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, 2001
[ ] 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)
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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___
PART I - FINANCIAL INFORMATION
ITEM 1. - Financial Statements
THE FIRST CONNECTICUT CAPITAL CORPORATION
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BALANCE SHEET, SEPTEMBER 30, 2001
(Dollars in thousands, except share data)
(Unaudited)
ASSETS 2001
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Cash and cash equivalents $ 420
Restricted cash 44
Loans - net of allowance for loan losses of $45 $ 2,810
Loans held for sale 989
Accrued interest receivable 6
Servicing rights 72
Fixed assets 13
Deferred income taxes 554
Other assets 51
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TOTAL ASSETS $ 4,958
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LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Line of credit $ 2,246
Accounts payable and other accrued expenses 21
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TOTAL LIABILITIES 2,267
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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 (7,148)
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TOTAL STOCKHOLDERS' EQUITY 2,692
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 4,958
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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 SIX MONTHS ENDED SEPTEMBER 30, 2001 AND 2000
(Dollars in thousands, except share data)
(Unaudited)
Three Months Six Months Three Months Six Months
Ended Ended Ended Ended
Sep. 30, 2001 Sep. 30,2001 Sep. 30, 2000 Sep. 30, 2000
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INTEREST INCOME:
Interest and fees on loans $ 160 $ 315 $ 160 $ 279
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INTEREST EXPENSE:
Interest expense on line of credit 62 123 28 76
Other interest expense 4 7 3 8
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TOTAL INTEREST EXPENSE 66 130 31 84
NET INTEREST INCOME 94 185 129 195
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OTHER OPERATING INCOME:
Servicing fees 135 251 83 168
Other fees 9 17 8 15
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Total other operating income 144 268 91 183
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TOTAL INCOME 238 453 220 378
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OTHER OPERATING EXPENSES:
Officers' salaries 35 87 35 71
Other salaries 12 25 9 18
Directors' fees -- 1 -- 1
Professional services 5 10 8 15
Collection expenses 4 10 1 1
Miscellaneous taxes 5 10 4 7
Employee and general insurance 10 21 11 22
Rent 8 16 8 16
Amortization of servicng rights -- -- 12 12
Corporate insurance expenses 5 10 6 11
Licenses, dues and subscriptions expenses 2 3 2 3
Communications 1 5 3 5
Advertising and promotions 1 2 1 2
Stock record and other financial expenses 2 6 3 8
Depreciation 1 2 2 5
Equipment and auto rental 3 7 3 6
Postage expenses 1 5 1 2
Office supplies 1 2 2 3
Other 1 7 2 5
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Total other operating expenses 97 229 113 213
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INCOME BEFORE INCOME TAX (PROVISION) BENEFIT 141 224 107 165
INCOME TAX (PROVISION) PROVISION (5) (10) (14) 31
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NET INCOME $ 136 $ 214 $ 93 $ 196
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INCOME PER COMMON SHARE (BASIC AND DILUTED) $ 0.12 $ 0.18 $ 0.08 $ 0.17
=========== =========== =========== ===========
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 SIX MONTHS ENDED SEPTEMBER 30, 2001
(Dollars in thousands, except share data)
(Unaudited)
Common Stock Additional Total
Number Of Paid - In Accumulated Stockholders'
Shares Amount Capital Deficit Equity
------ ------ ------- ------- ------
BALANCE, April 1, 2001 1,173,382 $ 587 $ 9,253 ($ 7,362) $ 2,478
Net Income 214 214
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BALANCE, September 30, 2001 1,173,382 $ 587 $ 9,253 ($ 7,148) $ 2,692
========= ========= ========= ========= =========
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 SIX MONTHS ENDED SEPTEMBER 30, 2001 AND 2000
(Dollars in thousands)
(Unaudited)
2001 2000
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OPERATING ACTIVITIES
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Net income $ 214 $ 196
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Deferred taxes -- (45)
Depreciation 2 5
Amortization of servicing rights -- 12
Origination of loans held for sale (8,120) (6,226)
Proceeds from sales of loans held for sale 8,105 6,004
Changes in assets and liabilities:
Increase in restricted cash -- (1)
Increase in accrued interest receivable (2) (1)
( Increase) decrease in other assets (4) 4
Decrease in accounts payable and other accrued expenses (9) (16)
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Net cash provided by (used in) operating activities 186 (68)
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INVESTING ACTIVITIES
Originations of loans 74 --
Principal collected on loans 2 105
Purchase of fixed assets -- (3)
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Net cash provided by investing activities 76 102
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FINANCING ACTIVITIES
Decrease in line of credit borrowings (74) (95)
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Net cash used in financing activities (74) (95)
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INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 188 (61)
CASH AND CASH EQUIVALENTS, BEGINNING 232 327
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CASH AND CASH EQUIVALENTS, ENDING $ 420 $ 266
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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, 2002. 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, 2001.
Certain amounts in the 2000 financial statements have been reclassified
to conform to the 2001 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 $214,000 for the six months ended
September 30, 2001 compared to net income of $196,000 for the six months ended
September 30, 2000. The increase of $18,000 is due to the increase of $83,000
collected in servicing fees. This was offset by an increase of $47,000 of
interest paid on the Corporation's line of credit and the increase of $16,000 in
officers' salaries.
INTEREST INCOME AND OTHER OPERATING INCOME
Interest and fees on loans increased $36,000 for the six months ended
September 30, 2001, as compared to the six months ended September 30, 2000. This
increase was primarily due to an increase in the number 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 generally favorable climate for the construction industries.
We continue to provide construction financing to a segment of the market whose
price range is less affected by economic conditions.
Servicing fees increased by $83,000 for the six months ended September
30, 2001, 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, the increase in the Limited
Partnership portfolios and the decrease of the interest rate paid on the
Corporation's line of credit.
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THE FIRST CONNECTICUT CAPITAL CORPORATION
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OTHER OPERATING EXPENSE
Total other operating expenses increased by $16,000 during the six
months ended September 30, 2001, as compared to the comparable period of the
prior year. This increase is due to the increase of $23,000 in officers'
salaries, and other salaries, offset by the decrease of $5,000 in Professional
services.
INCOME TAX PROVISION (BENEFIT)
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A net income tax provision of $10,000 was recorded for the six months
ended September 30, 2001, as compared to $31,000 tax benefit for the six months
ended September 30, 2000, which primarily reflects the current provision and the
reduction of the valuation allowance against net operating loss carryforwards
(NOLS), based on management's assessment of the amount of NOLS that will more
likely than not 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 commercial 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.
Attractive long-term mortgage rates are expected to encourage more spec
building, which should result in increased construction loan demand. Based upon
the continuing favorable climate in the construction industry in Connecticut,
the Corporation will expect to increase 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 continue to experience 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 ways to reduce expenses while at the
same time increase market activity of its products and services. Management is
continuing to actively pursue strategic acquisitions or mergers of other finance
companies in order to implement its business plan. The Corporation has also
engaged the service of an investment advisor to assist in maximizing
stockholders value. In connection with the above, certain members of the
Corporation's management (including certain members of the board of directors)
have indicated they may be interested in purchasing the operating assets of the
Corporation. The Board of Directors has indicated that it would consider such a
proposal when and if specific proposed terms and conditions are present.
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THE FIRST CONNECTICUT CAPITAL CORPORATION
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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 is for a term
of one year at an interest rate of 2.5% over the Wall Street Prime Rate and will
expire on December 1, 2001. This line is collateralized by an assignment of
notes and mortgages equal to the amount of the loan. At September 30, 2001, and
September 30, 2000 there was $2,246,000 and $1,623,000 advanced on this line of
credit, respectively. The Corporation is hopeful that this established long-term
conventional banking relationship will continue to grow and enable the
Corporation to increase its volume of business.
FINANCIAL RESOURCES
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As of September 30, 2001, the Corporation had $420,000 of unrestricted
cash and cash equivalents and approximately $2,692,000 of Stockholders' Equity.
The Corporation currently anticipates that during the year ending March
31, 2002, 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, 2002. 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. Due to the aforementioned line of credit, the Corporation
feels it will be able to meet these cash requirements. The Corporation also
continues to decrease its cash flow requirements by monitoring all expenses.
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 25, 2001 By: _________________________________
Lawrence R. Yurdin
President
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