FIRST CONNECTICUT CAPITAL CORP/NEW/
10KSB, 1999-06-16
MISCELLANEOUS BUSINESS CREDIT INSTITUTION
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                     U.S. SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549
                                   FORM 10-KSB

         Annual Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934. For the Fiscal Year ended MARCH 31, 1999.
                        Commission File number: 811-0969

                    THE FIRST CONNECTICUT CAPITAL CORPORATION
             ------------------------------------------------------
             (Exact name of Registrant as Specified in its Charter)

      CONNECTICUT                                    06-0759497
- - - - - - - - - - - - - - ------------------------                        -------------------
(State of Incorporation)                          (IRS Employer
                                                Identification No.)

1000 BRIDGEPORT AVENUE, SHELTON, CONNECTICUT           06484
- - - - - - - - - - - - - - --------------------------------------------         ---------
  (Address of principal executive offices)            Zip Code

Registrant's telephone number     (203) 944-5400
                                  --------------

Securities registered under Section 12(b) of the Exchange Act:  NONE
         Name of each exchange on
             which registered:
         -------------------------
                  NONE

Securities registered pursuant to Section 12(g) of the Exchange Act:
           Title of Class
           --------------
             COMMON

Check whether the registrant (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_____

Check if there is no disclosure of delinquent filers pursuant to Item 405 of
Regulation S-B is not contained herein, and will not be contained to the best of
registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [ X ]

Registrant's revenues for its most recent fiscal year:  $815,000

The aggregate market value of the voting stock held by non-affiliates of the
registrant as of June 3, 1999 based on the closing sales price of such stock on
such date was approximately $428,000

Check whether the registrant has 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 a court. Yes_____ No_____

The number of shares outstanding of the registrant's common stock as of June 3,
1999 was 1,173,382.

                      DOCUMENTS INCORPORATED BY REFERENCE:
The following documents are hereby incorporated by reference into the following
Parts of this Form 10-KSB: (1) financial statements and Independent Auditors'
Report for the fiscal years ended March 31, 1999 and 1998 is incorporated by
reference into Part II Item 7.


<PAGE>


                                     PART I
                                     ------

ITEM 1.  DESCRIPTION OF BUSINESS

GENERAL
- - - - - - - - - - - - - - -------

         The First Connecticut Capital Corporation (the "Corporation") is
engaged in the mortgage banking business, which involves the origination,
purchase, sale and servicing of mortgage loans secured by residential or
commercial real estate. The Corporation's revenues consist of loan servicing
fees, loan origination fees, interest on mortgage loans held prior to sale and
gains from the sale of loans and mortgage servicing rights. Mortgage loans which
are originated or purchased by the Corporation may be resold.

         The Corporation also engages in mortgage servicing, of its own
Portfolio Loan Program, which includes the processing and administration of
mortgage loan payments and remitting principal and interest to purchasers. The
Corporation also monitors delinquencies, collects late fees, manages
foreclosures, processes prepayments and loan assumption fees, provides
purchasers with required reports, and answers borrowers' inquiries. Although the
Corporation plans, from time to time, to sell a portion of its mortgage
servicing rights, it intends to build the size of its mortgage servicing
portfolio by retaining the servicing rights from a large share of its mortgage
loan originations.

         As of June 3, 1999, the Corporation serviced a total portfolio of
approximately $10,549,000, consisting, in part, of mortgage loans which were
sold by the Corporation to GF Mortgage Corporation, a subsidiary of Gruntal
Financial Corporation, a subsidiary of The Home Insurance Corporation, on
December 15, 1993. On April 19, 1996, GF Mortgage Corporation was sold to Walsh
Acquisition Company, also known as Walsh Securities. On October 27, 1997 the
balance of that portfolio was sold to Greenwich Capital Financial Corporation.
The Corporation continues to service the remaining balance of $3,470,000 as of
June 3, 1999, under a new service agreement. The Corporation also services its
Portfolio Loan Program, which had an outstanding balance of $3,490,000 at June
3, 1999. In addition the Corporation as General partner also services loans for
First Connecticut Capital Mortgage Fund A, Limited Partnership, which had a
mortgage loan balance of $3,589,000 at June 3, 1999.

HISTORY
- - - - - - - - - - - - - - -------

         The Corporation (formerly The First Connecticut Small Business
Investment Company) was incorporated on May 6, 1960 as a federally licensed
small business investment company under the Small Business Investment Act of
1958 and was registered as an investment company under the Investment Company
Act of 1940. The Corporation's business consisted of providing long-term loans
to finance the growth, expansion and development of small business concerns.



                                        1

<PAGE>



         On August 15, 1990, the Corporation filed a petition for relief under
Chapter 11 of the federal bankruptcy laws in the United States Bankruptcy Court.
On October 18, 1991, the Corporation filed a plan of reorganization (the "Plan")
with the United States Bankruptcy Court. The Plan was confirmed as of January 9,
1992. Under the Plan, the Corporation was required to surrender its license to
operate as a small business investment company.

         On June 29, 1993, the Corporation's application for deregistration
under the Investment Company Act of 1940 was approved by the Securities and
Exchange Commission.

         On December 15, 1993, the Corporation sold substantially all of its
outstanding investment portfolio to GF Mortgage Corporation for an amount
sufficient to settle substantially all of the Company's liabilities under the
Plan. As part of this transaction, restrictions under the Plan regarding the
Corporation's lending activities were waived.

         The Corporation was granted a license by the State of Connecticut
Department of Banking to engage in business as a First Mortgage
Loan-Lender/Broker on April 8, 1994. The Corporation is also licensed by the
State of Connecticut as a Second Mortgage Lender/Broker.

         On December 28, 1994 the United States Bankruptcy Court issued a final
decree closing the Chapter 11 case of the Company.

         On August 3, 1995 the Corporation was granted a license by the State of
Massachusetts, Department of Banking, to engage in business as a Mortgage
Lender.

SEASONALITY
- - - - - - - - - - - - - - -----------

         The Corporation's business and the mortgage banking industry as a whole
is generally subject to seasonal trends which reflect a pattern of home sales
and resales. Loan originations typically peak during the spring and summer
seasons and decline from mid-November through January. Prior to January 1996 the
Corporation focused its efforts on refinances of mortgages on residential
properties, which was generally the case throughout the industry. Since January
1996, the Corporation has expanded its Portfolio Loan Program to include
short-term mortgages for construction, remodeling and additions. These loans are
predominately secured by first mortgage liens on residential properties and are
sold to qualified investors or to the limited partnership as defined below with
fees retained for servicing.

COMPETITION
- - - - - - - - - - - - - - -----------

         The Corporation competes with other mortgage bankers, mortgage brokers,
state and national banks, thrift institutions and insurance companies for loan
originations and purchases. Many of its competitors have substantially greater
financial resources than the Corporation. The Corporation competes for loan
originations, in part, based on price, through print and electronic media
advertising campaigns, by telemarketing to potential borrowers, and by
maintaining close relationships with mortgage brokers, real estate brokers and
builder-developers.

                                        2



<PAGE>

REGULATION
- - - - - - - - - - - - - - ----------

         The Corporation is not presently an approved seller/servicer for the
Government National Mortgage Association ("GNMA"), the Federal National Mortgage
Association ("FNMA"), or the Federal Home Loan Mortgage Corporation ("FHLMC"),
nor is the Corporation an approved issuer and servicer under GNMA, FNMA or FHLMC
mortgage-backed securities programs. The Corporation is not qualified to
originate mortgage loans insured by the Federal Housing Administration (the
"FHA") or partially guaranteed by the Veterans Administration (the "VA"). The
Corporation does not presently intend to apply for such approvals or
qualifications. Accordingly, the Corporation is not currently subject to the
rules and regulations of these agencies with respect to originating, processing,
selling and servicing mortgage loans, but may become subject to such rules and
regulations should the Corporation become an approved issuer, seller or servicer
for any of these agencies. Such rules and regulations would, among other things,
prohibit discrimination and establish underwriting guidelines which include
provisions for inspections and appraisals and require credit reports on
prospective borrowers, and with respect to VA loans, fix maximum interest rates.

         The Corporation's mortgage loan origination activities are subject to
the Equal Credit Opportunity Act, the Federal Truth-In-Lending Act, the Real
Estate Settlement Procedures Act and the regulations promulgated thereunder
which prohibit discrimination and require the disclosure of certain information
to borrowers concerning credit and settlement costs. Additionally, the sale of
mortgage loans by the Corporation to purchasers may be subject to applicable
federal and state securities laws.

         There are various state laws affecting the Corporation's mortgage
banking operations, including licensing requirements and substantive limitations
on the interest and fees that may be charged. The Corporation is in possession
of all required licenses in those states in which it does business that require
such licenses, except where the absence of such licenses are not material to the
business and operations as a whole. States have the right to conduct financial
and regulatory audits of the loans under their jurisdiction.

PERSONNEL
- - - - - - - - - - - - - - ---------

         As of June 3, 1999, the Corporation had 4 employees, all of whom were
employed at the Corporation's headquarters in Shelton, Connecticut. The
Corporation believes that its relations with its employees are good.

INVESTMENT POLICIES
- - - - - - - - - - - - - - -------------------

         (i)      Investments in real estate - The Corporation does not invest
                  in real estate or interests in real estate but may acquire
                  real estate by foreclosure of mortgage loans owned by the
                  Corporation or by deed in lieu of foreclosure. Primarily such
                  properties would consist of 1-4 family dwellings or
                  un-improved building sites. The Corporation does not intend to
                  own or operate properties for an extended period of time but
                  rather its policy is to sell such properties at fair market
                  value as soon as possible.


                                        3


<PAGE>

         (ii)     Investments in real estate mortgages - The Corporation intends
                  to originate first or second real estate mortgages and sell
                  certain of these mortgages immediately to interested
                  purchasers, retaining the application fees and servicing
                  rights. Maturities of mortgages not sold will range from one
                  to five years.

         (iii)    The Corporation currently does not intend to invest in the
                  securities of, or interests in, persons or entities which are
                  primarily engaged in real estate activities.

ITEM 2.  DESCRIPTION OF PROPERTY

         The Corporation is located at 1000 Bridgeport Avenue, Shelton,
Connecticut. The office contains 1,772 square feet of space which the
Corporation currently leases from an unaffiliated party pursuant to a 5-year
lease expiring December 31, 2002.

ITEM 3.  LEGAL PROCEEDINGS

         None.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         None.

                                     PART II
                                     -------


ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

         The Corporation's common stock is traded over the counter, and the high
(bid) and low (asked) prices of the Corporation's stock are quoted in the NASDAQ
Electronic Bulletin under the symbol FCCC.

         Following are the high and low bid prices for the Corporation's common
stock during the fiscal years ended March 31, 1999 and 1998 according to the
NASDAQ Electronic Bulletin.
                                                     HIGH              LOW
                                                     ----              ---
        1998
        ----
        First Quarter                        $      .25000       $   .20000
        Second Quarter                              .43750           .15000
        Third Quarter                               .32000           .21875
        Fourth Quarter                              .26000           .22000


                                        4

<PAGE>



                                                      HIGH              LOW
                                                      ----              ---
        1999
        ----
        First Quarter                          $     .9375         $   .2200
        Second Quarter                               .5700             .2500
        Third Quarter                                .4300             .2800
        Fourth Quarter                               .4300             .2900

         The approximate number of stockholders of record on June 3, 1999 was
1,440 and the Corporation estimates that it has a total of approximately 1,750
beneficial shareholders. The closing bid quotation of the Corporation's Common
Stock on that date was approximately 40 cents. The Corporation has not paid any
dividends on its Common Stock since April 27, 1990. The Corporation currently
intends to retain earnings, for use in its business and does not anticipate
paying cash dividends in the foreseeable future.

ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS AND PLAN OF OPERATION

RESULTS OF OPERATIONS
- - - - - - - - - - - - - - ---------------------

         The Corporation had net income of $808,000 for the year ended March 31,
1999 compared to a net income of $288,000 for the year ended March 31, 1998. The
increase of $502,000 is due primarily to an increase in net gains on sales of
loans, interest and fees on loans, and an income tax benefit of $418,000.

         Total interest and fee income for 1999 was $328,000 as compared to
total interest and fee income for 1998 of $270,000 an increase of $58,000 or
21%. This increase was a result of interest and fees collected on loans held for
sale and partnership loans.

         In 1999, the Corporation recorded a $261,000 reduction to the allowance
for loan losses representing the reversal of specific reserves attributable to
the modification of an existing portfolio loan and the payoff of another loan.
The Modification and Extension Agreement includes additional collateral in the
form of a first mortgage position on adjacent real estate as well an assignment
of a lease from the tenant occupying this additional parcel. This additional
collateral further solidifies the Corporation's original security and eliminates
the need for a reserve on this loan.

         In 1998,the Corporation recorded $268,000 of income from the recovery
of a note payable. There was no such item in 1999.

         In 1999 the Corporation recognized $79,000 in net gains on loans held
for sale compared to $14,000 in 1998. This increase is due to increases in the
number and dollar amount of mortgage loans originated and sold by the
Corporation. Management attributes this increase to the successful marketing of
its expertise in construction lending, its ability to properly service loan
demand from homebuilders and the favorable general climate for the construction
industry.
                                        5

<PAGE>


         Total operating expenses for 1999 were $425,000 as compared to $468,000
in 1998, a decrease of $43,000 or 9%. This decrease was primarily due to the
decrease in officer salaries, amortization of servicing rights and loss on note
receivable previously discussed, offset by an increase in professional fees, the
issuance of a Directors and Officers liability insurance policy and costs
associated with the Corporation's Annual Meeting. Included in the net income for
the year ended March 31, 1998 is a loss of $52,000 resulting from the assignment
on October 27, 1997 of the loan portfolio serviced by the Corporation under the
Asset Management Loan Servicing Agreement Dated December 15, 1993 (the
"Agreement") from Walsh Securities to Greenwich Capital Financial Products, Inc.
The Corporation exchanged the unamortized balance of mortgage servicing rights
for the Walsh Portfolio and related receivable for certain collection costs for
a $560,000 non interest bearing note (the "Note"). The Note was discounted
approximately $78,000 to reflect a market rate of interest. The amortization of
servicing rights under the Agreement ended in fiscal year 1998 due to the
aforementioned assignment of the Walsh loan portfolio to Greenwich Capital
Financial Products. However, the Corporation continues to service the portfolio
for Greenwich Capital under a new agreement. During 1999, the Corporation has
continued to reduce overall operating expenses. Management believes that
significant further reduction of other operating expenses will be difficult to
achieve, based on the already extensive reductions that have already been
effected.

         A net income tax benefit of $418,000 was recorded in 1999, which
reflects the reduction of the valuation allowance against net operating loss
carryforwards (NOLS), based on management's assessment of the amount of NOLS
that will be more likely than not recoverable based on current and projected
profitability.

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 or commercial real estate.

         The Corporation continues to seek ways to reduce expenses while at the
same time increase market activity of its products and services. Management
plans to actively pursue strategic acquisitions or mergers of other finance
companies in order to implement its business plan of expansion.

LIQUIDITY AND CAPITAL RESOURCES
- - - - - - - - - - - - - - -------------------------------

         At March 31, 1999 and 1998, the Corporation had cash and cash
equivalents of $385,000 and $214,000, respectively.

         On March 5, 1999 the Corporation closed on a Commercial Line of Credit
with The Hudson United Bank (formerly Lafayette American Bank & Trust Company).
This $1,000,000 line of credit is for a term of one year at an interest rate of
2.5% over the Wall Street Prime Rate. There were no advances outstanding on this
line of credit at March 31, 1999. The Corporation is hopeful that this is the
first step in establishing a long-term conventional banking relationship that
will continue to grow and enable the Corporation to increase its volume of
business.
                                        6


<PAGE>


         The Corporation currently anticipates that during the year ending March
31, 2000, its principal financing needs will consist of funding its mortgage
loans held for sale and the ongoing net cost of mortgage loan originations. The
Corporation believes that cash on hand, internally generated funds and
availability on its new line of credit will be sufficient to meet its corporate,
general and administrative working capital and other cash requirements during
the year ending March 31, 2000. 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.
Although the Corporation anticipates increased activities in originating
mortgage loans, the difficulties experienced within the relevant economic
markets still exist and there are no assurances that increased activity will
occur. If construction loan demand continues to increase, the Corporation will
require additional cash to service those requirements. Due to the aforementioned
line of credit, the Corporation feels it will be able to meet these cash
requirements. The Corporation took certain steps during the year ended March 31,
1998 to decrease its cash flow requirements for the years ended March 31, 1998
and 1999. Those steps included a management salary reduction and a restatement
and termination of the pension plan. The Corporation also continues to decrease
its cash flow requirements by monitoring all expenses. As a result of the
aforementioned Note with Walsh Securities the Corporation's cash flow increased
by $120,000 a year. Management also believes additional steps can be taken if
necessary.

         The Corporation continues to investigate and pursue alternative and
supplementary methods to financing its operations and to support the growth of
the Corporation.

         The Corporation did not have any material capital commitments at March
31, 1999.

INFLATION
- - - - - - - - - - - - - - ---------

         Inflation will affect the Corporation most significantly in the area of
loan originations. Interest rates normally increase during periods of high
inflation and decrease during periods of low inflation.

ACCOUNTING PRONOUNCEMENTS
- - - - - - - - - - - - - - -------------------------

         NEW ACCOUNTING PRONOUNCEMENTS - In 1998, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards (SFAS) No.
133, "Accounting for Derivative Instruments and Hedging Activities". This
statement establishes accounting and reporting standards for derivative
instruments and for hedging activities. It requires that an entity recognize all
derivatives as either assets or liabilities in the statement of financial
position and measure those assets at fair market value. This statement is
effective for the fiscal years beginning after June 15, 2000. Management does
not believe the adoption of this standard will significantly impact the
Corporation's financial statements.



                                        7


<PAGE>


PARTNERSHIP
- - - - - - - - - - - - - - -----------

         In 1997 the Corporation formed a Limited Partnership known as First
Connecticut Capital Mortgage Fund A, Limited Partnership (the "Partnership") of
which the Corporation is the General Partner. The purpose of this 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 restricted to investors who qualify as "Accredited Investors"
as defined in Regulation D, promulgated under the Securities Act of 1933. This
program generates 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 purchased by the
Limited Partnership from the funds invested by the limited partner. As of June
3, 1999 the Corporation sold 89 units in the Partnership.
A copy of the offering memo is available upon request.

YEAR 2000 READINESS
- - - - - - - - - - - - - - -------------------

         The Corporation has taken action to understand the nature and extent of
the work required to make its computer-based systems that interface with
vendors, customers and others ready for the Year 2000. The Corporation's key
financial and operating systems have been reviewed, and the majority of the
systems do not require modifications. With the exception of one secondary loan
program, all required modifications have been completed and the systems have
been tested and are properly functioning. The modification required to the
secondary loan program will be completed by the end of September 1999. Cost
incurred to date are not material due to the nature of the modifications
required and the fact that these modifications involved very little hiring of
outside consultants. As of March 31, 1999 the Corporation has expensed
approximately $9,000 to replace hardware and does not expect any remaining costs
to have a material adverse impact on the Corporation financial position, results
of operation or cash flow.

         The Corporation has contacted its major suppliers, financial
institutions and registrar and transfer agent and has received written assurance
of Year 2000 compliance and are not expected to have a material impact on the
Corporation's financial condition or results of operations. The Corporation will
continue to assess their progress to adequately address the Year 2000 issues.
They have completed all implementation and testing except for the transfer
agent. The Corporation's contingency plan involves the use of a manual system
that runs concurrently with the automated system and the replacement or repair
of the problem software.

ITEM 7.  FINANCIAL STATEMENTS

         The following report and financial statements of the Corporation are
contained on the pages indicated.

         Independent Auditors' Report - Page 1
         Balance Sheets as of March 31, 1999 and 1998 - Page 2
         Statements of Income for the years ended March 31, 1999 and 1998 -
               Page 3

                                        8


<PAGE>

         Statements of Changes in Stockholders' Equity for the years ended March
               31, 1999 and 1998 - Page 4
         Statements of Cash Flows for the years ended March 31, 1999 and 1998 -
               Page 5
         Notes to Financial Statements - Page 6


ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
                  ACCOUNTING AND FINANCIAL DISCLOSURE

         The Corporation has not changed accountants in the twenty-four month
period prior to March 31, 1999. No disagreements on accounting or financial
disclosure practices occurred during the fiscal year ended March 31, 1999.


                                    PART III
                                    --------

ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
         COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT

DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
- - - - - - - - - - - - - - --------------------------------------------------

         The directors and executive officers of the Corporation as of May 1,
1999 are as follows:

         NAMES                 AGE           PRESENT POSITION
         -----                 ---           ----------------

David Engelson                 78            Chairman of the Board of Directors

Lawrence R. Yurdin             59            President, CEO  and Director

Jan E. Cohen                   42            Director

Thomas D'Addario               46            Director

Ronald Farrell                 54            Director

Michael L. Goldman             37            Assistant Secretary and Director

Priscilla E. Ottowell          52            Secretary and Controller


         David Engelson, Director of the Corporation since 1960. Chairman of the
Board of the Corporation.


                                       9

<PAGE>


         Lawrence R. Yurdin, Director of the Corporation since 1986. President
and Chief Executive Officer of the Corporation; employed by the Corporation in
various capacities since 1970.

         Jan E. Cohen, Director of the Corporation since 1998. CEO, President
and Director of CF Industries, Inc.; CEO, LLC Manager and Director of Northeast
Builders Supply and Home Centers, LLC.; CEO and LLC Manager of The Brilco
Business Center and a Member of the American Institute of Certified Public
Accountants and the Connecticut Society of CPA's.

         Thomas D'Addario, Director of Corporation since 1998. Vice President of
Mario D'Addario Buick, Inc., and Vice President of Mario D'Addario Limousine
Services.

         Ronald Farrell, Director of the Corporation since 1998. Principal
owner, Vice President and Operating Officer of the Kaufman Fuel Company.

         Michael L. Goldman, Assistant Secretary and Director of the Corporation
since 1998. Managing Principal in the law firm of Goldman, Gruder & Woods, LLC,
and Director and President of The State Street Mortgage Company.

         Priscilla E. Ottowell, elected Secretary of the Corporation on April
12, 1995. Employed by the Corporation as Controller since 1985.

         Each of the directors holds office for a term of one year, and until a
successor has been chosen and qualified. Directors, except Messrs. D. Engelson
and L. Yurdin, receive a fee of $300 per Board meeting.

         Mr. Lawrence R. Yurdin is the son-in-law of Mr. David Engelson,
Chairman of the Board and a Director of the Corporation.


ITEM 10. EXECUTIVE COMPENSATION

         The following summary compensation table sets forth certain information
regarding the annual and long-term compensation of David Engelson, Chairman and
Lawrence R. Yurdin, President and CEO, for each of the last three fiscal years.
No officers of the Corporation received salary and bonus in excess of $100,000.





                                      10

<PAGE>
<TABLE>
<CAPTION>



                           SUMMARY COMPENSATION TABLE

                                             Annual Compensation              Long Term Compensation
                                             -------------------              ----------------------
                                                                            Awards      Payouts
                                                              Other         ------      -------
                                                              Annual     Restricted               All Other
Name and                                                     Compen-       Stock   Options/  LTIP Compensa-
Principal                         Year      Salary    Bonus   sation       Awards    SARs   Payouts  tion
Position                          Ended       ($)      ($)     ($)           ($)      (#)     ($)    ($)
- - - - - - - - - - - - - - ----------                       -------    -------   ------  ------      --------- ------  ------- -------

<S>                              <C>       <C>         <C>     <C>       <C>          <C>    <C>      <C>
David Engelson                   03/31/99   $13,000      0      0         None        0       None     0
 Chairman of the                 03/31/98   $12,000      0      0         None        0       None     0
 Board & Treasurer               03/31/97   $38,493      0      0         None        0       None     0

Lawrence R Yurdin                03/31/99   $67,500      0      0         None        0       None     0
 President and CEO               03/31/98   $67,500      0      0         None        0       None     0
                                 03/31/97   $55,000      0      0         None        0       None     0

</TABLE>



ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
- - - - - - - - - - - - - - -----------------------------------------------

         The following tables' list the beneficial owners of more than five
percent of the Corporation's Common Stock and the shares beneficially owned by
all directors and executive officers of the Corporation as of March 31, 1999.

Name and Address of             Amount and Nature of
Beneficial Owner                  Beneficial Owner               Percent
- - - - - - - - - - - - - - ----------------                  ----------------               -------

Robert E. Humphreys                    114,900                   9.792
64 Alcott Street
Acton, MA  01720

SECURITY OWNERSHIP OF MANAGEMENT
- - - - - - - - - - - - - - --------------------------------

Name of                         Amount and Nature of
Beneficial Owner                  Beneficial Owner               Percent
- - - - - - - - - - - - - - ----------------                  ----------------               -------

David Engelson                          43,605                   3.716
Lawrence R. Yurdin                      21,707                   1.850
Jan E. Cohen                             2,113                    .180
Thomas D'Addario                        15,700                   1.340
Michael L. Goldman                      16,921                   1.440
Priscilla E. Ottowell                    4,389                    .374


                                       11

<PAGE>

All directors and executive officers
 as a group (nine persons)                 104,435                8.900

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

                          TRANSACTIONS WITH MANAGEMENT
         NONE


ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

         (a)   Exhibits


               (99) Independent Auditors' Report and Financial Statements.

         (b)   Reports on Form 8-K.

               No reports on Form 8-K were filed during the quarter ended
               March 31, 1999.










                                       12

<PAGE>




                                   SIGNATURES
                                   ----------

         Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                                           THE FIRST CONNECTICUT CAPITAL
                                           CORPORATION

6/9/99                                     By /S/ LAWRENCE R. YURDIN
- - - - - - - - - - - - - - --------------------                          -------------------------------
Date                                          Lawrence R. Yurdin
                                              President and CEO

6/11/99                                   By /S/ PRISCILLA E. OTTOWELL
- - - - - - - - - - - - - - --------------------                         -------------------------------
Date                                         Priscilla E. Ottowell
                                             Secretary and Controller

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

6/11/99                                     /S/ DAVID ENGELSON
- - - - - - - - - - - - - - --------------------                        ----------------------------------
Date                                        David Engelson
                                            Chairman and Director

6/10/99                                     /S/ JAN E. COHEN
- - - - - - - - - - - - - - --------------------                        ----------------------------------
Date                                        Jan E. Cohen
                                            Director

6/10/99                                     /S/ THOMAS D'ADDARIA
- - - - - - - - - - - - - - --------------------                        ----------------------------------
Date                                        Thomas D'Addario
                                            Director

6/10/99                                     /S/ RONALD FARRELL
- - - - - - - - - - - - - - --------------------                        ----------------------------------
Date                                        Ronald Farrell
                                            Director

6/10/99                                     /S/ MICHAEL L. GOLDMAN
- - - - - - - - - - - - - - --------------------                        ----------------------------------
Date                                        Michael L. Goldman
                                            Assistant Secretary and Director

6/9/99                                      /S/ LAWRENCE R. YURDIN
- - - - - - - - - - - - - - --------------------                        ----------------------------------
Date                                        Lawrence R. Yurdin
                                            President, CEO and Director

6/11/99                                     /S/ PRISCILLA E. OTTOWELL
- - - - - - - - - - - - - - --------------------                        ----------------------------------
Date                                        Priscilla E. Ottowell
                                            Secretary and Controller

                                       13


<PAGE>





                    THE FIRST CONNECTICUT CAPITAL CORPORATION
                    -----------------------------------------

      Financial Statements for the Years Ended March 31, 1999 and 1998 and
                          Independent Auditors' Report



                                       14



<PAGE>






INDEPENDENT AUDITORS' REPORT


To the Stockholders and Board of Directors
         of The First Connecticut Capital Corporation:

We have audited the accompanying balance sheets of The First Connecticut Capital
Corporation (the "Corporation") as of March 31, 1999 and 1998 and the related
statements of income, changes in stockholders' equity and cash flows for the
years then ended. These financial statements are the responsibility of the
Corporation's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

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 are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. 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, such financial statements present fairly, in all material
respects, the financial position of the Corporation at March 31, 1999 and 1998
and the results of its operations and its cash flows for the years then ended in
conformity with generally accepted accounting principles.






May 21, 1999


                                       15


<PAGE>

THE FIRST CONNECTICUT CAPITAL CORPORATION
- - - - - - - - - - - - - - -----------------------------------------
<TABLE>
<CAPTION>

BALANCE SHEETS, MARCH 31, 1999 AND 1998
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)



                                                               NOTES      1999      1998
                                                               -----      ----      ----
ASSETS
- - - - - - - - - - - - - - ------

<S>                                                                    <C>        <C>
Cash and cash equivalents                                              $   385    $   214
Restricted cash                                                   1         53         49
Loans - net of allowance for loan losses of                       5        663        466
             $39 in 1999 and $300 in 1998
Loans held for sale                                                        294         94
Partnership loans                                                           30         91
Accrued interest                                                            10         21
Note receivable, net                                                       357        450
Servicing rights                                                  1         79         14
Fixed assets                                                      6         22         37
Deferred income taxes                                             8        421       --
Other assets                                                                55         35
                                                                       -------    -------

TOTAL ASSETS                                                           $ 2,369    $ 1,471
                                                                       =======    =======


LIABILITIES AND STOCKHOLDERS' EQUITY
- - - - - - - - - - - - - - ------------------------------------

LIABILITIES - Accounts payable and other accrued expenses              $   232    $   142

Commitments and contingencies                                    11

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        587
Additional paid in capital                                               9,253      9,253
Accumulated deficit                                                     (7,703)    (8,511)
                                                                       -------    -------

TOTAL STOCKHOLDERS' EQUITY                                               2,137      1,329
                                                                       -------    -------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                             $ 2,369    $ 1,471
                                                                       =======    =======

</TABLE>

See notes to financial statements.

                                       16

<PAGE>

THE FIRST CONNECTICUT CAPITAL CORPORATION
- - - - - - - - - - - - - - -----------------------------------------

STATEMENTS OF INCOME
FOR THE YEARS ENDED MARCH 31, 1999 AND 1998
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>

                                                        NOTES      1999            1998
                                                        -----      ----            ----
INTEREST INCOME:
<S>                                                             <C>            <C>
Interest and fees on loans                                      $       328    $       270

INTEREST EXPENSE:
Interest expense                                                          9              4
                                                                -----------    -----------

NET INTEREST INCOME                                                     319            266
                                                                -----------    -----------

REDUCTION OF ALLOWANCE FOR LOANS                                        261             49
                                                                -----------    -----------

NET INTEREST  INCOME AFTER REDUCTION OF
   ALLOWANCE FOR LOANS                                                  580            315
                                                                -----------    -----------

OTHER OPERATING INCOME:
Servicing fees                                                          122            132
Other fees                                                               34             32
Recovery on note payable                                   11           --             268
Net gains on sales of loans held for sale                                79             14
                                                                -----------    -----------
    Total Other Operating Income                                        235            446
                                                                -----------    -----------

TOTAL INCOME                                                            815            761
                                                                -----------    -----------

OTHER OPERATING EXPENSES:

Officers' salaries                                                      131            138
Other salaries                                                           36             37
Directors' fees                                                           5              9
Professional services                                                    37             32
Miscellaneous taxes                                                      16             21
Employee and general insurance                                           37             38
Loss on note receivable                                     4           --              52
Loss on disposal of fixed assets                                         14           --
Rent                                                                     28             31
Amortization of servicing rights                            1            14             27
Corporate insurance expenses                                             12              7
Licences, dues and subscriptions expenses                                 7              3
Communications                                                           11             11
Advertising and promotions                                                2              5
Stock record and other financial expenses                                 6              5
Depreciation                                                             11             10
Other                                                                    58             42
                                                                -----------    -----------
    Total Other Operating Expenses                                      425           468
                                                                -----------    -----------

INCOME BEFORE INCOME TAXES                                              390            293
INCOME TAX (BENEFIT) EXPENSE                                8          (418)             5
                                                                -----------    -----------

NET INCOME                                                      $       808    $       288
                                                                ===========    ===========

INCOME PER COMMON SHARE (BASIC AND DILUTED)                 1   $      0.69    $      0.25
                                                                ===========    ===========

Weighted average number of
  common shares outstanding (Basic and Diluted)                   1,173,382      1,173,382
                                                                ===========    ===========
</TABLE>

See notes to financial statements

                                       17


<PAGE>

THE FIRST CONNECTICUT CAPITAL CORPORATION

STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED MARCH 31, 1999 AND 1998 (DOLLARS IN THOUSANDS, EXCEPT SHARE
DATA)
<TABLE>
<CAPTION>

                                 Common Stock                                 Total
                         Number Of                  Paid-In   Accumulated  Stockholders'
                          Shares        Amount      Surplus    Deficit        Equity
                          ------        ------      -------    -------        ------

<S>                      <C>         <C>         <C>         <C>          <C>
BALANCE, APRIL 1,1997    1,173,382   $     587   $   9,253   ($  8,799)   $   1,041


Net Income                                                         288          288
                         ---------   ---------   ---------   ---------    ---------

BALANCE, MARCH 31,1998   1,173,382         587       9,253      (8,511)       1,329



Net Income                                                         808          808

                         ---------   ---------   ---------   ---------    ---------
BALANCE, MARCH 31,1999   1,173,382   $     587   $   9,253   ($  7,703)   $   2,137
                         =========   =========   =========   =========    =========

</TABLE>

See notes to financial statements.



                                       18

<PAGE>


THE FIRST CONNECTICUT CAPITAL CORPORATION
- - - - - - - - - - - - - - -----------------------------------------
<TABLE>
<CAPTION>

STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED MARCH 31, 1999 AND 1998
(DOLLARS IN THOUSANDS)
                                                                              1999       1998
                                                                              ----       ----
OPERATING ACTIVITIES
- - - - - - - - - - - - - - --------------------
<S>                                                                         <C>        <C>
   Net income                                                               $   808    $   288
   Adjustments to reconcile net income to net cash
     provided by operating activities:
       Deferred income tax benefit                                             (421)      --
       Loss on disposal of fixed assets                                          14       --
       Net gains on sales of loans held for sale                                (79)       (14)
       Reduction of allowance for loan losses                                  (261)       (49)
       Loss on note receivable                                                 --           52
       Principal collected on note receivable                                   120         40
       Recovery on note payable                                                --         (268)
       Depreciation                                                              11         10
       Amortization (accretion)                                                 (13)        27
       Origination of loans held for sale                                    (8,146)    (7,033)
       Proceeds from sales of loans held for sale                             7,946      7,333
       Decrease (increase) in Partnership loans                                  61        (91)
       Decrease in accrued interest receivable                                   11         20
       Increase in other assets                                                 (20)        (4)
       Increase (decrease) in accounts payable and other accrued expenses        90        (29)
       Increase in restricted cash                                               (4)        (4)
                                                                            -------    -------

            Net cash provided by operating activities                           117        278
                                                                            -------    -------
INVESTING ACTIVITIES
- - - - - - - - - - - - - - --------------------
      Originations of loans                                                    (506)      --
      Principal collected on loans                                              570         42
      Proceeds from sales of fixed assets                                         3       --
      Purchases of fixed assets                                                 (13)      --
                                                                            -------    -------

            Net cash provided by investing activities                            54         42
                                                                            -------    -------
FINANCING ACTIVITIES
- - - - - - - - - - - - - - --------------------
     Decrease in warehouse line of credit                                      --         (317)
                                                                            -------    -------

            Net cash used in financing activities                              --         (317)
                                                                            -------    -------

INCREASE IN CASH AND CASH EQUIVALENTS                                           171          3

CASH AND CASH EQUIVALENTS, BEGINNING                                            214        211
                                                                            -------    -------

CASH AND CASH EQUIVALENTS, ENDING                                           $   385    $   214
                                                                            =======    =======
</TABLE>


See notes to financial statements.



                                       19


<PAGE>






THE FIRST CONNECTICUT CAPITAL CORPORATION


NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 1999 AND 1998  AMOUNTS)

1.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         LOANS - Loans are generally recorded at the principal amount
outstanding. Interest rates on loans are fixed at the time of issuance and are
based upon current market rates at the time. As of March 31, 1999 and 1998,
outstanding loans are payable in a variety of methods over a term of less than
five years, all are collateralized by liens on real properties; a few of such
properties are subject to prior liens. Interest income on loans is recognized
based on rates applied to principal amounts outstanding. In connection with most
loans, the borrower also pays a nonrefundable fee to the Corporation. Loans are
generally placed on nonaccrual status when they become 180 days past due or
earlier, if the loan is considered impaired. Any unpaid amounts previously
accrued on these loans are reversed from income. Subsequent cash receipts are
applied to the outstanding principal balance or to interest income if, in the
judgment of management, collection of the outstanding principal is not in
question. Loans are removed from non-accrual status when they become current as
to both principal and interest and when subsequent performance reduces the
concern as to the collectibility of principal and interest.


         LOANS HELD FOR SALE - Mortgage loans originated and intended for sale
in the secondary market are carried at the lower of cost or fair value in the
aggregate. Net unrealized losses are recognized through a valuation allowance
charged to income.

         ALLOWANCE FOR LOAN LOSSES - The allowance for loan losses is determined
by management on a loan by loan basis. The allowance is an amount that
management believes will be adequate to absorb losses on existing loans that may
become uncollectible, based on evaluations of the collectibility of the loans.
The evaluations take into consideration such factors as geographic location,
assessment of collateral quality, appraisals of significant collateral and other
conditions that may affect the borrower's ability to repay.

         Certain impaired loans are measured based on the present value of
expected future cash flows discounted at the loan's effective interest rate or,
as a practical expedient, at the loan's observable market price or the estimated
fair value of the collateral if the loan is collateral dependent.

         CONCENTRATION OF CREDIT RISKS - The nature of the Corporation's
business is to fund and service mortgages to qualified borrowers within the
northeastern United States, and more localized in the state of Connecticut where
management has the most experience. The mortgage loans are predominately
collateralized with residential properties; however, there are a few smaller
commercial properties as well as some vacant land. The Corporation maintains a
strict real estate appraisal policy as well as underwriting guidelines.


                                       20


<PAGE>


THE FIRST CONNECTICUT CAPITAL CORPORATION


NOTES TO FINANCIAL STATEMENTS - continued
FOR THE YEARS ENDED MARCH 31, 1999 AND 1998
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)

         CASH AND CASH EQUIVALENTS - For the purpose of the statements of cash
flows, the Corporation has defined cash as including cash on hand and cash in
interest bearing and noninterest bearing operating bank accounts. Highly liquid
investments such as time deposits with an original maturity of three months or
less are considered to be cash equivalents.

         RESTRICTED CASH - Restricted cash is composed of a certificate of
deposit which is being maintained as collateral for the Corporation's standby
letter of credit.

         INCOME TAXES - The Corporation follows the asset and liability method,
whereby deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
basis. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled.


         FIXED ASSETS - Fixed assets are carried at original cost. Depreciation
is provided for primarily by using accelerated depreciation methods over the
estimated service lives as follows:

                  Improvements                       31 years
                  Furniture and fixtures             3-5 years
                  Equipment                          3-5 years
                  Automobiles                        3 years

         LOAN SERVICING - Effective January 1, 1997, SFAS No. 122 "Accounting
for Mortgage Servicing Rights" was superseded by SFAS No. 125, "Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of Liabilities,"
the effective provisions of which were adopted by the Corporation as of that
date. This statement specifies accounting and reporting standards for transfers
and servicing of financial assets and extinguishments of liabilities and for
distinguishing whether a transfer of a financial asset in exchange for cash or
other consideration should be accounted for as a sale or as a pledge of
collateral in a secured borrowing. The Corporation recorded an asset of $79 and
$14, related to servicing of loans as of March 31, 1999 and 1998, respectively.
This asset is affected by the predominant risk characteristics of the underlying
financial assets and, accordingly, the Corporation periodically assesses the
asset for impairment. Since the underlying financial assets primarily represent
loans collateralized by first mortgages, the servicing rights asset encompasses
risks commonly associated with mortgage loans. Estimation of a valuation
allowance to reduce the servicing rights asset to fair value involves evaluating
the characteristics of the underling assets including interest rates, estimated
remaining lives, dates of origination, terms, and geographic location. No
valuation allowance was recorded at March 31, 1999 and 1998, based on the
characteristics of the underlying financial assets.

                                       21


<PAGE>


THE FIRST CONNECTICUT CAPITAL CORPORATION


NOTES TO FINANCIAL STATEMENTS - continued
FOR THE YEARS ENDED MARCH 31, 1999 AND 1998
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)

         INCOME PER COMMON SHARE - As of March 31, 1998, the Corporation adopted
Statement of Financial Accounting Standards No. 128 ("SFAS No. 128"), "Earnings
per Share," which establishes new standards for the computation and disclosure
of earning per share ("EPS"). The new statement requires dual presentation of
"basic" EPS and "diluted" EPS. Basic EPS is based on the weighted average number
of common shares outstanding for the period, excluding the effects of any
potentially dilutive securities. Diluted EPS reflects the potential dilution
that could occur if securities or other contracts to issue common stock were
exercised or converted. Net income per share is calculated by dividing net
income by the weighted average number of common shares outstanding during the
period.


         STOCK OPTIONS - The Corporation has adopted SFAS No. 123, "Accounting
for Stock-Based Compensation." This statement encourages, but does not require,
employers to adopt a fair value method of accounting for employee stock-based
compensation. The Corporation continues to account for stock-based compensation
using the intrinsic value method under Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees." Regardless of the method used
for employee stock-based arrangements, SFAS No. 123 requires increased
disclosures of stock-based compensation arrangements with employees. The
Corporation has adopted SFAS No. 123 through a separate disclosure to the
financial statements.

         USE OF ESTIMATES - 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 revenue and expenses during
the reporting periods. Actual results could differ from those estimates.

         NEW ACCOUNTING PRONOUNCEMENTS - In 1998, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards (SFAS) No.
133, "Accounting for Derivative Instrument and Hedging Activities". This
statement establishes accounting and reporting standards for derivative
instruments and for hedging activities. It requires that an entity recognize all
derivatives as either assets or liabilities in the statement of financial
position and measured those assets at fair market value. This statement is
effective for the fiscal years beginning after June 15, 2000. Management does
not believe the adoption of this standard will significantly impact the
Corporation's financial statements.

         RECLASSIFICATIONS - Certain amounts in the 1998 financial statements
have been reclassified to conform to the 1999 presentation.




                                       22

<PAGE>


THE FIRST CONNECTICUT CAPITAL CORPORATION

NOTES TO FINANCIAL STATEMENTS - continued
FOR THE YEARS ENDED MARCH 31, 1999 AND 1998
DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)


2.       PARTNERSHIP

         On March 21, 1997, the Corporation formed a Limited Partnership (the
"Partnership") known as First Connecticut Capital Mortgage Fund A, Limited
Partnership as to which the Corporation is the General Partner. The intent of
this entity is to sell units in the Limited Partnership to investors in a
private placement, up to a maximum of $5,000 in $50 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 generates 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 purchased
by the Limited Partnership from the funds invested by the limited partner.

         As of March 31, 1999 and 1998, the Corporation had a one percent
interest in the Partnership with a recorded investment balance of $13 which is
accounted for on the equity method of accounting. The following presents
unaudited summarized financial information for the Partnership as of and for the
years ended December 31, 1998 and 1997, the Partnership's fiscal year end:

                                                             1998         1997
                                                             ----         ----

        Total Assets
         (principally consisting of mortgages receivable)   $ 3,622     $ 1,279
        Total Liabilities                                        36          11
        Total Partnership Capital                             3,586       1,269
        Total Revenues                                          245          40
        Net income (loss)                                         9     $    (1)


3.       SALE OF LOANS

         In a prior year, the Corporation sold loans including accrued interest
to GF Mortgage Corporation, an unrelated purchaser which is a subsidiary of
Gruntal Financial Corporation, in exchange for satisfaction of outstanding
liabilities to the Participants' Trust and the SBA, and options to purchase
60,000 shares of the Corporation's common stock (see Note 13). The Corporation
also received a participation under certain conditions in the recovery of
non-accrued interest or principal in excess of the book value of the loans and
entered into an Asset Management and Loan Servicing Agreement (the "Agreement")
whereby the Corporation continued to service the portfolio for an amount equal
to 1/12th of one percent of the principal balance outstanding each month and
received 2.5% of the principal outstanding or the sales price as defined in the
Agreement upon subsequent sale of these loans to an outside party. During the
year ended March 31, 1998 the Corporation realized $41 in accordance with this
Agreement. See Note 4 for a discussion of the termination of the Agreement.


                                       23


<PAGE>


THE FIRST CONNECTICUT CAPITAL CORPORATION


NOTES TO FINANCIAL STATEMENTS - continued
FOR THE YEARS ENDED MARCH 31, 1999 AND 1998
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)


4.       TERMINATION OF SERVICING RIGHTS

         On October 27, 1997, Walsh Securities assigned the balance of the loan
portfolio serviced by the Corporation under the Agreement to Greenwich Capital
Financial Products, Inc. ("Greenwich Capital") As a result of this transaction,
the Agreement was terminated. Walsh Securities issued a promissory note (the
"Note") dated November 12, 1997 in the amount of $560 to fulfill their
obligation to the Corporation under the Agreement. Since the Note is not
interest bearing, interest was imputed at 8.5% resulting in an original issue
discount ("OID") of $78. The discounted value of the Note of $482 was exchanged
for the unamortized balance of the servicing rights of $320 and a receivable of
$214 for certain reimbursable fees and expenses resulting in a net loss of $52
on the transaction. This OID will be amortized to interest income over the life
of the Note.

         The Note requires monthly payments of $10 beginning December 1, 1997
through December 1, 2000 with a lump sum payment of $200 on December 31, 2000.

         The Corporation will continue to service the remaining loan portfolio
for Greenwich Capital under a new servicing agreement.

5.       LOANS AND ALLOWANCE FOR LOAN LOSSES

         Loans and allowance for loan losses at March 31, are as follows:

                                                           1999          1998

         Loans                                          $   702        $    766
         Allowance for loan losses                          (39)           (300)
                                                       --------        --------

         Total                                         $    663        $    466
                                                       ========        ========

         Changes in the allowance for loan losses are summarized as follows for
         the years ended March 31:
                                                           1999          1998

         Beginning balance                             $    300         $   695
         Reduction of allowance for loan losses            (261)            (49)
         Write-offs                                        -0-             (346)
                                                       --------         --------

         Ending balance                                $     39         $   300
                                                       ========         ========

                                       24


<PAGE>


THE FIRST CONNECTICUT CAPITAL CORPORATION

NOTES TO FINANCIAL STATEMENTS - continued
FOR THE YEARS ENDED MARCH 31, 1999 AND 1998
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)


         At March 31, 1999, the Corporation has a recorded investment in
impaired loans of $198 and a related allowance for investment losses of $39, as
compared to $735 of impaired loans and a related allowance for investment losses
of $300 at March 31, 1998. The average recorded investment in impaired loans for
the years ended March 31, 1999 and 1998 was $571 and $1,042, respectively, and
the income recorded on these loans identified as impaired totaled $131 and $107,
respectively.

         Loans on which the accrual of interest has been discontinued amounted
to approximately $14 and $94 at March 31, 1999 and 1998, respectively. If those
loans had been current throughout their terms, interest income would have
increased $2 and $12 for the years ended March 31, 1999 and 1998, respectively.

6.       FIXED ASSETS

         At March 31, 1999 and 1998, the costs and related accumulated
depreciation of the Corporation's fixed assets were as follows:

                                             1999              1998
                                             ----              ----

         Improvements                      $    7           $     7
         Equipment                            145               234
                                           ------            ------
         Fixed assets at cost                 152               241
         Less accumulated depreciation       (130)             (204)
                                           ------            ------
         Fixed assets-net                  $   22           $    37
                                           ======           =======

7.       PARI PASU LOAN PARTICIPATIONS

         Certain participation agreements provide for the participant and the
Corporation to share, pari pasu in the rights and risks of payment in certain
loan accounts. Loans are shown net of the pari pasu participation amount. There
were no outstanding participant balances under these agreements at March 31,
1999. At March 31, 1998 the outstanding participant balances were $44.





                                       25


<PAGE>





THE FIRST CONNECTICUT CAPITAL CORPORATION


NOTES TO FINANCIAL STATEMENTS - continued
FOR THE YEARS ENDED MARCH 31, 1999 AND 1998
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)

8.       INCOME TAXES

         The income tax provision (benefit) consist of the following:

                                                              1999       1998
                                                              ----       ----
Current:
         Federal                                           $    -0-   $   -0-
         State                                                   3         5
                                                           ---------  --------
Total current:                                                   3         5
                                                           ---------  --------

Deferred:
         Federal                                                55        -0-
         State                                                  13        -0-
                                                           ---------  --------
Total deferred                                                  68        -0-

Adjustment of beginning of year
valuation allowance:
         Federal                                              (451)       -0-
         State                                                 (38)       -0-
                                                          ---------  --------
Total adjustment                                              (489)       -0-

Total income tax (benefit) provision                         $(418)   $    5
                                                          ========    =======

         The State income tax currently payable for both years consist of the
minimum tax and tax on capital.

         A reconciliation of the income tax (benefit) provision computed by
applying the Federal statutory rate to income before income taxes to the actual
provision (benefit) for income taxes for the years ended March 31, 1999 and 1998
is as follows:

                                                              1999      1998
                                                              ----      ----
         Income tax provision
           at statutory rate                                $  136    $  103
         State income tax, net of
           federal benefit                                      11        -0-
         Adjustment of beginning of year
           valuation allowance                                (489)       -0-
         Other                                                  51        -0-
         Benefit of net operating loss carryforward
           for which no asset was previously
           recognized                                         (127)      (98)
                                                           -------    ------
         Total                                              $( 418)   $    5
                                                           =======    ======

                                       26


<PAGE>

THE FIRST CONNECTICUT CAPITAL CORPORATION


NOTES TO FINANCIAL STATEMENTS - continued
FOR THE YEARS ENDED MARCH 31, 1999 AND 1998
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)


The components of the net deferred tax asset are as follows:

                                                      1999               1998
                                                      ----              -----
         Deferred tax asset:
           Net operating loss carryforward           $2,840            $3,295
           Valuation allowance                       (2,419)           (3,295)
                                                     ------            -------
         Net deferred tax asset                      $  421            $  -0-
                                                     ======            =======

         Deferred tax assets result from net operating loss carryforwards
(NOLS). Due to the uncertainty of realizing the remaining benefits of these
NOLS, a valuation allowance has been established. The valuation allowance was
reduced by $876 and $451 for the years ended March 31, 1999 and 1998,
respectively. During 1999 the Corporation reduced the beginning of the year
allowance by $489 for the portion of the NOLS that it believes is more likely
than not to be recoverable based on its current and projected profitability. The
remaining reduction in 1999 relates to the expiration of the NOLS from the year
ended March 31, 1994 for state income tax purposes.

         At March 31, 1999, the Corporation had available federal and state net
operating loss carryforwards of $9,110 and $1,257, respectively, for income tax
purposes which expire as follows:

                                   FEDERAL              STATE
                                   -------              -----

                2000                 --                 $  678
                2001                 --                    483
                2002                 --                     69
                2003                 --                     27
                2008               $3,731                 --
                2009                4,087                 --
                2010                  679                 --
                2011                  497                 --
                2012                   81                 --
                2013                   35                 --
                                   ------               ------

                                   $9,110               $1,257
                                   ======               ======





                                       27

<PAGE>


THE FIRST CONNECTICUT CAPITAL CORPORATION


NOTES TO FINANCIAL STATEMENTS - continued
FOR THE YEARS ENDED MARCH 31, 1999 AND 1998
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)

9.       LINE OF CREDIT

         On March 5, 1999 the Corporation closed on a Commercial Line of Credit
with The Hudson United Bank ( formerly Lafayette American Bank & Trust Company).
This $1,000 line of credit is for a term of one year and interest is computed at
2.5% over the Wall Street Prime Rate. There were no advances outstanding on this
line of credit at March 31, 1999.

10.      TRANSACTIONS WITH AFFILIATES

         Affiliates include directors and officers of the Corporation and
members of their immediate families and companies which have a 5% or more
ownership in the Corporation.

         Legal services, including representation of the Corporation on the
closing of all new loans, foreclosure proceedings on delinquent loans and
general corporate and security matters, are provided by a firm in which a
director is a principal. Fees for these services were $5 and $17 for the years
ended March 31, 1999 and 1998, respectively.

11.      COMMITMENTS AND CONTINGENCIES

         The Corporation had made certain guarantees with a contractual balance
of $368 at March 31, 1997. The guarantees were for small business concerns from
whom collateralized loans were outstanding and were previously sold (see Note
4). During the year ended March 31, 1995, $368 of these guarantees had been
called by the bank. The Corporation had fully accrued for the guaranteed amounts
called at March 31, 1997. On March 31, 1998 this guarantee had been negotiated,
forgiven and released for a cash payment of $100, resulting in income of $268
included in the recovery of notes payable in the statement of operations for
1998.

         As of March 31, 1999 and 1998, the Corporation had outstanding loan
commitments of $2,180 and $2,447, respectively.

12.      LETTER OF CREDIT

         The Corporation has a $40 letter of credit outstanding as of March 31,
1999 and 1998 at a stated interest rate of 2.00% per annum related to obtaining
its Connecticut license as a First Mortgage Loan-Lender/Broker. The letter of
credit expires February 9, 2000. At March 31, 1999 and 1998, restricted cash
includes a $53 and $49 certificate of deposit, which is being maintained as
collateral for the letter of credit.
                                       28

<PAGE>





THE FIRST CONNECTICUT CAPITAL CORPORATION


NOTES TO FINANCIAL STATEMENTS - continued
FOR THE YEARS ENDED MARCH 31, 1999 AND 1998
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)

13.      STOCK OPTIONS

         The Corporation has a compensatory stock option plan (the "Plan") which
enables the granting of options to officers to purchase shares of the
Corporation's common stock at prices equal to fair value at the date of grant.
Options expire within five years of grant.

         During the year ended March 31, 1999, 60,000 options were granted at an
exercise price of $1.21. No options were exercised or canceled during the year
ended March 31, 1999 and there were no options outstanding at March 31, 1998.
The Corporation applies APB Opinion No. 25 and related interpretations in
accounting for its Plan. Accordingly, no compensation costs has been recognized
for stock options awarded under the Plan. Had compensation costs for the
Corporation's stock option plan been determined based on the fair value at grant
dates consistent with the methodology prescribed under Statement of Financial
Accounting Standard No. 123, "Accounting for Stock-Based Compensation", the
Corporation's net income for the year ended March 31, 1999 would have decreased
by $39.

         In connection with the Purchase Agreement (see Note 3) and pursuant to
a stock option agreement dated December 15, 1993, the Corporation granted GF
Mortgage Corporation the right and option to purchase 60,000 shares of the
Corporation's common stock which expired on December 15, 1998 at an exercise
price of $1.50 per share.

14.      DIVIDEND REINVESTMENT PLAN

         Previously, the Corporation had established a Dividend Reinvestment
Plan whereby holders of the Corporation's common stock may automatically invest
cash dividend payments in additional shares of common stock at a price equal to
90% of the then market value, as defined, without payment of any brokerage
commissions or service charge. No shares of common stock were issued under this
plan during 1999 or 1998.

15.      LEASES

         The Corporation leases office space and equipment for use in
operations. The leases generally provide that the Corporation pays taxes,
insurance and maintenance expenses. Some leases contain renewal options, and
rent payments change in accordance with changes in the Consumer Price Index.
Rental expense relating to cancelable and noncancelable operating leases
amounted to $28 and $31 for the years ended March 31, 1999 and 1998,
respectively.

         As of March 31, 1999, future minimum rental payments required under
noncancelable operating leases were as follows:



                                       29

<PAGE>

THE FIRST CONNECTICUT CAPITAL CORPORATION

NOTES TO FINANCIAL STATEMENTS - continued
FOR THE YEARS ENDED MARCH 31, 1999 AND 1998
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)

                     Year Ending                 Minimum
                      March 31,              Rental Payments
                      ---------              ---------------
                       2000                         $35
                       2001                          32
                       2002                          23

                                   TOTAL            $90
                                                  =====

16.      FAIR VALUE OF FINANCIAL INSTRUMENTS

         Methods and assumptions for estimating the fair value of the Company's
financial instruments are set forth below. Fair values are calculated based on
the value without regard to any premium or discount that may result from
concentrations of ownership of a financial instrument, possible tax
ramifications or estimated transaction costs.


         LOANS - As substantially all of the Corporation's loans fall within the
scope of SFAS No. 114, the estimated fair value for such loans is based on the
present value of expected future cash flows discounted at the loan's effective
interest rate or on recent external appraisals or other available market
information if the loan is collateral dependent. Assumptions regarding credit
risk, cash flow, and discount rates are judgmentally determined using available
market information and specific borrower information.

         SERVICING RIGHTS - The Corporation estimates fair value for its
servicing rights by discounting expected net cash flows through maturity from
servicing activities at market discount rates that reflect the credit and
interest rate risk inherent in the servicing rights.

         NOTE RECEIVABLE - The fair value of the note receivable is estimated by
discounting future cash flows at a current market rate of interest.

         OTHER ON-BALANCE SHEET FINANCIAL INSTRUMENTS - Other on-balance sheet
financial instruments include cash and cash equivalents, restricted cash,
accrued interest and a warehouse line of credit. The carrying value of each of
these financial instruments is a reasonable estimation of fair value.

         LOANS HELD FOR SALE - For loans held for sale fair value is estimated
by discounting contractual cash flows adjusted for prepayment estimates using
discount rates based on secondary market sources adjusted to reflect differences
in servicing and credit costs.

         The carrying values were equal to the estimated fair values of cash and
cash equivalents, restricted cash, net investments, loans held for resale, note
receivable, accrued interest and net servicing rights as of March 31, 1999 and
1998.

                                       30

<PAGE>

THE FIRST CONNECTICUT CAPITAL CORPORATION

NOTES TO FINANCIAL STATEMENTS - continued
FOR THE YEARS ENDED MARCH 31, 1999 AND 1998
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)



         LIMITATIONS - Fair value estimates are made at a specific point in
time, based on relevant market information and information about the financial
instrument. These estimates do not reflect any premium or discount that could
result from offering for sale at one time the Company's entire holdings of a
particular financial instrument. Because no market exists for a significant
portion of the Company's financial instruments, fair value estimates are based
on judgments regarding future expected loss experience, current economic
conditions, risk characteristics of various financial instruments and other
factors. These estimates are subjective in nature and involve uncertainties and
matters of significant judgment and, therefore, cannot be determined with
precision. Changes in assumptions could significantly affect the estimates.



                                       31




<TABLE> <S> <C>



<ARTICLE>      5

<S>                             <C>
<PERIOD-TYPE>                                           12-MOS
<FISCAL-YEAR-END>                                  MAR-31-1999
<PERIOD-START>                                     APR-01-1998
<PERIOD-END>                                       MAR-31-1999
<CASH>                                                     438
<SECURITIES>                                                 0
<RECEIVABLES>                                            1,947
<ALLOWANCES>                                               (39)
<INVENTORY>                                                  0
<CURRENT-ASSETS>                                             0
<PP&E>                                                     152
<DEPRECIATION>                                            (129)
<TOTAL-ASSETS>                                           2,369
<CURRENT-LIABILITIES>                                      232
<BONDS>                                                      0
<COMMON>                                                   587
                                        0
                                                  0
<OTHER-SE>                                               1,550
<TOTAL-LIABILITY-AND-EQUITY>                             2,369
<SALES>                                                    815
<TOTAL-REVENUES>                                           815
<CGS>                                                        0
<TOTAL-COSTS>                                                0
<OTHER-EXPENSES>                                           425
<LOSS-PROVISION>                                             0
<INTEREST-EXPENSE>                                           0
<INCOME-PRETAX>                                            390
<INCOME-TAX>                                              (418)
<INCOME-CONTINUING>                                          0
<DISCONTINUED>                                               0
<EXTRAORDINARY>                                              0
<CHANGES>                                                    0
<NET-INCOME>                                               808
<EPS-BASIC>                                             0.69
<EPS-DILUTED>                                             0.69



</TABLE>



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