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, 2000
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE
EXCHANGE ACT
For the transition period from _____________ to ______________
Commission file number 811-0969
THE FIRST CONNECTICUT CAPITAL CORPORATION
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(EXACT NAME OF SMALL BUSINESS ISSUER AS)
(SPECIFIED IN ITS CHARTER)
CONNECTICUT 06-0759497
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(STATE OR OTHER JURISDICTION (IRS EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
1000 BRIDGEPORT AVENUE, SHELTON, CONNECTICUT 06484
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(203) 944-5400
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(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
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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
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PART I - FINANCIAL INFORMATION
ITEM 1. - Financial Statements
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<CAPTION>
THE FIRST CONNECTICUT CAPITAL CORPORATION
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BALANCE SHEET, SEPTEMBER 30, 2000
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
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(UNAUDITED)
ASSETS 2000
------ ----
<S> <C>
Cash and cash equivalents $ 266
Restricted cash 43
Loans - net of allowance for loan losses of $45 2,241
Loans held for sale 781
Accrued interest receivable 7
Servicing rights 128
Fixed assets 14
Deferred income taxes 599
Other assets 40
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TOTAL ASSETS $ 4,119
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LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Line of credit $ 1,623
Accounts payable and other accrued expenses 29
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TOTAL LIABILITIES 1,652
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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 (7,373)
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TOTAL STOCKHOLDERS' EQUITY 2,467
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 4,119
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</TABLE>
See notes to condensed financial statements.
2
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<TABLE>
<CAPTION>
THE FIRST CONNECTICUT CAPITAL CORPORATION
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STATEMENTS OF INCOME
FOR THE THREE AND SIX MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
----------- Three Months Six Months Three Months Six Months
Ended Ended Ended Ended
Sep 30, 2000 Sep 30, 2000 Sep 30, 1999 Sep 30, 1999
------------ ------------ ------------ ------------
INTEREST INCOME:
<S> <C> <C> <C> <C>
Interest and fees on loans $ 160 $ 279 $ 151 $ 300
----------- ----------- ----------- -----------
INTEREST EXPENSE:
Interest expense on line of credit 28 76 10 11
Other interest expense 3 8 2 11
----------- ----------- ----------- -----------
TOTAL INTEREST EXPENSE 31 84 12 22
NET INTEREST INCOME 129 195 139 278
----------- ----------- ----------- -----------
OTHER OPERATING INCOME:
Servicing fees 83 168 42 70
Other fees 8 15 7 13
----------- ----------- ----------- -----------
Total other operating income 219 183 49 83
----------- ----------- ----------- -----------
TOTAL INCOME 348 378 188 361
----------- ----------- ----------- -----------
OTHER OPERATING EXPENSES:
Officers' salaries 35 71 38 67
Other salaries 9 18 9 17
Directors' fees -- 1 1 2
Professional services 8 15 8 19
Miscellaneous taxes 4 7 4 7
Employee and general insurance 11 22 9 17
Rent 8 16 8 15
Amortization of servicng rights 12 12 -- --
Corporate insurance expenses 6 11 5 10
Licenses, dues and subscriptions expenses 2 3 2 4
Communications 3 5 3 6
Advertising and promotions 1 2 1 3
Stock record and other financial expenses 3 8 5 8
Depreciation 2 5 2 5
Equipment and auto rental 3 6 4 7
Postage expenses 1 2 1 2
Office supplies 2 3 2 4
Other 3 6 5 13
----------- ----------- ----------- -----------
Total other operating expenses 113 213 107 206
----------- ----------- ----------- -----------
INCOME BEFORE INCOME TAX BENEFIT 235 165 81 155
INCOME TAX (PROVISION) BENEFIT (14) 31 47 140
----------- ----------- ----------- -----------
NET INCOME $ 222 $ 196 $ 128 $ 295
=========== =========== =========== ===========
INCOME PER COMMON SHARE (BASIC AND DILUTED) $ 0.19 $ 0.17 $ 0.11 $ 0.25
=========== =========== =========== ===========
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 condensed financial statements.
3
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<TABLE>
<CAPTION>
THE FIRST CONNECTICUT CAPITAL CORPORATION
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STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2000
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
COMMON STOCK TOTAL
------------ ADDITIONAL STOCK
NUMBER OF PAID - IN ACCUMULATED HOLDERS'
SHARES AMOUNT CAPITAL DEFICIT EQUITY
--------- ------ ----------- -------- --------
<S> <C> <C> <C> <C> <C>
BALANCE, April 1,2000 1,173,382 $ 587 $ 9,253 ($ 7,569) $ 2,271
Net Income 196 196
--------- --------- --------- --------- ---------
BALANCE, September 30, 2000 1,173,382 $ 587 $ 9,253 ($ 7,373) $ 2,467
========= ========= ========= ========= =========
</TABLE>
See notes to condensed financial statements.
4
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<TABLE>
<CAPTION>
THE FIRST CONNECTICUT CAPITAL CORPORATION
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STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
(DOLLARS IN THOUSANDS)
(UNAUDITED)
2000 1999
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OPERATING ACTIVITIES
<S> <C> <C>
Net income $ 196 $ 295
Adjustments to reconcile net income to net cash
used in operating activities:
Deferred taxes (45) (140)
Depreciation 5 5
Amortization of servicing rights 12 --
Interest accretion on note receivable -- (14)
Origination of loans held for sale (6,226) (7,769)
Proceeds from sales of loans held for sale 6,004 6,495
Increase (decrease) in accrued interest receivable (1) 1
Decrease in other assets 4 13
Decrease in accounts payable and other accrued expenses (16) (211)
Increase in restricted cash (1) --
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Net cash used in operating activities (68) (1,325)
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INVESTING ACTIVITIES
Originations of loans -- --
Net decrease on loans 105 18
Purchase of fixed assets (3) --
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Net cash provided by (used in) investing activities 102 18
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FINANCING ACTIVITIES
(Decrease) increase in line of credit borrowings (95) 944
Principal collected on note receivable -- 45
Decrease in Partnership loans -- 30
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Net cash (used in) provided by financing activities (95) 1,019
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DECREASE IN CASH AND CASH EQUIVALENTS (61) (288)
CASH AND CASH EQUIVALENTS, BEGINNING 327 385
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CASH AND CASH EQUIVALENTS, ENDING $ 266 $ 97
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</TABLE>
See notes to condensed financial statements.
5
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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 accounting principles generally accepted in the United States of
America ("GAAP") 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 notes required by GAAP 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, 2001. For further information,
refer to the financial statements and notes thereto included in the
Corporation's Annual Report on Form 10-KSB for the year ended March 31, 2000.
Certain amounts in the 1999 financial statements have been
reclassified to conform to the 2000 presentation.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The Corporation is currently licensed in the state of Connecticut to
operate as Mortgage Lender/Broker.
The Corporation had net income of $196,000 for the six months ended
September 30, 2000 compared to net income of $295,000 for the six months ended
September 30, 1999. The decrease of $99,000 is due primarily to an increase in
interest paid on the Corporation's line of credit, a decrease in the income tax
benefit and a decrease in interest and fees collected on loans, partially offset
by an increase in other operating income.
INTEREST INCOME AND OTHER OPERATING INCOME
Interest and fees on loans decreased $21,000 for the six months ended
September 30, 2000, as compared to the six months ended September 30, 1999. This
decrease was primarily due to a decrease in the number of mortgage loans
originated and funded by the Corporation. The Northeast in general has continued
to experience a slow down in housing starts for this period, which is attributed
to higher interest rates. Management continues to conservatively underwrite new
applications and will not lessen its standards in order to compensate for a
slower real estate market. Inventory levels of unsold properties remains low and
therefore management believes the future of the construction market will remain
strong.
Servicing fees increased by $98,000 for the six months ended
September 30, 2000, 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.
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THE FIRST CONNECTICUT CAPITAL CORPORATION
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 OPERATING EXPENSE
Total other operating expenses increased by $7,000 during the six
months ended September 30, 2000, as compared to the comparable period of the
prior year. This increase is due to an increase in officers' salaries of $4,000,
increase in employee and general insurance of $5,000 and the increase in
amortization of servicing rights of $12,000 partially offset by a reduction in
professional services and other 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.
INCOME TAX BENEFIT
An income tax benefit of $31,000 was recorded for the six months
ended September 30, 2000, as compared to $140,000 for the six months ended
September 30, 1999, which primarily reflects the reduction of the valuation
allowance against net operating loss carryforwards (NOLS), based on management's
assessment of the amount of NOLS that more likely than not will be realized
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
collateralized by residential properties and other real estate. These loans are
predominately collateralized 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 and mortgage
servicing rights.
It is anticipated that based upon the favorable climate in the
construction industry in Connecticut, the Corporation will continue to maintain
its present level of activities in these area. Management is cognizant that
residential construction is seasonal in nature, as well as sensitive to changing
interest rates. As such, we have experienced slower loan demand during the three
months ended June 30, 2000. Loan demand increased for the second quarter as
construction activity traditionally peaks during the period. We continue to seek
other forms of short term lending products such as "bridge" financing, land
loans, remodeling loans and small mixed use or commercial properties in order to
increase loan demand while at the same time, exercising conservative and
responsible underwriting standards. All of our products are underwritten
pursuant to strict guidelines which include conservative loan to value ratios,
minimum credit standards and feasible exit strategies.
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THE FIRST CONNECTICUT CAPITAL CORPORATION
LINE OF CREDIT
The Corporation has a $2,000,000 Commercial Line of Credit with The
Hudson United Bank which expires December 7, 2000, and is currently being
renegotiated. Interest is computed at 2.25% over the Wall Street Journal Prime
Rate. This line is collateralized by an assignment of notes and mortgages equal
to the amount of the loan.
FINANCIAL RESOURCES
As of September 30, 2000, the Corporation had approximately $266,000
of unrestricted cash and cash equivalents and approximately $2.467 million of
Stockholders' Equity.
The Corporation currently anticipates that during the year ending
March 31, 2001, 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 of its 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, 2001. 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. If construction loan demand increases, the Corporation will require
additional cash to service those requirements. The Corporation continues to
monitor its cash flow requirements, and, due to the aforementioned line of
credit, the Corporation feels it will be able to meet these cash requirements.
THE FIRST CONNECTICUT CAPITAL CORPORATION
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
NONE
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned duly authorized.
THE FIRST CONNECTICUT CAPITAL
CORPORATION
(Registrant)
Date: October 27, 2000 By:___________________________
Lawrence R. Yurdin
President
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