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 September 30, 1999
[ ] 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
-----------------------------------------
(Exact name of small business issuer as)
(specified in its charter)
Connecticut 06-0759497
----------- ----------
(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)
----------------------------------------------------
(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>
THE FIRST CONNECTICUT CAPITAL CORPORATION
- - - - - - - - - - - - - - -----------------------------------------
BALANCE SHEETS, SEPTEMBER 30, 1999
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
- - - - - - - - - - - - - - -----------------------------------------
(UNAUDITED)
- - - - - - - - - - - - - - -----------
<TABLE>
<CAPTION>
ASSETS
- - - - - - - - - - - - - - ------
<S> <C>
Cash and cash equivalents $97
Restricted cash 53
Loans - net of allowance for loan losses of 645
$39 in 1999
Loans held for sale 1,568
Accrued interest 9
Note receivable, net 327
Servicing rights 79
Fixed assets 16
Deferred income taxes 564
Other assets 42
---------
TOTAL ASSETS $3,400
=========
LIABILITIES AND STOCKHOLDERS' EQUITY
- - - - - - - - - - - - - - ------------------------------------
LIABILITIES
- - - - - - - - - - - - - - -----------
Line of credit $944
Accounts payable and other accrued expenses 24
---------
TOTAL LIABILITIES 968
---------
Commitments and contingencies
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
Additional paid in capital 9,253
Accumulated deficit (7,408)
---------
TOTAL STOCKHOLDERS' EQUITY 2,432
---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $3,400
=========
</TABLE>
See notes to financial statements.
2
<PAGE>
THE FIRST CONNECTICUT CAPITAL CORPORATION
- - - - - - - - - - - - - - -----------------------------------------
STATEMENTS OF INCOME
FOR THE THREE AND SIX MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
- - - - - - - - - - - - - - -----------------------------------------
(UNAUDITED)
- - - - - - - - - - - - - - -----------
<TABLE>
<CAPTION>
Three Months Six Months Three Months Six Months
Ended Ended Ended Ended
Sep. 30, 1999 Sep. 30, 1999 Sep. 30, 1998 Sep. 30, 1998
------------- ------------- ------------- -------------
INTEREST INCOME:
<S> <C> <C> <C> <C>
Interest and fees on loans $151 $300 $114 $194
INTEREST EXPENSE:
Interest expense 2 11 2 2
RECOVERY OF INVESTMENTS LOSSES - - 60 60
----------- ---------- ----------- ----------
NET INTEREST INCOME AFTER
RECOVERY OF INVESTMENT LOSSES 149 289 172 252
----------- ---------- ----------- ----------
OTHER OPERATING INCOME:
Servicing fees 32 59 27 53
Other fees 7 13 1 20
----------- ---------- ----------- ----------
Total Other Operating Income 39 72 28 73
----------- ---------- ----------- ----------
TOTAL INCOME 188 361 200 325
----------- ---------- ----------- ----------
OTHER OPERATING EXPENSES:
Officers' salaries 38 67 34 65
Other salaries 9 17 9 17
Directors' fees 1 2 2 4
Professional services 8 19 11 17
Miscellaneous taxes 4 7 4 8
Employee and general insurance 9 17 8 17
Rent 8 15 7 13
Corporate insurance expenses 5 10 8 10
Licenses, dues and subscriptions expenses 2 4 2 4
Communications 3 6 2 5
Advertising and promotions 1 3 0 1
Stock record and other financial expenses 5 8 1 3
Depreciation 2 5 2 4
Other 12 26 11 24
----------- ---------- ----------- ----------
Total Other Operating Expenses 107 206 101 192
----------- ---------- ----------- ----------
INCOME BEFORE INCOME TAXES 81 155 99 133
INCOME TAX (BENEFIT) EXPENSE (47) (140) - -
----------- ---------- ----------- ----------
NET INCOME $128 $295 $99 $133
=========== ========== =========== ==========
INCOME PER COMMON SHARE (BASIC AND DILUTED) $0.11 $0.25 $0.08 $0.11
=========== ========== =========== ==========
Weighted average number of
common shares outstanding (Basic and Diluted) 1,173,382 1,173,382 1,173,382 1,173,382
=========== ========== =========== ==========
</TABLE>
See notes to financial statements.
3
<PAGE>
THE FIRST CONNECTICUT CAPITAL CORPORATION
- - - - - - - - - - - - - - -----------------------------------------
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
- - - - - - - - - - - - - - -----------------------------------------
(UNAUDITED)
- - - - - - - - - - - - - - -----------
<TABLE>
<CAPTION>
Common Stock Total
------------ -----
Number Of Paid-In Accumulated Stockholders'
Shares Amount Surplus Deficit Equity
------ ------ ------- ------- ------
<S> <C> <C> <C> <C> <C>
BALANCE, APRIL 1,1998 1,173,382 $587 $9,253 ($8,511) $1,329
Net Income 133 133
---------- -------- ---------- ------------ ------------
BALANCE, SEPTEMBER 30,1998 1,173,382 $587 $9,253 ($8,378) $1,462
========== ======== ========== ============ ============
BALANCE, APRIL 1,1999 1,173,382 $587 $9,253 ($7,703) $2,137
Net Income 295 295
---------- -------- ---------- ------------ ------------
BALANCE, SEPTEMBER 30,1999 1,173,382 $587 $9,253 ($7,408) $2,432
========== ======== ========== ============ ============
</TABLE>
See notes to financial statements.
4
<PAGE>
THE FIRST CONNECTICUT CAPITAL CORPORATION
- - - - - - - - - - - - - - -----------------------------------------
STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(DOLLARS IN THOUSANDS)
- - - - - - - - - - - - - - ----------------------
(UNAUDITED)
- - - - - - - - - - - - - - -----------
<TABLE>
<CAPTION>
Six Months Six Months
Ended Sep.30,1999 Ended Sep.30,1998
----------------- -----------------
OPERATING ACTIVITIES
<S> <C> <C>
Net income $295 $133
Adjustments to reconcile net income to net cash
provided by operating activities:
Recovery of investment losses 0 (60)
Deferred taxes (140) 0
Principal collected on note receivable 45 50
Depreciation 5 4
Accretion of discount on note receivable (14) (11)
Origination of loans held for sale (7,769) (4,525)
Proceeds from sales of loans held for sale 6,495 4,283
Decrease in Partnership loans 30 91
Increase in accrued interest receivable 1 (17)
Increase in other assets 13 0
(Decrease) increase in accounts payable and other accrued expenses (211) (117)
Increase in restricted cash 0 1
------------------ ------------------
Net cash (used in ) provided by operating activities (1,250) (168)
------------------ ------------------
INVESTING ACTIVITIES
Principal collected on loans 18 66
------------------ ------------------
Net cash provided by investing activities 18 66
------------------ ------------------
FINANCING ACTIVITIES
Increase in line of credit 944 0
------------------ ------------------
Net cash provided by financing activities 944 0
------------------ ------------------
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (288) (102)
CASH AND CASH EQUIVALENTS, BEGINNING 385 214
------------------ ------------------
CASH AND CASH EQUIVALENTS, ENDING $97 $112
================== ==================
</TABLE>
See notes to financial statements.
5
<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 known as 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, 2000. 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, 1999.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The Corporation is currently licensed in the States of Connecticut and
Massachusetts to operate as Mortgage Lender/Broker.
The Corporation had net income of $295,000 for the six months ended
September 30, 1999 compared to a net income of $133,000 for the six months ended
September 30, 1998.
INTEREST INCOME AND OTHER OPERATING INCOME
- - - - - - - - - - - - - - ------------------------------------------
Interest and fees on loans increased $106,000 for the six months ended
September 30, 1999, as compared to the six months ended September 30, 1998. This
increase was primarily due to an increase in origination fees collected by the
Corporation, due to an increase in the number and dollar amount of mortgage
loans originated and funded by the Corporation. Management attributes the
increase to its successful marketing of its knowledge of construction and real
estate lending, its ability to service loan demand from homebuilders, remodelers
and developers and the favorable general climate for the construction industry.
Servicing fees increased by $6,000 for the six months ended September
30, 1999, as compared to the same period in the prior year. This increase is due
to an increase in servicing fees earned on its short-term construction and
remodeling mortgage loans and the Limited Partnership portfolios. This increase
is partially offset by the continued reduction and liquidation of the portfolio
sold under the Loan and Real Property Purchase Agreement dated June 29, 1993
(and amended on October 29, 1993). Servicing fees generated by this portfolio
will continue to decline as the portfolio continues to be liquidated in
accordance with such Loan and Real Property Purchase Agreement. Other fee income
has declined by $7,000 from the prior year due to a non-recurring charge of
$8,000 and interest earned on idle funds.
6
<PAGE>
THE FIRST CONNECTICUT CAPITAL CORPORATION
OTHER OPERATING EXPENSE
- - - - - - - - - - - - - - -----------------------
Total other operating expenses increased by $14,000 during the six
months ended September 30, 1999, as compared to the comparable period of the
prior year. This change is primarily due to an increase in audit fees, tax
preparation fees and the issuance of a Directors and Officers liability
insurance policy. 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.
INCOME TAX BENEFIT
- - - - - - - - - - - - - - ------------------
As of September 30, 1999 the deferred tax asset of $564,000 increased
by $143,000 as compared to March 31, 1999 of $421,000, as the result of
re-evaluating the allowance against net operating loss carryforward (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 properties and other real estate. These loans are predominately
secured by first mortgage liens on residential properties and are sold to
qualified investors, with origination and servicing fees retained by the
Corporation. The Corporation's revenues consist of loan servicing fees, loan
origination fees, interest on mortgage loans held prior to sale and mortgage
servicing rights. Since January 1996, the Corporation has expanded its Portfolio
Loan Program to include short-term mortgages for construction, remodeling and
additions, and such short-term mortgages presently constitute and are expected
to continue to constitute a significant portion of the Corporation's loan
portfolio.
It is anticipated that based on the favorable climate in the
construction industry in Connecticut, the Corporation will continue to increase
its level of activities in these areas, thus generating additional servicing
fees and interest income. Management is cognizant that home construction is
seasonal in nature, and loan originations, as expected, have increased in the
first quarter. The level of activity has dramatically improved with the spring
and summer market.
FINANCIAL RESOURCES
- - - - - - - - - - - - - - -------------------
As of September 30, 1999, the Corporation had approximately $97,000 of
unrestricted cash and cash equivalents and approximately $2.432 million of
Stockholders' Equity.
7
<PAGE>
THE FIRST CONNECTICUT CAPITAL CORPORATION
The Corporation currently anticipates that during the fiscal 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 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
operation. If construction loan demand continues to increase, the Corporation
will require additional cash to service those requirements. The Corporation
continues to investigate and pursue alternative and supplementary methods to
finance its operations and to support this anticipated growth.
The Corporation believes that cash on hand, internally generated funds
and the new credit facility will be sufficient to meet its corporate, general
and administrative working capital and other cash requirements during the fiscal
year ending March 31, 2000.
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 $1,000,000 line of credit is for a term of one year and interest is
computed at 2.5% over the Wall Street Prime Rate. This line is secured by an
assignment of notes and mortgages equal to the amount of the loan. At September
30, 1999 there was $944,000.00 advanced on this line of credit.
LIMITED PARTNERSHIP
- - - - - - - - - - - - - - -------------------
On March 21, 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 Partnership
sells units to investors, for the purpose of funding a short-term Portfolio Loan
Program. The limited partners must be 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
September 30, 1999 the Corporation sold 87 units, of which 4 units were sold
during the quarter ended September 30, 1999, generating $200,000 of funds for
lending activities during the quarter ending September 30, 1999.
8
<PAGE>
THE FIRST CONNECTICUT CAPITAL CORPORATION
PART II. OTHER INFORMATION
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 has been completed as expected by the end of September
1999. Costs 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 had
expensed approximately $9,000 to replace hardware and as of September 30, 1999
no other additional costs were incurred..
The Corporation has contacted its major suppliers, financial
institutions and registrar and transfer agent and has received written assurance
of Year 2000 compliance and is 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 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: October 19, 1999 By:_________________________________
Lawrence R. Yurdin
President
9
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-START> APR-1-1999
<PERIOD-END> SEP-30-1999
<CASH> 150
<SECURITIES> 0
<RECEIVABLES> 3,273
<ALLOWANCES> (39)
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 151
<DEPRECIATION> (134)
<TOTAL-ASSETS> 3,400
<CURRENT-LIABILITIES> 968
<BONDS> 0
0
0
<COMMON> 587
<OTHER-SE> 1,845
<TOTAL-LIABILITY-AND-EQUITY> 3,400
<SALES> 361
<TOTAL-REVENUES> 361
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 206
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 155
<INCOME-TAX> (140)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 295
<EPS-BASIC> 0.25
<EPS-DILUTED> 0.25
</TABLE>
