U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB/A
(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
-----------------------------------------
(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
--------------------------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(203) 944-5400
--------------
(ISSUER'S TELEPHONE NUMBER)
----------------------------------------------------
(FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR,
IF CHANGED SINCE LAST REPORT)
Check whether the issuer (1) filed all reports required to be filed
by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for
such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days. Yes X No
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
- -----------------------------------------
BALANCE SHEET, SEPTEMBER 30, 2001
(Dollars in thousands, except share data)
- -----------------------------------------
(Unaudited)
- -----------
ASSETS 2001
- ------ ----
Cash and cash equivalents $420
Restricted cash 44
Loans - net of allowance for loan losses of $612 2,278
Loans held for sale 989
Accrued interest receivable 6
Servicing rights 72
Fixed assets 13
Deferred income taxes 554
Other assets 51
-------
TOTAL ASSETS $4,427
=======
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
LIABILITIES
- -----------
Line of credit $2,246
Accounts payable and other accrued expenses 21
-------
TOTAL LIABILITIES 2,267
-------
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 (7,680)
-------
TOTAL STOCKHOLDERS' EQUITY 2,160
-------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $4,427
=======
See notes to condensed financial statements.
2
THE FIRST CONNECTICUT CAPITAL CORPORATION
- -----------------------------------------
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
------------- ------------ ------------- -------------
INTEREST INCOME:
Interest and fees on loans $160 $315 $160 $279
----------- ---------- ---------- -----------
INTEREST EXPENSE:
Interest expense on line of credit 62 123 28 76
Other interest expense 4 7 3 8
----------- ---------- ---------- -----------
TOTAL INTEREST EXPENSE 66 130 31 84
NET INTEREST INCOME 94 185 129 195
----------- ---------- ---------- -----------
Reserve for loan losses, net 13 12 - -
----------- ---------- ---------- -----------
NET INTEREST INCOME AFTER RESERVE FOR LOAN LOSSES 81 173 129 195
OTHER OPERATING INCOME:
Servicing fees 135 251 83 168
Other fees 9 17 8 15
----------- ---------- ---------- -----------
Total other operating income 144 268 91 183
----------- ---------- ---------- -----------
TOTAL INCOME 225 441 220 378
----------- ---------- ---------- -----------
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
----------- ---------- ---------- -----------
Total other operating expenses 97 229 113 213
----------- ---------- ---------- -----------
INCOME BEFORE INCOME TAX (PROVISION) BENEFIT 128 212 107 165
INCOME TAX (PROVISION) PROVISION (5) (10) (14) 31
----------- ---------- ---------- -----------
NET INCOME $123 $202 $93 $196
=========== ========== ========== ===========
INCOME PER COMMON SHARE (BASIC AND DILUTED) $0.10 $0.17 $0.08 $0.17
=========== ========== ========== ===========
Weighted average number of
common shares outstanding: basic 1,173,382 1,173,382 1,173,382 1,173,382
=========== ========== ========== ===========
common shares outstanding: diluted 1,185,711 1,178,857 1,173,382 1,173,382
=========== ========== ========== ===========
See notes to condensed financial statements.
3
THE FIRST CONNECTICUT CAPITAL CORPORATION
- -----------------------------------------
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2001
(Dollars in thousands, except share data)
- -----------------------------------------
(Unaudited)
- -----------
Common Stock Total
------------ -----
Number Of Additional Accumulated Stockholders'
Shares Amount Paid-In Capital Deficit Equity
------ ------ --------------- ------- ------
BALANCE, April 1, 2001 1,173,382 $587 $9,253 ($7,882) $1,958
Net Income 202 202
----------- --------- ---------- ------------- -------------
BALANCE, September 30, 2001 1,173,382 $587 $9,253 ($7,680) $2,160
=========== ========= ========== ============= =============
See notes to condensed financial statements.
4
THE FIRST CONNECTICUT CAPITAL CORPORATION
- -----------------------------------------
STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2001 AND 2000
(Dollars in thousands)
- ----------------------
(Unaudited)
- -----------
2001 2000
---- ----
OPERATING ACTIVITIES
- --------------------
Net income $202 $196
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Deferred taxes - (45)
Depreciation 2 5
Provision for loan losses 12 -
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)
---------- --------------------
Net cash provided by (used in) operating activities 186 (68)
---------- --------------------
INVESTING ACTIVITIES
- --------------------
Principal collected on loans 76 105
Purchase of fixed assets - (3)
---------- --------------------
Net cash provided by investing activities 76 102
---------- --------------------
FINANCING ACTIVITIES
- --------------------
Decrease in line of credit borrowings (74) (95)
---------- --------------------
Net cash used in financing activities (74) (95)
---------- --------------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 188 (61)
CASH AND CASH EQUIVALENTS, BEGINNING 232 327
---------- --------------------
CASH AND CASH EQUIVALENTS, ENDING $420 $266
========== ====================
See notes to condensed financial statements.
5
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/A for the year ended March 31, 2001.
Certain amounts in the 2000 financial statements have been
reclassified to conform to the 2001 presentation.
NOTE B - RESTATEMENT
The Corporation's management has restated the 10-KSB for the fiscal
year ended March 31, 2001 based on information obtained after the close of the
Corporation's fiscal year. This restatement related to the adjustment of certain
loan values which were adjusted to reflect current market values as of March 31,
2001. This restatement reduced net income and shareholders' equity by $520,000
for the year ended March 31, 2001. The effects of this restatement for the six
months ended September 30, 2001 was to reduce shareholders' equity by $532,000
and decrease net income by $12,000 from previously reported results.
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 $202,000 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 $6,000 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, the increase of $16,000 in
officers' salaries and the of 13,000 to the Corporation's provision for loan
losses.
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.
6
THE FIRST CONNECTICUT CAPITAL 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.
PROVISION FOR LOAN LOSSES
- -------------------------
For the six months ending September 30, 2001 the Corporation recorded
a $12,000 provision for loan losses due to the quarterly review of the loan
portfolio. No such provision was recorded in the six months ending September 30,
2000.
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)
- ------------------------------
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
- -----------------
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.
7
THE FIRST CONNECTICUT CAPITAL CORPORATION
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.
LINE OF CREDIT
- --------------
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
- -------------------
As of September 30, 2001, the Corporation had $420,000 of
unrestricted cash and cash equivalents and approximately $2,160,000 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.
8
THE FIRST CONNECTICUT CAPITAL CORPORATION
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
Form 8K filed December 5, 2001
Form 8K filed February 11, 2002
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 12, 2002 By: _________________________________
Lawrence R. Yurdin
President
9