U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
(Mark One)
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended DECEMBER 31, 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
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(203) 944-5400
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(ISSUER'S TELEPHONE NUMBER)
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(FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR,
IF CHANGED SINCE LAST REPORT)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes X No
--- ---
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required
to be filed by Section 12, 13 or 15(d) of the Exchange Act after the
distribution of securities under a plan confirmed by court.
Yes _____ No _____
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date: 1,173,382
Transitional Small Business Format: Yes No X
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<PAGE>
THE FIRST CONNECTICUT CAPITAL CORPORATION
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BALANCE SHEETS, DECEMBER 31, 1999
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
- - - - - - - - - - - - - - -----------------------------------------
(UNAUDITED)
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<TABLE>
<CAPTION>
ASSETS
- - - - - - - - - - - - - - ------
<S> <C>
Cash and cash equivalents $ 237
Restricted cash 55
Loans - net of allowance for loan losses of $39 639
Loans held for sale 1,808
Accrued interest 11
Servicing rights 79
Fixed assets 14
Deferred income taxes 544
Other assets 76
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TOTAL ASSETS $ 3,463
=======
LIABILITIES AND STOCKHOLDERS' EQUITY
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LIABILITIES
Line of credit $ 1,260
Accounts payable and other accrued expenses 38
-------
TOTAL LIABILITIES 1,298
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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 (7,675)
-------
TOTAL STOCKHOLDERS' EQUITY 2,165
-------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 3,463
=======
</TABLE>
See notes to financial statements.
2
<PAGE>
THE FIRST CONNECTICUT CAPITAL CORPORATION
STATEMENTS OF INCOME
FOR THE THREE AND NINE MONTHS ENDED DECEMBER 31, 1999 AND 1998
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
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(UNAUDITED)
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<TABLE>
<CAPTION>
Three Months Nine Months Three Months Nine Months
Ended Ended Ended Ended
Dec. 31, 1999 Dec. 31, 1999 Dec. 31, 1998 Dec. 31, 1998
------------- ------------- ------------- -------------
INTEREST INCOME:
<S> <C> <C> <C> <C>
Interest and fees on loans $ 121 $ 421 $ 64 $ 258
INTEREST EXPENSE:
Interest expense 3 14 2 4
RECOVERY OF INVESTMENTS LOSSES -- -- 183 243
----------- ----------- ----------- -----------
NET INTEREST INCOME AFTER
RECOVERY OF INVESTMENT LOSSES 118 407 245 497
----------- ----------- ----------- -----------
OTHER OPERATING INCOME:
Servicing fees 59 118 28 81
Other fees 11 24 1 21
----------- ----------- ----------- -----------
Total Other Operating Income 70 142 29 102
----------- ----------- ----------- -----------
TOTAL INCOME 188 549 274 599
----------- ----------- ----------- -----------
OTHER OPERATING EXPENSES:
Officers' salaries 44 111 34 99
Other salaries 11 28 10 27
Directors' fees 0 2 1 5
Professional services 10 29 15 32
Miscellaneous taxes 4 11 4 12
Employee and general insurance 10 27 12 29
Rent 7 22 9 22
Corporate insurance expenses 5 15 4 7
Licenses, dues and subscriptions expenses 2 6 2 5
Communications 3 9 3 8
Advertising and promotions 0 3 1 2
Stock record and other financial expenses 4 12 1 4
Depreciation 2 7 2 6
Loss on note receivable 322 322 0 0
Other 11 37 7 39
----------- ----------- ----------- -----------
Total Other Operating Expenses 435 641 105 297
----------- ----------- ----------- -----------
INCOME (LOSS) BEFORE INCOME TAXES (247) (92) 169 302
INCOME TAX (BENEFIT) EXPENSE 20 (120) -- --
----------- ----------- ----------- -----------
NET INCOME ($ 267) $ 28 $ 169 $ 302
=========== =========== =========== ===========
INCOME PER COMMON SHARE (BASIC AND DILUTED) ($ 0.23) $ 0.02 $ 0.14 $ 0.26
=========== =========== =========== ===========
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
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STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED DECEMBER 31, 1999 AND
THE TWELVE MONTHS ENDED MARCH 31, 1999
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
- - - - - - - - - - - - - - -----------------------------------------
(UNAUDITED)
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<TABLE>
<CAPTION>
Common Stock
------------ Total
Number Of Paid-In Accumulated Stockholders'
Shares Amount Surplus Deficit Equity
------ ------ ------- ------- ------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, APRIL 1,1998 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
============== ========== ============ ================ ===============
Net Income 28 28
-------------- ---------- ------------ ---------------- ---------------
BALANCE, DECEMBER 31,1999 1,173,382 $587 $9,253 ($7,675) $2,165
============== ========== ============ ================ ===============
</TABLE>
See notes to financial statements.
4
<PAGE>
THE FIRST CONNECTICUT CAPITAL CORPORATION
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STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED DECEMBER 31, 1999 AND 1998
(DOLLARS IN THOUSANDS)
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(UNAUDITED)
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<TABLE>
<CAPTION>
Nine Months Nine Months
Ended Ended
Dec.31,1999 Dec.31,1998
----------- -----------
OPERATING ACTIVITIES
<S> <C> <C>
Net income $ 28 $ 302
Adjustments to reconcile net income to net cash
used in operating activities:
Recovery of investment losses 0 (243)
Deferred taxes (123) 0
Loss on note receivable 322 0
Amortization of discount on note receivable 0 (19)
Principal collected on note receivable 50 90
Depreciation 7 6
Accretion of discount on note receivable (15) 0
Origination of loans held for sale (11,675) (6,508)
Proceeds from sales of loans held for sale 10,161 6,117
Decrease in Partnership loans 30 76
Increase in accrued interest receivable (1) (10)
Increase in other assets (21) (12)
(Decrease) increase in accounts payable
and other accrued expenses (194) 189
Increase in restricted cash (2) (1)
-------- --------
Net cash used in operating activities (1,432) (13)
-------- --------
INVESTING ACTIVITIES
Principal collected on loans 24 71
Loss on disposal of fixed assets 0 4
-------- --------
Net cash provided by investing activities 24 75
-------- --------
FINANCING ACTIVITIES
Increase in line of credit 1,260 0
-------- --------
Net cash provided by financing activities 1,260 0
-------- --------
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (148) 62
CASH AND CASH EQUIVALENTS, BEGINNING 385 214
-------- --------
CASH AND CASH EQUIVALENTS, ENDING $ 237 $ 276
======== ========
</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 $28,000 for the nine months ended
December 31, 1999 compared to a net income of $302,000 for the nine months ended
December 31, 1998.
INTEREST INCOME AND OTHER OPERATING INCOME
- - - - - - - - - - - - - - ------------------------------------------
Interest and fees on loans increased $163,000 for the nine months ended
December 31, 1999, as compared to the nine months ended December 31, 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 $37,000 for the nine months ended December
31, 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 increased by $3,000 from the prior year due to an increase in other loan
closing fees and interest earned on idle funds.
6
<PAGE>
THE FIRST CONNECTICUT CAPITAL CORPORATION
OTHER OPERATING EXPENSE
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Total other operating expenses increased by $344,000 during the nine
months ended December 31, 1999, as compared to the comparable period of the
prior year. This change is primarily due to the write-off of $322,000 of an
unsecured note receivable, based upon information obtained in this quarter. This
note predates the company's short-term mortgage program and relates to the
liquidation of the portfolio sold under the Loan and Real Property Purchase
Agreement dated Jun 29, 1993 (and amended on October 29, 1993). This increase is
also due to the 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 December 31, 1999 the deferred tax asset of $544,000 increased by
$123,000 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.
The favorable climate in the construction industry in Connecticut
continues. The quarter ending December 31, 1999 is traditionally a slower period
than the first and second quarters due in part to weather and the holiday
season. It is anticipated that the level of activity will increase during the
fourth quarter, which encompasses the spring market. Management is cognizant of
the fact that construction lending is limited in nature and therefore is
continually seeking other types of short term lending products. These loans
include "bridge" financing, land loans, credit restoration loans, and smaller
mixed use or commercial properties. All of these products are underwritten
pursant to strict guidelines which include conservative loan to value ratios,
minimum credit standards and feasible exit strategies.
7
<PAGE>
THE FIRST CONNECTICUT CAPITAL CORPORATION
FINANCIAL RESOURCES
- - - - - - - - - - - - - - -------------------
As of December 31, 1999, the Corporation had approximately $237,000 of
unrestricted cash and cash equivalents and approximately $2.165 million of
Stockholders' Equity.
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 December 7, 1999 the Corporation closed its second Commercial Line
of Credit with The Hudson United Bank (formerly Lafayette American Bank & Trust
Company). This $2,000,000 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 December
31, 1999 there was $1,260,000.00 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
December 31, 1999 the Corporation sold 88 units, of which 1 unit was sold during
the quarter ended December 31, 1999, generating $50,000 of funds for lending
activities during the quarter ending December 31, 1999.
8
<PAGE>
THE FIRST CONNECTICUT CAPITAL CORPORATION
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
NONE
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned duly authorized.
THE FIRST CONNECTICUT CAPITAL CORPORATION
(Registrant)
Date: February 9, 2000 By:_________________________________
Lawrence R. Yurdin
President
9
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-START> APR-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 292
<SECURITIES> 0
<RECEIVABLES> 3,196
<ALLOWANCES> (39)
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 151
<DEPRECIATION> (137)
<TOTAL-ASSETS> 3,463
<CURRENT-LIABILITIES> 1,298
<BONDS> 0
0
0
<COMMON> 587
<OTHER-SE> 1,578
<TOTAL-LIABILITY-AND-EQUITY> 3,463
<SALES> 549
<TOTAL-REVENUES> 549
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 641
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (92)
<INCOME-TAX> (120)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 28
<EPS-BASIC> 0.02
<EPS-DILUTED> 0.02
</TABLE>
