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, 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
(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)
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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
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APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
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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
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Transitional Small Business Format: Yes No X
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PART I - FINANCIAL INFORMATION
ITEM 1. - Financial Statements
THE FIRST CONNECTICUT CAPITAL CORPORATION
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BALANCE SHEET, DECEMBER 31, 2000
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
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(UNAUDITED)
ASSETS 2000
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Cash and cash equivalents $ 115
Restricted cash 43
Loans - net of allowance for loan losses of $45 2,160
Loans held for sale 988
Accrued interest receivable 8
Servicing rights 132
Fixed assets 14
Deferred income taxes 614
Other assets 54
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TOTAL ASSETS $ 4,128
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LIABILITIES AND STOCKHOLDERS' EQUITY
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LIABILITIES
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Line of credit $ 1,551
Accounts payable and other accrued expenses 46
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TOTAL LIABILITIES 1,597
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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 (7,309)
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TOTAL STOCKHOLDERS' EQUITY 2,531
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 4,128
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See notes to condensed financial statements.
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THE FIRST CONNECTICUT CAPITAL CORPORATION
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STATEMENTS OF INCOME
FOR THE THREE AND NINE MONTHS ENDED DECEMBER 31, 2000 AND 1999
(Dollars in thousands, except share data)
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(Unaudited)
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Three Months Nine Months Three Months Nine Months
Ended Ended Ended Ended
Dec 31, 2000 Dec 31, 2000 Dec 31, 1999 Dec 31, 1999
------------ ------------ ------------ ------------
INTEREST INCOME:
Interest and fees on loans $ 130 $ 409 $ 121 $ 421
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INTEREST EXPENSE:
Interest expense on line of credit 54 130 22 34
Other interest expense 3 11 3 14
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TOTAL INTEREST EXPENSE 57 141 25 48
NET INTEREST INCOME 73 268 96 373
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OTHER OPERATING INCOME:
Servicing fees 89 257 81 152
Other fees 7 22 11 24
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Total other operating income 96 279 92 176
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TOTAL INCOME 169 547 188 549
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OTHER OPERATING EXPENSES:
Officers' salaries 44 115 44 111
Other salaries 14 32 11 28
Directors' fees -- 1 -- 2
Professional services 8 23 10 29
Miscellaneous taxes 4 11 4 11
Employee and general insurance 11 33 10 27
Rent 7 23 7 22
Amortization of servicng rights (4) 8 -- --
Corporate insurance expenses 5 16 5 15
Licenses, dues and subscriptions expenses 1 4 2 6
Communications 3 8 3 9
Advertising and promotions 1 3 -- 3
Stock record and other financial expenses 4 12 4 12
Depreciation 2 7 2 7
Equipment and auto rental 3 9 3 10
Postage expenses 2 4 2 4
Office supplies -- 3 1 5
Loss on note receivable -- -- 322 322
Other 11 17 5 18
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Total other operating expenses 116 329 435 641
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INCOME BEFORE INCOME TAX BENEFIT 53 218 (247) (92)
INCOME TAX (PROVISION) BENEFIT 11 42 (20) 120
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NET INCOME $ 64 $ 260 ($ 267) $ 28
=========== =========== =========== ===========
INCOME PER COMMON SHARE (BASIC AND DILUTED) $ 0.05 $ 0.22 ($ 0.23) $ 0.02
=========== =========== =========== ===========
Weighted average number of
common shares outstanding (basic and diluted) 1,173,382 1,173,382 1,173,382 1,173,382
=========== =========== =========== ===========
See notes to condensed financial statements.
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THE FIRST CONNECTICUT CAPITAL CORPORATION
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STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED DECEMBER 31, 2000
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
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(UNAUDITED)
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COMMON STOCK
------------ TOTAL
NUMBER OF ADDITIONAL ACCUMULATED STOCKHOLDERS'
SHARES AMOUNT PAID - IN CAPITAL DEFICIT EQUITY
--------- ------- ------------------ -------- ---------
BALANCE, April 1,2000 1,173,382 $ 587 $ 9,253 ($ 7,569) $ 2,271
Net Income 260 260
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BALANCE, December 31, 2000 1,173,382 $ 587 $ 9,253 ($ 7,309) $ 2,531
========= ========= ========= ========= =========
See notes to condensed financial statements.
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THE FIRST CONNECTICUT CAPITAL CORPORATION
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STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED DECEMBER 31, 2000 AND 1999
(DOLLARS IN THOUSANDS)
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(UNAUDITED)
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2000 1999
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OPERATING ACTIVITIES
Net income $ 260 $ 28
Adjustments to reconcile net income to net cash
used in operating activities:
Deferred taxes (60) (123)
Depreciation 7 7
Amortization of servicing rights 8 --
Interest accretion on note receivable -- (15)
Loss on note receivable -- 322
Origination of loans held for sale (9,520) (11,675)
Proceeds from sales of loans held for sale 9,091 10,161
Increase in accrued interest receivable (2) (1)
Increase in other assets (10) (21)
Increase (decrease) in accounts payable and other accrued expenses 1 (193)
Increase in restricted cash (1) (2)
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Net cash used in operating activities (226) (1,512)
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INVESTING ACTIVITIES
Originations of loans -- --
Net decrease on loans 186 24
Purchase of fixed assets (5) --
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Net cash provided by investing activities 181 24
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FINANCING ACTIVITIES
(Decrease) increase in line of credit borrowings (167) 1,260
Principal collected on note receivable -- 50
Decrease in Partnership loans -- 30
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Net cash (used in) provided by financing activities (167) 1,340
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DECREASE IN CASH AND CASH EQUIVALENTS (212) (148)
CASH AND CASH EQUIVALENTS, BEGINNING 327 385
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CASH AND CASH EQUIVALENTS, ENDING $ 115 $ 237
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See notes to condensed financial statements.
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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 $260,000 for the nine months ended
December 31, 2000 compared to net income of $28,000 for the nine months ended
December 31, 1999. The increase of $232,000 is due primarily to an increase in
servicing fees, partially offset by an increase in interest paid on line of
credit, and a one time write-off of a note receivable recorded in December of
1999.
INTEREST INCOME AND OTHER OPERATING INCOME
Interest and fees on loans decreased $12,000 for the nine months
ended December 31, 2000, as compared to the nine months ended December 31, 1999.
This decrease was primarily due to a decrease in the number of mortgage loans
originated and funded by the Corporation. This is traditionally a slower quarter
due in part to weather and the holiday season. 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 that the construction
market will remain strong in the near and mid-terms. We continue to provide
construction financing to a segment of the market whose price range is less
affected by economic conditions.
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THE FIRST CONNECTICUT CAPITAL CORPORATION
Servicing fees increased by $105,000 for the nine months ended December 31,
2000, as compared to the same period in the prior year. This increase is due to
an increase in servicing fees earned on the Corporation's 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 the Loan and Real Property Purchase
Agreement.
OTHER OPERATING EXPENSE
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Total other operating expenses decreased by $312,000 during the nine
months ended December 31, 2000, as compared to the comparable period of the
prior year. This decrease is due to the write off an unsecured note receivable
of $322,000 recorded in December of 1999. This note predates the Corporation's
short-term mortgage program and relates to the liquidation of the portfolio sold
under the Loan and Real Property Purchase Agreement date June 29, 1993 (and
amended on October 29, 1993). For the current period the Corporation showed an
increase in officers' and other salaries of $8,000, an increase in employee and
general insurance of $6,000 and the increase in amortization of servicing rights
of $8,000 partially offset by a reduction in professional services and various
other expense categories. Management believes that significant further reduction
of other operating expenses will be difficult to achieve, based on the extensive
reductions that have already been effected.
INCOME TAX BENEFIT
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An income tax benefit of $42,000 was recorded for the nine months
ended December 31, 2000, as compared to $120,000 for the nine months ended
December 31, 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
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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 this area. Management is cognizant that
residential construction is seasonal in nature, as well as sensitive to changing
interest rates. Loan demand, in general however, remains steady. We are
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THE FIRST CONNECTICUT CAPITAL CORPORATION
experiencing an increase in "repeat business" from our growing list of
contractors/borrowers primarily due to our streamlined application and closing
process. We continue to provide prompt, professional and personalized service
which is extremely attractive, as well as unique, in today's lending
environment.
The Corporation continues to seek other forms of short-term financing
opportunities while at the same time, exercising conservative and responsible
underwriting standards. All of our financing application undergo strict
underwriting guidelines which include conservative loan to value ratios, minimal
credit standards and feasible exit strategies.
Management continues to work with our investment advisers relative to a plan to
increase shareholder value. We hope to be able to present the shareholders with
more detail in the foreseeable future.
LINE OF CREDIT
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On December 15, 2000 the Corporation closed its third Commercial Line
of Credit with Hudson United Bank. This $3,000,000 line of credit will expire on
December 1, 2001. 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
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As of December 31, 2000, the Corporation had $115,000 of unrestricted
cash and cash equivalents and approximately $2.531 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.
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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 2, 2001 By:_________________________________
Lawrence R. Yurdin
President
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