<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------------
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the quarterly period ended MARCH 31, 1999
--------------
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _____________ to _____________
Commission file number 0-22861
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FIRST INTERNATIONAL BANCORP, INC.
---------------------------------
(Exact Name of Registrant as Specified in Its Charter)
Delaware 06-1151731
- -------- ----------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
280 Trumbull Street, Hartford, CT 06103
- --------------------------------- -----
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code 860-727-0700
------------
Indicate by a check 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 such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date. The number of shares of common
stock, par value $.10 per share, outstanding on April 30, 1999 was 8,159,687.
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
FIRST INTERNATIONAL BANCORP, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
<TABLE>
<CAPTION>
ASSETS
------
March 31, December 31,
----------- ------------
1999 1998
----------- ------------
(unaudited)
<S> <C> <C>
Cash and cash equivalents.......................... $ 62,762 $ 58,335
Investment securities.............................. 36,545 35,619
Loans, net......................................... 102,525 108,958
Loans held-for-sale................................ 28,597 8,577
Premises and equipment, net........................ 3,544 3,815
Receivable from loans sold......................... 25,797 43,610
Prepaid expenses and other assets.................. 19,406 14,812
---------- ------------
Total assets................................... $279,176 $273,726
========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
March 31, December 31,
----------- ------------
1999 1998
----------- ------------
(unaudited)
Deposits........................................... $222,751 $219,874
Other liabilities.................................. 4,365 4,781
---------- -----------
Total liabilities.............................. 227,116 224,655
Stockholders' equity;
Common stock, 8,159,687 and 7,952,637
shares issued and outstanding..................... 816 795
Paid-in capital in excess of par value, net........ 34,557 32,561
Stockholder note receivable........................ (1,980) (941)
Accumulated other comprehensive income............. 460 428
Retained earnings.................................. 18,207 16,228
---------- -----------
Total stockholders' equity..................... 52,060 49,071
---------- -----------
Total liabilities and stockholders' equity..... $279,176 $273,726
========== ===========
</TABLE>
See accompanying notes to unaudited condensed financial statements.
2
<PAGE>
FIRST INTERNATIONAL BANCORP, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(dollars in thousands, except per share amounts)
(unaudited)
<TABLE>
<CAPTION>
Three Month Ended
March 31,
------------------
1999 1998
-------- -------
<S> <C> <C>
Interest income:
Loans, including net fees............................ $ 2,789 $3,996
Investment securities................................ 576 316
Federal funds sold................................... 686 162
-------- ------
Total interest income............................. 4,051 4,474
Interest expense:
Deposits............................................. 2,359 1,670
Other................................................ 223 12
-------- ------
Total interest expense............................ 2,582 1,682
-------- ------
Net interest income.................................. 1,469 2,792
Provision for possible loan losses........................ 1,539 781
-------- ------
Net interest income after provision
for possible loan losses.......................... (70) 2,011
Non-interest income:
Gain on sale of:
Guaranteed loans.................................. 2,787 2,696
Other loans....................................... 34 126
Loan-backed securitizations....................... 147 -
Loans to commercial paper conduit................. 82 -
-------- ------
Total gains on loan sales................. 3,050 2,822
Loan servicing income and fees....................... 1,196 927
Service charges and other deposit fees............... 68 145
Gain on sale of branch............................... 8,915 -
Other income......................................... 16 15
-------- ------
Total non-interest income......................... 13,245 3,909
-------- ------
Total operating income............................... 13,175 5,920
Non-interest expense:
Salaries and benefits................................ 6,667 2,237
Occupancy............................................ 455 371
Office expenses...................................... 210 184
Marketing............................................ 486 260
Furniture and equipment.............................. 294 225
Outside services..................................... 318 100
Loan collection...................................... 71 58
Other................................................ 851 106
-------- ------
Total non-interest expense........................ 9,352 3,541
-------- ------
Income before income taxes........................... 3,823 2,379
Provision for income taxes................................ 1,606 976
-------- ------
Net income........................................ $ 2,217 $1,403
======== ======
Basic earnings per common share........................... $ 0.28 $ 0.18
======== ======
Diluted earnings per common share......................... $ 0.27 $ 0.17
======== ======
</TABLE>
See accompanying notes to unaudited condensed financial statements.
3
<PAGE>
FIRST INTERNATIONAL BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
(unaudited)
<TABLE>
<CAPTION>
For the Three Months Ended
March 31,
---------------------------
1999 1998
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net cash provided by (used in) operating activities................ ($ 2,414) $ 738
---------- ----------
Cash flows from investing activities:
Net decrease (increase) in loans................................... 5,669 (22,088)
Purchase of investment securities available for sale............... (2,674) -
Purchase of equity securities available for sale................... (177) -
Proceeds from maturities and principal repayments of investment
securities available for sale..................................... 793 592
Proceeds from maturities and principal repayments of investment
securities held to maturity....................................... 237 4,030
Proceeds from sale of investment securities........................ - 1,102
Proceeds from sale of other real estate owned...................... 82 -
Proceeds from sale of branch premises.............................. 185 -
Capital expenditures, net.......................................... (173) (1,134)
---------- ----------
Net cash provided by (used in) investing activities........ 3,942 (17,498)
---------- ----------
Cash flows from financing activities:
Net increase in deposits........................................... 2,877 9,952
Net increase (decrease) in other borrowings........................ (717) 409
Proceeds from sale of common stock................................ 2,017 19
Principal payment on stockholder note receivable................... 941 -
Principal advance on stockholder note receivable................... (1,980) -
Dividends paid..................................................... (239) (236)
---------- ----------
Net cash provided by financing activities.................. 2,899 10,144
---------- ----------
Net increase (decrease) in cash and cash equivalents....................... 4,427 (6,616)
Cash and cash equivalents at beginning of period........................... 58,335 17,394
---------- ----------
Cash and cash equivalents at end of period................................. $62,762 $10,778
========== ==========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
4
<PAGE>
FIRST INTERNATIONAL BANCORP, INC. AND SUBSIDIARY
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
General
- -------
The consolidated financial statements include the accounts of First
International Bancorp, Inc. (the "Company") and its wholly-owned subsidiary,
First International Bank, National Association (the "Bank"). In 1998, the Bank
established three special purpose subsidiaries to facilitate loan
securitizations and the sale of loans to a commercial paper conduit.
Intercompany accounts and transactions have been eliminated in consolidation.
The Bank has representative offices which are responsible for regional loan
origination efforts, in Boston and Springfield, Massachusetts; Providence, Rhode
Island; Morristown, New Jersey; Rochester, New York; Pittsburgh and Philadelphia
Pennsylvania; Detroit, Michigan; Cleveland, Ohio; and Washington, D. C. The
Bank's primary revenues are derived from net interest income and the origination
and sale, on a servicing retained basis, of commercial loans. The Bank is a
national leader in the use of loan guarantee programs offered by the U. S. Small
Business Administration (the "SBA"), the U. S. Department of Agriculture (the
"USDA") and the Export-Import Bank of the United States ("Ex-Im Bank").
The accompanying unaudited condensed consolidated financial statements were
prepared in accordance with the instructions for Form 10-Q and, therefore, do
not include all disclosures necessary for a complete presentation of financial
condition, results of operations and cash flows in conformity with generally
accepted accounting principles. In the opinion of management, all adjustments
(consisting of only normal recurring adjustments) that are necessary for a fair
presentation of the interim financial statements have been included. The results
of operations for the interim periods shown are not necessarily indicative of
the results to be expected for the entire fiscal year or any interim period. The
interim financial information should be read in conjunction with the Company's
Annual Report for the year ended December 31, 1998.
Certain 1998 amounts have been reclassified to conform with the 1999
presentation. These reclassifications had no impact on net income.
Comprehensive Income
- --------------------
SFAS No. 130 "Reporting Comprehensive Income," which is effective for years
beginning after December 15, 1997, established standards for the reporting and
display of comprehensive income, defined as the change in equity of a business
enterprise during a period from nonowner sources. The adoption of SFAS No. 130
requires the Company to present the impact of any change in the market value of
the "available for sale" investment portfolio or other components of
comprehensive income. For the three month periods ended March 31, 1999 and 1998
such comprehensive income totaled $32,000 and $2,000, after income taxes,
respectively. All amounts are comprised only of changes in the valuation
allowance for the investment portfolio.
5
<PAGE>
2. Recent Accounting Pronouncements
In June 1998, the FASB issued Statement No. 133 "Accounting for Derivative
Instruments and Hedging Activities," which is effective for the Company's
financial statements issued after December 31, 1999. This statement establishes
accounting and reporting standards for derivative instruments and for hedging
activities, and requires that all derivatives be recognized as either assets or
liabilities in the entity's balance sheet and be measured at fair value. Changes
in the fair value of the derivative instruments are to be recognized depending
on the intended use of the derivative and whether or not it has been designated
as a hedge. This statement is not expected to have a significant impact upon the
Company's financial position, results of operations or cash flows.
6
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Except for the historical information contained herein, this Quarterly Report on
Form 10-Q may contain forward-looking statements within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act
of 1934. Investors are cautioned that forward-looking statements are inherently
uncertain. Actual performance and results of operations may differ materially
from those projected or suggested in the forward-looking statements due to
certain risks and uncertainties, including without limitation (i) the
continuation in their present form of the government guarantee loan programs of
the SBA, USDA and Ex-Im Bank, upon which a significant portion of the Company's
business depends, (ii) the Company's ability to continue its recent growth by
relying on non-interest income, principally gains on the sale of domestic and
international commercial loans and related servicing income, in an increasingly
competitive market for loan originations, (iii) disruption in the U.S. capital
markets delaying or preventing the Company from receiving funding under
warehouse lines of credit or completing loan sales or securitizations, and (iv)
the Company's ability to accurately estimate loan losses and calculate the value
of its servicing assets, including related interest-only strips. Additional
information concerning certain risks and uncertainties that would cause actual
results to differ materially from those projected or suggested in the
forward-looking statements is contained in the Company's December 1998 Form 10-K
filing with the Securities and Exchange Commission. The forward-looking
statements contained herein represent the Company's judgment as of the date of
this Form 10-Q, and the Company cautions readers not to place undue reliance on
such statements.
General
The Company's earnings have been historically derived from (i) the origination,
sale and securitization of government guaranteed and other commercial loans,
(ii) net interest income, which is the difference between interest earned on
interest-earning assets (principally loans) and interest-bearing liabilities
(principally deposits), and (iii) fee income on loans serviced for others.
On March 26, 1999, the Company sold its last retail branch and its checking and
savings accounts. The Company retained its certificates of deposit and continues
to offer certificates of deposit to retail and brokered depositors. The Company
also expects to obtain funding for its operations from warehouse lines of
credit, the sale of loans on a loan-by-loan basis, private placement
securitizations and from the sale of loans to a commercial paper conduit.
7
<PAGE>
Results of Operations
<TABLE>
<CAPTION>
For the Three Months Ended March 31,
------------------------------------------------
1999 1998 % Change
--------------- ------------- ----------------
(amounts in thousands, except per share amounts)
<S> <C> <C> <C>
Net interest income........................................ $1,469 $2,792 (47%)
Provision for loan losses.................................. 1,539 781 97
--------------- ------------- ----------------
Net interest income after provision...................... (70) 2,011 (103)
Gain on loan sales......................................... 3,050 2,822 8
Other non-interest income.................................. 1,280 1,087 18
Gain on sale of branch..................................... 8,915 - -
Non-interest expense....................................... 9,352 3,541 164
--------------- ------------- ----------------
Income before income taxes............................... 3,823 2,379 61
Income taxes............................................... 1,606 976 65
--------------- ------------- ----------------
Net Income............................................. $2,217 $1,403 58%
=============== ============= ================
Basic earnings per share................................. $0.28 $0.18
=============== =============
Diluted earnings per share................................ $0.27 $0.17
=============== =============
Weighted average shares - basic......................... 7,957 7,876
=============== =============
Weighted average shares - diluted........................ 8,164 8,215
=============== =============
</TABLE>
Comparison of the Three Months Ended March 31, 1999 and 1998:
Net Income. Net income increased 58% or $814,000 for the three month period
ended March 31, 1999 when compared to the three month period ended March 31,
1998. The increase was primarily the result of the sale of the Company's retail
branch facility and its checking, savings and money market deposit accounts,
which was partially offset by sale-related and certain non-recurring expenses,
the loan loss provision and the cost of the liquidity held during the quarter to
fund the sale of deposits as discussed below. Increases in gain on loan sales
and loan servicing income were attributable to an increase in loans originated
and the increase in the balance of loans managed for others, respectively.
Diluted earnings per share increased 59% or $.10 to $.27 per share for the three
month period ended March 31, 1999 from $.17 per share for the three month period
ended March 31, 1998.
Net Interest Income. Net interest income decreased 47% or $1.3 million for the
three month period ending March 31, 1999 when compared to the same period ending
March 31, 1998. Average earning assets increased 26% or $51 million while
interest-bearing liabilities increased 47% or $63 million. The net interest
spread for the three month period ended March 31, 1999 decreased 282 basis
points reflecting a relative increase in the percentage of lower yielding
LIBOR-based loans that were included in the balance sheet at March 31, 1999 and
a 75 basis point decrease in the prime rate during the third quarter of 1998.
Approximately 45 basis points of the compression in the spread is due to the
amortization costs of the Company's warehouse funding line, which are amortized
over the term of the facility.
8
<PAGE>
Average Balances, Interest, Yields and Rates
- --------------------------------------------
<TABLE>
<CAPTION>
For The Three Months Ended For The Three Months Ended 1999 Compared to 1998
March 31, 1999 March 31, 1998 Change Due to (Z):
------------------------------ ----------------------------- ---------------------------
Interest Average Interest Average
Average Earned Yield/ Average Earned Yield/
Balance Paid Rate Balance Paid Rate Volume Rate Total
------------------------------ ----------------------------- --------------------------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Assets:
Loans (1):
Commercial $151,421 $2,719 7.18% $152,110 $3,815 10.03% ($12) ($1,084) ($1,096)
Residential 2,960 55 7.43% 7,626 140 7.34% (87) 2 (85)
Other customer 693 15 8.78% 1,782 41 9.33% (24) (2) (26)
-------- ------ ---- -------- ------ ------- ----- ------- -------
Total loans 155,074 2,789 7.19% 161,518 3,996 9.90% (123) (1,084) (1,207)
Investment securities 31,536 576 7.31% 21,453 316 5.89% 184 76 260
Federal funds sold 59,048 686 4.71% 11,605 162 5.66% 551 (27) 524
-------- ------ ---- -------- ------ ------- ----- ------- -------
Total investment securities and
funds sold 90,584 1,262 5.61% 33,058 478 5.81% 735 49 784
-------- ------ ---- -------- ------ ------- ----- ------- -------
Total earnings assets 245,658 4,051 6.60% 194,576 4,474 9.20% 612 (1,035) (423)
Total non-earning assets 35,647 19,407
-------- --------
Total assets $281,305 $213,983
======== ========
Liabilities:
Deposits:
Interest bearing demand deposits $ 7,924 $ 46 2.35% $ 7,649 $ 46 2.44% $ 2 ($2) $ 0
Premier money market 101,337 1,202 4.81% 83,110 1,108 5.41% 216 (122) 94
Other savings 10,372 101 3.95% 8,175 41 2.03% 21 39 60
Retail and IRA certificates of
deposit 25,138 335 5.40% 32,858 464 5.73% (103) (26) (129)
Brokered certificates of deposit 51,000 675 5.37% 833 11 5.36% 664 0 664
-------- ------ ---- -------- ------ ------- ----- ------- -------
Total deposits 195,771 2,359 4.89% 132,625 1,670 5.11% 800 (111) 689
Warehouse borrowings 0 218 0.00% 0 0 0.00% 0 0 0
Other borrowings 419 5 4.84% 609 12 7.99% (2) (5) (7)
-------- ------ ---- -------- ------ ------- ----- ------- -------
Total interest bearing liabilities 196,190 2,582 5.34% 133,234 1,682 5.12% 798 (116) 682
-------- ------ ---- -------- ------ ------- ----- ------- -------
Non-interest bearing liabilities:
Demand deposits 32,776 35,807
Other liabilities 3,913 3,052
-------- --------
Total non-interest bearing
liabilities 36,689 38,859
Stockholders' equity 48,426 41,890
-------- --------
Total liabilities and stockholders'
equity $281,305 $213,983
======== ========
Net interest income/net interest
spread $1,469 1.26% $2,792 4.08% ($186) ($919) ($1,105)
====== ==== ====== ===== ===== ===== =======
Net interest margin 2.33% 5.69%
==== =====
</TABLE>
(1) For purposes of these computations, non-accruing loans are included in the
average balance.
(2) The change in interest due to both rate and volume has been allocated to
volume and rate changes in proportion to the relationship of the absolute
dollar.
9
<PAGE>
Interest Income. Interest income decreased 9% or $423,000 to $4.1 million for
the three month period ended March 31, 1999 from $4.5 million for the three
month period ended March 31, 1998. Loan interest income decreased 30% or $1.2
million as the average balance of loans decreased 4% or $6.4 million and the
average yield on loans decreased 271 basis points. Although commercial
originations totaled $93 million for the three month period ended March 31, 1999
as compared to $78 million for the same period 1998, the majority of the loan
closings occurred in the last few weeks of the quarter, contributing little
interest income. The average balance decrease reflects the sale of the Company's
$5 million residential mortgage portfolio in the second quarter of 1998 and the
continued sale and securitization of commercial loan originations. Interest
income includes $210,000 of adjustments related to the recoverability of certain
accrued interest and deferred costs. The decrease in the yield is also the
result of three prime rate decreases totaling 75 basis points which occurred in
the third quarter of 1998 and an increase in the portfolio of lower priced LIBOR
based loans. Privately insured loans indexed to LIBOR increased 100% or $16.6
million for the three month period ended March 31, 1999 compared to the same
period in 1998. These loans are priced on average at LIBOR plus 250 basis
points, which currently approximates the prime rate. However, prime based loans
are priced on average at prime plus 100 basis points.
The decrease in loan interest income was mitigated by an increase in investment
interest income of 164% or $784,000 to $1.3 million for the three month period
ended March 31, 1999 from $478,000 for the three month period ended March 31,
1998. The average balance of federal funds sold increased by $47 million for the
period as liquid investments were maintained to fund both loan closings and the
$151 million sale of the Company's checking, savings and money market deposits.
The average balance of investment securities increased 47% or $10 million
reflecting the retention of certain notes by the Company upon completion of loan
securitizations in 1998. The retained notes are comprised of subordinated notes
with investment grade ratings of AA to BBB as well as $3.3 million in unrated
notes. The average yield on all such retained notes was 7.83% for the quarter
ended March 31, 1999.
Interest Expense. Interest expense increased 53% or $900,000 to $2.6 million for
the three month period ended March 31, 1999 from $1.7 million for the three
month period ended March 31, 1998 as the average balance of interest bearing
deposits increased 47% or $63 million. The average balance of certificates of
deposit increased 126% or $42.4 million reflecting a $50 million increase in
average brokered certificates of deposit. The brokered certificates, which
mature periodically within one year, were used to fund the $151 million sale of
the checking, savings and money market deposit accounts.
Interest expense for the three month period ended March 31, 1999 also includes
$223,000 of expense related to the $75 million warehouse line of credit, which
is available to fund qualifying commercial term loans. Although the line was
unused during the quarter, fees paid at origination of the line in December 1998
are amortized over the term of the facility.
Provision for Possible Loan Losses. The provision for possible loan losses
totaled $1.5 million for the three month period ended March 31, 1999 compared to
$781,000 for the three month period ended March 31, 1998. The increase reflects
an overall increase in the Allowance for Loan Losses to $4.5 million at March
31, 1999 from $4.0 million at December 31, 1998 due to
10
<PAGE>
an increasing percentage of unguaranteed commercial loans, the seasoning of the
commercial portfolio, and the introduction of new loan products where the
Company has limited historical experience. See Allowance for Loan Losses for
further discussion.
Non-Interest Income. Non-interest income is comprised of the following items:
<TABLE>
<CAPTION>
For the Three Months Ended
March 31,
-------------- -------------- ---------------
Non-Interest Income: 1999 1998 Change (%)
-------------- -------------- ---------------
(dollars in thousands)
<S> <C> <C> <C>
Gain on loan sales:
SBA sales $1,414 $1,308 8%
USDA sales 967 568 70
Ex-Im working capital sales 85 79 8
Ex-Im medium term sales 321 741 (57)
-------------- -------------- ---------------
Gain on guaranteed loan sales 2,787 2,696 3
Other loan sales 34 126 (73)
Loan backed securitizations 147 - -
Loans to commercial paper conduit 82 - -
-------------- -------------- ---------------
Total gain on loan sales 3,050 2,822 8
Loan servicing income and fees 1,196 927 29
Service charges and other deposit fees 68 145 (53)
Gain on sale of branch 8,915 - -
Other income 16 15 7
-------------- -------------- ---------------
Total Non-interest income $13,245 $3,909 239%
============== ============== ===============
</TABLE>
The $9.3 million increase in non-interest income for the three month period
ended March 31, 1999 as compared to the three month period ended March 31, 1998
was due primarily to the gain of $8.9 million recognized on the sale of the
Company's only branch facility and the related $151 million of checking, savings
and money market accounts.
Gains on loan sales increased 8% or $228,000 to $3.1 million for the three month
period ended March 31, 1999 from $2.8 million for the three month period ended
March 31, 1998. The aggregate rate of return on SBA and Ex-Im Bank loans sold
during the quarter ended March 31, 1999 increased to 585 basis points from 548
basis points for the same period last year. The relative rate of return on the
USDA loans was significantly higher in the quarter ended March 1999 due to the
overall higher loan rates and longer terms of the underlying loans. The gains as
a percentage of the principal sold will vary in relation to such loan
characteristics.
Gains on the sale of Ex-Im Bank medium term loans decreased by 57% or $420,000
for the period ended March 31, 1999 compared to the same period 1998, because
approximately $6 million or 35% of the Ex-Im Bank medium term loans sold in the
first quarter of 1998 were
11
<PAGE>
originated in December 1997. Ex-Im Bank medium term loans originated decreased
only 3% for the quarter ended March 31, 1999 as compared to the prior year's
quarter.
For the three months ended March 31, 1999, the gain on loan-backed
securitizations of $147,000 is the portion of gain related to the final
prefunded amount of the $65 million Business Loan Trust 1998-A commercial term
loan securitization completed in December 1998. The gain on sale of loans to the
commercial paper conduit is the result of a sale of $10 million of revolving
commercial loans.
Loan servicing income is comprised of the servicing fees received on loans sold
on a servicing-retained basis, net of amortization of the servicing asset. The
amount of the servicing fee varies in accordance with the terms of the loan
sale.
Detailed below are the components of this servicing income:
Loan Servicing Income and Fees For the Three Months Ended
- ------------------------------
March 31,
-------------------------
1999 1998
-------- --------
Loan Servicing Income: (dollars in thousands)
SBA guaranteed loans...................... $ 657 $ 281
USDA guaranteed loans..................... 193 76
Ex-Im working capital loans............... 51 56
Ex-Im medium term loans................... 56 96
Loan securitizations...................... 32 -
Other loans............................... 76 45
-------- --------
Loan servicing income................... 1,065 554
Servicing asset reduction................... (238) -
-------- --------
Net loan servicing income............... 827 554
Other fees.................................. 369 373
-------- --------
Total loan servicing income and fees........ $ 1,196 $ 927
======== ========
Loans Managed for Others
- ------------------------
Average balance............................. $668,199 $431,871
======== ========
Ending balance.............................. $685,201 $470,786
======== ========
The 92% or $511,000 increase in loan servicing income reflects the 55% or $236
million increase in the average balance of loans serviced for others to $668
million for the three month period ended March 31, 1999.
An impairment equal to $238,000 in the carrying value of the servicing asset
related to the Ex-Im Bank medium term loans made to borrowers in Brazil, a
country subject to macroeconomic pressures, was recognized in the quarter ended
March 31, 1999 following payment defaults on the underlying loans. Ex-Im Bank
has paid the claims in full or is in the process of full disbursement of
interest and principal to the investors under the Ex-Im Bank guarantee.
12
<PAGE>
The Company has historically assumed that Ex-Im Bank loans would amortize over
the 3-5 year contractual term of the loans and recognizes any impairment when it
becomes probable and estimable. Management will continue to monitor defaults and
prepayments which could result in a reduction of the remaining life of the
servicing asset and which would warrant a write down of the asset.
The Company's prepayment and default experience on the SBA and USDA guaranteed
loans, as well as the experience on the securitized pools, continues to be at
rates less than those assumed in the original calculations of the gain on sale.
The actual performance of each portfolio is monitored quarterly.
Other loan fee income of $369,000 for the period ended March 31, 1999 is
comprised primarily of $107,000 in advisory fees paid by clients to the Company
in conjunction with non-loan related services and $193,000 in letter of credit
fees. Letter of credit fees increased 72% or $81,000 for the three month ended
March 31, 1999 from $112,000 for the three month period ended March 31, 1998 due
to greater demand for this product from the Company's exporting borrowers. Such
fees are recognized over the term of the letter of credit.
Non-Interest Expense. Non-interest expense is comprised of the following items:
For the Three Months Ended
March 31,
--------------------------
1999 1998
----------- -----------
Non-Interest Expense: (dollars in thousands)
Salaries and benefits....................... $6,667 $2,237
Occupancy................................... 455 371
Office expenses............................. 210 184
Marketing expenses.......................... 486 260
Furniture and equipment..................... 294 225
Outside services............................ 318 100
Loan collection............................. 71 58
Other....................................... 851 106
----------- -----------
Total non-interest expense............... $9,352 $3,541
=========== ===========
The 164% or $5.8 million increase in non-interest expense for the three month
period ended March 31, 1999 as compared to the same period ended March 31, 1998
is primarily attributable to a $4.4 million increase in salaries and benefits.
In connection with the re-negotiation of the employment agreement between the
Company and its Chairman and Chief Executive Officer, a $1.7 million bonus was
paid in March 1999 to enable the Chief Executive Officer to retire the $980,000
note receivable held by the Company and to pay the income taxes associated with
the bonus. The note receivable was provided to finance the Chief Executive
Officer's purchase of 614,000 shares of common stock in 1994. The stock
purchased by the Chief Executive Officer is currently restricted, although the
Company has agreed pursuant to a registration rights agreement that such shares
may be registered for sale in the future.
13
<PAGE>
As compensation for the sale of the Company's last retail branch and deposits,
the Chief Executive Officer and another six members of senior management
received cash bonuses totaling $940,000.
The average number of employees increased by 27% or 43 people for the period
ended March 31, 1999 compared to the same period of 1998. The headcount increase
reflects the opening of representative offices in Detroit, Michigan and
Cleveland, Ohio, the full staffing of existing domestic representative offices,
and the addition of staff to the credit administration and loan servicing areas
to effectively support increased loan volume.
The 23% or $84,000 increase in occupancy expense reflects the addition of new
offices in the third and fourth quarters of 1998 in Detroit and Cleveland and
increased monthly common area and maintenance charges in the Company's Hartford
headquarters building. Additional personnel contributed to increases of 14% or
$26,000 in office expense, 31% or $69,000 in furniture and equipment expense.
Marketing expense includes $51,000 of advertising expense related to a retail
certificate of deposit campaign that was undertaken in March 1999 and a general
increase in marketing related to new representative offices.
The $218,000 increase in outside service expense reflects increases in legal
fees related to the establishment of agent relationships and/or representative
office status in several of the Company's international markets, as well as
outside contractors utilized to prepare files for the on-going securitization
and sale of loans.
Other expenses increased $745,000, including the accrual of a $340,000 liability
for the potential of loss of a government guarantee on a single SBA loan managed
for investors. The Company is currently appealing this matter, which is
technical and loan-specific. Since 1990, the Company has made repairs on
government guaranteed loans totaling less than $100,000. The Company services
guaranteed loans totaling $448.2 million at March 31, 1999.
Other expenses included legal and related expenses associated with various
projects, including the establishment of a business relationship with CIGNA
Financial Services, Inc. and Connecticut General Life Insurance Company with
respect to providing investment, discount brokerage, cash management and
retirement account services. Due to various corporate matters and projects
underway, the Company expects that legal expenses will be above historical
levels in the quarter ending June 30, 1999.
Income Taxes. The Company's effective tax rate increased to 42% for the three
month period ended March 31, 1999 from 41% for the three month period ended
March 31, 1998 due to the non-deductibility of the portion of the Chief
Executive Officer's compensation over $1 million.
14
<PAGE>
Discussion of Changes in Financial Condition to March 31, 1999 from December 31,
1998.
General. Total assets increased 1.7% or $4.7 million to $278.4 million from
$273.7 million at December 31, 1998 due to increases in loans held for sale and
federal funds. The growth was funded by retained earnings and an increase in
brokered certificates of deposit to fund the sale of the Company's checking and
savings accounts.
Cash and cash equivalents. The average balance of cash and cash equivalents
increased $44.4 million to $63.3 million for the three month period ended March
31, 1999 from $18.9 million for the period ended March 31, 1998. The average
balance of federal funds sold by the Company increased $47.4 million as
additional liquidity, in the form of overnight investments, was maintained to
fund loan closings and the sale of the Company's checking, savings and money
market accounts.
Investment Securities. Investment securities portfolios totaled $35.2 million, a
decrease of 1.1% or $400,000 from the December 31, 1998 balance of $35.6 million
due to scheduled amortization of the portfolio securities.
15
<PAGE>
Loans. The Company's loan portfolio and loans managed for others portfolio were
as follows:
<TABLE>
<CAPTION>
March 31, December 31,
Loans Portfolio 1999 1998
- --------------- --------- ------------
(dollars in thousands)
<S> <C> <C>
SBA loans............................................ $ 5,589 $ 22,774
USDA loans........................................... 15,669 14,017
Ex-Im working capital loans.......................... 3,639 4,796
Ex-Im term loans..................................... 341 62
Insured term loans................................... 19,846 14,210
Import loans......................................... 3,943 4,681
Equipment finance loans.............................. 4,906 4,020
Other commercial loans............................... 34,885 35,785
Owner occupied commercial mortgages.................. 14,084 6,917
Non-owner occupied commercial mortgages.............. 2,788 3,139
Other loans.......................................... 3,614 3,545
-------- --------
Total loans..................................... 109,304 113,946
Loans held for sale.................................. 28,597 8,577
Less:
Discount on retained loans...................... 2,621 1,419
Net deferred loan origination costs............. (342) (431)
Allowance for loan losses....................... 4,500 4,000
-------- --------
Loans, net...................................... $131,122 $117,535
======== ========
Loans Managed for Others
- ------------------------
Guaranteed Loans
SBA............................................. $251,685 $245,073
USDA............................................ 81,584 75,526
Ex-Im working capital........................... 11,634 14,788
Ex-Im term...................................... 100,256 102,638
Inventory buyer credit.......................... 2,534 300
FHLMC........................................... 452 455
-------- --------
448,145 438,780
Unguaranteed Portions and Unguaranteed Loans
SBA............................................. 69,664 74,033
USDA............................................ 5,878 6,173
Other commercial................................ 159,714 135,380
Home equity lines............................... 1,800 2,166
-------- --------
237,056 217,752
-------- --------
Total loans managed for others....................... $685,201 $656,532
======== ========
Total loans under management......................... $823,102 $779,055
======== ========
</TABLE>
16
<PAGE>
Loan originations and line of credit commitments were $92.8 million for the
three months ended March 31, 1999 and loan sales totaled $60.3 million for the
period. However, net loans decreased by 5.7% or $6.4 million to $102.5 million
at March 31, 1999 from $108.9 million at December 31, 1998 as approximately $23
million of the retained portions of SBA loans were reclassified from the loan
category to loans held for sale in advance of a securitization planned for the
quarter ending June 30, 1999.
Allowance for Loan Losses. The Company reviews the adequacy of the Allowance for
Loan Losses quarterly. At March 31, 1999 the Allowance totaled $4.5 million and
represented 3.3% of loans including loans held for sale. The Allowance totaled
$4.0 million at December 31, 1998 and represented 3.3% of loans. The overall
increase in the Allowance is due to an increasing percentage of unguaranteed
commercial loans, the seasoning of the commercial loan portfolio, and the
introduction of new loan products where the Company has limited historical
experience.
Net charge-offs for the three month period ended March 31, 1999 increased
$808,000 to $1.0 million from $231,000 for the three month period ending March
31, 1999. The Allowance at March 31, 1999 covered 1998 annual charge-offs 2.07
times.
17
<PAGE>
Activity in the Allowance for Loan Losses
- -----------------------------------------
<TABLE>
<CAPTION>
For the Year
For the Three Months Ended
Ended March 31, December 31,
---------------------------- ------------
1999 1998 1998
----------- ----------- ------------
(dollars in thousands)
<S> <C> <C> <C>
Balance of allowance for loan losses
at the beginning of the period................... $ 4,000 $ 3,100 $ 3,100
Charge offs:
SBA loans........................................ 93 - 775
Ex-Im working capital loans...................... 188 - -
Insured term loans............................... 112 - -
Other commercial loans........................... 622 234 959
Import loans..................................... 26 - -
Non-owner occupied commercial mortgages.......... - - 582
Other loans...................................... - 8 8
----------- ----------- ------------
Total charge-offs............................. 1,041 242 2,324
Recoveries:
SBA loans........................................ 1 - -
Other commercial loans........................... 1 2 30
Non-owner occupied commercial mortgages.......... - 9 123
----------- ----------- ------------
Total recoveries.............................. 2 11 153
----------- ----------- ------------
Net charge-offs..................................... 1,039 231 2,171
Provision for loan losses........................... 1,539 781 3,071
----------- ----------- ------------
Balance of allowance for loan
losses at end of period.......................... $ 4,500 $ 3,650 $ 4,000
=========== =========== ============
Total loans and loans held for sale................. $137,901 $171,534 $122,523
=========== =========== ============
Allowance to total loans............................ 3.3% 2.1% 3.3%
=========== =========== ============
</TABLE>
Non-performing loans for the three month period ended March 31, 1999 increased
$937,000 to $4.0 million. Although non-accrual loans have increased, at March
31, 1999 approximately 35% of these loans were current for principal and
interest under the contractual terms. The majority of the increase at March 31,
1999 is attributable to two loans, both of which were current for principal and
interest under the existing contractual terms.
18
<PAGE>
The following table sets forth information regarding the Company's
non-performing loans at the dates indicated:
<TABLE>
<CAPTION>
Non-Performing Loans March 31, December 31,
1999 1998
----------- ------------
(dollars in thousands)
<S> <C> <C>
Commercial:
Unguaranteed portions:
SBA and USDA loans......................... $1,593 $1,533
Ex-Im working capital loans................ 469 418
Other international loans..................... 605 112
Other commercial loans........................ 1,060 890
Owner occupied commercial mortgages........... - 6
Non-owner occupied commercial mortgages....... 169 -
Consumer loans.................................. 145 145
----------- ------------
Total non-performing loans................. $4,041 $3,104
=========== ============
Total non-performing loans to total loans....... 2.93% 2.53%
=========== ============
Total non-performing loans to total assets...... 1.45% 1.13%
=========== ============
Allowance to total non-performing loans......... 111% 129%
=========== ============
</TABLE>
The following table sets forth the breakdown of the Allowance for Loan Losses by
loan category at the dates indicated. Management believes that the Allowance can
be allocated by category only on an approximate basis, and therefore allocation
of the Allowance to each category is not necessarily indicative of future losses
and does not restrict use of the Allowance to absorb losses in any category. The
unallocated portion of the Allowance represents an amount that is not
specifically allocable to one of the loan portfolios. Loans to foreign entities
at March 31, 1999 represented 15% of total loans. Such loans are U.S. dollar
denominated and either 100% Ex-Im Bank guaranteed and sold at origination or
carry private insurance equal to 80-90% of the loan balance. The Company
currently has two private credit insurance policies issued by a Standard & Poors
AAA-rated company. The policies provide that the Company is responsible for a
deductible and for the first loss on the uninsured portion of the loan. The
aggregate deductible on the policies is $2 million.
19
<PAGE>
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
----------- ------------
(dollars in thousands)
<S> <C> <C>
Allocation of the Allowance by
Category of Loans:
Unguaranteed Portions of:
SBA loans..................................... $ 443 $ 841
USDA loans.................................... 250 209
Ex-Im working capital loans................... 268 245
Ex-Im term loans.............................. 10 2
Insured term loans............................... 650 479
Import loans..................................... 370 94
Equipment finance................................ 64 55
Other commercial loans........................... 1,350 1,311
Owner occupied commercial mortgages.............. 192 128
Non-owner occupied commercial mortgages.......... 56 63
Other loans...................................... 43 43
Loans held for sale.............................. 143 43
Unallocated...................................... 661 487
----------- ------------
Total allowance for loan losses............... $4,500 $4,000
=========== ============
Percent of Loans in Each Category to Total Loans:
Unguaranteed Portions of:
SBA loans..................................... 4.1% 18.6%
USDA loans.................................... 11.4 11.4
Ex-Im working capital loans................... 2.6 3.9
Ex-Im term loans.............................. 0.2 0.1
Insured term loans............................... 14.4 11.6
Import loans..................................... 2.9 3.8
Equipment finance................................ 3.6 3.3
Other commercial................................. 25.3 29.2
Owner occupied commercial mortgages.............. 10.2 5.6
Non-owner occupied commercial mortgages.......... 2.0 2.6
Other loans...................................... 2.6 2.9
Loans held for sale.............................. 20.7 7.0
----------- ------------
Total......................................... 100% 100%
=========== ============
</TABLE>
Stockholders' Equity. Stockholders' equity increased 4.6% or $2.2 million to
$51.3 million at March 31, 1999 from $49.0 million at December 31, 1998 due to
the retention of earnings net of a quarterly dividend of $.03 per share, or
$239,000.
Following the award of a bonus specifically for this purpose, the Company's
Chief Executive Officer repaid the promissory note that was issued in 1994 in
connection with his purchase of 614,600 shares of common stock. On March 31,
1999, the Company sold an additional 200,000 shares of common stock to the Chief
Executive Officer for an aggregate purchase price of $2,000,000, or $10 per
share. The stock purchased by the Chief Executive Officer is currently
restricted, although the Company has agreed, pursuant to a registration rights
agreement that such shares may be registered for sale in the future. The Company
received a cash payment of
20
<PAGE>
$20,000 and a promissory note in the amount of $1,980,000 for this transaction.
Principal plus interest, accruing at a rate of 7% compounded annually, is
payable on the note to the Company at the April 1, 2002 maturity date. The
interest and principal may be forgiven by the Company in certain circumstances.
The sale of the stock will increase stockholders' equity only when principal
payments are received as such stockholder note receivable is carried as part of
stockholders' equity since it is collateralized by stock of the Company.
Liquidity and Capital Resources.
The Company's primary sources of liquidity and funding are certificates of
deposit, warehouse lines of credit and loan sales and securitizations. Secondary
sources of liquidity include a Federal Home Loan Bank line of credit and federal
funds purchased.
Management considers cash flows related to scheduled payments by borrowers,
projected deposit levels, estimated liquidity needs for maturing certificates of
deposit, approved extensions of credit and unadvanced commitments to existing
borrowers in determining the level and maturity of funding necessary to support
operations. The on-going sales of the government guaranteed portions of loans at
origination also provides cash to fund operations. Such loan sales totaled $60.3
million for the three month period ended March 31, 1999, representing 65% of the
$92.8 million total loans originations for the three month period.
As of March 31, 1999 the Company had outstanding commitments to fund loans and
lines of credit of $65.6 million and had issued letters of credit totaling $32.1
million.
The Company believes that it will continue to have access to liquidity sources
to provide funding sufficient to support operating activities, loan originations
and commitments, and certificate of deposit maturities.
The Bank is subject to various regulatory capital requirements administered by
federal banking agencies and maintains a "well-capitalized" status, with a total
capital to risk-weighted assets of 21.94% and a Tier 1 capital to assets or
leverage ratio of 18.44% at March 31, 1999.
A subsidiary of the Bank entered into an interest rate swap with a notional
amount of $19 million in December 1998 in order to mitigate interest rate risk
inherent in the sale of revolving commercial loans to a commercial paper
facility. The swap provides for net settlement on a monthly basis which is
recorded as an adjustment to interest income. For the three month period ended
March 31, 1999, interest income totaling $16,000 was recorded related to the
swap.
As in prior periods, the Company has limited exposure to market risk as it has
an investment portfolio with a short duration and moderate level of interest
rate risk.
Year 2000 Compliance
As the Year 2000 approaches, a critical business issue has emerged regarding how
existing application software programs and operating systems can accommodate
this date value. In brief,
21
<PAGE>
many existing application software products in the market place were designed to
accommodate only a two digit position which represents the year (e.g. '95 is
stored on the system and represents the year 1995). As a result, the year 1999
(i.e., '99) could be the maximum date value these systems will be able to
accurately process.
Utilizing the framework provided by the Federal Financial Institutions
Examination Council ("FFIEC"), the Company developed a Year 2000 Compliance
Program as discussed below. The Company's Year 2000 Compliance Workplan
("Workplan") includes the following broad components:
1. Review of Mission Critical Systems for Year 2000 Readiness
2. Renovation of Internal Mission Critical Systems
3. Renovation of External Mission Critical Systems
4. Testing of Mission Critical Systems
5. Development of Business Resumption Contingency Plan
6. Assessment of Customer Risk
7. Remediation Contingency Plan
Senior management and the Technology Committee of the Board of Directors are
responsible for monitoring compliance with the Workplan. In addition, the
Company's primary regulator, the Office of the Comptroller of the Currency,
performs periodic off-site inquiries and on-site visitations to assess the
status of the Company's Year 2000 readiness and progress against the Workplan
and federal regulations. While the Company has devoted a significant amount of
human resources to address its Year 2000 readiness, management does not believe
that the resultant deferral of other information technology (IT) projects has
had a material impact on the Company's financial condition or results of
operations.
The Company has reviewed all mission critical systems, prioritized the details
of the plan and its resources, and has established deadlines for each of the
components of the Workplan. The Company's primary internal mission critical
systems included a deposit item processing system, wide area network which
supports word processing and spreadsheet applications as well as other external
software systems, and a AS/400 operating system. The Company determined that the
deposit item processing system could not be readily made Year 2000 compliant
and, therefore, outsourced this function in the first quarter of 1998. Total
annual costs for this third party service are estimated at $36,000. The
Company's word processing and spreadsheet software applications and the AS/400
operating system were upgraded to Year 2000 compliant versions in the first half
of 1998. Total costs of such software upgrades approximated $55,000. Certain
hardware components were also upgraded in conjunction with these software
initiatives at an estimated cost of $20,000. Management estimates that
additional costs to be incurred to execute the Workplan will not exceed $20,000.
Third party vendors support the Company's other mission critical IT and non-IT
systems. The Company has developed a plan to monitor and test all such systems.
Non-IT systems include the Company's facility-related operating systems and are
included in the Company's Workplan.
22
<PAGE>
As required by the FFIEC, the Business Resumption Contingency Plan has been
developed. Although the Company expects that each mission critical system will
be Year 2000 Compliant, the Plan was designed to mitigate serious disruptions to
the Company's business flow. The Plan is currently being validated in
preparation for independent third party testing which will be substantially
complete by June 30, 1999 in accordance with FFIEC guidelines.
The Company's Workplan also requires that the Year 2000 readiness of major
borrowers, wholesale time deposit brokers, investment bankers providing
borrowing facilities to the Company, and primary loan purchasers be evaluated.
Documentation has been received from these parties and it appears to meet the
FFIEC standards for determining Year 2000 preparedness and provides information
to assess any potential risk to the Company. The Company has reviewed the
documentation and it appears that the parties have adequately assessed Year 2000
risks and undertaken efforts to mitigate potential problems.
The above expectations are subject to uncertainties. If for example, the Company
fails to identify and address all Year 2000 problems in the mission critical
operations, fails to develop a comprehensive contingency plan, or is affected by
the inability of critical third parties to continue operations due to such
problems, the results of the Company's operations or financial condition could
be materially impacted. Such impact might result from operational difficulties
of the Company's borrowers and their resultant inability to repay their loans to
the Company; an ability of the Company to access wholesale funds providers or
other borrowing facilities; and an inability of the Company to normally process
deposit, loan or loan investor transactions.
Based on the current information and the efforts to date, however, it is not
expected that Year 2000 problems will have a material effect on the Company's
results of operations or financial condition. It also does not appear that a
Remediation Contingency Plan will be required. If it is subsequently determined
that such a plan is required, it will be developed pursuant to the applicable
FFIEC guidance.
23
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Registrant is not involved in any legal proceedings except for
routine litigation incidental to the business of banking, none of
which is expected to have a material adverse effect on the
Registrant's financial position, results of operations or cash flows.
Item 2. Changes in Securities
On March 31, 1999, pursuant to the exemption provided by Section 4(2)
of the Securities Act of 1933, the Company sold 200,000 shares of its
Common Stock to Brett N. Silvers, the Chairman and Chief Executive
Officer of the Company, for $10 per share, or a total of $2,000,000.
Such purchase price was paid $20,000 in cash and $1,980,000 by Mr.
Silvers' promissory note. Such interest and principal may be forgiven
by the Company in certain circumstances as described in the letter
amending the employment agreement between Mr. Silvers and the Company
attached hereto as an exhibit. The proceeds from such sale of common
stock to Mr. Silvers will be used by the Company as additional working
capital.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security-Holders
Not applicable.
Item 5. Other information
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
Exhibit
Number Description
------ -----------
3.1 Amended and Restated Certificate of Incorporation of
the Registrant.*
3.2 Amended and Restated By-laws of the Registrant.*
10.1 Second Amendment of Lease between Cambridge One
Commercial Plaza, LLC and the Bank dated as of
March 26, 1999.***
24
<PAGE>
10.2 Letter dated March 31, 1999 to Amend the Employment Agreement among
the Registrant, First International Bank, N.A. and Brett N. Silvers.
10.3 Registration Rights Agreement by and among First International
Bancorp, Inc. and Nancy W. Silvers and The Silvers Family Trust, dated
March 31, 1999.
10.4 Agreement for Purchase and Sale of Assets and Assumption of
Liabilities between First National Bank of New England and Hudson
United Bank, dated as of December 31, 1998.**
11.1 Computation of Per Share Earnings.
27 Financial Data Schedule for the Quarter Ended March 31, 1999.
* Denotes an exhibit which has previously been filed as an exhibit to the
Company's Registration Statement on Form S-1, Commission File No. 333-31339.
** Denotes an exhibit which has previously been filed as an exhibit to the
Company's Report on Form 8-K, Commission File No. 0-22861.
*** Denotes an exhibit which has previously been filed as an exhibit to the
Company's Report on Form 10-K, Commission File No. 0-22861.
Reports on Form 8-K
- -------------------
The Company filed a report on Form 8-K dated January 8, 1999 to report the
signing of the Agreement for Purchase and Sale of Assets and Assumption of
Liabilities between First National Bank of New England (now known as First
International Bank, N.A.) and Hudson United Bank, dated December 31, 1998.
25
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
First International Bancorp, Inc.
---------------------------------------
(Registrant)
Date: May 14, 1999 By: /s/ Brett N. Silvers
------------ ----------------------------------
Brett N. Silvers
Its Chief Executive Officer
and President
Date: May 14, 1999 By: /s/ Leslie A. Galbraith
------------ ----------------------------------
Leslie A. Galbraith
Its Treasurer and Secretary
and Chief Financial Officer
26
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
10.2 Letter dated March 31, 1999 to Amend the Employment Agreement
among the Registrant, First International Bank, N.A. and Brett
N. Silvers
10.3 Registration Rights Agreement by and among First International
Bancorp, Inc. and Nancy W. Silvers and The Silvers Family Trust,
dated March 31, 1999
11.1 Computation of Per Share Earnings
27 Financial Data Schedule
27
<PAGE>
Exhibit 10.2
March 31, 1999
Mr. Brett N. Silvers
61 Ledyard Road
West Hartford, CT 06117
Dear Brett:
Reference is made to the following:
A. that certain Promissory Note (the "Note") in the original principal
amount of $1,020,236 dated June 30, 1994 from you, Brett N. Silvers ("Silvers"),
to First International Bancorp, Inc. ("FIB"), as amended by that certain letter
agreement (the "Letter Agreement") dated July 3, 1997 among Silvers, FIB and
First National Bank of New England (now known as First International Bank,
National Association) ("First International");
B. that certain Employment Agreement (the "Employment Agreement") dated
as of April 15, 1994 among Silvers, FIB and First International, as amended by
the Letter Agreement; and
C. that certain Stock Pledge Agreement (the "Stock Pledge Agreement")
dated June 30, 1994 between Silvers and FIB, as amended by the Letter Agreement.
Silvers, FIB and First International agree as follows:
1. The principal payments under the Note are hereby forgiven. The
interest payments having previously been forgiven, FIB shall mark the Note
"cancelled" and the original of the Note shall be returned to Silvers.
2. The Employment Agreement is modified as follows:
(a) All references to "FNB" are hereby deleted and replaced
with "First International".
(b) The reference in Section 1 on page 1 to Silvers being
employed as President of First International is hereby deleted.
<PAGE>
(c) The first sentence in Section 4(a) on page 5 is deleted
in its entirety and the following is substituted in its place:
"FIB and First International shall together pay to Employee an
aggregate salary at a rate of (i) THREE HUNDRED SEVENTY-FIVE
THOUSAND DOLLARS ($375,000) per year, beginning retroactively
from January 1, 1999. Subsequent annual increases shall be
determined by and are at the sole discretion of the Board of
Directors of FIB and the Executive Committee of the Board of
Directors of First International based upon performance."
(d) Subsections (g), (h) and (i) of Section 4 (which were
added pursuant to the Letter Agreement) are deleted in their entirety
and the following are substituted in their place:
"(g) FIB and First International shall together pay to
Employee a cash bonus equal to $300,000 during the first
quarter of 1999. FIB and First International may, as
determined by and at the sole discretion of the Board of
Directors of FIB and the Executive Committee of the Board of
Directors of First International, together pay to Employee
subsequent annual cash bonuses based upon performance.
(h) FIB and First International shall together pay to
Employee a cash bonus equal to the sum of (i) the increase in
Employee's State and Federal tax liability resulting from the
forgiveness of interest and principal as provided for in that
certain Promissory Note dated June 30, 1994 from Employee to
FIB in the original principal amount of $1,020,236, as amended
by a certain letter agreement dated July 3, 1997 among
Employee, FIB and First International (the "Note"), plus (ii)
the increase in Employee's State and Federal tax liability
resulting from the payment of the amount paid to Employee
pursuant to (i) above.
(i) Upon a Change in Control (as defined below) during the
Term of Employment, FIB and First International shall together
pay to Employee a cash bonus equal to the sum of (i) an amount
equal to the principal and interest then outstanding under
that certain Promissory Note dated March 31, 1999 from
Employee to FIB in the original principal amount of
$1,980,000, plus (ii) the increase in Employee's State and
Federal tax liability resulting from the payment of
<PAGE>
the amount paid to Employee pursuant to (i) above (plus any
increase in such tax liability as a result of this clause
(ii))."
(e) Section 5.2(b) is deleted in its entirety and the
following is substituted in its place:
"(b) As used in this Agreement, a "Change in Control" shall
be deemed to have taken place if the Controlling
Stockholders dispose of 50% or more of their beneficial
ownership as of March 31, 1999 of the Common Stock of FIB or
of any successor thereto (taking into consideration
adjustments for any stock dividends, splits, combinations or
exchanges, or otherwise subsequent to March 31, 1999), and
the average price per share of Common Stock of FIB received
by the Controlling Stockholders for all stock sold by them
to persons and entities that are not Controlling
Stockholders was at least $30.00 per share (taking into
consideration adjustments for any stock dividends, splits,
combinations or exchanges, or otherwise subsequent to March
31, 1999) or such lesser amount as determined by and at the
sole discretion of the Board of Directors of FIB and the
Executive Committee of the Board of Directors of First
International."
3. The pledge pursuant to the Stock Pledge Agreement dated
June 30, 1994 and amended July 3, 1997 is hereby terminated and the
stock pledged thereunder shall promptly be delivered to Silvers.
4. On January 27, 1999, the Boards of Directors of FIB and
First International agreed that FIB shall sell, and Silvers agreed to
purchase, 200,000 shares of common stock, par value $.10 per share
("Common Stock") of FIB for the closing price of shares of Common Stock
as listed on NASDAQ on that date, aggregating $2,000,000.
Contemporaneously herewith, Silvers shall execute a subscription dated
the date hereof to purchase such 200,000 shares of Common Stock, the
form of which is attached hereto as Exhibit A. As consideration for his
---------
purchase of the 200,000 shares of Common Stock, Silvers will pay to
First International $20,000 in cash, and the balance will be paid as
set forth in a promissory note, the form of which is attached hereto as
Exhibit B (the "Note"). In order to secure the payment of the Note,
---------
Silvers shall execute a new pledge agreement pursuant to which he shall
pledge to First International all of the 200,000 shares of Common Stock
that he will purchase, in the form attached hereto as Exhibit C.
---------
Contemporaneously herewith, FIB shall execute a registration rights
agreement, the form of which is attached hereto as Exhibit D.
---------
<PAGE>
5. Promptly upon executing this Agreement, FIB and First International
shall together pay to Silvers a bonus of $20,000, the proceeds of which shall be
used by Silvers to pay the paid-in-capital in connection with the Common Stock
issued to Silvers as described in paragraph 4 above.
Except to the extent expressly amended herein, the Employment Agreement
remains unmodified and in full force and effect in accordance with its terms.
Please sign in the space provided below to indicate your acceptance of
the foregoing, whereupon the provisions of this letter shall take effect.
Very truly yours,
FIRST INTERNATIONAL BANCORP, INC.
By: /s/ Leslie A. Galbraith
-----------------------
Leslie A. Galbraith
Its Executive Vice President
FIRST INTERNATIONAL BANK,
NATIONAL ASSOCIATION
By: /s/ Leslie A. Galbraith
-----------------------
Leslie A. Galbraith
Its President
Agreed to and Accepted this
31st day of March, 1999.
/s/ Brett N. Silvers
- --------------------
Brett N. Silvers
<PAGE>
Exhibit A
---------
SUBSCRIPTION
------------
The undersigned, Brett N. Silvers, does hereby subscribe for, and agree
to purchase, 200,000 shares of the Common Stock of First International Bancorp,
Inc., a Delaware corporation, for (a) $20,000 cash, and (b) a promissory note in
the amount of $1,980,000, in the form attached hereto.
Dated this 31st day of March, 1999.
----------------------------------
Brett N. Silvers
<PAGE>
Exhibit B
---------
PROMISSORY NOTE
---------------
$1,980,000 March 31, 1999
FOR VALUE RECEIVED, the undersigned Brett N. Silvers (hereinafter
called "Maker") promises to pay to the order of First International Bancorp,
Inc. (hereinafter called "Payee") at its address at 280 Trumbull Street,
Hartford, Connecticut, or at such other place as the holder hereof (including
the Payee, hereinafter referred to as "Holder") may designate in lawful money of
the United States, the principal sum of One Million Nine Hundred Eighty Thousand
Dollars ($1,980,000), together with interest on the unpaid balance of this note,
beginning as of the date hereof, at an interest rate of seven (7%) percent per
annum, together with all expenses, including reasonable attorneys' fees,
incurred in any action to collect this note.
The principal of this note, together with accrued interest, shall be
due and payable in full on April 1, 2002. Such interest shall be calculated as
simple interest, rather than being compounded; however, notwithstanding the
interest rate and payment of interest and principal required above, no interest
or principal shall be payable under this note upon the occurrence of a Change of
Control (as defined in that certain Employment Agreement dated as of April 15,
1994 among Maker, Payee and First National Bank of Connecticut (now known as
First International Bank, National Association) ("First International"), as
amended by those certain letter agreements dated July 3, 1997 and March 31, 1999
among Maker, Payee and First International).
Maker agrees that (i) if Maker shall fail to pay any sum due under this
note within ten (10) days after receiving notice from the Holder that such
amount is due; or (ii) if Maker shall suffer or permit the filing by or against
it of any petition for adjudication, arrangement, reorganization or the like
under any bankruptcy or insolvency law or make an assignment for the benefit of
creditors, and if, in the case of an involuntary petition, such petition is not
dismissed within thirty (90) days of the filing thereof (each of the events and
circumstances in (i) and (ii) being events of default), then, upon the happening
of any of such event, the entire indebtedness with accrued interest thereon (if
any) due under this note shall be immediately due and payable at the option of
the Holder.
Maker may prepay any amounts on account of principal at any time
without the imposition of any fee or penalty.
<PAGE>
Notwithstanding any other provision hereof, in enforcing the provisions
hereof, the Holder shall not have the right to attach or execute upon any asset
of Maker unless and until the Holder shall have exhausted its remedies pursuant
to the Stock Pledge Agreement entered into between the Maker and the Payee this
day (that is, unless and until all of the shares of Payee Common Stock, par
value $.10 per share, pledged by Maker as collateral for this note have been
sold, and the proceeds thereof have been applied to the obligations of Maker set
forth in this note).
This note shall be governed by and construed in accordance with the
laws of the State of Connecticut.
Dated this 31st day of March, 1999.
--------------------------------------
Brett N. Silvers
<PAGE>
Exhibit C
---------
STOCK PLEDGE AGREEMENT
----------------------
AGREEMENT dated this 31st day of March, 1999, by and between BRETT N.
SILVERS, of West Hartford, Connecticut ("Pledgor"), and FIRST INTERNATIONAL
BANCORP, INC., a Delaware corporation ("Pledgee").
W I T N E S E T H:
WHEREAS, Pledgor is indebted to Pledgee pursuant to a Promissory Note
dated March 31, 1999, in the principal amount of $1,980,000 (the "Note"); and
WHEREAS, such indebtedness is being incurred by Pledgor in connection
with Pledgor's purchase from Pledgee of 200,000 shares of Common Stock of
Pledgee (the "Stock"); and
WHEREAS, Pledgor has agreed to pledge the Stock to Pledgee as
collateral for the Note, on the terms set forth herein.
NOW, THEREFORE, it is hereby agreed as follows:
1. Pledge. As collateral for the Note and any substitutions or
------
replacements for the Note (collectively, the "Obligations"), Pledgor hereby
pledges, assigns and delivers to the Pledgee and grants to Pledgee a first lien
security interest in the Stock. The Pledgor will deliver or cause to be
delivered to Pledgee, as soon as it is received by Pledgor or becomes available
to Pledgor from the issuer or any transfer agent for the issuer, a certificate
evidencing the ownership of the Stock. Contemporaneously herewith, Pledgor is
delivering to Pledgee a stock power executed in blank with respect to the Stock.
The Pledgee shall hold the Stock as security for the payment of and performance
of the Obligations and Pledgor shall not encumber, assign or dispose of the
Stock except in accordance with the provisions of this Agreement and except that
Pledgor shall have the right to transfer the Stock, subject to the first lien
security interest granted in this Agreement, to one or more family members of
Pledgor and/or trusts as to which the sole beneficiaries are Pledgor and/or
family members of Pledgor. However, Pledgor shall have the right at any time or
times to sell all or any of the Stock, free and clear of the lien of Pledgee, so
long as the proceeds of such sale are applied first to reduce the balance, if
any, of the Obligations.
2. Dividends And Other Rights. If the Pledgor becomes entitled to
--------------------------
receive or receives cash dividends or any other distribution with respect to the
Stock, Pledgor shall be entitled to retain all of such dividend or distribution.
<PAGE>
3. Representation. The Pledgor warrants and represents that (i)
--------------
the Stock is duly and validly pledged to the Pledgee; and (ii) Pledgor has good
title to all the Stock, free and clear of all pledges and other encumbrances.
4. Stock Adjustments or Additions. In the event that during the
------------------------------
term of this pledge any stock dividend is declared or made, or if any
reclassification, readjustment or other change is made in the capital structure
of the Company (collectively, "Stock Dividend or Change"), 100% of all new,
substituted and additional shares or securities of the Company issued to or
acquired by Pledgor by reason of such Stock Dividend or Change shall be
forthwith delivered to the Pledgee to be held by it under this Agreement, and
the term "Stock" shall be deemed to include such shares or securities.
5. Term. The pledge shall terminate upon payment of and
----
performance of all Obligations. Upon termination of this pledge, any Stock still
held hereunder shall be delivered forthwith to the Pledgor.
6. Default. The Pledgee shall have all of the rights and remedies
-------
with respect to the Stock subject to the Uniform Commercial Code in force in
Connecticut on the date hereof (the "Code"). Upon the occurrence of an event of
default under the Note, and during the continuation thereof, the Pledgee may (i)
cause all or any part of the Stock to be transferred into its name or into the
name of its nominee or nominees, and (ii) apply the Stock against the payment or
performance of the Obligations. Pledgor agrees that because of the Securities
Act of 1933, as amended, or any other laws or regulations, and for other
reasons, there may be legal and/or practical restrictions or limitations
affecting Pledges in any attempts to dispose of certain portions of the Stock
and for enforcement of its rights. For these reasons, Pledgee is hereby
authorized by Pledgor, but not obligated, in the event of the occurrence of an
event of default under the Documents, to sell all or any part of the Stock at
private sale, subject to investment letter or in any other manner which will not
require the Stock, or any part thereof, to be registered in accordance with the
Securities Act of 1933, as amended, or the rules and regulations promulgated
thereunder, or any other law or regulation, at a commercially reasonable price
obtainable by Pledgee at any such private sale or other disposition in the
manner mentioned above. Pledgee is also hereby authorized by Pledgor, but not
obligated, to take such actions, give such notices, obtain such consents, and do
such other things as Pledgee may deem to be required or appropriate in the event
of sale or disposition of any of the Stock. Pledgee may in its discretion
approach a restricted number of potential purchasers and Pledgor acknowledges
that a sale under such circumstances may yield a lower price for the Stock, or
any part or parts thereof, than would otherwise be obtainable if same were
either offered to a large number of potential purchasers, or registered and sold
in the open market. Pledgor agrees (a) that in the event Pledgee shall upon the
occurrence of an event of default under the Documents (an "Event of Default"),
sell the Stock, or any portion thereof, at such private sale or sales, Pledgee
shall have
<PAGE>
the right to rely upon the advice and opinion of any member firm of a national
securities exchange as to the commercially reasonably price obtainable upon such
a private sale thereof, and (b) that such reliance shall be conclusive evidence
that Pledgee handled such matter in a commercially reasonable manner under the
Code.
7. Voting. Until the occurrence of an event of default under the
------
Note, Pledgor shall have the exclusive right to vote the Stock, at any and all
meetings of the shareholders of the Company. Following the occurrence of an
event of default under the Note, and during the continuance thereof, Pledgee
shall have the right, after either giving written notice thereof to Pledgor that
it intends thereafter to do so or after transferring the shares into the name of
Pledgee or its nominee, at its sole discretion and without liability therefor,
to cause such shares not to be voted.
8. Duty of Care. Beyond the exercise of reasonable care to
------------
assure the safe custody of the certificates evidencing Stock while held
hereunder, the Pledgee shall have no duty or liability to collect any sums due
in respect thereof or to protect or preserve rights pertaining thereto, and
shall be relieved of all responsibility for the Stock upon surrendering the same
to the Pledgor.
9. Remedies Not Exclusive. The rights and remedies herein
----------------------
provided are cumulative and are in addition to, and not exclusive of, any rights
or remedies provided by law, including without limitation, the rights and
remedies of a secured party under the Uniform Commercial Code in force in
Connecticut on the date hereof and as may be amended from time to time.
10. Effect. This Agreement shall be binding upon and inure to the
------
benefit of the parties hereto and their respective successors and assigns.
11. Applicable Law. This Agreement shall be governed by and
--------------
construed according to the laws of the State of Connecticut and may not be
amended except in writing.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered on the date first above written.
FIRST INTERNATIONAL BANCORP, INC.
By:
----------------------------------------
Leslie A. Galbraith
<PAGE>
Its Executive Vice President
-------------------------------------------
Brett N. Silvers
<PAGE>
Exhibit D
---------
REGISTRATION RIGHTS AGREEMENT
-----------------------------
THIS REGISTRATION RIGHTS AGREEMENT is made as of March 31, 1999 by and
among FIRST INTERNATIONAL BANCORP, INC. (the "Company"), and NANCY W. SILVERS
and THE SILVERS FAMILY TRUST (collectively, the "Stockholders").
The Company is issuing 200,000 shares of the Common Stock of the Company on
the date hereof to Brett Silvers, Chairman, Chief Executive Officer and
President of the Company, who is transferring such shares on the date hereof to
his wife, Nancy W. Silvers. In connection therewith, the Company has agreed to
grant to Nancy W. Silvers, with respect to all of the 614,600 shares of Common
Stock owned by her after giving effect to such transfer, and to The Silvers
Family Trust, which owns 200,000 shares of the Common Stock of the Company,
certain registration rights on the terms set forth herein.
Accordingly, the Company covenants and agrees with the Stockholders as
follows:
1. Certain Definitions. As used in this Agreement, the following terms
-------------------
shall have the following respective meanings:
"Act" shall mean the Securities Act of 1933, as amended, or any similar
---
federal statute, and the rules and regulations of the SEC thereunder, all as the
same shall be in effect at the time.
"Agreement" shall mean this Registration Rights Agreement, as amended and
---------
in effect from time to time.
"Common Stock" shall mean the voting common stock of the Company, $.10 par
------------
value per share, and in addition, any capital stock or other securities into
which or for which Common Stock shall have been converted or exchanged pursuant
to any recapitalization, reorganization or merger of the Company.
"Equity Securities" shall mean any capital stock (including the Common
-----------------
Stock) of the Company, whether now authorized or not, and rights, option,
warrants or rights to purchase capital stock, and securities of any type
whatsoever that are, or may become, convertible into capital stock; the number
of shares of any Equity Security which is an option, warrant or right to
purchase capital stock or which is convertible into capital stock shall be the
number of shares of capital stock into which such option, warrant or right is
exercisable or convertible, without regard to when such option, warrant or right
may in fact be exercised or such convertible security may in fact be converted.
<PAGE>
-2-
"1934 Act" shall mean the Securities Exchange Act of 1934, as amended, or
--------
any similar federal statute, and the rules and regulations of the SEC
thereunder, all as the same shall be in effect at the time.
"SEC" shall mean the Securities and Exchange Commission, or any other
---
federal agency at the time administering the Act.
"Shares" shall mean (a) the 200,000 shares of Common Stock owned by The
------
Silvers Family Trust and the 614,600 shares of Common Stock owned by Nancy W.
Silvers as of the date hereof, (b) any capital stock or other securities into
which or for which such Common Stock shall have been converted or exchanged
pursuant to any recapitalization, reorganization or merger of the Company, and
(c) any shares of capital stock issued with respect to the foregoing pursuant to
a stock split or stock dividend; provided that no Shares which have been sold
-------- ----
pursuant to a public offering shall be considered to be outstanding Common
Shares hereunder.
2. Demand Registration Rights. If at any time after the date hereof the
--------------------------
Company shall receive from any Stockholder a written request that the Company
effect a registration with respect to all or a part of the Shares, the Company
will use its diligent best efforts to effect such registration as soon as
practicable (including, without limitation, the execution of an undertaking to
file post-effective amendments, appropriate qualification under applicable blue
sky or other state securities laws and appropriate compliance with applicable
regulations issued under the Act) as may be so requested and as would permit or
facilitate the sale and distribution of all or such portion of such Shares as
are specified in such request, provided that the Company shall not be obligated
--------
to effect, or take any action to effect, such registration pursuant to this
Section 2 after the Company has effected three (3) such registrations pursuant
to this Section 2 and such registrations have been declared or ordered
effective.
The registration statements filed pursuant to the request of any
Stockholder, subject to the provisions of Section 8(a) below, may include other
securities of the Company which are held by officers or directors of the Company
or which are held by parties who, by virtue of agreements with the Company, are
entitled to include their securities in any such registration.
The Company shall file a registration statement covering the Shares so
requested to be registered as soon as practicable after receipt of the request
of any Stockholder.
3. "Piggyback" Registration Rights. Whenever the Company proposes to
--------- ------------ ------
register any of its Common Stock under the Act for a public offering for cash,
whether as a primary or secondary offering (or pursuant to registration rights
granted to holders of other securities of the Company), other than a
registration relating solely to employee benefit plans, or a registration
relating solely to a SEC Rule 145 transaction, the Company shall, each such
time, give the Stockholders written notice of its intent to do so. Upon any
Stockholder's written request given within 15 days after the giving of any such
notice, the Company shall use its best efforts to cause to be included in such
registration all of the Shares held by such Stockholder, to the extent requested
to be
<PAGE>
-3-
registered; provided (i) at least ten percent (10%) of the Shares held by such
Stockholder are included in requests which are given within 15 days of such
notice by such Stockholder pursuant to this Agreement, and (ii) such Stockholder
agrees to sell Shares in the same manner and on the same terms and conditions as
the other Common Stock which the Company proposes to register. If the
registration of which the Company gives notice is for a registered public
offering involving an underwriting, the Company shall so advise the Stockholders
as a part of the written notice given pursuant to this Section 3. In such event,
the right of the Stockholders to registration pursuant to this Section 3 shall
be conditioned upon the Stockholders' participation in such underwriting and the
inclusion of the Stockholders' Shares in the underwriting to the extent provided
herein. In such event, the selling Stockholders shall (together with the
Company, directors and officers and the other shareholders distributing their
securities through such underwriting) enter into an underwriting agreement in
customary form and reasonably acceptable to the selling Stockholders in form and
content with the underwriter or underwriters selected for underwriting by the
Company and reasonably acceptable to the selling Stockholders.
4. Obligations of the Company. Whenever required under Sections 2 or 3
--------------------------
to use its best efforts to effect the registration of any of the Shares held by
the Stockholders, the Company shall, as expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration
statement with respect to such Shares and use its best efforts to cause
such registration statement to become and remain effective until the
Stockholders have completed the distribution of the Shares described in
such registration statements; provided, however, that the Company shall
in no event be obligated to cause any such registration to remain
effective for more than 90 days;
(b) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to comply with the provisions
of the Act with respect to the disposition of all securities covered by
such registration statement;
(c) Furnish to the Stockholders such numbers of
copies of a prospectus, including a preliminary prospectus, in
conformity with the requirements of the Act, and such other documents
as it may reasonably request in order to facilitate the disposition of
such Shares; and
(d) Use its best efforts to register and qualify the
Shares covered by such registration statement under such other
securities or Blue Sky laws of such jurisdictions as shall be
reasonably appropriate in the opinion of the Stockholders and the
managing underwriters for the distribution of the Shares covered by the
registration statement, provided that (anything herein to the contrary
notwithstanding with respect to the bearing of expenses) if any
jurisdiction in which the Shares shall be qualified shall require that
expenses incurred in connection with the qualification therein of the
Shares be borne by selling shareholders, then such expenses shall be
payable by selling
<PAGE>
-4-
shareholders pro rata, to the extent required by such jurisdiction,
and provided further that the Company shall not be obligated to
register or qualify such Shares in any particular jurisdiction in
which the Company would be required to execute a general consent to
service of process in order to effect such registration, qualification
or compliance, unless the Company is already subject to service in
such jurisdiction.
5. Furnish Information. It shall be a condition precedent to the
------- -----------
obligations of the Company to take any action required under Sections 2, 3 and 4
that the selling Stockholders shall furnish to the Company such information
regarding it, the Shares held by it and the intended method of disposition
thereof as the Company shall reasonably request and as shall be required in
connection with the action to be taken by the Company.
6. Expenses of Registration. Up to $20,000 in the aggregate of the
-------- -- ------------
expenses incurred in connection with the registrations pursuant to this
Agreement (excluding underwriting commissions allocable to the selling
Stockholders' Shares and discounts and counsel fees of the Stockholders, which
shall be borne by the selling Stockholders), including without limitation all
registration and qualification fees, printing, and fees and disbursements of
counsel for the Company, shall be borne by the Company; provided, however, that
the Company shall not be required to pay for Blue Sky registration or
qualification expenses in connection with states in which the Company is not
registering or qualifying its original issue shares or the shares of a
shareholder exercising demand registration rights.
7. Underwriting Requirements; Reduction of Shares to be Included in a
------------ ------------ --------- -- ------ -- -- -------- -- -
Registration.
- ------------
(a) If shareholders other than the Stockholders shall
request inclusion of securities of the Company in any registration
initiated by the Stockholders, the Stockholders shall, on behalf of all
shareholders, offer to include the securities of such other
shareholders in the registration and may condition such offer on their
acceptance of all applicable provisions of this Section. If such
registration is to be underwritten, then the Company shall (together
with all shareholders proposing to distribute their securities through
such underwriting) enter into an underwriting agreement in customary
form with the representative of the underwriter or underwriters
selected for such underwriting by the Stockholders and reasonably
acceptable to the Company.
Notwithstanding any other provision of this Section,
if the representative of the underwriter or underwriters advises the
Stockholders in writing that marketing factors make it advisable to
impose a limitation on the number of shares to be underwritten, the
securities of the Company held by other shareholders shall be excluded
from such registration to the extent so required by such limitation and
if a limitation of the number of shares is still required, the number
of the Stockholders' Shares that may be included in the registration
and underwriting shall be reduced accordingly. No securities
<PAGE>
-5-
excluded from the underwriting by reason of the underwriter's
marketing limitation shall be included in such registration.
If the underwriter has not limited the number of securities to be
underwritten, the Company may include its securities for its own
account in such registration if the underwriter so agrees and if the
number of securities which would otherwise have been included in such
registration and underwriting will not thereby be limited.
(b) Notwithstanding any other provision herein, if the
representative of the underwriter or underwriters advises the Company
in writing that marketing factors make it advisable to impose a
limitation on the number of shares of Common Stock to be underwritten
in connection with any "piggyback" registration pursuant to Section 3,
the Company shall so advise the Stockholders and all other holders of
Common Stock whose securities would otherwise be underwritten in such
underwriting, and the number of shares of Common Stock that may be
included in the registration and underwriting shall be allocated
first, to the Company, and next, among the Stockholders and all such
other holders in proportion, as nearly as practicable, to the
respective amounts of shares of Common Stock held by the Stockholder
and such persons at the time of filing the registration statement. No
shares of Common Stock or any other securities excluded from the
underwriting by reason of the underwriter's marketing limitation shall
be included in such registration.
8. Indemnification. In the event any of the Shares held by any
---------------
Stockholder are included in a registration statement under this Agreement:
(a) To the extent permitted by law, the Company will indemnify
and hold harmless such Stockholder, its trustees, officers, directors,
employees and agents, any underwriter (as defined in the Act) for
them, and each person, if any, who controls them or such underwriter
within the meaning of the Act, against any losses, claims, damages or
liabilities, joint or several, to which they may become subject under
the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based
upon any untrue or alleged untrue statement of any material fact
contained in such registration statement, including any preliminary
prospectus or final prospectus contained therein or any amendments or
supplements thereto, or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be
stated therein, or necessary to make the statements therein not
misleading; and will reimburse such Stockholder, its trustees,
officers, directors, employees and agents, such underwriter or
controlling person for any legal or other expenses reasonably incurred
by it in connection with investigating or defending any such loss,
claim, damage, liability or action if it is judicially determined that
there were material misstatements or omissions; provided, however,
that the indemnity agreement contained in this Section shall not apply
to amounts paid in settlement of any such loss, claim, damage,
liability or action if such settlement is effected without the consent
of the Company (which consent shall not be unreasonably withheld), nor
shall the
<PAGE>
-6-
Company be liable in any such case for any such loss, damage,
liability or action to the extent that it arises out of or is based
upon an untrue statement or alleged untrue statement or omission made
in connection with such registration statement, preliminary
prospectus, final prospectus, or amendments or supplements thereto, in
reliance upon and in conformity with written information furnished
expressly for use in connection with such registration by the
Stockholder or controlling person with respect to it.
(b) To the extent permitted by law, the selling Stockholders will
indemnify and hold harmless the Company, each of its directors, each
of its officers who have signed such registration statement, each
person, if any, who controls the Company within the meaning of the
Act, any underwriter for the Company (within the meaning of the Act)
and each other shareholder of the Company whose securities are
included in such registration statement against any losses, claims,
damages or liabilities to which the Company or any such director,
officer, controlling person, underwriter or shareholder may become
subject, under the Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereto) arise out of or
are based upon any untrue statement of any material fact contained in
such registration statement, including any preliminary prospectus or
final prospectus contained therein or any amendments or supplements
thereto, or arise out of or are based upon the omission to state
therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, in each case to the extent
that such untrue statement or omission was made in such registration
statement, preliminary prospectus, final prospectus, or amendments or
supplements thereto, in reliance upon and in conformity with written
information furnished by such Stockholders expressly for use in
connection with such registration; and such Stockholders will
reimburse any legal or other expenses reasonably incurred by the
Company or any such director, officer, controlling person, underwriter
or shareholder in connection with investigating or defending any such
loss, claim, damage, liability or action if it is judicially
determined that there were material misstatements or omissions;
provided, however, that the indemnity agreement contained in this
Section shall not apply to amounts paid in settlement of any such
loss, claim, damage, liability or action if such settlement is
effected without the Stockholders' consent (which consent shall not be
unreasonably withheld).
(c) Promptly after receipt by an indemnified party under this
Section of notice of the commencement of any action, such indemnified
party will, if a claim in respect thereof is to be made against any
indemnifying party under this Section, notify the indemnifying party
in writing of the commencement thereof and the indemnifying party
shall have the right to participate in, and to the extent the
indemnifying party desires, jointly with any other indemnifying party
similarly noticed, to assume at its expense the defense thereof with
counsel mutually satisfactory to the parties. The failure to notify an
indemnifying party promptly of the commencement of any such action, if
prejudicial to his ability to defend such action, shall relieve such
indemnifying party of any liability to the indemnified party under
this Section, but the
<PAGE>
-7-
omission so to notify the indemnifying party will not relieve him of
any liability which he may have to any indemnified party otherwise
other than under this Section.
9. Reports Under Securities Exchange Act of 1934. With a view to making
------- ----- ---------- -------- --- -- ----
available to the Stockholders the benefits of Rule 144 promulgated under the Act
and any other rule or regulation of the SEC that may at any time permit the
Stockholders to sell securities of the Company to the public without
registration, the Company agrees to use its best efforts: (i) to make and keep
public information available, as those terms are understood and defined in Rule
144, at all times, (ii) to file with the SEC in a timely manner all reports and
other documents required to be filed by an issuer of securities registered under
the Act or the 1934 Act (at any time after the Company becomes subject to such
requirements), and (iii) as long as the Stockholders hold any of the Shares, to
furnish in writing upon any Stockholder's request a written statement by the
Company that it has complied with the reporting requirements of Rule 144 and of
the Act and the 1934 Act, and to furnish to the Stockholders a copy of the most
recent annual or quarterly report of the Company, and such other reports and
documents so filed by the Company as may be reasonably requested in availing the
Stockholders of any rule or regulation of the SEC permitting the selling of any
such securities without registration.
10. Lockup Agreement. In consideration for the Company agreeing to its
------ ---------
obligations under this Agreement, the Stockholders agree in connection with any
registration of the Company's securities, upon the reasonable request of the
Company or the underwriters managing any underwritten offering of the Company's
securities, not to sell, make any short sale of, loan, grant any option for the
purchase of, or otherwise dispose of any Shares or other securities of the
Company (other than those included in the registration) without the prior
written consent of the Company or such underwriters, as the case may be, for
such period of time not to exceed the later of (i) one hundred and eighty (180)
days from the filing date and (ii) ninety (90) days from the effective date of
the registration statement, as the Company or the underwriters may specify.
11. Representations and Warranties of the Company. The Company represents
--------------- --- ---------- -- --- -------
and warrants to the Stockholders that this Agreement has been duly executed and
delivered by the Company and constitutes the legal, valid and binding obligation
of the Company, enforceable in accordance with its terms.
12. Miscellaneous.
-------------
(a) All covenants and agreements contained in this Agreement by or
on behalf of any of the parties hereto shall bind and inure to the benefit
of the respective successors and assigns of the parties hereto (including
without limitation transferees of any Shares subject hereto or any portion
thereof), whether so expressed or not; provided, however, that no
Stockholder (or its transferees) may transfer its rights under this
Agreement except to a transferee of at least 10% of the Shares and only if
such transferee becomes a party to this Agreement (including, without
limitation, for purposes of agreeing to comply
<PAGE>
-8-
with the agreements of the Stockholders set forth herein). Any action or
decision provided herein to be taken or made by the Stockholders hereunder that
is required to be taken by the Stockholders collectively rather than
individually shall be taken or made by the holders of at least 51% of the total
number of then outstanding Equity Securities.
(b) All notices, requests, consents and other communications hereunder
shall be in writing and shall be delivered by hand, sent by Federal Express or
other recognized overnight delivery service, or mailed by certified or
registered mail, return receipt requested, postage prepaid, addressed as
follows:
if to the Company or the Stockholder, at the address of such party set
forth on the signature page hereof;
if to any subsequent holder of Shares subject hereto, to it at such address
as may have been furnished to the Company in writing by such holder;
or, in any case, at such other address or addresses as shall have been
furnished in writing to the Company (in the case of a holder of Shares subject
hereto) or to the holders of such Shares (in the case of the Company) in
accordance with the provisions of this paragraph.
(c) This Agreement shall be governed by and construed in accordance with
the laws of the State of Connecticut (without regard to its conflict of laws or
choice of laws principles).
(d) This Agreement may not be amended or modified, and no provision hereof
may be waived, without the written consent of the party against whom enforcement
of such an amendment, modification or waiver is sought.
(e) This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
(f) If any provision of this Agreement shall be held to be illegal, invalid
or unenforceable, such illegality, invalidity or unenforceability shall attach
only to such provision and shall not in any manner affect or render illegal,
invalid or unenforceable any other provision of this Agreement, and this
Agreement shall be carried out as if any such illegal, invalid or unenforceable
provision were not contained herein.
[Signature Follow on Next Page]
<PAGE>
-9-
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first above written.
FIRST INTERNATIONAL BANCORP, INC.
By:
-----------------------------------------
Its
THE SILVERS FAMILY TRUST
By
-----------------------------------------
BRUCE C. SILVERS, ITS TRUSTEE
--------------------------------------------
NANCY W. SILVERS
<PAGE>
Exhibit 10.3
REGISTRATION RIGHTS AGREEMENT
-----------------------------
THIS REGISTRATION RIGHTS AGREEMENT is made as of March 31, 1999 by and
among FIRST INTERNATIONAL BANCORP, INC. (the "Company"), and NANCY W. SILVERS
and THE SILVERS FAMILY TRUST (collectively, the "Stockholders").
The Company is issuing 200,000 shares of the Common Stock of the Company on
the date hereof to Brett Silvers, Chairman, Chief Executive Officer and
President of the Company, who is transferring such shares on the date hereof to
his wife, Nancy W. Silvers. In connection therewith, the Company has agreed to
grant to Nancy W. Silvers, with respect to all of the 614,600 shares of Common
Stock owned by her after giving effect to such transfer, and to The Silvers
Family Trust, which owns 200,000 shares of the Common Stock of the Company,
certain registration rights on the terms set forth herein.
Accordingly, the Company covenants and agrees with the Stockholders as
follows:
1. Certain Definitions. As used in this Agreement, the following terms
------- -----------
shall have the following respective meanings:
"Act" shall mean the Securities Act of 1933, as amended, or any similar
---
federal statute, and the rules and regulations of the SEC thereunder, all as the
same shall be in effect at the time.
"Agreement" shall mean this Registration Rights Agreement, as amended and
---------
in effect from time to time.
"Common Stock" shall mean the voting common stock of the Company, $.10 par
------ -----
value per share, and in addition, any capital stock or other securities into
which or for which Common Stock shall have been converted or exchanged pursuant
to any recapitalization, reorganization or merger of the Company.
"Equity Securities" shall mean any capital stock (including the Common
------ ----------
Stock) of the Company, whether now authorized or not, and rights, option,
warrants or rights to purchase capital stock, and securities of any type
whatsoever that are, or may become, convertible into capital stock; the number
of shares of any Equity Security which is an option, warrant or right to
purchase capital stock or which is convertible into capital stock shall be the
number of shares of capital stock into which such option, warrant or right is
exercisable or convertible, without regard to when such option, warrant or right
may in fact be exercised or such convertible security may in fact be converted.
"1934 Act" shall mean the Securities Exchange Act of 1934, as amended, or
---- ---
any similar federal statute, and the rules and regulations of the SEC
thereunder, all as the same shall be in effect at the time.
"SEC" shall mean the Securities and Exchange Commission, or any other
---
federal agency at the time administering the Act.
<PAGE>
-2-
"Shares" shall mean (a) the 200,000 shares of Common Stock owned by The
------
Silvers Family Trust and the 614,600 shares of Common Stock owned by Nancy W.
Silvers as of the date hereof, (b) any capital stock or other securities into
which or for which such Common Stock shall have been converted or exchanged
pursuant to any recapitalization, reorganization or merger of the Company, and
(c) any shares of capital stock issued with respect to the foregoing pursuant to
a stock split or stock dividend; provided that no Shares which have been sold
pursuant to a public offering shall be considered to be outstanding Common
Shares hereunder.
2. Demand Registration Rights. If at any time after the date hereof the
------ ------------ ------
Company shall receive from any Stockholder a written request that the Company
effect a registration with respect to all or a part of the Shares, the Company
will use its diligent best efforts to effect such registration as soon as
practicable (including, without limitation, the execution of an undertaking to
file post-effective amendments, appropriate qualification under applicable blue
sky or other state securities laws and appropriate compliance with applicable
regulations issued under the Act) as may be so requested and as would permit or
facilitate the sale and distribution of all or such portion of such Shares as
are specified in such request, provided that the Company shall not be obligated
--------
to effect, or take any action to effect, such registration pursuant to this
Section 2 after the Company has effected three (3) such registrations pursuant
to this Section 2 and such registrations have been declared or ordered
effective.
The registration statements filed pursuant to the request of any
Stockholder, subject to the provisions of Section 8(a) below, may include other
securities of the Company which are held by officers or directors of the Company
or which are held by parties who, by virtue of agreements with the Company, are
entitled to include their securities in any such registration.
The Company shall file a registration statement covering the Shares so
requested to be registered as soon as practicable after receipt of the request
of any Stockholder.
3. "Piggyback" Registration Rights. Whenever the Company proposes to
--------- ------------ ------
register any of its Common Stock under the Act for a public offering for cash,
whether as a primary or secondary offering (or pursuant to registration rights
granted to holders of other securities of the Company), other than a
registration relating solely to employee benefit plans, or a registration
relating solely to a SEC Rule 145 transaction, the Company shall, each such
time, give the Stockholders written notice of its intent to do so. Upon any
Stockholder's written request given within 15 days after the giving of any such
notice, the Company shall use its best efforts to cause to be included in such
registration all of the Shares held by such Stockholder, to the extent requested
to be registered; provided (i) at least ten percent (10%) of the Shares held by
such Stockholder are included in requests which are given within 15 days of such
notice by such Stockholder pursuant to this Agreement, and (ii) such Stockholder
agrees to sell Shares in the same manner and on the same terms and conditions as
the other Common Stock which the Company proposes to register. If the
registration of which the Company gives notice is for a registered public
offering involving an underwriting, the Company shall so advise the Stockholders
as a part of the written notice given pursuant to this Section 3. In such event,
the right of the Stockholders to registration pursuant to this Section 3 shall
be conditioned upon the
<PAGE>
-3-
Stockholders' participation in such underwriting and the inclusion of the
Stockholders' Shares in the underwriting to the extent provided herein. In such
event, the selling Stockholders shall (together with the Company, directors and
officers and the other shareholders distributing their securities through such
underwriting) enter into an underwriting agreement in customary form and
reasonably acceptable to the selling Stockholders in form and content with the
underwriter or underwriters selected for underwriting by the Company and
reasonably acceptable to the selling Stockholders.
4. Obligations of the Company. Whenever required under Sections 2 or 3
----------- -- --- -------
to use its best efforts to effect the registration of any of the Shares held by
the Stockholders, the Company shall, as expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration
statement with respect to such Shares and use its best efforts to cause
such registration statement to become and remain effective until the
Stockholders have completed the distribution of the Shares described in
such registration statements; provided, however, that the Company shall
in no event be obligated to cause any such registration to remain
effective for more than 90 days;
(b) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to comply with the provisions
of the Act with respect to the disposition of all securities covered by
such registration statement;
(c) Furnish to the Stockholders such numbers of
copies of a prospectus, including a preliminary prospectus, in
conformity with the requirements of the Act, and such other documents
as it may reasonably request in order to facilitate the disposition of
such Shares; and
(d) Use its best efforts to register and qualify the
Shares covered by such registration statement under such other
securities or Blue Sky laws of such jurisdictions as shall be
reasonably appropriate in the opinion of the Stockholders and the
managing underwriters for the distribution of the Shares covered by the
registration statement, provided that (anything herein to the contrary
notwithstanding with respect to the bearing of expenses) if any
jurisdiction in which the Shares shall be qualified shall require that
expenses incurred in connection with the qualification therein of the
Shares be borne by selling shareholders, then such expenses shall be
payable by selling shareholders pro rata, to the extent required by
such jurisdiction, and provided further that the Company shall not be
obligated to register or qualify such Shares in any particular
jurisdiction in which the Company would be required to execute a
general consent to service of process in order to effect such
registration, qualification or compliance, unless the Company is
already subject to service in such jurisdiction.
5. Furnish Information. It shall be a condition precedent to the
------- -----------
obligations of the Company to take any action required under Sections 2, 3 and 4
that the selling Stockholders shall furnish to the Company such information
regarding it, the Shares held by it and the intended method of disposition
thereof as the Company shall reasonably request and as shall be required in
connection with the action to be taken by the Company.
<PAGE>
-4-
6. Expenses of Registration. Up to $20,000 in the aggregate of the
-------- -- ------------
expenses incurred in connection with the registrations pursuant to this
Agreement (excluding underwriting commissions allocable to the selling
Stockholders' Shares and discounts and counsel fees of the Stockholders, which
shall be borne by the selling Stockholders), including without limitation all
registration and qualification fees, printing, and fees and disbursements of
counsel for the Company, shall be borne by the Company; provided, however, that
the Company shall not be required to pay for Blue Sky registration or
qualification expenses in connection with states in which the Company is not
registering or qualifying its original issue shares or the shares of a
shareholder exercising demand registration rights.
7. Underwriting Requirements; Reduction of Shares to be Included in a
------------ ------------ --------- -- ------ -- -- -------- -- -
Registration.
- ------------
(a) If shareholders other than the Stockholders shall
request inclusion of securities of the Company in any registration
initiated by the Stockholders, the Stockholders shall, on behalf of all
shareholders, offer to include the securities of such other
shareholders in the registration and may condition such offer on their
acceptance of all applicable provisions of this Section. If such
registration is to be underwritten, then the Company shall (together
with all shareholders proposing to distribute their securities through
such underwriting) enter into an underwriting agreement in customary
form with the representative of the underwriter or underwriters
selected for such underwriting by the Stockholders and reasonably
acceptable to the Company.
Notwithstanding any other provision of this Section,
if the representative of the underwriter or underwriters advises the
Stockholders in writing that marketing factors make it advisable to
impose a limitation on the number of shares to be underwritten, the
securities of the Company held by other shareholders shall be excluded
from such registration to the extent so required by such limitation and
if a limitation of the number of shares is still required, the number
of the Stockholders' Shares that may be included in the registration
and underwriting shall be reduced accordingly. No securities excluded
from the underwriting by reason of the underwriter's marketing
limitation shall be included in such registration.
If the underwriter has not limited the number of
securities to be underwritten, the Company may include its securities
for its own account in such registration if the underwriter so agrees
and if the number of securities which would otherwise have been
included in such registration and underwriting will not thereby be
limited.
(b) Notwithstanding any other provision herein, if
the representative of the underwriter or underwriters advises the
Company in writing that marketing factors make it advisable to impose a
limitation on the number of shares of Common Stock to be underwritten
in connection with any "piggyback" registration pursuant to Section 3,
the Company shall so advise the Stockholders and all other holders of
Common Stock whose securities would otherwise be
<PAGE>
-5-
underwritten in such underwriting, and the number of shares of Common
Stock that may be included in the registration and underwriting shall
be allocated first, to the Company, and next, among the Stockholders
and all such other holders in proportion, as nearly as practicable, to
the respective amounts of shares of Common Stock held by the
Stockholder and such persons at the time of filing the registration
statement. No shares of Common Stock or any other securities excluded
from the underwriting by reason of the underwriter's marketing
limitation shall be included in such registration.
8. Indemnification. In the event any of the Shares held by any
---------------
Stockholder are included in a registration statement under this Agreement:
(a) To the extent permitted by law, the Company will indemnify
and hold harmless such Stockholder, its trustees, officers, directors,
employees and agents, any underwriter (as defined in the Act) for
them, and each person, if any, who controls them or such underwriter
within the meaning of the Act, against any losses, claims, damages or
liabilities, joint or several, to which they may become subject under
the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based
upon any untrue or alleged untrue statement of any material fact
contained in such registration statement, including any preliminary
prospectus or final prospectus contained therein or any amendments or
supplements thereto, or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be
stated therein, or necessary to make the statements therein not
misleading; and will reimburse such Stockholder, its trustees,
officers, directors, employees and agents, such underwriter or
controlling person for any legal or other expenses reasonably incurred
by it in connection with investigating or defending any such loss,
claim, damage, liability or action if it is judicially determined that
there were material misstatements or omissions; provided, however,
that the indemnity agreement contained in this Section shall not apply
to amounts paid in settlement of any such loss, claim, damage,
liability or action if such settlement is effected without the consent
of the Company (which consent shall not be unreasonably withheld), nor
shall the Company be liable in any such case for any such loss,
damage, liability or action to the extent that it arises out of or is
based upon an untrue statement or alleged untrue statement or omission
made in connection with such registration statement, preliminary
prospectus, final prospectus, or amendments or supplements thereto, in
reliance upon and in conformity with written information furnished
expressly for use in connection with such registration by the
Stockholder or controlling person with respect to it.
(b) To the extent permitted by law, the selling Stockholders will
indemnify and hold harmless the Company, each of its directors, each
of its officers who have signed such registration statement, each
person, if any, who controls the Company within the meaning of the
Act, any underwriter for the Company (within the meaning of the Act)
and each other shareholder of the Company whose securities are
included in such registration statement against any losses, claims,
damages or liabilities to which the Company or any such director,
officer, controlling person, underwriter or shareholder may become
subject, under the Act or otherwise, insofar
<PAGE>
-6-
as such losses, claims, damages or liabilities (or actions in respect
thereto) arise out of or are based upon any untrue statement of any
material fact contained in such registration statement, including any
preliminary prospectus or final prospectus contained therein or any
amendments or supplements thereto, or arise out of or are based upon
the omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, in
each case to the extent that such untrue statement or omission was
made in such registration statement, preliminary prospectus, final
prospectus, or amendments or supplements thereto, in reliance upon and
in conformity with written information furnished by such Stockholders
expressly for use in connection with such registration; and such
Stockholders will reimburse any legal or other expenses reasonably
incurred by the Company or any such director, officer, controlling
person, underwriter or shareholder in connection with investigating or
defending any such loss, claim, damage, liability or action if it is
judicially determined that there were material misstatements or
omissions; provided, however, that the indemnity agreement contained
in this Section shall not apply to amounts paid in settlement of any
such loss, claim, damage, liability or action if such settlement is
effected without the Stockholders' consent (which consent shall not be
unreasonably withheld).
(c) Promptly after receipt by an indemnified party under this
Section of notice of the commencement of any action, such indemnified
party will, if a claim in respect thereof is to be made against any
indemnifying party under this Section, notify the indemnifying party
in writing of the commencement thereof and the indemnifying party
shall have the right to participate in, and to the extent the
indemnifying party desires, jointly with any other indemnifying party
similarly noticed, to assume at its expense the defense thereof with
counsel mutually satisfactory to the parties. The failure to notify an
indemnifying party promptly of the commencement of any such action, if
prejudicial to his ability to defend such action, shall relieve such
indemnifying party of any liability to the indemnified party under
this Section, but the omission so to notify the indemnifying party
will not relieve him of any liability which he may have to any
indemnified party otherwise other than under this Section.
9. Reports Under Securities Exchange Act of 1934. With a view to
------- ----- ---------- -------- --- -- ----
making available to the Stockholders the benefits of Rule 144 promulgated
under the Act and any other rule or regulation of the SEC that may at any
time permit the Stockholders to sell securities of the Company to the
public without registration, the Company agrees to use its best efforts:
(i) to make and keep public information available, as those terms are
understood and defined in Rule 144, at all times, (ii) to file with the SEC
in a timely manner all reports and other documents required to be filed by
an issuer of securities registered under the Act or the 1934 Act (at any
time after the Company becomes subject to such requirements), and (iii) as
long as the Stockholders hold any of the Shares, to furnish in writing upon
any Stockholder's request a written statement by the Company that it has
complied with the reporting requirements of Rule 144 and of the Act and the
1934 Act, and to furnish to the Stockholders a copy of the most recent
annual or quarterly report of the Company, and such other reports and
documents so filed by the Company as may be reasonably requested in
availing the Stockholders of any rule or regulation of the SEC permitting
the selling of any such securities without registration.
<PAGE>
-7-
10. Lockup Agreement. In consideration for the Company agreeing to its
------ ---------
obligations under this Agreement, the Stockholders agree in connection with any
registration of the Company's securities, upon the reasonable request of the
Company or the underwriters managing any underwritten offering of the Company's
securities, not to sell, make any short sale of, loan, grant any option for the
purchase of, or otherwise dispose of any Shares or other securities of the
Company (other than those included in the registration) without the prior
written consent of the Company or such underwriters, as the case may be, for
such period of time not to exceed the later of (i) one hundred and eighty (180)
days from the filing date and (ii) ninety (90) days from the effective date of
the registration statement, as the Company or the underwriters may specify.
11. Representations and Warranties of the Company. The Company represents
--------------- --- ---------- -- --- -------
and warrants to the Stockholders that this Agreement has been duly executed and
delivered by the Company and constitutes the legal, valid and binding obligation
of the Company, enforceable in accordance with its terms.
12. Miscellaneous.
-------------
(a) All covenants and agreements contained in this Agreement by or on
behalf of any of the parties hereto shall bind and inure to the benefit of
the respective successors and assigns of the parties hereto (including
without limitation transferees of any Shares subject hereto or any portion
thereof), whether so expressed or not; provided, however, that no
Stockholder (or its transferees) may transfer its rights under this
Agreement except to a transferee of at least 10% of the Shares and only if
such transferee becomes a party to this Agreement (including, without
limitation, for purposes of agreeing to comply with the agreements of the
Stockholders set forth herein). Any action or decision provided herein to
be taken or made by the Stockholders hereunder that is required to be taken
by the Stockholders collectively rather than individually shall be taken or
made by the holders of at least 51% of the total number of then outstanding
Equity Securities.
(b) All notices, requests, consents and other communications hereunder
shall be in writing and shall be delivered by hand, sent by Federal Express
or other recognized overnight delivery service, or mailed by certified or
registered mail, return receipt requested, postage prepaid, addressed as
follows:
if to the Company or the Stockholder, at the address of such party set
forth on the signature page hereof;
if to any subsequent holder of Shares subject hereto, to it at such
address as may have been furnished to the Company in writing by such
holder;
or, in any case, at such other address or addresses as shall have been
furnished in writing to the Company (in the case of a holder of Shares
subject hereto) or to the holders of such Shares (in the case of the
Company) in accordance with the provisions of this paragraph.
(c) This Agreement shall be governed by and construed in accordance
with the laws of the State of Connecticut (without regard to its conflict
of laws or choice of laws principles).
<PAGE>
-8-
(d) This Agreement may not be amended or modified, and no provision
hereof may be waived, without the written consent of the party against whom
enforcement of such an amendment, modification or waiver is sought.
(e) This Agreement may be executed in two or more counterparts, each
of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
(f) If any provision of this Agreement shall be held to be illegal,
invalid or unenforceable, such illegality, invalidity or unenforceability
shall attach only to such provision and shall not in any manner affect or
render illegal, invalid or unenforceable any other provision of this
Agreement, and this Agreement shall be carried out as if any such illegal,
invalid or unenforceable provision were not contained herein.
[Signature Follow on Next Page]
<PAGE>
-9-
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first above written.
FIRST INTERNATIONAL BANCORP, INC.
By: /s/ Leslie A. Galbraith
-----------------------------------------------
Its Executive Vice President
THE SILVERS FAMILY TRUST
By /s/ Bruce C. Silvers
-----------------------------------------------
BRUCE C. SILVERS, ITS TRUSTEE
/s/ Nancy W. Silvers
-------------------------------------------------
NANCY W. SILVERS
<PAGE>
EXHIBIT 11.1 COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
MARCH 31,
---------------------------
1999 1998
----------- -----------
<S> <C> <C>
Weighted average common stock................... 7,957,342 7,876,209
Weighted average common stock equivalents....... 206,898 338,411
----------- -----------
Weighted average common stock and equivalents... 8,164,240 8,214,620
=========== ===========
Net income...................................... $ 2,217,202 $ 1,402,927
=========== ===========
Net income per share - Basic.................... $ 0.28 $ 0.18
=========== ===========
Net income per share - Diluted.................. $ 0.27 $ 0.17
=========== ===========
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 11,271,622
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 51,490,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 31,132,654
<INVESTMENTS-CARRYING> 36,430,863
<INVESTMENTS-MARKET> 36,548,338
<LOANS> 137,901,687
<ALLOWANCE> 4,500,000
<TOTAL-ASSETS> 279,175,996
<DEPOSITS> 222,750,702
<SHORT-TERM> 330,677
<LIABILITIES-OTHER> 4,035,105
<LONG-TERM> 0
0
0
<COMMON> 815,969
<OTHER-SE> 51,243,543
<TOTAL-LIABILITIES-AND-EQUITY> 279,175,996
<INTEREST-LOAN> 2,788,469
<INTEREST-INVEST> 575,529
<INTEREST-OTHER> 686,204
<INTEREST-TOTAL> 4,050,202
<INTEREST-DEPOSIT> 2,358,824
<INTEREST-EXPENSE> 2,581,730
<INTEREST-INCOME-NET> 1,468,472
<LOAN-LOSSES> 1,538,914
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 9,351,825
<INCOME-PRETAX> 3,822,764
<INCOME-PRE-EXTRAORDINARY> 3,822,764
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,217,202
<EPS-PRIMARY> 0.28
<EPS-DILUTED> 0.27
<YIELD-ACTUAL> 2.33
<LOANS-NON> 4,040,607
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 4,000,000
<CHARGE-OFFS> 1,040,725
<RECOVERIES> 1,811
<ALLOWANCE-CLOSE> 4,500,000
<ALLOWANCE-DOMESTIC> 3,101,190
<ALLOWANCE-FOREIGN> 660,222
<ALLOWANCE-UNALLOCATED> 738,588
</TABLE>
