Ameritrans Capital Corporation is a specialty finance company engaged in making loans to and investments in small businesses. Ameritrans Capital Corp. has a market cap of $4.24 million; its shares were traded at around $1.25 with and P/S ratio of 1.27.
Highlight of Business Operations:Corporate Loans outstanding as of September 30, 2009 decreased by $2,589,004, or 19%, to $10,943,000, as compared with the three months ended September 30, 2008. The interest rate earned on Corporate Loans decreased in 2009, as compared with the prior year, primarily due to decreases in LIBOR. This LIBOR decrease was partially offset by higher rates earned on loans originated in this fiscal year, the use of LIBOR floors in loan agreements, and further offset by increases in rates on existing loans due to covenant resets. The decrease in loans outstanding and amortization on other corporate loans was due to a sale of a loan and a fair value adjustment of a loan of approximately $670,000.
Life settlement contracts outstanding decreased by $2,519,296 as of September 30, 2009, or 86%, as compared with the three months ended September 30, 2008. This investment has stopped accruing interest and a fair value adjustment downward of approximately $2,500,000 has been made to reflect the value of the investment. The reduction in interest income for the three months ended September 30, 2009 was approximately $87,000. (See Note 2 of the consolidated financial statements).
Professional fees for the three months ended September 30, 2009 decreased $181,096 to $253,838, or approximately 42%, when compared to the three months ended September 30, 2008. Accounting fees for internal controls decreased approximately $101,000 to $30,000 when compared to the three months ended September 30, 2008. In 2008 documentation with regard to controls was being improved, therefore considerably more fees were spent on implementation. Legal fees to non-related parties decreased approximately $113,000 to $40,000 when compared to the three months ended September 30, 2008. Through better management of professional resources, the Company reduced the costs of preparing its SEC filings. . Audit fees decreased approximately $26,000 to $48,000 when compared to the three months ended September 30, 2008. This decrease was due to a reduction in audit fees attributable the Companys smaller portfolio. These decreases were partially offset by increases in legal fees for Vibrant life services and consulting fees. Miscellaneous administrative expenses decreased $120,950, or 49%, when compared with the three months ended September 30, 2008.
Net assets from operations decreased to $2,973,998, for the three months ended September 30, 2009 as compared to $478,606, for the three months ended September 30, 2008. The decrease in net assets from operations between the periods was attributable primarily to decreases in interest income and increased operating expenses discussed above. The decrease in assets from operations was also significantly impacted by a reduction in the fair value of certain investments in the Companys portfolio due to the write down of the Companys life settlement investments of approximately $1,400,000 and write down of the fair value of a corporate loan of approximately $686,000 to reflect the restructuring of investments. The write off of interest income for $220,000 was related to the life settlement investments. The Company incurred a realized loss on foreclosure and sale of an asset acquired of approximately $212,000. Dividends for Participating Preferred Stock were not declared for the three months ended September 30, 2009. For three months ended September 30, 2008 dividends for Participating Preferred Stock were $84,375.
Total assets decreased $3,174,089, to $25,112,067, at September 30, 2009 as compared to June 30, 2009 total assets of $28,286,156. This decrease was primarily due to a decrease in investments of $3,452,271, partially offset by an increase in cash and equivalents of $308,209. Total liabilities decreased during the quarter by $201,541, primarily due to a reduction of interest payable of $158,808, and a reduction in other liabilities of $42,733.
Assuming that the assets and liabilities were to remain constant and no actions were taken to alter the existing interest rate sensitivity, a hypothetical immediate 1% increase in interest rates would have resulted in an additional net increase in net assets from operations of $45,581 at September 30, 2009. This is comprised of a 1% change in two components, loans receivable of $18,602,347 at variable interest rate terms, and $370,000 for bank debt subject to variable market rates. This hypothetical does not take into account interest rate floors or caps on the Companys loan receivable portfolio. No assurances can be given however, that actual results would not differ materially from the potential outcome simulated by these estimates.
Read the The complete Report