<PAGE> 1
Form 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Quarterly report pursuant to section 13 or 15(d) of the Securities Exchange Act
of 1934
For the quarterly period Commission file number:
ended MARCH 31, 1997 0-22832
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ALLIED CAPITAL LENDING CORPORATION
-----------------------------------------------------------
(exact name of Registrant as specified in its charter)
MARYLAND 52-1081052
- ----------------------- --------------------
(State or jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
c/o ALLIED CAPITAL ADVISERS, INC.
1666 K STREET, NW
9TH FLOOR
WASHINGTON, DC 20006
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(Address of principal executive offices)
Registrant's telephone number, including area code: (202) 331-1112
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Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 12 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter periods as 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
--- ---- -----
On May 12, 1997 there were 5,138,933 shares outstanding of the Registrant's
common stock, $0.0001 par value.
<PAGE> 2
ALLIED CAPITAL LENDING CORPORATION
FORM 10-Q INDEX
<TABLE>
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheet as of March 31, 1997
and December 31, 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Consolidated Statement of Operations - For the Three Months Ended
March 31, 1997 and 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Consolidated Statement of Changes in Net Assets - For the Three Months
Ended March 31, 1997 and 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Consolidated Statement of Cash Flows - For the Three Months
Ended March 31, 1997 and 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Notes to the Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
PART II. OTHER INFORMATION
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Item 2. Changes in Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Item 3. Defaults Upon Senior Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Item 4. Submission of Matters to a Vote of Security Holders . . . . . . . . . . . . . . . . . . . . . . . . . 10
Item 5. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
</TABLE>
<PAGE> 3
PART I - Financial Information
Item 1. Financial Statements
ALLIED CAPITAL LENDING CORPORATION
CONSOLIDATED BALANCE SHEET
(in thousands, except number of shares)
<TABLE>
<CAPTION>
March 31, 1997 December 31, 1996
------------- -----------------
(unaudited)
<S> <C> <C>
ASSETS
Investments at Value:
Loans (cost: 1997 - $57,407; 1996 - $54,867). . . . . . . . . $57,127 $54,613
Loan held for sale (cost: 1997 - $5,403; 1996 - $5,444). . . 5,708 5,795
------ ------
Total investments . . . . . . . . . . . . . . . . . . 62,835 60,408
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . 2,372 1,316
Accrued interest receivable . . . . . . . . . . . . . . . . . . 891 861
Excess servicing asset . . . . . . . . . . . . . . . . . . . . 5,100 5,043
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . 2,083 774
------ ------
Total assets . . . . . . . . . . . . . . . . . . . . . $73,281 $68,402
====== ======
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Notes payable . . . . . . . . . . . . . . . . . . . . . . . . . $28,513 $23,743
Accounts payable and accrued expenses . . . . . . . . . . . . . 2,499 1,857
Investment advisory fee payable . . . . . . . . . . . . . . . . 446 421
Dividends and distributions payable . . . . . . . . . . . . . . - 410
------ ------
Total liabilities . . . . . . . . . . . . . . . . . . . 31,458 26,431
------ ------
Commitments and Contingencies
Shareholders' Equity:
Common stock, $0.0001 par value; 20,000,000 shares
authorized; 5,138,933 and 5,126,905 shares issued and
outstanding at 3/31/97 and 12/31/96 . . . . . . . . . . . . . - -
Additional paid-in capital . . . . . . . . . . . . . . . . . . 42,592 42,404
Net unrealized appreciation on investments . . . . . . . . . . 25 97
Distributions in excess of accumulated earnings . . . . . . . . (794) (530)
------ ------
Total shareholders' equity . . . . . . . . . . . . . 41,823 41,971
------ ------
Total liabilities and shareholders' equity . . . . . $73,281 $68,402
====== ======
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
1
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ALLIED CAPITAL LENDING CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands, except per share amounts)
(unaudited)
<TABLE>
<CAPTION>
For the Three Months Ended
March 31,
----------------------------------
1997 1996
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<S> <C> <C>
Investment Income:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . $2,024 $1,591
Premium income . . . . . . . . . . . . . . . . . . . . . . . 482 662
----- ------
Total investment income . . . . . . . . . . . . . . . . . . 2,506 2,253
----- -----
Operating Expenses:
Investment advisory fee . . . . . . . . . . . . . . . . . . . 446 314
Interest expense . . . . . . . . . . . . . . . . . . . . . . 520 396
Other operating expenses . . . . . . . . . . . . . . . . . . 135 132
----- ------
Total expenses . . . . . . . . . . . . . . . . . . . . . . 1,101 842
----- ------
Net investment income . . . . . . . . . . . . . . . . . . . . . 1,405 1,411
Net realized losses on investments . . . . . . . . . . . . . . (28) (60)
----- -------
Net investment income before net unrealized
depreciation on investments . . . . . . . . . . . . . . . . . 1,377 1,351
Net unrealized depreciation on investments . . . . . . . . . . (72) (21)
----- -------
Net increase in net assets resulting from
operations . . . . . . . . . . . . . . . . . . . . . . . . . $1,305 $1,330
===== =====
Earnings per share . . . . . . . . . . . . . . . . . . . . . . $ 0.25 $ 0.30
===== =====
Weighted average number of shares and share
equivalents outstanding . . . . . . . . . . . . . . . . . . . 5,156 4,386
===== =====
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
2
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ALLIED CAPITAL LENDING CORPORATION
CONSOLIDATED STATEMENT OF CHANGES IN NET ASSETS
(in thousands, except per share amounts)
(unaudited)
<TABLE>
<CAPTION>
For the Three Months Ended March 31,
------------------------------------
1997 1996
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<S> <C> <C>
Increase in Net Assets Resulting from Operations:
Net investment income . . . . . . . . . . . . . . . . . . . . . . $ 1,405 $ 1,411
Net realized losses on investments . . . . . . . . . . . . . . . . (28) (60)
Net unrealized depreciation on investments . . . . . . . . . . . . (72) (21)
------ ------
Net increase in net assets resulting from operations . . . . . 1,305 1,330
------ ------
Distributions to Shareholders from:
Net investment income. . . . . . . . . . . . . . . . . . . . . (1,641) (1,315)
------ ------
Capital Share Transactions:
Sale of common stock . . . . . . . . . . . . . . . . . . . . . 100 -
Issuance of common stock in lieu of cash distributions . . . . 88 66
------ ------
Net increase in net assets resulting from capital share
transactions. . . . . . . . . . . . . . . . . . . . . . . 188 66
------ ------
Total increase (decrease) in net assets . . . . . . . . . . . . . (148) 81
Net assets at beginning of period . . . . . . . . . . . . . . . . 41,971 32,884
------ ------
Net assets at end of period . . . . . . . . . . . . . . . . . . . $41,823 $32,965
====== ======
Net asset value per share . . . . . . . . . . . . . . . . . . . . $ 8.14 $ 7.51
====== ======
Shares outstanding at end of period . . . . . . . . . . . . . . . 5,139 4,389
====== ======
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
3
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ALLIED CAPITAL LENDING CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
For the three months ended March 31,
------------------------------------
1997 1996
----- -------
<S> <C> <C>
Cash Flows from Operating Activities:
Net increase in net assets resulting from operations . . . . . . . . . $ 1,305 $ 1,330
Adjustments to reconcile net increase in assets resulting
from operations to net cash provided by (used in) operating
activities:
Premium income . . . . . . . . . . . . . . . . . . . . . . . . . . (482) (662)
Amortization of loan discounts and fees . . . . . . . . . . . . . . (188) (100)
Net realized losses on investments . . . . . . . . . . . . . . . . 28 60
Net unrealized depreciation on investments . . . . . . . . . . . . 72 21
Changes in assets and liabilities:
Accrued interest receivable . . . . . . . . . . . . . . . . . . . (30) 29
Excess servicing asset . . . . . . . . . . . . . . . . . . . . . (57) (402)
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . (1,309) 115
Accounts payable and accrued expenses . . . . . . . . . . . . . . 637 (1,135)
Investment advisory fee payable . . . . . . . . . . . . . . . . . 25 (16)
------- ------
Net cash (used in) provided by operating activities . . . . . . 1 (760)
------- ------
Cash flows from Investing Activities:
Loan originations . . . . . . . . . . . . . . . . . . . . . . . . . . (10,903) (6,509)
Proceeds from the sale of loans . . . . . . . . . . . . . . . . . . . 6,907 8,080
Collection of principal . . . . . . . . . . . . . . . . . . . . . . . 2,244 1,901
------- ------
Net cash provided by investing activities . . . . . . . . . . . (1,752) 3,472
------- ------
Cash Flows from Financing Activities:
Dividends and distributions paid . . . . . . . . . . . . . . . . . . (1,963) (1,589)
Net borrowings (repayments) under revolving lines of credit . . . . 4,770 (2,906)
------- ------
Net cash provided by (used in) financing activities . . . . . 2,807 (4,495)
------- ------
Net increase (decrease) in cash and cash equivalents . . . . . . . . . . 1,056 (1,783)
Cash and cash equivalents, beginning of period . . . . . . . . . . . . . 1,316 3,020
------- ------
Cash and cash equivalents, end of period . . . . . . . . . . . . . . . . $ 2,372 $ 1,237
======= ======
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
4
<PAGE> 7
ALLIED CAPITAL LENDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997
(UNAUDITED)
NOTE 1. ORGANIZATION
Effective January 1, 1997, Allied Capital Lending Corporation
(Company) reorganized to provide the Company with greater flexibility
to generate loans and to better match its financing with its
investment opportunities, and to maximize the return on the Company's
loans (Reorganization). The Company formed two subsidiaries, Allied
Capital SBLC Corporation (Allied SBLC) and Allied Capital Credit
Corporation (Allied Credit). Both Allied SBLC and Allied Credit
(Subsidiaries) are Maryland corporations and closed-end management
investment companies that have elected to be regulated as business
development companies (BDCs) under the Investment Company Act of 1940
(1940 Act). Effective January 1, 1997, the Company assigned its small
business lending company (SBLC) license and transferred all Section
7(a) loans and related assets and liabilities to Allied SBLC in return
for 100% of Allied SBLC's common stock. The Company dissolved ACLC
Limited Partnership (Partnership), of which the Company had a 1%
general partnership interest and owned a 98% limited partnership
interest, and purchased the 1% limited partnership interest not owned
by the Company. The Company assumed all of the Partnership's assets
and liabilities upon the dissolution. The consolidated financial
statement of the Company for 1996 include the accounts of the Company
and the Partnership.
NOTE 2. GENERAL
In the opinion of management, the accompanying unaudited consolidated
financial statements of the Company contain all adjustments
(consisting of only normal recurring accruals) necessary to present
fairly the Company's consolidated financial position as of March 31,
1997 and the results of operations and changes in net assets for the
periods indicated. Certain information and footnote disclosures
normally included in the financial statements prepared in accordance
with generally accepted accounting principles have been condensed or
omitted. It is suggested that these financial statements be read in
conjunction with the financial statements and notes thereto included
in the Company's December 31, 1996 Annual Report. The results of
operations for the three months ended March 31, 1997 are not
necessarily indicative of the operating results to be expected for the
full year. Certain reclassifications have been made to the 1996
financial statements in order to conform to the 1997 presentation.
NOTE 3. DIVIDENDS
The Company's board of directors declared a first quarter dividend
equivalent to $0.32 per share payable on March 31, 1997 to
shareholders of record on March 14, 1997. In connection with this
dividend, the Company paid cash of $1,571,000 and distributed new
shares of common stock to participants in the dividend reinvestment
plan with a value of $70,000 for a total dividend of $1,641,000. The
Company's board of directors also declared an extra distribution in
December 1996 of $0.08 per share, which was paid to shareholders on
January 31, 1997, for a total distribution in 1996 equal to $1.30 per
share.
NOTE 4. NOTES PAYABLE
The Company has a $25,000,000 secured revolving line of credit with a
commercial bank to finance its Section 7(a) loans which expires May
31, 1998. The interest rate associated with this line of credit is
equal to one-month LIBOR plus 1.6 percent per annum for borrowings
secured by the guaranteed portion of Section 7(a) loans and one-month
LIBOR plus 2.2 percent per annum for borrowings secured by the
unguaranteed portion of Section 7(a) loans. Interest is payable
monthly. As of March 31, 1997, the Company was paying interest rates
ranging from 7.29 percent to 7.89 percent per annum on the amounts
outstanding under this line. The line of credit requires an annual
facility fee of $50,000, payable in quarterly installments. As of
March 31, 1997, the Company had outstanding borrowings under this
secured line of credit equal to $16,942,000.
5
<PAGE> 8
The Company has a $15,000,000 secured revolving line of credit with a
commercial bank to finance its Section 504 loans and Companion Loans
to Section 7(a) loans, which expires May 31, 1998. This line of
credit bears interest at a rate equal to one-month LIBOR plus 1.6
percent per annum, payable monthly. As of March 31, 1997, the Company
was paying interest of 7.29 percent on the amounts outstanding under
this line. The agreement requires an annual facility fee of $30,000,
payable in quarterly installments. As of March 31, 1997, the Company
had outstanding borrowings under this line of credit equal to
$11,571,000.
NOTE 5. EARNINGS PER SHARE
In March 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No.128, "Earnings per
Share" (SFAS 128). SFAS 128 is effective for financial statements for
both interim and annual periods ending after December 15, 1997. SFAS
128 modifies the method of calculation of net income per share and
also requires a reconciliation between basic and diluted per share
amounts. Early adoption of the statement prior to the end of 1997 is
not allowed.
The following table (in thousands, except per share data) presents the
effect of SFAS 128 on the Company's net income per share as if adopted
for current period disclosure.
<TABLE>
<CAPTION>
Quarter Ended March 31
1997 1996
---- ----
<S> <C> <C>
Net income . . . . . . . . . . . . . . . . . . . $1,305 $1,330
===== =====
Basic average shares outstanding . . . . . . . . 5,128 4,370
===== =====
Basic net income per share . . . . . . . . . . . $ 0.25 $ 0.30
===== =====
Effect of dilutive securities:
Outstanding stock options . . . . . . . . . 28 -
----- -----
Diluted average shares outstanding . . . . . . . 5,156 4,370
===== =====
Diluted net income per share . . . . . . . . . . $ 0.25 $ 0.30
===== =====
</TABLE>
NOTE 6. COMMITMENTS AND CONTINGENCIES
Commitments. The Company had loan commitments outstanding equal to
$53,967,000 at March 31, 1997 to invest in various existing and
prospective portfolio companies.
Litigation. The Company is party to certain lawsuits in connection
with its business. While the outcome of these legal proceedings
cannot be predicted with certainty at this time, management does not
expect that these actions will have a material effect upon the
financial condition of the Company.
6
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the
financial statements and notes thereto included elsewhere in this
report.
ORGANIZATION
Allied Capital Lending Corporation (Company), a Maryland corporation,
is closed-end management investment company that has elected to be
regulated as a business development company under the 1940 Act.
The Company, through Allied Capital SBLC Corporation (Allied SBLC), is
licensed by the SBA as a small business lending company (SBLC) and is
a participant in the U.S. Small Business Administration (SBA) Section
7(a) guaranteed loan program. The Company also participates in the
SBA Section 504 loan program and generates Companion Loans to Section
7(a) loans. Until December 31, 1996, the Company made these loans
through its ownership in ACLC Limited Partnership (Partnership), which
was formed in April 1995. Until December 31, 1996, the Company had a
1% general partnership interest and owned a 98% limited partnership
interest in the Partnership, the consolidated financial statements of
the Company for 1996 include the accounts of the Company and the
Partnership.
Effective January 1, 1997, the Company reorganized to provide the
Company with greater flexibility to generate loans and to better match
its financing with its investment opportunities, and to maximize the
return on the Company's loans (Reorganization). The Company formed two
subsidiaries, Allied SBLC and Allied Capital Credit Corporation
(Allied Credit). Both Allied SBLC and Allied Credit (Subsidiaries)
are Maryland corporations and closed-end management investment
companies that have elected to be regulated as business development
companies (BDCs) under the 1940 Act. Effective January 1, 1997, the
Company assigned its SBLC license and transferred all Section 7(a)
loans and related assets and liabilities to Allied SBLC in return for
100% of Allied SBLC's common stock. The Company, dissolved the
Partnership and purchased the 1% limited partnership interest not
owned by the Company. The Company assumed all of the Partnership's
assets and liabilities upon the dissolution.
LIQUIDITY AND CAPITAL RESOURCES
The Company requires capital to make loans, to carry those loans until
sale occurs, and to carry the unsold portion of the principal amount
of the loans to maturity.
The Company and the Subsidiaries have two separate secured revolving
lines of credit with available amounts totaling $40 million to finance
Section 7(a) loans, Section 504 loans and Companion Loans to Section
7(a) loans. The lines have interest rates ranging from one-month
LIBOR plus 1.6% to one-month LIBOR plus 2.2%. Interest is payable
monthly, and both lines expire in May 1998. The lines require an
annual fee of $80,000 in total. At March 31, 1997, the Company was
paying interest at rates ranging from 7.29% to 7.89% on total
outstanding borrowings of $28.5 million.
The Company is currently negotiating an additional secured revolving
line of credit with a commercial bank to finance other types of loans
not related to the SBA lending programs in which the Company currently
participates. The Company anticipates this new facility to have
borrowing capacity of up to $15 million, an interest rate of one-month
LIBOR plus 1.35%, an annual facility fee of $30,000, and a total
commitment fee of $15,000. The terms of the agreement are under
negotiation and the final terms may differ.
Management plans to continue to use leverage to finance the growth of
the Company. However as a BDC, the Company must maintain 200% asset
coverage for senior securities representing indebtedness, which will
limit the Company's ability to borrow on a consolidated basis. The
Company will, however, be able to increase its leverage in Allied SBLC
beyond the 200% asset coverage limit, subject to market availability.
It is management's belief that the Company will have access to the
capital resources necessary to expand and develop its business. The
Company may seek to obtain funds through additional equity offerings,
debt financings, or loan sales. The Company anticipates that adequate
cash will be available to make new loans, fund its operating expenses,
satisfy debt service obligations and pay dividends throughout the
remainder of 1997.
7
<PAGE> 10
RESULTS OF OPERATIONS
Comparison of the Three Months Ended March 31, 1997 to March 31, 1996
The Company originated $10.9 million in new loans during the first
quarter of 1997. Net of loan sales, repayments and changes in
portfolio valuation, the Company's total loans to small businesses
increased by $2.4 million to $62.8 million at March 31, 1997 as
compared to $60.4 million at December 31, 1996. At March 31, 1997,
loans to small businesses totaled 86% of the Company's total assets,
compared to 88% at December 31, 1996.
For the three months ended March 31, 1997, the net increase in net
assets resulting from operations was $1.3 million, or $0.25 per share,
a comparable level of earnings as compared to $1.3 million, or $0.30
per share, for the same period for 1996. The lower earnings per share
in the first quarter of 1997 results from an increase of 18% in the
weighted average number of shares and share equivalents used to
calculate earnings per share. The Company issued 723,245 new shares
in the second and third quarters of 1996 through a rights offering to
shareholders and through a private sale.
Investment income increased $253,000, or 11%, over the comparative
three months of 1996 to $2.5 million. This increase is due to a net
increase in loans of $18.5 million since March 31, 1996. Premium
income from the sales of the guaranteed portion of the Section 7(a)
loans, Section 504 loans and Companion Loans to Section 7(a) loans was
$482,000 in the three months ended March 31, 1997 as compared to
$662,000 for the three months ended March 31, 1996. Premium income
declined as fewer loans were sold in the first quarter of 1997 versus
1996.
Investment advisory fees were $446,000 for the three months ended
March 31, 1997, a 42% increase over $314,000 for the three months
ended March 31, 1996. This increase is a result of an increase in
invested and other assets on which the advisory fee is based.
Interest expense was $520,000 for the three months ended March 31,
1997 as compared to $396,000 for the same period in 1996. The Company
funds its loan origination activity through borrowings under its
credit facilities. Amounts outstanding under the Company's credit
facilities were $28.5 million at March 31, 1997 compared to $16.0
million at March 31, 1996. Other operating expenses of $135,000 for
the three months ended March 31, 1997 were consistent with $132,000
for the same period of 1996.
FACTORS AFFECTING THE COMPANY'S BUSINESS
The Company's business remains largely dependent upon two
government-sponsored SBA-administered loan programs, the Section 7(a)
guaranteed loan program and the Section 504 loan program. The Section
7(a) and Section 504 loan programs are regulated by the SBA pursuant
to laws passed by Congress. There is no assurance the government
appropriations for these programs or for the operations of the SBA
will be continued. In addition, both programs are subject to changes
in laws or regulations at any time that could have an adverse impact
on the Company's operations with regard to the programs.
Effective May 5, 1997, the SBA reduced the maximum loan size for the
Section 7(a) guaranteed loan program from effectively $1 million to
$500,000, citing loan demand and limited loan guaranty funds. The SBA
guaranty remains between 75% and 80% of the face amount. The maximum
guaranty on a Section 7(a) loan is now $375,000.
Allied Capital Lending Corporation is an active participant in the
7(a) guaranteed loan program, and the new loan size limit will impact
the overall volume of new loan originations by the Company for 1997.
Section 7(a) loans originated by the Company in 1996 totaled $46.4
million, with an average loan size of $602,305. The impact of the new
loan size limit, however, will be tempered by the Company's current
backlog of $38 million in SBA-approved 7(a) loans awaiting closing,
and the Company's loan origination activity in other areas that are
not affected by the SBA's recent actions. The Company also originates
loans pursuant to the SBA Section 504 loan program, and other small
business loans. Loans originated in these other programs accounted
for 17% of the Company's total loan origination in 1996, and are
expected to increase in 1997. The Company is currently negotiating an
additional line of credit to finance its non-SBA lending programs.
The Company understands that the SBA has taken this recent action in
an effort to manage its budget for the fiscal year ending September
30, 1997. The loan size limit is expected to be in place through the
end of the
8
<PAGE> 11
government's fiscal year, at which time it is anticipated that if
appropriations for the programs are increased, the agency will
increase the loan size limit.
The SBA imposed a similar loan size limitation for Section 7(a) loans
in 1995, spanning the months of January through September. Even with
the loan size limit, the Company was able to increase its loan
originations 10% from $43.8 million for the year ended December 31,
1994 to $48.2 million for the year ended December 31, 1995.
9
<PAGE> 12
Part II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
The Company is party to certain lawsuits in connection with its
business. While the outcome of these legal proceedings cannot be
predicted with certainty at this time, management does not expect that
these actions will have a material effect upon the financial
condition of the Company.
Item 2. CHANGES IN SECURITIES
No material changes have occurred in the securities of the Registrant.
Item 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
Item 5. OTHER INFORMATION
Not applicable.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) List of Exhibits
11 Statement of Computation of Earnings Per Share
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Company during the
quarter ended March 31, 1997.
10
<PAGE> 13
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 thereunder duly authorized.
ALLIED CAPITAL LENDING CORPORATION
----------------------------------
(Registrant)
/s/ Jon A.DeLuca
----------------------------------
Date: May 12, 1997 Jon A. DeLuca
------------ Executive Vice President, Treasurer and
Chief Financial Officer
11
<PAGE> 1
Allied Capital Lending Corporation and Subsidiaries
Exhibit 11 Statement of Computation of Earnings Per Share
Form 10-Q
March 31, 1997
<TABLE>
<CAPTION>
For the Three Months Ended
March 31,
----------------------------
1997 1996
----------------------------
<S> <C> <C>
Primary Earnings Per Share:
Net Increase in Net Assets Resulting
from Operations $1,305,000 $1,330,000
============================
Weighted average number of
shares outstanding 5,127,772 4,385,564
Weighted average number of
shares issuable on exercise
of outstanding stock options 28,228 -
----------------------------
Weighted average number of shares and
share equivalents outstanding 5,156,000 4,385,564
============================
Earnings per Share $0.25 $0.30
============================
Fully Diluted Earnings Per Share:
Net Increase in Net Assets Resulting
from Operations $1,305,000 $1,330,000
============================
Weighted average number of
shares and share equivalents
outstanding as computed for
primary earnings per share 5,156,000 4,385,564
Weighted average of additional
shares issuable on exercise
of outstanding stock options 5,735 -
----------------------------
Weighted average of shares and
share equivalents outstanding, as adjusted 5,161,735 4,385,564
============================
Earnings per Share $0.25 $0.30
============================
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ALLIED
CAPITAL LENDING CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET AND
CONSOLIDATED STATEMENTS OF OPERATIONS, CHANGES IN NET ASSETS, AND CASH FLOWS
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<INVESTMENTS-AT-COST> 62,810
<INVESTMENTS-AT-VALUE> 62,835
<RECEIVABLES> 891
<ASSETS-OTHER> 2,083
<OTHER-ITEMS-ASSETS> 7,472
<TOTAL-ASSETS> 73,281
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 31,458
<TOTAL-LIABILITIES> 31,458
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 42,592
<SHARES-COMMON-STOCK> 5,139
<SHARES-COMMON-PRIOR> 5,127
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (794)
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 25
<NET-ASSETS> 41,823
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 2,024
<OTHER-INCOME> 482
<EXPENSES-NET> 1,101
<NET-INVESTMENT-INCOME> 1,405
<REALIZED-GAINS-CURRENT> (28)
<APPREC-INCREASE-CURRENT> (72)
<NET-CHANGE-FROM-OPS> 1,305
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1,641
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 7
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 5
<NET-CHANGE-IN-ASSETS> (148)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> (530)
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 446
<INTEREST-EXPENSE> 520
<GROSS-EXPENSE> 1,101
<AVERAGE-NET-ASSETS> 41,897
<PER-SHARE-NAV-BEGIN> 8.19
<PER-SHARE-NII> 0.27
<PER-SHARE-GAIN-APPREC> (0.02)
<PER-SHARE-DIVIDEND> 0.32
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 8.14
<EXPENSE-RATIO> 0.03
<AVG-DEBT-OUTSTANDING> 26,128
<AVG-DEBT-PER-SHARE> 5.08
</TABLE>
