SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

 

FORM 10-K

 

Annual Report Pursuant to Section 13 or 15(d) of

the Securities Exchange Act of 1934

 

For the fiscal year ended December 31, 2001 Commission file number 014140

 

F I R S T   A L B A N Y   C O M P A N I E S   I N C .

(Exact name of registrant as specified in its charter)

 

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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 ý   No o

 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.   o

 

As of March 15, 2002, 8,589,378 shares, par value $.01 per share, were outstanding.  The aggregate market value of the shares of common stock of the Registrant held by non-affiliates (based upon the closing price of Registrant’s shares as reported on the NASDAQ system on March 15, 2002, which was $7.20 was $46,488,470.

 

DOCUMENTS INCORPORATED BY REFERENCE

 

Portions of the Registrant’s definitive proxy statement to be filed with the Securities and Exchange Commission are incorporated by reference into Part III.

 

Part I

 

Item 1.  Business

 

First Albany Companies Inc. (the “Company”) is the parent Company of First Albany Corporation (“First Albany”), First Albany Asset Management Corporation and FA Technology Ventures Corporation. First Albany is a research driven investment banking and capital markets boutique providing corporate and public finance services and the trading of corporate, government and municipal securities for institutions. First Albany Asset Management Corporation is an investment advisor managing the assets of institutions and individuals. FA Technology Ventures Corporation manages private equity funds, providing venture financing to emerging growth companies.

 

In August 2000 First Albany divested its retail brokerage operation, the Private Client Group.  The operating results of the Private Client Group are reported as discontinued operations.

 

The Company (formed in 1985) and First Albany (formed in 1953) are New York corporations.  First Albany is a member of the New York Stock Exchange, Inc. (“NYSE”), the American Stock Exchange, Inc. (“ASE”), the Boston Stock Exchange, Inc. (“BSE”) and various other exchanges and is registered as a broker-dealer with the Securities and Exchange Commission (“SEC”).  First Albany is also a member of the National Association of Securities Dealers, Inc. (“NASD”) and the Securities Investor Protection Corporation (“SIPC”), which insures customer funds and securities deposited with a broker-dealer up to $500,000 per customer, with a limitation of $100,000 on claims for cash balances.  First Albany has obtained additional coverage of $7,500,000 per customer from First City Partnership Limited and is underwritten by Lloyd’s of London which is rated A- (Excellent) by A.M. Best

 

Sources of Revenues

 

A breakdown of the amount and percentage of revenues from each principal source for the periods indicated follows (excludes discontinued operations):

 

For the Years Ended		December 31, 2001					December 31, 2000					December 31, 1999
		Amount			Percent		Amount			Percent		Amount			Percent
	(In thousands of dollars)
Commissions		$	14,533		9.0	%	$	17,654		9.1	%	$	14,962		9.6	%
Principal transactions		94,319			58.1	%	58,421			30.1	%	50,979			32.8	%
Investment banking		22,306			13.8	%	33,741			17.4	%	29,679			19.1	%
Investment (losses) gains		(219		)	(0.1	)%	(669		)	(0.3	)%	(1,749		)	(1.1	)%
Fees and other		5,272			3.2	%	4,761			2.5	%	4,584			2.9	%
Total operating revenues		136,211			84.0	%	113,908			58.8	%	98,455			63.3	%
Interest income		26,011			16.0	%	79,920			41.2	%	57,088			36.7	%
Total revenues		$	162,222		100.0	%	$	193,828		100.0	%	$	155,543		100.0	%

 

2

 

Securities Commissions

 

In executing customers’ orders to buy or sell listed securities and securities in which it does not make a market, First Albany generally acts as an agent and charges a commission.

 

Principal Transactions

 

First Albany buys and maintains inventories of municipal debt (tax-exempt and taxable), corporate debt, convertible securities and equity securities as a “market maker” for sale of those securities to other dealers and to customers.  As of December 31, 2001, First Albany made a market in 158 common stocks quoted on National Association of Securities Dealers Automated Quotation (“NASDAQ”).  Most of the inventory positions are carried for the purpose of generating sales credits by the institutional sales force.  First Albany also trades tax-exempt and taxable municipal bonds, and taxable debt securities, including U.S. Treasury bills, notes, and bonds; U.S. Government agency notes and bonds; bank certificates of deposit; mortgage-backed securities; and corporate obligations.  Principal transactions have been a significant source of revenue and should continue to be so in the future.

 

First Albany’s trading activities require the commitment of capital and may place First Albany’s capital at risk. All inventory positions are marked to the market at a minimum on a weekly basis.  First Albany also has an institutional municipal risk trading operation, in which certain inventory positions are hedged by highly liquid future contracts and U.S. Government Securities.  The following table sets forth the highest, lowest, and average month-end inventories (including the net of securities owned and securities sold, but not yet purchased) for calendar 2001 by securities category where First Albany acted as principal.

 

		Highest Inventory			Lowest Inventory			Average Inventory
	(In thousands of dollars)
State and municipal bonds		$	236,195		$	139,439		$	179,146
Corporate obligations		58,807			20,087			38,627
Corporate stocks		9,405			4,578			7,074
U.S. Government and federal agencies obligations		(6,963		)	(52,531		)	(31,940		)

 

Investment Banking

 

First Albany manages, co-manages, and participates in corporate and municipal securities offerings. For the periods indicated, the table below highlights the number and dollar amount of corporate and municipal securities offerings managed or co-managed by First Albany and the number and amount of First Albany’s underwriting participations in syndicates, including those managed or co-managed by First Albany:

 

Corporate Stock and Bond Offerings
		Managed or Co-Managed					Syndicate Participations
Year Ended		Number of Issues		Amount of Offering			Number of Participations		Amount of Participation
		(In thousands of dollars)
December 2001		3		$	275,138		9		$	22,732
December 2000		14		2,226,350			78		246,503
December 1999		19		1,648,114			173		302,440

 

3

 

 

Municipal Bond Offerings
		Managed or Co-Managed					Syndicate Participations
Year Ended		Number of Issues		Dollar Amount			Number of Participations		Dollar Amount
		(In thousands of dollars)
December 2001		331		$	30,430,595		364		$	4,532,902
December 2000		265		21,950,526			279		3,100,034
December 1999		289		27,686,276			331		3,626,019

 

Participation in an underwriting syndicate or selling group involves both economic and regulatory risks.  An underwriter or selling group member may incur losses if it is forced to resell the securities it has committed to purchase at less than the agreed-upon purchase price.

 

Operations

 

First Albany’s operations include: execution of orders; processing of transactions; receipt, identification, and delivery of funds and securities; custody of customers’ securities; internal financial control; and compliance with regulatory and legal requirements.  First Albany clears its own securities transactions.

 

The volume of transactions handled by the operations staff fluctuates substantially.  The monthly number of purchase and sale transactions, adjusted for the sale of the Private Client Group, processed for the periods indicated were as follows:

 

		Number of Monthly Transactions
Year Ended