THE FIRST CONNECTICUT CAPITAL CORPORATION

                              FINANCIAL STATEMENTS
                        AND INDEPENDENT AUDITORS' REPORT

                          AS OF AND FOR THE YEARS ENDED
                             MARCH 31, 2002 AND 2001

























<PAGE>


                    THE FIRST CONNECTICUT CAPITAL CORPORATION
              FINANCIAL STATEMENTS AND INDEPENDENT AUDITORS' REPORT
                   FOR THE YEARS ENDED MARCH 31, 2002 AND 2001



                                TABLE OF CONTENTS

                                                                          PAGE

INDEPENDENT AUDITORS' REPORT                                               1

FINANCIAL STATEMENTS:

             Balance Sheets                                                2

             Statements of Income                                          3

             Statements of Changes in Stockholders' Equity                 4

             Statements of Cash Flows                                      5

             Notes to Financial Statements                                 6















<PAGE>






                          INDEPENDENT AUDITOR'S REPORT


To the Board of Directors and Stockholders of
The First Connecticut Capital Corporation:

We have audited the balance sheets of The First Connecticut Capital Corporation
(a Connecticut corporation) as of March 31, 2002 and 2001, and the related
statements of income, changes in stockholders' equity, and cash flows for the
years then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, such financial statements present fairly, in all material
respects, the financial position of The First Connecticut Capital Corporation as
of March 31, 2002 and 2001, and the results of its operations and its cash flows
for the years then ended in conformity with accounting principles generally
accepted in the United States of America.




/s/ SASLOW LUFKIN & BUGGY, LLP
------------------------------
Saslow Lufkin & Buggy, LLP
Hartford, Connecticut

May 21, 2002










<PAGE>

<TABLE>
<CAPTION>

                    The First Connecticut Capital Corporation
                                 Balance Sheets
                             March 31, 2002 and 2001
                    (DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)






                                     ASSETS

                                                            2002          2001
                                                            ----          ----

<S>                                                        <C>          <C>
Cash and cash equivalents                                  $   437      $   232
Restricted cash                                               --             44
Loans, net of allowance of
   $594 in 2002 and $600 in 2001                             2,172        2,366
Loans due from related parties                                 225           50
Loans held for sale                                          1,355          923
Due from partnerships                                           92         --
Fixed assets                                                    16           15
Mortgage servicing rights                                       69           72
Deferred income taxes                                          250          554
Other assets                                                   125           52
                                                           -------      -------

      Total assets                                         $ 4,741      $ 4,308
                                                           =======      =======


                      LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES

Line of credit                                             $ 2,441      $ 2,320
Accounts payable related parties                               203         --
Accounts payable and accrued expenses                           94           30
                                                           -------      -------
      Total liabilities                                      2,738        2,350

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          587
Paid-in capital                                              9,253        9,253
Accumulated deficit                                         (7,837)      (7,882)
                                                           -------      -------
      Total stockholders' equity                             2,003        1,958
                                                           -------      -------

      Total liabilities and stockholders' equity           $ 4,741      $ 4,308
                                                           =======      =======




   THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
</TABLE>





                                      -2-
<PAGE>
<TABLE>
<CAPTION>


                    The First Connecticut Capital Corporation
                              Statements of Income
                   For the Years Ended March 31, 2002 and 2001
                    (DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)



                                                                         2002           2001
                                                                         ----           ----

INTEREST INCOME
<S>                                                                  <C>            <C>
Interest and fees on loans                                           $       663    $       589
                                                                     -----------    -----------

Interest expense on line of credit                                           229            180
Other interest expense                                                        13             15
                                                                     -----------    -----------
        Total interest expense                                               242            195
                                                                     -----------    -----------

        Net interest income                                                  421            394

(Reduction) provision for loan losses                                         (6)           555
                                                                     -----------    -----------

        Net interest income (loss) after provision for loan losses           427           (161)
                                                                     -----------    -----------

OTHER OPERATING INCOME
Servicing fees                                                               156             77
Net gains on sales of loans held for sale                                    335            303
Other fees                                                                    66             26
                                                                     -----------    -----------
        Total other operating income                                         557            406
                                                                     -----------    -----------

        Total income                                                         984            245

OTHER OPERATING EXPENSES
Officers' salaries                                                           178            152
Other salaries                                                                55             44
Directors' fees                                                                3              1
Professional services                                                        103             26
Miscellaneous taxes                                                           19             16
Employee and general insurance                                                48             45
Note receivable loss                                                          10           --
Rent                                                                          31             31
Amortization of servicing rights                                              72            140
Corporate insurance expenses                                                  22             22
Licenses, dues and subscriptions                                               9              5
Communications                                                                 8             10
Advertising and promotions                                                     7              4
Stock record and other financial expenses                                     12             10
Depreciation                                                                   5              6
Equipment and auto rental                                                     14             12
Postage, office and other expenses                                            28             29
                                                                     -----------    -----------
        Total other operating expenses                                       624            553

Income (loss) before income taxes                                            360           (308)
Income tax provision                                                         315              5
                                                                     -----------    -----------
        Net income (loss)                                            $        45    $      (313)
                                                                     ===========    ===========
Income (loss) per common share (basic and diluted)                   $       .04    $      (.27)
                                                                     ===========    ===========

Weighted average number of common shares
   outstanding: (basic)                                                1,173,382      1,173,382
                                                                     ===========    ===========
                (diluted)                                              1,186,630      1,173,382
                                                                     ===========    ===========



   THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
</TABLE>





                                      -3-
<PAGE>
<TABLE>
<CAPTION>


                    The First Connecticut Capital Corporation
                  Statements of Changes in Stockholders' Equity
                   For the Years Ended March 31, 2002 and 2001
                    (DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)


                                                                              TOTAL
                               COMMON STOCK         PAID-IN   ACCUMULATED  STOCKHOLDERS'
                            SHARES      AMOUNT      CAPITAL     DEFICIT       EQUITY
                            ------      ------      -------     -------       ------


<S>                      <C>         <C>         <C>         <C>          <C>
Balance, April 1, 2000    1,173,382   $     587   $   9,253   $  (7,569)   $   2,271

Net loss                       --          --          --          (313)        (313)
                          ---------   ---------   ---------   ---------    ---------

Balance, March 31, 2001   1,173,382         587       9,253      (7,882)       1,958

Net income                     --          --          --            45           45
                          ---------   ---------   ---------   ---------    ---------

Balance, March 31, 2002   1,173,382   $     587   $   9,253   $  (7,837)   $   2,003
                          =========   =========   =========   =========    =========




   THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
</TABLE>





                                      -4-
<PAGE>
<TABLE>
<CAPTION>


                    The First Connecticut Capital Corporation
                            Statements of Cash Flows
                   For the Years Ended March 31, 2002 and 2001
                             (DOLLARS IN THOUSANDS)

                                                                    2002        2001
                                                                    ----        ----

OPERATING ACTIVITIES
<S>                                                               <C>         <C>
Net income (loss)                                                 $     45    $   (313)
Adjustments to reconcile net income (loss) to net
   cash provided by (used in) operating activities:
Depreciation                                                             5           6
(Reduction) provision for loan losses                                   (6)        555
Amortization of servicing rights                                        72         140
   Net gain on sales of loans held for sale                            (69)        (71)
   Decrease in deferred taxes                                          304        --
Origination of loans held for sale                                 (13,821)    (10,458)
Proceeds from sales of loans held for sale                          13,389      10,044
Changes in assets and liabilities:
   Decrease (increase) in restricted cash                               44          (2)
   Increase in other assets                                            (73)         (2)
   Increase (decrease) in accounts payable and accrued expenses        267         (15)
                                                                  --------    --------
Net cash provided by (used in) operating activities                    157        (116)
                                                                  --------    --------

INVESTING ACTIVITIES
Originations of loans                                               (3,132)     (2,844)
Principal collected on loans                                         3,157       2,268
Purchases of fixed assets                                               (6)         (5)
                                                                  --------    --------
Net cash provided by (used in) investing activities                     19        (581)
                                                                  --------    --------

FINANCING ACTIVITIES
Increase in line of credit borrowings                                  121         602
Advances and amounts due from partnerships                             (92)       --
                                                                  --------    --------
Net cash provided by financing activities                               29         602
                                                                  --------    --------

Increase (decrease) in cash                                            205         (95)

Cash and cash equivalents, beginning of year                           232         327
                                                                  --------    --------

Cash and cash equivalents, end of year                            $    437    $    232
                                                                  ========    ========

           Supplemental disclosure of cash flow information:
Cash paid for interest                                            $    234    $    195
                                                                  ========    ========
Cash paid for taxes                                               $     11    $      5
                                                                  ========    ========

   THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
</TABLE>




                                      -5-
<PAGE>


                    The First Connecticut Capital Corporation
                          Notes to Financial Statements
                   For the Years Ended March 31, 2002 and 2001
                  (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)



NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

COMPANY OPERATIONS - The First Connecticut Capital Corporation (the
"Corporation") is engaged in the mortgage banking business, which involves the
origination, purchase, sale and servicing of mortgage loans secured by
residential or commercial real estate. The Corporation's revenues consist of
loan servicing fees, loan origination fees, interest on mortgage loans held
prior to sale and gains from the sale of loans and mortgage servicing rights.
Mortgage loans that are originated or purchased by the Corporation may be
resold. The Corporation also engages in mortgage servicing of its own Portfolio
Loan Program, which includes the processing and administration of mortgage loan
payments and remitting principal and interest to purchasers.

LOANS - Loans are generally recorded at the principal amount outstanding less
any net deferred loan fees. Loan origination and commitment fees, as well as
certain direct origination costs, are recognized as interest income over the
term of the loans using a method that approximates the interest method. Interest
rates on loans are fixed at the time of issuance and are based upon current
market rates at the time. Outstanding loans are payable in a variety of methods
over a term generally not exceeding one year, all loans are collateralized by
liens on real properties; a few of such properties are subject to prior liens.
Interest income on loans is recognized based on rates applied to principal
amounts outstanding. In connection with most loans, the borrower also pays a
nonrefundable fee to the Corporation. Loans are generally placed on non-accrual
status when they become 180 days past due or earlier, if the loan is considered
impaired.

Any unpaid amounts previously accrued on these loans are reversed from income.
Subsequent cash receipts are applied to the outstanding principal balance or to
interest income if, in the judgment of management, collection of the outstanding
principal is not in question. Loans are removed from non-accrual status when
they become current as to both principal and interest and when subsequent
performance reduces the concern as to the collectibility of principal and
interest.

LOANS HELD FOR SALE - Mortgage loans originated and intended for sale in the
secondary market are carried at the lower of cost or fair value in the
aggregate. Net unrealized losses are recognized through a valuation allowance
charged to income. Net fees and costs associated with originating and acquiring
loans held for sale are deferred and are included in the basis for determining
the gain or loss on sales of loans held for sale. Gains on sales are recorded at
the settlement date and cost is determined on a specific identification basis.




                                      -6-
<PAGE>


                   The First Connecticut Capital Corporation
                          Notes to Financial Statements
                   For the Years Ended March 31, 2002 and 2001
                  (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)




NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

ALLOWANCE FOR LOAN LOSSES - The allowance for loan losses is determined by
management on a loan-by-loan basis. The allowance is an amount that management
believes will be adequate to absorb losses on existing loans that may become
un-collectible based on evaluations of the collectibility of the loans. The
evaluations take into consideration such factors as geographic location,
assessment of collateral quality, appraisals of significant collateral and other
conditions that may affect the borrower's ability to repay. The allowance is
increased by the provision charged to earnings and reduced by charge-offs, net
of recoveries. Loans are charged off to the extent they are deemed
uncollectible. The amount of the allowance for loan losses is highly dependent
upon management's estimates of variables affecting valuation, appraisals of
collateral, evaluations of performance and status, and the amount and timing of
future cash flows expected to be received on impaired loans. Such estimates,
appraisals, evaluations and cash flows may be subject to frequent adjustments
due to changing economic prospects of borrowers or properties. These estimates
are reviewed periodically and adjustments, if necessary, are recorded in the
provision for loan losses in the periods in which they become known.

Certain impaired loans are measured based on the present value of expected
future cash flows discounted at the loan's effective interest rate or, as a
practical expedient, at the loan's observable market price or the estimated fair
value of the collateral if the loan is collateral dependent.

CONCENTRATION OF CREDIT RISKS - The nature of the Corporation's business is to
fund and service mortgages to qualified borrowers within the northeastern United
States, primarily in the state of Connecticut where management has the most
experience. The mortgage loans are predominately collateralized by residential
properties; however, there are a few smaller commercial properties as well as
some vacant land. The Corporation maintains a strict real estate appraisal
policy as well as underwriting guidelines.

CASH AND CASH EQUIVALENTS - The Corporation has defined cash as including cash
on hand and cash in interest bearing and non-interest bearing operating bank
accounts. Highly liquid investments such as time deposits with an original
maturity of three months or less are considered to be cash equivalents. At times
during the year the Corporation's cash balances exceed federal depository
insurance limits of $100,000.

RESTRICTED CASH - Restricted cash is composed of a certificate of deposit, which
is being maintained as collateral for the Corporation's standby letter of
credit. The Corporation is no longer required to maintain this letter of credit
at March 31, 2002.




                                      -7-
<PAGE>


                   The First Connecticut Capital Corporation
                          Notes to Financial Statements
                   For the Years Ended March 31, 2002 and 2001
                  (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)



NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

INCOME TAXES - The Corporation follows the asset and liability method, whereby
deferred tax assets and liabilities are recognized for the future consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax basis.

Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled.

FIXED ASSETS - Fixed assets are carried at original cost. Depreciation is
provided for primarily by using accelerated depreciation methods over the
estimated service lives as follows:

               Improvements                              31 years
               Furniture and Fixtures                   3-5 years
               Equipment                                3-5 years

Maintenance and repairs costs are expensed as incurred.

MORTGAGE SERVICING RIGHTS - The Corporation recorded an asset related to
servicing of loans. This asset is affected by the predominant risk
characteristics of the underlying financial assets and, accordingly, the
Corporation periodically assesses the asset for impairment. Since the underlying
financial assets primarily represent loans collateralized by first mortgages,
the servicing rights asset encompasses risks commonly associated with mortgage
loans. Mortgage servicing rights are amortized over the period of the estimated
net servicing income which is generally less than one year as the Corporation's
loan portfolio is short term in nature. The Corporation's loans are generally
under one year in nature. Estimation of a valuation allowance to reduce the
servicing rights asset to fair value involves evaluating the characteristics of
the underlying assets including interest rates, estimated remaining lives, dates
of origination, terms, and geographic location.

INCOME PER COMMON SHARE - Basic earnings per share ("EPS") is based on the
weighted average number of common shares outstanding for the period, excluding
the effects of any potentially dilutive securities. Diluted EPS reflects the
potential dilution that could occur if securities or other contracts to issue
common stock were exercised or converted. Net income per share is calculated by
dividing net income by the weighted average number of common shares outstanding
during the period.




                                      -8-
<PAGE>


                   The First Connecticut Capital Corporation
                          Notes to Financial Statements
                   For the Years Ended March 31, 2002 and 2001
                  (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)



NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

INCOME PER COMMON SHARE (CONTINUED) - Basic and dilutive income per share was
calculated using the following number of shares:

                                                       2002            2001
                                                       ----            ----
        Average shares outstanding                  1,173,382       1,173,382
                                                    ---------       ---------

        Basic shares                                1,173,382       1,173,382
        Net dilutive effect of options                 13,248            --
                                                    ---------       ---------
        Diluted shares                              1,186,630       1,173,382
                                                    =========       =========

STOCK OPTIONS - As allowed by Financial Accounting Standard No. 123, the
Corporation accounts for stock-based compensation using the intrinsic value
method under Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees."

The Company generally awards options for a fixed number of shares at an option
price equal to the fair value at the date of grant. The Company has adopted the
disclosure-only provisions of FASB's Statement of Financial Accounting Standards
No. 123, "Accounting for Stock-Based Compensation" (FAS 123).

USE OF ESTIMATES - The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenue and expenses during the reporting periods. Actual results could differ
significantly from those estimates.

NEW ACCOUNTING PRONOUNCEMENTS - In December 2001, the AICPA's Accounting
Standards Executive Committee issued Statement of Position 01-6, "Accounting by
Certain Entities That Lend to or Finance the Activities of Others". This SOP
reconciles and conforms, as appropriate, the accounting and financial reporting
provisions established by the AICPA's Audit and Accounting Guide for Banks and
Savings Institutions and the Audit and Accounting Guide for Financial Companies.
This statement is effective for the fiscal years beginning after December 15,
2001. Management does not believe that adoption of this statement will
significantly impact the Corporation's financial statements.





                                      -9-
<PAGE>


                   The First Connecticut Capital Corporation
                          Notes to Financial Statements
                   For the Years Ended March 31, 2002 and 2001
                  (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)




NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

RECLASSIFICATIONS - Certain reclassifications were made to the 2001 financial
statements to conform to the 2002 presentation. The 2001 financial statements
reflect a $294 reclassification from servicing fees to interest and fees on
loans as the Company had previously recorded interest earned from loans held for
investment purposes and loans held for sale as servicing fees. In addition, the
2001 financial statements reflect a $231 reclassification from interest and fees
on loans to net gains on sales of loans held for sale as the Company had
previously recorded the origination fees on loans which were sold as interest
and fees on loans and not as a component of the overall loan balance and
therefore not recognizing the actual gain on sale.

NOTE 2 - PARTNERSHIPS

On March 21, 1996, the Corporation formed a Limited Partnership (the "Limited
Partnership A") known as First Connecticut Capital Mortgage Fund A, Limited
Partnership of which the Corporation is the General Partner.

The purpose of this entity is to sell units in the Limited Partnership to
investors in a private placement, up to a maximum of $5,000 in $50 units, for
the purpose of funding a short-term Portfolio Loan Program for the Limited
Partnership. The limited partners will be restricted to investors who qualify as
"Accredited Investors", as defined in Regulation D, promulgated under the
Securities Act of 1933.

This program generates income to the Corporation in the form of loan origination
fees and servicing fees in excess of stipulated income returns to the limited
partners in connection with mortgage loans that are purchased by the Limited
Partnership from the funds invested by the limited partners. The Corporation
does not guarantee a return of capital or interest to the limited partners.

On June 26, 2001 the Corporation established a second private placement offering
to be known as First Connecticut Capital Mortgage Fund B, Limited Partnership
(the "Limited Partnership Fund B") of which the Corporation is the General
Partner. The purpose of the new Limited Partnership Fund B is to sell units to
investors in a private placement, up to a maximum of $5,000 in $50 units, for
the purpose of supplying additional funding to a short-term Portfolio Loan
Program. The partners will also be limited to investors who qualify as
"Accredited Investors". The Corporation does not guarantee a return of capital
or interest to the limited partners.




                                      -10-
<PAGE>


                   The First Connecticut Capital Corporation
                          Notes to Financial Statements
                   For the Years Ended March 31, 2002 and 2001
                  (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)




NOTE 2 - PARTNERSHIPS (CONTINUED)

As of March 31, 2002 and 2001, the Corporation had a one-percent interest in the
Limited Partnership Fund "A" with a recorded investment balance of $43 and $13,
which is accounted for on the equity method of accounting and included within
other assets. The following presents un-audited summarized financial information
for the Limited Partnership as of and for the years ended December 31, 2001 and
2000, the Limited Partnership's fiscal year end:

                                                      2001              2000
                                                      ----              -----
      Total assets (principally consisting
          of mortgages receivable)                 $    4,837        $    4,645
      Total liabilities                                    71                42
      Total partnership capital                         4,765             4,603
      Total revenues                                      597               560
      Net income                                           12                44

As of March 31, 2002, the Corporation had a one-percent interest in the Limited
Partnership Fund "B" with a recorded investment balance of $12, which is
accounted for on the equity method of accounting and included within other
assets. The following presents un-audited summarized financial information for
the Limited Partnership as of and for the year ended December 31, 2001, the
Limited Partnership's fiscal year end:

                                                               2001
                                                               ----
      Total assets (principally consisting
          of mortgages receivable)                          $    813
      Total liabilities                                            6
      Total partnership capital                                  807
      Total revenues                                              31
      Net loss                                                    (1)

The Corporation has not consolidated their investments in the partnerships as
the limited partners can remove the Corporation as the General Partner through a
simple majority vote without cause and therefore the Corporation does not
believe that it has an overall controlling interest within the Partnerships.


NOTE 3 - LOANS AND ALLOWANCE FOR LOAN LOSSES

Loans and allowance for loan losses at March 31 are as follows:

                                                    2002          2001
                                                    ----          ----
Loans                                             $ 2,766       $ 2,966
Allowance for loan losses                            (594)         (600)
                                                  -------       -------
Total                                             $ 2,172       $ 2,366
                                                  =======       =======



                                      -11-
<PAGE>


                   The First Connecticut Capital Corporation
                          Notes to Financial Statements
                   For the Years Ended March 31, 2002 and 2001
                  (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)


NOTE 3 - LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)

      Loans due from related parties           $      225        $       50
                                               ==========        ==========

      Loans held for sale                      $    1,355        $      923
                                               ==========        ==========

Changes in the allowance for loan losses are summarized as follows for the years
ended March 31:

                                                   2002              2001
                                                   ----              ----
      Beginning balance                      $      600        $       45
      Provisions                                     (6)              555
      Charge-offs                                     -                 -
      Recoveries                                      -                 -
                                             ----------        ----------
      Ending balance                         $      594        $      600
                                             ==========        ==========

No valuation allowance has been established for the loans held for sale or loans
due from related parties as of March 31, 2002 and 2001.

Loans and loans held for sale have interest rates ranging between 12% and 15%.
None of the Corporation's loans have a recourse provision.

At March 31, 2002, the Corporation has impaired loans of $628 and a related
allowance of $569, as compared to $646 of impaired loans and a related allowance
for investment losses of $565 at March 31, 2001.

The average impaired loans for the years ended March 31, 2002 and 2001 was $637
and $658, respectively, and the income recorded on these (under the cash basis
method) loans identified as impaired totaled $66 and $69, respectively. Loans on
which the accrual of interest has been discontinued for the years ended March
31, 2002 and 2001 amounted to $25 and $253, respectively. If those loans had
been current throughout their term, interest income would have increased $2 and
$34 for the years ended March 31, 2002 and 2001.

In 2001 the Corporation engaged a loan portfolio valuation company to evaluate
the Corporation's loan portfolio in order to obtain an independent opinion as to
a reasonable sales price for such loan assets on the secondary market and/or in
connection with a private transaction as discussed in Note 13. The portfolio
valuation company noted that within the Corporation's loan portfolio are three
SBIC loans that were originated in the early 1980's. The loan valuation company
deemed these loans to be impaired due to the nature of their collateral (1st
mortgage liens on select properties which may have environmental issues) as well
as other negative factors.


                                      -12-
<PAGE>





                   The First Connecticut Capital Corporation
                          Notes to Financial Statements
                   For the Years Ended March 31, 2002 and 2001
                  (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)




NOTE 3 - LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)

The Corporation has elected to write-down the three loans to the loans
observable market prices based upon the above discussed appraisal. The effect of
this write-down of $520 is included within the $555 increase in the allowance
for loan losses for 2001.

Loans serviced for the benefit of others totaled $11,442 and $10,412 for the
years ended March 31, 2002 and 2001, respectively.

NOTE 4 - FIXED ASSETS

At March 31, the costs and related accumulated depreciation of the Corporation's
fixed assets were as follows:

                                                        2002             2001
                                                        ----             ----
                  Improvements                    $        7       $        7
                  Equipment                               49               43
                                                  ----------       ----------
                  Fixed assets at cost                    56               50
                  Accumulated depreciation               (40)             (35)
                                                  ----------       ----------
                  Fixed assets - net              $       16       $       15
                                                  ==========       ==========

NOTE 5 - MORTGAGE SERVICING RIGHTS

Mortgage servicing rights are summarized as follows:

                                                            2002           2001
                                                            ----           ----
                  Balance at beginning of year, net   $       72     $      140
                     Originations                             69             72
                     Amortization                            (72)          (140)
                                                      ----------     ----------
                  Balance at end of year, net         $       69     $       72
                                                      ==========     ==========

The estimated fair value of capitalized mortgage servicing rights is based on
estimated cash flows discounted using rates commensurate with risks involved.
Assumptions regarding prepayments, defaults and interest rates are determined
using available market information. No valuation allowance was recorded at March
31, 2002 and 2001, based on the characteristics of the underlying financial
assets.




                                      -13-
<PAGE>





                   The First Connecticut Capital Corporation
                          Notes to Financial Statements
                   For the Years Ended March 31, 2002 and 2001
                  (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)





NOTE 6 - INCOME TAXES

The income tax provision consists of the following for the years ended March 31:

                                                        2002             2001
                                                        ----             ----
                  Current:
                     Federal                      $        -       $        -
                     State                                11                5
                                                  ----------       ----------
                  Total current:                          11                5
                                                  ----------       ----------

                  Deferred:
                     Federal                             304                -
                     State                                 -                -
                                                  ----------       ----------
                  Total deferred                         304                -
                                                  ----------       ----------

                  Total income tax provision      $      315       $        5
                                                  ==========       ==========

The state income tax currently payable for both years consists of the minimum
tax and tax on capital.

A reconciliation of the income tax provision computed by applying the federal
and state statutory rates to income before taxes to the actual income tax
provision for the years ended March 31 is as follows:

                                                           2002           2001
                                                           ----           ----
       Federal income tax provision
          at statutory rate                          $      109     $      (94)
       State income tax, net of
          federal benefit                                    11              5
       Valuation allowance adjustment and other             195             94
                                                     ----------     ----------
       Total                                         $      315     $        5
                                                     ==========     ==========

The components of the net deferred tax asset at March 31 are as follows:

                                                           2002          2001
                                                           ----          ----
             Deferred tax asset:
                Net operating loss carryforwards     $    2,558    $    2,674
                Loan loss reserves                          178           180
                Valuation allowance                      (2,486)       (2,300)
                                                     ----------    ----------
             Net deferred tax asset                  $      250    $      554
                                                     ==========    ==========


                                      -14-
<PAGE>




                   The First Connecticut Capital Corporation
                          Notes to Financial Statements
                   For the Years Ended March 31, 2002 and 2001
                  (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)





NOTE 6 - INCOME TAXES (CONTINUED)

The deferred tax asset results primarily from net operating loss carryforwards
(NOLS). Management has evaluated the available evidence about future taxable
income. The valuation allowance reduces the deferred tax asset related to the
NOLS to management's best estimate of the amount of such deferred tax asset that
more likely than not will be realized. The valuation allowance was increased by
$186 and $71 for years ended March 31, 2002 and 2001, respectively. This
increase is due primarily to a change in the expected utilization of NOLS based
on current net income projections and a decrease in the estimated realizability
of the deferred tax asset. The Corporation's deferred tax asset may ultimately
become impaired and not realized if the Corporation were to change ownership or
if management were to purchase the assets and liabilities of the Corporation,
see Note 13.

At March 31, 2002, the Corporation had available federal net operating loss
carryforwards of $8,527, for income tax purposes, which expire from 2003 to
2016.

NOTE 7 - LINE OF CREDIT

The Corporation has a commercial line of credit with Hudson United Bank dated
February 27, 2002. This $3,000 line of credit is for a term of one year and
interest is computed at 2.5% over the Wall Street Prime Rate. The effective
interest rate (Wall Street Prime Rate plus 2.5%) at March 31, 2002 and 2001 was
7.25% and 11.0%, respectively.

The line of credit is collateralized by an assignment of notes and mortgages
equal to the amount of the loan. At March 31, 2002 and 2001, there was $2,441
and $2,320 advanced on this line of credit, respectively. In addition, the bank
has a security interest in all assets of the Corporation as a result of the line
of credit.

The Corporation was in violation with certain bank line of credit financial
covenants as of March 31, 2002 and 2001. These covenants, which are tested
annually, are: a) debt to worth ratio not to exceed 1 to 1 and b) net worth
requirement of $2,000. Hudson United Bank has waved the violation of the debt to
worth ratio covenant for the year ended March 31, 2002 and the violation of the
debt to worth ratio covenant and the net worth requirement for the year ended
March 31, 2001. On May 20, 2002 the line of credit was increased to $3,500 and
extended to June 30, 2003.

The Corporation's liquidity is highly dependent upon the banks credit line. If
the credit facility was not in place the Corporation would seek other similar or
alternative financing sources.




                                      -15-
<PAGE>




                   The First Connecticut Capital Corporation
                          Notes to Financial Statements
                   For the Years Ended March 31, 2002 and 2001
                  (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)





NOTE 8 - TRANSACTIONS WITH AFFILIATES

Affiliates include directors and officers of the Corporation and members of
their immediate families and companies, which have a 5% or more ownership in the
Corporation.

Legal services, including representation of the Corporation on the closing of
all new loans, foreclosure proceedings on delinquent loans and general corporate
and security matters are provided by a firm in which a director of the
Corporation is a principal. Fees for these services were $1 for the years ended
March 31, 2002 and 2001.

As of March 31, 2002, the Corporation is servicing two loans equal to $500 ($225
which is owned and retained by the Corporation) to Sonny Field, LLC. The
President of Sonny Field, LLC, is a director of the Corporation. The loan is
collateralized by a first mortgage on property owned by Sonny Field, LLC and is
personally guaranteed by the director. The Loan Committee and the Board of
Directors approved the loan which was granted at terms equivalent to other arm's
length transactions entered into by the Corporation. The loan is well secured
and is current at June 2002.

As of March 31, 2001, the Corporation was servicing a $120 loan ($50 which was
owned and retained by the Corporation) outstanding to CF Industries, Inc. The
President of CF Industries, Inc. is a director of the Corporation. The loan is
collateralized by a first mortgage on property owned by CF Industries, Inc. and
is personally guaranteed by the director. The Loan Committee and the Board of
Directors approved the loan which was granted at terms equivalent to other arm's
length transactions entered into by the Corporation. The loan was paid off in
full during 2002.

The Corporation utilizes the appraisal services of Larson Associates, LLC for
the majority of the Corporation's appraisal needs. Larson Associates, LLC is
owned by the Corporation's president and his spouse. The Corporation does not
pay for these appraisals as the fees are paid by the borrower. Larson
Associates, LLC performs appraisal services for a number of other clients in
addition to the Corporation, and management of the Corporation believes that all
appraisals performed by Larson Associates, LLC were performed in an unbiased
manner and represent proper market valuations.

The Corporation subleases office space to Larson Associates, LLC on a monthly
basis. Amounts received from Larson Associates, LLC for the years ended March
31, 2002 and 2001 were $5.




                                      -16-
<PAGE>



                   The First Connecticut Capital Corporation
                          Notes to Financial Statements
                   For the Years Ended March 31, 2002 and 2001
                  (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)





NOTE 8 - TRANSACTIONS WITH AFFILIATES (CONTINUED)

During 2002 and 2001 the Corporation has sold loans to Limited Partnership A and
Limited Partnership B. In addition, the Corporation services all loans sold to
these partnerships. As of March 31, 2002 and 2001 the Corporation is servicing
$4,768 and $4,379, of loans for Limited Partnership A and $1,254 and $0 of loans
for Limited Partnership B, respectively. For the year ended March 31, 2002, and
2001, service fee income earned for servicing these loans amounted to
approximately $63 and $16 from Limited Partnership A and approximately $3 and $0
from Limited Partnership B, respectively.

Certain members of the Corporation's management, board of directors, employees
and their immediate families are limited partners of Limited Partnership A and
Limited Partnership B. As of March 31, 2002 and 2001 these individuals accounted
for 19% and 24%, respectively, of the ownership in Limited Partnership A. As of
March 31, 2002 these individuals accounted for 7% of the ownership in Limited
Partnership B.

During 2002 and 2001 the Corporation has sold portions of loans to certain
members of management, board of directors, employees and their immediate
families ("affiliates"). In addition, the Corporation services all of these
loans. As of March 31, 2002 and 2001 the Corporation is servicing $2,721 and
$2,726 of loans owned by certain members of management, board of directors,
employees and their immediate families, respectively. Service fee income earned
for servicing these loans amounted to approximately $41 and $33 for the years
ended March 31, 2002 and 2001, respectively. Within the above loan amounts the
Corporation is servicing $1,390 and $1,647 of loans, as of March 31, 2002 and
2001, respectively, which were sold to a board member, his limited liability
company or trust of which fees were earned of $17 and $19, respectively. If for
any reason the above loans were to default and become an asset acquired, upon
liquidation, the board member, his limited liability company or trust is
entitled to recovery of its investment and accrued interest before the
Corporation can recover its investment in any of the above loans. The
Corporation does not guarantee any investment or interest return in the above
transactions.

The Corporation grants a priority position on one or more loans with the board
member, his limited liability company or trust, when the loan bears a higher
nature of risk or has a higher loan to value ratio than loans sold to Limited
Partnership A, Limited Partnership B or others. Loans are sold to this board
member or his limited liability company or trust only if such loans cannot be
sold to Limited Partnership A or B, assigned to Hudson United Bank or sold to a
different person who does not require a loan priority. It is the opinion of
management that the Corporation benefits by selling such loans under this
arrangement to such board member, his limited liability company or his trust
rather than declining such loans.




                                      -17-
<PAGE>



                   The First Connecticut Capital Corporation
                          Notes to Financial Statements
                   For the Years Ended March 31, 2002 and 2001
                  (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)



NOTE 8 - TRANSACTIONS WITH AFFILIATES (CONTINUED)

The following table summarizes the amount of the loans serviced and the fee
income generated from loan sales to affiliates:

                                                   2002                 2001
                                                   ----                 ----
             Loan sales:
                Management                      $    367           $      310
                Board of Directors                 1,532                1,788
                Employees and families               822                  628
                                                --------           ----------

             Totals                             $  2,721           $    2,726
                                                ========           ==========

             Fee income:
                Management                      $      6           $        4
                Board of Directors                    23                   22
                Employees and families                12                    7
                                                --------           ----------

                Totals                          $     41           $       33
                                                ========           ==========

None of the above transactions with affiliates have a recourse provision.

NOTE 9 - COMMITMENTS AND CONTINGENCIES

As of March 31, 2002 the Corporation has a $75 letter of credit outstanding
issued to the Town of Glastonbury, Connecticut for soil and erosion compliance
on one of the construction projects to which the Corporation has a loan. No
amounts have been drawn or are expected to be drawn on this letter of credit.

The Corporation had a $40 letter of credit outstanding at March 31, 2001 at a
stated interest rate of 2% per annum related to obtaining its Connecticut
license as a First Mortgage Loan-Lender/Broker. The letter of credit expires
February 9, 2002. At March 31, 2001 restricted cash includes a $44 certificate
of deposit, which is being maintained as collateral for the letter of credit. At
March 31, 2002 the letter of credit was no longer required and the certificate
of deposit was closed.

On May 6, 2002 the Corporation has entered into a $250 letter of credit issued
to the Town of North Branford, Connecticut for building compliance on one of the
construction projects to which the Corporation has a loan. No amounts have been
drawn or are expected to be drawn on this letter of credit.

As of March 31, 2002 and 2001, the Corporation had outstanding loan commitments
of $3,068 and $2,969, respectively.



                                      -18-
<PAGE>



                   The First Connecticut Capital Corporation
                          Notes to Financial Statements
                   For the Years Ended March 31, 2002 and 2001
                  (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)




NOTE 9 - COMMITMENTS AND CONTINGENCIES (CONTINUED)

The Corporation has not been required to perform on any financial guarantees
during the years ended March 31, 2002 and 2001. The Corporation has not incurred
any losses on it commitments for the years ended March 31, 2002 and 2001.

NOTE 10 - STOCK OPTIONS

The Corporation has a compensatory stock option plan which enables the granting
of options to officers and directors to purchase shares of the Corporation's
common stock at prices equal to fair value at the date of grant. Options expire
within ten years of grant and vest immediately.

On May 3, 2001, 100,000 options were granted under the 1999 stock option plan at
an exercise price of $.64. The options expire ten years from grant date. As of
March 31, 2002 100,000 options were outstanding under the Plan. No options were
exercised or canceled during the year ended March 31, 2002 and no compensation
cost has been recognized for stock options awarded under the 1999 stock option
plan.

The Company has adopted the disclosure only provision of FAS 123. If the Company
had elected to recognize compensation costs based on the fair value at the date
of the grant for awards granted, consistent with the provisions of FAS 123, the
Company's net income would have been adjusted to reflect additional compensation
expense of $35 for the year ended March 31, 2002. Pro forma net income and
earnings per share (basic and diluted) would have been $10 and $0, respectively.
The estimated weighted average fair value of stock options at the time of the
grant using the Black-Scholes option pricing model was $.35 a share. The
assumptions which were used in computing the weighted fair value of the options
were as follows:

           Annualized dividend yield             0%
           Expected Volatility               108.0%
           Risk free interest rate             5.2%
           Expected option term                 10







                                      -19-
<PAGE>



                   The First Connecticut Capital Corporation
                          Notes to Financial Statements
                   For the Years Ended March 31, 2002 and 2001
                  (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)






NOTE 11 - LEASES

The Corporation leases office space and equipment for use in operations. The
leases generally provide that the Corporation pays taxes, insurance and
maintenance expenses. Some leases contain renewal options, and rent payments
change in accordance with changes in the Consumer Price Index. Rental expense
relating to cancelable and non-cancelable operating leases amounted to $31 and
$31 for the years ended March 31, 2002 and 2001, respectively.

As of March 31, 2002, future minimum rental payments required under
non-cancelable operating leases were as follows:

               2003             $ 36
               2004               36
               2005               36
               2006               36
               2007               36
               2008               27
                               -----
               Total           $ 207
                               =====

NOTE 12 - FAIR VALUE OF FINANCIAL INSTRUMENTS

The information provided below is required by FASB Statement No. 107,
DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS. Methods and assumptions
for estimating the fair value of the Corporation's financial instruments are set
forth below. Fair values are calculated based on the value without regard to any
premium or discount that may result from concentrations of ownership of a
financial instrument, possible tax ramifications or estimated transaction costs.

LOANS - Substantially all of the Corporation's loans have a maturity of one year
or less. For loans considered to be impaired under FAS 114, the estimated fair
value for loans is based on the present value of expected future cash flows
discounted at the loan's effective interest rate or on recent external
appraisals or other available market information if the loan is collateral
dependent. Assumptions regarding credit risk, cash flow, and discount rates are
judgmentally determined using available market information and specific borrower
information.

LOANS HELD FOR SALE - For loans held for sale the fair value is estimated by
discounting contractual cash flows adjusted for prepayment estimates using
discount rates based on secondary market sources adjusted to reflect differences
in servicing and credit costs.




                                      -20-
<PAGE>



                   The First Connecticut Capital Corporation
                          Notes to Financial Statements
                   For the Years Ended March 31, 2002 and 2001
                  (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)



NOTE 12 - FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)

MORTGAGE SERVICING RIGHTS - The Corporation estimates fair value for its
servicing rights by discounting expected net cash flows through maturity from
servicing activities at market discount rates that reflect the credit and
interest rate risk inherent in the servicing rights.

OTHER ON-BALANCE SHEET FINANCIAL INSTRUMENTS - Other on-balance sheet financial
instruments include cash and cash equivalents, restricted cash, accrued interest
receivable and a line of credit. The carrying value of each of these financial
instruments is a reasonable estimation of fair value.

The following summarizes the Corporation's carrying value and fair value of the
financial instruments as of March 31, 2002 and 2001.

<TABLE>
<CAPTION>

                                         MARCH 31, 2002           MARCH 31, 2001
                                    --------------------------------------------------
                                    CARRYING      ESTIMATED    CARRYING   ESTIMATED
                                      VALUE      FAIR VALUE   VALUE FAIR    VALUE
Assets
<S>                                   <C>          <C>          <C>       <C>
   Cash and cash equivalents          $  437       $  437       $  276    $  276
   Loans, net                          2,172        2,172        2,366     2,366
   Loans due from related parties        225          225           50        50
   Loans held for sale                 1,355        1,355          923       923
   Mortgage servicing rights              69           69           72        72

LIABILITIES
   Line of credit                      2,441        2,441        2,320     2,320
   Accounts payable                      297          297           30        30
</TABLE>


The above table does not include any amounts for the value of any off-balance
sheet items as discussed in Note 9, as the carrying and fair values are not
significant.


                                      -21-
<PAGE>




                    The First Connecticut Capital Corporation
                          Notes to Financial Statements
                   For the Years Ended March 31, 2002 and 2001
                  (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)







NOTE 12 - FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)

LIMITATIONS - Fair value estimates are made at a specific point in time, based
on relevant market information and information about the financial instrument.
These estimates do not reflect any premium or discount that could result from
offering for sale at one time the Company's entire holdings of a particular
financial instrument. Because no market exists for a significant portion of the
Company's financial instruments, fair value estimates are based on judgments
regarding future expected loss experience, current economic conditions, risk
characteristics of various financial instruments and other factors. These
estimates are subjective in nature and involve uncertainties and matters of
significant judgment and, therefore, cannot be determined with precision.
Changes in assumptions could significantly affect the estimate.

NOTE 13 - CORPORATE PLANS

The Corporation continues to seek ways to reduce expenses while at the same time
increase market activity of its products and services. The Corporation has
engaged the services of an investment advisor to assist in maximizing
stockholder value. In this connection, 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 Company and are
in the process of preparing a final offer to be presented to the stockholders
for approval. It is expected that this offer will be presented in July 2002.





                                      -22-
<PAGE>