<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 1995
[ ] 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: 811-3780
PMC CAPITAL, INC.
(Exact name of registrant as specified in its charter)
FLORIDA 59-2338539
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
17290 PRESTON ROAD, 3RD FLOOR, DALLAS, TX 75252 (214) 380-0044
(Address of principal executive offices) (Registrant's telephone number)
Securities registered pursuant to Section 12(b) of the Act:
COMMON STOCK, $.01 PAR VALUE
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES [x] NO [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [x]
The aggregate market value of the voting stock held by non-affiliates of the
registrant, based upon the closing sale price of the Common stock on February
29, 1996 as reported on the American Stock Exchange, was approximately $102
million. Common stock held by each officer and director and by each person who
owns 10% or more of the outstanding Common Stock have been excluded because
such persons may be deemed to be affiliates. This determination of affiliate
status is not necessarily a conclusive determination for other purposes.
As of February 29, 1996, the Registrant had 10,935,490 shares of Common Stock
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the Registrant's Proxy Statement to be filed with the
Securities and Exchange Commission within 120 days after the year covered by
this Form 10-K with respect to the Annual Meeting of Shareholders to be held on
May 24, 1996 are incorporated by reference into part III.
<PAGE> 2
PMC CAPITAL, INC
FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 1995
------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Form
10-K
Report
Item Page
- ---- ------
<S> <C> <C>
PART I
1. Business of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4. Submission of Matters to a Vote of Security Holders . . . . . . . . . . . . . . . 9
PART II
5. Market for the Registrant's Common Stock and Related Shareholder
Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
6. Selected Consolidated Financial Data . . . . . . . . . . . . . . . . . . . . . . . 11
7. Management's Discussion and Analysis of Financial Condition and
Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
8. Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . 20
9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
PART III
10. Directors and Executive Officers of the Registrant . . . . . . . . . . . . . . . . 21
11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
12. Security Ownership of Certain Beneficial Owners and Management . . . . . . . . . . 21
13. Certain Relationships and Related Transactions . . . . . . . . . . . . . . . . . . 21
PART IV
14. Exhibits, Financial Statements, Schedules and Reports on Form 8-K . . . . . . . . 22
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . F-1
Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E-1
</TABLE>
<PAGE> 3
PART I
ITEM 1. BUSINESS OF THE COMPANY
GENERAL
PMC Capital, Inc. ("PMC Capital" or "PMC" and, together with its
subsidiaries, the "Company") is a diversified closed-end management investment
company that operates as a business development company ("BDC") under the
Investment Company Act of 1940, as amended (the "1940 Act"). The common stock
of the Company is traded on the American Stock Exchange under the symbol "PMC".
The Company engages in the business of originating loans to small businesses
either directly or through its three principal subsidiaries: First Western
SBLC, Inc. ("First Western"), PMC Investment Corporation ("PMIC") and Western
Financial Capital Corporation ("Western Financial"). In addition, the Company
is the sole shareholder of PMC Advisers, Inc. ("PMC Advisers") and PMC Funding
Corp. First Western, PMIC and Western Financial are registered under the 1940
Act as diversified closed-end management investment companies. PMC Advisers,
organized in July 1993, is a registered investment advisor under the Investment
Advisers Act of 1940 and acts as the investment advisor for PMC Commercial
Trust ("PMC Commercial" or the "Trust"), a Texas real estate investment trust
and an affiliate of PMC Capital. PMC Advisers provides investment advisory
services to PMC Commercial pursuant to an investment management agreement. PMC
Capital has elected to be taxed as a regulated investment company and
distributes substantially all its taxable income as dividends to its
shareholders, thereby incurring no Federal income tax liability on such income.
The Company primarily originates loans to individuals and small
business concerns in the lodging, medical and food service industries,
primarily in the Southwest and Southeast regions of the United States. A
majority of the Company's loans in the lodging industry (the largest industry
concentration in the Company's loan portfolio) are to owner-operated facilities
generally operating under national franchises. The Company believes that
franchise operations offer attractive lending opportunities because such
businesses employ proven business concepts, have consistent product quality,
are screened and monitored by franchisors and generally have a higher rate of
success as compared to other independently operated businesses. In addition,
management believes that the franchise lodging industry and the other industry
segments upon which it focuses are underserved by traditional lending sources.
PMC Capital, incorporated in Florida under the name of Pro-Med
Capital, Inc. in June 1983, became the successor by merger to Western Capital
Corporation (founded in 1979) in December 1983 and changed its name to "PMC
Capital, Inc." in March 1991. The principal executive offices of the Company
are located at 17290 Preston Road, Third Floor, Dallas, Texas 75252.
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Earnings per share on a quarterly basis since 1988 are as follows:
<TABLE>
<CAPTION>
Per Share Earnings (cents)
-------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
First Quarter 23.0 18.6 18.5 17.8 15.0 13.3 9.4 9.0
Second Quarter 25.6 23.3 23.0 22.5 14.6 12.0 10.6 9.0
Third Quarter 26.9 26.2 25.0 19.3 17.7 13.5 9.8 9.6
Fourth Quarter 28.0 44.0* 21.0 19.3 16.2 13.5 11.1 9.3
----- ----- ---- ---- ---- ---- ---- ----
103.5 112.1 87.5 78.9 63.5 52.3 40.9 36.9
</TABLE>
* Includes approximately $0.24 from a structured sale of a portion of the loan
portfolio.
LENDING PROGRAMS
FIRST WESTERN
First Western is a small business lending company ("SBLC") that
originates variable-rate loans which are partially guaranteed by the Small
Business Administration ("SBA") pursuant to its Section 7(a) program. While
the eligibility requirements of the Section 7(a) program vary by the industry
of the borrower and other factors, the general eligibility requirements are
that: (i) gross sales of the borrower cannot exceed $5.0 million (other than
with respect to certain industries where eligibility is determined based on a
number of employees), (ii) liquid assets or real estate equity of the borrower
(and certain affiliates) cannot exceed the greater of 25% of the loan amount or
$50,000 and (iii) the maximum aggregate SBA loan guarantees to a borrower
cannot exceed $750,000.
However, effective March 1, 1996, certain eligibility requirements
have been amended as follows. When the total amount of the proposed financing:
(1) Is $250,000 or less, each 20 percent owner of the applicant
must contribute to the business personal liquid assets per the SBA rules and
regulations ("Personal Liquid Assets") in excess of two times the total
financing or $100,000, whichever is greater;
(2) Is between $250,001 and $500,000, each 20 percent owner of
the applicant must contribute Personal Liquid Assets to the business in excess
of one and one-half times the total financing or $500,000, whichever is
greater; and
(3) Exceeds $500,000, each 20 percent owner of the applicant must
contribute to the business Personal Liquid Assets in excess of one times the
total financing or $750,000, whichever is greater.
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The Company does not know what impact, if any, these changes will have
on future loan originations of First Western.
At December 31, 1995, First Western had loans receivable, net, in an
aggregate amount of $20.8 million. During the year ended December 31, 1995,
First Western originated $40.6 million in loans and sold $30.3 million of the
guaranteed portion of its loans into the secondary market (without recourse to
the Company). At December 31, 1995, First Western had loans receivable with an
aggregate balance of approximately $659,000 (3.2% of First Western loans
receivable, net) greater than 60 days past due. Loans written-off and the
change in unrealized depreciation on First Western's investments, net of
recoveries, was $238,056 during the year ended December 31, 1995.
PMIC
PMIC is a licensed specialized small business investment company
("SSBIC") under the Small Business Investment Act of 1958, as amended ("SBIA").
PMIC uses long-term funds provided by the SBA, together with its own capital,
to provide long-term, fixed-rate collateralized loans to eligible small
businesses owned by "disadvantaged" persons, as defined under the regulations
of the SBA. PMIC is eligible as an SSBIC to obtain long-term, fixed-rate
funding, generally at below-market rates, from the SBA through the issuance of
debentures (guaranteed by the SBA and on which the interest rate is reduced
through an SBA subsidy by 3% during the first five years) and preferred stock
(currently issuable to the SBA with a 4% per annum cumulative dividend rate).
Issuance of debentures and preferred stock is subject to SBA approval and
availability. See "Overview of SBA Regulations".
At December 31, 1995, PMIC had loans receivable, net, in an aggregate
amount of $36.7 million. During the year ended December 31, 1995, PMIC
originated $21.2 million in loans. At December 31, 1995, PMIC had loans
receivable with an aggregate balance of approximately $707,000 (2.0% of loans
receivable, net) greater than 60 days past due. Realized and unrealized losses
on PMIC's investments were $27,155 during the year ended December 31, 1995.
WESTERN FINANCIAL
Western Financial is a licensed small business investment company
("SBIC") under the SBIA that provides fixed- rate loans to small business
concerns and persons. As an SBIC, Western Financial is eligible to obtain
long-term, fixed-rate funding, generally at below-market rates, from the SBA
through the issuance of debentures (guaranteed by the SBA). Issuance of
debentures is subject to SBA approval and availability. See "Overview of SBA
Regulations".
At December 31, 1995, Western Financial had loans receivable, net, in
an aggregate amount of $25.1 million. During the year ended December 31, 1995,
Western Financial originated $8.0 million in loans. At December 31, 1995,
Western Financial had loans receivable with an aggregate
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principal balance of approximately $436,000 (1.7% of loans receivable, net)
greater than 60 days past due. Realized and unrealized losses on Western
Financial's investments were $93,704 during the year ended December 31, 1995.
PMC CAPITAL
PMC Capital has originated loans to borrowers on a non-SBA supported
basis using criteria similar to that utilized by its three principal
subsidiaries whose loans are funded under the SBA programs. These loans are:
(i) to borrowers who exceed the eligibility requirements of the SBA 7(a) or
SBIC programs, (ii) payable in monthly installments of principal and interest
based upon four to 25 year amortization tables, with the balance due at
maturity (typically four to 10 years), (iii) primarily collateralized by real
estate and (iv) generally guaranteed by the principals of the borrowers. The
funding for this lending program is limited to the extent of leverage available
to the Company. However, the Company expects that most non-SBA supported loans
will be made by PMC Commercial in the future and that such loans will be made
by the Company only to the extent that PMC Commercial does not have available
funds.
At December 31, 1995, PMC Capital had loans receivable, net, in an
aggregate amount of $27.9 million. During the year ended December 31, 1995,
PMC Capital originated $7.7 million in loans. At December 31, 1995, PMC
Capital had no loans receivable greater than 60 days past due. PMC Capital had
no realized or unrealized losses during the year ended December 31, 1995.
ELECTION TO BE A BUSINESS DEVELOPMENT COMPANY
In 1980, the 1940 Act was amended to permit closed-end investment
companies which make certain types of investments ("Qualifying Assets") to
elect to become business development companies ("BDCs") rather than registered
investment companies. Under this amendment (the "1980 Amendment"), BDCs must
register their shares under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and become subject to the Exchange Act's periodic
reporting requirements rather than the 1940 Act's reporting requirements. On
June 7, 1994, PMC Capital elected to operate as a BDC. Companies having
securities registered under the Exchange Act, such as PMC Capital, must file
quarterly rather than semi-annual financial reports. The 1980 Amendment
provides BDCs with greater operating flexibility relating to capital
structure, portfolio diversification, transactions with downstream affiliates,
executive stock options and the frequency of which they may make distributions
from capital gains, that may be greater than that available to registered
investment companies.
Under the 1980 Amendment, a BDC such as PMC Capital may only acquire
Qualifying Assets unless, at the time of their acquisition, Qualifying Assets
represent at least 70% of the value of the BDC's total assets. The principal
categories of Qualifying Assets relevant to the business of PMC Capital are the
following:
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(1) Securities purchased in transactions not involving any public
offering from the issuer of such securities, which issuer is an eligible
portfolio company. An eligible portfolio company is defined in the 1980
Amendment as any issuer which:
(a) is organized under the laws of, and has its principal
place of business in, the United States;
(b) is not an investment company other than an SBIC
wholly-owned by the BDC (PMC Capital's investments in and
advances to PMIC, Western Financial and First Western are
Qualifying Assets ); and
(c) does not have any class of securities with respect to
which a broker or dealer may extend margin credit.
(2) Securities received in exchange for or distributed on or with
respect to securities described in (1) above, or pursuant to the exercise of
options, warrants or rights relating to such securities.
(3) Cash, cash items, Government securities or high quality debt
securities maturing in one year or less from the time of investment.
In addition, a BDC must have been organized (and have its principal
place of business) in the United States for the purpose of making investments
in the type of securities described in (1) above and, in order to classify the
securities as Qualifying Assets for purposes of the 70% test, the BDC must make
available to the issuer of the securities significant managerial assistance
which means, among other things:
(1) Any arrangement whereby the BDC, through its directors,
officers or employees, offers to provide, and, if accepted,
does so provide, significant guidance and council concerning
the management, operations or business objectives and policies
of a portfolio company; or
(2) In the case of an SBIC, making loans to a portfolio company.
Under the 1980 Amendment, now that PMC Capital has elected to be
regulated as a BDC, it may not change the nature of its business so as to cease
to be, or withdraw its election as, a BDC unless authorized by the vote of a
majority of the shares of Common Stock.
FUNDAMENTAL AND OTHER POLICIES OF THE COMPANY AND ITS SUBSIDIARIES
PMC Capital and each of its investment company subsidiaries have
designated certain investment policies as "fundamental policies," which may
only be changed with the approval of the holders of PMC Capital's outstanding
shares of Common Stock as described below.
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The following investment policies of PMC Capital and its
investment company subsidiaries are fundamental policies and may not
be changed without the approval of the lesser of (i) more than 50% of
PMC Capital's outstanding voting securities or (ii) 67% or more of PMC
Capital's voting securities present at a meeting of security holders
at which a quorum is present. All other investment policies of PMC
Capital may be changed by its Board of Directors at any time.
1. The Company will not purchase or sell commodities or commodity
contracts.
2. The Company will not engage in short sales, purchase
securities on margin or trade in contracts commonly called puts or calls or in
combinations thereof, except that it may acquire warrants, options or other
rights to subscribe to or sell securities in furtherance of its investment
objectives.
3. The Company will not underwrite securities of other issuers,
except that it may acquire portfolio securities under circumstances where, if
sold, the Company might be deemed an underwriter for purposes of the Securities
Act of 1933. The Company may purchase "restricted securities" as to which
there are substantial restrictions on resale under the Securities Act of 1933.
4. The Company will not purchase any securities of a company if
any of the directors or officers of the Company owns more than 0.5% of such
company and such persons owning more than 0.5% together own 5% or more of the
shares of such company.
5. The Company may issue senior securities in the form of
debentures, reverse repurchase agreements and preferred stock and may borrow
monies from banks and other lenders, all on an unsecured basis. The 1940 Act
limits the Company to the issuance of one class of senior debt securities and
one class of senior equity securities.
6. The Company will not invest more than 25% of its total assets
in any one industry except in the lodging industry which may constitute 100% of
the Company's portfolio. The Company will invest at least 25% of its total
assets in the lodging industry.
7. The Company may invest in real estate development companies,
may make real estate acquisition loans and real estate improvement loans and
may further make other loans secured by real estate.
8. The Company may make loans and purchase debt securities in
furtherance of its investment objectives. The Company will not make loans to
its officers, directors or other affiliated persons.
9. PMIC will perform the functions and conduct the activities
contemplated under the SBIA, and will provide assistance solely to small
business concerns which will contribute to a well-balanced national economy by
facilitating ownership of such concerns by persons whose participation in the
free enterprise system is hampered because of social or economic disadvantages.
These
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fundamental policies of PMIC may not be changed without shareholder approval
and without the prior written consent of the SBA.
As stated above, the Company has a fundamental policy that requires it
to invest at least 25% of its total assets in the lodging industry, and allows
investment of up to 100% of total assets in the lodging industry. At December
31, 1995 and 1994, loans to businesses in the lodging industry comprised 55%
and 41% of its total assets, respectively.
There can be no assurance that the Company will continue to experience
the positive results it has historically achieved from lending to the lodging
industry or that market conditions will enable the Company to maintain or
increase its level of loan concentration in this industry. Any economic
factors that negatively impact this industry could have a material adverse
effect on the business of the Company. Additionally, at December 31, 1995,
loans to businesses located in Texas, Florida and Georgia comprised
approximately 41%, 13% and 10% of the Company's outstanding loan portfolio,
respectively. A decline in economic conditions in any of these states may
adversely affect the Company.
COMPETITION
PMC Capital's primary competition comes from banks, financial
institutions, franchise loan programs and other companies operating under SBA
sponsored programs. Some of these competitors have greater financial and
larger managerial resources than the Company. Competition increased as the
financial strength of the banking and thrift industries improved. PMC Capital
believes that it competes effectively with such entities on the basis of the
interest rates, maturities and payment schedules, the quality of its service,
its reputation as a lender, the timely credit analysis and decision making
processes, and the renewal options available to borrowers. In addition, to
the extent that the investment opportunities reviewed by PMC Advisers conform
to the investment criteria of PMC Commercial, and PMC Commercial has funds
available to make these investments, such investments will be made by PMC
Commercial.
During December 1995, in addition to being a "Certified SBA lender" in
Miami, Florida and "Preferred SBA lender" in Dallas, Texas, First Western was
granted the designation of a "preferred lender" in over 50 additional districts
of the SBA. Under the 7(a) program, in order to have SBA guarantee on portions
of loans, they must have some level of SBA approval. Within the SBA Section
7(a) program, the different status levels for SBA approvals are (i) guaranteed
lender, (ii) certified lender and (iii) preferred lender. Approval of loans
under the guaranteed lender program requires the greatest amount of review time
by the SBA while the preferred lender program the least. The granting of
preferred lender status in those SBA districts should assist the Company in
competing for loan origination opportunities due to the reduction in approval
time.
LEVERAGE
The Company has borrowed funds and issued shares of preferred stock,
and intends to borrow
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additional funds through advances on its line of credit facility and through
the issuance of: (i) notes payable, (ii) SBA debentures, if available, and
(iii) additional shares of preferred stock of PMIC to the SBA, if available.
Under current appropriations for the fiscal year of the SBA ending September
1996, the availablity of SBA debentures will be limited and SBA preferred stock
will not be available. See "Overview of SBA Regulations". As a result of the
issuance of notes and debentures and preferred stock to the SBA, the Company is
leveraged. The SBA and private lenders have fixed dollar claims on the
Company's assets superior to the claims of the holders of Common Stock. Any
increase in the interest rate earned by the Company on investments in excess of
the interest rate or dividend payable on the funds obtained from either
borrowings or the issuance of preferred stock would cause its net income to
increase more than it would without the leverage, while any decrease in the
interest rate earned by the Company on investments would cause net income to
decline by a greater amount than it would without the leverage. Leverage is
thus generally considered a speculative investment technique. In order for the
Company to repay indebtedness or meet its obligations in respect of any
outstanding preferred stock on a timely basis, the Company may be required to
dispose of assets at a time which it would not otherwise do so and at prices
which may be below the net book value of such assets. Dispositions of assets
may adversely impact the Company's results of operations.
INTEREST RATE AND PREPAYMENT RISK
Net income of the Company is effected by the spread between the rate
at which it borrows funds and the rate at which it loans these funds. The
portfolio of PMC Capital, Western Financial and PMIC are typically long-term
and at fixed rates and the borrowed funds of these companies are typically
long-term and at fixed rates. First Western originates variable rate loans and
has utilized equity capital of the Parent Company and a structrured sale to
obtain funds necessary to originate loans. If the yield on loans originated by
the Company with funds obtained from borrowings or the issuance of preferred
stock fails to cover the cost of such funds, the Company's cash flow will be
reduced. During periods of changing interest rates, interest rate mismatches
could negatively impact the Company's net income, dividend yield and the market
price of the Common Stock. Most of the fixed rate loans that the Company
originates have prepayment penalties. If interest rates decline, the Company
may experience significant prepayments. Such prepayments, as well as scheduled
repayments, are likely to be reloaned or invested at lower rates, which may
have an adverse effect on the Company's ability to maintain distributions at
existing levels.
EMPLOYEES
At December 31, 1995, the Company had 51 employees. Management of the
Company believes its relationship with its employees is satisfactory.
OVERVIEW OF SBA REGULATIONS
The lending operations of First Western, PMIC and Western Financial
are regulated by the SBA establishing, among other things, maximum interest
rates that borrowers may be charged (which
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currently may not exceed the greater of 19% per annum or 11% above the
Company's cost of funds from the SBA) and minimum and maximum maturities for
the Company's loans (which generally range from four to 25 years). Borrowers
must satisfy certain criteria established by the SBA to qualify for loans
originated by the Company under SBA sponsored programs, including limitations
on the net worth and net income of potential borrowers or alternative criteria
that focus upon the number of employees of the borrower and its gross revenues.
In addition, the SBA generally limits the aggregate amount of guaranties that
can be provided to any single borrower and restricts the use to which the loan
proceeds can be employed by the borrower.
Funding availability under the SBA's SBIC and SSBIC programs is
subject to the outcome of the U.S. Government's budget impasse. The SBA is
presently funding these programs for their 1996 fiscal year ending September
30, based on the continuing resolution of the U.S. Congress ("CR"). With
regard to leverage, the SBA has availability under the CR based upon prior
years funded amounts. In order to determine which licensees are to receive
funding, the SBA will give first priority to issue debentures to those
licensees which are to use such funds to refinance matured debentures and
second priority to fund those licensees requesting leverage which when issued
will not cause outstanding leverage to be greater than two times their
regulatory capital. PMIC and Western Financial have aggregate amounts of SBA
leverage which are currently at or greater than two times their regulatory
capital. The SBA has notified its licensees under the SSBIC program that there
is no subsidized leverage or preferred stock available for the remainder of the
SBA's current fiscal year ending September 30, 1996. There has not been any
announcement of whether or not any subsidized leverage or preferred stock will
be available in future fiscal years. See Management's Discussion and Analysis
of Financial Condition and Results of Operations - Liquidity and Capital
Resources.
ITEM 2. PROPERTIES
The Company's headquarters are located at 17290 Preston Road, Dallas,
Texas 75252 where its facilities comprise approximately 12,400 square feet of
space pursuant to leases with a corporation, a majority of whose shareholders
are officers and/or directors of the Company. In addition the Company also
leases office space in Hollywood, Florida and Atlanta, Georgia. The aggregate
annual lease payments for the year ended December 31, 1995 were approximately
$203,000.
ITEM 3. LEGAL PROCEEDINGS
The Company is involved from time to time in routine litigation
incidental to its business. The Company does not believe that the current
proceedings will have a material adverse effect on the results of operations or
financial condition of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of shareholders during the last
quarter of the year ended December 31, 1995.
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PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
SHAREHOLDER MATTERS
MARKET PRICE
The Common Stock is traded on the American Stock Exchange ("AMEX")
under the symbol "PMC". The following table sets forth, for the periods
indicated, high and low bid prices per share:
<TABLE>
<CAPTION>
1995 High Low
---- ------ ------
<S> <C> <C>
Fourth Quarter . . . . . . . $13.25 $11.38
Third Quarter . . . . . . . 12.00 10.88
Second Quarter . . . . . . . 12.13 10.75
First Quarter . . . . 13.50 11.13
</TABLE>
<TABLE>
<CAPTION>
1994 High Low
---- ------ ------
<S> <C> <C>
Fourth Quarter . . . . . . . $14.88 $11.88
Third Quarter . . . . . . . 17.13 14.13
Second Quarter . . . . . . . 17.38 14.50
First Quarter . . . . . . . 16.25 14.00
</TABLE>
At February 29, 1996, there were approximately 1,100 shareholders of
record of PMC Capital's common stock with a market price of $12.75 per share.
During the years ended December 31, 1995, 1994 and 1993, PMC Capital
declared cash dividends of $1.075 ($11,599,886), $1.055 ($11,244,226) and
$0.885 ($9,366,628), respectively, per share from ordinary income. The
dividends were declared as follows:
<TABLE>
<CAPTION>
Type Record Date 1995 1994 1993
---- ----------- ------- ------- -------
<S> <C> <C> <C> <C>
Regular March $ 0.245 $ 0.225 $ 0.185
Regular June 0.250 0.230 0.200
Regular September 0.255 0.235 0.210
Regular December 0.260 0.240 0.220
Extra December 0.065 0.125 0.070
------- ------ -------
$ 1.075 $1.055 $ 0.885
======= ====== =======
</TABLE>
10
<PAGE> 13
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
The following summary of Selected Consolidated Financial Data of
the Company should be read in conjunction with the consolidated financial
statements of the Company and the notes thereto and "Management's Discussion
and Analysis of the Financial Condition and Results of Operations" appearing
elsewhere in this Form 10-K. The selected financial data below provides
information about the Company's financial history and is derived from the
audited financial statements.
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------------------------------------------
1995 1994 1993 1992 1991
-------- ---------- ---------- ----------- -----------
(IN THOUSANDS, EXCEPT PER SHARE INFORMATION)
<S> <C> <C> <C> <C> <C>
Operating:
Operating income . . . . . . . . . . $ 21,262 $ 16,450 $ 15,670 $ 11,780 $ 8,212
Operating expenses . . . . . . . . . $ (9,541) $ (7,578) $ (5,933) $ (4,705) $ (3,935)
Realized and unrealized gain (loss)
on investments . . . . . . . . . . (359) $ 3,151 $ (404) $ (263) $ (50)
Net operating income and realized
and unrealized gain (loss) on
investments . . . . . . . . . . . . $ 11,362 $ 12,023 $ 9,333 $ 6,812 $ 4,227
Dividends declared, common . . . . . $ 11,600 $ 11,244 $ 9,367 $ 6,349 $ 3,786
Earnings per common share . . . . . . $ 1.03 $ 1.12 $ 0.87 $ 0.79 $ 0.63
Dividends per common share . . . . . $ 1.08 $ 1.06 $ 0.89 $ 0.69 $ 0.57
Weighted average common
shares outstanding . . . . . . . . 10,768 10,650 10,579 8,557 6,535
Loans funded . . . . . . . . . . . $ 77,567 $ 75,349 $ 74,091 $ 55,975 $ 41,392
At end of period:
Loans receivable, net . . . . . . . . $110,499 $ 75,264 $ 71,528 $ 54,059 $ 44,842
Total assets . . . . . . . . . . . . $156,479 $ 125,416 $ 112,515 $ 85,993 $ 57,012
SBA debentures payable . . . . . . . $ 43,540 $ 26,280 $ 20,280 $ 22,280 $ 23,140
Notes payable . . . . . . . . . . . . $ 35,001 $ 25,001 $ 25,001 $ 1 $ 4,251
Preferred stock of consolidated
subsidiary . . . . . . . . . . . . $ 7,000 $ 5,000 $ 3,000 $ 3,000 $ 3,000
Common shareholders' equity . . . . . $ 59,088 $ 57,371 $ 55,524 $ 54,839 $ 24,039
Number of common shares
outstanding . . . . . . . . . . . . 10,871 10,684 10,603 10,542 7,119
Ratios:
Return on average assets . . . . . . 8.0% 10.3% 9.4% 9.6% 8.1%
Return on average common
shareholders' equity . . . . . . . 19.2% 21.2% 16.8% 17.1% 20.7%
</TABLE>
11
<PAGE> 14
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
CERTAIN ACCOUNTING CONSIDERATIONS
In accordance with its business and financing strategy, the Company
sells the guaranteed portions of its SBA loans while retaining servicing
rights. A portion of the Company's revenue is recognized from the premium on
the sale of loans, which principally represents either cash received or an
excess servicing spread. The excess servicing spread is calculated as the
present value of the difference between the interest rate charged by the
Company to a borrower and the interest rate received by the investors who
purchased the loan to the extent that this difference exceeds the normal loan
servicing fees (the "Excess Servicing Spread").
At the time of sale, the value of the Excess Servicing Spread is
reported as income and concurrently recorded as a corresponding asset on the
Company's consolidated balance sheet (the "Excess Servicing Asset").
During the first quarter of 1995, the Company completed a reassessment
of the method used to amortize the Excess Servicing Asset. Historically, the
Company had amortized the Excess Servicing Asset based upon the estimated life
for each loan at the time of sale, expectation of prepayments and other
considerations. When a loan was paid in full, the remaining unamortized Excess
Servicing Asset, if any, was charged against income. Considering the above
factors and the Company's historical portfolio performance, the Company
extended to the expected remaining life of the related loans, on a pooled
basis, the period over which the remaining Excess Servicing Asset would be
amortized for loans originated and sold prior to January 1, 1995. The Excess
Servicing Asset is amortized on an accelerated method over the estimated
remaining lives of the related assets. There can be no assurance of the
accuracy of management's prepayment estimates. If prepayments occur at a
faster rate than expected, the amortization of the Excess Servicing Asset will
be accelerated as a charge to earnings. If actual prepayments occur at a
slower rate than estimated, cash flows from the Excess Servicing Spread would
exceed previously expected amounts and total income in future periods would be
enhanced. Management will evaluate on an ongoing basis the future benefit
anticipated from the Excess Servicing Asset. If it is determined the future
benefit is impaired, the Company will reflect the impairment as a charge to
earnings during the period evaluated. To the extent future Excess Servicing
Spread exceeds the estimated amortization of the Excess Servicing Asset
pertaining to these loans, additional revenues will be recognized.
RESULTS OF OPERATIONS
General. By increasing other sources of revenues, the Company has
been able to reduce its reliance on the income generated from its SBA
guaranteed lending subsidiary, First Western. Since 1992 the Company's other
lending activities have increased and the Company has established other revenue
sources. In the opinion of management, this diversification should stabilize
income and enhance future profits.
12
<PAGE> 15
PMC Capital has outstanding senior unsecured notes in an aggregate
principal amount of $35,000,000 (the "Senior Unsecured Notes") at a weighted
average interest rate of approximately 7.4% at December 31, 1995. All proceeds
from the Senior Unsecured Notes were used to originate non-SBA loans with
interest rates typically ranging from 10.5% to 11.5% plus a commitment fee of
3%, or to purchase loans from the Resolution Trust Corporation ("RTC") and/or
its agents. The spread between the rate at which PMC Capital's non-SBA lending
program has borrowed funds and the rate at which it has loaned these funds is
currently generating a positive effect on the Company's net operating income.
All of the loans originated by PMC Capital have penalty provisions as a
disincentive for prepayment. However, in a declining interest rate
environment, when borrowers could refinance at lower interest rates, the
likelihood of prepayment increases. If the loans are prepaid, the Company may
have to originate new loans with these funds at a lower interest rate. The
Company anticipates that even if relending rates were lower, they would likely
continue to exceed the cost of funds and generate a positive spread. In
periods of rising interest rates, the likelihood of prepayments on loans with
fixed interest rates is reduced.
Western Financial and PMIC have continued to increase lending
activities. The SBA, which regulates SBIC operations, provided certain
statutory relief during 1994 allowing Western Financial and PMIC to increase
their portfolio investments in the non-developer hospitality industry in excess
of one-third of their respective outstanding portfolios. Consequently, these
two subsidiaries have become more active lenders.
The following table sets forth information concerning the aggregate
gross loans funded for the Company and the respective changes from previous
years:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------------------------------
1995 1994 1993
------------------------ ------------------------ -------------------------
Increase Increase Increase
Company Funded (Decrease) Funded (Decrease) Funded (Decrease)
- ------- ------ ---------- ------ ---------- ------ ----------
<S> <C> <C> <C> <C> <C> <C>
PMIC $21.2 107.8% $10.2 209.1% $ 3.3 266.7%
Western
Financial 8.0 11.1% 7.2 500.0% 1.2 (45.5%)
First Western 40.6 (2.4%) 41.6 (22.0%) 53.3 3.3%
PMC Capital 7.7 (53.0%) 16.4 0.6% 16.3 1153.8%
----- ------ ----- ------ ----- -------
Total $77.5 2.8% $75.4 1.8% $74.1 32.3%
===== ====== ===== ====== ===== =======
</TABLE>
Increased revenues were also generated by PMC Advisers. PMC Advisers
provides investment advisory services to PMC Commercial pursuant to an
investment management agreement. During 1995, due to the increased investments
of PMC Commercial, the Company earned additional advisory fee income of
approximately $760,000. Increases in advisory fee income are expected to
continue as a result of anticipated increases in the loan portfolio of PMC
Commercial.
13
<PAGE> 16
Substantially all of the loans of First Western are variable rate
which are reset quarterly based on a spread above the prime rate of interest
charged by the banking industry ("Prime Rate"). The spread over the Prime Rate
is typically 2.5% to 2.75%. From February 1994 to September 1995, the Prime
Rate charged by major banking institutions increased from 6% to 9%. These
increases caused the stated interest rate on First Western's variable rate loan
portfolio to be increased by 300 basis points through September 30, 1995.
This upward trend has increased the yield on First Western's retained loan
portfolio. Beginning October 1, 1995, the yield on First Western's portfolio
was reduced 25 basis points due to the decrease in the Prime Rate to 8.75%. On
January 1, 1996, the yield on First Western's portfolio was further reduced by
25 basis points and in February 1996 the Prime Rate was reduced an additional
25 basis points with an anticipated reduction in yield on First Western's loan
portfolio beginning April 1, 1996. First Western is experiencing some
prepayments on its variable rate loans primarily due to the current interest
rate environment.
The interest rate environment and certain applicable legislative
changes have affected the secondary market for the SBA Section 7(a) guaranteed
portion of loans originated by First Western. The most notable legislative
changes resulted from the Revenue Reconciliation Act of 1993 which required SBA
program lenders to pay a fee of 40 basis points per annum on the outstanding
principal balance of any loans sold in the secondary market subsequent to
August 31, 1993 and reduced the SBA guaranteed percentage of certain loans.
This fee has been increased from 40 basis points to 50 basis points for all
loans approved after October 1, 1995 irrespective of whether the guaranteed
portions of these loans are sold into the secondary market. Since the Company
has historically sold the guaranteed portion of its SBA Section 7(a) loans into
the secondary market, the effect of this change to First Western will be the
increase in fees from 40 basis points to 50 basis points. The value of the
guaranteed portion of loans decreased as a result of this fee and the
percentage of loans eligible to be sold through the secondary market was
diminished by the reduction in the SBA guaranteed percentage. Additionally, as
interest rates fluctuated during 1994, the secondary market demand for the
guaranteed portion of the SBA Section 7(a) loans decreased and the premiums
declined. The secondary market demand increased in late 1994 and has continued
the increase during 1995, partially offsetting the negative effect of the fees
of 40 basis points per annum established in 1993. Continued program and market
changes may have an adverse effect on future periods of operations.
Effective October 1995, the fees charged to the borrower by the SBA
for the SBA's guaranty of a loan to the lender increased. The fees are now
based on the size of the originated loan and will range from 2% to 3.875% of
the guaranteed portion of the loan. The fees had been 2% of the guaranteed
portion of the loan. The Company does not know what impact, if any, these
changes will have on future loan originations of First Western.
During December 1994, First Western completed a securitization and
structured sale of $24.8 million of its non- guaranteed SBA loan portfolio.
This transaction was rated "Aaa" by Moody's Investors Service and created an
additional Excess Servicing Spread. The future profitability of the Company's
SBA Section 7(a) lending activities will be impacted by a number of factors
including; (i) the more efficient capital structure achieved by First Western's
securitization and future securitizatons, (ii) volume of lending, (iii) length
of loans, (iv) structure of sales to the secondary market, (v) interest rates
charged and related terms, (vi) quality of portfolio, (vii) prepayment
experience and (viii) legislative and/or regulatory changes.
14
<PAGE> 17
In 1994, PMIC filed a registration statement with the Securities and
Exchange Commission to register shares of its common stock. The Company
incurred approximately $136,000 in costs in connection with the filing of this
registration statement. PMIC, a licensed specialized small business investment
company, uses long-term funds provided by the SBA through the issuance of
debentures (which are guaranteed by the SBA and on which the interest rate is
reduced through a SBA subsidy by 3% during the first five years). Based on
discussions with staff members of the SBA, the Company has been notified that
there will be no SBA subsidized debentures or preferred stock available during
the fiscal year of the SBA ending September 30, 1996. As a result, the
registration has been cancelled. Accordingly, during the year ended December
31, 1995, the Company has expensed the costs of registration. In anticipation
of this potential unavailability of SBA subsidized funds during 1996, PMIC
issued $15 million in new subsidized debentures during 1995 and at December 31,
1995, had available approximately $7.6 million to fund future commitments made
by PMIC. To the extent PMIC has commitments above available working capital,
PMC Capital will originate those loans.
Any other aspect of the SBA programs under which the Company
participates could be modified by legislation or agency policy changes. PMC
Capital has evaluated alternative lending strategies and would pursue such
strategies should the SBA programs under which any of its subsidiaries operates
were to be eliminated or significantly curtailed.
YEAR ENDED DECEMBER 31, 1995 COMPARED TO THE YEAR ENDED DECEMBER 31, 1994
Interest income increased by $4.3 million (36%) from $12.0 million for
the year ended December 31, 1994, to $16.3 million for the year ended December
31, 1995. This increase was primarily attributable to: (i)the growth in the
Company's portfolio from $75.3 million at December 31, 1994 to $110.5 million
at December 31, 1995, (ii) the increased yield on First Western's loan
portfolio as a result of an increase in the Prime Rate and (iii) the increased
interest earned on temporary investments from funds received on the
securitization and structured sale of assets during December, 1994 which were
placed in short-term investments until loans were funded.
Premium income increased by $100,000 (4%) from $2.7 million for the
year ended December 31, 1994, to $2.8 million for the year ended December 31,
1995. The premium income increased even though the volume of loans sold
decreased by $2.7 million, or 8%, from $33.0 million during the year ended
December 31, 1994 to $30.3 million during the year ended December 31, 1995.
This increase in premium income was primarily attributable to the increased
demand for these SBA loan products by the secondary market. The increased
demand was a result of stabilized interest rates and the decrease in the prime
rate in July 1995. Accordingly, the premium on individual loans sold
increased. The premium derived from the secondary market is directly related
to the term of the loan.
Other investment income, net, increased by $65,000 (21%) from
$303,000 for the year ended December 31, 1994, to $368,000 for the year ended
December 31, 1995. This increase was primarily attributable to forfeited
deposits and prepayment penalties.
15
<PAGE> 18
Other income, net, increased by $300,000 (20%) from $1.5 million
during the year ended December 31, 1994, to $1.8 million during the year ended
December 31, 1995. This increase was primarily attributable to the investment
management fees generated by PMC Advisers.
Operating expenses, not including interest, increased by $500,000
(13%) from $4.0 million during the year ended December 31, 1994, to $4.5
million during the year ended December 31, 1995. Included in operating
expenses for the year ended December 31, 1995, are $136,000 pertaining to the
aggregate of costs of the PMIC registration statement. This increase was also
primarily attributable to: (i) increased staff and general overhead necessary
to manage the increased portfolio of the Company, (ii) the operations of PMC
Advisers and (iii) increases in state franchise tax expense.
Interest expense increased by $1.4 million (39%) from $3.6 million
during the year ended December 31, 1994, to $5.0 million during the year ended
December 31, 1995. This increase was primarily attributable to: (i) the
interest expense on $23,260,000 in SBA debentures issued or assumed between
September 1994 and September 1995 by PMIC and Western Financial, (ii) the
scheduled increase in interest rate on $5,000,000 of PMIC's SBA debentures
during the first half of 1995 and (iii) the issuance of $10,000,000 of senior
notes by PMC Capital on April 19, 1995.
Due to First Western's securitization and structured sale of assets,
during the year ended December 31, 1994, the Company recognized $3.3
million of gain. This gain represented the difference between the proceeds
from the sale of these assets plus the present value of the difference between
the interest charged to the borrowers and the interest paid to the purchasers
less the carrying value of the assets (including discounts from the application
of Financial Accounting Standards Board ("FASB") Emerging Issues Task Force
88-11) and an allowance for credit losses. During the year ended December 31,
1995 the Company did not complete any securitization and structured sale, and
did not have any comparable gain recognized. Not including the aforementioned
gain, realized and unrealized gain (loss) on investments has increased by
$163,000 (83%) from a loss of $196,000 for the year ended December 31, 1994, to
a loss of $359,000 during the year ended December 31, 1995. This increase in
loss is attributable primarily to a greater number of loans presently in the
process of liquidation. Based on updated area demographics, appraisals and the
condition of the collateral properties, valuation reserves were increased.
However, loan losses for the year ended December 31, 1995 continued at an
annualized rate of approximately 0.39% of average outstanding loans receivable,
primarily attributable to: (i) minimal losses incurred in the Company's largest
industry concentration (the lodging industry), (ii) continued monitoring
efforts, (iii) the strong economy and (iv) the low interest rates over the
previous several years.
YEAR ENDED DECEMBER 31, 1994 COMPARED TO THE YEAR ENDED DECEMBER 31, 1993
Interest income increased by $2.7 million (29%) from $9.3 million for
the year ended December 31, 1993, to $12 million for the year ended December
31, 1994. This increase was primarily attributable to: (i) the growth in the
non- SBA lending portfolio from $14.5 million at December 31, 1993 to $23.8
million at December 31, 1994, (ii) the growth in the weighted average of First
Western's retained loan portfolio from $30.0 million during the year ended
December 31, 1993 to $40.1 million during the year ended December 31, 1994 and
(iii) the increased interest rates earned during the second half of the year on
the retained portion of the variable rate loans of First Western.
16
<PAGE> 19
Premium income decreased by $2.8 million (51%) from $5.5 million for
the year ended December 31, 1993, to $2.7 million for the year ended December
31, 1994. This decrease was primarily attributable to the effect of
legislative changes and volatility in the secondary market (See "Results of
Operation- - General" above) and the decline in the aggregate amount of loans
originated and sold. The average gain on the sale of the guaranteed portion of
a loan into the secondary market decreased from 13% during the year ended
December 31, 1993 to 8% during the year ended December 31, 1994. Additionally,
the aggregate amount of loans sold to the secondary market declined from $36.8
million during the year ended December 31, 1993, to $33.0 million during the
year ended December 31, 1994.
Other investment income, net, increased by $100,000 ( 50%) from
$200,000 for the year ended December 31, 1993, to $300,000 for the year ended
December 31, 1994. This increase was primarily attributable to increased
prepayment charges collected on fixed-rate loans.
Other income, net, increased by $900,000 (150%) from $600,000 for the
year ended December 31, 1993, to $1.5 million for the year ended December 31,
1994. This increase was primarily attributable to the investment management
fees generated by Advisers. In addition, the Company recognized increased
revenues from forfeited deposits, construction loan monitoring and other fee
income.
Operating expenses, not including interest, increased by $400,000
(11%) from $3.6 million for the year ended December 31, 1993, to $4.0 million
for the year ended December 31, 1994. This increase was primarly attributable
to the result of increased staff and general overhead necessary to manage the
increased portfolio and the operations of PMC Advisers.
Interest expense increased by $1.3 million (57%) from $2.3 million for
the year ended December 31, 1993, to $3.6 million for the year ended December
31, 1994. This increase was primarily attributable to the $25 million Senior
Unsecured Notes issued in 1993, and $6 million in subordinated debentures
issued in September 1994.
Due to First Western's securitization and structured sale of assets,
during the year ended December 31, 1994, the Company recognized $3.3
million of gain. This gain represents the difference between the proceeds
from the sale of these assets plus the present value of the difference between
the interest charged to the borrowers and the interest paid to the purchasers
less the carrying value of the assets (including discounts from the application
of EITF 88-11) and an allowance for credit losses.
Realized and unrealized gain (loss) on investments (not including the
$3.3 million gain from the structured sale of loans) has been reduced from a
loss of $400,000 for the year ended December 31, 1993 to a loss of $200,000 for
the year ended December 31, 1994, a 50% reduction. The reduction was primarily
attributable to: (i) recovery of $68,000 on a loan in liquidation, (ii) a
strong economy with relatively low interest rates and (iii) no losses incurred
in the Company's largest industry concentration.
CASH FLOW ANALYSIS
The Company generated $12.8 million and $13.9 million from operating
activities during the years ended December 31, 1995 and 1994, respectively.
The decrease of $1.1 million (8.0%) was not attributable to any one significant
item.
17
<PAGE> 20
The Company used $31.9 million and $3.7 million through investing
activities during the years ended December 31, 1995 and 1994, respectively.
Included in the 1994 activity are the source of funds of $24.8 from the
structured sale of loans. There was no comparable transaction in 1995. Other
significant changes are noted below. The Company increased its use of funds
for loans originated by approximately $4 million from $43.1 million during the
year ended December 31, 1994 to $47.1 million during the year ended December
31, 1995. During the year ended December 31, 1995 principal collected was
$10.7 million as compared to $17.8 million during the year ended December 31,
1994. This decrease of $7.1 million (40%) was primarily due to higher
prepayments on larger principal balance fixed rate loans during 1994 primarily
in the portfolios of PMC Capital and PMIC. Also included as proceeds from
investing activity are the proceeds from government security sales net of
purchases of $5 million during the year ended December 31, 1995 as compared to
the use of funds for purchases in excess of sales of $1.9 million during the
year ended December 31, 1994.
The Company generated $16.9 million from financing activities during
the year ended December 31, 1995 as compared to the use of $1.8 million during
the year ended December 31, 1994. This change of $18.7 million was primarily
due to (i) increase in SBA debentures issued in 1995 to $15 million from $6
million in 1994 and ii) proceeds of $10 million from the issuance of notes
payable. It is also noted that the dividends paid during the year ended
December 31, 1995 was $11.2 million as compared to $9.8 million during the year
ended December 31, 1994, an increase of $1.4 million (14.3%).
LIQUIDITY AND CAPITAL RESOURCES
The primary use of the Company's funds is to originate loans. In
addition, the Company may use funds to acquire loans from governmental agencies
and/or their agents. The Company also uses funds for general and
administrative expenses, dividends to shareholders, interest expense, capital
expenditures, advances on loan liquidations and payments due on borrowing
facilities. Approximately $2.5 million of the Company's SBA debentures become
payable in September 1996. This amount could, subject to SBA approval, be
rolled over into new SBA debentures. See "Business of the Company - Overview
of SBA Regulations". As a regulated investment company, pursuant to the
Internal Revenue Code of 1986, the Company is required to pay out substantially
all of its net investment company taxable income to the common shareholders.
To sustain growth in the size of its investment portfolio, the Company
continually reviews the need for obtaining additional funds from either: (i)
debt offerings and additional credit facilities, (ii) securitization and sale
of a portion of the loan portfolio and/or (iii) equity offerings.
Historically, the Company's primary sources of capital and liquidity have been
debentures issued through programs of the SBA, private and public issuances of
common stock, the issuance of senior unsecured notes, a securitization and sale
of its loan portfolio and the utilization of its short-term, uncollateralized
line of credit. Availability of additional SBA debentures is limited and there
are no SBA subsidized debentures and preferred stock available through
September 30, 1996.
Loan commitments outstanding at December 31, 1995 to various
prospective small business companies, including the unfunded portion of
projects in the construction phase, amounted to approximately $86.9 million.
Of these commitments, $30.6 million were for loans partially guaranteed by the
SBA of which approximately $28.4 million will be sold into the secondary
market. Such commitments are made in the ordinary course of the Company's
business. Commitments to extend credit are agreements to lend to a customer
provided that the terms
18
<PAGE> 21
established in the contract are met. Commitments generally have fixed
expiration dates and require payment of a fee. Since some commitments expire
without the proposed loan closing, the total commitment amounts do not
necessarily represent future cash requirements.
During April 1995, the Company issued $10 million in senior unsecured
notes, $5 million of which is due in April 2003 with a fixed interest rate of
8.6% and the remaining $5 million is due in April 2004 with a variable interest
rate of LIBOR plus 1.30% (7.24% at December 31, 1995). During May 1995, PMIC
issued $2 million in preferred stock and Western Financial assumed $2.26
million in SBA debentures in exchange for the previously participated portion
of certain loans. During March 1995, June 1995 and September 1995, the
Company's subsidiaries issued $3 million, $5 million and $7 million in SBA
debentures, respectively. The Company also has a short-term line of credit
under which it can borrow approximately $10 million. In addition, at December
31, 1995, the Company had $31.6 million in cash and cash equivalents.
The lack of availability to issue SBA debentures through September 30,
1996 will require the Company to utilize other sources of funds prior to that
time. The cost and terms of these other sources of funds will not be as
favorable as those typically achieved on SBA debentures, however, the Company
has historically been able to issue debt through private placement of notes and
receive working capital through securitization and sale of a portion of its
portfolio. If additional funds are required, the Company would attempt to
either issue additional senior unsecured notes, privately or publicly raise
equity and/or securitize and structure a sale of either the unguaranteed
portion of SBA loans or the portfolio of PMC, Western Financial and PMIC.
Management believes that through utilization of one or more of these sources of
debt or equity capital, the Company should meet its liquidity needs for the
forseeable future.
PMC Capital is required to maintain a minimum of 200% asset coverage
of debt as defined in sections 18 and 61 of the 1940 Act as modified by
exemptive orders obtained by the Company from the Securities and Exchange
Commission.
RISKS ASSOCIATED WITH FORWARD-LOOKING STATEMENTS INCLUDED IN THIS FORM 10-K
This Form 10-K contains certain 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, which are intended to be covered by the safe
harbors created thereby. These statements include the plans and objectives of
management for future operations, including plans and objectives relating to
future growth of the loan portfolio and availability of funds. The
forward-looking statements included herein are based on current expectations
that involve numerous risks and uncertainties. Assumptions relating to the
foregoing involve judgments with respect to, among other things, future
economic, competitive and market conditions and future business decisions, all
of which are difficult or impossible to predict accurately and many of which
are beyond the control of the Company. Although the Company believes that the
assumptions underlying the forward- looking statements are reasonable, any of
the assumptions could be inaccurate and, therefore, there can be no assurance
that the forward-looking statements included in this Form 10-K will prove to be
accurate. In light of the significant uncertainties inherent in the
forward-looking statements included herein, the inclusion of such information
should not be regarded as a representation by the Company or any other person
that the objectives and plans of the Company will be achieved.
19
<PAGE> 22
RECENT ACCOUNTING PRONOUNCEMENTS
In 1993, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 114 "Accounting by
Creditors for Impairment of a Loan" and SFAS No. 118 "Accounting by Creditors
for Impairment of a Loan - Income Recognition and Disclosures." These
pronouncements are effective for fiscal years beginning after December 15,
1994. These statements provide income recognition criteria on loans and
generally require creditors to value certain impaired and restructured loans at
the present value of the expected future cash flows, discounted at the loan's
effective interest rate, or at fair value of the collateral if the loan is
collateral dependent.
The implementation SFAS No. 114 and SFAS No. 118 did not have an
effect on the Company's financial statements.
In May 1995, FASB issued SFAS No. 122, "Accounting for Mortgage
Servicing Rights," an amendment of SFAS No. 65, "Accounting for Certain
Mortgage Banking Activities," to require that an entity recognize as separate
assets rights to service mortgage loans for others, regardless of how such
servicing is acquired. SFAS No. 122 is effective for fiscal years beginning
after December 15, 1995. The effects on operations and financial condition of
implementing SFAS No. 122, in management's opinion, is not considered
significant.
In 1992, FASB issued SFAS No. 107, "Disclosures About fair Value of
Financial Instruments," to require disclosure in the body of the financial
statements or the accompanying notes regarding the fair value of financial
instruments for which it is practicable to estimate that value and the methods
and significant assumptions used. The effective date is for financial
statements issued in fiscal years ending after December 15, 1995. The Company
has incorporated the requirements of SFAS No.107 in the accompanying
consolidated financial statements.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and supplementary data are included in this
report beginning on page F-1.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None
20
<PAGE> 23
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Incorporated herein by reference to the Company's definitive proxy
statement to be filed with the Securities and Exchange Commission within 120
days after the year end covered by this Form 10-K with respect to the Annual
Meeting of Shareholders to be held on May 24, 1996.
ITEM 11. EXECUTIVE COMPENSATION
Incorporated herein by reference to the Company's definitive proxy
statement to be filed with the Securities and Exchange Commission within 120
days after the year end covered by this Form 10-K with respect to the Annual
Meeting of Shareholders to be held on May 24, 1996.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
Incorporated herein by reference to the Company's definitive proxy
statement to be filed with the Securities and Exchange Commission within 120
days after the year end covered by this Form 10-K with respect to the Annual
Meeting of Shareholders to be held on May 24, 1996.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Incorporated herein by reference to the Company's definitive proxy
statement to be filed with the Securities and Exchange Commission within 120
days after the year end covered by this Form 10-K with respect to the Annual
Meeting of Shareholders to be held on May 24, 1996.
21
<PAGE> 24
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
ON FORM 8-K
(a) Documents filed as part of this report:
(1) Financial Statements
See index to Financial Statements set forth on
page F-2 of this Form 10-K.
(2) Financial Statement Schedules
All schedules are omitted because they are not
required under the related instructions or not
applicable, or because the required information
is included in the consolidated financial
statements or notes thereto.
(3) Exhibits
See Exhibit Index beginning on page E-1 of this
Form 10-K.
(b) Reports on Form 8-K:
None
22
<PAGE> 25
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) or 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.
PMC Capital, Inc.
By: /s/ LANCE B. ROSEMORE
-----------------------------------
Lance B. Rosemore, President
Dated March 28, 1996
Pursuant to the requirements of the Securities Act of 1934, this
report has been signed by the following persons in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
Name Title Date
---- ----- ----
<S> <C> <C>
/S/ DR. FREDRIC M. ROSEMORE Chairman of the Board March 28, 1996
- --------------------------- and Treasurer
DR. FREDRIC M. ROSEMORE
/S/ LANCE B. ROSEMORE President, Chief Executive March 28, 1996
- --------------------- Officer, Secretary and Director
LANCE B. ROSEMORE (Principal Executive Officer)
/S/ DR. ANDREW S. ROSEMORE Executive Vice President, March 28, 1996
- -------------------------- Chief Operating Officer
DR. ANDREW S. ROSEMORE and Director
/S/ BARRY N. BERLIN Chief Financial Officer March 28, 1996
- ------------------- (Principal Financial and
BARRY N. BERLIN Accounting Officer)
/S/ LEE RUWITCH
- ---------------
LEE RUWITCH Director March 28, 1996
/S/ DR. MARTHA GREENBERG Director March 28, 1996
- ------------------------
DR. MARTHA GREENBERG
/S/ DR. IRVIN BORISH Director March 28, 1996
- ---------------------
DR. IRVIN BORISH
/S/ THOMAS HAMILL Director March 28, 1996
- -----------------
THOMAS HAMILL
/S/ ROBERT DIAMOND Director March 28, 1996
- ------------------
ROBERT DIAMOND
/S/ BARRY IMBER Director March 28, 1996
- ---------------
BARRY IMBER
</TABLE>
23
<PAGE> 26
PMC CAPITAL INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS AND REPORT OF
INDEPENDENT PUBLIC ACCOUNTANTS
For Inclusion on Form 10-K
Annual Report Filed with the
Securities and exchange Commission
December 31, 1995
F-1
<PAGE> 27
PMC CAPITAL, INC. AND SUBSIDIARIES
FORM 10-K
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
SUMMARY OF SELECTED FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-3
QUARTERLY STATISTICS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-4
CONSOLIDATED FINANCIAL STATEMENTS:
REPORT OF INDEPENDENT ACCOUNTANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-5
FINANCIAL HIGHLIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-6
CONSOLIDATED BALANCE SHEETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-7
CONSOLIDATED SCHEDULE OF INVESTMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-8
CONSOLIDATED STATEMENTS OF INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-10
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-11
CONSOLIDATED STATEMENTS OF CASH FLOWS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-12
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-13
CONSOLIDATING FINANCIAL STATEMENTS:
CONSOLIDATING BALANCE SHEET . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-32
CONSOLIDATING STATEMENT OF INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-33
CONSOLIDATING STATEMENT OF SHAREHOLDERS' EQUITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-34
CONSOLIDATING STATEMENT OF CASH FLOWS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-35
</TABLE>
F-2
<PAGE> 28
PMC CAPITAL, INC. AND SUBSIDIARIES
SUMMARY OF SELECTED FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------------------------------------------
1995 1994 1993 1992 1991
--------- ---------- --------- --------- ---------
( IN THOUSANDS, EXCEPT PER SHARE DATA AND RATIOS )
<S> <C> <C> <C> <C> <C>
OPERATING:
Operating income . . . . . . . . . . . . . . . $ 21,262 $ 16,450 $ 15,670 $ 11,780 $ 8,212
Operating expenses. . . . . . . . . . . . . . . (9,541) (7,578) (5,933) (4,705) (3,935)
Realized and unrealized gain (loss)
on investments . . . . . . . . . . . . . . . (359) 3,151 (404) (263) (50)
--------- ---------- --------- --------- ---------
Net operating income and realized
and unrealized gain (loss) on
investments . . . . . . . . . . . . . . . . . $ 11,362 $ 12,023 $ 9,333 $ 6,812 $ 4,227
========= ========= ========= ========= =========
Dividends declared, common . . . . . . . . . . $ 11,600 $ 11,244 $ 9,367 $ 6,349 $ 3,786
========= ========= ========= ========= =========
Earnings per common share . . . . . . . . . . . $ 1.03 $ 1.12 $ 0.87 $ 0.79 $ 0.63
========= ========= ========= ========= =========
Dividends per common share . . . . . . . . . . $ 1.08 $ 1.06 $ 0.89 $ 0.69 $ 0.57
========= ========= ========= ========= =========
Weighted average common shares
outstanding . . . . . . . . . . . . . . . . . 10,768 10,650 10,579 8,557 6,535
========= ========= ========= ========= =========
Loans funded . . . . . . . . . . . . . . . . . $ 77,567 $ 75,349 $ 74,091 $ 55,975 $ 41,392
========= ========= ========= ========= =========
AT END OF PERIOD:
Loans receivable, net . . . . . . . . . . . . . $ 110,499 $ 75,264 $ 71,528 $ 54,059 $ 44,842
========= ========= ========= ========= =========
Total assets . . . . . . . . . . . . . . . . . $ 156,479 $ 125,416 $ 112,515 $ 85,993 $ 57,012
========= ========= ========= ========= =========
SBA debentures payable . . . . . . . . . . . . $ 43,540 $ 26,280 $ 20,280 $ 22,280 $ 23,140
========= ========= ========= ========= =========
Notes payable . . . . . . . . . . . . . . . . . $ 35,001 $ 25,001 $ 25,001 $ 1 $ 4,251
========= ========= ========= ========= =========
Preferred stock of consolidated subsidiary . . $ 7,000 $ 5,000 $ 3,000 $ 3,000 $ 3,000
========= ========= ========= ========= =========
Common shareholders' equity . . . . . . . . . . $ 59,088 $ 57,371 $ 55,524 $ 54,839 $ 24,039
========= ========= ========= ========= =========
Number of common shares outstanding . . . . . . 10,871 10,684 10,603 10,542 7,119
========= ========= ========= ========= =========
RATIOS:
Return on average assets . . . . . . . . . . . 8.0% 10.3% 9.4% 9.6% 8.1%
========= ========= ========= ========= =========
Return on average common shareholders'
equity . . . . . . . . . . . . . . . . . . . 19.2% 21.2% 16.8% 17.1% 20.7%
========= ========= ========= ========= =========
</TABLE>
F-3
<PAGE> 29
PMC CAPITAL, INC. AND SUBSIDIARIES
QUARTERLY STATISTICS
(UNAUDITED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
--------------------------------------------------------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER TOTAL
---------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C>
OPERATING INCOME . . . . . . . . . . $4,693,891 $5,327,279 $5,633,876 $5,607,148 $21,262,194
NET OPERATING INCOME . . . . . . . . $2,520,268 $2,882,930 $3,154,375 $3,163,699 $11,721,272
NET GAIN (LOSS) ON INVESTMENTS . . . ($11,000) ($77,227) ($187,742) ($82,946) ($358,915)
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS . . . $2,509,268 $2,805,703 $2,966,633 $3,080,753 $11,362,357
- ------------------------------------------------------------------------------------------------------------------------
PER SHARE
- ------------------------------------------------------------------------------------------------------------------------
OPERATING INCOME . . . . . . . . . . $0.438 $0.496 $0.523 $0.517 $1.974
NET OPERATING INCOME . . . . . . . . $0.235 $0.268 $0.293 $0.292 $1.088
NET GAIN (LOSS) ON INVESTMENTS . . . ($0.001) ($0.007) ($0.017) ($0.008) ($0.033)
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS . . . $0.234 $0.261 $0.276 $0.284 $1.055
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1994
--------------------------------------------------------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER TOTAL
---------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C>
OPERATING INCOME . . . . . . . . . . $3,842,805 $4,206,943 $3,995,016 $4,405,520 $16,450,284
NET OPERATING INCOME . . . . . . . . $2,048,068 $2,485,534 $2,130,128 $2,208,680 $8,872,410
NET GAIN (LOSS) ON INVESTMENTS . . . ($51,621) $19,911 $686,130 $2,495,827 $3,150,247
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS . . . $1,996,447 $2,505,445 $2,816,258 $4,704,507 $12,022,657
- ------------------------------------------------------------------------------------------------------------------------
PER SHARE
- ------------------------------------------------------------------------------------------------------------------------
OPERATING INCOME . . . . . . . . . . $0.363 $0.395 $0.375 $0.413 $1.546
NET OPERATING INCOME . . . . . . . . $0.193 $0.233 $0.201 $0.207 $0.834
NET GAIN (LOSS) ON INVESTMENTS . . . ($0.005) $0.002 $0.064 $0.235 $0.296
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS . . . $0.188 $0.235 $0.265 $0.442 $1.130
</TABLE>
F-4
<PAGE> 30
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Directors
PMC Capital, Inc.:
We have audited the accompanying consolidated balance sheets of PMC Capital,
Inc. and subsidiaries as of December 31, 1995 and 1994, and the related
consolidated statements of income, shareholders' equity and cash flows for each
of the three years in the period ended December 31, 1995 and the financial
highlights for each of the four years in the period ended December 31, 1995. We
have also audited the accompanying consolidated schedule of investments as of
December 31, 1995. These financial statements and the financial highlights are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements and financial highlights based
on our audits. The financial highlights of PMC Capital, Inc. and subsidiaries
for the year ended December 31, 1991, were audited by other auditors whose
report dated February 18, 1994, expressed an unqualified opinion on those
financial highlights.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included the examination or confirmation of
securities owned as of December 31, 1995 and 1994. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements and financial highlights
referred to above present fairly, in all material respects, the consolidated
financial position of PMC Capital, Inc. and subsidiaries as of December 31,
1995 and 1994, the consolidated results of their operations and their cash
flows for each of the three years in the period ended December 31, 1995, and
the financial highlights for each of the four years in the period ended
December 31, 1995, and the consolidated schedule of investments as of December
31, 1995, in conformity with generally accepted accounting principles.
Our audit was conducted for the purpose of forming an opinion on the
consolidated financial statements taken as a whole. The supplementary
consolidating balance sheet and the related consolidating statement of income,
cash flows, and shareholders' equity are presented for purposes of additional
analysis rather than to present the financial position, results of operations,
and cash flows of the individual companies, and is not a required part of the
consolidated financial statements. The supplementary consolidating information
has been subjected to the auditing procedures applied in the audit of the
consolidated financial statements and, in our opinion, is fairly stated, in all
material respects, in relation to the consolidated financial statements taken
as whole.
COOPERS & LYBRAND L.L.P.
Dallas, Texas
March 20, 1996
F-5
<PAGE> 31
PMC CAPITAL, INC. AND SUBSIDIARIES
FINANCIAL HIGHLIGHTS
The following financial highlights of the Company should be read in conjunction
with the consolidated financial statements and the notes thereto appearing
elsewhere on this Form 10-K. The financial highlights below provide
information about the Company's financial history. It uses the Company's
fiscal year (which ends December 31) and expresses the per share operating
performance in terms of a single share outstanding throughout each fiscal
period. The information is derived from the audited consolidated financial
statements. The financial highlights for the years ended December 31, 1995,
1994, 1993 and 1992 have been audited by Coopers & Lybrand L.L.P., independent
accountants. The financial data for the year ended December 31, 1991 was
audited by other independent accountants.
<TABLE>
<CAPTION>
Year Ended December 31,
1995 1994 1993 1992 1991
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE ( 1 ):
Net asset value, beginning of period . . . . . . . . . $ 5.37 $ 5.24 $ 5.20 $ 3.38 $ 2.75
--------- --------- --------- --------- ---------
Net operating income . . . . . . . . . . . . . . . . . 1.09 0.83 0.92 0.83 0.65
Net gains or losses on securities
realized and unrealized (2) . . . . . . . . . . . . . 0.08 0.37 0.02 1.69 0.56
--------- --------- --------- --------- ---------
Total from investment operations . . . . . . . . . 1.17 1.20 0.94 2.52 1.21
--------- --------- --------- --------- ---------
Less distributions:
Preferred shareholder of consolidated subsidiary . . 0.02 0.01 0.01 0.01 0.01
Common shareholders. . . . . . . . . . . . . . . . . 1.08 1.06 0.89 0.69 0.57
--------- --------- --------- --------- ---------
Total distributions . . . . . . . . . . . . . . . 1.10 1.07 0.90 0.70 0.58
--------- --------- --------- --------- ---------
Net asset value, end of period . . . . . . . . . . . . $ 5.44 $ 5.37 $ 5.24 $ 5.20 $ 3.38
========= ========= ========= ========= =========
Per share market value, end of period . . . . . . . . . $ 12.63 $ 13.50 $ 14.50 $ 13.25 $ 9.88
========= ========= ========= ========= =========
Total investment return . . . . . . . . . . . . . . . . 2% 0% 16% 43% 123%
========= ========= ========= ========= =========
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period ( in thousands) . . . . . . . $ 59,088 $ 57,371 $ 55,524 $ 54,839 $ 24,039
========= ========= ========= ========= =========
Ratio of expenses to average net assets . . . . . . . . 16% 13% 11% 12% 20%
========= ========= ========= ========= =========
Ratio of operating income to average net assets . . . . 20% 16% 18% 18% 21%
========= ========= ========= ========= =========
Ratio of net operating income and realized and
unrealized gain (loss) on investments to
average net assets . . . . . . . . . . . . . . . . . 20% 21% 17% 17% 21%
========= ========= ========= ========= =========
Portfolio turnover ( 3 ) . . . . . . . . . . . . . . . 30% 65% 54% 77% 59%
========= ========= ========= ========= =========
</TABLE>
FOOTNOTES:
(1) The per share changes during the year are based on the weighted average
number of shares outstanding of the Company during the year presented.
(2) The per share net gains or losses on securities (realized and unrealized)
includes the effect of stock issuances and other changes in per share
amounts during the year presented.
(3) Included in the computation of the portfolio turnover rate are the sales of
loans through the secondary market or private placement.
F-6
<PAGE> 32
PMC CAPITAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------
1995 1994
-------------- ---------------
<S> <C> <C>
ASSETS
INVESTMENTS AT VALUE:
Loans receivable, net . . . . . . . . . . . . . . . . . . . . $ 110,499,485 $ 75,264,189
Excess servicing asset, net . . . . . . . . . . . . . . . . . 4,990,924 5,100,202
Cash equivalents . . . . . . . . . . . . . . . . . . . . . . 31,134,961 33,003,391
Government securities . . . . . . . . . . . . . . . . . . . . - 4,882,166
Restricted investments . . . . . . . . . . . . . . . . . . . 1,784,868 1,533,591
Real property owned . . . . . . . . . . . . . . . . . . . . . 4,505 307,658
-------------- ---------------
TOTAL INVESTMENTS . . . . . . . . . . . . . . . . . . . . . . . 148,414,743 120,091,197
-------------- ---------------
OTHER ASSETS:
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . 438,984 693,014
Accrued interest receivable . . . . . . . . . . . . . . . . . 723,360 425,038
Receivable for loans sold . . . . . . . . . . . . . . . . . . 4,370,715 1,910,080
Due from affiliates . . . . . . . . . . . . . . . . . . . . . 1,135,253 437,592
Investment in subsidiaries . . . . . . . . . . . . . . . . . 27,412 26,000
Property and equipment, net . . . . . . . . . . . . . . . . . 199,360 247,735
Deferred charges, deposits and other assets . . . . . . . . . 1,168,919 1,585,444
-------------- ---------------
TOTAL OTHER ASSETS . . . . . . . . . . . . . . . . . . . . . . 8,064,003 5,324,903
-------------- ---------------
TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . $ 156,478,746 $ 125,416,100
============== ===============
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES:
SBA debentures payable . . . . . . . . . . . . . . . . . . . $ 43,540,000 $ 26,280,000
Notes payable . . . . . . . . . . . . . . . . . . . . . . . . 35,001,000 25,001,000
Accrued interest payable . . . . . . . . . . . . . . . . . . 1,434,475 1,033,312
Deferred fee revenue . . . . . . . . . . . . . . . . . . . . 778,927 554,738
Borrower advances . . . . . . . . . . . . . . . . . . . . . . 2,260,314 2,954,162
Dividends payable . . . . . . . . . . . . . . . . . . . . . . 3,595,637 3,944,260
Accounts payable . . . . . . . . . . . . . . . . . . . . . . 2,500,231 2,153,750
Other liabilities . . . . . . . . . . . . . . . . . . . . . . 1,279,988 1,123,558
-------------- ---------------
TOTAL LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . 90,390,572 63,044,780
-------------- ---------------
Commitments and contingencies (Notes 7 and 8)
CUMULATIVE PREFERRED STOCK OF SUBSIDIARY . . . . . . . . . . . 7,000,000 5,000,000
-------------- ---------------
SHAREHOLDERS' EQUITY:
Common stock, authorized 15,000,000 shares of $.01 par value,
10,871,040 and 10,684,035 shares issued and outstanding
at December 31, 1995 and 1994, respectively . . . . . . 108,710 106,840
Additional paid-in capital . . . . . . . . . . . . . . . . . 58,429,112 56,254,654
Undistributed net operating income . . . . . . . . . . . . . 1,017,352 1,386,826
Net unrealized depreciation on investments . . . . . . . . . (467,000) (377,000)
-------------- ---------------
59,088,174 57,371,320
-------------- ---------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY . . . . . . . . . . $ 156,478,746 $ 125,416,100
============== ===============
NET ASSET VALUE PER COMMON SHARE . . . . . . . . . . . . . . . $5.44 $5.37
============== ===============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
F-7
<PAGE> 33
PMC CAPITAL INC. AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
NUMBER
OF
CATEGORY/ISSUER LOANS VALUE (1) % COST %
- --------------- ------ --------- ----- ---- -----
<S> <C> <C> <C> <C> <C>
LOANS TO SMALL BUSINESS CONCERNS (2):
SMALL BUSINESS LENDING COMPANY LOANS:
FIRST WESTERN SBLC, INC. AND SUBSIDIARY
Hotels and motels . . . . . . . . . . . . . . . . . . . . 164 $ 15,828,325 10.66% $ 16,777,847 10.89%
Health care . . . . . . . . . . . . . . . . . . . . . . . 11 26,672 0.02% 27,540 0.02%
Restaurants . . . . . . . . . . . . . . . . . . . . . . . 75 1,367,700 0.92% 1,546,833 1.00%
Food and grocery stores . . . . . . . . . . . . . . . . . 18 230,705 0.16% 248,298 0.16%
Gasoline / service stations . . . . . . . . . . . . . . . 22 586,940 0.40% 646,970 0.42%
Wholesale . . . . . . . . . . . . . . . . . . . . . . . . 25 232,699 0.16% 292,348 0.19%
Services . . . . . . . . . . . . . . . . . . . . . . . . 76 1,120,155 0.75% 1,219,991 0.79%
Manufacturing . . . . . . . . . . . . . . . . . . . . . . 20 292,003 0.20% 301,003 0.20%
Laundromats . . . . . . . . . . . . . . . . . . . . . . . 14 192,715 0.13% 194,813 0.13%
Car washes . . . . . . . . . . . . . . . . . . . . . . . 4 29,600 0.02% 31,374 0.02%
Retail, other . . . . . . . . . . . . . . . . . . . . . . 80 926,273 0.62% 975,576 0.63%
--- ------------ ----- ------------ -----
Total small business lending company loans . . . . . . . . 509 20,833,787 14.04% 22,262,593 14.45%
--- ------------ ----- ------------ -----
SMALL BUSINESS INVESTMENT COMPANY LOANS:
WESTERN FINANCIAL CAPITAL CORPORATION
Hotels and motels . . . . . . . . . . . . . . . . . . . . 32 17,494,073 11.79% 17,825,455 11.56%
Health care . . . . . . . . . . . . . . . . . . . . . . . 55 1,478,806 1.00% 1,616,270 1.05%
Restaurants . . . . . . . . . . . . . . . . . . . . . . . 2 369,649 0.25% 369,649 0.24%
Food and grocery stores . . . . . . . . . . . . . . . . . 3 478,369 0.32% 478,786 0.31%
Gasoline / service stations . . . . . . . . . . . . . . . 5 2,107,924 1.42% 2,152,254 1.40%
Services . . . . . . . . . . . . . . . . . . . . . . . . 18 1,667,496 1.12% 1,694,220 1.10%
Laundromats . . . . . . . . . . . . . . . . . . . . . . . 2 184,582 0.12% 184,582 0.12%
Manufacturing . . . . . . . . . . . . . . . . . . . . . . 5 388,710 0.26% 388,927 0.25%
Retail, other . . . . . . . . . . . . . . . . . . . . . . 7 577,315 0.39% 616,928 0.40%
Other notes receivable . . . . . . . . . . . . . . . . . 4 306,309 0.21% 306,309 0.20%
--- ------------ ----- ------------ -----
Total small business investment company loans . . . . . . . 133 25,053,233 16.88% 25,633,380 16.63%
--- ------------ ----- ------------ -----
SPECIALIZED SMALL BUSINESS INVESTMENT COMPANY LOANS:
PMC INVESTMENT CORPORATION
Hotels and motels . . . . . . . . . . . . . . . . . . . . 50 30,308,592 20.43% 30,847,659 20.01%
Health care . . . . . . . . . . . . . . . . . . . . . . . 25 939,515 0.63% 1,006,622 0.65%
Restaurants . . . . . . . . . . . . . . . . . . . . . . . 4 959,831 0.65% 965,782 0.63%
Food and grocery stores . . . . . . . . . . . . . . . . . 7 1,198,192 0.81% 1,213,383 0.79%
Gasoline / service stations . . . . . . . . . . . . . . . 5 1,829,704 1.23% 1,877,682 1.22%
Services . . . . . . . . . . . . . . . . . . . . . . . . 3 479,097 0.32% 479,359 0.31%
Laundromats . . . . . . . . . . . . . . . . . . . . . . . 1 10,912 0.01% 10,912 0.01%
Retail, other . . . . . . . . . . . . . . . . . . . . . . 1 68,916 0.04% 70,431 0.04%
Other notes receivable . . . . . . . . . . . . . . . . . 3 872,764 0.59% 905,894 0.59%
--- ------------ ----- ------------ -----
Specialized small business investment company loans . . . . 99 36,667,523 24.71% 37,377,724 24.25%
--- ------------ ----- ------------ -----
COMMERCIAL LOANS:
PMC CAPITAL, INC.
Hotels and motels . . . . . . . . . . . . . . . . . . . . 38 22,400,117 15.08% 22,458,538 14.58%
Retail centers and other . . . . . . . . . . . . . . . . 8 5,544,825 3.74% 5,936,478 3.85%
--- ------------ ----- ------------ -----
Commercial loans . . . . . . . . . . . . . . . . . . . . . 46 27,944,942 18.82% 28,395,016 18.43%
--- ------------ ----- ------------ -----
TOTAL LOANS RECEIVABLE (6) . . . . . . . . . . . . . . . . 787 $110,499,485 74.45% $113,668,713 73.76%
=== ============ ===== ============ =====
</TABLE>
(Continued on next page)
F-8
<PAGE> 34
PMC CAPITAL INC. AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS
DECEMBER 31, 1995
(CONTINUED)
<TABLE>
<CAPTION>
CATEGORY/ISSUER VALUE (1) % COST %
- --------------- --------- ------ ---- ------
<S> <C> <C> <C> <C>
CASH EQUIVALENTS AND OTHER INVESTMENTS:
CASH EQUIVALENTS (3):
Certificates of deposit . . . . . . . . . . . . . . . . . . . . $ 495,000 0.33% $ 495,000 0.32%
MONEY MARKET AND FUND DEPOSIT ACCOUNTS (4):
SunBank Miami, money market . . . . . . . . . . . . . . . . . . 1,069,985 0.72% 1,069,985 0.69%
Bank One Texas, money market . . . . . . . . . . . . . . . . . 11,822,460 7.97% 11,822,460 7.67%
SunTrust, overnight repo account . . . . . . . . . . . . . . . 5,230,378 3.52% 5,230,378 3.39%
Lehman Brothers, Prime money market fund . . . . . . . . . . . 3,340,062 2.25% 3,340,062 2.17%
Lehman Brothers, Prime Value money market fund . . . . . . . . 2,664,081 1.80% 2,664,081 1.73%
Goldman Sachs, Prime Obligation money market fund. . . . . . . 3,223,781 2.17% 3,223,781 2.09%
Goldman Sachs, Money Market Portfolio money market fund . . . 3,289,214 2.22% 3,289,214 2.13%
------------- ------ ------------ ------
Total cash equivalents . . . . . . . . . . . . . . . . . . . . . 31,134,961 20.98% 31,134,961 20.20%
------------- ------ ------------ ------
OTHER INVESTMENTS (7):
Excess servicing asset. . . . . . . . . . . . . . . . . . . . . 4,990,924 3.37% 7,513,784 4.88%
SunBank Miami, restricted investments . . . . . . . . . . . . . 1,784,868 1.20% 1,784,868 1.16%
Real property owned . . . . . . . . . . . . . . . . . . . . . . 4,505 0.00% 4,505 0.00%
------------- ------ ------------ ------
Total other investments. . . . . . . . . . . . . . . . . . . . . 6,780,297 4.57% 9,303,157 6.04%
------------- ------ ------------ ------
TOTAL CASH EQUIVALENTS AND OTHER INVESTMENTS . . . . . . . . . . 37,915,258 25.55% 40,438,118 26.24%
------------- ------ ------------ ------
TOTAL INVESTMENTS (5) . . . . . . . . . . . . . . . . . . . . . . $ 148,414,743 100.00% $154,106,831 100.00%
============= ====== ============ ======
</TABLE>
(1) Names have been omitted as disclosure to the public may be detrimental to
the small business.
(2) Interest rates on loans receivable range from 6.5% to 14.0%.
(3) Interest rates on certificates of deposit range from 5.6% to 5.7%. All
certificates held by either PMC or any of its subsidiaries are less than
$100,000 in any one institution, generally have maturities of 90 days and
are considered to be cash equivalents.
(4) Interest rates on money market and fund deposit accounts range from 2.5%
to 5.7%.
(5) The aggregate cost of investments for Federal income tax purposes is
$149,848,000.
(6) Balances are at face value of loans, less discounts aggregating $1,183,730
in accordance with Emerging Issues Task Force 88-11, discounts on
purchased loans of $552,357, deferred fee revenue of $966,141 and reserves
of $467,000.
(7) The value of other investments is net of a $2,522,860 reserve established
in connection with the structured sale of loans.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
F-9
<PAGE> 35
PMC CAPITAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------------------------
1995 1994 1993
-------------- -------------- ---------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . $ 16,329,854 $ 11,952,049 $ 9,320,504
Premium income . . . . . . . . . . . . . . . . . . . . . . . 2,847,139 2,728,446 5,523,667
Other investment income, net. . . . . . . . . . . . . . . . . 368,220 302,517 202,523
-------------- -------------- ---------------
Total investment income . . . . . . . . . . . . . . . . . . . . 19,545,213 14,983,012 15,046,694
Equity in income (loss) of subsidiaries . . . . . . . . . . . . (77,778) - -
Other income, net . . . . . . . . . . . . . . . . . . . . . . . 1,794,759 1,467,272 623,333
-------------- -------------- ---------------
Total income . . . . . . . . . . . . . . . . . . . . . . . . . 21,262,194 16,450,284 15,670,027
-------------- -------------- ---------------
EXPENSES:
Salaries and related benefits . . . . . . . . . . . . . . . . 2,778,264 2,551,816 2,267,679
Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . 202,929 175,914 219,015
Legal and accounting . . . . . . . . . . . . . . . . . . . . 151,875 75,984 117,750
Directors and shareholders expense . . . . . . . . . . . . . 38,447 43,606 44,020
Small Business Administration fees . . . . . . . . . . . . . 77,303 48,309 52,395
General and administrative . . . . . . . . . . . . . . . . . 1,053,298 899,561 760,461
Profit sharing plan . . . . . . . . . . . . . . . . . . . . . 189,494 167,754 152,350
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . 5,049,312 3,614,930 2,319,414
-------------- -------------- ---------------
Total expenses . . . . . . . . . . . . . . . . . . . . . . . . 9,540,922 7,577,874 5,933,084
-------------- -------------- ---------------
Net operating income . . . . . . . . . . . . . . . . . . . . . 11,721,272 8,872,410 9,736,943
-------------- -------------- ---------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Loans written-off . . . . . . . . . . . . . . . . . . . . . (309,211) (406,989) (424,660)
Recoveries on loans written-off . . . . . . . . . . . . . . 40,296 68,000 -
Sale of assets . . . . . . . . . . . . . . . . . . . . . . - 3,346,236 -
Change in unrealized appreciation
(depreciation) on investments . . . . . . . . . . . . . . (90,000) 143,000 21,000
-------------- -------------- ---------------
Total realized and unrealized gain (loss) on investments . . . (358,915) 3,150,247 (403,660)
-------------- -------------- ---------------
NET OPERATING INCOME AND REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS . . . . . . . . . . . . . . . . . $ 11,362,357 $ 12,022,657 $ 9,333,283
============== ============== ===============
PREFERRED DIVIDENDS . . . . . . . . . . . . . . . . . . . . . . $221,945 $112,356 $89,763
============== ============== ===============
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING . . . . . . . . . . 10,767,783 10,649,885 10,578,756
============== ============== ===============
EARNINGS PER COMMON SHARE . . . . . . . . . . . . . . . . . . . $1.03 $1.12 $0.87
============== ============== ===============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
F-10
<PAGE> 36
PMC CAPITAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
NET
ADDITIONAL UNDISTRIBUTED UNREALIZED
COMMON PAID-IN NET OPERATING DEPRECIATION
STOCK CAPITAL INCOME ON INVESTMENTS TOTAL
------ ---------- ------------- -------------- -----
<S> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1993 . . . . . . . . . . . . . $ 105,419 $ 54,267,000 $ 1,007,859 $ (541,000) $ 54,839,278
Issuances of common stock:
Dividend reinvestment plan, 60,805 shares . . . . 607 807,312 - - 807,919
Net income . . . . . . . . . . . . . . . . . . . . - - 9,312,283 21,000 9,333,283
Dividends:
Preferred . . . . . . . . . . . . . . . . . . . . - - (89,763) - (89,763)
Common ( $0.89 per common share ) . . . . . . . . - - (9,366,628) - (9,366,628)
--------- ------------- ------------ ---------- -------------
BALANCE, DECEMBER 31, 1993 . . . . . . . . . . . . 106,026 55,074,312 863,751 (520,000) 55,524,089
Issuances of common stock:
Dividend reinvestment plan, 81,345 shares . . . . 814 1,180,342 - - 1,181,156
Net income . . . . . . . . . . . . . . . . . . . . - - 11,879,657 143,000 12,022,657
Dividends:
Preferred . . . . . . . . . . . . . . . . . . . . - - (112,356) - (112,356)
Common ( $1.06 per common share ) . . . . . . . . - - (11,244,226) - (11,244,226)
--------- ------------- ------------ ---------- -------------
BALANCE, DECEMBER 31, 1994 . . . . . . . . . . . . 106,840 56,254,654 1,386,826 (377,000) 57,371,320
Issuances of common stock:
Dividend reinvestment plan, 187,005 shares . . . 1,870 2,174,458 - - 2,176,328
Net income . . . . . . . . . . . . . . . . . . . . - - 11,452,357 (90,000) 11,362,357
Dividends:
Preferred . . . . . . . . . . . . . . . . . . . . - - (221,945) - (221,945)
Common ( $1.08 per common share ) . . . . . . . . - - (11,599,886) - (11,599,886)
--------- ------------- ------------ ---------- -------------
BALANCE, DECEMBER 31, 1995 . . . . . . . . . . . . $ 108,710 $ 58,429,112 $ 1,017,352 $ (467,000) $ 59,088,174
========= ============= ============ ========== =============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
F-11
<PAGE> 37
PMC CAPITAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------------
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net operating income and realized and unrealized gain (loss) on
investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 11,362,357 $ 12,022,657 $ 9,333,283
Adjustments to reconcile net operating income and realized and unrealized . . .
gain (loss) on investments to net cash provided by operating activities:
Loans funded, held for sale . . . . . . . . . . . . . . . . . . . . . . . (30,468,122) (32,249,364) (42,689,039)
Proceeds from sale of guaranteed loans . . . . . . . . . . . . . . . . . 30,298,570 32,988,708 36,763,920
Change in unrealized depreciation on investments and loans written-off. . 358,915 195,989 403,660
Unrealized premium income, net . . . . . . . . . . . . . . . . . . . . . 79,962 5,542 (428,790)
Depreciation and amortization of property and equipment and other
deferred costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . 170,433 149,859 115,040
Amortization of excess servicing asset . . . . . . . . . . . . . . . . . 971,610 1,492,345 1,241,413
Accretion of discount on portfolio . . . . . . . . . . . . . . . . . . . (167,930) (302,201) (209,358)
Accretion of deferred fees . . . . . . . . . . . . . . . . . . . . . . . (508,062) (470,381) (122,903)
Accretion on government securities . . . . . . . . . . . . . . . . . . . (123,318) (30,573) (43,460)
Deferred fees collected . . . . . . . . . . . . . . . . . . . . . . . . . 1,050,318 1,003,541 343,358
(Gain) loss on sale of assets . . . . . . . . . . . . . . . . . . . . . . 26,059 (43,298) 16,074
Gain on structured sale of loans . . . . . . . . . . . . . . . . . . . . - (3,346,238) -
Equity in loss of subsidiary . . . . . . . . . . . . . . . . . . . . . . 77,778 - -
Net change in operating assets and liabilities:
Accrued interest receivable . . . . . . . . . . . . . . . . . . . . . (298,322) (44,592) (62,308)
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (165,848) 460,598 (834,929)
Accrued interest payable . . . . . . . . . . . . . . . . . . . . . . . 401,163 202,075 240,541
Borrower advances . . . . . . . . . . . . . . . . . . . . . . . . . . (693,848) 371,178 1,174,888
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . 502,911 1,484,983 59,567
------------ ------------ ------------
NET CASH PROVIDED BY OPERATING ACTIVITIES . . . . . . . . . . . . . . . . . . . . 12,874,626 13,890,828 5,300,957
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Loans funded . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (47,098,934) (43,100,003) (31,401,899)
Principal collected . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,651,520 17,756,494 13,632,687
Proceeds from structured sale of loans . . . . . . . . . . . . . . . . . . . . - 24,844,359 -
Purchase of furniture and fixtures and other assets . . . . . . . . . . . . . . (52,712) (828,373) (340,296)
Purchase of government securities . . . . . . . . . . . . . . . . . . . . . . . (3,942,013) (4,856,363) (2,951,770)
Proceeds from maturities of government securities . . . . . . . . . . . . . . . 8,947,497 3,000,000 -
Investment in restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . (251,277) (1,533,591) -
Proceeds from sale of assets . . . . . . . . . . . . . . . . . . . . . . . . . 232,786 1,010,280 439,324
Investment in subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . (400,000) - -
------------ ------------ ------------
NET CASH USED IN INVESTING ACTIVITIES . . . . . . . . . . . . . . . . . . . . . . (31,913,133) (3,707,197) (20,621,954)
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of SBA debentures . . . . . . . . . . . . . . . . . . . 15,000,000 6,000,000 -
Proceeds from issuance of notes payable . . . . . . . . . . . . . . . . . . . 10,000,000 - 25,000,000
Proceeds from issuance of common stock . . . . . . . . . . . . . . . . . . . . 1,399,220 535,035 270,755
Proceeds from issuance of preferred stock . . . . . . . . . . . . . . . . . . 2,000,000 2,000,000 -
Payment of dividends on common stock . . . . . . . . . . . . . . . . . . . . . (11,188,909) (9,773,666) (7,810,342)
Payment of dividends on preferred stock . . . . . . . . . . . . . . . . . . . (204,437) (67,315) (89,763)
Payment on SBA debentures . . . . . . . . . . . . . . . . . . . . . . . . . . - - (2,000,000)
Advances from (to) affiliates, net . . . . . . . . . . . . . . . . . . . . . . 357,099 (369,992) (93,600)
Payment of issuance costs . . . . . . . . . . . . . . . . . . . . . . . . . . (446,926) (157,500) (272,376)
------------ ------------ ------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES . . . . . . . . . . . . . . . 16,916,047 (1,833,438) 15,004,674
------------ ------------ ------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS . . . . . . . . . . . . . . (2,122,460) 8,350,193 (316,323)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD . . . . . . . . . . . . . . . . . 33,696,405 25,346,212 25,662,535
------------ ------------ ------------
CASH AND CASH EQUIVALENTS, END OF PERIOD . . . . . . . . . . . . . . . . . . . . $ 31,573,945 $ 33,696,405 $ 25,346,212
============ ============ ============
SUPPLEMENTAL DISCLOSURE:
INTEREST PAID . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,648,149 $ 3,412,855 $ 2,078,873
============ ============ ============
DIVIDENDS REINVESTED . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 777,107 $ 646,121 $ 537,165
============ ============ ============
LOANS RECEIVABLE ACQUIRED IN EXCHANGE FOR SBA DEBENTURES . . . . . . . . . . . $ 2,109,062 $ - $ -
============ ============ ============
RECLASSIFICATION FROM LOANS RECEIVABLE TO REAL PROPERTY OWNED . . . . . . . . $ 65,000 $ 649,942 $ 720,170
============ ============ ============
LOANS TO FACILITATE SALE OF REAL PROPERTY OWNED . . . . . . . . . . . . . . . $ 85,000 $ 1,345,319 $ -
============ ============ ============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
F-12
<PAGE> 38
PMC CAPITAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
BUSINESS
PMC Capital, Inc. ("PMC" or "PMC Capital") is a diversified,
closed-end management investment company that on June 7, 1994 elected
to operate as a business development company under the Investment
Company Act of 1940 (the "1940 Act"). PMC engages in the business of
originating loans to small businesses either directly or through its
three principal subsidiaries; First Western SBLC, Inc. ("First
Western"), PMC Investment Corporation ("PMIC") and Western Financial
Capital Corporation ("Western Financial"). First Western, PMIC and
Western Financial are registered under the 1940 Act as diversified,
closed-end management investment companies. In addition, PMC is the
sole shareholder of PMC Advisers, Inc. ("PMC Advisers") and PMC
Funding Corp. PMC has elected to be taxed as a regulated investment
company and distributes substantially all of its taxable income as
dividends to shareholders.
First Western is a small business lending company ("SBLC") that
originates variable-rate loans which are partially guaranteed by the
Small Business Administration ("SBA") pursuant to its Section 7(a)
program. While the eligibility requirements of the Section 7(a)
program vary by the industry of the borrower and other factors, the
general eligibility requirements are that; (i) gross sales of the
borrower cannot exceed $5.0 million (other than with respect to
certain industries where eligibility is determined based on the number
of employees), (ii) liquid assets or real estate equity of the
borrower (and certain affiliates) cannot exceed the greater of 25% of
the loan amount or $50,000 and (iii) the maximum aggregate SBA loan
guarantees to a borrower cannot exceed $750,000.
PMIC is a licensed specialized small business investment company
("SSBIC") under the Small Business Investment Act of 1958, as amended
("SBIA"). PMIC uses long-term funds provided by the SBA, together
with its own capital, to provide long-term, fixed-rate collateralized
loans to eligible small businesses owned by "disadvantaged" persons,
as defined under the regulations of the SBA. As an SSBIC, PMIC is
eligible to obtain long-term, fixed-rate funding, generally at
below-market rates, from the SBA through the issuance of debentures
(which are guaranteed by the SBA and on which the interest rate is
reduced through an SBA subsidy by 3% during the first five years) and
preferred stock (which is currently issuable to the SBA with a 4% per
annum cumulative dividend rate).
Western Financial is a licensed small business investment company
("SBIC") under the SBIA that provides fixed- rate loans to borrowers
whether or not they qualify as "disadvantaged". As an SBIC, Western
Financial is eligible to obtain long-term, fixed-rate funding,
generally at below-market rates, from the SBA through the issuance of
debentures.
PMC has originated loans to borrowers on a non-SBA supported basis
using similar criteria as that used for other loans that are funded
under the SBA programs utilized by the subsidiaries. These loans are
made to borrowers who exceed the eligibility requirements of the SBA
7(a) or SBIC programs.
F-13
<PAGE> 39
PMC CAPITAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
PMC Advisers, organized in July 1993, is a registered investment
advisor under the Investment Advisers Act of 1940 which acts as the
investment advisor for PMC Commercial Trust ("PMC Commercial" or the
"Trust"), a Texas real estate investment trust and an affiliate of PMC
Capital, Inc.
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of PMC and
its wholly owned regulated investment company subsidiaries
(collectively "the Company"). Intercompany transactions have been
eliminated in consolidation.
The accounts of PMC Advisers and PMC Funding Corp. are accounted for
by the equity method of accounting in conformity with the requirements
of the 1940 Act.
VALUATION OF INVESTMENTS
Loans receivable are carried at the Board of Directors' estimate of
fair value. The Board of Directors has estimated the fair value of
loans receivable to be the loan principal balance less deferred fees
and discounts, unless there is doubt as to the realization of the loan
(a "problem loan"). A valuation reserve is established for a problem
loan based on the creditor's payment history, collateral value,
guarantor support, and other factors. Changes in market interest
rates are not considered in determining the estimate of fair value.
When selling the SBA-guaranteed portion of loans, the basis of the
retained portion of the loans have been reduced by the differential
between the face amount of the unguaranteed portion of the loans and
the value as determined in accordance with Emerging Issues Task Force
("EITF" 88-11). This difference being the Retained Loan Discount. At
the time of sale, premium income has been reduced by the Retained Loan
Discount. Unless the underlying loans are paid in full or sold, the
Retained Loan Discount is amortized over the life of the underlying
loan based on an effective yield method. When a loan is prepaid, the
remaining Retained Loan Discount is recognized as an increase to
interest income. When a loan is sold, the remaining Retained Loan
Discount is included as a reduction to the basis of the retained
portion of the underlying loan as a reduction of cost.
Excess servicing related to the sale of the guaranteed portion of SBA
loans is carried at the Board of Directors' estimate of fair value at
the time of the related loan sale and amortized on a pool basis over
the estimated life of the underlying pool of loans.
F-14
<PAGE> 40
PMC CAPITAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
For those sales of the unguaranteed portion of SBA loans, the related
excess servicing asset has been offset by an allowance which
represents the Board of Directors' estimate of probable credit losses
to be incurred over the lives of the loans sold.
Deferred fees consist of non-refundable fees less direct loan
origination costs. These fees are being recognized over the life of
the related loan as an adjustment of yield.
Real property owned is carried at the Board of Directors' estimate of
fair value, based upon appraisals and other factors.
Cash equivalents are carried at value, which approximates cost.
Debt incurred by the Company is valued at cost. Changes in market
interest rates are not considered in determining fair value as
determined by the Board of Directors.
PROPERTY AND EQUIPMENT
Property, equipment and leasehold improvements are carried at their
value, which is cost less accumulated depreciation and amortization.
Depreciation and amortization is computed using accelerated and
straight-line methods, with estimated useful lives ranging from five
to 15 years.
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Realized gains or losses are measured by the difference between the
proceeds from the sale and the cost basis of the investment, without
regard to unrealized gains and losses previously recognized. The gain
or loss calculated also includes loans written-off or charged-down
during the year and recoveries of loans written-off or charged-down in
prior years.
Other changes in the value of investments are included as changes in
the unrealized appreciation (depreciation) on investments in the
statements of income.
Realized gains on the sale of the unguaranteed portion of SBA loans
are recognized based upon the difference between the sales price as
adjusted for any excess servicing ( net of the allowance for credit
losses) and the carrying value of the assets (including the Retained
Loan Discount).
INTEREST INCOME
Interest income on loans is accrued as earned. The accrual of
interest is generally suspended when the related loan becomes 60 days
past due ("Non-accrual Loan"). Interest income on a Non-accrual Loan
is recognized on the cash basis.
Interest income includes the interest rate spread on loans sold to the
secondary market or through the unguaranteed portion of SBA loans less
the amortization of any excess servicing asset.
F-15
<PAGE> 41
PMC CAPITAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
PREMIUM INCOME
For loans originated by the SBLC after January 1, 1990, gain on the
sale of the SBA guaranteed portion of such loans to the secondary
market has been adjusted to reflect a normal service fee for the
future servicing rights retained by the Company. Premium income
represents the differential between the value attributable to the sale
of a loan to the secondary market and the principal balance (cost) of
the loan in accordance with EITF 88-11. The sale price includes the
value attributable to any excess servicing spread retained by the
Company plus any cash received.
DEFERRED CHARGES
Costs incurred in connection with the issuance of SBA debentures and
the notes payable are included in deferred charges, deposits and other
assets. These costs are amortized over the life of the related
obligation.
FEDERAL INCOME TAXES
The Company has elected to be treated as a regulated investment
company by meeting certain requirements of the Internal Revenue Code
relating to the distribution of its net investment income to
shareholders. Thereby the Company incurs no Federal income tax
liability on such income. Based on its status as a regulated
investment company, the Company may elect to retain, deem to
distribute or distribute, in whole or in part, net long-term capital
gains realized on the disposition of its investments.
Any dividends declared by the Company in October, November or December
of any calendar year, payable to shareholders of record on a specified
date in such month and actually paid during January of the following
year, may be treated as if it were received by the shareholders on
December 31 of the year declared.
DISTRIBUTIONS TO SHAREHOLDERS
Distributions to shareholders are recorded on the ex-dividend date.
STATEMENT OF CASH FLOWS
The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents for
purposes of the statement of cash flows.
STATEMENT OF FINANCIAL ACCOUNTING STANDARDS ("SFAS") NOS. 114 AND 118
The Company adopted SFAS No.114, "Accounting by Creditors for
Impairment of a Loan," and SFAS No. 118, "Accounting by Creditors for
Impairment of a Loan Income Recognition and Disclosures" on January 1,
1995. Under these new standards, a loan is considered impaired, based
on current information and events, if it is probable that the Company
will
F-16
<PAGE> 42
PMC CAPITAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
be unable to collect the scheduled payments of principal or interest
when due according to the contractual terms of the loan agreement.
Since most of the Company's loans are collateral dependent, the
measurement of impaired loans is generally based on the fair value of
the collateral. To the extent that loans are not collateral
dependent, the measurement of impaired loans will be based on the
present value of expected future cash flows from loan payments
discounted at the historical effective interest rate. The adoption of
SFAS Nos. 114 and 118 did not have a material effect on the Company's
consolidated financial statements.
Loans, including impaired loans, are generally classified as
nonaccrual if they are past due as to maturity or payment of principal
or interest for a period of more than 60 days. If a loan or a portion
of a loan is classified as doubtful or is partially reserved or
charged-off, the loan is classified as nonaccrual. Loans that are on
a current payment status or past due less than 60 days may also be
classified as nonaccrual if repayment in full of principal and/or
interest is in doubt.
EXCESS SERVICING ASSET
During 1995, the Emerging Issues Task Force ("EITF") reached a
consensus on Issue No. 94-9, "Determining a Normal Servicing Fee Rate
for the Sale of an SBA Loan." This consensus provides that for
purposes of allocating the recorded investment in a loan between the
portion of the loan sold and the portion retained, including any
excess servicing asset, a normal servicing fee of 40 basis points
should be used. The Company has historically used 50 basis points as
a normal servicing fee. The effect of this change in estimate was not
material to the consolidated financial statements during the year
ended December 31, 1995.
RECLASSIFICATION
Certain prior period amounts have been reclassified to conform to
current year presentation.
NOTE 2. LOANS RECEIVABLE:
Loans receivable consist primarily of loans made under SBIC, SSBIC,
and SBLC programs established by the SBA and financings to businesses
outside of the SBA loan programs.
As an SBLC, First Western originates loans which are partially
guaranteed by the SBA and which are collateralized generally, with
first liens on real and/or personal property of the borrower. The SBA
guarantees repayment of up to 90% of the principal amount of the
loans originated by First Western. First Western sells, without
recourse, the guaranteed portion of its loans into the secondary
market while retaining the rights to service the loans. Funding for
the SBA's Section 7(a) loan program depends on the annual
appropriations by the U.S. Congress. At December 31, 1995, included
in loans receivable are approximately $5.0 million which represents
the guaranteed portion of First Western loans available for sale.
F-17
<PAGE> 43
PMC CAPITAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2. LOANS RECEIVABLE: (CONTINUED)
The principal balance of the loans serviced on behalf of third parties
by First Western was approximately $150.1 million and $143.3 million
at December 31, 1995 and 1994, respectively.
First Western's loans, generally: (i) range in original principal
amount from $30,000 to $1,400,000, (ii) provide for a variable rate of
interest based on 1.5% to 2.75% above the then prevailing prime rate,
(iii) have a term of seven to 25 years, (iv) may be prepaid without
penalty and (v) require monthly payments covering accrued interest and
amortization of principal based in part on the remaining useful life
of the assets collateralizing the loans and on the borrowers' use of
loan proceeds.
PMIC and WFCC originate loans that are payable in monthly installments
of principal and interest based upon four to 20 year amortization
tables, with the balance due at maturity. These loans are
collateralized with first liens on real and/or personal property and
are generally guaranteed by the principals of the borrower.
PMC originates loans to borrowers on a non-SBA supported basis, using
similar criteria for loans that are funded under the SBA programs
utilized by its three principal subsidiaries. These loans are: (i)
to borrowers who exceed the eligibility requirements of the SBA 7(a)
or SBIC programs, (ii) payable in monthly installments of principal
and interest based upon four to 25 year amortization tables, with the
balance due at maturity, (iii) generally collateralized by real estate
and/or equipment and (iv) are generally guaranteed by the principals
of the borrower.
The Company's portfolio of investments consists of loans to borrowers
located principally in the southern portion of the United States. The
most significant concentration of loans were to borrowers in Texas,
Georgia and Florida, as noted below:
<TABLE>
<CAPTION>
Percentage of Loan Portfolio
State December 31,
----- ----------------------------
1995 1994
---- ----
<S> <C> <C>
Texas 41% 40%
Florida 13% 16%
Georgia 10% 10%
Other 36% 34%
---- ----
100% 100%
==== ====
</TABLE>
F-18
<PAGE> 44
PMC CAPITAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2. LOANS RECEIVABLE: (CONTINUED)
The activity in net unrealized depreciation on investments is as
follows:
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------
1995 1994
---------- ---------
<S> <C> <C>
Balance, beginning of period . . . . . . . . . . . . $ 377,000 $ 520,000
Provision for losses . . . . . . . . . . . . . . . . 399,211 263,989
Loans written-off . . . . . . . . . . . . . . . . . (309,211) (406,989)
---------- ---------
Balance, end of period . . . . . . . . . . . . . . . $ 467,000 $ 377,000
========== =========
</TABLE>
Loans receivable with an aggregate retained balance of $1.8 million
and $1.2 million were greater than 60 days past due at December 31,
1995 and 1994, respectively.
At December 31, 1995, the recorded investment in loans for which
impairment has been recognized in accordance with SFAS No. 114 totaled
$1.5 million. Of this total, approximately $20,000 related to loans
with no valuation reserve, since the estimated fair value of the
collateral for each loan exceeds the respective loan balance.
Approximately $1.5 million of these loans have a corresponding
valuation allowance of $446,000. The Company has recognized $21,000
in valuation allowances on identified problem loans of $300,000 which
were not deemed impaired. The Company did not recognize any material
amount of interest on impaired loans during the portion of the period
that they were impaired. Had these impaired loans performed in
accordance with their original terms, interest income of approximately
$168,000 would have been recognized during the year ended December 31,
1995.
NOTE 3. EXCESS SERVICING ASSET:
First Western sells, through separate transactions, the SBA guaranteed
portion of all its originated loans into the secondary market ("SBA
Guaranteed Sales"), and the unguaranteed portion of certain of its
originated loans through private placements. First Western retains the
right to service all such loans. The guaranteed portions are sold to
either dealers in government guaranteed loans or institutional investors
and certain of the unguaranteed portions have been sold in privately
negotiated transactions between First Western and the purchaser.
By retaining the right to service the loan, First Western earns an
interest rate spread equal to the difference between the interest rate on
the loan and the interest rate paid to the purchaser on the sold portion
(this difference being the "Servicing Spread"). On SBA Guaranteed Sales,
First Western or PMC recognizes premium income by receiving either a cash
premium, an excess servicing right on the sale or a combination of these
elements. On SBA Guaranteed Sales that involve receiving the maximum
premium, First Western retains the minimum Servicing Spread of 1%
required by SBA regulations ("SBA Minimum Servicing"). When receiving
the maximum premium, PMC or First Western would recognize as premium
income
F-19
<PAGE> 45
PMC CAPITAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3. EXCESS SERVICING ASSET: (CONTINUED)
the difference between the amount received from the purchaser and the
aggregate of the outstanding principal amount of the guaranteed portion
plus any value of the Servicing Spread in excess of normal servicing
(the "Excess Servicing Spread").
On SBA Guaranteed Sales where First Western retains Servicing Spread in
excess of the SBA Minimum Servicing, First Western recognizes premium
income equal to the value of the Excess Servicing Spread, plus the
difference, if any, between the amount received from the purchaser and
the outstanding principal amount of the guaranteed portion sold as valued
in accordance with EITF 88-11.
The Board of Directors estimates the value of the Excess Servicing Spread
based upon various factors including premiums realized on comparable
transactions in the secondary market with a 1% servicing fee being
retained, comparable market bids with normal servicing rates on SBA loans
and the likelihood of prepayment. The value of the Excess Servicing
Spread is recognized as premium income at the time of the sale and is
concurrently capitalized as an excess servicing asset on First Western's
balance sheet, which is then amortized over the estimated life of the
loan. When the Excess Servicing Spread is retained by the SBLC, the
amount of cash actually received over the life of the loan may exceed the
gain previously recognized at the time the loan was sold. If actual cash
flows exceed the excess servicing asset, the SBLC will recognize
additional income in excess of the value of the excess servicing asset.
A shorter loan life than that estimated at the time when the excess
servicing asset was established will result in the carrying value of the
excess servicing asset being written down through a charge to earnings.
During the first quarter of 1995, the Company completed a reassessment of
the method used to amortize the Excess Servicing Asset. Historically,
the Company had amortized the Excess Servicing Asset based upon the
estimated life for each loan at the time of sale, expectation of
prepayments and other considerations. When a loan was paid in full, the
remaining unamortized Excess Servicing Asset, if any, was charged against
income. Considering the above factors and the Company's historical
portfolio performance, the Company extended to the expected remaining
life of the related loans, on a pooled basis, the period over which the
remaining Excess Servicing Asset would be amortized for loans originated
and sold prior to January 1, 1995. The Excess Servicing Asset is
amortized on an accelerated method over the estimated remaining lives of
the related pool assets. There can be no assurance of the accuracy of
management's prepayment estimates. If prepayments occur at a faster rate
than expected, the amortization of the Excess Servicing Asset will be
accelerated as a charge to earnings. If actual prepayments occur at a
slower rate than estimated, cash flows from the Excess Servicing Spread
would exceed previously expected amounts and total income in future
periods would be enhanced.
F-20
<PAGE> 46
PMC CAPITAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3. EXCESS SERVICING ASSET: (CONTINUED)
The sale of the unguaranteed portion of SBA loans has also generated an
excess servicing asset to the extent that the Servicing Spread exceeds
the normal servicing fee. This asset has been reduced by a valuation
allowance in connection with the provisions of the sale (See Note 8).
The activity in the excess servicing asset is summarized as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------
1995 1994
---------- ----------
<S> <C> <C>
Balance, beginning of year . . . . . . . . . . . . . $5,100,202 $5,108,095
Additions, net of allowances . . . . . . . . . . . . . 791,522 1,484,452
Less: amortization, net . . . . . . . . . . . . . . . (900,800) (1,492,345)
---------- ----------
Balance, end of year . . . . . . . . . . . . . . . . . $4,990,924 $5,100,202
========== ==========
</TABLE>
NOTE 4. PROPERTY AND EQUIPMENT:
<TABLE>
<CAPTION>
At December 31, 1995 and 1994, property and equipment consisted of the following:
1995 1994
---------- ---------
<S> <C> <C>
Furniture and equipment . . . . . . . . . . . . . . . . $ 288,852 $ 276,854
Leasehold improvements . . . . . . . . . . . . . . . . . 150,000 150,000
Automobiles . . . . . . . . . . . . . . . . . . . . . . 12,673 51,932
---------- ---------
451,525 478,786
Less: accumulated depreciation . . . . . . . . . . . . 252,165 231,051
---------- ---------
$ 199,360 $ 247,735
========== =========
</TABLE>
Depreciation and amortization expense for the years ended December 31,
1995, 1994 and 1993 was approximately $57,000, $75,000 and $63,000,
respectively.
NOTE 5. NOTES PAYABLE:
PMC has a $10 million uncollateralized revolving line of credit
facility which, as extended, expires June, 1997. Advances pursuant to
the line of credit bear interest at the Company's option at the bank's
prime rate or the London Interbank Offering Rate (LIBOR) plus 200
basis points. The credit facility requires the Company to meet
certain covenants, the most restrictive of which includes that the
ratio of net charge-offs to net loans receivable will not exceed 1.5%,
and the ratio of total liabilities to net worth will not exceed 200%.
At December 31, 1995 and 1994, the Company had $1,000 outstanding
pursuant to this credit facility. At December 31, 1995, the Company
was in compliance with all covenants of this facility.
PMC has consumated $35 million in private placements of
uncollateralized senior notes. These borrowings have been utilized to
fund commitments of the non-SBA lending program.
F-21
<PAGE> 47
PMC CAPITAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5. NOTES PAYABLE: (CONTINUED)
The notes require the Company to meet certain covenants, the most
restrictive of which require; (i) that net loans receivable (as
defined in the note agreement) exceed 150% of senior funded debt, (ii)
the increase in the Company's loan valuation reserve for any 12 month
period must not exceed 3% of net loans receivable, and (iii) the
Company's consolidated earnings plus interest expense must exceed 150%
of interest expense. At December 31, 1995, the Company was in
compliance with all of the covenants of these notes. At December 31,
1995 outstanding uncollateralized senior notes were as follows:
<TABLE>
<CAPTION>
Interest Final
Date Rate Amount Maturity
---- -------- ------ --------
<S> <C> <C> <C>
July 19, 1993 7.20% $20,000,000(2) July 19, 2001
December 15, 1993 6.97% 5,000,000 December 15, 2002
April 19, 1995 8.60% 5,000,000 April 19, 2003
April 19, 1995 LIBOR +1.3% (1) 5,000,000 April 19, 2004
-----------
$35,000,000
===========
</TABLE>
(1) Reset quarterly, 7.24% at December 31, 1995.
(2) Payable in three equal annual installments commencing
July 19, 1999.
Principal payments required on the senior notes at December 31, 1995,
are as follows:
<TABLE>
<CAPTION>
Year Ending
December 31, Amount
------------ -----------
<S> <C>
1999 $6,666,667
2000 6,666,667
2001 6,666,666
2002 5,000,000
2003 5,000,000
2004 5,000,000
-----------
$35,000,000
===========
</TABLE>
F-22
<PAGE> 48
PMC CAPITAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6. SBA DEBENTURES PAYABLE:
Debentures payable represent amounts due to the SBA as a result of
borrowing made pursuant to the SBIA.
At December 31, 1995, the maturities, interest rates and principal
payments on the SBA debentures were as follows:
<TABLE>
<CAPTION>
Maturity Date Interest Rate Amount
------------- ------------- -----------
<S> <C> <C>
September 1, 1996 8.750% $ 2,490,000
February 1, 1997 7.950% 2,480,000
September 1, 1997 (8) 10.350% 800,000
February 1, 1998 8.850% 1,500,000
August 18, 1999 (1) 8.125% 1,000,000
December 1, 1999 (8) 8.600% 650,000
September 1, 1999 8.800% 2,500,000
January 2, 2000 (2) 7.875% 3,000,000
March 1, 2000 9.350% 1,000,000
June 1, 2000 (8) 9.300% 300,000
June 1, 2000 (3) 9.300% 2,000,000
September 1, 2000 9.600% 4,310,000
December 1, 2002 (8) 7.510% 510,000
September 1, 2004 (4) 5.200% 3,000,000
September 1, 2004 8.200% 3,000,000
March 1, 2005 (5) 4.840% 3,000,000
June 1, 2005 (6) 3.690% 5,000,000
September 1, 2005 (7) 3.875% 7,000,000
-----------
$43,540,000
===========
</TABLE>
(1) The interest rate on this debenture was 5.125% through
August 18, 1994, as a result of the subsidy program
provided by the SBA.
(2) The interest rate on this debenture was 4.875% through
January 2, 1995, as a result of the subsidy program
provided by the SBA.
(3) The interest rate on this debenture was 6.300% through
June 1, 1995, as a result of the subsidy program provided
by the SBA.
(4) The interest rate will increase to 8.200% in September
1999 until maturity.
(5) The interest rate will increase to 7.840% in March 2000
until maturity.
(6) The interest rate will increase to 6.690% in June 2000
until maturity.
F-23
<PAGE> 49
PMC CAPITAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6. SBA DEBENTURES PAYABLE: (CONTINUED)
(7) The interest rate will increase to 6.875% in September
2000 until maturity.
(8) During April 1995, the Company assumed $2,260,000 in SBA
debentures from a non-affiliated small business investment
corporation in exchange for loans receivable of $2,109,062
and cash of $150,938. The loans acquired were initially
originated by the Company and a portion sold to the
non-affiliated small business investment corporation. All
of these loans were purchased at par and were performing
according to their terms at the time of reacquisition.
NOTE 7. COMMITMENTS AND CONTINGENCIES:
OPERATING LEASES
During 1991, the Company entered into an agreement to lease its
corporate office space for a 15 year period from a corporation, a
majority of whose principals are officers and directors of the
Company. Leasehold improvements of $150,000 have been paid to the
corporation for costs incurred during the build-out of the leased
premises. The lease has been amended to allow the Company to
terminate such lease without penalty upon 60 days written notice to
the corporation. During 1995, the Company entered into agreements to
lease additional space for one year periods.
The independent members of the Board of Directors will decide on an
annual basis whether PMC will continue the leases and the annual lease
payments.
The Company has additional agreements to lease office space in Florida
and Georgia.
Rental expense amounted to approximately $203,000, $176,000 and
$219,000 during the years ended December 31, 1995, 1994 and 1993,
respectively.
Future minimum lease payments at December 31, 1995 are as follows:
<TABLE>
<CAPTION>
Year Ending
December 31, Amount
------------ ------------
<S> <C>
1996 $ 189,000
1997 175,000
1998 175,000
1999 167,000
2000 152,000
Thereafter 906,000
------------
$ 1,764,000
============
</TABLE>
F-24
<PAGE> 50
PMC CAPITAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7. COMMITMENTS AND CONTINGENCIES: (CONTINUED)
LOAN COMMITMENTS
Loan commitments outstanding at December 31, 1995, to various
prospective small business companies, including the unfunded portion
of projects in the construction phase amounted to approximately $86.9
million. Of these commitments, $30.6 million are for loans to be
originated by First Western and subject to SBA Guaranteed Sales.
These commitments are made in the ordinary course of the Company's
business and in management's opinion, are generally on the same terms
as those to existing borrowers. Commitments to extend credit are
agreements to lend to a customer provided that the terms established
in the contract are met. Commitments generally have fixed expiration
dates and require payment of a fee. Since some commitments are
expected to expire without being drawn upon, the total commitment
amounts do not necessarily represent future cash requirements.
EMPLOYMENT AGREEMENTS
The Company has employment contracts with certain of its officers for
terms expiring August, 1997. Annual remuneration during the term of
the contracts range from $91,000 to $214,500. Future minimum
payments under these contracts are as follows:
<TABLE>
<CAPTION>
Year Ending
December 31, Amount
------------ -----------
<S> <C>
1996 $ 926,000
1997 540,000
-----------
$ 1,466,000
===========
</TABLE>
During the years ended December 31, 1995, 1994 and 1993 compensation
to officers was approximately $1,229,000, $1,243,000 and $1,048,000,
respectively.
LITIGATION
In the normal course of business, the Company is subject to various
proceedings and claims, the resolution of which will not, in
management's opinion, have a material adverse effect on the Company's
consolidated financial position or results of operations.
SBA FUNDING
Approximately $62 million of the Company's loans outstanding at
December 31, 1995 are funded under the SSBIC and SBIC programs which
allow for PMIC and Western Financial to borrow funds at below market
rates. The availability of funding under the SSBIC and SBIC is
subject to annual appropriations by the U.S. Congress which have not
been finalized for the government's fiscal year ending September 30,
1996.
F-25
<PAGE> 51
PMC CAPITAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8. CREDIT RISK:
In connection with First Western's structured sale of a 94% portion of
certain unguaranteed SBA loans during December 1994, the Company is
subject to credit risk. Total proceeds from the sale amounted to
$24.8 million. Pursuant to the structured sale, the investors'
protection from losses is provided by: (i) the subordination of a
portion of loans receivable totaling approximately $1.6 million at the
time of sale ($1.3 million at December 31, 1995) (ii) the
subordination of Servicing Spread on those loans sold in the
securitization and (iii) cash deposits provided by the Company. At
December 31, 1995, approximately $1,785,000 of cash deposits held in
interest bearing accounts were restricted. As a result of the
Company's subordinated position, the $3.1 million excess servicing
asset recognized during the year ended December 31, 1994 in connection
with the structured sale has been reduced by a valuation reserve of
$2.6 million. At December 31, 1995, the excess servicing asset was
$2.6 million with a valuation reserve of $2.5 million.
The Company has a fundamental policy that requires investment of at
least 25% of its total assets in the lodging industry, and allows
investment of up to 100% of total assets in this industry. At
December 31, 1995 and 1994, loans to businesses in the lodging
industry comprised 55% and 41% of its total assets, respectively.
There can be no assurance that the Company will continue to experience
the positive results it has historically acheived from these lending
activities or that market conditions will enable the Company to
maintain or increase this level of loan concentration. Any economic
factors that negatively impact the lodging industry could have a
material adverse effect on the business of the Company. Additionally,
loans to businesses located in Texas, Florida and Georgia currently
comprise approximately 41%, 13% and 10% of the Company's outstanding
loan portfolio, respectively. A decline in economic conditions in any
of these states may adversely affect the Company.
NOTE 9. CUMULATIVE PREFERRED STOCK OF CONSOLIDATED SUBSIDIARY:
PMIC has outstanding 30,000 shares of $100 par value, 3% cumulative
preferred stock (the "3% Preferred Stock") and 40,000 shares of $100
par value, 4% cumulative preferred stock (the "4% Preferred Stock").
The 3% Preferred Stock and the 4% Preferred Stock (collectively the
"Preferred Stock") are held by the SBA pursuant to the SBIA.
PMIC is entitled to redeem, in whole or in part, the 3% Preferred
Stock by paying 35% of the par value of these securities plus
dividends accumulated and unpaid on the date of redemption. While the
3% Preferred Stock may be redeemed, redemption is not mandatory.
Dividends of approximately $90,000 on the 3% Preferred Stock were
recognized during each of the years ended December 31, 1995, 1994 and
1993.
F-26
<PAGE> 52
PMC CAPITAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 9. CUMULATIVE PREFERRED STOCK OF CONSOLIDATED SUBSIDIARY: (CONTINUED)
The 4% Preferred Stock was issued during September 1994 ($2,000,000)
and May 1995 ($2,000,000), and must be redeemed at par no later than
15 years from the date of issuance. Dividends of approximately
$132,000 and $22,000 were recognized during the years ended December
31, 1995 and 1994, respectively.
Neither series of SBA Preferred Stock has any preemptive or conversion
rights. The Preferred Stock provides for a liquidation preference in
the amount of $100 per share plus accrued and unpaid dividends.
NOTE 10. SHAREHOLDERS' EQUITY:
The Company has a dividend reinvestment and cash purchase plan ("the
Plan") for up to 500,000 shares of common stock. As amended,
participants of the Plan have the option to reinvest all or a portion
of dividends received plus an optional cash purchase of $10,000 per
month. The purchase price of the shares is 98% of the average of the
high and low price of the common stock as published for the five
trading days immediately prior to the dividend record date or prior to
the optional cash payment purchase date. During the years ended
December 31, 1995, 1994 and 1993, the Company issued 187,005, 81,345
and 60,805 shares of common stock pursuant to the Plan for proceeds
(through cash and the reinvestment of dividends) of $2,176,328,
$1,181,156 and $807,919, respectively.
NOTE 11. EARNINGS PER COMMON SHARE COMPUTATIONS:
The computations of earnings per common share are based on the
weighted average number of shares outstanding of the Company.
Earnings are defined as the net operating income and realized and
unrealized gain (loss) on investments and are reduced by the preferred
stock dividend requirements of PMIC. Preferred stock dividend
requirements were approximately $222,000, $112,000 and $90,000 during
the years ended December 31, 1995, 1994 and 1993, respectively. The
weighted average number of shares used in the computations of earnings
per common share were 10,767,783, 10,649,885 and 10,578,756 for the
years ended December 31, 1995, 1994 and 1993, respectively.
NOTE 12. BORROWER ADVANCES:
The Company finances several projects during the construction phase.
At December 31, 1995, the Company was in the process of funding
approximately $35.5 million in construction projects, of which $17.7
million in funding remained. As part of the monitoring process to
verify that the borrowers' cash equity is utilized for its intended
purpose, the Company receives amounts from the borrowers and releases
the funds upon presentation of appropriate supporting documentation.
The Company had approximately $2.3 million and $3.0 million in funds
held on behalf of borrowers at December 31, 1995 and 1994,
respectively.
F-27
<PAGE> 53
PMC CAPITAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 13. PROFIT SHARING PLAN:
The Company has a profit sharing plan available to its full-time
employees after one year of employment. Vesting increases ratably to
100% after the sixth year of employment. Pursuant to the profit
sharing plan, the Company has expensed approximately $188,000,
$168,000 and $152,000 during the years ended December 31, 1995, 1994
and 1993, respectively. Contributions to the profit sharing plan are
at the discretion of the Board of Directors.
NOTE 14. RELATED PARTY TRANSACTIONS:
Pursuant to agreements between PMC Capital and its wholly owned
subsidiaries, during the three years in the period ended December 31,
1995, PMC provided certain services to the subsidiaries at no cost.
These services and costs include salaries, rent and other general
corporate expenses. However, PMC retains all cash premiums on First
Western's SBA Guaranteed Sales ($2,927,101, $2,733,988 and $5,011,486
during the years ended December 31, 1995, 1994 and 1993, respectively)
as compensation for these services and for the working capital
provided by PMC Capital to First Western.
During December 1993, PMC Advisers entered into an investment
management agreement with the Trust. The officers and certain
directors of the Trust are officers and directors of PMC. Pursuant to
the agreement, the Trust pays PMC Advisers a base annual servicing fee
of 0.50% of the average assets (as defined in the agreement) of the
Trust under management plus an advisory fee of 1% of the average
invested assets (as defined in the agreement ) of the Trust. In
addition, PMC Advisers earns an advisory fee up to 1% of the average
invested assets upon meeting certain criteria in regards to investment
returns to the Trust shareholders. All such advisory fees are reduced
by 50% with respect to the value of average invested assets that
exceed the beneficiaries' equity of the Trust as a result of leverage
or the issuance of preferred shares. Pursuant to the investment
management agreement, advisory fees in the amount of $57,932 were
waived through June 1994.
Pursuant to the investment management agreement between PMC Advisers
and the Trust, PMC Advisers earned $1,189,720 and $428,811 during the
years ended December 31, 1995 and 1994 respectively.
F-28
<PAGE> 54
PMC CAPITAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 15. UNCONSOLIDATED SUBSIDIARY:
As described in Note 1, PMC Advisers is accounted for by the equity
method of accounting. During 1993 the advisor did not have any
operating activity. The following is the condensed balance sheet for
PMC Advisers as of December 31, 1995 and 1994 and the condensed
statement of income for the years ended December 31, 1995 and 1994:
BALANCE SHEET
<TABLE>
<CAPTION>
December 31,
------------------------------
1995 1994
--------- ---------
<S> <C> <C>
ASSETS
Cash equivalents . . . . . . . . . $ 140,162 $ 735,882
Other assets . . . . . . . . . 1,704 2,268
Due from affiliate . . . . . . . . . 840,812 179,523
--------- ---------
$ 982,678 $ 917,673
========= =========
LIABILITIES AND SHAREHOLDER'S EQUITY
Liabilities:
Due to parent . . . . . . . . . $ 364,933 $ 432,592
Deferred fee revenue . . . . . 591,745 450,381
Other liabilities . . . . . . . - 8,700
--------- ---------
956,678 891,673
--------- ---------
Shareholder's equity:
Common stock . . . . . . . . . 1,000 1,000
Additional paid-in capital . . 25,000 25,000
--------- ---------
26,000 26,000
--------- ---------
$ 982,678 $ 917,673
========= =========
</TABLE>
STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<S> <C> <C>
INCOME:
Management fee . . . . . . $1,189,720 $ 428,811
Other income . . . . . . . 54,940 194,449
---------- ----------
Total income . . . 1,244,660 623,260
---------- ----------
EXPENSES:
General and administrative $1,242,186 620,599
Other . . . . . . . . . . 2 ,474 2,661
---------- ----------
Total expenses . . 1,244,660 623,260
---------- ----------
NET INCOME . . . . $ - $ -
========== ==========
</TABLE>
F-29
<PAGE> 55
PMC CAPITAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 15. UNCONSOLIDATED SUBSIDIARY: (CONTINUED)
PMC Capital allocates overhead to PMC Advisers to the extent that PMC
Advisers utilizes the staff and facilities of PMC Capital. In no
event will the allocated expenses exceed the income available from the
operations of PMC Advisers.
NOTE 16. FAIR VALUES OF FINANCIAL INSTRUMENTS:
The estimates of fair value as required by SFAS No. 107 differ from
the value of the financial assets and liabilities determined by the
Board of Directors primarily as a result of the effects of discounting
future cash flows.
The estimated fair values of the Company's financial instruments
pursuant to SFAS No. 107 are as follows:
<TABLE>
<CAPTION>
Carrying Fair
Amount Value
-------- --------
(Amounts in thousands)
<S> <C> <C>
Assets:
Loans receivable, net $110,499 $114,353
Cash equivalents 31,135 31,135
Cash 439 439
Restricted investments 1,785 1,785
Other assets 6,229 6,229
Liabilities:
Debentures payable 43,540 42,362
Notes payable 35,001 34,881
Other liabilities 9,791 9,791
</TABLE>
(a) Loans receivable, net
The estimated fair value for all fixed rate loans is
estimated by discounting the estimated cash flows using the
current rate at which similar loans would be made to
borrowers with similar credit ratings and maturities.
The impact of delinquent loans on the estimation of the fair
values described above is not considered to have a material
effect and accordingly, delinquent loans have been
disregarded in the valuation methodologies employed.
(b) Cash equivalents
The carrying amount is a reasonable estimation of fair
value.
F-30
<PAGE> 56
PMC CAPITAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 16. FAIR VALUES OF FINANCIAL INSTRUMENTS: (CONTINUED)
(c) Cash
The carrying amount is a reasonable estimation of fair
value.
(d) Restricted investments
The carrying amount is a reasonable estimation of fair
value.
(e) Other assets
The carrying amount is a reasonable estimation of fair
value.
(f) Debentures payable
The estimated fair value is based on present value
calculation based on prices of the same or similar
instruments after considering risk, current interest rates
and remaining maturities.
(g) Notes payable
The estimated fair value is based on present value
calculation based on prices of the same or similar
instruments after considering risk, current interest rates
and remaining maturities.
(h) Other liabilities
The carrying amount is a reasonable estimation of fair
value.
NOTE 17. WRITE-DOWN OF REGISTRATION COSTS
In 1994, PMC Investment Corporation ("PMIC") filed a registration
statement with the Securities and Exchange Commission to register
shares of its common stock. The Company had incurred approximately
$136,000 in costs in connection with the filing of the registration
statement. PMIC, a licensed specialized small business investment
company, uses long-term funds provided by the SBA through the
issuance of debentures (which are guaranteed by the SBA and on which
the interest rate is reduced through an SBA subsidy of 3% during the
first five years). Due to the lack of availability of SBA subsidized
debentures or preferred stock for the SBA's fiscal year ending
September 30, 1996, the Company believes the registration will not be
completed in the near term. Accordingly, during the year ended
December 31, 1995, the Company has expensed the costs of
registration.
F-31
<PAGE> 57
PMC CAPITAL, INC. AND SUBSIDIARIES
CONSOLIDATING BALANCE SHEET
DECEMBER 31, 1995
<TABLE>
<CAPTION>
CONSOLIDATED
BEFORE PMC CAPITAL,
CONSOLIDATED ELIMINATION ELIMINATION INC.
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
ASSETS
INVESTMENTS AT VALUE, SEE ACCOMPANYING SCHEDULE:
Loans receivable, net . . . . . . . . . . . . . . . . $ 110,499,485 $ - $ 110,499,485 $ 27,944,942
Excess servicing asset, net . . . . . . . . . . . . . 4,990,924 - 4,990,924 -
Cash equivalents . . . . . . . . . . . . . . . . . . 31,134,961 - 31,134,961 19,097,967
Restricted investments . . . . . . . . . . . . . . . 1,784,868 - 1,784,868 -
Real property owned . . . . . . . . . . . . . . . . . 4,505 - 4,505 -
-------------- -------------- -------------- --------------
Total investments . . . . . . . . . . . . . . . . . . . 148,414,743 - 148,414,743 47,042,909
-------------- -------------- -------------- --------------
OTHER ASSETS:
Cash . . . . . . . . . . . . . . . . . . . . . . . . 438,984 - 438,984 163,272
Accrued interest receivable . . . . . . . . . . . . . 723,360 - 723,360 185,970
Receivable for loans sold . . . . . . . . . . . . . . 4,370,715 - 4,370,715 359,856
Due from affiliates . . . . . . . . . . . . . . . . . 1,135,253 (27,532,040) 28,667,293 28,666,293
Investment in subsidiaries . . . . . . . . . . . . . 27,412 (23,588,714) 23,616,126 23,616,126
Property and equipment, net . . . . . . . . . . . . . 199,360 - 199,360 90,220
Deferred charges, deposits and other assets . . . . . 1,168,919 - 1,168,919 271,184
-------------- -------------- -------------- --------------
Total other assets . . . . . . . . . . . . . . . . . . 8,064,003 (51,120,754) 59,184,757 53,352,921
-------------- -------------- -------------- --------------
TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . . $ 156,478,746 $ (51,120,754) $ 207,599,500 $ 100,395,830
============== ============== =============== ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES:
SBA debentures payable . . . . . . . . . . . . . . . $ 43,540,000 $ - $ 43,540,000 $ -
Notes payable . . . . . . . . . . . . . . . . . . . . 35,001,000 - 35,001,000 35,001,000
Accrued interest payable . . . . . . . . . . . . . . 1,434,475 - 1,434,475 441,925
Deferred fee revenue . . . . . . . . . . . . . . . . 778,927 - 778,927 231,840
Borrower advances . . . . . . . . . . . . . . . . . . 2,260,314 - 2,260,314 369,078
Dividends payable . . . . . . . . . . . . . . . . . . 3,595,637 - 3,595,637 3,533,089
Accounts payable . . . . . . . . . . . . . . . . . . 2,500,231 - 2,500,231 82,775
Other liabilities . . . . . . . . . . . . . . . . . . 1,279,988 - 1,279,988 863,996
Due to affiliates . . . . . . . . . . . . . . . . . . - (27,532,040) 27,532,040 -
-------------- -------------- -------------- --------------
Total liabilities . . . . . . . . . . . . . . . . . . . 90,390,572 (27,532,040) 117,922,612 40,523,703
-------------- -------------- -------------- --------------
Cumulative preferred stock of subsidiary . . . . . . . 7,000,000 3,000,000 4,000,000 -
-------------- -------------- -------------- --------------
SHAREHOLDERS' EQUITY:
Cumulative preferred stock of subsidiary, 3% . . . . - (3,000,000) 3,000,000 -
Common stock . . . . . . . . . . . . . . . . . . . . 108,710 (21,739) 130,449 108,710
Additional paid-in capital . . . . . . . . . . . . . 58,429,112 (21,872,652) 80,301,764 58,429,112
Undistributed net operating income . . . . . . . . . 1,017,352 (2,694,323) 3,711,675 1,334,305
Net unrealized depreciation on investments . . . . . (467,000) - (467,000) -
-------------- -------------- -------------- --------------
59,088,174 (27,588,714) 86,676,888 59,872,127
Less treasury stock . . . . . . . . . . . . . . . . . - 1,000,000 (1,000,000) -
-------------- -------------- -------------- --------------
Total shareholders' equity . . . . . . . . . . . . . . 59,088,174 (26,588,714) 85,676,888 59,872,127
-------------- -------------- -------------- --------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY . . . . . . $ 156,478,746 $ (51,120,754) $ 207,599,500 $ 100,395,830
============== ============== =============== ==============
NET ASSET VALUE PER COMMON SHARE . . . . . . . . . . . $ 5.44
==============
<CAPTION>
FIRST WESTERN
WESTERN SBLC, FINANCIAL PMC
AND CAPITAL INVESTMENT
SUBSIDIARY CORPORATION CORPORATION
-------------- -------------- ---------------
<S> <C> <C> <C>
ASSETS
INVESTMENTS AT VALUE, SEE ACCOMPANYING SCHEDULE:
Loans receivable, net . . . . . . . . . . . . . . . . $ 20,833,787 $ 25,053,233 $ 36,667,523
Excess servicing asset, net . . . . . . . . . . . . . 4,990,924 - -
Cash equivalents . . . . . . . . . . . . . . . . . . 1,712,858 2,763,393 7,560,743
Restricted investments . . . . . . . . . . . . . . . 1,784,868 - -
Real property owned . . . . . . . . . . . . . . . . . 5 4,500 -
-------------- -------------- ---------------
Total investments . . . . . . . . . . . . . . . . . . . 29,322,442 27,821,126 44,228,266
-------------- -------------- ---------------
OTHER ASSETS:
Cash . . . . . . . . . . . . . . . . . . . . . . . . 162,673 5,470 107,569
Accrued interest receivable . . . . . . . . . . . . . 126,231 182,045 229,114
Receivable for loans sold . . . . . . . . . . . . . . 4,010,859 - -
Due from affiliates . . . . . . . . . . . . . . . . . - 1,000 -
Investment in subsidiaries . . . . . . . . . . . . . - - -
Property and equipment, net . . . . . . . . . . . . . 36,380 36,380 36,380
Deferred charges, deposits and other assets . . . . . 249,283 129,417 519,035
-------------- -------------- ---------------
Total other assets . . . . . . . . . . . . . . . . . . 4,585,426 354,312 892,098
-------------- -------------- ---------------
TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . . $ 33,907,868 $ 28,175,438 $ 45,120,364
============== ============== ===============
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES:
SBA debentures payable . . . . . . . . . . . . . . . $ - $ 19,540,000 $ 24,000,000
Notes payable . . . . . . . . . . . . . . . . . . . . - - -
Accrued interest payable . . . . . . . . . . . . . . 45,134 577,066 370,350
Deferred fee revenue . . . . . . . . . . . . . . . . 127,303 152,930 266,854
Borrower advances . . . . . . . . . . . . . . . . . . 1,273,243 203,863 414,130
Dividends payable . . . . . . . . . . . . . . . . . . - - 62,548
Accounts payable . . . . . . . . . . . . . . . . . . 2,370,249 3,112 44,095
Other liabilities . . . . . . . . . . . . . . . . . . 341,992 26,000 48,000
Due to affiliates . . . . . . . . . . . . . . . . . . 27,470,648 - 61,392
-------------- -------------- ---------------
Total liabilities . . . . . . . . . . . . . . . . . . . 31,628,569 20,502,971 25,267,369
-------------- -------------- ---------------
Cumulative preferred stock of subsidiary . . . . . . . - - 4,000,000
-------------- -------------- ---------------
SHAREHOLDERS' EQUITY:
Cumulative preferred stock of subsidiary, 3% . . . . - - 3,000,000
Common stock . . . . . . . . . . . . . . . . . . . . 50 20,689 1,000
Additional paid-in capital . . . . . . . . . . . . . 1,999,950 7,433,885 12,438,817
Undistributed net operating income . . . . . . . . . 1,497,299 399,893 480,178
Net unrealized depreciation on investments . . . . . (218,000) (182,000) (67,000)
-------------- -------------- ---------------
3,279,299 7,672,467 15,852,995
Less treasury stock . . . . . . . . . . . . . . . . . (1,000,000) - -
-------------- -------------- ---------------
Total shareholders' equity . . . . . . . . . . . . . . 2,279,299 7,672,467 15,852,995
-------------- -------------- ---------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY . . . . . . $ 33,907,868 $ 28,175,438 $ 45,120,364
============== ============== ===============
NET ASSET VALUE PER COMMON SHARE . . . . . . . . . . .
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATING FINANCIAL
STATEMENTS.
F-32
<PAGE> 58
PMC CAPITAL, INC. AND SUBSIDIARIES
CONSOLIDATING STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
CONSOLIDATED
BEFORE PMC CAPITAL,
CONSOLIDATED ELIMINATION ELIMINATION INC.
-------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Investment income:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . $ 16,329,854 $ - $ 16,329,854 $ 4,264,341
Premium income . . . . . . . . . . . . . . . . . . . . . . 2,847,139 - 2,847,139 2,927,101
Other investment income, net . . . . . . . . . . . . . . . 368,220 - 368,220 290,605
-------------- ------------- ------------- -------------
Total investment income . . . . . . . . . . . . . . . . . . . 19,545,213 - 19,545,213 7,482,047
Other income, net . . . . . . . . . . . . . . . . . . . . . . 1,794,759 - 1,794,759 1,397,987
Equity in income (loss) of subsidiaries . . . . . . . . . . . (77,778) (9,035,634) 8,957,856 8,957,856
-------------- ------------- ------------- -------------
Total income . . . . . . . . . . . . . . . . . . . . . . . . 21,262,194 (9,035,634) 30,297,828 17,837,890
-------------- ------------- ------------- -------------
Expense:
Salaries and related benefits . . . . . . . . . . . . . . . 2,778,264 - 2,778,264 2,778,264
Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . 202,929 - 202,929 202,929
Legal and Accounting . . . . . . . . . . . . . . . . . . . 151,875 - 151,875 138,979
Directors and shareholders expense . . . . . . . . . . . . 38,447 - 38,447 38,447
Small Business Administration fees . . . . . . . . . . . . 77,303 - 77,303 -
General and administrative . . . . . . . . . . . . . . . . 1,053,298 - 1,053,298 727,741
Profit sharing plan . . . . . . . . . . . . . . . . . . . . 189,494 - 189,494 189,494
Interest . . . . . . . . . . . . . . . . . . . . . . . . . 5,049,312 - 5,049,312 2,399,679
-------------- ------------- ------------- -------------
Total expense . . . . . . . . . . . . . . . . . . . . . . . . 9,540,922 - 9,540,922 6,475,533
-------------- ------------- ------------- -------------
Net operating income . . . . . . . . . . . . . . . . . . . . 11,721,272 (9,035,634) 20,756,906 11,362,357
-------------- ------------- ------------- -------------
Realized and unrealized gain (loss)
on investments:
Loans written-off . . . . . . . . . . . . . . . . . . . . (309,211) - (309,211) -
Recoveries on loans written-off . . . . . . . . . . . . . 40,296 - 40,296 -
Change in unrealized appreciation
(depreciation) on investments . . . . . . . . . . . . . (90,000) - (90,000) -
-------------- ------------- ------------- -------------
(358,915) - (358,915) -
-------------- ------------- ------------- -------------
Net operating income and realized and unrealized
gain (loss) on investments . . . . . . . . . . . . . . . . $ 11,362,357 $ (9,035,634) $ 20,397,991 $ 11,362,357
============== ============= ============= =============
Earnings per share . . . . . . . . . . . . . . . . . . . . . $1.03
==============
<CAPTION>
FIRST WESTERN
WESTERN SBLC, FINANCIAL PMC
AND CAPITAL INVESTMENT
SUBSIDIARY CORPORATION CORPORATION
------------- ----------- -------------
<S> <C> <C> <C>
Investment income:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,444,772 $ 3,006,913 $ 3,613,828
Premium income . . . . . . . . . . . . . . . . . . . . . . (79,962) - -
Other investment income, net . . . . . . . . . . . . . . . 10,005 44,017 23,593
------------- ----------- -------------
Total investment income . . . . . . . . . . . . . . . . . . . 5,374,815 3,050,930 3,637,421
Other income, net . . . . . . . . . . . . . . . . . . . . . . 312,946 10,946 72,880
Equity in income (loss) of subsidiaries . . . . . . . . . . . - - -
------------- ----------- -------------
Total income . . . . . . . . . . . . . . . . . . . . . . . . 5,687,761 3,061,876 3,710,301
------------- ----------- -------------
Expense:
Salaries and related benefits . . . . . . . . . . . . . . . - - -
Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . - - -
Legal and Accounting . . . . . . . . . . . . . . . . . . . 8,090 1,735 3,071
Directors and shareholders expense . . . . . . . . . . . . - - -
Small Business Administration fees . . . . . . . . . . . . - 37,253 40,050
General and administrative . . . . . . . . . . . . . . . . 76,967 44,740 203,850
Profit sharing plan . . . . . . . . . . . . . . . . . . . . - - -
Interest . . . . . . . . . . . . . . . . . . . . . . . . . 41,564 1,676,152 931,917
------------- ----------- -------------
Total expense . . . . . . . . . . . . . . . . . . . . . . . . 126,621 1,759,880 1,178,888
------------- ----------- -------------
Net operating income . . . . . . . . . . . . . . . . . . . . 5,561,140 1,301,996 2,531,413
------------- ----------- -------------
Realized and unrealized gain (loss)
on investments:
Loans written-off . . . . . . . . . . . . . . . . . . . . (171,056) (79,000) (59,155)
Recoveries on loans written-off . . . . . . . . . . . . . - 8,296 32,000
Change in unrealized appreciation
(depreciation) on investments . . . . . . . . . . . . . (67,000) (23,000) -
------------- ----------- -------------
(238,056) (93,704) (27,155)
------------- ----------- -------------
Net operating income and realized and unrealized
gain (loss) on investments . . . . . . . . . . . . . . . . $ 5,323,084 $ 1,208,292 $ 2,504,258
============= =========== =============
Earnings per share . . . . . . . . . . . . . . . . . . . . .
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATING FINANCIAL
STATEMENTS.
F-33
<PAGE> 59
PMC CAPITAL, INC. AND SUBSIDIARIES
CONSOLIDATING STATEMENT OF SHAREHOLDERS' EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
ADDITIONAL UNDISTRIBUTED
PREFERRED COMMON PAID-IN NET OPERATING
STOCK, 3% STOCK CAPITAL INCOME
-------------- ------------ ------------- ---------------
<S> <C> <C> <C> <C>
PMC CAPITAL, INC.
BALANCES, JANUARY 1, 1995 . . . . . . . . . . . . . . . $ - $ 106,840 $ 56,254,654 $ 1,571,835
Net income . . . . . . . . . . . . . . . . . . . . . . - - - 11,362,357
Dividend reinvestment plan, 187,005 shares . . . . . . - 1,870 2,174,458 -
Dividends on common stock . . . . . . . . . . . . . . . - - - (11,599,886)
-------------- ------------ ------------- ---------------
BALANCES, DECEMBER 31, 1995 . . . . . . . . . . . . . $ - $ 108,710 $ 58,429,112 $ 1,334,306
============== ============ ============= ===============
FIRST WESTERN SBLC, INC. AND SUBSIDIARY
BALANCES, JANUARY 1, 1995 . . . . . . . . . . . . . . . $ - $ 50 $ 1,999,950 $ 1,457,215
Net income . . . . . . . . . . . . . . . . . . . . . . - - - 5,390,084
Dividends to parent company . . . . . . . . . . . . . . - - - (5,350,000)
-------------- ------------ ------------- ---------------
BALANCES, DECEMBER 31, 1995 . . . . . . . . . . . . . $ - $ 50 $ 1,999,950 $ 1,497,299
============== ============ ============= ===============
WESTERN FINANCIAL CAPITAL CORPORATION
BALANCES, JANUARY 1, 1995 . . . . . . . . . . . . . . . $ - $ 20,689 $ 6,433,885 $ 218,601
Net income . . . . . . . . . . . . . . . . . . . . . . - - - 1,231,292
Contribution of capital . . . . . . . . . . . . . . . . - - 1,000,000 -
Dividends to parent company . . . . . . . . . . . . . . - - - (1,050,000)
-------------- ------------ ------------- ---------------
BALANCES, DECEMBER 31, 1995 . . . . . . . . . . . . . $ - $ 20,689 $ 7,433,885 $ 399,893
============== ============ ============= ===============
PMC INVESTMENT CORPORATION
BALANCES, JANUARY 1, 1995 . . . . . . . . . . . . . . . $ 3,000,000 $ 1,000 $ 5,438,817 $ 97,865
Net income . . . . . . . . . . . . . . . . . . . . . . - - - 2,504,258
Contribution of capital . . . . . . . . . . . . . . . . - - 7,000,000 -
Dividends to parent company . . . . . . . . . . . . . . - - - (1,900,000)
Dividends, preferred . . . . . . . . . . . . . . . . . - - - (221,945)
-------------- ------------ ------------- ---------------
BALANCES, DECEMBER 31, 1995 . . . . . . . . . . . . . $ 3,000,000 $ 1,000 $ 12,438,817 $ 480,178
============== ============ ============= ===============
ELIMINATION ADJUSTMENTS
Equity in income of subsidiaries . . . . . . . . . . . - - - (9,035,634)
Dividends to parent . . . . . . . . . . . . . . . . . . - - - 8,300,000
Stock of subsidiaries . . . . . . . . . . . . . . . . . (3,000,000) (21,739) (21,872,652) -
Undistributed earnings of subsidiaries . . . . . . . . - - - (1,958,690)
-------------- ------------ ------------- ---------------
(3,000,000) (21,739) (21,872,652) (2,694,324)
-------------- ------------ ------------- ---------------
CONSOLIDATED $ - $ 108,710 $ 58,429,112 $ 1,017,352
============== ============ ============= ===============
<CAPTION>
NET
UNREALIZED
APPRECIATION TOTAL
(DEPRECIATION) TREASURY SHAREHOLDERS'
ON INVESTMENTS STOCK EQUITY
-------------- -------------- ---------------
<S> <C> <C> <C>
PMC CAPITAL, INC.
BALANCES, JANUARY 1, 1995 . . . . . . . . . . . . . . . $ - $ - $ 57,933,329
Net income . . . . . . . . . . . . . . . . . . . . . . - - 11,362,357
Dividend reinvestment plan, 187,005 shares . . . . . . - - 2,176,328
Dividends on common stock . . . . . . . . . . . . . . . - - (11,599,886)
-------------- -------------- ---------------
BALANCES, DECEMBER 31, 1995 . . . . . . . . . . . . . $ - $ - $ 59,872,128
============== ============== ===============
FIRST WESTERN SBLC, INC. AND SUBSIDIARY
BALANCES, JANUARY 1, 1995 . . . . . . . . . . . . . . . $ (151,000) $ (1,000,000) $ 2,306,215
Net income . . . . . . . . . . . . . . . . . . . . . . (67,000) - 5,323,084
Dividends to parent company . . . . . . . . . . . . . . - - (5,350,000)
-------------- -------------- ---------------
BALANCES, DECEMBER 31, 1995 . . . . . . . . . . . . . $ (218,000) $ (1,000,000) $ 2,279,299
============== ============== ===============
WESTERN FINANCIAL CAPITAL CORPORATION
BALANCES, JANUARY 1, 1995 . . . . . . . . . . . . . . . $ (159,000) $ - $ 6,514,175
Net income . . . . . . . . . . . . . . . . . . . . . . (23,000) - 1,208,292
Contribution of capital . . . . . . . . . . . . . . . . - - 1,000,000
Dividends to parent company . . . . . . . . . . . . . . - - (1,050,000)
-------------- -------------- ---------------
BALANCES, DECEMBER 31, 1995 . . . . . . . . . . . . . $ (182,000) $ - $ 7,672,467
============== ============== ===============
PMC INVESTMENT CORPORATION
BALANCES, JANUARY 1, 1995 . . . . . . . . . . . . . . . $ (67,000) $ - $ 8,470,682
Net income . . . . . . . . . . . . . . . . . . . . . . - - 2,504,258
Contribution of capital . . . . . . . . . . . . . . . . - - 7,000,000
Dividends to parent company . . . . . . . . . . . . . . - - (1,900,000)
Dividends, preferred . . . . . . . . . . . . . . . . . - - (221,945)
-------------- -------------- ---------------
BALANCES, DECEMBER 31, 1995 . . . . . . . . . . . . . $ (67,000) $ - $ 15,852,995
============== ============== ===============
ELIMINATION ADJUSTMENTS
Equity in income of subsidiaries . . . . . . . . . . . - - (9,035,634)
Dividends to parent . . . . . . . . . . . . . . . . . . - - 8,300,000
Stock of subsidiaries . . . . . . . . . . . . . . . . . - 1,000,000 (23,894,391)
Undistributed earnings of subsidiaries . . . . . . . . - - (1,958,690)
-------------- -------------- ---------------
- 1,000,000 (26,588,715)
-------------- -------------- ---------------
CONSOLIDATED $ (467,000) $ - $ 59,088,174
============== ============== ===============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATING FINANCIAL
STATEMENTS.
F-34
<PAGE> 60
PMC CAPITAL, INC. AND SUBSIDIARIES
CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
CONSOLIDATED
BEFORE PMC CAPITAL,
CONSOLIDATED ELIMINATION ELIMINATION INC.
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net operating income and realized and
unrealized gain (loss) on investments . . . . . . . . . . . . $ 11,362,357 $ (9,035,634) $ 20,397,991 $ 11,362,357
Adjustments to reconcile net operating
income and realized and unrealized
gain (loss) on investments to net cash
provided by (used in) operating activities:
Loans funded, held for sale . . . . . . . . . . . . . . . (30,468,122) - (30,468,122) -
Proceeds from sale of guaranteed loans . . . . . . . . . 30,298,570 - 30,298,570 -
Change in unrealized depreciation on
investments and loans written-off . . . . . . . . . . 358,915 - 358,915 -
Unrealized premium income, net . . . . . . . . . . . . . 79,962 - 79,962 -
Amortization of property and equipment
and other deferred costs . . . . . . . . . . . . . 170,433 - 170,433 89,906
Amortization of excess servicing asset . . . . . . . . . 971,610 - 971,610 -
Accretion of discount on portfolio . . . . . . . . . . . (167,930) - (167,930) (38,875)
Accretion of deferred fees . . . . . . . . . . . . . . . (508,062) - (508,062) (103,597)
Accretion on government securities . . . . . . . . . . . (123,318) - (123,318) (123,318)
Deferred fees collected . . . . . . . . . . . . . . . . . 1,050,318 - 1,050,318 (114,807)
(Gain) loss on sale of assets . . . . . . . . . . . . . . 26,059 - 26,059 127
Equity in loss of unconsolidated subsidiary . . . . . . . 77,778 - 77,778 77,778
Net change in operating assets
and liabilities:
Accrued interest receivable . . . . . . . . . . . . . (298,322) - (298,322) (39,721)
Other assets . . . . . . . . . . . . . . . . . . . . (165,848) - (165,848) (283,459)
Accrued interest payable . . . . . . . . . . . . . . 401,163 - 401,163 123,934
Borrower advances . . . . . . . . . . . . . . . . . . (693,848) - (693,848) (294,814)
Other liabilities . . . . . . . . . . . . . . . . . . 502,911 - 502,911 315,085
------------ ------------ ------------ ------------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES . . . . . . . 12,874,626 (9,035,634) 21,910,260 10,970,596
------------ ------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Loans funded . . . . . . . . . . . . . . . . . . . . . . . . . (47,098,934) - (47,098,934) (7,695,209)
Principal collected and other adjustments . . . . . . . . . . . 10,651,520 - 10,651,520 3,762,943
Purchase of furniture and fixtures and other
assets . . . . . . . . . . . . . . . . . . . . . . . . . . . (52,712) - (52,712) (25,644)
Purchase of government securities' . . . . . . . . . . . . . . (3,942,013) - (3,942,013) (3,942,013)
Proceeds from maturities of government securities . . . . . . . 8,947,497 - 8,947,497 8,947,497
Investment in restricted cash . . . . . . . . . . . . . . . . . (251,277) - (251,277) -
Proceeds from sale of assets . . . . . . . . . . . . . . . . . 232,786 - 232,786 -
Investment in subsidiaries . . . . . . . . . . . . . . . . . . (400,000) 8,735,634 (9,135,634) (9,135,634)
------------ ------------ ------------ ------------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES . . . . . . . (31,913,133) 8,735,634 (40,648,767) (8,088,060)
------------ ------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of SBA debentures . . . . . . . . . . . 15,000,000 - 15,000,000 -
Proceeds from issuance of notes payable . . . . . . . . . . . 10,000,000 - 10,000,000 10,000,000
Proceeds from issuance of common stock . . . . . . . . . . . . 1,399,220 (8,000,000) 9,399,220 1,399,220
Proceeds from issuance of preferred stock . . . . . . . . . . 2,000,000 - 2,000,000 -
Payment of dividends on common stock . . . . . . . . . . . . . (11,188,909) 8,300,000 (19,488,909) (11,188,909)
Payment of dividends on preferred stock . . . . . . . . . . . (204,437) - (204,437) -
Advances from (to) affiliates, net . . . . . . . . . . . . . . 357,099 - 357,099 (7,182,620)
Payment of issuance costs on notes and debentures . . . . . . (446,926) - (446,926) (53,176)
------------ ------------ ------------ ------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES . . . . . . . 16,916,047 300,000 16,616,047 (7,025,485)
------------ ------------ ------------ ------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS . . . . . . (2,122,460) - (2,122,460) (4,142,949)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR . . . . . . . . . . 33,696,405 - 33,696,405 23,404,188
------------ ------------ ------------ ------------
CASH AND CASH EQUIVALENTS, END OF YEAR . . . . . . . . . . . . . $ 31,573,945 $ - $ 31,573,945 $ 19,261,239
============ ============ ============ ============
SUPPLEMENTAL DISCLOSURE:
Interest paid . . . . . . . . . . . . . . . . . . . . . . . . $ 4,648,149 $ - $ 4,648,149 $ 2,275,745
============ ============ ============ ============
Dividends reinvested . . . . . . . . . . . . . . . . . . . . . $ 777,107 $ - $ 777,107 $ 777,107
============ ============ ============ ============
Loans receivable acquired in exchange for SBA debentures . . . $ 2,109,062 $ - $ 2,109,062 $ -
============ ============ ============ ============
Reclassification from loans receivable to
real property owned . . . . . . . . . . . . . . . . . . . . $ 65,000 $ - $ 65,000 $ -
============ ============ ============ ============
Loans to facilitate sale of real property owned . . . . . . . $ 85,000 $ - $ 85,000 $ -
============ ============ ============ ============
<CAPTION>
FIRST WESTERN
WESTERN SBLC, FINANCIAL PMC
AND CAPITAL INVESTMENT
SUBSIDIARY CORPORATION CORPORATION
--------------- --------------- -----------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net operating income and realized and
unrealized gain (loss) on investments . . . . . . . . . . . . $ 5,323,084 $ 1,208,292 $ 2,504,258
Adjustments to reconcile net operating
income and realized and unrealized
gain (loss) on investments to net cash
provided by (used in) operating activities:
Loans funded, held for sale . . . . . . . . . . . . . . . (30,468,122) - -
Proceeds from sale of guaranteed loans . . . . . . . . . 30,298,570 - -
Change in unrealized depreciation on
investments and loans written-off . . . . . . . . . . 238,056 93,704 27,155
Unrealized premium income, net . . . . . . . . . . . . . 79,962 - -
Amortization of property and equipment
and other deferred costs . . . . . . . . . . . . . . 3,336 37,057 40,134
Amortization of excess servicing asset . . . . . . . . . 971,610 - -
Accretion of discount on portfolio . . . . . . . . . . . (128,319) (351) (385)
Accretion of deferred fees . . . . . . . . . . . . . . . (164,227) (95,411) (144,827)
Accretion on government securities . . . . . . . . . . . - - -
Deferred fees collected . . . . . . . . . . . . . . . . . 53,470 392,634 719,021
(Gain) loss on sale of assets . . . . . . . . . . . . . . 46,856 6,482 (27,406)
Equity in loss of unconsolidated subsidiary . . . . . . . - - -
Net change in operating assets
and liabilities:
Accrued interest receivable . . . . . . . . . . . . . (89,647) (57,786) (111,168)
Other assets . . . . . . . . . . . . . . . . . . . . 72,400 9,594 35,617
Accrued interest payable . . . . . . . . . . . . . . 3,623 59,578 214,028
Borrower advances . . . . . . . . . . . . . . . . . . (611,250) 90,047 122,169
Other liabilities . . . . . . . . . . . . . . . . . . 203,388 23,247 (38,809)
--------------- --------------- -----------------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES . . . . . . . 5,832,790 1,767,087 3,339,787
--------------- --------------- -----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Loans funded . . . . . . . . . . . . . . . . . . . . . . . . . (10,156,041) (8,011,887) (21,235,797)
Principal collected and other adjustments . . . . . . . . . . . 1,566,535 3,768,432 1,553,610
Purchase of furniture and fixtures and other
assets . . . . . . . . . . . . . . . . . . . . . . . . . . . (25,386) (1,682) -
Purchase of government securities' . . . . . . . . . . . . . . - - -
Proceeds from maturities of government securities . . . . . . . - - -
Investment in restricted cash . . . . . . . . . . . . . . . . . (251,277) - -
Proceeds from sale of assets . . . . . . . . . . . . . . . . . 49,530 30,000 153,256
Investment in subsidiaries . . . . . . . . . . . . . . . . . . - - -
--------------- --------------- -----------------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES . . . . . . . (8,816,639) (4,215,137) (19,528,931)
--------------- --------------- -----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of SBA debentures . . . . . . . . . . . - - 15,000,000
Proceeds from issuance of notes payable . . . . . . . . . . . - - -
Proceeds from issuance of common stock . . . . . . . . . . . . - 1,000,000 7,000,000
Proceeds from issuance of preferred stock . . . . . . . . . . - - 2,000,000
Payment of dividends on common stock . . . . . . . . . . . . . (5,350,000) (1,050,000) (1,900,000)
Payment of dividends on preferred stock . . . . . . . . . . . - - (204,437)
Advances from (to) affiliates, net . . . . . . . . . . . . . . 8,411,348 (601,000) (270,629)
Payment of issuance costs on notes and debentures . . . . . . - - (393,750)
--------------- --------------- -----------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES . . . . . . . 3,061,348 (651,000) 21,231,184
--------------- --------------- -----------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS . . . . . . 77,499 (3,099,050) 5,042,040
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR . . . . . . . . . . 1,798,032 5,867,913 2,626,272
--------------- --------------- -----------------
CASH AND CASH EQUIVALENTS, END OF YEAR . . . . . . . . . . . . . $ 1,875,531 $ 2,768,863 $ 7,668,312
=============== =============== =================
SUPPLEMENTAL DISCLOSURE:
Interest paid . . . . . . . . . . . . . . . . . . . . . . . . $ 37,941 $ 1,616,574 $ 717,889
=============== =============== =================
Dividends reinvested . . . . . . . . . . . . . . . . . . . . . $ - $ - $ -
=============== =============== =================
Loans receivable acquired in exchange for SBA debentures . . . $ - $ 2,109,062 $ -
=============== =============== =================
Reclassification from loans receivable to
real property owned . . . . . . . . . . . . . . . . . . . . $ 65,000 $ - $ -
=============== =============== =================
Loans to facilitate sale of real property owned . . . . . . . $ - $ 85,000 $ -
=============== =============== =================
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATING FINANCIAL
STATEMENTS.
F-35
<PAGE> 61
EXHIBITS
<TABLE>
<CAPTION>
Exhibit Description Page
------- ----------- ----
<S> <C> <C>
3.1 Articles of Incorporation, as amended (incorporated by
reference to Exhibit 4(b)(1) to Amendment No. 9 to the
Registration Statement on Form N-2 (Registration No.
33-2535) (the "N-2 Registration Statement"), Amendment
No. 9 dated November 29, 1991.
3.2 By-Laws, as amended (incorporated by reference to
Exhibit 2 to Amendment No.7 to the N-2 Registration
Statement dated April 27, 1989).
4.1 Certificate of Common Stock. (incorporated by reference
to Exhibit 4 to Amendment No. 1 to the N-2 Registration
Statement dated November 10, 1993).
4.2 Debenture dated September 24, 1986 for $2,490,000 loan
with SBA - incorporated by reference from Registrant's
Form N-2, Amendment No. 6, dated April 27, 1988.
4.3 Debenture dated February 4, 1987 for $2,480,000 loan
with SBA - incorporated by reference from Registrant's
Form N-2, Amendment No. 6, dated April 27, 1988.
4.4 Debenture dated February 17, 1988 for $1,500,000 loan
With SBA - incorporated by reference from Exhibit E
4(b)(5)(n) to the Registrant's Form N-2, Amendment
No. 7 dated April 27, 1991.
4.5 Debenture dated June 27, 1990 for $2,000,000 loan
with SBA - incorporated by reference from Exhibit
4(b)(5)(n) Registrant's Form N-2, Amendment No. 9,
dated April 29, 1991.
4.6 Debenture dated September 26, 1990 for $2,810,000
loan with SBA - incorporated by reference from Exhibit
4(b)(5)(o) to the Registrant's Form N-2, Amendment 9,
dated April 29, 1991.
4.7 Debenture dated September 26, 1990 for $1,500,000
loan with SBA - incorporated by reference from Exhibit
4(b)(5)(p) to the Registrant's Form N-2, Amendment 9,
dated April 29, 1991.
</TABLE>
E-1
<PAGE> 62
<TABLE>
<S> <C>
4.8 Debenture dated March 29, 1990 for $1,000,000 loan
with SBA - incorporated by reference from Exhibit 5(q)
from Registrant's Form N-2, Amendment No. 3, dated
August 18, 1992.
4.9 Debenture dated September 27, 1989 for $1,000,000
loan with SBA - incorporated by reference from Exhibit
5(r) from Registrant's Form N-2, Amendment No. 3,
dated August 18, 1992.
4.10 Debenture dated September 27, 1989 for $1,500,000
loan with SBA - incorporated by reference from Exhibit
5(s) from Registrant's Form N-2, Amendment No. 3,
dated August 18, 1992.
4.11 Debenture dated January 2, 1990 for $3,000,000 loan
with SBA - incorporated by reference from Exhibit (5)(t)
from Registrant's Form N-2, Amendment No. 3, dated
August 18, 1992.
4.12 Debenture dated August 18, 1989 for $1,000,000 loan
with SBA - incorporated by reference from Exhibit (5)(u)
from Registrant's Form N-2, Amendment No. 3, dated
August 18, 1992.
**4.13 Debenture dated September 28, 1994 for $3,000,000
loan with SBA.
**4.14 Debenture dated September 28, 1994 for $3,000,000
loan with SBA.
**4.15 Senior Note dated July 19, 1993 for $6,000,000 with
Columbine Life Insurance Company.
**4.16 Senior Note dated July 19, 1993 for $9,000,000 with
Life Insurance Company of Georgia.
**4.17 Senior Note dated July 19, 1993 for $5,000,000 with
SouthLand Life Insurance Company.
**4.18 Senior Note dated December 15, 1993 for $2,000,000
with Peerless Insurance Company.
**4.19 Senior Note dated December 15, 1993 for $3,000,000
with Security Life of Denver Insurance Company.
</TABLE>
E-2
<PAGE> 63
<TABLE>
<S> <C>
*4.20 Debenture dated March 29, 1995 for $3,000,000
loan with SBA.
*4.21 Debenture dated June 28, 1995 for $5,000,000
loan with SBA.
*4.22 Debenture dated September 27, 1995 for $7,000,000
loan with SBA.
*4.23 Debenture dated September 29, 1987 for $800,000
loan with SBA. Assumed from J & D Capital Corporation
*4.24 Debenture dated December 20, 1989 for $650,000
loan with SBA. Assumed from J & D Capital Corporation
*4.25 Debenture dated June 27,1990 for $300,000 loan
with SBA. Assumed from J & D Capital Corporation
*4.26 Debenture dated December 6, 1992 for $510,000 loan
with SBA.
*4.27 Senior Note Dated April 19, 1995 for $5,000,000
with Security Life of Denver Insurance Company.
*4.28 Senior Note Dated April 19, 1995 for $2,000,000
with Peerless Insurance Company.
*4.29 Senior Note Dated April 19, 1995 for $2,000,000
with Indiana Insurance Company.
*4.30 Senior Note Dated April 19, 1995 for $1,000,000
with Security Life of Denver Insurance Company.
**10.1 Employment contract between the Registrant and
Lance B. Rosemore dated August 1, 1994.
**10.2 Employment contract between the Registrant and
Andrew S. Rosemore dated August 1, 1994.
**10.3 Employment contract between the Registrant and
Fredric M. Rosemore dated August 1, 1994.
**10.4 Employment contract between the Registrant and
Jan F. Salit dated August 1, 1994.
</TABLE>
E-3
<PAGE> 64
<TABLE>
<S> <C>
**10.5 Employment contract between the Registrant and
Barry N. Berlin dated August 1, 1994.
**10.6 Employment contract between the Registrant and
Mary J. Brownmiller dated August 1, 1994.
*10.7 Sixth Renewal Master Promissory Note for $10,000,000
with Sun Trust Bank, Miami.
*21 Subsidiaries
*27 Financial Data Schedule
</TABLE>
-----------------------
* filed herewith
** incorporated by reference from the
Registrant's Form 10-K for the fiscal year
ended December 31, 1994
E-4
<PAGE> 1
OMB Approval No: 3245-0081
Expiration Date: 02-28-96
Page 1 of 3
Sec. 301(d)
SBIC License No. 04/04-5240 Loan No. 08005100-09
----------- ------------
DEBENTURE
*****************
$ 3,000,000.00 Date of Issuance March 29, 1995
- ---------------- -------------------
PMC Investment Corporation (the "Company")
- ----------------------------------------------------------------
(Name of Licensee)
17290 Preston Road, Third Floor, Dallas, Texas 75252
- -------------------------------------------------------------------------------
(Street) (City) (State) (Zip)
For value received, the Company hereby promises to pay to the order of Chemical
Bank, as Trustee (the "Trustee") under that certain Amended and Restated Trust
Agreement dated as of March 1, 1990, as same may be amended from time to time,
by and among the Trustee, the U.S. Small Business Administration ("SBA") and
SBIC Funding Corporation, and as the Holder hereof the principal sum of
three million and 00/100s dollars ($ 3,000,000.00 ) (the "Original Principal
Amount") on March 1, 2005 (the "Maturity Date") at such location as SBA, as
guarantor of this debenture, may direct and to pay interest semiannually on
March 1st and September 1st (the "Payment Dates") of each year, as herein
provided. This debenture shall bear interest at the rate of 7.84% per annum
(the "Stated Interest Rate"). The Company promises to pay interest at the rate
of 4.84% per annum (supplemented by interest payments made by SBA of 3% per
annum) beginning from the date of issuance above-stated through March 1, 2000,
after which time the Company shall pay the Stated Interest Rate, on the basis
of a year of 365 days, for the actual number of days (including the first day
but excluding the last day) elapsed, on said principal sum until payment of
such principal sum has been made or duly provided for. The Company shall
deposit all payments with respect to this debenture not later than 12:00 noon
(Washington, D.C. time) on the applicable Payment Date or the next business
day if the Payment Date is not a business day, all as directed by SBA.
This debenture is issued by the Company and guaranteed by SBA, pursuant and
subject to Section 303 of the Small Business Investment Act of 1958, as amended
(the "Act") (15 U.S.C. Section 683). This debenture is subject to the
regulations promulgated under the Act, as amended from time to time, provided,
however, that 13 C.F.R. Sections 107.210 (h) and 107.261 as in effect on the
date of this debenture are incorporated herein as if fully set forth.
4.20
<PAGE> 2
Page 2 of 3
The Company may elect to prepay this debenture, as a whole and not in part, on
any Payment Date, in the manner and at the price as next described. The
prepayment price (the "Prepayment Price") shall be an amount equal to the
outstanding principal balance of this debenture, plus interest accrued and
unpaid thereon to the Payment Date selected for prepayment, plus a prepayment
premium (the "Prepayment Premium"). The Prepayment Premium amount is
calculated as a declining percentage (the "Applicable Percentage") multiplied
by the Original Principal Amount of this debenture in accordance with the
following table:
<TABLE>
<CAPTION>
<S> <C>
Consecutive Payment Dates Applicable Percentage
1st or 2nd 5 %
3rd or 4th 4 %
5th or 6th 3 %
7th or 8th 2 %
9th or 10th 1 %
</TABLE>
No Prepayment Premium is required for a prepayment that occurs on a Payment
Date that is on or after the 11th consecutive Payment Date.
The amount of the Prepayment Price shall be sent to SBA or such agent as SBA
shall direct, by wire payment in immediately available funds, not less than
three business days prior to the regular payment date. Until the Company is
notified otherwise in writing by SBA, any Prepayment Price shall be paid to the
account maintained by the Trustee, entitled the SBA Prepayment Subaccount, and
shall include an identification of the Company by name and SBA-assigned license
number, the loan number appearing on the face hereof, and such other
information as SBA or its agent may specify.
This debenture shall be deemed issued in the District of Columbia as of the
day, month, and year first stated above. The terms and conditions of this
debenture shall be construed in accordance with, and its validity and
enforcement governed by, federal law.
The warranties, representations, or certifications made to SBA on SBA Form 1022
related to this debenture are incorporated herein as if fully set forth.
Should any provision of this debenture or any of the documents incorporated by
reference herein be declared illegal or unenforceable by a court of competent
jurisdiction, the remaining provisions shall remain in full force and effect
and this debenture shall be construed as if said provisions were not contained
herein.
<PAGE> 3
Page 3 of 3
All notices to Company which are required or may be given under this debenture
shall be sufficient in all respects if sent to the above-noted address of the
Company. For the purposes of this debenture, the Company may change this
address only upon written approval of SBA.
IN WITNESS WHEREOF, the Company has caused this debenture to be signed by its
duly authorized officer and its corporate seal to be hereunto affixed and
attested by its Secretary or Assistant Secretary as of the date of issuance
stated above.
CORPORATE SEAL
PMC Investment Corporation
-------------------------------------
(Name of Licensee)
By: /s/ Andrew S. Rosemore
--------------------------------------
Andrew S. Rosemore, President
----------------------------------------
(Typed Name and Title)
ATTEST:
/s/ Lance B. Rosemore
- ----------------------------------
Secretary
<PAGE> 1
OMB Approval No: 3245-0081
Expiration Date: 02-28-96
Page 1 of 3
Sec. 301(d)
SBIC License No. 04/04-5240 Loan No. 080005400-07
-------------- -------------
DEBENTURE
*****************
$ 5,000,000.00 Date of Issuance June 28, 1995
- ------------------ ----------------------
PMC Investment Corporation (the "Company")
- -----------------------------------------------------------------
(Name of Licensee)
17290 Preston Road, Third Floor, Dallas, Texas 75252
- --------------------------------------------------------------------------------
(Street) (City) (State) (Zip)
For value received, the Company hereby promises to pay to the order of Chemical
Bank, as Trustee (the "Trustee") under that certain Amended and Restated Trust
Agreement dated as of February 1, 1995, as same may be amended from time to
time, by and among the Trustee, the U.S. Small Business Administration ("SBA")
and SBIC Funding Corporation, and as the Holder hereof the principal sum of
five million and 00/100s dollars ($ 5,000,000.00) (the "Original Principal
Amount") on June 1, 2005 (the "Maturity Date") at such location as SBA, as
guarantor of this debenture, may direct and to pay interest semiannually on
June 1st and December 1st (the "Payment Dates") of each year, as herein
provided. This debenture shall bear interest at the rate of 6.69% per annum
(the "Stated Interest Rate"). The Company promises to pay interest at the rate
of 3.69% per annum) (supplemented by interest payments made by SBA of 3% per
annum) beginning from the date of issuance above-stated through June 1, 2000,
after which time the Company shall pay the Stated Interest Rate, on the basis of
a year of 365 days, for the actual number of days (including the first day but
excluding the last day) elapsed, on said principal sum until payment of such
principal sum has been made or duly provided for. The Company shall deposit all
payments with respect to this debenture not later than 12:00 noon (Washington,
D.C. time) on the applicable Payment Date or the next business day if the
Payment Date is not a business day, all as directed by SBA.
This debenture is issued by the Company and guaranteed by SBA, pursuant and
subject to Section 303 of the Small Business Investment Act of 1958, as amended
(the "Act") (15 U.S.C. Section 683). This debenture is subject to the
regulations promulgated under the Act, as amended from time to time, provided,
however, that 13 C.F.R. Sections 107.210 (h) and 107.261 as in effect on the
date of this debenture are incorporated herein as if fully set forth.
4.21
<PAGE> 2
Page 2 of 3
The Company may elect to prepay this debenture, as a whole and not in part, on
any Payment Date, in the manner and at the price as next described. The
prepayment price (the "Prepayment Price") shall be an amount equal to the
outstanding principal balance of this debenture, plus interest accrued and
unpaid thereon to the Payment Date selected for prepayment, plus a prepayment
premium (the "Prepayment Premium"). The Prepayment Premium amount is
calculated as a declining percentage (the "Applicable Percentage") multiplied
by the Original Principal Amount of this debenture in accordance with the
following table:
<TABLE>
<CAPTION>
Consecutive Payment Dates Applicable Percentage
<S> <C>
1st or 2nd 5 %
3rd or 4th 4 %
5th or 6th 3 %
7th or 8th 2 %
9th or 10th 1 %
</TABLE>
No Prepayment Premium is required for a prepayment that occurs on a Payment
Date that is on or after the 11th consecutive Payment Date.
The amount of the Prepayment Price shall be sent to SBA or such agent as SBA
shall direct, by wire payment in immediately available funds, not less than
three business days prior to the regular payment date. Until the Company is
notified otherwise in writing by SBA, any Prepayment Price shall be paid to the
account maintained by the Trustee, entitled the SBA Prepayment Subaccount, and
shall include an identification of the Company by name and SBA-assigned license
number, the loan number appearing on the face hereof, and such other
information as SBA or its agent may specify.
This debenture shall be deemed issued in the District of Columbia as of the
day, month, and year first stated above. The terms and conditions of this
debenture shall be construed in accordance with, and its validity and
enforcement governed by, federal law.
The warranties, representations, or certifications made to SBA on the SBA Form
1022 or the Company's application letter for an SBA commitment related to this
debenture are incorporated herein as if fully set forth.
Should any provision of this debenture or any of the documents incorporated by
reference herein be declared illegal or unenforceable by a court of competent
jurisdiction, the remaining provisions shall remain in full force and effect
and this debenture shall be construed as if said provisions were not contained
herein.
<PAGE> 3
Page 3 of 3
All notices to the Company which are required or may be given under this
debenture shall be sufficient in all respects if sent to the above-noted
address of the Company. For the purposes of this debenture, the Company may
change this address only upon written approval of SBA.
IN WITNESS WHEREOF, the Company has caused this debenture to be signed by its
duly authorized officer and its corporate seal to be hereunto affixed and
attested by its Secretary or Assistant Secretary as of the date of issuance
stated above.
CORPORATE SEAL
PMC Investment Corporation
----------------------------------
(Name of Licensee)
By: /s/ Andrew S. Rosemore
----------------------------------
Andrew S. Rosemore, President
----------------------------------
(Typed Name and Title)
ATTEST:
/s/ Lance B. Rosemore
- -------------------------
Secretary
<PAGE> 1
OMB Approval No: 3245-0081
Expiration Date: 02-28-96
Page 1 of 3
Sec. 301(d)
SBIC License No. 04/04-5240 Loan No. 080005851-08
------------ ------------
DEBENTURE
*****************
$ 7,000,000.00 Date of Issuance September 27, 1995
- ------------------ ------------------------
PMC Investment Corporation ("the "Company")
- ----------------------------------------------------------------
(Name of Licensee)
17290 Preston Road, Third Floor, Dallas, Texas 75252
- --------------------------------------------------------------------------------
(Street) (City) (State) (Zip)
For value received, the Company hereby promises to pay to the order of Chemical
Bank, as Trustee (the "Trustee") under that certain Amended and Restated Trust
Agreement dated as of February 1, 1995, as same may be amended from time to
time, by and among the Trustee, the U.S. Small Business Administration ("SBA")
and SBIC Funding Corporation, and as the Holder hereof the principal sum of
seven million and 00/100s dollars ($ 7,000,000.00) (the "Original Principal
Amount") on September 1, 2005 (the "Maturity Date") at such location as SBA, as
guarantor of this debenture, may direct and to pay interest semiannually on
March 1st and September 1st (the "Payment Dates") of each year, as herein
provided. This debenture shall bear interest at the rate of 6.875% per annum
(the "Stated Interest Rate"). The Company promises to pay interest at the rate
of 3.875 % per annum) (supplemented by interest payments made by SBA of 3%
per annum) beginning from the date of issuance above-stated through September 1,
2000, after which time the Company shall pay the Stated Interest Rate, on the
basis of a year of 365 days, for the actual number of days (including the first
day but excluding the last day) elapsed, on said principal sum until payment of
such principal sum has been made or duly provided for. The Company shall
deposit all payments with respect to this debenture not later than 12:00 noon
(Washington, D.C. time) on the applicable Payment Date or the next business day
if the Payment Date is not a business day, all as directed by SBA.
This debenture is issued by the Company and guaranteed by SBA, pursuant and
subject to Section 303 of the Small Business Investment Act of 1958, as amended
(the "Act") (15 U.S.C. Section 683). This debenture is subject to the
regulations promulgated under the Act, as amended from time to time, provided,
however, that 13 C.F.R. Sections 107.210 (h) and 107.261 as in effect on the
date of this debenture are incorporated herein as if fully set forth.
4.22
<PAGE> 2
Page 2 of 3
The Company may elect to prepay this debenture, as a whole and not in part, on
any Payment Date, in the manner and at the price as next described. The
prepayment price (the "Prepayment Price") shall be an amount equal to the
outstanding principal balance of this debenture, plus interest accrued and
unpaid thereon to the Payment Date selected for prepayment, plus a prepayment
premium (the "Prepayment Premium"). The Prepayment Premium amount is
calculated as a declining percentage (the "Applicable Percentage") multiplied
by the Original Principal Amount of this debenture in accordance with the
following table:
<TABLE>
<CAPTION>
Consecutive Payment Dates Applicable Percentage
<S> <C> <C> <C>
1st or 2nd 5 %
3rd or 4th 4 %
5th or 6th 3 %
7th or 8th 2 %
9th or 10th 1 %
</TABLE>
No Prepayment Premium is required for a prepayment that occurs on a Payment
Date that is on or after the 11th consecutive Payment Date.
The amount of the Prepayment Price shall be sent to SBA or such agent as SBA
shall direct, by wire payment in immediately available funds, not less than
three business days prior to the regular payment date. Until the Company is
notified otherwise in writing by SBA, any Prepayment Price shall be paid to the
account maintained by the Trustee, entitled the SBA Prepayment Subaccount, and
shall include an identification of the Company by name and SBA-assigned license
number, the loan number appearing on the face hereof, and such other
information as SBA or its agent may specify.
This debenture shall be deemed issued in the District of Columbia as of the
day, month, and year first stated above. The terms and conditions of this
debenture shall be construed in accordance with, and its validity and
enforcement governed by, federal law.
The warranties, representations, or certifications made to SBA on the SBA Form
1022 or the Company's application letter for an SBA commitment related to this
debenture are incorporated herein as if fully set forth.
Should any provision of this debenture or any of the documents incorporated by
reference herein be declared illegal or unenforceable by a court of competent
jurisdiction, the remaining provisions shall remain in full force and effect
and this debenture shall be construed as if said provisions were not contained
herein.
<PAGE> 3
Page 3 of 3
All notices to the Company which are required or may be given under this
debenture shall be sufficient in all respects if sent to the above-noted
address of the Company. For the purposes of this debenture, the Company may
change this address only upon written approval of SBA.
IN WITNESS WHEREOF, the Company has caused this debenture to be signed by its
duly authorized officer and its corporate seal to be hereunto affixed and
attested by its Secretary or Assistant Secretary as of the date of issuance
stated above.
CORPORATE SEAL
PMC Investment Corporation
-----------------------------------
(Name of Licensee)
By: /s/ Lance B. Rosemore
-----------------------------------
Lance B. Rosemore, Secretary
-----------------------------------
(Typed Name and Title)
ATTEST:
/s/ Barry N. Berlin
- --------------------------------
Assistant Secretary
<PAGE> 1
OMB Approval No: 3245-0081
Expiration Date: 04-30-90
Page 1 of 3
SBIC License No. 04/04-0188 Loan No. 04608800-07
---------------- -------------
DEBENTURE
*****************
$ 800,000.00 Date of Issuance September 29, 1987
- --------------- ----------------------
J & D Capital Corp. (the "Company")
- -----------------------------------------------------------------
(Name of Licensee)
12747 Biscayne Blvd. N. Miami Florida 33181
- --------------------------------------------------------------------------------
(Street) (City) (State) (Zip)
For value received, the Company hereby promises to pay to the order of Chemical
Bank, as Trustee (the "Trustee") under that certain Trust Agreement dated as of
January 15, 1987 by and among the Trustee, the U.S. Small Business
Administration ("SBA") and SBIC Funding Corporation, and as the Holder hereof
the principal sum of eight hundred thousand and 00/100s dollars
($ 800,000.00) (the "Original Principal Amount") on September 1, 1997 at
such location as SBA, as guarantor of this debenture, may direct and to pay
interest semiannually on March 1st and September 1st (the "PaymentDates") of
each year, as herein provided, at the rate of 10.35% per annum on the basis of
a year of 365 days, for the actual number of days (including the first day but
excluding the last day) elapsed (the "Stated Interest Rate"), on said principal
sum from the date of the issuance hereof until payment of such principal sum has
been made or duly provided for. The Company shall deposit all payments with
respect to this debenture not later than 12:00 noon (Washington, D.C. time) on
the applicable Payment Date or the next business day if the Payment Date is not
a business day, all as directed by SBA.
This debenture is issued by the Company and guaranteed by SBA, pursuant and
subject to Section 303(a) and (b) (1) of the Small Business Investment Act of
1958, as amended (the "Act") (15 U.S.C. Section 683). This debenture is
subject to the regulations under the Act, as amended from time to time (the
"Regulations"), provided, however, that Regulation 13 C.F.R. Section 107.203 is
incorporated herein as if fully set forth.
4.23
<PAGE> 2
Page 2 of 3
The Company may elect to prepay this debenture, as a whole and not in part, on
any Payment Date after the ninth consecutive Payment Date in the manner and at
the price as next described. The prepayment price shall be an amount equal to
the outstanding principal balance of this debenture, plus interest accrued and
unpaid thereon to the Payment Date selected for prepayment, plus a prepayment
premium (the "Prepayment Premium") calculated as a declining percentage (the
"Applicable Percentage") of the dollar amount of the Stated Interest Rate times
the Original Principal Amount in accordance with the following table (the
"Prepayment Price"):
<TABLE>
<CAPTION>
Consecutive Payment Dates Applicable Percentage
<S> <C>
10th or 11th 100 %
12th or 13th 80 %
14th or 15th 60 %
16th or 17th 40 %
18th or 19th 20 %
</TABLE>
The amount of the Prepayment Price shall be sent to SBA or such agent as SBA
shall direct, by wire payment in immediately available funds, not less than
three business days prior to the regular payment date. Until the Company is
notified otherwise in writing by SBA, any Prepayment Price shall be paid to the
account maintained by the Trustee, entitled the SBA Prepayment Subaccount, and
shall include an identification of the Company by name and SBA-assigned license
number, the loan number appearing on the face hereof, and such other
information as SBA or its agent may specify.
This debenture shall be deemed issued in the District of Columbia as of the
day, month, and year first stated above. The terms and conditions of this
debenture shall be construed in accordance with, and its validity and
enforcement governed by, the laws of the District of Columbia.
The warranties, representations, or certifications made to SBA on SBA Form 1022
related to this debenture are incorporated herein as if fully set forth.
Should any provision of this debenture or any of the documents incorporated by
reference herein be declared illegal or unenforceable by a court of competent
jurisdiction, the remaining provisions shall remain in full force and effect
and this debenture shall be construed as if said provisions were not contained
herein.
<PAGE> 3
Page 3 of 3
All notices to Company which are required or may be given under this debenture
shall be sufficient in all respects if sent to the above-noted address of the
Company. For the purposes of this debenture, the Company may change this
address only upon written approval of SBA.
COMPANY ORGANIZED AS CORPORATION
IN WITNESS WHEREOF, the Company has caused this debenture to be signed by its
duly authorized officer and its corporate seal to be hereunto affixed and
attested by its Secretary or Assistant Secretary as of the date of issuance
stated above.
CORPORATE SEAL
J & D Capital Corp.
--------------------------------
(Name of Licensee)
By: /s/ Jack Carmel
--------------------------------
Jack Carmel, President
--------------------------------
(Typed Name and Title)
ATTEST:
/s/ Diane W. Carmel
- ------------------------------
Secretary
<PAGE> 1
OMB Approval No: 3245-0081
Expiration Date: 04-30-90
Page 1 of 3
SBIC License No. 04/04-0188 Loan No. 04623400-02
------------- -------------
DEBENTURE
*****************
$ 650,000.00 Date of Issuance December 20, 1989
- --------------------- -----------------------
J & D Capital Corp. (the "Company")
- -----------------------------------------------------------------
(Name of Licensee)
12747 Biscayne Blvd. N. Miami Florida 33181
- --------------------------------------------------------------------------------
(Street) (City) (State) (Zip)
For value received, the Company hereby promises to pay to the order of Chemical
Bank, as Trustee (the "Trustee") under that certain Trust Agreement dated as of
January 15, 1987 by and among the Trustee, the U.S. Small Business
Administration ("SBA") and SBIC Funding Corporation, and as the Holder hereof
the principal sum of six hundred fifty thousand and 00/100s dollars
($ 650,000.00) (the "Original Principal Amount") on December 1, 1999 at such
location as SBA, as guarantor of this debenture, may direct and to pay interest
semiannually on June 1st and December 1st (the "Payment Dates") of each year, as
herein provided, at the rate of 8.60% per annum on the basis of a year of 365
days, for the actual number of days (including the first day but excluding the
last day) elapsed (the "Stated Interest Rate"), on said principal sum from the
date of the issuance hereof until payment of such principal sum has been made or
duly provided for. The Company shall deposit all payments with respect to this
debenture not later than 12:00 noon (Washington, D.C. time) on the applicable
Payment Date or the next business day if the Payment Date is not a business day,
all as directed by SBA.
This debenture is issued by the Company and guaranteed by SBA, pursuant and
subject to Section 303(a) and (b) of the Small Business Investment Act of 1958,
as amended (the "Act") (15 U.S.C. Section 683). This debenture is subject to
the regulations under the Act, as amended from time to time (the
"Regulations"), provided, however, that Regulation 13 C.F.R. Section 107.203 is
incorporated herein as if fully set forth.
4.24
<PAGE> 2
Page 2 of 3
The Company may elect to prepay this debenture, as a whole and not in part, on
any Payment Date after the ninth consecutive Payment Date in the manner and at
the price as next described. The prepayment price shall be an amount equal to
the outstanding principal balance of this debenture, plus interest accrued and
unpaid thereon to the Payment Date selected for prepayment, plus a prepayment
premium (the "Prepayment Premium") calculated as a declining percentage (the
"Applicable Percentage") of the dollar amount of the Stated Interest Rate times
the Original Principal Amount in accordance with the following table (the
"Prepayment Price"):
<TABLE>
<CAPTION>
Consecutive Payment Dates Applicable Percentage
<S> <C> <C> <C>
10th or 11th 100 %
12th or 13th 80 %
14th or 15th 60 %
16th or 17th 40 %
18th or 19th 20 %
</TABLE>
The amount of the Prepayment Price shall be sent to SBA or such agent as SBA
shall direct, by wire payment in immediately available funds, not less than
three business days prior to the regular payment date. Until the Company is
notified otherwise in writing by SBA, any Prepayment Price shall be paid to the
account maintained by the Trustee, entitled the SBA Prepayment Subaccount, and
shall include an identification of the Company by name and SBA-assigned license
number, the loan number appearing on the face hereof, and such other
information as SBA or its agent may specify.
This debenture shall be deemed issued in the District of Columbia as of the
day, month, and year first stated above. The terms and conditions of this
debenture shall be construed in accordance with, and its validity and
enforcement governed by, the laws of the District of Columbia.
The warranties, representations, or certifications made to SBA on SBA Form 1022
related to this debenture are incorporated herein as if fully set forth.
Should any provision of this debenture or any of the documents incorporated by
reference herein be declared illegal or unenforceable by a court of competent
jurisdiction, the remaining provisions shall remain in full force and effect
and this debenture shall be construed as if said provisions were not contained
herein.
<PAGE> 3
Page 3 of 3
All notices to Company which are required or may be given under this debenture
shall be sufficient in all respects if sent to the above-noted address of the
Company. For the purposes of this debenture, the Company may change this
address only upon written approval of SBA.
COMPANY ORGANIZED AS CORPORATION
IN WITNESS WHEREOF, the Company has caused this debenture to be signed by its
duly authorized officer and its corporate seal to be hereunto affixed and
attested by its Secretary or Assistant Secretary as of the date of issuance
stated above.
CORPORATE SEAL
J & D Capital Corp.
------------------------------
(Name of Licensee)
By: /s/ Jack Carmel
------------------------------
Jack Carmel, President
------------------------------
(Typed Name and Title)
ATTEST:
/s/ Diane W. Carmel
- ------------------------------
Secretary
<PAGE> 1
OMB Approval No: 3245-0081
Expiration Date: 01-31-93
Page 1 of 3
SBIC License No. 04/04-0188 Loan No. 0462500-00
------------- -------------
DEBENTURE
*****************
$ 300,000.00 Date of Issuance June 27, 1990
- --------------- -------------------
J & D Capital Corp. (the "Company")
- ----------------------------------------------------------------
(Name of Licensee)
12747 Biscayne Blvd. N. Miami Florida 33181
- --------------------------------------------------------------------------------
(Street) (City) (State) (Zip)
For value received, the Company hereby promises to pay to the order of Chemical
Bank, as Trustee (the "Trustee") under that certain Amended and Restated Trust
Agreement dated as of March 1, 1990, as same may be amended from time to time,
by and among the Trustee, the U.S. Small Business Administration ("SBA") and
SBIC Funding Corporation, and as the Holder hereof the principal sum of three
hundred thousand and 00/100s dollars ($ 300,000.00) (the "Original Principal
Amount") on June 1, 2000 (the "Maturity Date") at such location as SBA, as
guarantor of this debenture, may direct and to pay interest semiannually on
June 1st and December 1st (the "Payment Dates") of each year, as herein
provided, at the rate of 9.30% per annum on the basis of a year of 365 days,
for the actual number of days (including the first day but excluding the last
day) elapsed (the "Stated Interest Rate"), on said principal sum from the date
of the issuance hereof until payment of such principal sum has been made or
duly provided for. The Company shall deposit all payments with respect to this
debenture not later than 12:00 noon (Washington, D.C. time) on the applicable
Payment Date or the next business day if the Payment Date is not a business
day, all as directed by SBA.
This debenture is issued by the Company and guaranteed by SBA, pursuant and
subject to Section 303 of the Small Business Investment Act of 1958, as amended
(the "Act") (15 U.S.C. Section 683). This debenture is subject to the
regulations under the Act, as amended from time to time (the "Regulations"),
provided, however, that Regulation 13 C.F.R. Section 107.203 is incorporated
herein as if fully set forth.
4.25
<PAGE> 2
Page 2 of 3
The Company may elect to prepay this debenture, as a whole and not in part, on
any Payment Date after the ninth consecutive Payment Date in the manner and at
the price as next described. The prepayment price shall be an amount equal to
the outstanding principal balance of this debenture, plus interest accrued and
unpaid thereon to the Payment Date selected for prepayment, plus a prepayment
premium (the "Prepayment Premium") calculated as a declining percentage (the
"Applicable Percentage") of the dollar amount of the Stated Interest Rate times
the Original Principal Amount in accordance with the following table (the
"Prepayment Price"):
<TABLE>
<CAPTION>
Consecutive Payment Dates Applicable Percentage
<S> <C>
10th or 11th 100 %
12th or 13th 80 %
14th or 15th 60 %
16th or 17th 40 %
18th or 19th 20 %
</TABLE>
The amount of the Prepayment Price shall be sent to SBA or such agent as SBA
shall direct, by wire payment in immediately available funds, not less than
three business days prior to the regular payment date. Until the Company is
notified otherwise in writing by SBA, any Prepayment Price shall be paid to the
account maintained by the Trustee, entitled the SBA Prepayment Subaccount, and
shall include an identification of the Company by name and SBA-assigned license
number, the loan number appearing on the face hereof, and such other
information as SBA or its agent may specify.
This debenture shall be deemed issued in the District of Columbia as of the
day, month, and year first stated above. The terms and conditions of this
debenture shall be construed in accordance with, and its validity and
enforcement governed by, the laws of the District of Columbia.
The warranties, representations, or certifications made to SBA on SBA Form 1022
related to this debenture are incorporated herein as if fully set forth.
Should any provision of this debenture or any of the documents incorporated by
reference herein be declared illegal or unenforceable by a court of competent
jurisdiction, the remaining provisions shall remain in full force and effect
and this debenture shall be construed as if said provisions were not contained
herein.
<PAGE> 3
Page 3 of 3
All notices to Company which are required or may be given under this debenture
shall be sufficient in all respects if sent to the above-noted address of the
Company. For the purposes of this debenture, the Company may change this
address only upon written approval of SBA.
COMPANY ORGANIZED AS CORPORATION
IN WITNESS WHEREOF, the Company has caused this debenture to be signed by its
duly authorized officer and its corporate seal to be hereunto affixed and
attested by its Secretary or Assistant Secretary as of the date of issuance
stated above.
CORPORATE SEAL
J & D Capital Corp.
-------------------------------
(Name of Licensee)
By: /s/ Jack Carmel
-------------------------------
Jack Carmel, President
-------------------------------
(Typed Name and Title)
ATTEST:
/s/ Diane W. Carmel
- ------------------------------
Secretary
<PAGE> 1
OMB Approval No: 3245-0081
Expiration Date: 01-31-93
Page 1 of 3
SBIC License No. 04/04-0188 Loan No. 04633400-04
-------------- --------------
DEBENTURE
*****************
$ 510,000.00 Date of Issuance December 16, 1992
- ----------------- ---------------------
J & D Capital Corp. (the "Company")
- ----------------------------------------------------------------
(Name of Licensee)
12747 Biscayne Blvd. N. Miami Florida 33181
- --------------------------------------------------------------------------------
(Street) (City) (State) (Zip)
For value received, the Company hereby promises to pay to the order of Chemical
Bank, as Trustee (the "Trustee") under that certain Amended and Restated Trust
Agreement dated as of March 1, 1990, as same may be amended from time to time,
by and among the Trustee, the U.S. Small Business Administration ("SBA") and
SBIC Funding Corporation, and as the Holder hereof the principal sum of five
hundred ten thousand and 00/100s dollars ($ 510,000.00) (the "Original
Principal Amount") on December 1, 2002 (the "Maturity Date") at such location as
SBA, as guarantor of this debenture, may direct and to pay interest semiannually
on June 1st and December 1st (the "Payment Dates") of each year, as herein
provided, at the rate of 7.51% per annum on the basis of a year of 365 days,
for the actual number of days (including the first day but excluding the last
day) elapsed (the "Stated Interest Rate"), on said principal sum from the date
of the issuance hereof until payment of such principal sum has been made or duly
provided for. The Company shall deposit all payments with respect to this
debenture not later than 12:00 noon (Washington, D.C. time) on the applicable
Payment Date or the next business day if the Payment Date is not a business day,
all as directed by SBA.
This debenture is issued by the Company and guaranteed by SBA, pursuant and
subject to Section 303 of the Small Business Investment Act of 1958, as amended
(the "Act") (15 U.S.C. Section 683). This debenture is subject to the
regulations under the Act, as amended from time to time (the "Regulations"),
provided, however, that Regulated 13 C.F.R. Section 107.203 is incorporated
herein as if fully set forth.
4.26
<PAGE> 2
Page 2 of 3
The Company may elect to prepay this debenture, as a whole and not in part, on
any Payment Date, in the manner and at the price as next described. The
prepayment price (the "Prepayment Price) shall be an amount equal to the
outstanding principal balance of this debenture, plus interest accrued and
unpaid thereon to the Payment Date selected for prepayment, plus a prepayment
premium (the "Prepayment Premium"). The Prepayment Premium amount is
calculated as a declining percentage (the "Applicable Percentage") multiplied
by the Original Principal Amount of this debenture in accordance with the
following table:
<TABLE>
<CAPTION>
Consecutive Payment Dates Applicable Percentage
<S> <C>
1st or 2nd 5 %
3rd or 4th 4 %
5th or 6th 3 %
7th or 8th 2 %
9th or (10th If Not also Maturity Date) 1 %
</TABLE>
No Prepayment Premium is required to repay this debenture on its Maturity Date.
No Prepayment Premium is required when the prepayment occurs on a Payment Date
that is on or after the 11th consecutive Paymnet Date of this debenture, if
this debenture has a consecutive Prepayment Date term.
The amount of the Prepayment Price shall be sent to SBA or such agent as SBA
shall direct, by wire payment in immediately available funds, not less than
three business days prior to the regular payment date. Until the Company is
notified otherwise in writing by SBA, any Prepayment Price shall be paid to the
account maintained by the Trustee, entitled the SBA Prepayment Subaccount, and
shall include an identification of the Company by name and SBA-assigned license
number, the loan number appearing on the face hereof, and such other
information as SBA or its agent may specify.
This debenture shall be deemed issued in the District of Columbia as of the
day, month, and year first stated above. The terms and conditions of this
debenture shall be construed in accordance with, and its validity and
enforcement governed by, the laws of the District of Columbia.
The warranties, representations, or certifications made to SBA on SBA Form 1022
related to this debenture are incorporated herein as if fully set forth.
Should any provision of this debenture or any of the documents incorporated by
reference herein be declared illegal or unenforceable by a court of competent
jurisdiction, the remaining provisions shall remain in full force and effect
and this debenture shall be construed as if said provisions were not contained
herein.
<PAGE> 3
Page 3 of 3
All notices to Company which are required or may be given under this debenture
shall be sufficient in all respects if sent to the above-noted address of the
Company. For the purposes of this debenture, the Company may change this
address only upon written approval of SBA.
COMPANY ORGANIZED AS CORPORATION
IN WITNESS WHEREOF, the Company has caused this debenture to be signed by its
duly authorized officer and its corporate seal to be hereunto affixed and
attested by its Secretary or Assistant Secretary as of the date of issuance
stated above.
CORPORATE SEAL
J & D Capital Corp.
----------------------------------
(Name of Licensee)
By: /s/ Jack Carmel
----------------------------------
Jack Carmel, President
----------------------------------
(Typed Name and Title)
ATTEST:
/s/ Diane W. Carmel
- ------------------------------
Secretary
<PAGE> 1
PMC CAPITAL, INC.
FLOATING RATE SENIOR PROMISSORY NOTE DUE APRIL 19, 2004
$5,000,000 ATLANTA, GEORGIA
APRIL 19, 1995
NO. R-1
FOR VALUE RECEIVED, the undersigned, PMC CAPITAL, INC. (herein called the
"Company"), a corporation organized and existing under the laws of the State of
Florida, hereby promises to pay to SECURITY LIFE OF DENVER INSURANCE COMPANY,
or registered assigns, the principal sum of FIVE MILLION DOLLARS ($5,000,000)
on April 19, 2004. The Company also promises to pay to the holder hereof
interest (calculated on the basis of a 360-day year and the actual days
elapsed) on the unpaid principal balance outstanding hereunder, (i) from the
date hereof until maturity (whether by acceleration or otherwise) at the rate
per annum, specified in the Note Agreement referred to below, such interest
rate to change when and as provided therein, and (ii) from such maturity until
paid, at a rate per annum which shall be 1% in excess of the rate per annum
specified in the foregoing clause (i), provided that in no event shall such
rate at any time be greater than the maximum rate permitted by applicable law.
Such interest for any full or partial Rate Period (as defined in the Agreement)
during which any principal balance is outstanding hereunder shall be payable
quarterly on the last day (or if not a LIBOR Business Day, the immediately
preceding LIBOR Business Day) of April, July, October and January in each year,
commencing with the April, July October or January next succeeding the date
hereof, until the principal hereof shall have become due and payable. All
unpaid interest accrued through the date of maturity (whether by acceleration
or otherwise) shall be due and payable on such date.
Payments of principal, premium, if any, and interest are to be made at the
main office of Wachovia Bank of Georgia, N.A., in Atlanta, Georgia, or at such
other place as the holder hereof shall designate to the Company in writing, in
lawful money of the United States of America.
This Note is issued pursuant to a Note Agreement, dated as of April 19,
1995 (herein called the "Agreement"), between the Company and Security Life of
Denver Insurance Company and is entitled to the benefits thereof. As provided
in the Agreement, this Note is subject to prepayment, in whole or from time to
time in part, in certain cases without premium and in other cases with a
premium as specified in the Agreements.
This Note is a registered note and, as provided in the Agreement, upon
surrender of this Note for registration of transfer, duly endorsed, or
accompanied by a written instrument of transfer duly executed, by the
registered holder hereof or such holder's attorney duly authorized in writing,
a new Note for a like principal amount will be issued to, and registered in the
name of , the transferee. Prior to due presentment for registration of
transfer, the Company may treat the person in whose name this Note is
registered as the owner hereof for the purpose of receiving payment and for all
other purposes, and the Company shall not be affected by any notice to the
contrary.
In case an Event of Default, as defined in the Agreement, shall occur and
be continuing, the principal of this Note may be declared or otherwise become
due and payable in the manner and with the effect provided in the Agreement.
This Note is executed and delivered in and is intended to be performed in
the State of Georgia
Exhibit 4.27
<PAGE> 2
and shall be construed and enforced in accordance with, and the rights of the
holder hereunder shall be governed by, the law of such State without giving
effect to principles of conflicts of law. Time is of the essence of this Note.
If this Note is collected by or through an attorney-at-law, all costs of
collection, including reasonable attorney's fees, shall be paid by the Company.
It is expressly stipulated and agreed to be the intent of the Company and
the holder hereof at at times to comply with the applicable laws governing the
maximum rate or amount of interest payable on or in connection with the
Agreement, this Note and the indebtedness evidenced thereby (including
applicable United States federal law to the extent that it permits the Company
to contract for, charge take, reserve or receive a greater amount of interest
than under applicable state laws). If the applicable law is ever judicially
interpreted so as to render usurious any amount called for under the Agreement
or this Note, or contracted for, charged, taken reserved or received with
respect to the indebtedness evidenced hereby, or if acceleration of the
maturity of this Note or if any prepayment by the Company results in the
Company having paid any interest in excess of that permitted by applicable law,
then it is the express intent of the Company and the holder hereof that all
excess amounts shall be canceled automatically, and, if previously paid, such
excess amounts shall be applied to the reduction of the principal amount owing
under the Notes and this Agreement or on account of any other indebtedness of
the Company to you, and not to the payment of interest, or if such excess
amounts exceed the unpaid balance of principal of such indebtedness, such
excess amounts shall be refunded to the Company, and the provisions of the
Agreement and this Note immediately be deemed reformed and the amounts
thereafter collectible hereunder and thereunder reduced, without the necessity
of the execution of any new document, so as to comply with the applicable law,
but so as to permit the recovery of the fullest amount otherwise called for
hereunder and thereunder. The right to accelerate maturity of this Note does
not include the right to accelerate any interest which has not otherwise
accrued on the date of such acceleration, and the holder hereof does not intend
to collect any unearned interest in the event of acceleration. All sums paid
or agreed to be paid to the holder hereof for the use, forbearance or detention
of the indebtedness evidenced hereby shall, to the extent permitted by
applicable law, be amortized, prorated, allocated and spread throughout the
full term of such indebtedness until payment in full so that the rate or amount
of interest on account of such indebtedness does not exceed the applicable
usury ceiling. As used herein, "MAXIMUM RATE" shall mean the maximum
nonusurious rate of interest which may be lawfully contracted for, charged,
taken, reserved or received by the holder hereof from the Company in connection
with the indebtedness evidenced hereby under applicable law.
Except for any notice required by the Agreement, the Company expressly
waives notice (including without limitation, notice of intention to accelerate
maturity, notice of acceleration of maturity, notice of nonpayment, and notice
of protest), demand, presentment for payment, protest, bringing of suit, and
diligence in taking any action to collect amount owing hereunder or in
providing against any of the rights and properties securing payment hereof.
This Note is executed under seal.
PMC CAPITAL, INC.
(CORPORATE SEAL) By: /s/ Lance B. Rosemore
--------------------------------
Name: Lance B. Rosemore
------------------------------
Title: President
-----------------------------
<PAGE> 1
PMC CAPITAL, INC.
8.60% SENIOR PROMISSORY NOTE DUE APRIL 19, 2003
$2,000,000 ATLANTA, GEORGIA
APRIL 19, 2003
NO. R-3
FOR VALUE RECEIVED, the undersigned, PMC CAPITAL, INC. (herein so called
the "Company"), a corporation organized and existing under the laws of the
State of Florida, hereby promises to pay to PEERLESS INSURANCE COMPANY, or
registered assigns, the principal sum of TWO MILLION DOLLARS ($2,000,000) on
April 19, 2003, with interest (computed on the basis of a 360-day year-30-day
month) (a) on the unpaid balance thereof at the rate of 8.60% per annum from
the date hereof, payable quarterly on the last day (or if not a Business Day,
the immediately prior Business Day) of April, July, October and January in each
year, commencing with the April, July October or January next succeeding the
date hereof, until the principal hereof shall have become due and payable, and
(b) on any overdue payment (including any overdue prepayment) of principal,
and, to the extent permitted by applicable law, any overdue payment of premium
and any overdue payment of interest, payable quarterly as aforesaid (or, at the
option of the registered holder hereof, on demand), at a rate per annum from
time to time equal to the greater of (i) 9.60% or (ii) the rate of interest
publicly announced by Wachovia Bank of Georgia, N.A., from time to time in
Atlanta, Georgia as its Prime Rate, such Prime Rate to change for purposes of
this Note when and as changes therein are made by such bank, provided that in
no event shall such rate at any time be greater than the maximum rate permitted
by applicable law. "Business Day" shall mean any day other than a Saturday, a
Sunday or a day on which commercial banks in either New York, New York, or
Atlanta, Georgia, are required or authorized to be closed.
Payments of principal, premium, if any, and interest are to be made at the
main office of Wachovia Bank of Georgia, N.A., in Atlanta, Georgia, or at such
other place as the holder hereof shall designate to the Company in writing, in
lawful money of the United States of America.
This Note is one of a series of Senior Promissory Notes (herein called the
"Notes") issued pursuant to separate, identical Note Agreements, dated as of
April 19, 1995 (herein called the "Agreements"), between the Company and the
respective original purchasers of the Notes named in the Purchaser Schedule
attached thereto and is entitled to the benefits thereof. As provided in the
Agreements, this Note is subject to prepayment, in whole or from time to time
in part, in certain cases without premium and in other cases with a premium as
specified in the Agreements. The company agrees to make prepayments of
principal on the dates and in the amounts specified in the Agreements.
This Note is a registered Note and, as provided in the Agreements, upon
surrender of this Note for registration of transfer, duly endorsed, or
accompanied by a written instrument of transfer duly executed, by the
registered holder hereof or such holder's attorney duly authorized in writing,
a new Note for a like principal amount will be issued to, and registered in the
name of, the transferee. Prior to due presentment for registration of
transfer, the Company may treat the person in whose name this Note is
registered as the owner hereof for the purpose of receiving payment and for all
other purposes, and the Company shall not be affected by any notice to the
contrary.
In case an Event of Default, as defined in the Agreement, shall occur and
be continuing, the principal of this Note may be declared or otherwise become
due and payable in the manner and with the effect provided in the Agreements.
Exhibit 4.28
<PAGE> 2
This Note is executed and delivered in and is intended to be performed in
the State of Georgia and shall be construed and enforced in accordance with,
and the rights of the holder hereunder shall be governed by, the law of such
State without giving effect to principles of conflicts of law. Time is of the
essence of this Note.
If this Note is collected by or through an attorney-at-law, all costs of
collection, including reasonable attorney's fees, shall be paid by the Company.
It is expressly stipulated and agreed to be the intent of the Company and
the holder hereof at at times to comply with the applicable laws governing the
maximum rate or amount of interest payable on or in connection with the
Agreement, this Note and the indebtedness evidenced thereby (including
applicable United States federal law to the extent that it permits the Company
to contract for, charge take, reserve or receive a greater amount of interest
than under applicable state laws). If the applicable law is ever judicially
interpreted so as to render usurious any amount called for under the Agreement
or this Note, or contracted for, charged, taken reserved or received with
respect to the indebtedness evidenced hereby, or if acceleration of the
maturity of this Note or if any prepayment by the Company results in the
Company having paid any interest in excess of that permitted by applicable law,
then it is the express intent of the Company and the holder hereof that all
excess amounts shall be canceled automatically, and, if previously paid, such
excess amounts shall be applied to the reduction of the principal amount owing
under the Notes and this Agreement or on account of any other indebtedness of
the Company to you, and not to the payment of interest, or if such excess
amounts exceed the unpaid balance of principal of such indebtedness, such
excess amounts shall be refunded to the Company, and the provisions of the
Agreement and this Note immediately be deemed reformed and the amounts
thereafter collectible hereunder and thereunder reduced, without the necessity
of the execution of any new document, so as to comply with the applicable law,
but so as to permit the recovery of the fullest amount otherwise called for
hereunder and thereunder. The right to accelerate maturity of this Note does
not include the right to accelerate any interest which has not otherwise
accrued on the date of such acceleration, and the holder hereof does not intend
to collect any unearned interest in the event of acceleration. All sums paid
or agreed to be paid to the holder hereof for the use, forbearance or detention
of the indebtedness evidenced hereby shall, to the extent permitted by
applicable law, be amortized, prorated, allocated and spread throughout the
full term of such indebtedness until payment in full so that the rate or amount
of interest on account of such indebtedness does not exceed the applicable
usury ceiling. As used herein, "MAXIMUM RATE" shall mean the maximum
nonusurious rate of interest which may be lawfully contracted for, charged,
taken, reserved or received by the holder hereof from the Company in connection
with the indebtedness evidenced hereby under applicable law.
Except for any notice required by the Agreement, the Company expressly
waives notice (including without limitation, notice of intention to accelerate
maturity, notice of acceleration of maturity, notice of nonpayment, and notice
of protest), demand, presentment for payment, protest, bringing of suit, and
diligence in taking any action to collect amount owing hereunder or in
providing against any of the rights and properties securing payment hereof.
This Note is executed under seal.
PMC CAPITAL, INC.
(CORPORATE SEAL) By: /s/ Lance B. Rosemore
-------------------------------
Name: Lance B. Rosemore
-----------------------------
Title: President
----------------------------
<PAGE> 1
PMC CAPITAL, INC.
8.60% SENIOR PROMISSORY NOTE DUE APRIL 19, 2003
$2,000,000 ATLANTA, GEORGIA
APRIL 19, 2003
NO. R-2
FOR VALUE RECEIVED, the undersigned, PMC CAPITAL, INC. (herein so called
the "Company"), a corporation organized and existing under the laws of the
State of Florida, hereby promises to pay to INDIANA INSURANCE COMPANY, or
registered assigns, the principal sum of TWO MILLION DOLLARS ($2,000,000) on
April 19, 2003, with interest (computed on the basis of a 360-day year-30-day
month) (a) on the unpaid balance thereof at the rate of 8.60% per annum from
the date hereof, payable quarterly on the last day (or if not a Business Day,
the immediately prior Business Day) of April, July, October and January in each
year, commencing with the April, July October or January next succeeding the
date hereof, until the principal hereof shall have become due and payable, and
(b) on any overdue payment (including any overdue prepayment) of principal,
and, to the extent permitted by applicable law, any overdue payment of premium
and any overdue payment of interest, payable quarterly as aforesaid (or, at the
option of the registered holder hereof, on demand), at a rate per annum from
time to time equal to the greater of (I) 9.69% or (ii) the rate of interest
publicly announced by Wachovia Bank of Georgia, N.A., from time to time in
Atlanta, Georgia as its Prime Rate, such Prime Rate to change for purposes of
this Note when and as changes therein are made by such bank, provided that in
no event shall such rate at any time be greater than the maximum rate permitted
by applicable law. "Business Day" shall mean any day other than a Saturday, a
Sunday or a day on which commercial banks in either New York, New York, or
Atlanta, Georgia, are required or authorized to be closed.
Payments of principal, premium, if any, and interest are to be made at the
main office of Wachovia Bank of Georgia, N.A., in Atlanta, Georgia, or at such
other place as the holder hereof shall designate to the Company in writing, in
lawful money of the United States of America.
This Note is one of a series of Senior Promissory Notes (herein called the
"Notes") issued pursuant to separate, identical Note Agreements, dated as of
April 19, 1995 (herein called the "Agreements"), between the Company and the
respective original purchasers of the Notes named in the Purchaser Schedule
attached thereto and is entitled to the benefits thereof. As provided in the
Agreements, this Note is subject to prepayment, in whole or from time to time
in part, in certain cases without premium and in other cases with a premium as
specified in the Agreements. The company agrees to make prepayments of
principal on the dates and in the amounts specified in the Agreements.
This Note is a registered note and, as provided in the Agreements, upon
surrender of this Note for registration of transfer, duly endorsed, or
accompanied by a written instrument of transfer duly executed, by the
registered holder hereof or such holder's attorney duly authorized in writing,
a new Note for a like principal amount will be issued to, and registered in the
name of , the transferee. Prior to due presentment for registration of
transfer, the Company may treat the person in whose name this Note is
registered as the owner hereof for the purpose of receiving payment and for all
other purposes, and the Company shall not be affected by any notice to the
contrary.
In case an Event of Default, as defined in the Agreement, shall occur and
be continuing, the principal of this Note may be declared or otherwise become
due and payable in the manner and with the effect provided in the Agreements.
Exhibit 4-29
<PAGE> 2
This Note is executed and delivered in and is intended to be performed in
the State of Georgia and shall be construed and enforced in accordance with,
and the rights of the holder hereunder shall be governed by, the law of such
State without giving effect to principles of conflicts of law. Time is of the
essence of this Note.
If this Note is collected by or through an attorney-at-law, all costs of
collection, including reasonable attorney's fees, shall be paid by the Company.
It is expressly stipulated and agreed to be the intent of the Company and
the holder hereof at at times to comply with the applicable laws governing the
maximum rate or amount of interest payable on or in connection with the
Agreement, this Note and the indebtedness evidenced thereby (including
applicable United States federal law to the extent that it permits the Company
to contract for, charge take, reserve or receive a greater amount of interest
than under applicable state laws). If the applicable law is ever judicially
interpreted so as to render usurious any amount called for under the Agreement
or this Note, or contracted for, charged, taken reserved or received with
respect to the indebtedness evidenced hereby, or if acceleration of the
maturity of this Note or if any prepayment by the Company results in the
Company having paid any interest in excess of that permitted by applicable law,
then it is the express intent of the Company and the holder hereof that all
excess amounts shall be canceled automatically, and, if previously paid, such
excess amounts shall be applied to the reduction of the principal amount owing
under the Notes and this Agreement or on account of any other indebtedness of
the Company to you, and not to the payment of interest, or if such excess
amounts exceed the unpaid balance of principal of such indebtedness, such
excess amounts shall be refunded to the Company, and the provisions of the
Agreement and this Note immediately be deemed reformed and the amounts
thereafter collectible hereunder and thereunder reduced, without the necessity
of the execution of any new document, so as to comply with the applicable law,
but so as to permit the recovery of the fullest amount otherwise called for
hereunder and thereunder. The right to accelerate maturity of this Note does
not include the right to accelerate any interest which has not otherwise
accrued on the date of such acceleration, and the holder hereof does not intend
to collect any unearned interest in the event of acceleration. All sums paid
or agreed to be paid to the holder hereof for the use, forbearance or detention
of the indebtedness evidenced hereby shall, to the extent permitted by
applicable law, be amortized, prorated, allocated and spread throughout the
full term of such indebtedness until payment in full so that the rate or amount
of interest on account of such indebtedness does not exceed the applicable
usury ceiling. As used herein, "MAXIMUM RATE" shall mean the maximum
nonusurious rate of interest which may be lawfully contracted for, charged,
taken, reserved or received by the holder hereof from the Company in connection
with the indebtedness evidenced hereby under applicable law.
Except for any notice required by the Agreement, the Company expressly
waives notice (including without limitation, notice of intention to accelerate
maturity, notice of acceleration of maturity, notice of nonpayment, and notice
of protest), demand, presentment for payment, protest, bringing of suit, and
diligence in taking any action to collect amount owing hereunder or in
providing against any of the rights and properties securing payment hereof.
This Note is executed under seal.
PMC CAPITAL, INC.
(CORPORATE SEAL) By: /s/ Lance B. Rosemore
-------------------------------
Name: Lance B. Rosemore
-----------------------------
Title: President
----------------------------
Exhibit 4.29
<PAGE> 1
PMC CAPITAL, INC.
8.60% SENIOR PROMISSORY NOTE DUE APRIL 19, 2003
$1,000,000 ATLANTA, GEORGIA
APRIL 19, 2003
NO. R-1
FOR VALUE RECEIVED, the undersigned, PMC CAPITAL, INC. (herein so called
the "Company"), a corporation organized and existing under the laws of the
State of Florida, hereby promises to pay to SECURITY LIFE OF DENVER INSURANCE
COMPANY, or registered assigns, the principal sum of ONE MILLION DOLLARS
($1,000,000) on April 19, 2003, with interest (computed on the basis of a
360-day year-30-day month) (a) on the unpaid balance thereof at the rate of
8.60% per annum from the date hereof, payable quarterly on the last day (or if
not a Business Day, the immediately prior Business Day) of April, July, October
and January in each year, commencing with the April, July October or January
next succeeding the date hereof, until the principal hereof shall have become
due and payable, and (b) on any overdue payment (including any overdue
prepayment) of principal, and, to the extent permitted by applicable law, any
overdue payment of premium and any overdue payment of interest, payable
quarterly as aforesaid (or, at the option of the registered holder hereof, on
demand), at a rate per annum from time to time equal to the greater of (i)
9.60% or (ii) the rate of interest publicly announced by Wachovia Bank of
Georgia, N.A., from time to time in Atlanta, Georgia as its Prime Rate, such
Prime Rate to change for purposes of this Note when and as changes therein are
made by such bank, provided that in no event shall such rate at any time be
greater than the maximum rate permitted by applicable law. "Business Day"
shall mean any day other than a Saturday, a Sunday or a day on which commercial
banks in either New York, New York, or Atlanta, Georgia, are required or
authorized to be closed.
Payments of principal, premium, if any, and interest are to be made at the
main office of Wachovia Bank of Georgia, N.A., in Atlanta, Georgia, or at such
other place as the holder hereof shall designate to the Company in writing, in
lawful money of the United States of America.
This Note is one of a series of Senior Promissory Notes (herein called the
"Notes") issued pursuant to separate, identical Note Agreements, dated as of
April 19, 1995 (herein called the "Agreements"), between the Company and the
respective original purchasers of the Notes named in the Purchaser Schedule
attached thereto and is entitled to the benefits thereof. As provided in the
Agreements, this Note is subject to prepayment, in whole or from time to time
in part, in certain cases without premium and in other cases with a premium as
specified in the Agreements. The company agrees to make prepayments of
principal on the dates and in the amounts specified in the Agreements.
This Note is a registered Note and, as provided in the Agreements, upon
surrender of this Note for registration of transfer, duly endorsed, or
accompanied by a written instrument of transfer duly executed, by the
registered holder hereof or such holder's attorney duly authorized in writing,
a new Note for a like principal amount will be issued to, and registered in the
name of , the transferee. Prior to due presentment for registration of
transfer, the Company may treat the person in whose name this Note is
registered as the owner hereof for the purpose of receiving payment and for all
other purposes, and the Company shall not be affected by any notice to the
contrary.
In case an Event of Default, as defined in the Agreement, shall occur and
be continuing, the principal of this Note may be declared or otherwise become
due and payable in the manner and with the effect provided in the Agreements.
Exhibit 4.30
<PAGE> 2
This Note is executed and delivered in and is intended to be performed in
the State of Georgia and shall be construed and enforced in accordance with,
and the rights of the holder hereunder shall be governed by, the law of such
State without giving effect to principles of conflicts of law. Time is of the
essence of this Note.
If this Note is collected by or through an attorney-at-law, all costs of
collection, including reasonable attorney's fees, shall be paid by the Company.
It is expressly stipulated and agreed to be the intent of the Company and
the holder hereof at times to comply with the applicable laws governing the
maximum rate or amount of interest payable on or in connection with the
Agreement, this Note and the indebtedness evidenced thereby (including
applicable United States federal law to the extent that it permits the Company
to contract for, charge take, reserve or receive a greater amount of interest
than under applicable state laws). If the applicable law is ever judicially
interpreted so as to render usurious any amount called for under the Agreement
or this Note, or contracted for, charged, taken reserved or received with
respect to the indebtedness evidenced hereby, or if acceleration of the
maturity of this Note or if any prepayment by the Company results in the
Company having paid any interest in excess of that permitted by applicable law,
then it is the express intent of the Company and the holder hereof that all
excess amounts shall be canceled automatically, and, if previously paid, such
excess amounts shall be applied to the reduction of the principal amount owing
under the Notes and this Agreement or on account of any other indebtedness of
the Company to you, and not to the payment of interest, or if such excess
amounts exceed the unpaid balance of principal of such indebtedness, such
excess amounts shall be refunded to the Company, and the provisions of the
Agreement and this Note immediately be deemed reformed and the amounts
thereafter collectible hereunder and thereunder reduced, without the necessity
of the execution of any new document, so as to comply with the applicable law,
but so as to permit the recovery of the fullest amount otherwise called for
hereunder and thereunder. The right to accelerate maturity of this Note does
not include the right to accelerate any interest which has not otherwise
accrued on the date of such acceleration, and the holder hereof does not intend
to collect any unearned interest in the event of acceleration. All sums paid
or agreed to be paid to the holder hereof for the use, forbearance or detention
of the indebtedness evidenced hereby shall, to the extent permitted by
applicable law, be amortized, prorated, allocated and spread throughout the
full term of such indebtedness until payment in full so that the rate or amount
of interest on account of such indebtedness does not exceed the applicable
usury ceiling. As used herein, "MAXIMUM RATE" shall mean the maximum
nonusurious rate of interest which may be lawfully contracted for, charged,
taken, reserved or received by the holder hereof from the Company in connection
with the indebtedness evidenced hereby under applicable law.
Except for any notice required by the Agreement, the Company expressly
waives notice (including without limitation, notice of intention to accelerate
maturity, notice of acceleration of maturity, notice of nonpayment, and notice
of protest), demand, presentment for payment, protest, bringing of suit, and
diligence in taking any action to collect amount owing hereunder or in
providing against any of the rights and properties securing payment hereof.
This Note is executed under seal.
PMC CAPITAL, INC.
(CORPORATE SEAL) By: /s/ Lance B. Rosemore
-------------------------------
Name: Lance B. Rosemore
-----------------------------
Title: President
----------------------------
<PAGE> 1
SIXTH
RENEWAL MASTER PROMISSORY NOTE
$10,000,000.00
Dallas, Texas
JANUARY 8, 1996
FOR VALUE RECEIVED, the undersigned, PMC CAPITAL, INC., a Florida
corporation, hereinafter called "MAKER", promises to pay to the order of
SUNTRUST BANK, MIAMI, NATIONAL ASSOCIATION, F/K/A SUNBANK/ MIAMI, NATIONAL
ASSOCIATION a national banking association, hereinafter called "BANK", or its
successors or assigns, at its office at 777 Brickell Avenue, Miami, Florida
33131, or at such other addresses as BANK or any subsequent holder of this Note
may designate in writing from time to time, in the manner hereinafter set
forth, in immediately available local collected funds, the principal sum of TEN
MILLION AND 00/000 DOLLARS ($10, 000, 000. 00) , or so much thereof as may be
advanced and outstanding from time to time, together with interest thereon in
accordance with one of the hereinafter described interest rates, from the
date(s) of funding until paid or to maturity according to the terms of this
note.
INTEREST RATE OPTIONS:
PRIME RATE OPTION:
Interest shall accrue at a fluctuating rate per annum equal to the annual
rate of interest announced or published by SunTrust Banks of Florida, Inc.,
from time to time as its prime rate ("the Prime Rate"), such rate to be
adjusted on any day of the month on which any change in the Prime Rate becomes
effective. The Prime Rate is that annual rate of interest announced by
SunTrust Banks of Florida, Inc. from time to time as its prime rate (such rate
is only a benchmark is purely discretionary and is not necessarily the best or
lowest rate charged borrowing customers of Bank). All interest shall be
computed on a daily basis and calculated on the basis of a three hundred sixty
(360) day year.
LIBOR RATE OPTION
At the option of the MAKER and by notice to the BANK in accordance with the
Revolving Credit Agreement as modified, the MAKER may elect to have an Advance
under this note bear interest at the Libor Rate Option which is a variable rate
of TWO HUNDRED FIFTY (250) BASIS POINTS over the LONDON INTERBANK OFFERING RATE
10.7
<PAGE> 2
("LIBOR") . Interest rates hereunder may be selected for periods of 30-, 60-,
or 90-day duration based on the rate for LIBOR obligations of comparable
maturity as published one day prior to the Advance date in the Wall Street
Journal, however, if said publication is no longer in existence, then as
published in a similar publication. The MAKER shall give written notice to
BANK prior to 12: 00 P. M., EST, on the day which is two (2) business days
prior to the day an Advance is desired and such notice from MAKER to BANK shall
specify the interest period requested for said Advance. The MAKER's right to
select the LIBOR RATE OPTION shall continue throughout the term of this Note.
Accrued interest on all PRIME RATE Advances shall be payable monthly in
arrears. Accrued interest and principal Advances on all LIBOR RATE OPTIONS
shall be paid in arrears at the expiration of the selected duration period.
The PRIME RATE OPTION shall be presumed to be applicable in the absence of
specific notification from MAKER to BANK to the contrary.
This Note constitutes the "Renewal Note", described in that certain
Agreement for Seventh Modification of Revolving Credit Agreement of even date
herewith (the "Modification Agreement") and all future modifications thereto,
by and between BANK and MAKER, and the principal and interest due hereunder
shall be payable in accordance with those terms and provisions of the
Modification Agreement which are applicable to this Renewal Note. This Note
shall be deemed to evidence the principal amount actually outstanding under the
Line (defined in the Agreement for Seventh Modification of Revolving Credit
Agreement ( "Seventh Modification Agreement") ), even though the face amount of
this Note may be in excess of such principal amount outstanding from time to
time.
This Note is subject to all terms and provisions of the following
agreements between MAKER and BORROWER: (i) the Seventh Modification Agreement;
(ii) the Sixth Modification Agreement; (iii) that Agreement for Fifth
Modification of Revolving Credit Agreement (iv) that certain Fourth
Modification Agreement dated June 17, 1993; (v) that certain third Modification
Agreement dated June 24, 1992; (vi) that certain Second Modification of
Revolving Credit Agreement dated December 23, 1991 ; (vii) that certain
Modification of Loan Documents dated May 3, 1991; (viii) that certain Agreement
for Modification of Revolving Credit Agreement, dated July 27, 1990; and (ix)
the certain Revolving Credit Agreement, dated May 5, 1989 (collectively
hereinafter referred to as the "Agreements") , which are hereby incorporated by
this reference as though set forth in full herein, any default under the
Agreements constituting a default under this Note. In the event of any
conflict or inconsistency between the terms and provisions of this Note and
those of the Agreements, the terms and provisions of the Agreements shall in
all respects govern and control.
<PAGE> 3
In the event of any default under the Agreements, including a failure to
make any payment of principal or interest due hereunder on the due date
thereof, BANK may, at its option, accelerate maturity, and the unpaid principal
balance hereof and all unpaid accrued interest shall thereupon immediately
become due and payable without presentment, demand, notice or protest, and BANK
shall have the right to set off against this Note all money owed by BANK in any
capacity to MAKER and to set off against all other liabilities of MAKER to
BANK, all money owed by BANK in any capacity to MAKER. Failure to exercise
this option with respect to any failure or breach shall not constitute a waiver
of the right as to any subsequent failure or breach.
MAKER, as well as any and all endorsers, guarantors, sureties and all other
parties liable for the payment of any sum or sums due or to become due under
the terms of this Note, waive presentment, protest and demand, and notice or
protest, demand and dishonor, and nonpayment of this Note, and consent that the
holder hereof shall have the right, without notice, to deal in any way at any
time with any party hereto, or to grant any extension or extensions of time for
payment of any of said indebtedness or any other indulgences or forbearance
whatsoever, or to release any of the security for this Note or any of the
guarantors of this Note without in any way affecting the liability of any other
party for the payment of this Note.
MAKER further agrees to pay all costs of collection, including reasonable
attorneys' fees (inclusive of any bankruptcy or appellate proceedings), in the
case the principal of this Note or any interest thereon is not paid when due,
whether suit be brought or not.
No delay or omission on the part of the holder hereof in exercising any
right hereunder shall operate as a waiver of such right or any other right
under this Note, nor shall any waiver on one occasion be construed as a bar to
or waiver of any such right on any future occasion. No waiver under or
modification of this Note shall be effective unless in writing and signed by
the holder of this Note.
Interest hereunder shall be charged only on the sums advanced from the date
of Advance to the date of repayment.
MAKER does not intend or expect to pay, nor does BANK intend or expect to
charge, accept or collect any interest which, when added to any commitment fee
or any other charge upon the principal, shall be in excess of the highest
lawful rate allowable under the laws of the State of Florida or the United
States of America, whichever is higher or unlimited. Should acceleration,
prepayment or any other charges upon the principal or any portion thereof
result in the computation or earning of interest in excess of the
<PAGE> 4
highest lawful rate allowable under the laws of the State of Florida or the
United States of America, whichever is higher or unlimited, then any and all
such excess is hereby waived and shall be applied against the remaining
principal balance, if any, and thereafter refunded to MAKER.
Except as otherwise specifically provided with respect to the maximum rate
of interest hereunder, this Note shall be governed as to validity,
interpretation, construction, effect and all other respects by the laws and
decisions of the State of Florida.
The undersigned hereby waives any plea of jurisdiction or venue as not
having a place of business in Dade County, Florida, and hereby specifically
authorizes any action brought upon the enforcement of this Note by BANK to be
instituted and prosecuted in either the Circuit Court of Dade County, Florida,
or in the United States District Court for the Southern District of Florida, at
the election of BANK.
All payments made hereunder shall be credited first to accrued interest and
then to principal; however, in the event of any default hereunder, BANK may, in
its sole discretion, and in such order as it may choose, apply any payment to
interest, principal, and/or lawful charges and expenses then accrued.
From and after the date of an Event of Default (as defined in the
Agreements), the principal balance under this Note shall bear interest, from
such date until paid, at the Default Rate (as defined in the Agreements).
This Note is binding upon MAKER and its successors and assigns.
This Note renews and replaces that Fifth Renewal Master Promissory Note of
MAKER in the principal amount of TEN MILLION DOLLARS ($10,000,000.00) , dated
as of June 29, 1994, payable to the order of BANK.
MAKER AND BANK BY ITS ACCEPTANCE HEREOF HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVE ANY RIGHT EITHER MAY HAVE TO A TRIAL BY JURY IN RESPECT OF
ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH
THIS NOTE AND ANY AGREEMENT, DOCUMENT OR INSTRUMENT EXECUTED IN CONJUNCTION
HEREWITH, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER
VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY HERETO. THIS PROVISION IS A
MATERIAL INDUCEMENT FOR BANK ACCEPTING THIS NOTE FROM MAKER AND FOR BANK
ENTERING INTO THE MODIFICATION AGREEMENT.
A Florida Corporation
By: /s/ Lance B. Rosemore
---------------------------------
(Corporate Seal) LANCE B. ROSEMORE
As its: President
<PAGE> 1
SUBSIDIARIES OF REGISTRANT
<TABLE>
<CAPTION>
State
of
Company Incorporation
------- -------------
<S> <C>
PMC Investment Corporation Florida
Western Financial Capital Corporation Florida
First Western SBLC, Inc. Florida
PMC Funding Corporation Florida
PMC Advisers, Inc. Texas
</TABLE>
EXHIBIT 21
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE DECEMBER 31, 1995 FORM 10-K OF PMC CAPITAL INC. AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 438,984
<SECURITIES> 31,134,961
<RECEIVABLES> 116,060,560<F1>
<ALLOWANCES> (467,000)
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 451,525
<DEPRECIATION> (252,165)
<TOTAL-ASSETS> 156,478,746<F2>
<CURRENT-LIABILITIES> 9,790,657<F3>
<BONDS> 78,541,000
<COMMON> 58,537,822
4,000,000<F4>
3,000,000<F4>
<OTHER-SE> 550,352
<TOTAL-LIABILITY-AND-EQUITY> 156,478,746<F5>
<SALES> 0
<TOTAL-REVENUES> 21,262,194<F6>
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 4,491,610
<LOSS-PROVISION> 358,915
<INTEREST-EXPENSE> 5,049,312
<INCOME-PRETAX> 11,362,357
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11,362,357
<EPS-PRIMARY> 1.03
<EPS-DILUTED> 1.03
<FN>
<F1>Includes current and long term portion of all loans receivable - before
reserve, interest receivable on loans and receivable for loans sold. Does not
include receivable from affiliate.
<F2>Includes the following items not included above
(i) Excess servicing asset $4,990,924
(ii) Restricted investments 1,784,868
(iii) Real property owned 4,505
(iv) Due from affiliates 1,135,253
(v) Deferred charges, deposit and
other assets, net 1,168,919
(vi) Investment in subsidiary 27,412
----------
$9,111,881
==========
<F3>Includes the following:
(i) Accrued interest payable $ 1,434,475
(ii) Borrower advances 2,260,314
(iii) Dividends payable 3,595,637
(iv) Accounts payable 2,500,231
-----------
$ 9,790,657
===========
<F4>Preferred stock of subsidiary held by SBA. See footnotes to financial
statements.
<F5>Includes the following items not included above
(i) Deferred fee revenue $ 778,927
(ii) Other liabilities 1,279,988
----------
$2,058,915
==========
<F6>Reserves consist primarily of interest and other yield on investments.
</FN>
</TABLE>
