<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1994
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OF 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
--------------- -----------------
Commission file number 0-17224
First Financial Caribbean Corporation
(Exact name of registrant as specified in its charter)
Puerto Rico 66-0312162
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification number)
1159 F.D. Roosevelt Avenue, 00920
San Juan, Puerto Rico (Zip Code)
(Address of principal
executive offices)
Registrant's telephone number, (809) 749-7100
including area code
Former name, former address and Not applicable
former fiscal year, if changed
since last report
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 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
----- -----
Number of shares of Common Stock outstanding at March 31, 1994 - 6,950,264
Page 1 of 22 pages.
Exhibit Index on page 14.
<PAGE> 2
2
FIRST FINANCIAL CARIBBEAN CORPORATION
<TABLE>
<CAPTION>
INDEX
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PAGE
<S> <C> <C>
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
--------------------
Consolidated Balance Sheet as of March 31, 1994 and December 31, 1993 . . . . . . . . . . . . . . . . . . . 3
Consolidated Statement of Income and Retained Earnings - Three-month periods ended March 31, 1994
and March 31, 1993 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Consolidated Statement of Cash Flows - Three-month periods ended March 31, 1994 and March 31,
1993 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Notes to Consolidated Condensed Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations . . . . . . . . . . . 8
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PART II - OTHER INFORMATION
Item 1 - Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
-----------------
Item 2 - Changes in Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
---------------------
Item 3 - Defaults Upon Senior Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
-------------------------------
Item 4 - Submission of Matters to a Vote of Security Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
---------------------------------------------------
Item 5 - Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
-----------------
Item 6 - Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
--------------------------------
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
</TABLE>
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3
FIRST FINANCIAL CARIBBEAN CORPORATION
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS OF DOLLARS EXCEPT FOR SHARE INFORMATION)
<TABLE>
<CAPTION>
March 31, 1994 December 31, 1993
(unaudited) (audited)
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<S> <C> <C>
ASSETS
------
Cash and cash equivalents 40,981 37,307
Accounts receivable, net 22,161 22,816
Mortgage loans held for sale 264,096 272,077
Mortgage-backed securities held for sale 300,494 131,843
Mortgage notes receivable, net 383 403
Property, leasehold improvements and equipment, net 7,127 5,771
Cost in excess of fair value of net assets acquired 6,625 6,537
Real estate held for sale, net 2,578 2,928
Other assets 6,829 6,749
--------- --------
Total assets $ 651,274 $ 486,431
========= =========
Escrow funds (See contra) $ 65,925 $ 62,650
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Loans payable $ 194,463 $ 192,794
Securities sold under agreements to repurchase 289,385 143,200
Deposits 38,333 26,451
Advances from FHLB 2,128 2,431
Payables and accrued liabilities 38,983 38,402
Income tax payable 3,857 3,749
Deferred tax liability 3,627 2,460
--------- ---------
Total liabilities 570,776 409,487
--------- ---------
Stockholders' equity:
10.5% Cumulative Convertible Preferred Stock, Series A,
$1 par value, 2,000,000 shares authorized;
313,350 shares issued and outstanding (1993 - 414,413)
(liquidating preference of $10 per share, aggregating
$3,133,500) 313 414
Common stock, $1 par value, 10,000,000 shares authorized;
6,964,264 shares issued and outstanding (1993-6,762,138) 6,964 6,762
Paid-in capital 16,784 16,885
Retained earnings 56,756 53,219
--------- ---------
80,817 77,280
Treasury stock at par value, 14,000 shares (14) (14)
Unearned compensation under employment contracts (305) (322)
--------- ---------
Total stockholders' equity 80,498 76,944
--------- ---------
Commitments and contingencies --------- ---------
Total liabilities and stockholders' equity $ 651,274 $ 486,431
========= =========
Liability for escrow funds (See contra) $ 65,925 $ 62,650
========= =========
</TABLE>
The accompanying notes are an integral part of this statement.
<PAGE> 4
4
FIRST FINANCIAL CARIBBEAN CORPORATION
CONSOLIDATED STATEMENT OF INCOME AND RETAINED EARNINGS
(In thousands of dollars,
except for shares outstanding and per share data)
Unaudited
<TABLE>
<CAPTION>
Three-Month Period Ended
March 31,
1994 1993
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<S> <C> <C>
Revenues:
Mortgage loans sales and fees $ 3,475 $ 7,622
Servicing income 2,768 2,606
Interest income 8,724 5,106
Rental and other income 107 44
--------- ---------
15,074 15,378
Expenses:
Interest 3,571 2,282
Loan origination costs, administrative and general 7,801 6,063
--------- ---------
11,372 8,345
--------- ---------
Income before income taxes and cumulative effect of
change in accounting principle 3,702 7,033
--------- ---------
Income taxes:
Current 108 2,639
Deferred 287 153
--------- ---------
395 2,792
--------- ---------
Income before cumulative effect of change
in accounting principle 3,307 4,241
Cumulative effect of change in
accounting principle-adoption of SFAS 115, net of income
taxes of $880 1,215
--------- ---------
Net income 4,522 4,241
Retained earnings at beginning of period 53,219 35,042
Less cash dividends paid:
Convertible preferred stock (86) (134)
Common stock (899) (656)
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Retained earnings at end of period $ 56,756 $ 38,493
========= =========
Earnings per share:
Primary:
Income before cumulative effect of accounting change $ 0.47 $ 0.63
Cumulative effect 0.18
--------- ---------
Net Income $ 0.65 $ 0.63
========= =========
Fully Diluted:
Income before cumulative effect of accounting change $ 0.44 $ 0.56
Cumulative effect 0.16
--------- ---------
Net income 0.60 $ 0.56
========= =========
Weighted average number of shares outstanding:
Primary 6,840,433 6,555,174
========= =========
Fully diluted 7,576,964 7,576,964
========= =========
</TABLE>
The accompanying notes are an integral part of this statement.
<PAGE> 5
5
FIRST FINANCIAL CARIBBEAN CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands of dollars)
(unaudited)
<TABLE>
<CAPTION>
THREE-MONTH PERIOD ENDED
MARCH 31
1994 1993
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,522 $ 4,241
--------- --------
Adjustments to reconcile net income to net cash (used) provided by
operating activities:
Amortization of cost in excess of fair value of net assets acquired . . . 76 78
Amortization of purchased servicing rights . . . . . . . . . . . . . . . 180 123
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . 329 134
Cumulative effect of change in accounting principle . . . . . . . . . . (1,215)
Allowances for losses . . . . . . . . . . . . . . . . . . . . . . . . . 115 39
Decrease in mortgage loans held for sale . . . . . . . . . . . . . . . . 7,981 20,135
Increase in mortgage-backed securities . . . . . . . . . . . . . . . . . (166,115) (60,581)
Increase in interest receivable . . . . . . . . . . . . . . . . . . . . (1,059) (531)
Increase in loans payable . . . . . . . . . . . . . . . . . . . . . . . 1,669 41,177
Increase in interest payable . . . . . . . . . . . . . . . . . . . . . . 209 729
Increase (decrease) in securities sold under agreements to repurchase . 146,185 (24,823)
(Decrease) increase in payables and accrued liabilities . . . . . . . . (69) 20,142
Increase in income tax payable . . . . . . . . . . . . . . . . . . . . . 395 2,744
Amortization of unearned compensation under employment contracts . . . . 17 74
---------- --------
Total adjustments . . . . . . . . . . . . . . . . . . . . . . . . . (11,302) (560)
--------- --------
Net cash (used) provided by operating activities . . . . . . . . . . . . (6,780) 3,681
--------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of certificates of deposit . . . . . . . . . . . . . . . . . . (1,203)
Decrease in mortgage notes receivable . . . . . . . . . . . . . . . . . . 20 2,139
Decrease in accounts receivable . . . . . . . . . . . . . . . . . . . . . 1,599 610
Purchase of rental property, leasehold improvements and equipment . . . . (1,685) (626)
Additions to cost in excess of fair value of net assets acquired . . . . . (164) (174)
Proceeds from disposal of real estate held for sale . . . . . . . . . . . 788 460
Acquisition of real estate held for sale . . . . . . . . . . . . . . . . . (438) (19)
Servicing rights acquired . . . . . . . . . . . . . . . . . . . . . . . . (10)
(Increase) decrease in other assets . . . . . . . . . . . . . . . . . . . (260) 428
--------- --------
Net cash (used) provided by investing activities . . . . . . . . . . . . (140) 1,605
--------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,882
Dividends declared and paid . . . . . . . . . . . . . . . . . . . . . . . (985) (790)
Repayment of advances from FHLB . . . . . . . . . . . . . . . . . . . . . (303)
Decrease in loans payable related to mortgage notes receivable . . . . . . (2,139)
--------- --------
Net cash provided (used) by financing activities . . . . . . . . . . . 10,594 (2,929)
--------- --------
Net increase in cash and cash equivalents . . . . . . . . . . . . . . . . 3,674 2,357
Cash and cash equivalents at beginning of period . . . . . . . . . . . . . 37,307 18,687
--------- --------
Cash and cash equivalents at end of period . . . . . . . . . . . . . . . $ 40,981 $ 21,044
========== ========
</TABLE>
The accompanying notes are an integral part of this statement.
<PAGE> 6
6
FIRST FINANCIAL CARIBBEAN CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
a. The Consolidated Condensed Financial Statements (unaudited) have
been prepared in conformity with the accounting policies stated in
the Company's Annual Audited Financial Statements included in the
Company's 1993 Annual Report to Stockholders, and should be read in
conjunction with the Notes to the Consolidated Financial
Statements appearing in that report. All adjustments (consisting
only of normal recurring accruals) which are, in the opinion of
management, necessary for a fair presentation of results for the
interim periods have been reflected.
b. The results of operations for the three-month period ended March 31,
1994 are not necessarily indicative of the results to be expected
for the full year.
c. In January 1994, the Company adopted Statement of Financial
Accounting Standards No. 115 "Accounting for certain investments in
Debt and Equity Securities". The adoption of SFAS 115 requires the
Company to classify and account for investments in equity securities
that have readily determinable fair values and all investments in
debt securities according to three categories as follows:
- Debt securities that the enterprise has the positive
intent and ability to hold to maturity are classified as
held to maturity and reported at amortized cost.
- Debt and equity securities that are bought and held
principally for the purpose of selling them in the near
term are classified as trading and reported at fair
value, with unrealized gains and losses included in
earnings. Mortgage-backed securities held for sale in
conjunction with mortgage banking activities must be
classified as trading securities.
- Debt and equity securities not classified as either
held-to-maturity or trading are classified as available-
for-sale and reported at fair value, with unrealized
gains and losses excluded from earnings and reported in a
separate component of shareholders' equity.
The adoption of this standard resulted in the classification of
approximately $132 million in mortgage-backed securities as trading
securities and in the recognition of a net unrealized gain of
$1,215,000 as of January 1, 1994. In addition to the cumulative
effect, the adoption of SFAS 115 resulted in a decrease of mortgage
loan sales and fees of approximately $200,000 for the quarter ended
March 31, 1994.
d. Primary net income per share is determined by dividing net income,
after deducting preferred stock dividends, by the weighted average
number of shares of common stock outstanding considering the
dilutive effect of restricted stock awards. Fully diluted net
income per share has been computed based on the assumption that all
the shares of the Company's 10 1/2% Cumulative Convertible Preferred
Stock, Series A (the "Series A Preferred Stock") are converted into
common stock.
<PAGE> 7
7
e. Cash dividends per share paid for the three-month periods ended
March 31, 1994 and 1993 were as follows:
Three-Month Period Ended
March 31,
1994 1993
---- ----
Series A Preferred Stock $0.2625 $0.2625
Common Stock $0.13 $0.10
f. At March 31, 1994, escrow funds include approximately $9,837,000 of
escrow funds deposited with Doral Federal Savings Bank ("Doral
Federal"). These funds are included in the Company's financial
statements. Escrow Funds include approximately $56,088,000
deposited with other banks which are excluded from the Company's
assets and liabilities.
g. On October 25, 1993 the Company declared a two-for-one stock split
on its shares of common stock outstanding. The stock split was
effected in the form of a stock dividend of one additional share of
common stock for each share of common stock held of record date on
November 22, 1993. As a result, a total of 3,381,069 shares of
common stock were issued on December 10, 1993. Also as a result of
the stock split referred to above, each outstanding share of the
Company's Series A Preferred Stock is now convertible into two
shares of common stock at a conversion price of $5 per share.
For purposes of the computation of earnings per share and common
stock dividends per share, the stock split including the effect of
the preferred stock's change in the computation of common stock
equivalents, was retroactively recognized for the first quarter of
1993.
<PAGE> 8
8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
The interim Consolidated Condensed Statement of Cash Flows reflect the working
capital needs of the Company.
Operating activities used $6.8 million of net cash during the
three-month period ended March 31, 1994 versus $3.7 million provided in the
comparable period of 1993. The major changes were an increase of $146 million
in securities sold under agreements to repurchase and an increase of $166
million in mortgage-backed securities held for sale. Both increases related
to a decision made in the first quarter to increase holdings of mortgage-backed
securities to maximize net interest income produced by these securities, a
substantial portion of which is tax exempt to the Company under Puerto Rico
income tax law.
Investing activities used cash of $140,000 in the first three months of 1994
due primarily to purchases of furniture, equipment and leasehold improvements
of $1.7 million offset by a decrease in accounts receivable which produced
cash of $1.6 million. Acquisitions of real estate owned used cash of $438,000
while disposals contributed cash of $788,000. Acquisitions of servicing rights
were minimal since the Company prefers to increase its servicing portfolio
through internal originations.
During the first three months of 1994, financing activities provided $10.6
million of cash due to additional deposits attracted by the Company's thrift
subsidiary, Doral Federal, amounting to $11.9 million net of quarterly dividend
payments of $985,000 and repayment of advances to the Federal Home Loan Bank of
$303,000.
Total liabilities were approximately 7.1 and 5.3 times stockholders' equity at
March 31, 1994 and December 31, 1993, respectively. The increase leverage at
March 31, 1994 is due to a significant increase in securities sold under
agreements to repurchase as compared to December 31, 1993. The additional
debt was incurred to finance purchases of mortgage-backed securities for sale
and to earn a positive spread during the holding period.
FFCC borrows money under warehousing lines of credit to fund its
mortgage loan commitments and repays the borrowings as the mortgages are sold.
The warehousing lines of credit then become available for additional
borrowings. Included among FFCC's credit facilities are gestation or pre-sale
facilities which permit the Company to obtain more favorable rates once
mortgage loans have been pooled for securitization but prior to the actual
issuance of the mortgage-backed securities. FFCC held mortgage loans prior to
sale for an average period of approximately 128 days for the three-month period
ended March 31, 1994 and 98 days during the year ended December 31, 1993. The
increase in the days mortgage loans were held prior to sale is due to purchases
of mortgage-backed securities made in the first quarter. At March 31, 1994,
and December 31, 1993, FFCC had available warehousing lines of credit of $407.5
million and $257.5 million, respectively. At March 31, 1994 and December 31,
1993, FFCC had used approximately $118.5 million and $90.9 million,
respectively, of credit available under its warehousing lines of credit.
FFCC's warehousing lines of credit are generally terminable at the discretion
of the lender. Interest rate spreads on certain mortgage loans and
mortgage-backed securities in Puerto Rico have traditionally been higher than
in the mainland U.S. due to the ability of the Company to finance a significant
portion of its mortgage loans and mortgage-backed securities with lower-cost
tax advantaged funds.
<PAGE> 9
9
FFCC also obtains short-term financing through repurchase agreement lines of
credit with financial institutions and investment banking firms. Under these
agreements, FFCC sells GNMA, FNMA or FHLMC-guaranteed mortgage-backed
securities and simultaneously agrees to repurchase them at a future date at a
fixed price. FFCC uses the proceeds of such sales to repay borrowings under
its warehousing lines of credit. The effective cost of funds under repurchase
agreements is typically lower than the cost of funds borrowed under FFCC's
warehousing lines of credit. At March 31, 1994 and December 31, 1993, FFCC had
available repurchase agreement lines of credit in the amount of $215 million.
FFCC's continued use of repurchase agreements will depend on the cost of
repurchase agreements relative to the cost of borrowing under its lines of
credit with banks.
The monthly weighted average interest rate of FFCC's borrowings for warehousing
lines of credit and for repurchase agreement lines of credit was 4.25% and
3.34%, respectively, for the year ended December 31, 1993 compared to 4.54% for
warehousing lines of credit and 3.47% for repurchase agreements in each case
for the three-month period ended March 31, 1994.
Servicing agreements relating to the mortgage-backed securities programs of
FNMA, FHLMC and GNMA and certain other investors as well as mortgage loans sold
to certain other purchasers, require FFCC to advance funds to make scheduled
payments of principal, interest, taxes and insurance, if such payments have not
been received from the borrowers. Funds advanced by FFCC pursuant to these
arrangements are generally recovered by FFCC within two weeks. During the
three-month period ended March 31, 1994, the monthly average amount of funds
advanced by the Company under such servicing agreements was $2.9 million.
During the three-month period ended March 31, 1994, the Company collected an
average of $900,000 per month in net servicing fees, including late charges.
At March 31, 1994 and December 31, 1993, the servicing portfolio amounted to
approximately $2.5 billion and $2.4 billion, respectively. The Company may
from time to time in the future determine to sell portions of the servicing
portfolio to raise additional funds.
FFCC generally has been able to provide for its growth and expansion and for
continued liquidity with funds from short-term borrowing. FFCC expects that it
will have adequate resources to finance its operations.
The Company will continue to explore alternative and supplementary methods of
financing its operations, including both debt and equity financing. There can
be no assurance, however, that the Company will be successful in consummating
any such transactions.
Assets and Liabilities
At March 31 1994, total assets were $651 million compared to $486
million at December 31, 1993. This increase was primarily due to an increase
of $169 million in mortgage-backed securities held for sale as a direct result
of a decision made by the Company in the first quarter of 1994 to increase its
holdings of mortgage-backed securities in order to maximize interest income
produced by these securities. Total liabilities were $571 million at March 31,
1994 compared to $409 million at December 31, 1993. This increase was largely
the result of an increase in securities sold under agreements to repurchase
related to the financing of the higher level of mortgage-backed securities
holdings.
As of March 31, 1994, FFCC held approximately $2.6 million of real estate
owned, compared to $2.9 million as of December 31, 1993.
<PAGE> 10
10
Results of Operations for Quarters Ended March 31, 1994 and 1993
Revenues for the three-month period ended March 31, 1994 decreased by $304,000
compared to the three-month period ended March 31, 1993. Net income increased
to $4.5 million from $4.2 million for the comparable period of 1993. This
increase resulted from the one time effect of adopting SFAS 115, "Accounting
for Certain Investments in Debts and Equity Securities". The adoption of SFAS
115 produced a net unrealized gain of $1.2 million as of January 1, 1994.
Income before the cumulative effect of the adoption of SFAS 115 was $3.3
million compared to $4.2 for the comparable period of 1993. This decrease is
largely attributable to decreased gains on the sale of mortgage loans and
higher operating costs. The Company initiated a campaign to increase loan
processing fees and reduce operating expenses for the second quarter of 1994.
Revenues from mortgage loan sales and origination fees decreased to $3.5
million for the quarter ended March 31, 1994 from $7.6 million for the
comparable period of 1993 due to decreased gains on the sale of mortgage loans
and mortgage-backed securities related to increases in prevailing interests
rates, reduced fees as a result of competitive factors and a reduction in the
volume of loan originations. The total volume of loans originated was $268
million for the three-month period ended March 31, 1994 compared to $297
million for the three-month period ended March 31, 1993. The decrease in loan
originations was the result of decreased demand for mortgage loans, especially
refinancing loans, due to increases in mortgage interest rates.
Net interest income increased by approximately $2.3 million for the three-month
period ended March 31, 1994 versus the comparable period of 1993. This
increase was largely the result of carrying a significantly larger portfolio
of mortgage-backed securities. The weighted average interest rate spread was
428 basis points during the first quarter of 1994 compared to 412 basis points
for the comparable period of 1993.
Loan servicing income increased to approximately $2.8 million for the
three-month period ended March 31, 1994 compared to $2.6 million for the same
period in 1993. The relatively small increase in loan servicing income is due
primarily to the fact that during the first quarter of 1993, the Company
recorded as servicing income approximately $376,000 of excess servicing
realized in connection with the sale of mortgage loans. No such excess
servicing was recorded as servicing income during the first quarter of 1994.
Also, the amortization of excess servicing recorded in the prior year reduced
servicing income in the first quarter of 1994 by approximately $100,000. The
mortgage servicing portfolio was $2.5 billion at March 31, 1994, an increase of
$100 million over the December 31, 1993 level.
Other expenses (excluding interest expense) increased to $7.8 million during
the three-month period ended March 31, 1994 compared to $6.1 million for the
comparable period of 1993 as a result of increased staffing and costs
associated with higher mortgage activity levels experienced during the
preceding year.
The provision for income taxes decreased to $1.275 million for the
three-month period ended March 31, 1994, including $880,000 attributed to the
cumulative effect of adopting SFAS 115, compared to $2.7 million for the
three-months ended March 31, 1993, due to a decrease in income before taxes
together with a decrease in the effective tax rate from 40% to 22%. The
decrease in the effective income tax rate was due to primarily an increase in
the proportion of total income before taxes consisting of tax exempt income.
Interest on FHA and VA mortgages and GNMA mortgage-backed securities are tax
exempt under Puerto Rico law.
<PAGE> 11
12
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
Other than legal proceedings in the normal course of its business, the
Company is not a party to any material legal proceeding and, to the knowledge
of the Company's management, there are no material legal proceedings
threatened. In the opinion of the Company's management, the pending and
threatened legal proceedings of which management is aware will not have a
material adverse effect on the financial condition of the Company.
ITEM 2 - CHANGES IN SECURITIES
Not Applicable.
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES
Not Applicable.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable.
ITEM 5 - OTHER INFORMATION
Dividend declaration
On April 6, 1994, the Board of Directors authorized the declaration of a
cash dividend of $ 0.2625 per share to be paid on June 30, 1994 to shareholders
of record on June 10, 1994 of the Company's 10 1/2% Cumulative Convertible
Preferred Stock, Series A, and also authorized a quarterly $0.13 per share cash
dividend to be paid on June 3, 1994 to shareholders of record as of May 13,
1994 of the Company's Common Stock.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.26 - Financing Facility Agreement dated March 21, 1994, between
Nomura Asset Capital Corporation, FFCC and Doral Mortgage Corporation.
(b) Reports on Form 8-K
None.
<PAGE> 12
13
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 thereunto duly authorized.
FIRST FINANCIAL CARIBBEAN CORPORATION
(Registrant)
Date: March 13, 1994
------------------------------
Salomon Levis
Chairman of the Board
and Chief Executive Officer
Date: March 13, 1994 /s/ Richard F. Bonini
------------------------------
Richard F. Bonini
Senior Executive Vice President
and Secretary
Date: March 13, 1994 /s/ Luis Alvarado
------------------------------
Luis Alvarado
Executive Vice President
Chief Financial Officer and
Principal Accounting Officer
<PAGE> 13
14
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIALLY
NUMBERED
DESCRIPTION PAGE
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<S> <C> <C> <C>
10.26 - Financing Facility Agreement dated March 21, 1994, between
Nomura Asset Capital Corporation, FFCC and Doral Mortgage
Corporation.
</TABLE>
<PAGE> 1
EXHIBIT 10.26
NOMURA ASSET CAPITAL CORPORATION
MORTGAGE FUNDING PROGRAM
FINANCING FACILITY AGREEMENT
DATED: MARCH 21, 1994
BETWEEN
NOMURA ASSET CAPITAL CORPORATION, AS THE LENDER
AND
FIRST FINANCIAL CARIBBEAN CORPORATION,
AND
DORAL MORTGAGE CORPORATION, EACH A BORROWER
The Lender has agreed to establish for the benefit of each Borrower a Mortgage
Loan Financing Facility (the "Financing Facility") upon the terms set forth
herein. Capitalized terms used but not defined herein have meanings set forth
in the Pledge Agreement, dated the date hereof, between the Borrower and Lender
(the "Pledge Agreement"). As used herein, the term "Borrower" shall mean First
Financial Caribbean Corporation ("FFCC") if FFCC is the Borrower under an
Advance hereunder or Doral Mortgage Corporation ("DMC") if DMC is the Borrower
under an Advance hereunder.
1. Financing Facility. The Borrower shall have the right to request from time
to time that the Lender make loans to the Borrower secured by mortgage loans
(each, an "Advance" and, collectively, the "Advances"). The Lender shall
consider each such request and make such Advances as the Lender in its sole
discretion determines, provided that the Lender shall not be obligated to make
any Advance pursuant to this Agreement. Each Advance shall be evidenced by a
master promissory note duly executed by the Borrower (the "Promissory Note")
and the related Notice of Advance in the form attached hereto ("Notice of
Advance"). The principal amount of the Promissory Note shall be the aggregate
principal amount of the Advances that may be outstanding at any one time (the
"Maximum Loan Amount"). Interest on the Promissory Note shall be payable only
for the periods during which the Advances evidenced thereby are outstanding,
and the Promissory Note shall be enforceable only to the extent of the unpaid
aggregate principal amount of the Advances then outstanding, plus accrued and
unpaid interest thereon and any other amounts due thereunder.
2. Advances. The Borrower shall request each Advance by notifying the Lender
in writing of the principal amount, specified term and funding date of the
proposed Advance. The Lender may in its sole discretion notify the Borrower
that it is willing to make an Advance, specifying the terms including the
interest rate per annum (the "Quoted Rate") on the proposed Advance. Within
one (1) hour of receipt
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of such notice, if the Borrower elects to borrow the Advance, the Borrower
shall notify the Lender by fully executing and delivering to the Lender a
Notice of Advance. On the date specified in the Notice of Advance, the Lender
will make its Advance to the Borrower upon the satisfaction of the conditions
precedent to such Advance set forth in Section 4 hereof. Promptly thereafter,
the Lender will send to the Borrower a written confirmation of such Advance
(each, a "Confirmation"), and the Borrower's acceptance of the related proceeds
shall constitute the Borrower's agreement to the terms of such Confirmation.
Such Confirmation may be termed a "Repo Confirmation", but for purposes hereof
the term "Repo", when used in any such Confirmation, shall be deemed to mean
"Advance." Upon each disbursement of funds by the Lender pursuant to a Notice
of Advance, the Borrower shall have effected a borrowing from the Lender
hereunder and shall be obligated to repay to the Lender, on the date specified
in the Notice of Advance in United States dollars and in same day funds, the
principal amount thereof plus interest thereon, all in accordance with the
terms of this Agreement, the Promissory Note and the Notice of Advance. In
taking any action pursuant to the Facility Documents, the Lender may
conclusively rely upon, and shall incur no liability to the Borrower in acting
upon, any request or other communication that the Lender believes to have been
given or made by a person authorized to borrow on the Borrower's behalf,
whether or not such person is listed on the certificate delivered pursuant to
Section 4.1.4 hereof.
3. Representations, Warranties and Covenants. The Borrower hereby represents,
warrants and covenants as follows:
3.1 The Borrower is a corporation duly organized, validly existing
and in good standing under the laws of its jurisdiction of
incorporation and the Borrower's principal place of business,
and the Borrower is in compliance with applicable law.
3.2. The Borrower is an approved seller/servicer or issuer in good
standing with each Agency to which Agency Mortgage Loans will
be submitted.
3.3. The Borrower's execution, delivery and performance of the
Facility Documents are within the Borrower's charter and
corporate powers, have been duly authorized by all necessary
corporate action, and do not contravene the Borrower's charter
or bylaws or any rule, regulation or other law or contractual
restriction affecting the Borrower or the Borrower's property.
3.4 Other than the necessary filings with the Agencies regarding
the Collateral (to the extent that the Collateral includes
Agency Mortgage Loans), no authorization or approval or other
action by, and no notice to or filing with, any governmental
authority or regulatory body is required for the Borrower's
due execution, delivery and performance of the Facility
Documents.
3.5 The Facility Documents are the Borrower's legal, valid and
binding obligations, enforceable against the Borrower in
accordance with their respective terms.
3.6 The available balance sheets, statements of income and changes
in financial condition of the Borrower and the Borrower's
subsidiaries as of the Borrower's most recently
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completed fiscal year and quarter, fairly present the
Borrower's financial condition and results of operations for
the period then ended and are in accordance with generally
accepted accounting principles consistently applied, and
copies of such statements, together with the most recent
opinion with respect to such statements of an independent
public accounting firm, have been provided to the Lender, and
since such date there has been no material adverse change in
such financial condition, operations or business prospects.
3.7 There is no pending or threatened action or
proceeding affecting the Borrower or any of the Borrower's
subsidiaries before any court, governmental agency or
arbitrator, that may materially and adversely affect the
financial condition, operations or business prospects of the
Borrower or any of the Borrower's subsidiaries.
3.8 At any time any Advance is made or shall be
outstanding, the Collateral Value of the items of Collateral
related to such Advance shall be as set forth in the Notice
of Advance. To the extent that a deficiency in Collateral
Value exists, the Borrower shall promptly cure any such
deficiency by delivering cash, securities or other additional
Collateral acceptable to the Lender.
3.9 The Borrower is duly licensed, qualified and
in good standing in every state in which the Borrower
transacts business.
3.10 The Facility Documents are not entered into in
contemplation of insolvency or with any intent to hinder,
delay or defraud any of the Borrower's creditors.
4. CONDITIONS PRECEDENT.
4.1 Initial Advance. As conditions precedent to
the making of the initial Advance, the Lender shall have
received on or before the day of such Advance the following,
in form and substance satisfactory to the Lender and duly
executed by the Borrower.
4.1.1 The Facility Documents.
4.1.2 Evidence that all other actions necessary or,
in the sole discretion of the Lender, desirable to
perfect and protect the security interests and liens
created by the Pledge Agreement have been taken.
4.1.3 A certified copy of the Borrower's corporate
resolutions approving the Facility Documents and
borrowings thereunder (either specifically or by
general resolution approving borrowings of the type
described in the Facility Documents), and all
documents evidencing other necessary corporate action
or governmental approvals as may be required in
connection with the Facility Documents.
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4.1.4 A certificate of the Borrower's Corporate Secretary or
Assistant Secretary certifying the names, true signatures and
titles of the Borrower's officers duly authorized to request
Advances and to sign the Facility Documents and the other
documents to be delivered thereunder.
4.1.5 A favorable opinion of the Borrower's counsel, which may be
internal counsel, as to such matters as the Lender may
reasonably request.
4.1.6 All the documents set forth in paragraph 4.2 below.
4.2 Additional Advances. As conditions precedent to making Advances
subsequent to the initial Advance hereunder, (1) the requested Advance,
together with the outstanding principal balance of all prior Advances,
shall not exceed the Maximum Loan Amount and (2) the Lender shall have
received on or before the day of such Advance the following, in form
and substance satisfactory to the Lender and duly executed:
4.2.1 A Notice of Advance and the related Collateral Receipt;
4.2.2 If the Collateral is subject to a security interest or lien
immediately prior to the Advance, a letter from the holder of
such security interest or lien releasing the Collateral from
such security interest or lien upon receipt of a stated sum
that is less than or equal to the related Advance;
4.2.3 If the Collateral consists of Agency Mortgage Loans, either (A)
an assignment by the Borrower to Nomura Securities
International, Inc. ("NSI") of the related Purchase Commitment,
in form and substance acceptable to the Lender in its sole
discretion, or (B) evidence that the Borrower has instructed
the relevant Agency to pay the purchase price for such Agency
Mortgage Loans under the related Purchase Commitment directly
to the Lender or its designee, unless otherwise agreed by the
Lender;
4.2.4 If the Collateral consists of Nonagency Mortgage Loans,
evidence that such Nonagency Mortgage Loans are covered
by pool insurance and a pool insurance certificate (not a
commitment to insure) issued by a Pool Insurer, in form and
substance and for such amounts acceptable to the Lender in its
sole discretion, unless otherwise agreed by the Lender or, if
the Nonagency Mortgage Loans are intended to back
mortgage-backed securities issued by Borrower, a subsidiary or
affiliate of the Borrower or trust created by any of the
foregoing, the delivery of such Nonagency Mortgage Loans will
constitute a representation of the Borrower that such Nonagency
Mortgage Loans are the type and quality usually included in a
securitized pool consisting of such assets which would be
eligible for credit enhancement by Financial Security Assurance
(or such other insurer acceptable to the Lender) and which
would expect to issue a security which would be rated in the
highest generic rating category by a nationally recognized
statistical rating agency; and
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4.2.5 Such other documents as the Lender may reasonably request.
5. Term. The term of the Financing Facility shall commence as of the date of
this Agreement and shall terminate upon notice from the Lender or the Borrower.
Termination shall not affect the Borrower's obligations with respect to any
Advances outstanding at the time of such termination or shall not be effective
with respect to any Advances made prior to the Lender's receipt of notice
thereof. The Borrower's obligation to indemnify the Lender pursuant to this
Agreement shall survive the termination hereof.
6. Indemnification. The Borrower shall indemnify and hold harmless the Lender
from and against all reasonable losses, costs, expenses and other liabilities,
including without limitation fees and expenses of counsel, that the Lender may
sustain in the enforcement of its rights hereunder.
7. Notices. Any notices or other communications permitted or required hereunder
shall be in writing and shall be deemed conclusively to have been given if (a)
personally delivered, (b) mailed by registered or certified mail, postage
prepaid, and return receipt requested, (c) sent by express courier delivery
service and received by the party to whom it is sent or (d) transmitted by
telex or facsimile transmission (or any other type of electronic transmission
agreed upon by the parties) and confirmed by a writing given by means of (a),
(b) or (c).
8. Miscellaneous. All rights and obligations hereunder of the Lender,
but not the Borrower, are assignable. No supplement, modification, waiver or
termination of this Agreement or any provision hereof shall be binding unless
executed in writing by the parties to be bound thereby. No waiver of any of
the provisions of this Agreement shall constitute a waiver of any other
provisions nor shall such waiver constitute a continuing waiver unless
otherwise expressly provided. This Agreement and the Facility Documents
constitute the entire agreement among the parties hereto pertaining to the
subject matter hereof and supersedes all prior and contemporaneous agreements.
This Agreement shall be construed in accordance with, and governed by, the law
of the State of New York, without giving effect to the conflict of law
principles thereof. The Borrower hereby waives trial by jury and hereby
irrevocably consents to the non-exclusive jurisdiction of any court of the
State of New York, or in the United States District Court for the Southern
District of New York, arising out of or relating to the Facility Documents in
any action or proceeding. The Borrower hereby submits and waives any objection
that the Borrower may have to personal jurisdiction and venue in the courts of
the State of New York and United States District Court for the Southern
District of New York, over any disputes arising out of or relating to and
transaction hereunder.
9. Joint and Several. The joint and several obligations of each Borrower
hereunder is absolute, unconditional, irrevocable, present and continuing and,
with respect to any payment to be made to Lender, is a guaranty of payment (and
not of collectability) and is in no way conditional or contingent upon the
continued existence of the other Borrower and is not and will not be subject to
any setoffs. Any notice or other communication provided to one Borrower
pursuant hereto shall be deemed to have been given to both Borrowers and
failure to be sent any notice or communication contemplated hereby shall not
relieve a Borrower from its joint and several liability for the obligations of
the other Borrower hereunder.
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IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first written above.
NOMURA ASSET CAPITAL CORPORATION
By: /s/ James K. Lieblich
------------------------------
Name: James K. Lieblich
Title: Director
Sworn to before me
this 16th day of March, 1994
/s/ James Klee Finkel
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Notary Public
FIRST FINANCIAL CARIBBEAN CORPORATION
By: /s/ Alfredo Casals
-------------------------------
Name: Alfredo Casals
Title: Assistant to Chairman & CEO
Affidavit No. 32155
Sworn to and subscribed to before me in San Juan, Puerto Rico on the
15 day of March, 1994, by the following person personally known to me,
personally, of legal age, married, business executive and a resident of San
Juan, Puerto Rico, in his capacity as above stated of First Financial Caribbean
Corporation.
--------------------------------
Notary Public
DORAL MORTGAGE CORPORATION
By: /s/ Nancy Hernandez
-------------------------
Name: Nancy Hernandez
Title: President
Affidavit No. 32159
Sworn to and subscribed to before me in San Juan, Puerto Rico on the
15 day of March, 1994, by the following person personally known to me,
personally, of legal age, married, business executive and a resident of San
Juan, Puerto Rico, in his capacity as President of Doral Mortgage Corporation.
---------------------------------
Notary Public
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NOTICE OF ADVANCE NO. _________
Nomura Asset Capital Corporation
2 World Financial Plaza
Building B, 21st Floor
New York, New York 10281
Attention: James K. Lieblich
Facsimile (212) 667-1044
RE: Agency/Nonagency __________Identification/Pool # __________
Security Rate _________ % Maturity:___________________
Pursuant to the Financing Facility Agreement, dated ________, 199_,
between Nomura Asset Capital Corporation (the "Lender") and the undersigned
(as amended from time to time, the "Facility Agreement"), the undersigned
hereby gives notice of its election to borrow from the Lender an Advance and,
in connection therewith, sets forth below the following information (each
capitalized term used herein shall have the meaning specified therefor in the
Facility Agreement):
1. The aggregate unpaid principal of the Mortgage Loans is
$_______________.
2. The principal amount of this Advance is $________________.
3. The Quoted Rate for this Advance is _____% per annum.
4. The beginning Business Day of this Advance is _______________,
199__.
5. The Maturity Date of this Advance is ______________, 199__.
6. The Collateral Value of the items of Collateral shall be
_________%.
7. If applicable, the aggregate principal amount of the Mortgage
Loans that are secured by second or third liens on the related mortgage
property is $____________, which represents __________% of the Mortgage Loans.
The undersigned hereby certifies that the following statements are
true and correct on the date hereof and shall be true and correct on the date
of the Advance requested herein, before and after giving effect thereto: (a)
each of the representations and warranties contained in the Facility Agreement
and the Pledge Agreement are true and correct in all material respects, (b) no
Default or Event of Default (as such terms are defined in the Pledge Agreement)
has occurred and is continuing, (c) if applicable, the undersigned has,
coincident or prior to this Notice of Advance, delivered and validly assigned
genuine and enforceable Purchase Commitments to NSI for Agency Mortgage Loans
or an Agency Security or to the Lender for Nonagency Mortgage Loans, each in an
aggregate amount equal to the Face Value of the Pool, and (d) Customer has
satisfied all of the conditions precedent in Section 4 of the Facility
Agreement.
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The Advance made pursuant hereto shall be made in connection with the
items of Collateral described in the Collateral Receipt No. __________, dated
_______________, 199__.
____________________________, as Customer
By:______________________________________
Name:____________________________________
Title:___________________________________
Date:__________________, 199__
