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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(MARK ONE)
[X] Annual Report under Section 13 or 15(d) of the Securities Exchange Act
of 1934 (Fee required) For the fiscal year ended December 31, 1999
OR
[ ] Transition Report under Section 13 or 15(d) of the Securities Exchange
Act of 1934 (No fee required)
For the transition period from ________ to ________
Commission file no. 333-69973
FIRST CAPITAL BANK HOLDING CORPORATION
(Name of Small Business Issuer in Its Charter)
Florida 59-3532208
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification No.)
1891 South 14th Street
Fernandina Beach, Florida 32034
(Address of Principal Executive Offices) (Zip Code)
(904) 321-0400
Issuer's Telephone Number, Including Area Code
Securities registered pursuant to Section 12(b) of the Act: None.
Securities registered pursuant to Section 12(g) of the Act: None.
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 [ ]
Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B in this form, and no disclosure will 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-KSB or any
amendment to this Form 10-KSB. [ ]
The issuer's loss for its most recent fiscal year was $444,313. As of
December 31, 1999, 1,000,000 shares of Common Stock were issued and
outstanding.
The aggregate market value of the Common Stock held by non-affiliates
of the Company on March 1, 2000 is $6,626,220. This calculation is based upon
an estimate of the fair market value of the Common Stock of $10.00 per share,
which was the price of the last trade of which management is aware prior to
this date. There is not an active trading market for the Common Stock and it is
not possible to identify precisely the market value of the Common Stock.
Transitional Small Business Disclosure Format. (Check one): Yes [ ] No [X]
DOCUMENTS INCORPORATED BY REFERENCE
None.
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ITEM 1. DESCRIPTION OF BUSINESS
This Report contains statements which constitute forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933 and
the Securities Exchange Act of 1934. These statements are based on many
assumptions and estimates and are not guarantees of future performance. Our
actual results may differ materially from those projected in any
forward-looking statements, as they will depend on many factors about which we
are unsure, including many factors which are beyond our control. The words
"may," "would," "could," "will," "expect," "anticipate," "believe," "intend,"
"plan," and "estimate," as well as similar expressions, are meant to identify
such forward-looking statements. Potential risks and uncertainties include, but
are not limited to:
- significant increases in competitive pressure in the banking and
financial services industries;
- changes in the interest rate environment which could reduce
anticipated or actual margins;
- changes in political conditions or the legislative or regulatory
environment;
- general economic conditions, either nationally or regionally and
especially in primary service area, becoming less favorable than
expected resulting in, among other things, a deterioration in
credit quality;
- changes occurring in business conditions and inflation;
- changes in technology;
- changes in monetary and tax policies;
- changes in the securities markets; and
- other risks and uncertainties detailed from time to time in our
filings with the Securities and Exchange Commission.
GENERAL
First Capital Bank Holding Corporation was incorporated as a Florida
corporation on July 29, 1998, primarily to own and control all of the capital
stock of First National Bank of Nassau County. On July 26, 1999, the company
acquired 100% of the outstanding common stock of First National Bank, which
operates in the Fernandina Beach, Florida area. We raised $10,000,000 through
an offering of our common stock at $10 per share, of which $7,000,000 was used
to capitalize First National Bank. First National Bank is chartered and
regulated by the Office of the Comptroller of Currency and the Federal Deposit
Insurance Corporation. First National Bank commenced operations on July 26,
1999.
Through First National Bank, we engage in a commercial banking
business from our main office located at 1891 South 14th Street, in the City of
Fernandina Beach, Florida (Nassau County). First National Bank is a full
service commercial bank without trust powers. First National Bank offers a full
range of interest bearing and non-interest bearing accounts, including
commercial and retail checking accounts, money market accounts, individual
retirement accounts, certificates of deposit, commercial loans, real estate
loans, home equity loans and consumer/installment loans. In addition, First
National Bank provides such consumer services as U.S. Savings Bonds, travelers
checks, cashiers checks, safe deposit boxes, bank by mail services, direct
deposit, and automatic teller services.
MARKETING FOCUS
Our primary market area is within the Jacksonville, Florida
metropolitan area, which includes the five counties of Duval, Nassau, St.
Johns, Clay, and Baker. Nassau County is an integral part of the Jacksonville
metropolitan area
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and has participated in the growth experienced by the area in recent years. The
Jacksonville market has a current population in excess of 1,000,000 people and
is projected to grow to a population of 1,200,000 by 2010. Fernandina Beach's
strategic location within the Jacksonville metropolitan area, along with its
coastal setting, makes it a location of choice for many residents taking
advantage of the resources and job opportunities in the metropolitan market of
Jacksonville.
The five-county area has a lower unemployment rate than the State of
Florida average which, in turn, is lower than the national average. The climate
and geography of the area have encouraged strong population and economic growth
and the new NFL football team, the Jacksonville Jaguars, has given the
five-county area a higher profile regionally and nationally.
Our primary service area represents a geographic area which includes
the communities of Amelia Island, Fernandina Beach, O'Neil, and Yulee, Florida.
The boundaries of the primary service area are the St. Mary's River and the
State of Georgia to the north, the Atlantic Ocean to the east, Duval County to
the south, and Baker County to the west.
We target our products and services to meet the needs of the area's
customer base, initially focusing on providing small- to middle-market business
loans, residential mortgages, and consumer loans to these customers. We believe
that more than 75% of First National Bank's customer base is represented by the
businesses and residents located in the primary service area.
Nassau County has been one of the fastest growing regions in Florida
over the last several years. The county's population has grown 67.5% from the
1980 census to 51,000 in 1990, and is estimated to be approximately 80,000 by
2004. The per capita income in the county was $55,294 as of 1998.
Nassau County has many positive attributes that contribute to the
area's business growth and stability. These include easy access to two
interstates, an extensive rail service network, Jacksonville International
Airport, and the Port of Fernandina, which is the deepest natural port on the
southeastern coast of the United States. The paper, timber, and resort
industries form the core of the area's economy and, as an indication of recent
growth, commercial building permits have increased 237% over the past ten
years. Amelia Island is considered to be one of the foremost residential and
retirement areas in Florida as it attracts affluent retirees and second
homeowners from the Eastern states of the country. The Ritz-Carlton Hotel with
its 300 rooms and the Amelia Island Plantation are among the premier resort
hotels on Florida's East Coast.
DEPOSITS
First National Bank offers a full range of interest-bearing and
non-interest-bearing accounts, including commercial and retail checking
accounts, money market accounts, individual retirement accounts, regular
interest-bearing statement savings accounts and certificates of deposit with
fixed and variable rates and a range of maturity date options. The sources of
deposits are residents, businesses, and employees of businesses within our
market area, obtained through the personal solicitation of its officers and
directors, direct mail solicitation, and advertisements published in the local
media. We pay competitive interest rates on time and savings deposits up to the
maximum permitted by law or regulation. In addition, we have implemented a
service charge fee schedule competitive with other financial institutions in
our market area, covering such matters as maintenance fees on checking
accounts, per item processing fees on checking accounts, returned check charges
and the like.
LENDING ACTIVITIES
General. We emphasize a range of lending services, including real
estate, commercial and consumer loans, to individuals and small-to medium-sized
businesses and professional concerns that are located in or conduct a
substantial portion of their business in our market area. We emphasize retail
banking, home mortgages, real estate development, and consumer lending needs.
We do not make non-real estate commercial purpose loans that exceed 20% of its
assets or non-real estate consumer purpose loans that exceed 35% of our assets.
Outside of the inherent risk of the credit worthiness of our borrowers, other
risks associated with residential mortgage loans are the inability to move
foreclosed real estate in a down market or economy, shifts in the demographics
of a given market from residential zonings to
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commercial, individual customers who have been displaced due to corporate
downsizing/loss of income, and an overall economic downturn creating
unemployment due to lack of product demand.
Real Estate Loans. One of the primary components of our loan portfolio
is loans secured by first or second mortgages on real estate. These loans
generally consist of commercial real estate loans, construction and development
loans, and residential real estate loans (home equity loans are excluded as
they are classified as consumer loans). Loan terms generally are limited to
five years or less, although payments may be structured on a longer
amortization basis. Interest rates may be fixed or adjustable, and will more
likely be fixed in the case of shorter term loans. We generally charge an
origination fee. We attempt to reduce credit risk in the commercial real estate
portfolio by emphasizing loans on owner-occupied office and retail buildings
where the loan-to-value ratio, established by independent appraisals, does not
exceed 80%. In addition, we typically require personal guarantees of the
principal owners of the collateral property, combined with our review of the
personal financial statements of the principal owners. We generally apply the
same underwriting criteria for home equity loans and lines of credit as for
first mortgage loans, as described above. Home equity lines of credit typically
expire ten years or less after origination. The principal economic risk
associated with each category of anticipated loans, including real estate
loans, is the creditworthiness of our borrowers. The risks associated with real
estate loans vary with many economic factors, including employment levels and
fluctuations in the value of real estate.
Commercial Loans. We make loans for commercial purposes in various
lines of businesses. Equipment loans are typically for a term of five years or
less at fixed or variable rates, with the loan fully amortized over the term
and secured by the financed equipment and with a loan-to-value ratio of 80% or
less. Working capital loans typically have terms not exceeding one year and are
usually secured by accounts receivable, inventory, or personal guarantees of
the principals of the business. For loans secured by accounts receivable or
inventory, principal is typically repaid as the assets securing the loan are
converted into cash, and in other cases principal is typically due at maturity.
The principal economic risk associated with each category of loans, including
commercial loans, is the creditworthiness of our borrowers. The risks
associated with commercial loans vary with many economic factors, including the
economy in the Nassau County area. The well-established banks in the Nassau
County area make proportionately more loans to medium- to large-sized
businesses than we do. Many of our anticipated commercial loans are made to
small- to medium-sized businesses which may be less able to withstand
competitive, economic, and financial conditions than larger borrowers.
Consumer Loans. We make a variety of loans to individuals for personal
and household purposes, including secured and unsecured installment and term
loans and lines of credit. These loans typically carry balances of less than
$25,000 and, in the case of non-revolving loans, are amortized over a period
not to exceed 60 months. The revolving loans typically bear interest at a fixed
rate and require monthly payments of interest and a portion of the principal
balance. As with the other categories of loans, the principal economic risk
associated with consumer loans is the creditworthiness of our borrowers, and
the principal competitors for consumer loans are the established banks in the
Nassau County area.
Loan Approval and Review. Our loan approval policies provide for
various levels of officer lending authority. When the amount of aggregate loans
to a single borrower exceeds that individual officer's lending authority, the
loan request will be considered and approved by an officer with a higher
lending limit. We have established a Board loan committee that must approve any
loan over the chief executive officer's lending limit. We will not make any
loans to any director, officer, or employee on terms more favorable to such
person than would be available to an unaffiliated person.
Lending Limits. Our lending activities are subject to a variety of
lending limits imposed by federal law. While differing limits apply in certain
circumstances based on the type of loan or the nature of the borrower
(including the borrower's relationship with us), in general we are subject to a
loan-to-one-borrower limit. This limit will increase or decrease as our capital
increases or decreases. Unless we are able to sell participations in our loans
to other financial institutions, we will not be able to meet all of the lending
needs of loan customers requiring aggregate extensions of credit above these
limits.
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OTHER BANKING SERVICES
Other services we provide include cash management services, safe
deposit boxes, travelers checks, direct deposit of payroll and social security
checks, and automatic drafts for various accounts. We are associated with a
shared network of automated teller machines that may be used by our customers
throughout Florida and other regions.
COMPETITION
Competition in our primary service area is intense. As of June 30,
1999, total bank deposits in Nassau County were approximately $375 million.
Including our bank, the market is served by seven banks with 15 branches. There
are six regional bank holding companies represented in Nassau County which hold
a combined market share of 82% of total deposits.
Financial institutions primarily compete with one another for
deposits. In turn, a bank's deposit base directly affects its loan activities
and general growth. Primary methods of competition include interest rates on
deposits and loans, service charges on deposit accounts, and designing unique
financial services products. We compete with financial institutions which have
much greater financial resources and which offer more services and possibly
better terms to their customers. However, we believe that we are able to
attract sufficient deposits to enable us to compete effectively with other area
financial institutions. We believe we have the advantage of being locally owned
and managed, enabling us to benefit from the high visibility and excellent
business contacts of our directors and officers.
We also compete with existing area financial institutions other than
commercial banks and savings and loan associations, including insurance
companies, consumer finance companies, brokerage houses, credit unions, and
other business entities which have recently been invading the traditional
banking markets. Due to the growth of our market area, we expect additional
competition to be created by new entrants to the market.
EMPLOYEES
As of March 20, 2000, we had 13 full-time employees and 1 part-time
employee.
SUPERVISION AND REGULATION
Both holding companies and national banks are extensively regulated
under both federal and state law. The following is a brief summary of banking
statutes and rules and regulations that affect First Capital Bank Holding
Corporation and First National Bank. These laws and regulations are generally
intended to protect depositors, not shareholders. These regulations are very
complex, and we refer you to the particular statutes, and regulatory provisions
for a thorough understanding.
GRAMM-LEACH-BLILEY ACT
On November 4, 1999, the U.S. Senate and House of Representatives each
passed the Gramm-Leach-Bliley Act, previously known as the Financial Services
Modernization Act of 1999. The Act was signed into law by President Clinton on
November 12, 1999. Among other things, the Act repeals the restrictions on
banks affiliating with securities firms contained in sections 20 and 32 of the
Glass-Steagall Act. The Act also permits bank holding companies to engage in a
statutorily provided list of financial activities, including insurance and
securities underwriting and agency activities, merchant banking, and insurance
company portfolio investment activities. The Act also authorizes activities
that are "complementary" to financial activities.
The Act is intended to grant to community banks certain powers as a
matter of right that larger institutions have accumulated on an ad hoc basis.
Nevertheless, the Act may have the result of increasing the amount of
competition that we face from larger institutions and other types of companies.
In fact, it is not possible to predict the full effect that the Act will have
on us. From time to time other changes are proposed to laws affecting the
banking industry, and these changes could have a material effect on our
business and prospects. We cannot predict the nature
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or the extent of the effect on our business and earnings of fiscal or monetary
policies, economic controls, or new federal or state legislation.
FIRST CAPITAL BANK HOLDING CORPORATION
First Capital Bank Holding Corporation is a bank holding company under
the federal Bank Holding Company Act of 1956 because it owns the outstanding
stock of the bank. As a Florida corporation, the company is also subject to
Chapter 607, Florida Business Corporation Act and the regulations effected by
the Florida Department of State.
The Bank Holding Company Act. Under the Bank Holding Company Act, the
company is subject to periodic examination by the Federal Reserve and required
to file periodic reports of its operations and any additional information that
the Federal Reserve may require. Our activities at the bank and holding company
level are limited to:
- banking and managing or controlling banks;
- furnishing services to or performing services for its subsidiaries;
and
- engaging in other activities that the Federal Reserve determines
to be so closely related to banking and managing or controlling
banks as to be a proper incident thereto.
Investments, Control, and Activities. With certain limited exceptions,
the Bank Holding Company Act requires every bank holding company to obtain the
prior approval of the Federal Reserve before:
- acquiring substantially all the assets of any bank;
- acquiring direct or indirect ownership or control of any voting
shares of any bank if after the acquisition it would own or
control more than 5% of the voting shares of such bank (unless it
already owns or controls the majority of such shares); or
- merging or consolidating with another bank holding company.
In addition, and subject to certain exceptions, the Bank Holding
Company Act and the Change in Bank Control Act, together with regulations
thereunder, require Federal Reserve approval prior to any person or company
acquiring "control" of a bank holding company. Control is conclusively presumed
to exist if an individual or company acquires 25% or more of any class of
voting securities of the bank holding company. Control is rebuttably presumed
to exist if a person acquires 10% or more, but less than 25%, of any class of
voting securities and either the Company has registered securities under
Section 12 of the Securities Exchange Act of 1934 or no other person owns a
greater percentage of that class of voting securities immediately after the
transaction. We intend to register our common stock under the Securities
Exchange Act of 1934 in April 2000. The regulations provide a procedure for
challenge of the rebuttable control presumption.
Under the Bank Holding Company Act, a bank holding company is generally
prohibited from engaging in, or acquiring direct or indirect control of more
than 5% of the voting shares of any company engaged in nonbanking activities
unless the Federal Reserve Board, by order or regulation, has found those
activities to be so closely related to banking or managing or controlling banks
as to be a proper incident thereto. Some of the activities that the Federal
Reserve Board has determined by regulation to be proper incidents to the
business of a bank holding company include:
- making or servicing loans and certain types of leases;
- engaging in certain insurance and discount brokerage activities;
- performing certain data processing services;
- acting in certain circumstances as a fiduciary or investment or
financial adviser;
- owning savings associations; and
- making investments in certain corporations or projects designed
primarily to promote community welfare.
The Federal Reserve Board imposes certain capital requirements on the
company under the Bank Holding Company Act, including a minimum leverage ratio
and a minimum ratio of "qualifying" capital to risk-weighted assets. These
requirements are described below under "Capital Regulations." Subject to its
capital requirements and certain
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other restrictions, the company is able to borrow money to make a capital
contribution to the bank, and these loans may be repaid from dividends paid
from the bank to the company. Our ability to pay dividends will be subject to
regulatory restrictions as described below in "First National Bank -
Dividends." The company is also able to raise capital for contribution to the
bank by issuing securities without having to receive regulatory approval,
subject to compliance with federal and state securities laws.
Source of Strength; Cross-Guarantee. In accordance with Federal
Reserve Board policy, the company is expected to act as a source of financial
strength to the bank and to commit resources to support the bank in
circumstances in which the company might not otherwise do so. Under the Bank
Holding Company Act, the Federal Reserve Board may require a bank holding
company to terminate any activity or relinquish control of a nonbank
subsidiary, other than a nonbank subsidiary of a bank, upon the Federal Reserve
Board's determination that such activity or control constitutes a serious risk
to the financial soundness or stability of any subsidiary depository
institution of the bank holding company. Further, federal bank regulatory
authorities have additional discretion to require a bank holding company to
divest itself of any bank or nonbank subsidiary if the agency determines that
divestiture may aid the depository institution's financial condition.
FIRST NATIONAL BANK
First National Bank operates as a national banking association
incorporated under the laws of the United States and subject to examination by
the Office of the Comptroller of the Currency. Deposits in the bank are insured
by the FDIC up to a maximum amount, which is generally $100,000 per depositor
subject to aggregation rules.
The Office of the Comptroller of the Currency and the FDIC regulate or
monitor virtually all areas of the bank's operations, including:
- security devices and procedures;
- adequacy of capitalization and loss reserves;
- loans;
- investments;
- borrowings;
- deposits;
- mergers;
- issuances of securities;
- payment of dividends;
- interest rates payable on deposits;
- interest rates or fees chargeable on loans;
- establishment of branches;
- corporate reorganizations;
- maintenance of books and records; and
- adequacy of staff training to carry on safe lending and deposit
gathering practices.
The Office of the Comptroller of the Currency requires the bank to maintain
specified capital ratios and imposes limitations on the bank's aggregate
investment in real estate, bank premises, and furniture and fixtures. The
Office of the Comptroller of the Currency also requires the bank to prepare
quarterly reports on the bank's financial condition and to conduct an annual
audit of its financial affairs in compliance with its minimum standards and
procedures.
Under the FDIC Improvement Act, all insured institutions must undergo
regular on site examinations by their appropriate banking agency. The cost of
examinations of insured depository institutions and any affiliates may be
assessed by the appropriate agency against each institution or affiliate as it
deems necessary or appropriate. Insured institutions are required to submit
annual reports to the FDIC, their federal regulatory agency, and state
supervisor when applicable. The FDIC Improvement Act directs the FDIC to
develop a method for insured depository institutions to provide supplemental
disclosure of the estimated fair market value of assets and liabilities, to the
extent feasible and practicable, in any balance sheet, financial statement,
report of condition or any other report of any insured depository institution.
The FDIC Improvement Act also requires the federal banking regulatory agencies
to prescribe,
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by regulation, standards for all insured depository institutions and depository
institution holding companies relating, among other things, to the following:
- internal controls;
- information systems and audit systems;
- loan documentation;
- credit underwriting;
- interest rate risk exposure; and
- asset quality.
National banks and their holding companies which have been chartered
or registered or have undergone a change in control within the past two years
or which have been deemed by the Office of the Comptroller of the Currency or
the Federal Reserve Board to be troubled institutions must give the Office of
the Comptroller of the Currency or the Federal Reserve Board 30 days prior
notice of the appointment of any senior executive officer or director. Within
the 30 day period, the Office of the Comptroller of the Currency or the Federal
Reserve Board, as the case may be, may approve or disapprove any such
appointment.
Deposit Insurance. The FDIC establishes rates for the payment of
premiums by federally insured banks and thrifts for deposit insurance. A
separate Bank Insurance Fund and Savings Association Insurance Fund are
maintained for commercial banks and savings associations with insurance
premiums from the industry used to offset losses from insurance payouts when
banks and thrifts fail. In 1993, the FDIC adopted a rule which establishes a
risk-based deposit insurance premium system for all insured depository
institutions. Under this system, until mid-1995 depository institutions paid to
Bank Insurance Fund or Savings Association Insurance Fund from $0.23 to $0.31
per $100 of insured deposits depending on its capital levels and risk profile,
as determined by its primary federal regulator on a semiannual basis. Once the
Bank Insurance Fund reached its legally mandated reserve ratio in mid-1995, the
FDIC lowered premiums for well-capitalized banks, eventually eliminating
premiums for well-capitalized banks, with a minimum semiannual assessment of
$1,000. However, in 1996 Congress enacted the Deposit Insurance Funds Act of
1996, which eliminated even this minimum assessment. It also separated the
Financial Corporation assessment to service the interest on its bond
obligations. The amount assessed on individual institutions, including the
bank, by Financial Corporation assessment is in addition to the amount paid for
deposit insurance according to the risk-related assessment rate schedule.
Increases in deposit insurance premiums or changes in risk classification will
increase the bank's cost of funds, and we may not be able to pass these costs
on to our customers.
Transactions With Affiliates and Insiders. The bank is subject to the
provisions of Section 23A of the Federal Reserve Act, which places limits on
the amount of loans or extensions of credit to, or investments in, or certain
other transactions with, affiliates and on the amount of advances to third
parties collateralized by the securities or obligations of affiliates. The
aggregate of all covered transactions is limited in amount, as to any one
affiliate, to 10% of the bank's capital and surplus and, as to all affiliates
combined, to 20% of the bank's capital and surplus. Furthermore, within the
foregoing limitations as to amount, each covered transaction must meet
specified collateral requirements. Compliance is also required with certain
provisions designed to avoid the taking of low quality assets.
The bank is also subject to the provisions of Section 23B of the
Federal Reserve Act which, among other things, prohibits an institution from
engaging in certain transactions with certain affiliates unless the
transactions are on terms substantially the same, or at least as favorable to
such institution or its subsidiaries, as those prevailing at the time for
comparable transactions with nonaffiliated companies. The bank is subject to
certain restrictions on extensions of credit to executive officers, directors,
certain principal shareholders, and their related interests. These extensions
of credit (i) must be made on substantially the same terms, including interest
rates and collateral, as those prevailing at the time for comparable
transactions with third parties and (ii) must not involve more than the normal
risk of repayment or present other unfavorable features.
Dividends. A national bank may not pay dividends from its capital. All
dividends must be paid out of undivided profits then on hand, after deducting
expenses, including reserves for losses and bad debts. In addition, a national
bank is prohibited from declaring a dividend on its shares of common stock
until its surplus equals its stated capital, unless there has been transferred
to surplus no less than one-tenth of the bank's net profits of the preceding
two
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consecutive half-year periods (in the case of an annual dividend). The approval
of the Office of the Comptroller of the Currency is required if the total of
all dividends declared by a national bank in any calendar year exceeds the
total of its net profits for that year combined with its retained net profits
for the preceding two years, less any required transfers to surplus.
Branching. National banks are required by the National Bank Act to
adhere to branch office banking laws applicable to state banks in the states in
which they are located. Under current Florida law, the bank may open branch
offices throughout Florida with the prior approval of the Office of the
Comptroller of the Currency. In addition, with prior regulatory approval, the
bank will be able to acquire existing banking operations in Florida.
Furthermore, federal legislation has recently been passed which permits
interstate branching. The law permits out-of-state acquisitions by bank holding
companies, interstate branching by banks if allowed by state law, and
interstate merging by banks.
Community Reinvestment Act. The Community Reinvestment Act requires
that, in connection with examinations of financial institutions within their
respective jurisdictions, the Federal Reserve, the FDIC, or the Office of the
Comptroller of the Currency, shall evaluate the record of each financial
institution in meeting the credit needs of its local community, including low
and moderate income neighborhoods. These factors are also considered in
evaluating mergers, acquisitions, and applications to open a branch or
facility. Failure to adequately meet these criteria could impose additional
requirements and limitations on the bank.
Other Regulations. Interest and other charges collected or contracted
for by the bank are subject to state usury laws and federal laws concerning
interest rates. The bank's loan operations are also subject to federal laws
applicable to credit transactions, such as:
- the federal Truth-In-Lending Act, governing disclosures of credit
terms to consumer borrowers;
- the Home Mortgage Disclosure Act of 1975, requiring financial
institutions to provide information to
enable the public and public officials to determine whether a
financial institution is fulfilling its obligation to help meet the
housing needs of the community it serves;
- the Equal Credit Opportunity Act, prohibiting discrimination on
the basis of race, creed or other prohibited factors in extending
credit;
- the Fair Credit Reporting Act of 1978, governing the use and
provision of information to credit reporting agencies;
- the Fair Debt Collection Act, governing the manner in which consumer
debts may be collected by collection agencies; and
- the rules and regulations of the various federal agencies charged
with the responsibility of implementing such federal laws.
The deposit operations of the bank also are subject to:
- the Right to Financial Privacy Act, which imposes a duty to
maintain confidentiality of consumer financial records and
prescribes procedures for complying with administrative subpoenas
of financial records; and
- the Electronic Funds Transfer Act and Regulation E issued by the
Federal Reserve Board to implement that act, which governs
automatic deposits to and withdrawals from deposit accounts and
customers' rights and liabilities arising from the use of
automated teller machines and other electronic banking services.
Capital Regulations. The federal bank regulatory authorities have
adopted risk-based capital guidelines for banks and bank holding companies that
are designed to make regulatory capital requirements more sensitive to
differences in risk profiles among banks and bank holding companies and account
for off-balance sheet items. The guidelines are minimums, and the federal
regulators have noted that banks and bank holding companies contemplating
significant expansion programs should not allow expansion to diminish their
capital ratios and should maintain ratios in excess of the minimums. We have
not received any notice indicating that either the Company or First National
Bank is subject to higher capital requirements. The current guidelines require
all bank holding companies and federally-regulated banks to maintain a minimum
risk-based total capital ratio equal to 8%, of which at least 4% must be Tier 1
capital. Tier 1 capital includes common shareholders' equity, qualifying
perpetual preferred stock, and minority interests in equity accounts of
consolidated subsidiaries, but excludes goodwill and most other intangibles and
excludes
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the allowance for loan and lease losses. Tier 2 capital includes the
excess of any preferred stock not included in Tier 1 capital, mandatory
convertible securities, hybrid capital instruments, subordinated debt and
intermediate term-preferred stock, and general reserves for loan and lease
losses up to 1.25% of risk-weighted assets.
Under these guidelines, banks' and bank holding companies' assets are
given risk-weights of 0%, 20%, 50%, or 100%. In addition, certain off-balance
sheet items are given credit conversion factors to convert them to asset
equivalent amounts to which an appropriate risk-weight applies. These
computations result in the total risk-weighted assets. Most loans are assigned
to the 100% risk category, except for first mortgage loans fully secured by
residential property and, under certain circumstances, residential construction
loans, both of which carry a 50% rating. Most investment securities are
assigned to the 20% category, except for municipal or state revenue bonds,
which have a 50% rating, and direct obligations of or obligations guaranteed by
the United States Treasury or United States Government agencies, which have a
0% rating.
The federal bank regulatory authorities have also implemented a
leverage ratio, which is equal to Tier 1 capital as a percentage of average
total assets less intangibles, to be used as a supplement to the risk-based
guidelines. The principal objective of the leverage ratio is to place a
constraint on the maximum degree to which a bank holding company may leverage
its equity capital base. The minimum required leverage ratio for top-rated
institutions is 3%, but most institutions are required to maintain an
additional cushion of at least 100 to 200 basis points.
The FDIC Improvement Act established a new capital-based regulatory
scheme designed to promote early intervention for troubled banks which requires
the FDIC to choose the least expensive resolution of bank failures. The new
capital-based regulatory framework contains five categories of compliance with
regulatory capital requirements, including "well capitalized," "adequately
capitalized," "undercapitalized," "significantly undercapitalized," and
"critically undercapitalized." To qualify as a "well capitalized" institution,
a bank must have a leverage ratio of no less than 5%, a Tier 1 risk-based ratio
of no less than 6%, and a total risk-based capital ratio of no less than 10%,
and the bank must not be under any order or directive from the appropriate
regulatory agency to meet and maintain a specific capital level. Currently, we
qualify as "well capitalized."
Under the FDIC Improvement Act regulations, the applicable agency can
treat an institution as if it were in the next lower category if the agency
determines (after notice and an opportunity for hearing) that the institution
is in an unsafe or unsound condition or is engaging in an unsafe or unsound
practice. The degree of regulatory scrutiny of a financial institution
increases, and the permissible activities of the institution decreases, as it
moves downward through the capital categories. Institutions that fall into one
of the three undercapitalized categories may be required to do some or all of
the following:
- submit a capital restoration plan;
- raise additional capital;
- restrict their growth, deposit interest rates, and other activities;
- improve their management;
- eliminate management fees; or
- divest themselves of all or a part of their operations.
Bank holding companies controlling financial institutions can be called upon to
boost the institutions' capital and to partially guarantee the institutions'
performance under their capital restoration plans.
These capital guidelines can affect us in several ways. If we grow at
a rapid pace, our capital may be depleted too quickly, and a capital infusion
from the holding company may be necessary, which could impact our ability to
pay dividends. Our capital levels will initially be more than adequate;
however, rapid growth, poor loan portfolio performance, poor earnings
performance, or a combination of these factors could change our capital
position in a relatively short period of time.
The FDIC Improvement Act requires the federal banking regulators to
revise the risk-based capital standards to provide for explicit consideration
of interest-rate risk, concentration of credit risk, and the risks of
untraditional activities. We are uncertain what effect these regulations would
have.
10
<PAGE> 11
Failure to meet these capital requirements would mean that a bank
would be required to develop and file a plan with its primary federal banking
regulator describing the means and a schedule for achieving the minimum capital
requirements. In addition, such a bank would generally not receive regulatory
approval of any application that requires the consideration of capital
adequacy, such as a branch or merger application, unless the bank could
demonstrate a reasonable plan to meet the capital requirement within a
reasonable period of time.
Enforcement Powers. The Financial Institution Reform Recovery and
Enforcement Act expanded and increased civil and criminal penalties available
for use by the federal regulatory agencies against depository institutions and
certain "institution-affiliated parties." Institution-affiliated parties
primarily include management, employees, and agents of a financial institution,
as well as independent contractors and consultants such as attorneys and
accountants and others who participate in the conduct of the financial
institution's affairs. These practices can include the failure of an
institution to timely file required reports or the filing of false or
misleading information or the submission of inaccurate reports. Civil penalties
may be as high as $1,000,000 a day for such violations. Criminal penalties for
some financial institution crimes have been increased to twenty years. In
addition, regulators are provided with greater flexibility to commence
enforcement actions against institutions and institution-affiliated parties.
Possible enforcement actions include the termination of deposit insurance.
Furthermore, banking agencies' power to issue cease-and-desist orders were
expanded. Such orders may, among other things, require affirmative action to
correct any harm resulting from a violation or practice, including restitution,
reimbursement, indemnifications or guarantees against loss. A financial
institution may also be ordered to restrict its growth, dispose of certain
assets, rescind agreements or contracts, or take other actions as determined by
the ordering agency to be appropriate.
Effect of Governmental Monetary Policies. Our earnings are affected by
domestic economic conditions and the monetary and fiscal policies of the United
States government and its agencies. The Federal Reserve Bank's monetary
policies have had, and are likely to continue to have, an important impact on
the operating results of commercial banks through its power to implement
national monetary policy in order, among other things, to curb inflation or
combat a recession. The monetary policies of the Federal Reserve Board have
major effects upon the levels of bank loans, investments and deposits through
its open market operations in United States government securities and through
its regulation of the discount rate on borrowings of member banks and the
reserve requirements against member bank deposits. It is not possible to
predict the nature or impact of future changes in monetary and fiscal policies.
ITEM 2. DESCRIPTION OF PROPERTY
Our principal place of business is located in Fernandina Beach,
Florida. On June 16, 1998, we entered into a contract to acquire 1.28 acres of
land located at 1891 South 14th Street at its intersection with Island Walk Way
for a total purchase price of $265,000. The banking facility is 6,500 square
feet of finished space at a cost of approximately $850,000. The office building
is located approximately 15 miles from Interstate 95. We believe that the
facilities will adequately serve our needs for at least the next 12 months.
ITEM 3. LEGAL PROCEEDINGS.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matter was submitted to a vote of security holders during the
fourth quarter of the fiscal year covered by this report.
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
Our articles of incorporation authorize us to issue up to 10,000,000
shares of common stock, of which 1,000,000 shares, for a total of $10,000,000,
were sold in the initial public offering and are outstanding as of March 20,
2000. We have 609 shareholders of record. To date, we have not paid cash
dividends on our common stock. We
11
<PAGE> 12
intend to retain earnings to support operations and finance expansion and
therefore do not anticipate paying cash dividends in the foreseeable future.
All outstanding shares of our common stock are entitled to share
equally in dividends from funds legally available when declared by the Board of
Directors.
(b) Pursuant to Commission Rule 463, we are obligated to report on the
use of proceeds from our initial public offering. The information provided
below is given as of December 31, 1999.
(1) The company's registration statement on Form SB-2
(File No. 333-69973) was declared effective by the
Commission on April 12, 1999.
(2) The offering commenced on April 12, 1999.
(3) The offering did not terminate before any securities
were sold.
(4) (i) The offering terminated on July 27, 1999,
upon the sale of all the securities that the
company had registered.
(ii) Allen C. Ewing & Co. served as a sales
agent for the offering. In addition, the
company's officers and directors sold
shares in the offering, but did not receive
any commissions for their efforts.
(iii) Common stock was the only class of
securities registered in the offering.
(iv) 1,000,000 shares ($10,000,000) of common
stock were registered, of which 1,000,000
shares ($10,000,000) were sold.
(v) The company incurred approximately $281,142
in expenses (including sales commissions)
in connection with the issuance and
distribution of the common stock in the
offering. All of these expenses were paid
directly or indirectly to persons or
entities other than directors, officers,
persons owning 10% or more of the company's
securities, or affiliates of the company.
(vi) The net proceeds to the company after
deducting the total expenses described
above were $9,718,858.
(vii) Through December 31, 1999, $2,332,978 of
the net proceeds of the offering were
invested in cash, $7,000,000 was invested
in our bank subsidiary; and $190,638 was
used to pay organization costs. None of the
net proceeds have been paid directly or
indirectly to directors, officers, persons
owning 10% or more of the company's
securities, and affiliates of the company,
except for an aggregate of $222,950 paid as
salaries to officers of First National
Bank.
(viii) The use of proceeds described above does
not represent a material change from the
use of proceeds disclosed in the prospectus
for the offering.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATION
This discussion and analysis is intended to assist the reader in
understanding the financial condition and results of operations of First
Capital Bank Holding Corporation. This commentary should be read in conjunction
with the financial statements and the related notes and the other statistical
information included elsewhere in this report.
12
<PAGE> 13
OVERVIEW
First Capital Bank Holding Corporation was incorporated as a Florida
corporation on July 29, 1998, primarily to own and control all of the capital
stock of First National Bank of Nassau County. On July 26, 1999, the company
acquired 100% of the outstanding common stock of First National Bank, which
operates in the Fernandina Beach, Florida area. We raised $10,000,000 through
an offering of our common stock at $10 per share, of which $7,000,000 was used
to capitalize First National Bank. First National Bank is chartered and
regulated by the Office of the Comptroller of Currency and the Federal Deposit
Insurance Corporation. First National Bank commenced operations on July 26,
1999 in temporary facilities located at 1875-A South 14th Street, Fernandina
Beach, Florida. We moved into our new main office location at 1891 South 14th
Street, Fernandina Beach, Florida, on September 27, 1999.
During the development stage, from July 29, 1998 to December 31, 1998,
we had a net loss of $190,638, and for the year ended December 31, 1999, we had
a net loss of $444,313. Losses from inception to December 31, 1999 were
$634,951. During 1999, our total assets grew from $384,712 to $21,406,482 as of
December 31, 1999.
We have omitted information from our discussion for the period from
our inception, July 29, 1998 through December 31, 1998, because we did not
commence operations until July 26, 1999, and this information would not be
meaningful. The following discussion should be read with these points in mind.
The following discussion also should be read in conjunction with our
consolidated financial statements and the other financial data included in this
annual report. The following discussion should be read with an understanding of
the Company's short operating history.
RESULTS OF OPERATIONS
As of December 31, 1999, which was the end of the first partial year
(five months) of banking operations, the Company had total assets of
$21,406,482, which consisted of cash and due from banks of $1,056,088, federal
funds sold of $1,871,000, investment securities available for sale of
$10,059,587, net loans of $6,337,579, premises and equipment of $1,646,871 and
other assets of $435,357. The Company's liabilities consisted of total deposits
of $12,382,702 and other liabilities of $11,185. Total shareholders' equity as
of December 31, 1999 was $9,012,595.
The Company's net loss for the year ended December 31, 1999 was
$444,313, which included pre-opening expenses to prepare the Bank for
operations. The Bank was staffed at a full service level during June 1999, in
preparation of the Bank's opening on July 26, 1999.
Interest income of $521,671 was earned for the period ending December
31, 1999. Interest on investment securities of $256,885 represented the largest
portion of interest income. During the period, net interest expense was
$130,697, resulting in net interest income of $390,974.
The provision for loan losses was set at 1.15% of total loans,
resulting in a $74,000 provision as of December 31, 1999. Management estimates
that this is the amount necessary to adequately reflect possible loan losses.
Management's judgment about the adequacy of the allowance is based upon a
number of future assumptions, which are believed to be reasonable, but which
may or may not be accurate. There is no assurance that future charge-offs will
not exceed the allowance for loan losses or that additional increases in the
loan loss allowance will not be required. The Company had no loan losses or
charge-offs in 1999.
Other income in 1999 was $18,823. Other expenses in 1999 was $780,110,
which included salaries and benefits of $426,690, occupancy expenses of
$90,885, and other operating expenses of $262,535.
NET INTEREST INCOME
Earnings are dependent on net interest income to be the primary source
of revenue. Net interest income is the difference between income on
interest-earning assets and expense on interest-bearing liabilities. Interest
rate spread, or margin, is the difference between the yield on average earning
assets and the rate on average interest-bearing liabilities. Net yield on
earning assets is net interest income divided by average interest-earning
assets. Net interest income for the year ended December 31, 1999 was $390,974.
13
<PAGE> 14
AVERAGE BALANCES, YIELDS AND RATES
The following table sets forth, for the year ended December 31, 1999,
the weighted average yields earned, the weighted average rates paid, the
interest rate spread and the net yield on earning assets and interest-bearing
liabilities, on an annualized basis.
<TABLE>
<CAPTION>
Average
Balance Income/Expense Yield/Rate
--------------- -------------- ----------
<S> <C> <C> <C>
ASSETS:
Federal funds sold $ 1,888,332 $ 99,454 5.27%
Investment securities 4,124,570 256,885 6.23%
Loans 1,902,220 165,332 8.69%
--------------- -----------
Total earning assets 7,915,122 521,671 6.59%
All other assets 1,019,447
---------------
Total assets $ 8,934,569
===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-bearing deposits $ 2,912,869 $ 97,248 3.34%
Noninterest-bearing deposits 831,726
Short-term borrowings 430,890 33,449 7.52%
--------------- -----------
Deposits and short-term borrowings 4,189,485 130,697 3.12%
Other liabilities 22,405
Stockholders' equity 4,722,679
---------------
Total liabilities and stockholders' equity $ 8,934,569
===============
Net interest spread 3.47%
Net interest income/margin $ 390,974
===========
</TABLE>
As shown in the previous table, the average yield on earning assets
was 6.59%, while the average cost of funds was 3.12% for a net interest spread
of 3.47%. The net interest margin as a percentage of interest-earning assets
was 4.38%. The average balances above were calculated on an annualized basis,
even though the Company and the Bank were not in operations for the entire
year. Income on loans includes loan fees that amounted to $34,656. Interest
expense of $33,449 was incurred on short-term borrowings used to organize the
Bank. See the section in this discussion relating to short-term borrowings.
RATE/VOLUME ANALYSIS
Net interest income can be analyzed in terms of the impact of changing
rates and changing volume. As this was the first period of operations for the
Company, all interest income and expense is attributable to volume. Therefore,
the Company has omitted the table analyzing the changes in net interest income
as it would not be meaningful since there are no 1998 results.
LIQUIDITY AND RATE SENSITIVITY
Asset/liability management is the process by which the Company
monitors and controls the mix and maturities of its assets and liabilities. The
essential purposes of asset/liability management are to ensure adequate
liquidity and to maintain an appropriate balance between interest sensitive
assets and interest sensitive liabilities to minimize potentially adverse
impacts on earnings from changes in market interest rates.
14
<PAGE> 15
Primary sources of liquidity for the Company are a stable base of
deposits, scheduled repayments on the Company's loans, and interest and
maturities of its investments. All securities of the Company have been
classified as available-for-sale. If necessary, the Company has the ability to
sell a portion of its investment securities to manage its interest sensitivity
gap or liquidity. The Company also may utilize its cash and due from banks and
federal funds sold to meet liquidity needs. Additionally, the Company has
unsecured lines of credit with correspondent banks in the amount of $5,450,000.
No borrowings have been drawn on these lines of credit.
The principal monitoring technique employed by the Company is the
measurement of the Company's interest sensitivity "gap," which is the positive
or negative dollar difference between assets and liabilities that are subject
to interest rate repricing within a given period of time. Interest rate
sensitivity can be managed by repricing assets or liabilities, selling
securities available-for-sale, replacing an asset or liability at maturity, or
adjusting the interest rate during the life of an asset or liability. Managing
the amount of assets and liabilities repricing in this same time interval helps
to minimize interest rate risk and manage net interest income in changing
interest rate environments. The Company's net interest income generally would
benefit from rising interest rates when it has an asset-sensitive gap position.
Conversely, the Company's net interest income generally would benefit from
decreasing interest rates of interest when it has a liability-sensitive gap
position.
Because the Bank has only been open since July 1999, and not yet
generated a substantial amount of variable rate loans, the Company is currently
liability sensitive over three-month and one-year time frames. However, the
Company's gap analysis is not a precise indicator of its interest sensitivity
position. The analysis presents only a static view of the timing of maturities
and repricing opportunities, without taking into consideration that changes in
interest rates do not affect all assets and liabilities equally. For example,
rates paid on a substantial portion of core deposits may change contractually
within a relatively short time frame, but those rates are viewed by management
as significantly less interest-sensitive than market-based rates such as those
paid on non-core deposits. Net interest income may be affected by other
significant factors in a given interest rate environment, including changes in
the volume and mix of earning assets and interest-bearing liabilities.
INTEREST RATE SENSITIVITY ANALYSIS
The asset mix of the balance sheet is continually evaluated in terms
of several variables: yield, credit quality, appropriate funding sources and
liquidity. To effectively manage the liability mix of the balance sheet, there
should be a focus on expanding the various funding sources. The interest rate
sensitivity position as of December 31, 1999 is presented in the following
table. The difference between rate sensitive assets and rate sensitive
liabilities, or the interest rate sensitivity gap, is shown at the bottom of
the table. Since all interest rates and yields do not adjust at the same
velocity, the gap is only a general indicator of rate sensitivity. The table
may not be indicative of the Company's rate sensitivity position at other
points in time.
<TABLE>
<CAPTION>
After three After one but
Within three but within within five After five
months twelve months years years Total
---------- ------------- ------------- ---------- --------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
INTEREST-EARNING ASSETS:
Federal funds sold $ 1,871 $ -- $ -- $ -- $ 1,871
Investment securities 500 -- 8,621 1,438 10,559
Loans 2,525 357 2,144 1,312 6,338
---------- --------- ----------- -------- --------
Total earning assets $ 4,896 $ 357 $ 10,765 $ 2,750 $ 18,768
========== --========= ========= ======== ========
INTEREST-BEARING LIABILITIES:
Money market and NOW $ 8,413 $ -- $ -- $ -- $ 8,413
Regular savings 149 -- -- -- 149
Time deposits 106 1,691 493 -- 2,290
---------- --------- --------- -------- --------
Total interest-bearing liabilities $ 8,668 $ 1,691 $ 493 $ -- $ 10,852
========== ========= ========= ======== ========
Interest-sensitivity gap $ (3,772) $ (1,334) $ 10,272 $ 2,750 $ 7,916
Cumulative interest-sensitivity gap $ (3,772) $ (5,106) $ 5,166 $ 7,916 $ 7,916
Ratio of interest-sensitivity gap to
total earning assets (20%) (27%) 28% 42% 42%
</TABLE>
15
<PAGE> 16
LOAN PORTFOLIO
Since loans typically provide higher interest yields than do other
types of earning assets, the Company's intent is to channel a substantial
percentage of its earning assets into the loans category. However, since the
Bank only commenced operations in July 1999, that category has not yet grown to
a substantial percentage of total earning assets, comparable to banks that are
well established. Total net loans outstanding at December 31, 1999 were
$6,337,579.
Major classifications of loans as of December 31, 1999 are summarized as
follows:
<TABLE>
<CAPTION>
Amount Percent of total
---------- ----------------
<S> <C> <C>
Commercial, financial and agricultural $1,224,920 19.10%
Real estate - mortgage 4,325,716 67.47%
Real estate - construction 488,968 7.63%
Consumer 371,975 5.80%
---------- ------
Total loans $6,411,579 100.00%
Less: Allowance for loan losses 74,000
----------
Total net loans $6,337,579
=========
</TABLE>
The major component of the Company's loan portfolio was real estate
mortgage loans, which represented 67.47% of the loan portfolio. In the context
of this discussion, we define a "real estate mortgage loan" as any loan, other
than loans for construction purposes, secured by real estate, regardless of the
purpose of the loan. We follow the common practice of financial institutions in
our market area of obtaining a security interest in real estate whenever
possible, in addition to any other available collateral. We take this
collateral to reinforce the likelihood of the ultimate repayment of the loan;
however, this tends to increase the magnitude of our real estate loan portfolio
component. Generally, we limit our loan-to-value ratio to 80%. Due to the short
time frame the portfolio existed, the current loan mix may not be indicative of
the ongoing make-up of the portfolio. In order to reduce collateral risk,
management will attempt to maintain a relatively diversified portfolio.
Maturities and sensitivity of loans to changes in interest rates
The information in the following table is based on the contractual
maturities of individual loans, including loans that may be subject to renewal
at their contractual maturity. Renewal of such loans is subject to review and
credit approval, as well as modification of terms upon their maturity. Actual
repayments of loans may differ from maturities reflected below because
borrowers have the right to prepay obligations with or without prepayment
penalties.
The following table summarizes major classifications of loans by maturities as
of December 31, 1999:
16
<PAGE> 17
<TABLE>
<CAPTION>
After one,
One year but within After five
or less five years Years Total
----------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
Commercial, financial and
agricultural $ 99,689 $ 490,550 $ 634,681 $ 1,224,920
Real estate - mortgage 1,081,375 961,124 2,283,217 4,325,716
Real estate - construction 488,968 -- -- 488,968
Consumer 166,705 162,588 42,682 371,975
----------- ----------- ----------- -------------
Total $ 1,836,737 $ 1,614,262 $ 2,960,580 $ 6,411,579
=========== =========== =========== -------------
Loans maturing after one year with:
Fixed interest rates $ 3,660,337
Floating interest rates $ 914,505
</TABLE>
PROVISION AND ALLOWANCE FOR LOAN LOSSES
The Company has developed policies and procedures for evaluating the
overall quality of its credit portfolio and the timely identification of
potential credit problems. Additions to the allowance for loan losses are made
to maintain the allowance at an appropriate level based on management's
analysis of the potential risk in the loan portfolio.
As of December 31, 1999, the allowance for loan losses was $74,000, or
1.15% of outstanding loans of $6,411,579. The Bank has not charged off any
loans since commencing operations. The provision for loan losses was made
primarily as a result of management's assessment of general loan loss risk.
SUMMARY OF LOAN LOSS EXPERIENCE
An analysis of the Bank's loss experience is furnished in the
following table for the year ended December 31, 1999, as well as a breakdown of
the allowance for possible loan losses:
<TABLE>
<CAPTION>
Year ended December 31, 1999
----------------------------
<S> <C>
Balance at beginning of period $ --
Charge-offs --
Recoveries --
Net charge-offs --
Additions charged to operations 74,000
-------
Balance at end of period $74,000
=======
Ratio of net charge-offs during the period to average loans outstanding 0%
during the period =======
</TABLE>
17
<PAGE> 18
As of December 31, 1999, the allowance was allocated as follows:
<TABLE>
<CAPTION>
Percent of loans in
Year ended each category
December 31, 1999 to total loans
----------------- --------------
<S> <C> <C>
Commercial, financial and agricultural $ 14,134 19.10%
Real estate - mortgage 49,931 67.47%
Real estate - construction 5,643 7.63%
Consumer 4,292 5.80%
Total $ 74,000 100.00%
=========== =========
</TABLE>
INVESTMENT PORTFOLIO
At December 31, 1999, the investment securities portfolio of
$10,398,634 represented approximately 57.49% of the company's earning assets.
The Company had investments in US Government Agency Securities and Mortgage
backed securities with fair value of $5,424,352 and $4,635,235 and amortized
costs of $5,492,600 and $4,675,034 respectively for a net unrealized loss of
$108,047. The Company also invested in stock of the Federal Reserve Bank in the
amount of $210,000 and the Federal Home Loan Bank in the amount of $21,000.
The amortized cost and estimated fair value of investment securities available
for sale at December 31, 1999, by contractual maturity, are shown below.
Expected maturities will differ from contractual maturities because borrowers
may have the right to call or prepay obligations without call or prepayment
penalties.
<TABLE>
<CAPTION>
After one but
Within one year within five years Total Yield
--------------- ------------------ ----------- ----------
<S> <C> <C> <C> <C>
U.S. Government Agencies $ 498,550 $ 4,994,050 $ 5,492,600 6.40%
Mortgage Backed Securities 4,675,034 6.69%
Other 231,000 6.16%
Total 10,398,634 6.53%
============= ==========
</TABLE>
As of December 31, 1999, the Company had short-term investments in
Federal funds sold at $1,871,000. The funds were sold on an overnight basis to
other banks. As the Bank grows, management expects to shift from overnight
investments into the loan portfolio.
DEPOSITS AND OTHER INTEREST-BEARING LIABILITIES
As of December 31, 1999, deposits were the only component of
interest-bearing liabilities. Average total deposits were $3,744,595. The
following is a table of deposits by category at year end 1999.
<TABLE>
<CAPTION>
Percentage of
Ending Percentage of Average total average Effective
balance total deposits balance deposits cost
------------- -------------- ------------- ------------- ---------
<S> <C> <C> <C> <C> <C>
Demand deposit accounts $ 1,531,558 12.37% $ 831,726 12.62% --
NOW accounts 3,970,019 32.06% 995,128 31.61% 1.15%
Money market accounts 4,443,468 35.88% 1,425,365 40.13% 4.70%
Savings accounts 149,151 1.20% 37,476 1.19% 1.96%
Time deposits less
than $100,000 1,052,767 8.50% 199,719 6.34% 5.32%
Time deposits of $100,00
or more 1,235,739 9.98% 255,182 8.11% 5.47%
------------- ----------- ------------- -----------
Total deposits $ 12,382,702 100.00% $ 3,744,595 100.00%
============= =========== ============= ===========
</TABLE>
18
<PAGE> 19
Core deposits, which exclude time deposits of $100,000 or more, provide a
relatively stable funding source for the Company's loan portfolio and other
earning assets. The Company's core deposits were $11,146,963 as of December 31,
1999.
The maturity distribution of the Company's time deposits as of December 31,
1999 is as follows:
<TABLE>
<S> <C>
Three months or less $ 106,313
Over three through six months 830,929
Over six through twelve months 859,540
Over twelve months 491,724
----------
Total $2,288,506
==========
</TABLE>
SHORT-TERM BORROWINGS
As of December 31, 1999, the Company had no outstanding balances under
short-term borrowings. During 1998, the Company had a line of credit in the
amount of $1,500,000 with a bank that was used to finance the purchase of land,
building and furniture, fixtures and equipment and to pay operating expenses
while in organization. The average rate paid on the borrowings was 7.75%.
The Company also has unsecured lines of credit available on a one to
fourteen day basis with correspondent banks for $5,450,000. No borrowings have
been made from these lines as of December 31, 1999.
RETURN ON EQUITY AND ASSETS
The following table shows the return on average assets (net income
divided by average total assets), return on average equity (net income divided
by average equity), and equity to assets ratio (average equity divided by
average total assets) for 1999. Since its inception, the Company has not paid
any cash dividends.
<TABLE>
<S> <C>
Return on average assets (4.97 %)
Return on average equity (9.41 %)
Equity to assets ratio 42.10 %
</TABLE>
CAPITAL ADEQUACY
The Federal Reserve Board and bank regulatory agencies require bank
holding companies and financial institutions to maintain capital at adequate
levels based on a percentage of assets and off-balance sheet exposures,
adjusted for risk weights ranging from 0% to 100%. The Federal Reserve
guidelines also contain an exemption from the capital requirements for bank
holding companies with less than $150 million in consolidated assets. Because
the Company has less than $150 million in assets, it is not currently subject
to these guidelines. However, the Bank must maintain its capital levels in
accordance with these rules.
Under the capital adequacy guidelines, capital is classified into two
tiers. Tier 1 capital consists of common shareholders' equity, excluding the
unrealized gain or loss on securities available for sale, minus certain
intangible assets. Tier 2 capital consists of the general reserve for loan
losses subject to certain limitations. The qualifying capital base for purposes
of the risk-based capital ratio consists of the sum of its Tier 1 and Tier 2
capital. The Bank is also required to maintain capital at a minimum level based
on total average assets, which is known as the Tier 1 leverage ratio.
19
<PAGE> 20
The table below illustrates the Bank's regulatory capital ratios as of December
31, 1999:
<TABLE>
<CAPTION>
To Be Well Capitalized
For Capital Adequacy Under Prompt Corrective
Actual Purposes Action Provisions
---------------------- -------------------- -----------------------
Amount Ratio Amount Ratio Amount Ratio
<S> <C> <C> <C> <C> <C> <C>
As of December 31, 1999:
Total Capital
(to Risk Weighted Assets) $6,825,000 77% 712,000 8% 889,000 10%
Tier 1 Capital
(to Risk Weighted Assets) $6,751,000 76% 356,000 4% 534,000 6%
Tier 1 Capital
(to Average Assets) $6,751,000 36% 750,000 4% 938,000 5%
</TABLE>
Detail disclosures related to the Company have been excluded as they
significantly exceed the disclosures herein.
The above ratios indicate that the capital positions of the Company
and the Bank are sound and that the Company is well positioned for future
growth.
A condition of the original offering was that a minimum of 610,000
shares of common stock be sold. There were a total of 1,000,000 shares sold
during the offering period with net proceeds after offering expenses of
$9,718,858. Of the proceeds, $7,000,000 was used to capitalize the Bank. The
Company believes that this amount is sufficient to fund the activities of the
Bank in its initial stages of operations and that the Bank will generate
sufficient income from operations to fund its activities on an on-going basis.
The remaining offering proceeds were retained in the Company to fund activities
which may be considered appropriate investments of capital at some point in the
future.
As of December 31, 1999, there were no significant commitments
outstanding for capital expenditures.
IMPACT OF INFLATION AND CHANGING PRICES
The effect of relative purchasing power over time due to inflation has
not been taken into effect in the financial statements of the Company. Rather,
the statements have been prepared on an historical cost basis in accordance
with generally accepted accounting principles.
Since most of the assets and liabilities of a financial institution
are monetary in nature, the effect of changes in interest rates will have a
more significant impact on the Company's performance than will the effect of
changing prices and inflation in general. Interest rates may generally increase
as the rate of inflation increases, although not necessarily in the same
magnitude.
ACCOUNTING PRONOUNCEMENTS
In 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 133 ("SFAS 133"), "Accounting
for Derivative Instruments and Hedging Activities". SFAS 133 establishes
accounting and reporting standards for hedging derivatives and for derivative
instruments including derivative instruments embedded in other contracts. It
requires the fair value recognition of derivatives as assets or liabilities in
the financial statements. The accounting for the changes in the fair value of a
derivative depends on the intended use of the derivative instruments at
inception. Instruments used as fair value hedges account for the change in fair
value in the earnings of the period simultaneous with accounting for the fair
value change of the item being hedged. Cash flow hedges account for the change
in fair value of the effective portion in comprehensive income rather than
earnings and foreign currency hedges which are accounted for in comprehensive
income as part of the translation adjustment. Derivative instruments that are
not intended as a hedge account for the change in fair value in the earnings of
the period of the change. In 1999, the FASB issued Statement No. 137 which
deferred implementation of SFAS 133 to become effective for all fiscal quarters
beginning after June 15, 2000, but initial application of the statement must be
20
<PAGE> 21
made as of the beginning of the quarter. At the date of initial application, an
entity may transfer any held to maturity security into the available for sale
or trading categories without calling into question the entity's intent to hold
other securities to maturity in the future. The Company believes the adoption
of these standards will not have a material impact on its financial position,
results of operations or liquidity.
INDUSTRY DEVELOPMENTS
On November 4, 1999, the U.S. Senate and House of Representatives each
passed the Gramm-Leach-Bliley Act, previously known as the Financial Services
Modernization Act of 1999. The Act was signed into law by President Clinton on
November 12, 1999. Among other things, the Act repeals the restrictions on
banks affiliating with securities firms contained in sections 20 and 32 of the
Glass-Steagall Act. The Act also permits bank holding companies to engage in a
statutorily provided list of financial activities, including insurance and
securities underwriting and agency activities, merchant banking, and insurance
company portfolio investment activities. The Act also authorizes activities
that are "complementary" to financial activities.
The Act is intended to grant to community banks certain powers as a
matter of right that larger institutions have accumulated on an ad hoc basis.
Nevertheless, the Act may have the result of increasing the amount of
competition that we face from larger institutions and other types of companies.
In fact, it is not possible to predict the full effect that the Act will have
on us. In addition, from time to time, various bills are introduced in the
United States Congress with respect to the regulation of financial
institutions. Certain of these proposals, if adopted, could significantly
change the regulation of banks and the financial services industry. The Company
cannot predict whether any of these proposals will be adopted or, if adopted,
how these proposals would affect the Company.
FORWARD-LOOKING STATEMENTS
The Private Securities Litigation Reform Act of 1995 (the Act)
provides a safe harbor for forward-looking statements made by or on behalf of
the Company. The Company has made, and may continue to make, various written or
verbal forward-looking statements with respect to business and financial
matters, including statements contained in this report, filings with the
Securities and Exchange Commission, and reports to stockholders. All statements
which address operating performance, events or developments that we expect or
anticipate will occur in the future, including statements related to loan
growth, deposit growth, per share growth, and statements expressing general
sentiment about future operating results and non-historical information, are
forward-looking statements within the meaning of the Act. The forward-looking
statements are and will be based on management's then current views and
assumptions regarding future events and operating performance. Certain factors
that would affect financial performance or cause actual results to vary
significantly from estimates contained in or underlying forward-looking
statements include:
- Interest rate fluctuations and other market conditions.
- Strength of the consumer and commercial credit sectors, as
well as real estate markets.
- Changes in laws and regulations, including changes in
accounting standards and taxation requirements (including tax
rate changes, new tax laws, and revised tax law
interpretations).
- Competitive pricing and other pressures on loans and deposits
and the Company's ability to obtain market share in its trade
areas.
- The outcome of litigation which depends on judicial
interpretations of law and findings of juries.
- Other risks and uncertainties as detailed from time to time
in Company filings with the Securities and Exchange
Commission.
21
<PAGE> 22
YEAR 2000 ISSUES
Like many financial institutions, we rely on computers to conduct our
business and information systems processing. Industry experts were concerned
that on January 1, 2000, some computers would not be able to interpret the new
year properly, causing computer malfunctions. Although this did not happen,
some experts remain concerned that computer malfunctions may occur on other key
dates during 2000, such as October 10, 2000.
In accordance with bank regulatory guidelines, we developed and
executed a plan to ensure that our computer and telecommunication systems do
not have these Year 2000 problems. We rely on third party vendors to supply our
computer and telecommunication systems and other office equipment, and to
process our data and account information. Because we commenced operations in
1999, we had the ability to choose vendors which we believed to be ready for
the Year 2000. As a result, we did not spend any material amount in 1999 to
implement our Year 2000 plan. Our Year 2000 plan extends to all of our vendors,
including our vendors for core data processing system, ATM hardware, account
origination software, telephone systems, and suppliers of office equipment,
such as copy and fax machines. Under our plan, we reviewed the test results,
assurances, and warranties of all of these vendors, and we believe that all
these systems are Year 2000 compliant. Our technology and processing vendors
work with many other financial institutions, all of which, like us, are
required by their bank regulators to be Year 2000 compliant. Because our
systems are substantially similar to those used in many other banks, we believe
that the scrutiny imposed by our regulators and the banking industry in general
have significantly reduced the Year 2000 related risks we might otherwise have
faced. Under our plan, we will continue to monitor the situation throughout
2000. We are executing this plan under the supervision of our board of
directors.
Our agreements with each of our primary vendors include contractual
assurances and warranties regarding Year 2000 compliance. Some of these
warranties are limited by disclaimers of liability which specifically exclude
special, incidental, indirect, and consequential damages. These limitations
could limit our ability to obtain recourse against a vendor who is not Year
2000 compliant by excluding damages for things such as lost profits and
customer lawsuits.
We have also evaluated our worst case scenario and developed
contingency plans in case Year 2000 issues do arise. In the worst case, our
systems would be down for a period of time and we would be required to complete
all transactions and keep all records manually. We will have all required forms
and procedures in place for manual processing, and believe we can do this for
at least a week without serious disruption of our business. We do not believe
we will encounter any issues that cannot be resolved within this period. Any
affected systems which cannot be fixed will be replaced with alternatives,
although this is unlikely to be necessary.
The Year 2000 issue may also negatively affect the business of our
customers, but to date we are not aware of any material Year 2000 issues
affecting them. We include Year 2000 readiness in our lending criteria to
minimize risk. However, this will not eliminate the issue, and any financial
difficulties our customers' experience caused by Year 2000 issues could impair
their ability to repay loans to the bank.
We did not have any significant Year 2000 problems on January 1, 2000,
and we do not expect to experience any significant Year 2000 problems. We also
believe that we will be able to continue to operate the business if one or more
of our vendors experience unanticipated Year 2000 problems.
22
<PAGE> 23
ITEM 7. FINANCIAL STATEMENTS
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors
First Capital Bank Holding Corporation
We have audited the accompanying consolidated balance sheets of First Capital
Bank Holding Corporation and subsidiary as of December 31, 1999 and 1998, and
the related statements of operations, changes in shareholders' equity,
comprehensive income and cash flows for the year ended December 31, 1999 and
the period from July 29, 1998 (inception) to December 31, 1998. 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 generally accepted auditing
standards. Those standards require that we plan and perform the audit 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, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of First Capital Bank
Holding Corporation and subsidiary as of December 31, 1999 and 1998 and the
results of their operations and their cash flows for the year ended December
31, 1999 and the period from July 29, 1998 (inception) to December 31, 1998 in
conformity with generally accepted accounting principles.
Atlanta, Georgia
January 27, 2000
<PAGE> 24
FIRST CAPITAL BANK HOLDING CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1999 AND 1998
Assets
<TABLE>
<CAPTION>
1999 1998
------------ --------
<S> <C> <C>
Cash and due from banks $ 1,056,088 2,535
Federal funds sold 1,871,000 --
------------
Cash and cash equivalents 2,927,088 2,535
Investment securities available for sale 10,059,587 --
Other investments 231,000 --
Loans, net 6,337,579 --
Premises and equipment, net 1,646,871 300,861
Accrued interest receivable and other assets 204,357 81,316
------------ --------
$ 21,406,482 384,712
============ ========
<CAPTION>
Liabilities and Shareholders' Equity
Deposits:
Non interest demand $ 1,531,558 --
Interest bearing demand 3,970,019 --
Savings 4,592,619 --
Time 1,052,767 --
Time over $100,000 1,235,739 --
------------ --------
Total deposits 12,382,702 --
Note payable -- 520,678
Accrued interest payable and other liabilities 11,185 54,172
------------ --------
Total liabilities 12,393,887 574,850
------------ --------
Commitments
Shareholders' equity:
Preferred stock, par value $.01, 1,000,000 shares authorized,
no shares issued and outstanding -- --
Common stock, par value $.01; 10,000,000 shares authorized;
1,000,000 and 10 issued and outstanding, respectively 10,000 --
Additional paid-in capital 9,708,858 500
Accumulated deficit (634,951) (190,638)
Accumulated comprehensive loss (71,312) --
------------ --------
Total shareholders' equity 9,012,595 (190,138)
------------ --------
$ 21,406,482 384,712
============ ========
</TABLE>
See accompanying notes to consolidated financial statements
2
<PAGE> 25
FIRST CAPITAL BANK HOLDING CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999 AND
THE PERIOD FROM JULY 29, 1998 (INCEPTION) TO DECEMBER 31, 1998
<TABLE>
<CAPTION>
1999 1998
------------ --------
<S> <C> <C>
Interest income:
Interest and fees on loans $ 165,332 --
Interest on investment securities 256,885 --
Interest on federal funds sold 99,454 --
------------ --------
Total interest income 521,671 --
------------ --------
Interest expense:
Interest on deposits 97,248 --
Other 33,449 12,921
------------ --------
Total interest expense 130,697 12,921
------------ --------
Net interest income (loss) 390,974 (12,921)
Provision for loan losses 74,000 --
------------ --------
Net interest income (expense) after provision for loan losses 316,974 (12,921)
------------ --------
Other income:
Service charges on deposit accounts 5,790 --
Other income 13,033 --
------------ --------
Total other income 18,823 --
------------ --------
Other expenses:
Salaries and employee benefits 426,690 54,674
Occupancy and equipment 90,885 8,152
Other operating 262,535 114,891
------------ --------
Total other expenses 780,110 177,717
------------ --------
Net loss $ (444,313) (190,638)
============ =========
Net loss per share $ (.44) (.19)
============ =========
Average shares outstanding 1,000,000 1,000,000
============ =========
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE> 26
FIRST CAPITAL BANK HOLDING CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1999
AND THE PERIOD FROM JULY 29, 1998 (INCEPTION) TO DECEMBER 31, 1998
<TABLE>
<CAPTION>
Additional Accumulated
Paid-In Accumulated Comprehensive
Common Stock Capital Deficit Income Total
---------- ----------- ------------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Proceeds from the sale of
organizational shares -- 500 -- -- 500
Net loss -- -- (190,638) -- (190,638)
---------- ----------- ------------- ------------- ------------
Balance, December 31, 1998 500 (190,638) -- (190,138)
Proceeds from stock offering,
net of offering costs of $281,142 10,000 9,708,858 -- -- 9,718,858
Redemption of organizational
shares (500) -- -- (500)
Change in unrealized loss on
securities available for sale -- (71,312) (71,312)
Net loss -- -- (444,313) -- (444,313)
---------- ----------- ------------- ------------- ------------
Balance, December 31, 1999 $ 10,000 9,708,858 (634,951) (71,312) 9,012,595
========== =========== ============= ============= ============
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE> 27
FIRST CAPITAL BANK HOLDING CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED DECEMBER 31, 1999
AND THE PERIOD FROM JULY 29, 1998 (INCEPTION) TO DECEMBER 31, 1998
<TABLE>
<CAPTION>
1999 1998
------------ --------
<S> <C> <C>
Net loss $ (444,313) (190,638)
------------ --------
Other comprehensive income:
Unrealized holding losses on investment securities
available for sale (108,048) --
Associated tax benefit 36,736 --
------------ --------
Total other comprehensive loss, net of income taxes (71,312) --
------------ --------
Total comprehensive income $ (515,625) (190,638)
============ ========
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE> 28
FIRST CAPITAL BANK HOLDING CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1999
AND THE PERIOD FROM JULY 29, 1998 (INCEPTION) TO DECEMBER 31, 1998
<TABLE>
<CAPTION>
1999 1998
------------ --------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (444,313) (190,638)
Adjustments to reconcile net loss to net cash
Used by operating activities:
Depreciation and accretion 32,722 2,321
Provision for loan losses 74,000 --
Change in:
Accrued interest and other assets (166,828) (793)
Accrued payable interest and other liabilities (42,987) 54,172
------------ --------
Net cash used by operating activities (547,406) (134,938)
------------ --------
Cash flows from investing activities:
Purchases of investment securities available for sale (10,150,860) --
Purchases of other investments (231,000) --
Net change in loans (6,411,579) --
Purchase of premises and equipment (1,395,507) (303,182)
------------ --------
Net cash used by investing activities (18,188,946) (303,182)
------------ --------
Cash flows from financing activities:
Net change in deposits 12,382,702 --
Net change in line of credit (520,678) 520,678
Proceeds from the sale of common stock 10,000,000 --
Payment of deferred offering expense (200,619) (80,523)
Sale of (redemption of) organizational shares (500) 500
------------ --------
Net cash provided by financing activities 21,660,905 440,655
------------ --------
Net increase in cash and cash equivalents 2,924,553 2,535
Cash and cash equivalents at beginning of year 2,535 --
------------
Cash and cash equivalents at end of year $ 2,927,088 2,535
============ ========
Supplemental schedule of noncash investing and Financing activities:
Change in unrealized loss on investment
Securities available for sale, net of tax $ (71,312) --
============ ========
Supplemental disclosures of cash flow information:
Cash paid during the year for interest $ 130,513 6,340
============ ========
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE> 29
FIRST CAPITAL BANK HOLDING CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
First Capital Bank Holding Corporation (the "Company") was
incorporated for the purpose of becoming a bank holding company. On
July 26, 1999, the Company acquired 100% of the outstanding common
stock of First National Bank of Nassau County (the "Bank"), which
operates in the Fernandina Beach, Florida area. The Bank is chartered
and regulated by the Office of the Comptroller of Currency and the
Federal Deposit Insurance Corporation. The Bank commenced operations
on July 26, 1999.
The Company raised $10,000,000 through an offering of its common stock
at $10 per share of which $7,000,000 was used to capitalize the Bank.
Basis of Presentation
The consolidated financial statements include the accounts of the
Company and the Bank. All intercompany accounts and transactions have
been eliminated in consolidation. Certain 1998 amounts were
reclassified to conform to the 1999 presentation. The Company through
June 30, 1999 was reported on as a development stage corporation.
The accounting principles followed by the Company and its subsidiary,
and the method of applying these principles, conform with generally
accepted accounting principles (GAAP) and with general practices
within the banking industry. In preparing financial statements in
conformity with GAAP, management is required to make estimates and
assumptions that affect the reported amounts in the financial
statements. Actual results could differ significantly from those
estimates. Material estimates common to the banking industry that are
particularly susceptible to significant change in the near term
include, but are not limited to, the determination of the allowance
for loan losses, the valuation of real estate acquired in connection
with foreclosures or in satisfaction of loans, and valuation
allowances associated with the realization of deferred tax assets
which are based on future taxable income.
Cash and Cash Equivalents
For purposes of reporting cash flows, cash and cash equivalents include
cash and due from banks and federal funds sold.
Investment Securities
The Company classifies its securities in one of three categories:
trading, available for sale, or held to maturity. Trading securities
are bought and held principally for the purpose of selling them in the
near term. Held to maturity securities are those securities for which
the Company has the ability and intent to hold until maturity. All
securities not included in trading or held to maturity are classified
as available for sale. At December 31, 1999, all securities are
classified as available for sale.
Available for sale securities are recorded at fair value. Held to
maturity securities are recorded at cost, adjusted for the
amortization or accretion of premiums or discounts. Unrealized holding
gains and losses, net of the related tax effect, on securities
available for sale are excluded from earnings and are reported as a
separate component of shareholders' equity until realized. Transfers
of securities between categories are recorded at fair value at the
date of transfer.
A decline in the market value of any available for sale or held to
maturity security below cost that is deemed other than temporary is
charged to earnings and establishes a new cost basis for the security.
7
<PAGE> 30
Premiums and discounts are amortized or accreted over the life of the
related securities as adjustments to the yield. Realized gains and
losses for securities classified as available for sale and held to
maturity are included in earnings and are derived using the specific
identification method for determining the cost of securities sold.
Other investments
Other investments include equity securities with no readily
determinable fair value. These investments are carried at cost.
Loans and Allowance for Loan Losses
Loans are stated at principal amount outstanding, net of the allowance
for loan losses. Unearned interest on discounted loans is recognized as
income over the term of the loans using a method which approximates a
level yield. Interest on other loans is calculated by using the simple
interest method on daily balances of the principal amount outstanding.
A loan is considered impaired when, based on current information and
events, it is probable that all amounts due according to the
contractual terms of the loan agreement will not be collected.
Impaired loans are measured based on the present value of expected
future cash flows discounted at the loan's effective interest rate, or
at the loan's observable market price, or at the fair value of the
collateral of the loan if the loan is collateral dependent. Accrual of
interest is discontinued on a loan when management believes, after
considering economic and business conditions and collection efforts,
that the borrower's financial condition is such that collection of
interest is doubtful.
The allowance for loan losses is established through a provision for
loan losses charged to expense. Loans are charged against the
allowance for loan losses when management believes that the
collectibility of the principal is unlikely. The allowance represents
an amount which, in management's judgment, will be adequate to absorb
probable losses on existing loans that may become uncollectible.
Management's judgment in determining the adequacy of the allowance is
based on evaluations of the collectibility of loans. These evaluations
take into consideration such factors as changes in the nature and
volume of the loan portfolio, current economic conditions that may
affect the borrower's ability to pay, overall portfolio quality and
review of specific problem loans.
Management believes that the allowance for loan losses is adequate.
While management uses available information to recognize losses on
loans, future additions to the allowance may be necessary based on
changes in economic conditions. In addition, various regulatory
agencies, as an integral part of their examination process,
periodically review the Bank's allowance for loan losses. Such
agencies may require the Bank to recognize additions to the allowance
based on judgments different than those of management.
Premises and Equipment
Premises and equipment are stated at cost less accumulated
depreciation. Major additions and improvements are capitalized while
maintenance and repairs that do not improve or extend the useful lives
of the assets are expensed. When assets are retired or otherwise
disposed of, the cost and related accumulated depreciation are removed
from the accounts, and any gain or loss is reflected in earnings for
the period.
Depreciation expense is computed using the straight-line method over
the following useful lives:
<TABLE>
<S> <C>
Buildings 40 years
Furniture and equipment 3-7 years
</TABLE>
Deferred Offering Expenses
Costs incurred in connection with the stock offering, consisting of
direct, incremental costs of the offering, were deferred and were
offset against the proceeds of the stock sale as a charge to
additional paid in capital.
8
<PAGE> 31
Income Taxes
The Company accounts for income taxes under the asset and liability
method. Accordingly, deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases and operating loss and
tax credit carryforwards. 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. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.
In the event the future tax consequences of differences between the
financial reporting bases and the tax bases of the assets and
liabilities results in deferred tax assets, an evaluation of the
probability of being able to realize the future benefits indicated by
such asset is required. A valuation allowance is provided for the
portion of the deferred tax asset when it is more likely than not that
some portion or all of the deferred tax asset will not be realized. In
assessing the realizability of the deferred tax assets, management
considers the scheduled reversals of deferred tax liabilities,
projected future taxable income, and tax planning strategies.
Accounting for Derivative Instruments and Hedging Activities
In 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 133 ("SFAS 133"),
"Accounting for Derivative Instruments and Hedging Activities". SFAS
133 establishes accounting and reporting standards for hedging
derivatives and for derivative instruments including derivative
instruments embedded in other contracts. It requires the fair value
recognition of derivatives as assets or liabilities in the financial
statements. The accounting for the changes in the fair value of a
derivative depends on the intended use of the derivative instruments
at inception. Instruments used as fair value hedges account for the
change in fair value in the earnings of the period simultaneous with
accounting for the fair value change of the item being hedged. Cash
flow hedges account for the change in fair value of the effective
portion in comprehensive income rather than earnings and foreign
currency hedges which are accounted for in comprehensive income as
part of the translation adjustment. Derivative instruments that are
not intended as a hedge account for the change in fair value in the
earnings of the period of the change. In 1999, the FASB issued
Statement No. 137 which deferred implementation of SFAS 133 to become
effective for all fiscal quarters beginning after June 15, 2000, but
initial application of the statement must be made as of the beginning
of the quarter. At the date of initial application, an entity may
transfer any held to maturity security into the available for sale or
trading categories without calling into question the entity's intent
to hold other securities to maturity in the future. The Company
believes the adoption of these standards will not have a material
impact on its financial position, results of operations or liquidity.
Net Loss Per Share
Earnings per common share are based on the weighted average number of
common shares outstanding during the period. The effects of potential
common shares outstanding during the period including stock options
and warrants are included in diluted earnings per share. No common
stock equivalents were considered as the effects of such would be
anti-dilutive to the loss per share calculation. Net loss per share as
of December 31, 1999 and 1998 were calculated assuming the actual
shares sold in the initial offering were outstanding for the entire
period.
9
<PAGE> 32
(2) INVESTMENT SECURITIES
Investment securities available for sale at December 31, 1999 are as
follows:
<TABLE>
<CAPTION>
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
U.S. Government agencies $ 5,492,600 2,358 (70,606) 5,424,352
Mortgage-backed securities 4,675,034 1,153 (40,952) 4,635,235
----------- ----------- ----------- -----------
Total $10,167,634 3,511 (111,558) 10,059,587
=========== =========== =========== ===========
</TABLE>
The amortized cost and estimated fair value of investment securities
available for sale at December 31, 1999, by contractual maturity, are
shown below. Expected maturities will differ from contractual
maturities because borrowers have the right to call or prepay
obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
Amortized Estimated
Cost Fair Value
----------- -----------
<S> <C> <C>
U.S. Government agencies:
Within 1 year $ 498,550 498,594
1 to 5 years 4,994,050 4,925,758
Mortgage-backed securities 4,675,034 4,635,235
----------- -----------
Total $10,167,634 10,059,587
=========== ===========
</TABLE>
There were no sales of securities available for sale during 1999.
There were no investments as of December 31, 1998.
10
<PAGE> 33
FIRST CAPITAL BANK HOLDING CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(3) LOANS
Major classifications of loans at December 31, 1999 are summarized as
follows:
<TABLE>
<S> <C>
Commercial, financial and agricultural $1,224,920
Real estate - mortgage 4,325,716
Real estate - construction 488,968
Consumer 371,975
----------
Total loans 6,411,579
Less: Allowance for loan losses 74,000
----------
$6,337,579
==========
</TABLE>
The Bank grants loans and extensions of credit to individuals and a
variety of businesses and corporations located in its general trade
area of the city of Fernandina Beach and Nassau County, Florida.
Although the Bank has a diversified loan portfolio, a substantial
portion of the loan portfolio is collateralized by improved and
unimproved real estate and is dependent upon the real estate market.
The Bank provided $74,000 for the year ended December 31, 1999 to the
allowance for loan losses for potential problem loans. There were no
charge-offs during 1999.
(4) PREMISES AND EQUIPMENT
Major classifications of premises and equipment at December 31, 1999
and 1998 are summarized as follows:
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Land $ 265,000 265,000
Building 947,229 8,610
Furniture and equipment 486,561 29,572
----------- -----------
1,698,790 303,182
Less: Accumulated depreciation (51,919) (2,321)
----------- -----------
$ 1,646,871 300,861
=========== ===========
</TABLE>
Depreciation expense amounted to $49,497 and $2,321 for 1999 and 1998.
(5) DEPOSITS
Maturities of time deposits at December 31, 1999 are as follows:
<TABLE>
Maturing in:
<S> <C>
2000 $ 1,796,801
2001 405,258
2002 61,447
2003 25,000
-----------
$ 2,288,506
===========
</TABLE>
11
<PAGE> 34
FIRST CAPITAL BANK HOLDING CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(6) INCOME TAXES
At December 31, 1999 and 1998, the Company had federal and state net
operating loss carryforwards for tax purposes of approximately
$238,000 and $15,000, respectively, which will expire beginning in
2013 if not previously utilized. No income tax expense or benefit was
recorded for the periods ended December 31, 1999 or 1998 due to these
loss carryforwards.
The following summarizes the components of deferred taxes at December
31, 1999 and 1998.
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Deferred income tax assets:
Allowance for loan losses $ 21,454 --
Pre-opening expenses 124,120 59,203
Premises and equipment -- 35
Operating loss carryforwards 81,011 5,182
Unrealized loss on available-for-sale securities 36,736 --
----------- -----------
Total gross deferred income tax assets 263,321 64,420
Less valuation allowance (214,222) (64,420)
----------- -----------
49,099 --
Deferred income tax liabilities, consisting of
premises and equipment (12,363) --
----------- -----------
Net deferred tax asset $ 36,736 --
=========== ===========
</TABLE>
The future tax consequences of the differences between the financial
reporting and tax basis of the Company's assets and liabilities
resulted in a net deferred tax asset. A valuation allowance was
established for the net deferred tax asset, as the realization of
these deferred tax assets is dependent on future taxable income.
(7) LINES OF CREDIT
The Bank has lines of credit at December 31, 1999 totaling $4,450,000,
which represent credit for overnight borrowings from financial
institutions.
(8) COMMITMENTS
The Company entered into an employment agreement with its President
and Chief Executive Officer, providing for an initial term of five
years commencing August 15, 1998. The agreement provides for a base
salary, an incentive bonus based on five percent of the Company's
pre-tax earnings, and 30,000 stock options which vest equally over
five years with an exercise price of $10 per share. Additionally, the
Company is to maintain a $1,000,000 key man life insurance policy,
with $500,000 payable to the Company and $500,000 payable to the
President's family. The agreement further provides for other
perquisites, and subjects the President to certain non-compete
restrictions.
The Bank is a party to financial instruments with off-balance-sheet
risk in the normal course of business to meet the financing needs of
its customers. These financial instruments include commitments to
extend credit and standby letters of credit. Those instruments
involve, to varying degrees, elements of credit risk in excess of the
amount recognized in the consolidated balance sheet. The contractual
amounts of those instruments reflect the extent of involvement the
Bank has in particular classes of financial instruments.
12
<PAGE> 35
The Bank's exposure to credit loss in the event of non-performance by
the other party to the financial instrument for commitments to extend
credit and standby letters of credit is represented by the contractual
amount of those instruments. The Bank uses the same credit policies in
making commitments and conditional obligations as it does for
on-balance-sheet instruments. In most cases, the Bank requires
collateral to support financial instruments with credit risk. At
December 31, 1999, the Bank has commitments to extend credit of
approximately $2,359,000 and $40,000 of standby letters of credit.
(9) STOCKHOLDERS' EQUITY
Shares of preferred stock may be issued from time to time in one or
more series as established by resolution of the Board of Directors of
the Company, up to a maximum of 1,000,000 shares. Each resolution
shall include the number of shares issued, preferences, special rights
and limitations as determined by the Board.
Dividends paid by the Bank are the primary source of funds available
to the Company. Banking regulations limit the amount of dividends that
may be paid without prior approval of the regulatory authorities.
These restrictions are based on the level of regulatory classified
assets, the prior years' net earnings, and the ratio of equity capital
to total assets. The Bank is currently not allowed to pay dividends to
the Company until it becomes cumulatively profitable.
(10) RELATED PARTY TRANSACTIONS
The Bank conducts transactions with directors and officers, including
companies in which they have a beneficial interest, in the normal
course of business. It is the Bank's policy to comply with federal
regulations that require that loan and deposit transactions with
directors and executive officers be made on substantially the same
terms as those prevailing at the time made for comparable loans and
deposits to other persons. As of December 31, 1999, there were related
party loans totaling $1,293,725. There were no related party loans
outstanding as of December 31, 1998.
(11) EMPLOYEE AND DIRECTOR BENEFIT PLANS
The Company issued 165,000 warrants to the organizers related to the
initial stock offering. Each organizer was granted one warrant for
each two shares purchased. Each warrant entitles the holder to
purchase one share of common stock at an exercise price of $10.00 per
share. The warrants are exercisable in equal amounts beginning on the
date the Bank opened for business and on each of the four succeeding
anniversaries of that date. The warrants expire on the fifth year
anniversary of the Bank opening.
The Company has a Stock Incentive Plan whereby 100,000 shares of
common stock have been reserved for issuance pursuant to the plan,
which may include incentive stock options or non-incentive stock
options. Incentive stock options are granted to employees at exercise
prices not less than fair market value at the date of grant. The
options vest evenly over five year periods with the first 20% vesting
immediately. The options are exercisable no later than ten years from
the date of grant. At December 31, 1999, 37,000 options were available
for distribution.
During 1999 the Board of Directors of the Company granted 63,000
options to purchase shares of common stock in the Company to employees
of the Company and the Bank. All options outstanding were granted with
an exercise price of $10.
13
<PAGE> 36
A summary status of the Company's stock option plan as of December 31,
1999 is presented below:
<TABLE>
<CAPTION>
1999
-----------------------------
Weighted
Average
Exercise
Shares Price
------- -----------
<S> <C> <C>
Outstanding, beginning of year -- --
Granted during the year 63,000 $ 10.00
------
Outstanding, end of year 63,000 $ 10.00
======
Options exercisable at year end 12,600 $ 10.00
======
Weighted average fair value of
options granted during the year $ 3.90
===========
Weighted average remaining
contractual lives (years) $ 9.83
===========
</TABLE>
The Company is encouraged, but not required, to compute the fair value
of options at the date of grant and to recognize such costs as
compensation expense over the vesting period or immediately if only
subject to a service requirement and the award is expected to vest.
The Company has chosen not to adopt these cost recognition principles.
No compensation expense has been recognized in 1999. Had compensation
cost been determined based upon the fair value of the options at the
grant dates, the Company's net loss and net loss per share would have
increased to the proforma amounts indicated below:
<TABLE>
<CAPTION>
1999
-----------
<S> <C> <C>
Net loss As reported $ 444,313
Proforma $ 493,453
Loss per share As reported $ 0.44
Proforma $ 0.49
</TABLE>
The fair value of each option is estimated on the date of grant using
the Minimum Value pricing model with the following weighted average
assumptions used for grants in 1999: no dividend yield, a risk free
interest rate of 5.2% and an expected life of 10 years.
(12) REGULATORY MATTERS
The Company and the Bank are subject to various regulatory capital
requirements administered by the federal banking agencies. Failure to
meet minimum capital requirements can initiate certain mandatory and
possibly additional discretionary actions by regulators that, if
undertaken, could have a direct material effect on the financial
statements. Under certain adequacy guidelines and the regulatory
framework for prompt corrective action, specific capital guidelines
that involve quantitative measures of the assets, liabilities, and
certain off-balance sheet items as calculated under regulatory
accounting practices must be met. The capital amounts and
classification are also subject to qualitative judgments by the
regulators about components, risk weightings, and other factors.
Quantitative measures established by regulation to ensure capital
adequacy require the Company and the Bank to maintain minimum amounts
and ratios (set forth in the table below) of Total and Tier 1 Capital
(as defined in the regulations) to risk-weighted assets (as defined),
and of Tier 1 Capital (as defined) to
14
<PAGE> 37
average assets (as defined). Management believes, as of December 31,
1999, that the Company and the Bank meet all capital adequacy
requirements to which they are subject.
As of December 31, 1999, the most recent notification from the Federal
Deposit Insurance Corporation categorized the Bank as well capitalized
under the regulatory framework for prompt corrective action. To be
categorized as well capitalized the Bank must maintain minimum total
risk-based, Tier 1 risk-based and Tier 1 leverage ratios as set forth
in the table. There are no conditions or events since that
notification that management believes have changed the Bank's
category.
The actual capital amounts and ratios are also presented in the table.
Detail disclosures related to the Company have been excluded as they
significantly exceed the disclosures herein.
<TABLE>
<CAPTION>
To Be Well
Captialized Under
For Capital Prompt Corrective
Actual Adequacy Purposes Action Provisions
------------------------ ---------------------- ----------------------
Amount Ratio Amount Ratio Amount Ratio
------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
As of December 31, 1999:
Total Capital
(to Risk Weighted Assets) $6,825,000 77% 712,000 8% 889,000 10%
Tier 1 Capital
(to Risk Weighted Assets) $6,751,000 76% 356,000 4% 534,000 6%
Tier 1 Capital
(to Average Assets) $6,751,000 36% 750,000 4% 938,000 5%
</TABLE>
15
<PAGE> 38
FIRST CAPITAL BANK HOLDING CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(13) FIRST CAPITAL BANK HOLDING CORPORATION (PARENT COMPANY ONLY)
FINANCIAL INFORMATION
Balance Sheets
December 31, 1999 and 1998
Assets
<TABLE>
<CAPTION>
1999 1998
---------- --------
<S> <C> <C>
Cash and interest bearing deposits $2,332,979 2,535
Investment in subsidiary 6,642,572 --
Premises and equipment -- 300,861
Deferred offering expenses -- 80,523
Other assets 37,044 793
---------- --------
$9,012,595 384,712
========== ========
Liabilities and Shareholders' Equity
Other liabilities -- 54,172
Line of credit -- 520,678
Shareholders' equity $9,012,595 (190,138)
---------- --------
$9,012,595 384,712
========== ========
</TABLE>
Statements of Operations
For the Year Ended December 31, 1999 and
the Period from July 29, 1998 (inception) to December 31, 1998
<TABLE>
<CAPTION>
1999 1998
---------- --------
<S> <C> <C>
Income:
Interest income $ 102,973 --
---------- --------
Expenses:
Interest 33,449 12,921
Salaries and employee benefits 139,961 54,674
Occupancy and equipment 12,553 8,152
Other operating 111,943 114,891
---------- --------
Total expenses 297,906 190,638
---------- --------
Loss before equity in
undistributed loss of subsidiary (194,933) (190,638)
Equity in undistributed loss of subsidiary (249,380) --
---------- --------
Net loss $ (444,313) (190,638)
========== ========
</TABLE>
16
<PAGE> 39
FIRST CAPITAL BANK HOLDING CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(13) FIRST CAPITAL BANK HOLDING CORPORATION (PARENT COMPANY ONLY)
FINANCIAL INFORMATION, CONTINUED
Statements of Cash Flows
For the Year Ended December 31, 1999
and the Period from July 29, 1998 (inception) to December 31, 1998
<TABLE>
<CAPTION>
1999 1998
---------- --------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (444,313) (190,638)
Adjustments to reconcile net loss to net
cash used by operating activities:
Equity in undistributed loss of subsidiary 249,380 --
Depreciation expense -- 2,321
Change in other (53,687) 53,379
---------- --------
Net cash used by operating activities (248,620) (134,938)
---------- --------
Cash flows from investing activities:
Capital infusion into subsidiary (6,699,139) --
Purchase of premises and equipment -- (303,182)
---------- --------
Net cash used by investing activities (6,699,139) (303,182)
---------- --------
Cash flows from financing activities:
Change in line of credit (520,678) 520,678
Sale of (redemption of) organization shares (500) 500
Proceeds from sale of common stock 10,000,000 --
Payments of deferred offering costs (200,619) (80,523)
---------- --------
Net cash provided by financing activities 9,278,203 440,655
---------- --------
Net increase in cash 2,330,444 2,535
Cash at beginning of year 2,535 --
---------- --------
Cash at end of year 2,332,979 2,535
========== ========
Supplemental schedule of noncash financing and investing activities:
Change in net unrealized loss on securities
available for sale of subsidiary, net of tax $ (71,312) --
Transfer of premise and equipment to Bank $ 300,861 --
Supplemental disclosures of cash flow information:
Cash paid during the year for interest $ 33,449 6,340
</TABLE>
17
<PAGE> 40
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
The Company is not yet subject to Section 16(a) of the Exchange Act.
Nevertheless, the Initial Statement of Beneficial Ownership on Form 3 was filed
with the SEC for each of these persons on January 20, 2000. The Company intends
to register its class of common stock under Section 12(g) of the Exchange Act
in April 2000.
ITEM 10. EXECUTIVE COMPENSATION
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table shows the cash compensation we paid to our chief
executive officer and president for the years ended December 31, 1998 and 1999.
None of our other executive officers earned total annual compensation,
including salary and bonus, in excess of $100,000 in 1999.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term
Compensation
Annual Compensation(1) Awards
-------------------------------- --------------------
Other Annual Number of Securities
Name and Principal Position Year Salary Bonus Compensation Underlying Options
- --------------------------- ---- ------ ----- ------------ --------------------
<S> <C> <C> <C> <C> <C>
Michael G. Sanchez 1999 $96,000 $10,000 $4,000 30,000
President and Chief Executive 1998 $35,484 -- -- --
Officer
</TABLE>
EMPLOYMENT AGREEMENTS
Michael G. Sanchez. We have entered into an employment agreement with
Michael G. Sanchez for a three-year term, pursuant to which Mr. Sanchez serves
as the president, the chief executive officer, and a director of both our
company and our subsidiary bank. Mr. Sanchez receives a salary of $96,000, plus
his yearly life insurance premium. Mr. Sanchez received an additional incentive
of $10,000 in September 1999 and is eligible to receive a bonus of up to 5% of
pre-tax net income of our bank and related entities. Mr. Sanchez is eligible to
participate in any management incentive program or any long-term equity
incentive program we adopt and is eligible for grants of stock options and
other awards thereunder. Upon adoption of our stock option plan, we granted Mr.
Sanchez options to purchase 30,000 shares of common stock. The options vest
over a five-year period and have a term of ten years. Additionally, Mr. Sanchez
participates in our other benefit programs and is entitled to a life insurance
policy, reimbursement for automobile expenses, and travel and business
expenses.
Mr. Sanchez's employment agreement also provides that following
termination of his employment and for a period of 12 months thereafter, Mr.
Sanchez may not, without our prior written consent, serve as an executive
officer of any bank, bank holding company, or other financial institution
within 35 miles of our headquarters.
18
<PAGE> 41
DIRECTOR COMPENSATION
Neither the company nor the bank paid directors' fees during the last
fiscal year.
On the date our bank opened for business, we granted our organizers
warrants to purchase additional shares of common stock in consideration for
their services in establishing our bank. Each warrant entitles the organizers
to purchase one additional share of common stock for every two shares he or she
purchased in the offering. Our organizers purchased an aggregate of 330,000
shares in the offering, and we issued warrants for an aggregate of 165,000
shares to our organizers.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
GENERAL
The following table shows how much common stock in the company is
owned by our directors, certain executive officers, and owners of more than 5%
of the outstanding common stock, as of March 13, 2000.
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENTAGE OF BENEFICIAL
NAME OWNED(1) OWNERSHIP
- ------------------------------------ ---------------- ------------------------
<S> <C> <C>
Ron Anderson 15,000 1.5%
Christina H. Bryan 25,500 2.6%
C. Brett Carter 40,100 4.0%
Suellen Rodeffer Garner 40,000 4.0%
Dr. William K. Haley 10,000 1.0%
Lorie L. McCarroll 15,000 1.5%
David F. Miller 42,520 4.3%
William J. Mock, Jr 20,100 2.0%
Marlene J. Murphy 10,000 1.0%
Robert L. Peters 20,000 2.0%
Lawrence Piper 5,000 0.5%
Michael G. Sanchez 10,000 1.0%
Harry R. Trevett 40,000 4.0%
Edward E. Wilson 20,800 2.1%
Marshall E. Wood 20,000 2.0%
Executive officers and directors as a 337,378 33.8%
group (17 persons)
</TABLE>
19
<PAGE> 42
(1) Includes shares for which the named person:
- has sole voting and investment power,
- has shared voting and investment power with a spouse, or
- holds in an IRA or other retirement plan program, unless
otherwise indicated in these footnotes.
Does not include shares that may be acquired by exercising stock
options or organizer warrants because no options or warrants are
exercisable within the next 60 days.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
INTERESTS OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS
We enter into banking and other transactions in the ordinary course of
business with our directors and officers and their affiliates. It is our policy
that these transactions be on substantially the same terms (including price, or
interest rates and collateral) as those prevailing at the time for comparable
transactions with unrelated parties. We do not expect these transactions to
involve more than the normal risk of collectibility nor present other
unfavorable features to us. Loans to individual directors and officers must
also comply with our bank's lending policies and statutory lending limits, and
directors with a personal interest in any loan application are excluded from
the consideration of the loan application. We intend for all of our
transactions with our affiliates to be on terms no less favorable to us than
could be obtained from an unaffiliated third party and to be approved by a
majority of disinterested directors.
ITEM 13. EXHIBITS, LIST AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report:
3.1. Amended and Restated Articles of Incorporation (incorporated by
reference to Exhibit 3.1 of the Registration Statement on Form SB-2,
File No. 333-69973).
3.2. Bylaws (incorporated by reference to Exhibit 3.2 of the Registration
Statement on Form SB-2, File No. 333-69973).
4.1. Form of Certificate of Common Stock (incorporated by reference to
Exhibit 4.1 of the Registration Statement on Form SB-2, File No.
333-69973).
4.2. Escrow Agreement by and between the Company and The Bankers Bank dated
December 22, 1998 (incorporated by reference to Exhibit 4.2 of the
Registration Statement on Form SB-2, File No. 333-69973).
5.1. Opinion Regarding Legality (incorporated by reference to Exhibit 5.1
of the Registration Statement on Form SB-2, File No. 333-69973).
5.2. Opinion of Counsel with respect to the Common Stock Purchase Warrants
and the underlying shares of Common Stock (incorporated by reference
to Exhibit 5.2 of the Registration Statement on Form SB-2, File No.
333-69973).
10.1. Real Estate Sales Contract for the proposed site of the Company dated
June 16, 1998 (incorporated by reference to Exhibit 10.1 of the
Registration Statement on Form SB-2, File No. 333-69973).
20
<PAGE> 43
10.2. Amended and Restated Employment Agreement between the Organizers of
the Company and Michael G. Sanchez, dated September 1, 1998
(incorporated by reference to Exhibit 10.2 of the Registration
Statement on Form SB-2, File No. 333-69973).
10.3. The Company's 1999 Stock Incentive Plan
10.4 Form of Organizer Warrant Certificate (incorporated by reference to
Exhibit 10.4 of the Registration Statement on Form SB-2, File No.
333-69973)
21 Subsidiaries of the Company
27.1. Financial Data Schedule. (for SEC use only).
- ----------------
(b) Reports on Form 8-K
The Company did not file any reports on Form 8-K during the fourth
quarter of 1999.
21
<PAGE> 44
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act
of 1934 (the "Exchange Act"), the registrant caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
FIRST CAPITAL BANK HOLDING CORPORATION
Date: March 24, 2000 By: /s/ Michael G. Sanchez
--------------------- -------------------------------------
Michael G. Sanchez
President and Chief Executive Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Michael G. Sanchez, his true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities, to sign
any and all amendments to this Annual Report on Form 10-KSB, and to file the
same, with all exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite or necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that attorney-in-fact and agent, or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
In accordance with the Exchange Act, this report has been signed below
by the following persons on behalf of the registrant in the capacities and on
the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------------------------- -------- ------------
<S> <C> <C>
/s/ Ron Anderson
- ---------------------------
Ron Anderson Director 03/24/00
------------
/s/ Christina H. Bryan
- ---------------------------
Christina H. Bryan Director 03/24/00
------------
/s C. Brett Carter
- ---------------------------
C. Brett Carter Director 03/24/00
------------
/s/ Suellen Rodeffer Garner
- ---------------------------
Suellen Rodeffer Garner Director 03/24/00
------------
/s/ William K. Haley, M.D.
- ---------------------------
William K. Haley, M.D. Director 03/24/00
------------
/s/ Lorie L. McCarroll
- ---------------------------
Lorie L. McCarroll Director 03/24/00
------------
</TABLE>
22
<PAGE> 45
<TABLE>
<CAPTION>
Signature Title Date
- --------------------------- -------- ------------
<S> <C> <C>
/s/ David F. Miller
- ---------------------------
David F. Miller Director 03/24/00
------------
/s/ William J. Mock, Jr.
- ---------------------------
William J. Mock, Jr. Director 03/24/00
------------
/s/ Marlene J. Murphy
- ---------------------------
Marlene J. Murphy Director 03/24/00
------------
/s/ Robert L. Peters
- ---------------------------
Robert L. Peters Director 03/24/00
------------
/s/ Lawrence Piper
- ---------------------------
Lawrence Piper Director 03/24/00
------------
/s/ Michael G. Sanchez
- ---------------------------
Michael G. Sanchez President, Chief 03/24/00
Executive Officer, ------------
and Director
/s/ Harry R. Trevett
- ---------------------------
Harry R. Trevett Director 03/24/00
------------
/s/ Edward E. Wilson
- ---------------------------
Edward E. Wilson Director 03/24/00
------------
/s/ Timothy S. Ayers
- ---------------------------
Timothy S. Ayers Chief Financial 03/24/00
Officer of the Bank ------------
</TABLE>
23
<PAGE> 46
INDEX TO EXHIBITS
Exhibit
Number Description
- ------ -----------
3.1. Amended and Restated Articles of Incorporation (incorporated by
reference to Exhibit 3.1 of the Registration Statement on Form SB-2,
File No. 333-69973).
3.2. Bylaws (incorporated by reference to Exhibit 3.2 of the Registration
Statement on Form SB-2, File No. 333-69973).
4.1. Form of Certificate of Common Stock (incorporated by reference to
Exhibit 4.1 of the Registration Statement on Form SB-2, File No.
333-69973).
4.2. Escrow Agreement by and between the Company and The Bankers Bank dated
December 22, 1998 (incorporated by reference to Exhibit 4.2 of the
Registration Statement on Form SB-2, File No. 333-69973).
5.1. Opinion Regarding Legality (incorporated by reference to Exhibit 5.1
of the Registration Statement on Form SB-2, File No. 333-69973).
5.2. Opinion of Counsel with respect to the Common Stock Purchase Warrants
and the underlying shares of Common Stock (incorporated by reference
to Exhibit 5.2 of the Registration Statement on Form SB-2, File No.
333-69973).
10.1. Real Estate Sales Contract for the proposed site of the Company dated
June 16, 1998 (incorporated by reference to Exhibit 10.1 of the
Registration Statement on Form SB-2, File No. 333-69973).
10.2. Amended and Restated Employment Agreement between the Organizers of
the Company and Michael G. Sanchez, dated September 1, 1998
(incorporated by reference to Exhibit 10.2 of the Registration
Statement on Form SB-2, File No. 333-69973).
10.3. The Company's 1999 Stock Incentive Plan
10.4. Form of Organizer Warrant Certificate (incorporated by reference to
Exhibit 10.4 of the Registration Statement on Form SB-2, File No.
333-69973)
21 Subsidiaries of the Company
27.1. Financial Data Schedule. (for SEC use only).
24
<PAGE> 1
EXHIBIT 10.3
FIRST CAPITAL BANK HOLDING CORPORATION
1999 STOCK INCENTIVE PLAN
<PAGE> 2
FIRST CAPITAL BANK HOLDING CORPORATION
1999 STOCK INCENTIVE PLAN
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I DEFINITIONS..........................................................................................1
ARTICLE II THE PLAN.............................................................................................4
2.1 NAME....................................................................................................4
2.2 PURPOSE.................................................................................................4
2.3 EFFECTIVE DATE..........................................................................................4
ARTICLE III PARTICIPANTS.........................................................................................4
ARTICLE IV ADMINISTRATION.......................................................................................5
4.1 DUTIES AND POWERS OF THE COMMITTEE......................................................................5
4.2 INTERPRETATION; RULES...................................................................................5
4.3 NO LIABILITY............................................................................................5
4.4 MAJORITY RULE...........................................................................................5
4.5 COMPANY ASSISTANCE......................................................................................5
ARTICLE V SHARES OF STOCK SUBJECT TO PLAN......................................................................6
5.2 ANTIDILUTION............................................................................................6
ARTICLE VI OPTIONS..............................................................................................7
6.1 TYPES OF OPTIONS GRANTED................................................................................7
6.2 OPTION GRANT AND AGREEMENT..............................................................................7
6.3 OPTIONEE LIMITATIONS....................................................................................7
6.4 $100,000 LIMITATION.....................................................................................8
6.5 EXERCISE PRICE..........................................................................................8
6.6 EXERCISE PERIOD.........................................................................................8
6.7 OPTION EXERCISE.........................................................................................8
6.8 RELOAD OPTIONS.........................................................................................10
6.9 NONTRANSFERABILITY OF OPTION...........................................................................10
6.10 TERMINATION OF EMPLOYMENT OR SERVICE...................................................................10
6.11 EMPLOYMENT RIGHTS......................................................................................10
6.12 CERTAIN SUCCESSOR OPTIONS..............................................................................10
6.13 EFFECT OF A CORPORATE TRANSACTION......................................................................11
6.14 FORFEITURE BY ORDER OF REGULATORY AGENCY...............................................................11
ARTICLE VII STOCK CERTIFICATES..................................................................................11
ARTICLE VIII TERMINATION AND AMENDMENT...........................................................................12
8.2 EFFECT ON GRANTEE'S RIGHTS.............................................................................12
ARTICLE IX RELATIONSHIP TO OTHER COMPENSATION PLANS............................................................12
ARTICLE X MISCELLANEOUS.......................................................................................12
EXHIBIT A TO FIRST CAPITAL BANK HOLDING CORPORATION 1999 STOCK
INCENTIVE PLAN - FORM OF STOCK OPTION AGREEMENT.................................................................1
SCHEDULE B 6
</TABLE>
i
<PAGE> 3
FIRST CAPITAL BANK HOLDING CORPORATION
1999 STOCK INCENTIVE PLAN
ARTICLE I
DEFINITIONS
As used herein, the following terms have the following meanings unless
the context clearly indicates to the contrary:
"Board" shall mean the Board of Directors of the Company.
"Cause" (i) with respect to the Company or any subsidiary which employs
the recipient of an Option (the "recipient") or for which such recipient
primarily performs services, the commission by the recipient of an act of fraud,
embezzlement, theft or proven dishonesty, or any other illegal act or practice
(whether or not resulting in criminal prosecution or conviction), or any act or
practice which the Committee shall, in good faith, deem to have resulted in the
recipient's becoming unbondable under the Company's or the subsidiary's fidelity
bond; (ii) the willful engaging by the recipient in misconduct which is deemed
by the Committee, in good faith, to be materially injurious to the Company or
any subsidiary, monetarily or otherwise, including, but not limited, improperly
disclosing trade secrets or other confidential or sensitive business information
and data about the Company or any subsidiaries and competing with the Company or
its subsidiaries, or soliciting employees, consultants or customers of the
Company in violation of law or any employment or other agreement to which the
recipient is a party; or (iii) the willful and continued failure or habitual
neglect by the recipient to perform his or her duties with the Company or the
subsidiary substantially in accordance with the operating and personnel policies
and procedures of the Company or the subsidiary generally applicable to all
their employees. For purposes of this Plan, no act or failure to act by the
recipient shall be deemed be "willful" unless done or omitted to be done by
recipient not in good faith and without reasonable belief that the recipient's
action or omission was in the best interest of the Company and/or the
subsidiary. Notwithstanding the foregoing, if the recipient has entered into an
employment agreement that is binding as of the date of employment termination,
and if such employment agreement defines "Cause," then the definition of "Cause"
in such agreement shall apply to the recipient in this Plan. "Cause" under
either (i), (ii) or (iii) shall be determined by the Committee.
"Code" shall mean the United States Internal Revenue Code of 1986,
including effective date and transition rules (whether or not codified). Any
reference herein to a specific section of the Code shall be deemed to include a
reference to any corresponding provision of future law.
"Committee" shall mean a committee of at least two Directors appointed
from time to time by the Board, having the duties and authority set forth
herein in addition to any other authority granted by the Board. In selecting
the Committee, the Board shall consider (i) the benefits under Section 162(m)
of the Code of having a Committee composed of "outside directors" (as that term
is defined in the Code) for certain grants of Options to highly compensated
executives, and (ii) the benefits under Rule 16b-3 of having a Committee
composed of either the entire Board or a Committee of at least two Directors
who are Non-Employee Directors for Options granted to or held by any Section 16
Insider. At any time that the Board shall not have appointed a committee as
described above, any reference herein to the Committee shall mean the Board.
"Company" shall mean First Capital Bank Holding Corporation, a Florida
corporation.
"Corporate Transaction" shall mean the occurrence of any of the
following events:
<PAGE> 4
(i) a merger or consolidation in which securities
possessing more than 50% of the total combined
voting power of the Company's outstanding securities
are transferred to a person or persons different
from the persons holding those securities
immediately prior to such transaction;
(ii) the sale, transfer or other disposition of all or
substantially all of the Company's assets in
complete liquidation or dissolution of the Company;
or
(iii) the grant of any bank regulatory approval (or notice
of no disapproval) for permission to acquire control
of the Company or any of its banking subsidiaries.
"Director" shall mean a member of the Board and any person who is an
advisory or honorary director of the Company if such person is considered a
director for the purposes of Section 16 of the Exchange Act, as determined by
reference to such Section 16 and to the rules, regulations, judicial decisions,
and interpretative or "no-action" positions with respect thereto of the
Securities and Exchange Commission, as the same may be in effect or set forth
from time to time.
"Employee" shall mean a person who constitutes an employee of the
Company as such term is defined in the instructions to the Form S-8
Registration Statement under the Securities Act of 1933, and also includes
non-employees to whom an offer of employment has been extended.
"Exchange Act" shall mean the Securities Exchange Act of 1934. Any
reference herein to a specific section of the Exchange Act shall be deemed to
include a reference to any corresponding provision of future law.
"Exercise Price" shall mean the price at which an Optionee may
purchase a share of Stock under a Stock Option Agreement.
"Fair Market Value" on any date shall mean (i) the closing sales price
of the Stock, regular way, on such date on the national securities exchange
having the greatest volume of trading in the Stock during the thirty-day period
preceding the day the value is to be determined or, if such exchange was not
open for trading on such date, the next preceding date on which it was open;
(ii) if the Stock is not traded on any national securities exchange, the
average of the closing high bid and low asked prices of the Stock on the
over-the-counter market on the day such value is to be determined, or in the
absence of closing bids on such day, the closing bids on the next preceding day
on which there were bids; or (iii) if the Stock also is not traded on the
over-the-counter market, the fair market value as determined in good faith by
the Board or the Committee based on such relevant facts as may be available to
the Board, which may include opinions of independent experts, the price at
which recent sales have been made, the book value of the Stock, and the
Company's current and future earnings.
"Incentive Stock Option" shall mean an option to purchase any stock of
the Company, which complies with and is subject to the terms, limitations and
conditions of Section 422 of the Code and any regulations promulgated with
respect thereto.
"Non-Employee Director" shall have the meaning set forth in Rule 16b-3
under the Exchange Act, as the same may be in effect from time to time, or in
any successor rule thereto, and shall be determined for all purposes under the
Plan according to interpretative or "no-action" positions with respect thereto
issued by the Securities and Exchange Commission.
2
<PAGE> 5
"Officer" shall mean a person who constitutes an officer of the
Company for the purposes of Section 16 of the Exchange Act, as determined by
reference to such Section 16 and to the rules, regulations, judicial decisions,
and interpretative or "no-action" positions with respect thereto of the
Securities and Exchange Commission, as the same may be in effect or set forth
from time to time.
"Option" shall mean an option, whether or not an Incentive Stock
Option, to purchase Stock granted pursuant to the provisions of Article VI
hereof.
"Optionee" shall mean a person to whom an Option has been granted
hereunder.
"Parent" shall mean any corporation (other than the Company or a
Subsidiary) in an unbroken chain of corporations ending with the Company if, at
the time of the grant (or modification) of the Option, each of the corporations
other than the Company or a Subsidiary owns stock possessing 50% or more of the
total combined voting power of the classes of stock in one of the other
corporations in such chain.
"Permanent and Total Disability" shall have the same meaning as given
to that term by Code Section 22(e)(3) and any regulations or rulings
promulgated thereunder.
"Plan" shall mean the First Capital Bank Holding Corporation 1999
Stock Incentive Plan, the terms of which are set forth herein.
"Purchasable" shall refer to Stock which may be purchased by an
Optionee under the terms of this Plan on or after a certain date specified in
the applicable Stock Option Agreement.
"Qualified Domestic Relations Order" shall have the meaning set forth
in the Code or in the Employee Retirement Income Security Act of 1974, or the
rules and regulations promulgated under the Code or such Act.
"Reload Option" shall have the meaning set forth in Section 6.8
hereof.
"Section 16 Insider" shall mean any person who is subject to the
provisions of Section 16 of the Exchange Act, as provided in Rule 16a-2
promulgated pursuant to the Exchange Act.
"Stock" shall mean the Common Stock, par value $0.01 per share, of the
Company or, in the event that the outstanding shares of Stock are hereafter
changed into or exchanged for shares of a different stock or securities of the
Company or some other entity, such other stock or securities.
"Stock Option Agreement" shall mean an agreement between the Company
and an Optionee under which the Optionee may purchase Stock hereunder, a sample
form of which is attached hereto as Exhibit A (which form may be varied by the
Committee in granting an Option).
"Subsidiary" shall mean any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company if, at the time of
the grant (or modification) of the Option, each of the corporations other than
the last corporation in the unbroken chain owns stock possessing 50% or more of
the total combined voting power of all classes of stock in one of the other
corporations in such chain.
3
<PAGE> 6
ARTICLE II
THE PLAN
2.1 Name. This Plan shall be known as "First Capital Bank Holding
Corporation 1999 Stock Incentive Plan."
2.2 Purpose. The purpose of the Plan is to advance the interests of
the Company, its Subsidiaries, and its shareholders by affording Employees and
Directors of the Company and its Subsidiaries an opportunity to acquire or
increase their proprietary interests in the Company. The objective of the
issuance of the Options is to promote the growth and profitability of the
Company and its Subsidiaries because the Optionees will be provided with an
additional incentive to achieve the Company's objectives through participation
in its success and growth and by encouraging their continued association with
or service to the Company.
2.3 Effective Date. The Plan shall become effective on October 27,
1999; provided, however, that if the shareholders of the Company have not
approved the Plan on or prior to the first anniversary of such effective date,
then all options granted under the Plan shall be non-incentive Stock Options.
If, at the time of any amendment to the Plan, shareholder approval is required
by the Code for Incentive Stock Options and such shareholder approval has not
been obtained (or is not obtained within 12 months thereof), any Incentive
Stock Options issued under the Plan shall automatically become options which do
not qualify as Incentive Stock Options.
ARTICLE III
PARTICIPANTS
The class of persons eligible to participate in the Plan shall consist
of all Directors and Employees of the Company or any Subsidiary.
4
<PAGE> 7
ARTICLE IV
ADMINISTRATION
4.1 Duties and Powers of the Committee. The Plan shall be
administered by the Committee. The Committee shall select one of its members as
its Chairman and shall hold its meetings at such times and places as it may
determine. The Committee shall keep minutes of its meetings and shall make such
rules and regulations for the conduct of its business as it may deem necessary.
The Committee shall have the power to act by unanimous written consent in lieu
of a meeting, and to meet telephonically. In administering the Plan, the
Committee's actions and determinations shall be binding on all interested
parties. The Committee shall have the power to grant Options in accordance with
the provisions of the Plan and may grant Options singly, in combination, or in
tandem. Subject to the provisions of the Plan, the Committee shall have the
discretion and authority to determine those individuals to whom Options will be
granted and whether such Options shall be accompanied by the right to receive
Reload Options, the number of shares of Stock subject to each Option, such
other matters as are specified herein, and any other terms and conditions of a
Stock Option Agreement. The Committee shall also have the discretion and
authority to delegate to any Officer its power to grant Options under the Plan
to Employees, but not to Employees who are Officers or Directors. To the extent
not inconsistent with the provisions of the Plan, the Committee may give an
Optionee an election to surrender an Option in exchange for the grant of a new
Option, and shall have the authority to amend or modify an outstanding Stock
Option Agreement, or to waive any provision thereof, provided that the Optionee
consents to such action.
4.2 Interpretation; Rules. Subject to the express provisions of the
Plan, the Committee also shall have complete authority to interpret the Plan,
to prescribe, amend, and rescind rules and regulations relating to it, to
determine the details and provisions of each Stock Option Agreement, and to
make all other determinations necessary or advisable for the administration of
the Plan, including, without limitation, the amending or altering of the Plan
and any Options granted hereunder as may be required to comply with or to
conform to any federal, state, or local laws or regulations. If an option
granted under the Plan is intended to be an Incentive Stock Option but does not
qualify as an Incentive Stock Option for any reason, then the option granted
shall remain valid but shall be a non-Incentive Stock Option.
4.3 No Liability. Neither any member of the Board nor any member of
the Committee shall be liable to any person for any act or determination made
in good faith with respect to the Plan or any Option granted hereunder.
4.4 Majority Rule. A majority of the members of the Committee shall
constitute a quorum, and any action taken by a majority at a meeting at which a
quorum is present, or any action taken without a meeting evidenced by a writing
executed by all the members of the Committee, shall constitute the action of
the Committee.
4.5 Company Assistance. The Company shall supply full and timely
information to the Committee on all matters relating to eligible persons, their
employment, death, retirement, disability, or other termination of employment,
and such other pertinent facts as the Committee may require. The Company shall
furnish the Committee with such clerical and other assistance as is necessary
in the performance of its duties.
5
<PAGE> 8
ARTICLE V
SHARES OF STOCK SUBJECT TO PLAN
5.1 Limitations. The maximum number of shares that may be issued
hereunder shall initially be 100,000. The total number of shares of Stock
issuable pursuant to Incentive Stock Options may not be increased to more than
100,000 (other than pursuant to antidilution adjustments) without shareholder
approval. In addition, the number of shares that may be issued hereunder shall
be subject to any antidilution adjustment pursuant to the provisions of Section
5.2 hereof. Any or all shares of Stock subject to the Plan may be issued in any
combination of Incentive Stock Options or non-Incentive Stock Options. Shares
subject to an Option may be either authorized and unissued shares or shares
issued and later acquired by the Company. The shares covered by any unexercised
portion of an Option that has terminated for any reason (except as set forth in
the following paragraph) may again be optioned under the Plan, and such shares
shall not be considered as having been optioned or issued in computing the
number of shares of Stock remaining available for option hereunder.
5.2 Antidilution.
(a) If (x) the outstanding shares of Stock are changed into
or exchanged for a different number or kind of shares or other securities of
the Company by reason of merger, consolidation, reorganization,
recapitalization, reclassification, combination or exchange of shares, or stock
split or stock dividend, (y) any spin-off, spin-out or other distribution of
assets materially affects the price of the Company's stock, or (z) there is any
assumption and conversion to the Plan by the Company of an acquired company's
outstanding option grants, then:
(i) the aggregate number and kind of shares of Stock for
which Options may be granted hereunder shall be adjusted
proportionately by the Committee; and
(ii) the rights of Optionees (concerning the number of
shares subject to Options and the Exercise Price) under
outstanding Options shall be adjusted proportionately by the
Committee.
(b) If the Company shall be a party to any reorganization in
which it does not survive, involving merger, consolidation, or acquisition of
the stock or substantially all the assets of the Company, the Committee, in its
sole discretion, may (but is not required to):
(i) notwithstanding other provisions hereof, declare
that all Options granted under the Plan shall become
exercisable immediately notwithstanding the provisions of the
respective Stock Option Agreements regarding exercisability,
that all such Options shall terminate 30 days after the
Committee gives written notice of the immediate right to
exercise all such Options and of the decision to terminate all
Options not exercised within such 30-day period; and/or
(ii) notify all Optionees that all Options granted under
the Plan shall be assumed by the successor corporation or
substituted on an equitable basis with options issued by such
successor corporation.
(c) If the Company is to be liquidated or dissolved in
connection with a reorganization described in Section 5.2(b), the provisions of
such Section shall apply. In all other instances, the adoption of a plan of
dissolution or liquidation of the Company shall, notwithstanding
6
<PAGE> 9
other provisions hereof, cause every Option outstanding under the Plan to
terminate to the extent not exercised prior to the adoption of the plan of
dissolution or liquidation by the shareholders, provided that, notwithstanding
other provisions hereof, the Committee may declare all Options granted under
the Plan to be exercisable at any time on or before the fifth business day
following such adoption notwithstanding the provisions of the respective Stock
Option Agreements regarding exercisability.
(d) The adjustments described in paragraphs (a) through (c)
of this Section 5.2, and the manner of their application, shall be determined
solely by the Committee, and any such adjustment may provide for the
elimination of fractional share interests; provided, however, that any
adjustment made by the Board or the Committee shall be made in a manner that
will not cause an Incentive Stock Option to be other than an Incentive Stock
Option under applicable statutory and regulatory provisions. The adjustments
required under this Article V shall apply to any successors of the Company and
shall be made regardless of the number or type of successive events requiring
such adjustments.
ARTICLE VI
OPTIONS
6.1 Types of Options Granted. The Committee may, under this Plan,
grant either Incentive Stock Options or Options which do not qualify as
Incentive Stock Options. Within the limitations provided in this Plan, both
types of Options may be granted to the same person at the same time, or at
different times, under different terms and conditions, as long as the terms and
conditions of each Option are consistent with the provisions of the Plan.
Without limitation of the foregoing, Options may be granted subject to
conditions based on the financial performance of the Company or any other
factor the Committee deems relevant.
6.2 Option Grant and Agreement. Each Option granted hereunder shall
be evidenced by minutes of a meeting or the written consent of the Committee
and by a written Stock Option Agreement executed by the Company and the
Optionee. The terms of the Option, including the Option's duration, time or
times of exercise, exercise price, whether the Option is intended to be an
Incentive Stock Option, and whether the Option is to be accompanied by the
right to receive a Reload Option, shall be stated in the Stock Option
Agreement. In structuring the terms of each Option, the Committee shall follow
the guidelines set forth in the FDIC statement of policy relating to
applications for deposit insurance, including that the terms should encourage
each Optionee to remain involved in the Company and/or its Subsidiaries, such
as by having a vesting period of equal percentages each year over the initial
three years following the grant of the Option and a requirement that the Option
be exercised or expire within a reasonable time after termination as an active
officer, employee, or director. No Incentive Stock Option may be granted more
than ten years after the earlier to occur of the effective date of the Plan or
the date the Plan is approved by the Company's shareholders. Separate Stock
Option Agreements may be used for Options intended to be Incentive Stock
Options and those not so intended, but any failure to use such separate
agreements shall not invalidate, or otherwise adversely affect the Optionee's
interest in, the Options evidenced thereby.
6.3 Optionee Limitations. The Committee shall not grant an
Incentive Stock Option to any person who, at the time the Incentive Stock
Option is granted:
(a) is not an employee of the Company or any of its
Subsidiaries (as the term "employee" is defined by the Code); or
7
<PAGE> 10
(b) owns or is considered to own stock possessing at least
10% of the total combined voting power of all classes of stock of the Company
or any of its Parent or Subsidiary corporations; provided, however, that this
limitation shall not apply if at the time an Incentive Stock Option is granted
the Exercise Price is at least 110% of the Fair Market Value of the Stock
subject to such Option and such Option by its terms would not be exercisable
after five years from the date on which the Option is granted. For the purpose
of this subsection (b), a person shall be considered to own: (i) the stock
owned, directly or indirectly, by or for his or her brothers and sisters
(whether by whole or half blood), spouse, ancestors and lineal descendants;
(ii) the stock owned, directly or indirectly, by or for a corporation,
partnership, estate, or trust in proportion to such person's stock interest,
partnership interest or beneficial interest therein; and (iii) the stock which
such person may purchase under any outstanding options of the Company or of any
Parent or Subsidiary.
6.4 $100,000 Limitation. Except as provided below, the Committee
shall not grant an Incentive Stock Option to, or modify the exercise provisions
of outstanding Incentive Stock Options held by, any person who, at the time the
Incentive Stock Option is granted (or modified), would thereby receive or hold
any Incentive Stock Options of the Company and any Parent or Subsidiary, such
that the aggregate Fair Market Value (determined as of the respective dates of
grant or modification of each option) of the stock with respect to which such
Incentive Stock Options are exercisable for the first time during any calendar
year is in excess of $100,000 (or such other limit as may be prescribed by the
Code from time to time); provided that the foregoing restriction on
modification of outstanding Incentive Stock Options shall not preclude the
Committee from modifying an outstanding Incentive Stock Option if, as a result
of such modification and with the consent of the Optionee, such Option no
longer constitutes an Incentive Stock Option; and provided that, if the
$100,000 limitation (or such other limitation prescribed by the Code) described
in this Section 6.4 is exceeded, the Incentive Stock Option, the granting or
modification of which resulted in the exceeding of such limit, shall be treated
as an Incentive Stock Option up to the limitation and the excess shall be
treated as an Option not qualifying as an Incentive Stock Option.
6.5 Exercise Price. The Exercise Price of the Stock subject to each
Option shall be determined by the Committee. Subject to the provisions of
Section 6.3(b) hereof, the Exercise Price of an Option shall not be less than
the Fair Market Value of the Stock as of the date the Option is granted (or in
the case of an Incentive Stock Option that is subsequently modified, on the
date of such modification).
6.6 Exercise Period. The period for the exercise of each Option
granted hereunder shall be determined by the Committee, but the Stock Option
Agreement with respect to each Option shall provide that such Option shall not
be exercisable after ten years from the date of grant (or modification) of the
Option.
6.7 Option Exercise.
(a) Unless otherwise provided in the Stock Option Agreement
or Section 6.6 hereof, an Option may be exercised at any time or from time to
time during the term of the Option as to any or all full shares which have
become Purchasable under the provisions of the Option, but not at any time as
to less than 100 shares unless the remaining shares that have become so
Purchasable are less than 100 shares. The Committee shall have the authority to
prescribe in any Stock Option Agreement that the Option may be exercised only
in accordance with a vesting schedule during the term of the Option.
8
<PAGE> 11
(b) An Option shall be exercised by (i) delivery to the
Company at its principal office a written notice of exercise with respect to a
specified number of shares of Stock and (ii) payment to the Company at that
office of the full amount of the Exercise Price for such number of shares in
accordance with Section 6.7(c). If requested by an Optionee, an Option may be
exercised with the involvement of a stockbroker in accordance with the federal
margin rules set forth in Regulation T (in which case the certificates
representing the underlying shares will be delivered by the Company directly to
the stockbroker).
(c) The Exercise Price is to be paid in full in cash upon
the exercise of the Option and the Company shall not be required to deliver
certificates for the shares purchased until such payment has been made;
provided, however, that in lieu of cash, in the Company's discretion all or any
portion of the Exercise Price may be paid by tendering to the Company shares of
Stock duly endorsed for transfer and owned by the Optionee, or by authorization
to the Company to withhold shares of Stock otherwise issuable upon exercise of
the Option, in each case to be credited against the Exercise Price at the Fair
Market Value of such shares on the date of exercise (however, no fractional
shares may be so transferred, and the Company shall not be obligated to make
any cash payments in consideration of any excess of the aggregate Fair Market
Value of shares transferred over the aggregate Exercise Price); provided
further, that the Board may provide in a Stock Option Agreement (or may
otherwise determine in its sole discretion at the time of exercise) that, in
lieu of cash or shares, all or a portion of the Exercise Price may be paid by
the Optionee's execution of a recourse note equal to the Exercise Price or
relevant portion thereof, subject to compliance with applicable state and
federal laws, rules and regulations. Notwithstanding the above, the Company
shall not be obligated to accept tender of shares of Stock as payment of the
Exercise Price if doing so would result in a charge to the Company's earnings
for financial reporting purposes.
(d) In addition to and at the time of payment of the
Exercise Price, the Optionee shall pay to the Company in cash the full amount
of any federal, state, and local income, employment, or other withholding taxes
applicable to the taxable income of such Optionee resulting from such exercise;
provided, however, that in the discretion of the Committee any Stock Option
Agreement may provide that all or any portion of such tax obligations, together
with additional taxes not exceeding the actual additional taxes to be owed by
the Optionee as a result of such exercise, may, upon the irrevocable election
of the Optionee, be paid by tendering to the Company whole shares of Stock duly
endorsed for transfer and owned by the Optionee, or by authorization to the
Company to withhold shares of Stock otherwise issuable upon exercise of the
Option, in either case in that number of shares having a Fair Market Value on
the date of exercise equal to the amount of such taxes thereby being paid, and
subject to such restrictions as to the approval and timing of any such election
as the Committee may from time to time determine to be necessary or appropriate
to satisfy the conditions of the exemption set forth in Rule 16b-3 under the
Exchange Act, if such rule is applicable.
(e) The holder of an Option shall not have any of the rights
of a shareholder with respect to the shares of Stock subject to the Option
until such shares have been issued and transferred to the Optionee upon the
exercise of the Option.
9
<PAGE> 12
6.8 Reload Options.
(a) The Committee may specify in a Stock Option Agreement
(or may otherwise determine in its sole discretion) that a Reload Option shall
be granted, without further action of the Committee, (i) to an Optionee who
exercises an Option (including a Reload Option) by surrendering shares of Stock
in payment of amounts specified in Sections 6.7(c) or 6.7(d) hereof, (ii) for
the same number of shares as are surrendered to pay such amounts, (iii) as of
the date of such payment and at an Exercise Price equal to the Fair Market
Value of the Stock on such date, and (iv) otherwise on the same terms and
conditions as the Option whose exercise has occasioned such payment, except as
provided below and subject to such other contingencies, conditions, or other
terms as the Committee shall specify at the time such exercised Option is
granted; provided, that the Committee may require that the shares surrendered
in payment as provided above must have been held by the Optionee for at least
six months prior to such surrender.
(b) Unless provided otherwise in the Stock Option Agreement,
a Reload Option may not be exercised by an Optionee (i) prior to the end of a
one-year period from the date that the Reload Option is granted, and (ii)
unless the Optionee retains beneficial ownership of the shares of Stock issued
to such Optionee upon exercise of the Option referred to above in Section
6.8(a)(i) for a period of one year from the date of such exercise.
6.9 Nontransferability of Option. Other than as provided below, no
Option shall be transferable by an Optionee other than by will or the laws of
descent and distribution or, in the case of non-Incentive Stock Options,
pursuant to a Qualified Domestic Relations Order, and, during the lifetime of
an Optionee, Options shall be exercisable only by such Optionee (or by such
Optionee's guardian or legal representative, should one be appointed). However,
a Non-Incentive Stock Option may, in connection with the Optionee's estate
plan, be assigned in whole or in part during Optionee's lifetime to one or more
members of the Optionee's immediate family or to a trust established for the
exclusive benefit of one or more such family members. The assigned portion
shall be exercisable only by the person or persons who acquire a proprietary
interest in the Option pursuant to such assignment. The terms applicable to the
assigned portion shall be the same as those in effect for this Option
immediately prior to such assignment and shall be set forth in such documents
issued to the assignee as the Committee may deem appropriate.
6.10 Termination of Employment or Service. The Committee shall have
the power to specify the effect upon an Optionee's right to exercise an Option
upon termination of such Optionee's employment or service under various
circumstances, which effect may include immediate or deferred termination of
such Optionee's rights under an Option, or acceleration of the date at which an
Option may be exercised in full. Unless a Stock Option Agreement specifically
provides otherwise, in the event the recipient of an Option is terminated from
his or her employment or other service to the Company or its subsidiaries for
Cause, Options, whether vested or unvested, granted to such person shall
terminate immediately and shall not thereafter be exercisable.
6.11 Employment Rights. Nothing in the Plan or in any Stock Option
Agreement shall confer on any person any right to continue in the employ of the
Company or any of its Subsidiaries, or shall interfere in any way with the
right of the Company or any of its Subsidiaries to terminate such person's
employment at any time.
6.12 Certain Successor Options. To the extent not inconsistent with
the terms, limitations and conditions of Code section 422 and any regulations
promulgated with respect thereto, an Option issued in respect of an option held
by an employee to acquire stock of any entity acquired, by merger or
10
<PAGE> 13
otherwise, by the Company (or any Subsidiary of the Company) may contain terms
that differ from those stated in this Article VI, but solely to the extent
necessary to preserve for any such employee the rights and benefits contained
in such predecessor option, or to satisfy the requirements of Code section
424(a).
6.13 Effect of a Corporate Transaction. All Options, to the extent
outstanding at the time of a Corporate Transaction but not otherwise fully
exercisable, shall automatically accelerate so that the Options shall,
immediately prior to the effective date of the Corporate Transaction, become
exercisable for all shares at the time subject to such Options and may be
exercised for any or all of those shares as fully vested shares of Stock.
6.14 Forfeiture by Order of Regulatory Agency. If the Company's or
any of its financial institution Subsidiaries' capital falls below the minimum
requirements contained in 12 CFR 3 or below a higher requirement as determined
by the Company's or such Subsidiary's primary bank regulatory agency, such
agency may direct the Company to require Optionees to exercise or forfeit some
or all of their Options. All options granted under this Plan are subject to the
terms of any such directive.
ARTICLE VII
STOCK CERTIFICATES
The Company shall not be required to issue or deliver any certificate
for shares of Stock purchased upon the exercise of any Option granted hereunder
or any portion thereof prior to fulfillment of all of the following conditions:
(a) The admission of such shares to listing on all stock exchanges
on which the Stock is then listed;
(b) The completion of any registration or other qualification of
such shares which the Committee shall deem necessary or advisable under any
federal or state law or under the rulings or regulations of the Securities and
Exchange Commission or any other governmental regulatory body;
(c) The obtaining of any approval or other clearance from any
federal or state governmental agency or body which the Committee shall
determine to be necessary or advisable; and
(d) The lapse of such reasonable period of time following the
exercise of the Option as the Board from time to time may establish for reasons
of administrative convenience.
Stock certificates issued and delivered to Optionees shall bear such
restrictive legends as the Company shall deem necessary or advisable pursuant
to applicable federal and state securities laws. The inability of the Company
to obtain approval from any regulatory body having authority deemed by the
Company to be necessary to the lawful issuance and sale of any Stock pursuant
to Options shall relieve the Company of any liability with respect to the
non-issuance or sale of the Stock as to which such approval shall not have been
obtained. However, the Company shall use its best efforts to obtain all such
approvals.
11
<PAGE> 14
ARTICLE VIII
TERMINATION AND AMENDMENT
8.1 Termination and Amendment. The Board may at any time terminate
the Plan; provided, however, that the Board (unless its actions are approved or
ratified by the shareholders of the Company within twelve months of the date
that the Board amends the Plan) may not amend the Plan to:
(a) Increase the total number of shares of Stock issuable
pursuant to Incentive Stock Options under the Plan, except as contemplated in
Section 5.2 hereof; or
(b) Change the class of employees eligible to receive
Incentive Stock Options that may participate in the Plan.
8.2 Effect on Optionee's Rights. No termination, amendment, or
modification of the Plan shall affect adversely a Optionee's rights under a
Stock Option Agreement without the consent of the Optionee or his legal
representative.
ARTICLE IX
RELATIONSHIP TO OTHER COMPENSATION PLANS
The adoption of the Plan shall not affect any other stock option,
incentive, or other compensation plans in effect for the Company or any of its
Subsidiaries; nor shall the adoption of the Plan preclude the Company or any of
its Subsidiaries from establishing any other form of incentive or other
compensation plan for employees or Directors of the Company or any of its
Subsidiaries.
ARTICLE X
MISCELLANEOUS
10.1 Replacement or Amended Grants. At the sole discretion of the
Committee, and subject to the terms of the Plan, the Committee may modify
outstanding Options or accept the surrender of outstanding Options and grant
new Options in substitution for them. However no modification of an Option
shall adversely affect a Optionee's rights under a Stock Option Agreement
without the consent of the Optionee or his legal representative.
10.2 Forfeiture for Competition. If a Optionee provides services to
a competitor of the Company or any of its Subsidiaries, whether as an employee,
officer, director, independent contractor, consultant, agent, or otherwise,
such services being of a nature that can reasonably be expected to involve the
skills and experience used or developed by the Optionee while an Employee, then
that Optionee's rights under any Options outstanding hereunder shall be
forfeited and terminated subject in each case to a determination to the
contrary by the Committee.
10.3 Leave of Absence. Unless provided otherwise in a particular
Stock Option Agreement, the following provisions shall apply upon an Optionee's
commencement of an authorized leave of absence:
(a) The exercise schedule in effect for such Option shall be frozen
as of the first day of the authorized leave, and the Option shall not become
exercisable for any additional installments of shares of Stock during the
period Optionee remains on such leave.
12
<PAGE> 15
(b) Should the Optionee resume active Employee status within 60
days after the start date of the authorized leave, Optionee shall, for purposes
of the applicable exercise schedule, receive service credit for the entire
period of such leave. If the Optionee does not resume active Employee status
within such 60-day period, then no service credit shall be given for the entire
period of such leave.
(c) If the Option is an Incentive Stock Option, then the following
additional provision shall apply:
If the leave of absence continues for more than
three months, then the Option shall automatically convert to a
Non-Incentive Stock Option under the Federal tax laws upon the
expiration of such three-month period, unless the Optionee's
reemployment rights are guaranteed by statute or written agreement.
Following any such conversion of the Option, all subsequent exercises
of the Option, whether effected before or after Optionee's return to
active Employee status, shall result in an immediate taxable event,
and the Company shall be required to collect from Optionee the
Federal, state and local income and employment withholding taxes
applicable to such exercise.
(d) In no event shall the Option become exercisable for any
additional shares or otherwise remain outstanding if Optionee does not resume
Employee status prior to the Expiration Date of the option term.
10.4 Plan Binding on Successors. The Plan shall be binding upon the
successors and assigns of the Company.
10.5 Headings, etc., No Part of Plan. Headings of Articles and
Sections hereof are inserted for convenience and reference; they do not
constitute part of the Plan.
10.6 Section 16 Compliance. With respect to Section 16 Insiders,
transactions under this Plan are intended to comply with all applicable
conditions of Rule 16b-3 or its successors under the Exchange Act. To the
extent any provision of the Plan or action by the Committee fails to so comply,
it shall be deemed void to the extent permitted by law and deemed advisable by
the Committee. In addition, if necessary to comply with Rule 16b-3 with respect
to any grant of an Option hereunder, and in addition to any other vesting or
holding period specified hereunder or in an applicable Stock Option Agreement,
any Section 16 Insider acquiring an Option shall be required to hold either the
Option or the underlying shares of Stock obtained upon exercise of the Option
for a minimum of six months.
IN WITNESS WHEREOF, the Company has caused this Plan to be executed as
of __________________, 1999, in accordance with the authority provided by the
Board of Directors.
First Capital Bank Holding Corporation
By:
----------------------------------------
Name: Michael G. Sanchez
Title: President
13
<PAGE> 16
EXHIBIT A
to
First Capital Bank Holding Corporation
1999 Stock Incentive Plan -
FORM OF EMPLOYEE OF STOCK OPTION AGREEMENT
FIRST CAPITAL BANK HOLDING CORPORATION
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT (this "Agreement") is entered into as of
this ___ day of _________, 1999, between First Capital Bank Holding
Corporation, a Florida corporation (the "Company"), and __________ (the
"Optionee").
WHEREAS, on October 27, 1999, the Board of Directors of the Company
adopted a Stock Incentive Plan known as the "First Capital Bank Holding
Corporation 1999 Stock Incentive Plan" (the "Stock Incentive Plan"), and
recommended that the Plan be approved by the Company's shareholders; and
WHEREAS, the Committee has granted the Optionee a stock option to
purchase the number of shares of the Company's common stock as set forth below,
and in consideration of the granting of that stock option the Optionee intends
to remain in the employ of the Company; and
WHEREAS, the Company considers it desirable and in its best interest
that the Optionee be provided an inducement to acquire an ownership interest in
the Company and an additional incentive to advance the interest of the Company
through the grant of an option to purchase shares of common stock of the
Company pursuant to the Stock Incentive Plan; and
WHEREAS, the Company and the Optionee desire to enter into a written
agreement with respect to such option in accordance with the Stock Incentive
Plan.
NOW, THEREFORE, as an employment incentive and to encourage stock
ownership, and also in consideration of the mutual covenants contained herein,
the Company and the Optionee agree as follows.
1. Incorporation of Stock Incentive Plan. This option is granted
pursuant to the provisions of the Stock Incentive Plan and the terms and
definitions of the Stock Incentive Plan are incorporated herein by reference
and made a part hereof. A copy of the Stock Incentive Plan has been delivered
to, and receipt is hereby acknowledged by, the Optionee.
2. Grant of Option. Subject to the provisions stated in this
Agreement, the Company hereby evidences its grant to the Optionee, not in lieu
of salary or other compensation, of the right and option (the "Option") to
purchase the number of shares of the Company's Common Stock, par value $0.01
per share (the "Stock"), set forth below, exercisable in the amounts and at the
time specified below. This Option is intended to be an Incentive Stock Option,
as defined in the Internal Revenue Code.
Number of Shares: *****
Exercise Price: $ *** per share
<PAGE> 17
Option Vesting Schedule: Options are exercisable with respect the shares of
Stock as follows, subject in each case to continued
employment by the Company or a subsidiary of the
Company through such date, and subject to the
provisions of Section 7 of this Agreement:
<TABLE>
<CAPTION>
No. of Shares Vesting Date
<S> <C>
***** _________ __, 2000
***** _________ __, 2001
***** _________ __, 2002
***** _________ __, 2003
***** _________ __, 2004
</TABLE>
Option Exercise Period: All options expire and are void unless
exercised on or before _______ ___, 2009.
3. Exercise Terms. The Optionee must exercise the Option for at least
the lesser of 100 shares or the number of shares of Purchasable Stock as to
which the Option remains unexercised. If this Option is not exercised with
respect to all or any part of the shares subject to this Option prior to its
expiration, the shares with respect to which this Option was not exercised
shall no longer be subject to this Option.
4. Restrictions on Transferability. No Option shall be transferable by
an Optionee other than by will or the laws of descent and distribution or
pursuant to a Qualified Domestic Relations Order. During the lifetime of an
Optionee, Options shall be exercisable only by such Optionee (or by such
Optionee's guardian or legal representative, should one be appointed). The
shares purchased pursuant to the exercise of an Incentive Stock Option shall
not be transferred by the Optionee except pursuant to the Optionee's will, or
the laws of descent and distribution, until such date which is the later of two
years after the grant of such Incentive Stock Option or one year after the
transfer of the shares to the Optionee pursuant to the exercise of such
Incentive Stock Option.
5. Notice of Exercise of Option. This Option may be exercised by the
Optionee, or by the Optionee's administrators, executors or personal
representatives, by a written notice (in substantially the form of the Notice
of Exercise attached hereto as Schedule A) signed by the Optionee, or by such
administrators, executors or personal representatives, and delivered or mailed
to the Company as specified in this Agreement to the attention of the President
or such other officer as the Company may designate. Any such notice shall (a)
specify the number of shares of Stock which the Optionee or the Optionee's
administrators, executors or personal representatives, as the case may be, then
elects to purchase hereunder, (b) contain such information as may be reasonably
required by the Company pursuant to this Agreement, and (c) be accompanied by
(i) a certified or cashier's check payable to the Company in payment of the
total Exercise Price applicable to such shares as provided herein, (ii) shares
of stock owned by the Optionee and duly endorsed or accompanied by stock
transfer powers having a Fair Market Value equal to the total Exercise Price
applicable to such Shares purchased hereunder, or
<PAGE> 18
(iii) a certified or cashier's check accompanied by the number of shares of
stock where Fair Market Value when added to the amount of the check equal the
total Exercise Price applicable to such shares purchased hereunder. Upon
receipt of any such notice and accompanying payment, and subject to the terms
hereof, the Company agrees to issue to the Optionee or the Optionee's
administrators, executors or personal representatives, as the case may be,
stock certificates for the number of shares specified in such notice registered
in the name of the person exercising this Option.
6. Adjustment in Option. The number of Shares subject to this
Option, the Exercise Price, and other matters are subject to adjustment during
the term of this Option in accordance with Section 5.2 of the Stock Incentive
Plan.
7. Termination of Employment.
(a) In the event of the termination of the Optionee's employment with
the Company or any of its Subsidiaries, other than a termination that is either
(i) for Cause, (ii) voluntary on the part of the Optionee and without written
consent of the Company, or (iii) for reasons of death or disability or
retirement, the Optionee may exercise this Option at any time within 30 days
after such termination to the extent of the number of shares which were
Purchasable hereunder at the date of such termination.
(b) In the event of a termination of the Optionee's employment that is
either (i) for Cause or (ii) voluntary on the part of the Optionee and without
the written consent of the Company, this Option, to the extent not previously
exercised, shall terminate immediately and shall not thereafter be or become
exercisable.
(c) In the event of the retirement of the Optionee at the normal
retirement date as prescribed from time to time by the Company or any
Subsidiary, the Optionee shall continue to have the right to exercise any
Options for shares which were Purchasable at the date of the Optionee's
retirement provided that, on the date which is three months after the date of
retirement, the Options will become void and unexercisable unless on the date
of retirement the Optionee enters into a noncompete agreement with the Company
and continues to comply with such noncompete agreement. This Option does not
confer upon the Optionee any right with respect to continuance of employment by
the Company or by any of its Subsidiaries. This Option shall not be affected by
any change of employment so long as the Optionee continues to be an employee of
the Company or one of its Subsidiaries.
(d) In the event of termination of employment because of the
Optionee's Permanent and Total Disability, the Optionee (or his or her personal
representative) may exercise this Option, within a period ending on the earlier
of (a) the last day of the one year period following the Optionee's Permanent
and Total Disability or (b) the expiration date of this Option, to the extent
of the number of shares which were Purchasable hereunder at the date of such
termination.
(e) In the event of the Optionee's death while employed by the Company
or any of its Subsidiaries or within three months after a termination of such
employment (if such termination was neither (i) for Cause nor (ii) voluntary on
the part of the Optionee and without the written consent of the Company), the
appropriate persons described in Section 5 hereof or persons to whom all or a
portion of this Option is transferred in accordance with Section 4 hereof may
exercise this Option at any time within a period ending on the earlier of (a)
the last day of the one year period following the Optionee's death or (b) the
expiration date of this Option. If the Optionee was an employee of the Company
at the time of death, this Option may be so exercised to the extent of the
number of shares that were Purchasable hereunder at the date of death. If the
Optionee's employment terminated prior to his or her death, this Option may be
exercised only to the extent of the number of shares covered by
<PAGE> 19
this Option which were Purchasable hereunder at the date of such termination.
8. Compliance with Regulatory Matters. The Optionee acknowledges
that the issuance of capital stock of the Company is subject to limitations
imposed by federal and state law and the Optionee hereby agrees that the
Company shall not be obligated to issue any shares of Stock upon exercise of
this Option that would cause the Company to violate law or any rule,
regulation, order or consent decree of any regulatory authority (including
without limitation the Securities and Exchange Commission) having jurisdiction
over the affairs of the Company. The Optionee agrees that he or she will
provide the Company with such information as is reasonably requested by the
Company or its counsel to determine whether the issuance of Stock complies with
the provisions described by this Section 8.
9. Forfeiture. The purpose of the Stock Incentive Plan is to attract,
retain, and reward employees, to increase stock ownership and identification
with the Company's interests, and to provide incentive for remaining with and
enhancing the value of the Company over the long-term. Therefore, the Company
and the Optionee agree as follows:
(a) If, at any time within the later of (i) one year after
termination of the Optionee's employment or (ii) one year after the Optionee's
exercise of any portion of this Option, the Optionee engages in any activity
which constitutes a violation of any confidentiality, noncompetition,
nonsolicitation, or similar provision of any employment or other agreement
between the Company and the Optionee (or, if no agreement is in place between
the Company and the Optionee, any Company policies pertaining to such matters),
or if the Optionee engages in any activity which is inimical, contrary, or
harmful to the interests of the Company (including conduct related to the
Optionee's employment for which either criminal or civil penalties against the
Optionee may be sought or violation of the Company's policies, including the
Company's insider trading policy), then (1) this Option shall terminate
effective the date on which the Optionee enters into such activity, unless
terminating sooner by operation of another term or condition of this Option or
the Stock Incentive Plan, and (2) any Option Gain realized by the Optionee from
exercising all or a portion of this Option shall be paid by the Optionee to the
Company. "Option Gain" shall mean the gain represented by the mean market price
on the date of exercise over the Exercise Price, multiplied by the number of
shares purchased through exercise of the Option, without regard to any
subsequent market price decrease or increase. The forfeiture provisions
described in this Section shall apply even if the Company does not elect
otherwise to enforce the employment agreement or take other action against the
Optionee, but shall not apply if termination of the Optionee's employment with
the Company occurs in connection with or following a Corporate Transaction
involving the Company (as defined in the Stock Incentive Plan).
(b) By accepting this Agreement, the Optionee consents to a
deduction from any amounts the Company owes the Optionee from time to time
(including amounts owed as wages or other compensation, fringe benefits, or
vacation pay), to the extent of the amounts the Optionee owes the Company under
this Section. Whether or not the Company elects to make any set-off in whole or
in part, if the Company does not recover by means of set-off the full amount
owed by the Optionee to the Company, calculated as set forth above, the
Optionee shall pay immediately the unpaid balance to the Company. The Optionee
hereby appoints the Company as its attorney-in-fact to execute any documents or
do any acts necessary to exercise its rights under this Section.
(c) The Optionee may be released from its obligations under this
Section only if the Board of Directors (or its duly appointed agent) determines
in its sole discretion that such action is in the best interests of the
Company.
<PAGE> 20
10. Miscellaneous.
(a) This Agreement shall be binding upon the parties hereto and
their representatives, successors and assigns.
(b) Unless the context clearly indicates to the contrary, all
capitalized terms used herein shall have the meanings as set forth in this
Agreement, or in the event a capitalized term is not clearly described in this
Agreement, the meanings as set forth in the First Capital Bank Holding
Corporation 1999 Stock Incentive Plan dated October 27, 1999.
(b) This Agreement is executed and delivered in, and shall be
governed by the laws of, the State of Florida.
(c) Any requests or notices to be given hereunder shall be deemed
given, and any elections or exercises to be made or accomplished shall be
deemed made or accomplished, upon actual delivery thereof to the designated
recipient, or three days after deposit thereof in the United States mail,
registered, return receipt requested and postage prepaid, addressed, if to the
Optionee, at the address set forth below and, if to the Company, to the
executive offices of the Company at 1891 South 14th Street, Fernandina Beach,
Florida 32035.
(d) This Agreement may not be modified except in writing executed
by each of the parties hereto.
IN WITNESS WHEREOF, the Board of Directors of the Company has caused
this Stock Option Agreement to be executed on behalf of the Company and the
Company's seal to be affixed hereto and attested by the Secretary or an
Assistant Secretary of the Company, and the Optionee has executed this Stock
Option Agreement under seal, all as of the day and year first above written.
FIRST CAPITAL BANK HOLDING CORPORATION
By:
----------------------------------------------
Name: Michael G. Sanchez
Title: President and Chief Executive Officer
OPTIONEE
By:
---------------------------------------------
Name: *********
Address:
------------------------------------------
------------------------------------------
<PAGE> 21
SCHEDULE A
NOTICE OF EXERCISE
TO EXERCISE STOCK OPTIONS, THE OPTIONEE SHOULD
COMPLETE THIS SCHEDULE, EXECUTE IT, AND RETURN IT TO THE COMPANY
The undersigned hereby notifies First Capital Bank Holding Company
(the "Company") of this election to exercise the undersigned's stock option to
purchase shares of the Company's common stock, par value $0.01 per share (the
"Common Stock"), pursuant to the Stock Option Agreement (the "Agreement")
between the undersigned and the Company dated _______________________________.
Accompanying this Notice is a check in the amount of $___________________
payable to the Company such amount being equal to the purchase price per share
set forth in the Agreement multiplied by the number of shares being purchased
hereby.
IN WITNESS WHEREOF, the undersigned has set his hand and seal, this
________ day of _________________, _________.
OPTIONEE [OR OPTIONEE'S
ADMINISTRATOR,
EXECUTOR OR PERSONAL
REPRESENTATIVE]
Name:
-------------------------------------
Print Name:
-------------------------------
<PAGE> 1
EXHIBIT 21. SUBSIDIARIES OF THE COMPANY
First National Bank of Nassau County
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF FIRST CAPITAL BANK HOLDING CORPORATION FOR THE YEAR
ENDED DECEMBER 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 1,056,088
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 1,871,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 0
<INVESTMENTS-CARRYING> 231,000
<INVESTMENTS-MARKET> 10,059,587
<LOANS> 6,411,579
<ALLOWANCE> 74,000
<TOTAL-ASSETS> 21,406,482
<DEPOSITS> 12,382,702
<SHORT-TERM> 0
<LIABILITIES-OTHER> 11,185
<LONG-TERM> 0
10,000
0
<COMMON> 0
<OTHER-SE> 9,002,595
<TOTAL-LIABILITIES-AND-EQUITY> 21,406,482
<INTEREST-LOAN> 165,332
<INTEREST-INVEST> 256,885
<INTEREST-OTHER> 99,454
<INTEREST-TOTAL> 521,671
<INTEREST-DEPOSIT> 97,248
<INTEREST-EXPENSE> 130,697
<INTEREST-INCOME-NET> 390,974
<LOAN-LOSSES> 74,000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 780,110
<INCOME-PRETAX> 0
<INCOME-PRE-EXTRAORDINARY> (444,313)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (444,313)
<EPS-BASIC> (0.44)
<EPS-DILUTED> (0.44)
<YIELD-ACTUAL> 0
<LOANS-NON> 0
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 0
<CHARGE-OFFS> 0
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 74,000
<ALLOWANCE-DOMESTIC> 74,000
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
