U. S. Securities and Exchange Commission
Washington, DC 20549
FORM 10-QSB
(Mark One)
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended December 31, 1997
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from _____________ to ______________
Commission file number 811-0969
The First Connecticut Capital Corporation
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(Exact name of small business issuer as)
(specified in its charter)
Connecticut 06-0759497
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(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
1000 Bridgeport Avenue, Shelton, Connecticut 06484
(Address of principal executive offices)
(203) 944-5400
(Issuer's telephone number)
1000 Lafayette Boulevard, Bridgeport, Connecticut 06604
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(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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 [ ]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by court. Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: 1,173,382
Transitional Small Business Format: Yes [ ] No [ X ]
<PAGE>
Item 1. Financial Statements
<TABLE>
<CAPTION>
THE FIRST CONNECTICUT CAPITAL CORPORATION
BALANCE SHEET, DECEMBER 31, 1997
(Dollars in thousands,except per share data)
(Unaudited)
<S> <C>
ASSETS
Investments:
Loans - net .................................................. $ 464
-------
Investments-net ........................................ 464
-------
Cash and cash equivalents .................................... 176
Restricted cash .............................................. 279
Loans held for sale .......................................... 161
Accrued interest ............................................. 32
Servicing rights ............................................. 27
Fixed assets ................................................. 37
Notes Receivable ............................................. 471
Other assets ................................................. 29
-------
TOTAL ASSETS ................................................. $ 1,676
=======
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Accounts payable and other accrued expenses .................. 635
-------
TOTAL LIABILITIES ............................................ 635
-------
Commitments and contingencies (Note B)
STOCKHOLDERS' EQUITY:
Common stock, no par value, stated value $.50
per share, authorized 3,000,000 shares,
issued and outstanding 1,173,382 shares ................... 587
Paid-in surplus .............................................. 9,253
Accumulated deficit .......................................... (8,799)
-------
TOTAL STOCKHOLDERS' EQUITY ................................... 1,041
-------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ................... $ 1,676
=======
</TABLE>
See notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
THE FIRST CONNECTICUT CAPITAL CORPORATION
STATEMENTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED DECEMBER 31, 1997 AND 1996 (Dollars in
thousands, except per share data)
(Unaudited)
Three Months Three Months Nine Months Nine Months
Ended Ended Ended Ended
Dec. 31, 1997 Dec. 31, 1996 Dec. 31, 1997 Dec. 31, 1996
---------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
INTEREST INCOME:
Interest and fees on loans $ 23 $ 27 $ 74 $ 76
---------- ----------- ----------- ----------
RECOVERY OF INVESTMENT LOSSES 0 0 205 0
---------- ----------- ----------- ----------
NET INTEREST INCOME AFTER
RECOVERY OF INVESTMENT LOSSES 23 27 279 76
---------- ----------- ----------- ----------
OTHER OPERATING INCOME:
Servicing fees 27 42 101 123
Loan Orgination fees 60 52 111 165
Other fees 10 6 13 10
---------- ----------- ----------- ----------
Total Other Operating Income 97 100 225 298
---------- ----------- ----------- ----------
TOTAL INCOME 120 127 504 374
---------- ----------- ----------- ----------
OTHER OPERATING EXPENSES:
Amortization of servicing rights 0 36 0 73
Collection expenses 1 3 0 2
Officers' salaries 26 42 103 130
Other salaries 19 30 28 100
Directors' fees 0 5 9 14
Professional services 5 5 24 4
Miscellaneous taxes 3 5 15 23
Employee and general insurance 7 17 24 51
Rent 8 3 22 25
Communications 2 4 8 12
Advertising and promotions 1 1 4 4
Stock record and other financial expenses 0 1 3 4
Employees' pension plan 5 2 7 4
Depreciation expense 4 6 11 17
Other operating expenses 15 35 41 94
---------- ----------- ----------- ----------
Total Other Operating Expenses 96 195 299 557
---------- ----------- ----------- ----------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE FIRST CONNECTICUT CAPITAL CORPORATION
STATEMENTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED DECEMBER 31, 1997 AND 1996 (Dollars in
thousands, except per share data)
(Unaudited) (continued)
Three Months Three Months Nine Months Nine Months
Ended Ended Ended Ended
Dec. 31, 1997 Dec. 31, 1996 Dec. 31, 1997 Dec. 31, 1996
---------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
NET INCOME (LOSS) BEFORE LOAN LOSSES 24 (68) 205 (183)
---------- ----------- ----------- ----------
Loan Losses 0 0 156 5
Loss on Asset Management Agreement
Transaction. Note C 44 0 54 0
---------- ----------- ----------- ----------
NET (LOSS) $ 20 $ (68) $ (5) $ (188)
========== =========== ========== ===========
(LOSS) PER COMMON SHARE $ (0.02) $ (0.06) $ (0.00) $ ( 0.16)
========== =========== ========== ===========
Weighted average number of
common shares outstanding 1,173,382 1,173,382 1,173,382 1,173,382
========== =========== ========== ===========
</TABLE>
See notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
THE FIRST CONNECTICUT CAPITAL CORPORATION
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED DECEMBER 31, 1997 AND 1996
(Dollars in thousands)
(Unaudited)
Common Stock Total
Number Of Paid-In Accumulated Stockholders'
Shares Amount Surplus Deficit Equity
--------- ---- ------ ------- ------
<S> <C> <C> <C> <C> <C>
BALANCE, MARCH 31,1996 1,173,382 $587 $9,253 ($8,569) $1,271
Net Loss (188) (188)
--------- ---- ------ ------- ------
BALANCE, DECEMBER 31,1996 1,173,382 $587 $9,253 ($8,757) $1,083
========= ==== ====== ======= ======
BALANCE, MARCH 31,1997 1,173,382 $587 $9,253 ($8,794) $1,046
Net Profit (5) (5)
--------- ---- ------ ------- ------
BALANCE, DECEMBER 31, 1997 1,173,382 $587 $9,253 ($8,799) $1,041
========= ==== ====== ======= ======
</TABLE>
See notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
THE FIRST CONNECTICUT CAPITAL CORPORATION
STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED DECEMBER 31, 1997 AND 1996
(Dollars in thousands)
(Unaudited)
Nine Months Nine Months
Ended Dec 31, Ended Dec 31,
1997 1996
------- -------
<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss) .................................................... $ (5) ($ 188)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Investment (gains) losses ........................................ (49) 5
Loss on Asset Management Agreement transaction Note C............. 54
Depreciation ..................................................... 11 17
Decrease in servicing rights ..................................... 311 73
Increase in notes receivable ..................................... (471) 0
Orgination of loans held for sale ................................ (4,979) (1,857)
Proceeds from sale of loans held for sale ........................ 5,198 1,629
Decrease( Increase) in accrued interest receivable ............... 8 (12)
Decrease (Increase) in other assets .............................. 216 (25)
Decrease (Increase) in accounts payable and other accrued expenses 151 (79)
Increase in restricted cash ...................................... (234) 0
------- -------
Net cash provided by (used in) operating activities ......... 211 (437)
------- -------
INVESTING ACTIVITIES
Principal collected on investments ................................... 71 12
------- -------
Net cash provided by investing activities ................... 71 12
------- -------
FINANCING ACTIVITIES
(Decrease) increase in warehouse line of credit ...................... (317) 145
------- -------
DECREASE IN CASH AND CASH EQUIVALENTS ................................... (35) (280)
CASH AND CASH EQUIVALENTS, BEGINNING .................................... 211 430
------- -------
CASH AND CASH EQUIVALENTS, ENDING ....................................... $ 176 $ 150
======= =======
</TABLE>
See notes to financial statements.
<PAGE>
THE FIRST CONNECTICUT CAPITAL CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements of The First
Connecticut Capital Corporation (the "Corporation"), formerly The First
Connecticut Small Business Investment Company, have been prepared in accordance
with generally accepted accounting principles for interim financial information
and with the instructions to Form 10-QSB and Article 10-01 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair representation have been included.
Operating results are not necessarily indicative of the results that may be
expected for the year ending March 31, 1998. For further information, refer to
the financial statements and footnotes thereto included in the Corporation's
annual report filed on Form 10-KSB for the year ended March 31, 1997.
NOTE B - COMMITMENTS AND CONTINGENCIES
The Corporation is involved in litigation and administrative
proceedings primarily arising in the normal course of its business. In the
opinion of management, the Corporation's liability, if any, under any pending
litigation or administrative proceeding would not materially affect its
financial condition or results of operations.
NOTE C - TERMINATION OF SERVICING RIGHTS
On October 27 1997, Walsh Securities assigned the balance of the loan
portfolio serviced by First Connecticut under the Asset Management Loan
Servicing Agreement dated 12/15/93 (the "Agreement') to Greenwich Capital
Financial Products, Inc. As a result of this transaction, the "Agreement" was
terminated. Walsh Securities issued a promissory note dated November 12, 1997 in
the amount of $560,000.00 to fulfill their obligation to First Connecticut under
the "Agreement". Since the note is not interest bearing, interest has been
imputed at 8.5% resulting in an original issue discount ("OID") of $471,000.00.
This OID will be amortized to interest income over the life of the note.
The discounted value of the note of $471,000.00 was exchanged for the
amortized balance of the servicing rights of $311,000.00 and a receivable of
$214,000.00 for the reimbursable fees and expenses resulting in a $54,000.00 net
loss on the transaction.
The note requires monthly payments of $10,000 beginning December 1,
1997 through December 1, 2000 with a lump sum payment of $200,000.00 on December
31, 2000.
First Connecticut will continue to service the remaining loan portfolio
for Greenwich Capital under a new servicing agreement.
<PAGE>
THE FIRST CONNECTICUT CAPITAL CORPORATION
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The Corporation had a net loss for the nine months ended December 31,
1997 of $5,000 compared to a net loss of $188,000 for the comparable period of
the prior year.
The Corporation is currently licensed in the States of Connecticut and
Massachusetts to operate as Mortgage Lender/Broker.
Interest Income and Other Operating Income
Loan origination fees decreased $54,000 for the nine months ended
December 31, 1997 as compared with the comparable period of the prior year. This
decrease was due to the reduction of mortgage loans originated and sold in the
secondary market. Total other operating income decreased by $73,000 from the
prior year due to the decrease in loan originations and a decrease in loans
serviced. First Connecticut has over reserved on a loan that has been
liquidated, thus resulting in a gain of $49,000.
Other Operating Expense
Other operating expenses declined $258,000 during the nine months ended
December 31, 1997 as compared to the comparable period of the prior year due
primarily to decreases in officers and clerical salaries, amortization of
servicing rights and an overall reduction in all operating expenses.
Plan of Operation
The Corporation is engaged in the mortgage banking business, which
involves the origination, purchase, sale and servicing of mortgage loans secured
by residential properties and other real estate. Since January 1996, the
Corporation has expanded its portfolio Loan Program to include short-term
mortgages for construction and remodeling. These loans are predominately secured
by first mortgage liens on residential properties and are sold to qualified
investors with orgination and servicing fees retained by the Corporation.
It is anticipated that the Corporation will continue to increase its
level of activities in these areas creating servicing fees and interest income.
<PAGE>
THE FIRST CONNECTICUT CAPITAL CORPORATION
LIQUIDITY AND FINANCIAL CONDITION
The Corporation has approximately $176,000 of unrestricted cash and
cash equivalents and approximately $1,041 million of Stockholders' Equity at
December 31, 1997.
The Corporation currently anticipates that during the year ending March
31, 1998, its principal financing needs will consist of funding its mortgage
loans held for sale and the ongoing net cost of mortgage loan originations and
cash flow used in operations. Future cash flow requirements will depend
primarily on the level of the Corporation's activities in originating and
selling mortgage loans, as well as cash flow required by its operations
The Corporation continues to investigate and pursue alternative and
supplementary methods to finance its operations and to support the growth of the
Corporation
The Corporation continues to monitor the cash on hand and the
internally generated funds and believes it will be sufficient to meet its
corporate, general and administrative working capital and other cash
requirements during the year ending March 31, 1998. The Corporation also
continues to decrease its cash flow requirements by monitoring all expenses. As
a result of the Note with Walsh Securities this will increase the corporations
cash flow by $120,000.00 a year. Management also believes additional steps can
be taken if necessary.
NEW OFFERING
The Corporation has formed a Limited Partnership known as First Connecticut
Capital Mortgage Fund A, Limited Partnership as to which the Corporation is the
General Partner. The intent of this new entity is to sell units in the Limited
Partnership to investors in a private placement, up to a maximum of $5 million
in $50,000 units for the purpose of funding a short-term Portfolio Loan Program
for the Limited Partnership. The limited partners will be limited to investors
who qualify as "Accredited Investors" as defined in Regulation D, promulgated
under the Securities Act of 1933. This program would generate income to the
Corporation in the form of loan origination fees and servicing fees in excess of
a guaranteed income return to the limited partners in connection with mortgage
loans that would be made by the Limited Partnership from the funds invested by
the limited partner. To date the Corporation has sold 25 units. A copy of the
offering memo is available upon request.
<PAGE>
THE FIRST CONNECTICUT CAPITAL CORPORATION
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
NONE
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned duly authorized.
THE FIRST CONNECTICUT CAPITAL
CORPORATION
(Registrant)
Date: February 13, 1998 By: /s/David Engelson
-----------------
David Engelson
President and Chief Financial
Officer
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-END> DEC-31-1997
<CASH> 455
<SECURITIES> 0
<RECEIVABLES> 1,676
<ALLOWANCES> (491)
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 244
<DEPRECIATION> (208)
<TOTAL-ASSETS> 1,676
<CURRENT-LIABILITIES> 635
<BONDS> 0
0
0
<COMMON> 587
<OTHER-SE> 454
<TOTAL-LIABILITY-AND-EQUITY> 1,676
<SALES> 504
<TOTAL-REVENUES> 504
<CGS> 0
<TOTAL-COSTS> 82
<OTHER-EXPENSES> 217
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 205
<INCOME-TAX> 0
<INCOME-CONTINUING> (210)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5)
<EPS-PRIMARY> 0.00
<EPS-DILUTED> 0.00
</TABLE>
