral for collateral dependent loans.

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.

Impaired loans that are collateral dependent are classified within Level 3 of the fair value hierarchy. Fair value adjustments on impaired loans were $(456,000) at March 31, 2012 and $(146,000) at March 31, 2011.

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. Fair value adjustments on mortgage servicing rights were $(71,000) at March 31, 2012 and $0 at March 31, 2011.

Foreclosed Assets Held for Sale

Fair value of foreclosed assets held for sale is based on market prices determined by appraisals less discounts for costs to sell. Foreclosed assets held for sale are classified within Level 2 of the valuation hierarchy. Fair value adjustments on foreclosed assets held for sale were $(6,000) at March 31, 2012 and $0 at March 31, 2011.

The following table presents the fair value measurement of assets measured at fair value on a nonrecurring basis and the level within the fair value hierarchy in which the fair value measurements fall at March 31, 2012 and 2011 (in thousands):

			Carrying value at March 31, 2012
			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 (collateral dependent)	$	668	$	—	$	—	$	668
Mortgage servicing rights		685		—		—		685
Foreclosed assets held for sale, net		86		—		—		86

			Carrying value at March 31, 2011
			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 (collateral dependent)	$	212	$	—	$	—	$	212
Mortgage servicing rights		591		—		—		591
Foreclosed assets held for sale, net		218		—		—		218

The following methods were used to estimate fair values of the Company’s other financial instruments and the level within the fair value hierarchy in which the fair value measurements fall at March 31, 2012. 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 due from banks, interest-bearing demand deposits, Federal Reserve and Federal Home Loan Bank stocks, accrued interest receivable and payable, and advances from borrowers for taxes and insurance. 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 short-term and other 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.

The following table presents estimated fair values of the Company’s other financial instruments at March 31, 2012 and 2011:

	March 31, 2012				March 31, 2011
	Carrying				Carrying
	Amount		Fair Value		Amount		Fair Value
	(In thousands)
Financial assets
Cash and due from banks	$	7,777	$	7,777	$	9,546	$	9,546
Interest-bearing demand deposits		20,551		20,551		17,813		17,813
Held-to-maturity securities		1,225		1,342		—		—
Loans held for sale		509		509		354		354
Loans, net of allowance for loan losses		125,752		128,315		120,164		121,796
Federal Reserve and Federal Home Loan Bank stock		1,189		1,189		1,056		1,056
Interest receivable		966		966		914		914
Financial liabilities
Deposits		181,288		176,171		176,352		164,566
Other borrowings		12,920		12,919		15,620		15,623
Short-term borrowing		—		—		1,800		1,800
Advances from borrowers for taxes and insurance		336		336		274		274
Interest payable		120		120		183		183
Unrecognized financial instruments (net of contract amount)
Commitments to originate loans		—		—		—		—
Letters of credit		—		—		—		—
Lines of credit		—		—		—		—

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Consolidated Statements of Income and Comprehensive Income [Parenthetical] (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Mar. 31, 2012	Mar. 31, 2011
Tax on unrealized (depreciation) appreciation on available-for-sale securities (in dollars)	$ (37)	$ (73)

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Restriction on Cash and Due From Banks

12 Months Ended

Mar. 31, 2012

Cash and Cash Equivalents [Abstract]

Restriction On Cash and Due From Banks [Text Block]

Note 2:     Restriction on Cash and Due From Banks

The Company is required to maintain reserve funds in cash and/or on deposit with the Federal Reserve Bank. The reserve required at March 31, 2012, was $3,010,000 and $2,804,000 for March 31, 2011.

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Significant Estimates and Concentrations

12 Months Ended

Mar. 31, 2012

Significant Estimates and Concentrations Disclosure [Abstract]

Significant Estimates and Concentrations Disclosure [Text Block]

Note 19:   Significant Estimates and Concentrations

Accounting principles generally accepted in the United States of America require disclosure of certain significant estimates and current vulnerabilities due to certain concentrations. Estimates related to the allowance for loan losses are reflected in the note regarding loans. Current vulnerabilities due to certain concentrations of credit risk are described in Note 20. Disclosures due to current economic conditions are described below.

Current Economic Conditions

The current protracted economic decline continues to present financial institutions with circumstances and challenges which in some cases resulted in large and unanticipated declines in the fair values of investments and other assets, constraints on liquidity and capital and significant credit quality problems including severe volatility in the valuation of real estate and other collateral supporting loans. The consolidated financial statements have been prepared using values and information currently available to the Company.

Given the volatility of current economic conditions, the values of assets and liabilities recorded in the consolidated financial statements could change rapidly, resulting in material future adjustments in asset values, the allowance for loan losses, and capital that could negatively impact the Company’s ability to meet regulatory capital requirements and maintain sufficient liquidity. Furthermore, the Company’s regulators could require material adjustments to asset values or the allowance for loan losses for regulatory capital purposes that could affect the Company’s measurement of regulatory capital and compliance with the capital adequacy guidelines under the regulatory framework for prompt corrective action.

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Comprehensive Income (Loss)

12 Months Ended

Mar. 31, 2012

Equity [Abstract]

Comprehensive Income (Loss) Note [Text Block]

Note 12:  Comprehensive Income (Loss)

Other comprehensive income (loss) components and related taxes were as follows:

	2012			2011
	(In thousands)
Unrealized gains (losses) on available-for-sale securities	$	(143	)	$	(188	)
Less tax expense (benefit)		(37	)		(73	)
Other comprehensive income (losses) related to available-for-sale securities	$	(106	)	$	(115	)

              The components of accumulated other comprehensive income, included in stockholders’ equity, are as follows:

	2012			2011
	(In thousands)
Net unrealized gain on securities available for sale	$	1,264		$	1,407
Tax effect		(509	)		(546	)
Net-of-tax amount	$	755		$	861