<PAGE> 1
PROSPECTUS Filed pursuant to Rule 424(b)(3)
File No. 333-69555
FIRST CAPITAL BANCSHARES, INC.
A Holding Company for
[FIRST CAPITAL BANK LOGO HERE]
720,000 Shares of Common Stock
$10.00 per share
-------------------------------
We are offering shares of common stock of First Capital Bancshares,
Inc. to fund the start-up of a new bank named First Capital Bank. We will be
the sole owner of First Capital Bank, which will be headquartered in Marlboro
County, South Carolina. We expect the bank to open in the second quarter of
1999. First Capital Bank will provide a full range of commercial and consumer
banking services to individuals and small- to medium-sized businesses. This is
our first offering of stock to the public and there is no public market for our
shares. The shares will not be listed on Nasdaq or any national exchange.
The shares will be sold primarily by our sales agent, Banc Stock
Financial Services, Inc., and by our officers and directors. The sales agent
has agreed to use its best efforts to sell the shares offered, but must sell a
minimum of 500,000 shares if it sells any. The offering is scheduled to end on
June 15, 1999, but we may extend the offering until January 31, 2000, at the
latest. The minimum purchase requirement is 100 shares.
We will place all the money we receive in the offering with an
independent escrow agent who will hold the money until we sell at least 500,000
shares and we receive preliminary approval from our bank regulatory agencies
for the new bank. If we do not meet these conditions before the end of the
offering period, we will return all funds to the subscribers with interest
earned.
This table summarizes the offering. It shows the maximum commissions
we expect to pay to the sales agent.
<TABLE>
<CAPTION>
================================== ========= ============== ==============
Per Share Minimum Total Maximum Total
--------- (500,000 Shares) (720,000 Shares)
-------------- --------------
<S> <C> <C> <C>
Public Offering Price............. $10.00 $5,000,000 $7,200,000
Sales Agency Commissions.......... 0.70 315,160 469,160
Proceeds to First Capital......... 9.30 4,684,840 6,730,840
================================== ========= ============== ==============
</TABLE>
THIS IS A RISKY INVESTMENT. IT IS NOT A DEPOSIT OR AN ACCOUNT AND IS
NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER
GOVERNMENT AGENCY. YOU SHOULD NOT INVEST IN THIS OFFERING UNLESS YOU CAN AFFORD
TO LOSE YOUR ENTIRE INVESTMENT. SOME OF THE RISKS OF THIS INVESTMENT ARE
DESCRIBED UNDER THE HEADING "RISK FACTORS" BEGINNING ON PAGE 6.
NEITHER THE SEC NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR
DISAPPROVED THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR
COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
[BANC STOCK FINANCIAL SERVICES, INC. LOGO HERE]
March 30, 1999
<PAGE> 2
PROPOSED PRIMARY SERVICE AREA
FIRST CAPITAL BANK
[A map of North and South Carolina, highlighting the Bennettsville area
is included here.]
FIRST CAPITAL BANCSHARES, INC.
BOARD OF DIRECTORS
[A picture of the board of directors is included here.]
<PAGE> 3
SUMMARY
We encourage you to read the entire prospectus carefully before
investing. See page 5 for instructions on how to subscribe for shares.
GENERAL
First Capital Bancshares is raising capital in this offering to open
First Capital Bank. First Capital Bancshares was organized by the following
Marlboro County area business leaders who will also make up its board of
directors:
Shoukath Ansari, M.D. Lee Howell
Wylie Cartrette Paul Rush, M.D.
J. Aubrey Crosland Lee C. Shortt
Glenn Dowdy Dale Hutchins
First Capital Bank will be a new locally owned and operated bank in
Marlboro County, South Carolina. Our initial office will be in Bennettsville,
South Carolina. We also plan to open a branch in McColl, South Carolina and are
considering a second branch in the neighboring town of Laurinburg, North
Carolina. The bank will be a federal thrift and its deposits will be insured by
the FDIC. We expect to open the bank for business in the second quarter of
1999. Our principal executive offices are located at:
207 Highway 15/401 Bypass East
Bennettsville, South Carolina 29512
Telephone: (843) 454-9337
Fax: (843) 454-9338
MARKET STRATEGY
Most of the banks currently located in the Marlboro County area of
South Carolina are branches of large regional and national banks. We believe
there is demand for a new local bank. To capitalize on this demand, we will
emphasize our local ownership and management and our strong ties to the
community. We plan to concentrate primarily on individuals and small- to
medium-sized businesses. We will offer general commercial and consumer banking
services with a focus on personalized service and on building long-term
customer relationships. As a federal thrift, we will also have the ability to
offer other products and services. Although initially we plan to limit our
activities to traditional banking, we may consider offering products such as
property and casualty insurance in the future.
MANAGEMENT
Our experienced management team consists of the following individuals:
- - Lee C. Shortt will be the chairman and chief executive officer of First
Capital Bancshares. Mr. Shortt has lived in Bennettsville for over 20
years and is the president of Shortt Auction and Realty Co., which he
founded in 1975.
- - James Aubrey Crosland will be president of both First Capital Bancshares
and First Capital Bank. Mr. Crosland is a native of Bennettsville and has
25 years of bank experience. He was most recently the financial manager
for Marlboro Constructors, Inc. before leaving to focus on the
organization of First Capital Bank. Mr. Crosland's other experience
includes serving as the Pee Dee area executive for Carolina First Bank,
community banking director for NationsBank in neighboring Florence, South
Carolina, city executive for Carolina Bank & Trust in Bennettsville,
operations officer and commercial lender for First National Bank of South
Carolina in Bennettsville, and credit manager at Wachovia.
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- - Randy McDonald will be the chief executive officer and chief lending
officer of First Capital Bank. Mr. McDonald has been in banking since
1979, most recently serving as the loan and asset management officer of
the Citizens Bank and the city executive in the Lake City, South Carolina
office of Carolina First Bank.
- - John M. Digby will serve as chief financial officer for both First Capital
Bancshares and First Capital Bank. Mr. Digby has 27 years of banking
experience and 10 years' experience as the chief financial officer of
community banks in Georgia and Clemson, South Carolina. He was most
recently a vice president of Community Capital Corporation in Greenwood,
South Carolina.
OBTAINING REGULATORY APPROVAL AND OPENING THE BANK
We have submitted an application to the Office of Thrift Supervision
which must be approved before we can open First Capital Bank. We anticipate
receiving conditional approval in the second quarter of 1999. We have already
received conditional approval for deposit insurance from the FDIC. In order to
open for business, we anticipate that these agencies will require that the bank
have at least $4.5 million in starting capital.
USE OF PROCEEDS FROM THE OFFERING
We hope to sell between 500,000 and 720,000 shares in this offering at
a price of $10.00 per share to raise between $5 million and $7.2 million. Our
directors have already purchased 30,000 shares of common stock at this price,
and intend to purchase at least 55,200 additional shares in this offering.
We will use the first $4.5 million raised in the offering, and 25% of
the amount raised in excess of $4.5 million, to provide the initial capital for
First Capital Bank. We will use the remaining proceeds to pay the cost of
organizing First Capital Bancshares, the expenses of this offering, and to
provide general working funds for First Capital Bancshares.
First Capital Bank intends to use the $4.5 million it receives from
First Capital Bancshares for expenses incurred to organize and open the bank,
for purchase, renovation, and furnishing of the bank's initial offices, and for
general working funds, including paying the salaries of officers and employees
and making loans and investments.
WE DO NOT PLAN TO PAY DIVIDENDS
We do not plan to pay dividends in the near future. Because we are a
start-up enterprise, we will use all earnings to fund our ongoing operation and
the growth of the business.
WE WILL HOLD THE SUBSCRIPTION FUNDS IN ESCROW
Because we cannot open the bank without regulatory approvals, we will
place all the proceeds from outside investors in this offering with an
independent escrow agent. The escrow agent will hold these funds until we raise
a minimum of $5 million and obtain preliminary regulatory approval from the
Office of Thrift Supervision to open the bank. We expect to receive this
approval in the second quarter of 1999. We currently intend to close the
offering on June 15, 1999, but may extend the offering up to January 31, 2000.
If we fail to meet these conditions by the close of the offering, our escrow
agent will promptly refund your subscription in full with interest earned. Even
if we meet these conditions and release the proceeds from escrow, we will
return your subscriptions in full with interest if we fail to open the bank for
any reason. In these events, we will use the investments by our founding
shareholders to pay expenses and liquidate the company.
WE WILL USE A SALES AGENT TO SELL SHARES IN THE OFFERING
We have engaged Banc Stock Financial Services Inc., a subsidiary of
The Banc Stock Group, Inc., as our sales agent to sell shares in the offering.
The sales agent has agreed to use its best efforts to sell the shares offered,
but must sell at least 500,000 shares in order to sell any. We have agreed to
pay the sales agent a 2.5%
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commission on shares sold in the offering to our founding directors, a 6.5%
commission on shares sold to investors which we identify (up to 200,000
shares), and a 7.0% commission on shares sold to the public. This will result
in fees and commissions of approximately $315,000 on the minimum of 500,000
shares and $470,000 on the maximum of 720,000 shares. We will also reimburse
the sales agent for its costs and expenses up to an additional $60,000.
HOW TO SUBSCRIBE
If you wish to subscribe for shares you should:
1. Complete, date, and execute the stock order form delivered
with this prospectus;
2. Make a check, bank draft, or money order payable to The
Banker's Bank, Escrow Account for First Capital Bancshares,
Inc., in the amount of $10.00 multiplied by the number of
shares for which you subscribed; and
3. Deliver the completed subscription agreement and check to the
sales agent at the following address:
Banc Stock Financial Services, Inc.
1105 Schrock Road
Suite 437
Columbus, OH 43229
Attention: Ms. Lisa R. Hunter,
Vice President/Compliance Officer
or to the escrow agent at the following address:
The Bankers Bank
2410 Paces Ferry Road
600 Paces Summit
Atlanta, GA 30339-4098
Attention: Mr. William R. Burkett,
Senior Vice President
All funds received by Banc Stock Financial Services, Inc. will be
forwarded to the escrow agent by noon on the next business day. If you have any
questions about the offering or how to subscribe, please call Mr. Crosland at
(843) 454-9337 or Mr. Edward Schmidt or Ms. Hunter at Banc Stock Financial
Services, Inc. at (800) 347-2265. You should retain a copy of the completed
subscription agreement for your records. The subscription price is due and
payable when the subscription agreement is delivered.
NOTE REGARDING FORWARD LOOKING STATEMENTS: This prospectus contains
certain "forward-looking statements" concerning First Capital Bancshares and
First Capital Bank and their operations, performance, financial conditions, and
likelihood of success. These statements are based on many assumptions and
estimates. Our actual results will depend on many factors about which we are
unsure, including those discussed above. Many of these risks and factors 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.
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RISK FACTORS
Investing in First Capital Bancshares common stock involves risks. Our
stock is not a deposit or an account and is not insured by the FDIC or any
other government agency. We are a new company and may not succeed due to many
factors. You should not invest in the common stock unless you can afford to
lose your entire investment. Before investing, we encourage you to read this
entire prospectus, including the following risk factors.
WE ARE A NEW BUSINESS AND CANNOT PREDICT WHETHER WE WILL BE SUCCESSFUL.
Neither First Capital Bancshares nor First Capital Bank has any
operating history. The operations of new businesses are always risky. Because
First Capital Bank has not yet opened, we do not have historical financial data
and similar information that would be available for a financial institution
that has been operating for several years. We cannot predict whether we will be
successful.
WE EXPECT TO INCUR LOSSES FOR AT LEAST TWO YEARS AND CANNOT PREDICT WHEN OR IF
WE WILL BECOME PROFITABLE.
In order for us to become profitable, we will need to attract a large
number of customers to deposit and borrow money. It will take time for us to
produce revenue. We expect to incur large initial expenses and therefore incur
losses. We may not be profitable for several years, if ever. Through December
31, 1998, we had incurred a net loss of $163,490. Prior to opening we expect to
incur losses in excess of $300,000. Although we expect to become profitable in
our second year, it is possible that we may never become profitable and that
you will lose part or all of your investment.
WE CANNOT OPEN THE BANK FOR BUSINESS UNTIL WE RECEIVE REGULATORY APPROVALS
WHICH ARE AT THE DISCRETION OF OUR REGULATORY AGENCIES.
We cannot begin operations until we receive all required regulatory
approvals. We will not receive these approvals until we satisfy certain rules
and requirements for new banks imposed by state and federal regulatory
agencies. We believe one requirement will be that we have at least $4.5 million
to capitalize the bank. We expect to satisfy these requirements and obtain all
necessary approvals by the second quarter of 1999, but it may take longer. We
cannot open the bank without regulatory approvals. To reduce the risks to
subscribers in this offering we will place all proceeds from outside investors
with an independent escrow agent as described in the summary above.
WE WILL DEPEND HEAVILY ON MR. SHORTT, MR. CROSLAND, MR. MCDONALD AND MR. DIGBY,
AND OUR BUSINESS WOULD SUFFER IF SOMETHING WERE TO HAPPEN TO ANY OF THEM OR IF
ANY OF THEM WERE TO LEAVE.
We will depend heavily on the senior management to make the bank
successful. In particular, we will depend on Mr. Shortt, Mr. Crosland, Mr.
McDonald, and Mr. Digby. These individuals will provide valuable services to
us, and each would be difficult to replace. The loss of one or more of the
senior management team could impair our ability to succeed. We have an
employment agreement with each of Messrs. Crosland, McDonald, and Digby, and we
carry $1,000,000 of life insurance payable to the bank on Mr. Crosland.
THE OFFERING PRICE OF $10.00 WAS DETERMINED ARBITRARILY AND IT WILL FLUCTUATE
ONCE THE SHARES BECOME FREELY TRADED AFTER THE OFFERING.
Because we are a start-up company and have no historical operations on
which to base the offering price, the market price of the stock after the
offering may be more susceptible to fluctuations than it otherwise might be.
The market price will be affected by our operating results, which could
fluctuate greatly. These fluctuations could result from expenses of operating
and expanding First Capital Bank, trends in the banking industry, economic
conditions in our market area, stock market fluctuations, and other factors
which are beyond our control. If our operating results are below expectations,
the market price of the common stock would probably fall.
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WE WILL NOT HAVE A LARGE NUMBER OF SHAREHOLDERS OR A LARGE NUMBER OF SHARES
AVAILABLE AFTER THE OFFERING, WHICH MAY LIMIT YOUR ABILITY TO SELL OR TRADE THE
SHARES AFTER THE OFFERING.
There is currently no market for our common stock. We will not be
listed on Nasdaq or any national stock exchange. After the offering, we
anticipate that at least two broker-dealers will attempt to match buy and sell
orders for our common stock on the Over-the-Counter Bulletin Board and that bid
and ask quotations on our stock will be displayed on the Electronic Pink Sheet
System. However, we do not expect a liquid market for our common stock to
develop for several years, if at all. A public market having depth and
liquidity depends on having enough buyers and sellers at any given time.
Because this a relatively small offering, we do not expect to have enough
shareholders or outstanding shares to support an active trading market in the
foreseeable future.
WE WILL FACE STRONG COMPETITION FOR CUSTOMERS FROM LARGER AND MORE ESTABLISHED
BANKS WHICH COULD PREVENT US FROM OBTAINING CUSTOMERS AND MAY CAUSE US TO HAVE
TO PAY HIGHER INTEREST RATES TO ATTRACT CUSTOMERS.
There is strong competition for customers from existing banks and
other types of financial institutions in the Marlboro County area and
elsewhere. Some of these competitors have been in business for a long time and
have already established their customer base and name recognition. Most are
larger than we will be and have greater financial and personal resources than
we will have. Some are affiliated with large regional and national banks, like
Carolina First and Wachovia, and offer services that we either do not expect to
provide or will not provide for some time, such as extensive and established
branch networks and trust services. Because of this competition we may have to
pay higher rates of interest to attract deposits. This would increase our costs
and make it more difficult to be profitable.
A LOCAL OR NATIONAL ECONOMIC DOWNTURN COULD REDUCE OUR CUSTOMER BASE, OUR LEVEL
OF DEPOSITS, AND DEMAND FOR FINANCIAL PRODUCTS SUCH AS LOANS.
We will operate in Marlboro County, South Carolina. An economic
downturn in the area would hurt our business. The county's population has
dropped slightly in the last 7 years, and a continuation or acceleration of
this trend could cause a drop in business opportunities for the bank.
Additionally, the per capita income for the area was generally low at $11,326,
indicating that an economic downturn could affect Marlboro County to a greater
extent than other areas of South Carolina or the United States in general.
AS A BANK, OUR PROFITABILITY DEPENDS ON THE INTEREST RATES WHICH WE PAY ON
DEPOSITS AND COLLECT ON LOANS. INTEREST RATES HAVE HISTORICALLY VARIED GREATLY
AND WE CANNOT PREDICT OR CONTROL THEM.
Our profitability depends on our net interest income and net interest
spread. Net interest income is the difference between the income we earn on
assets and the interest we pay on deposits and other borrowings. Net interest
income is largely determined by our net interest spread, which is the
difference between the rates we receive on loans and investments and the rates
we pay for deposits and other borrowings. Our net interest income and net
interest spread will depend on many factors that we cannot control. These
factors include competition, government economic and monetary policies, and
national and local economic conditions. For example, in a growing economy,
interest rates we earn on loans may drop, while rates we pay on deposits may
remain stable, causing a decrease in our interest rate spread and our net
interest income. Although we will try to minimize our exposure to interest rate
risk, we cannot eliminate it.
WE WOULD SUFFER LOSSES IF OUR BORROWERS DEFAULT ON THEIR LOANS.
There are risks inherent in making all loans, and the risks of loan
defaults by borrowers is unavoidable in the banking business. These risks
include:
- Risks caused by the length of the loan repayment period.
Longer repayment periods carry higher risk because of
increased uncertainty about the future.
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- Risks caused by concentrations in types of loans. For
instance, a high percentage of home mortgage loans would be
susceptible to a risk of a drop in the value of real estate.
- Risks caused by changes in the local or national economy or a
downturn for particular industries.
- Risks of nonpayment by individual borrowers.
- Risks resulting from uncertainties about the future value of
collateral used to secure our loans.
Because we will be smaller than most of our competitors, our loan
portfolio will not be as diverse, and these risks will be greater. We will try
to limit our exposure to these risks through prudent lending practices and by
carefully monitoring the amount of loans we make within specific industries,
but we cannot eliminate these risks. Substantial credit losses would result in
a decrease of our net income or an increase in our net losses, and could cause
a reduction in the amount of our bank's capital.
WE MAY NOT BE ABLE TO COMPETE WITH OUR LARGER COMPETITORS FOR LARGER CUSTOMERS
BECAUSE OUR LENDING LIMITS WILL BE LOWER THAN THEIRS.
The amount we can loan a single borrower will be limited to 15% of our
capital. We expect that our initial lending limit will be approximately
$675,000 immediately following the offering. To the extent we lose money
following the offering, our capital will decrease and our lending limits will
also decrease. Our lending limit will be significantly less than the limit for
most of our competitors and may affect our ability to seek relationships with
larger businesses in our market area. We intend to accommodate larger loans by
selling participations in those loans to other financial institutions, but we
may not be successful.
WE HAVE IMPLEMENTED ANTITAKEOVER DEVICES WHICH COULD MAKE IT MORE DIFFICULT FOR
ANOTHER COMPANY TO PURCHASE US, EVEN THOUGH SUCH A PURCHASE MAY INCREASE SHARE
VALUE.
In many cases, shareholders would receive a premium for their shares
if we are purchased by another company. However, state and federal law and our
articles of incorporation and bylaws make it difficult for anyone to purchase
First Capital without approval of our board of directors.
In addition, under South Carolina law no other financial institution
may acquire control of First Capital until First Capital has been in existence
for at least five years. For a discussion of some of these provisions, please
see "Description of Capital Stock - Antitakeover Effects" on page 32.
IT IS POSSIBLE THAT OUR COMPUTER SYSTEMS OR THOSE OF OUR PROCESSING VENDORS OR
LOAN CUSTOMERS COULD FAIL TO OPERATE ON JANUARY 1, 2000.
Like many financial institutions, we will rely upon computers for
conducting our business and for information systems processing. There is
concern among industry experts that on January 1, 2000, computers will be
unable to read or interpret the new year and there may be widespread computer
malfunctions. We will generally rely on software and hardware developed by
independent third parties for our information systems. We will require
warranties about year 2000 compliance from all third party hardware and
software system providers we use. We believe that our internal systems and
software, including our network connections, will be programmed to comply with
year 2000 requirements, although there is a risk they may not. Based on
information currently available, we believe that we will not incur significant
expenses in connection with the year 2000 issue.
The year 2000 issue may also negatively affect the business of our
customers. We intend to include year 2000 readiness in our lending criteria to
minimize this risk. However, we cannot be certain that this will 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. For more
information on year 2000 issues please refer to page 19.
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THE OFFERING
GENERAL
We are offering for sale a minimum of 500,000 shares and a maximum of
720,000 shares of our common stock at a price of $10.00 per share to raise
gross proceeds of between $5 million and $7.2 million. The minimum purchase for
any investor, together with the investor's affiliates, is 100 shares and the
maximum purchase is 5% of the offering unless we accept a subscription for more
or less.
Prior to this offering, the organizers purchased 30,000 shares of
common stock at $10.00 per share to fund the organization of First Capital
Bancshares and First Capital Bank. The organizers and their immediate families
intend to purchase at least 55,200 additional shares of common stock in this
offering, for a total investment of 85,200 shares and $852,000. As a result,
the organizers will own approximately 16.1% of the outstanding common stock if
we sell the minimum number of 530,000 shares in the offering and 11.4% of the
outstanding common stock if we sell the maximum number of 750,000 shares in the
offering. ALTHOUGH THEY HAVE NOT PROMISED TO DO SO, THE ORGANIZERS AND
AFFILIATES OF THE SALES AGENT MAY PURCHASE ADDITIONAL SHARES IN THE OFFERING,
UP TO 100% OF THE MINIMUM OFFERING IF NECESSARY TO COMPLETE THE OFFERING. All
of these individuals purchased shares for investment and not with the intent to
resell. Because purchases by these organizers and sales agent may be
substantial, you should not assume that the sale of the minimum offering amount
indicates the merits of this offering or that their investment decision is
shared by public investors.
We will accept subscriptions to purchase shares until midnight,
eastern standard time, on May 15, 1999, unless we sell all of the shares
earlier or otherwise terminate or extend the offering. See "Conditions to the
Offering and Release of Funds" below. We reserve the right to terminate the
offering at any time, or to extend the expiration date through January 31,
2000. Although we are not required to give you prior written notice of an
extension of the offering period, we expect to communicate quarterly with
subscribers and notify them of extensions. If the offering is extended,
subscriptions we have already accepted will still be binding. Once we become
subject to the reporting requirements of the Securities Exchange Act of 1934,
we will file quarterly reports on Form 10-Q and will make such documents
available to shareholders who request a copy. Extension of the expiration date
may increase our organizational and pre-opening expenses and the expenses of
this offering.
Subscriptions will be binding on subscribers once we accept them and
may not be revoked without our consent. We reserve the right to cancel accepted
subscriptions at any time and for any reason until the proceeds of this
offering are released from escrow. We may reject all or part of any
subscription. We may allocate shares among subscribers if the offering is
oversubscribed. In determining which subscriptions to accept we may take into
account any factors we consider relevant, including:
- the order in which subscriptions are received,
- a subscriber's potential to do business with or to direct
customers to us, and
- our desire to have a broad distribution of stock ownership.
If we reject any subscription, or accept a subscription but subsequently cancel
all or part of it, we will promptly refund the amount remitted for the portion
of the subscription rejected or canceled, with interest earned. We will issue
certificates for shares which have been subscribed, accepted and paid for
promptly upon the satisfaction of the offering conditions and release of the
escrowed funds.
CONDITIONS TO THE OFFERING AND RELEASE OF FUNDS
Initially, we will place all subscription proceeds we receive in an
escrow account maintained by an independent escrow agent. All funds received by
the sales agent will be forwarded to the escrow agent by noon of the next
business day. The escrow agent will not release these funds and we will not
issue any shares in the offering until we meet all of the following conditions:
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- We have accepted subscriptions and payment in full for a
minimum of 500,000 shares (which will result in gross
offering proceeds in excess of $5 million).
- We have obtained preliminary approval from the Office of
Thrift Supervision to acquire the stock of First Capital
Bank.
- The bank has received preliminary approval of its application
for a charter from the Office of Thrift Supervision.
If First Capital Bancshares terminates the offering prior to
satisfaction of these conditions or if the conditions are not satisfied prior
to the expiration of the offering, which would be December 31, 1999, at the
latest, then:
- We will cancel all subscription agreements and subscribers
will not receive shares or become shareholders of First
Capital Bancshares.
- The funds held in the escrow account will not be subject to
the claims of any creditor of First Capital Bancshares or
available to defray the expenses of this offering.
- We will return full amount of all subscription funds promptly
with interest earned.
The escrow agent has not investigated or passed upon the merits of an
investment in our stock. The escrow agent will invest subscription funds at our
direction in interest-bearing savings accounts, short-term United States
Treasury securities, FDIC-insured bank deposits, or such other investments as
we agree on with the escrow agent. We do not intend to invest the subscription
proceeds held in escrow in instruments that would mature after the expiration
date of the offering.
Even if the funds are released from escrow, if we do not receive final
regulatory approval or do not open the bank for any other reason, we will
return your subscriptions in full, together with any interest actually earned
on the subscriptions while they were held in escrow. We will use the
investments by our founding shareholders to pay expenses and then liquidate the
company.
PLAN OF DISTRIBUTION
We have entered into an sales agency agreement with Banc Stock
Financial Services, Inc., a subsidiary of The Banc Stock Group, Inc. The sales
agent has agreed to use its best efforts to sell between 500,000 and 720,000
shares of common stock to the public at the offering price. The sales agent may
not sell any shares unless it can sell at least 500,000 shares. The sales agent
will receive a 2.5% commission on shares sold in the offering to the
organizers, a 6.5% commission on shares sold in the offering to certain
investors identified by the organizers (up to 200,000 shares), and a 7.0%
commission on other shares sold in the offering. The sales agent did not
receive any commission on the 30,000 shares purchased by the organizers prior
to the offering. First Capital will also pay the sales agent's expenses in the
offering, up to a maximum of $35,000, and its legal fees up to $25,000. The
sales agent may select to sell shares through other dealers who are members of
the National Association of Securities Dealers, Inc.
The sales agent has the right to terminate the sales agency agreement
under some circumstances, for example, if the sales agent believes that there
is not a favorable public market for the sale of the shares. If the sales agent
terminates the sales agency agreement, we may sell the shares ourselves through
our officers and directors, or we may engage one or more other broker/dealers.
We do not currently have arrangements with any other broker/dealers. Until we
have sold the minimum number of shares, we will promptly forward all funds we
receive from the sale of shares to the escrow agent.
The sales agency agreement provides for reciprocal indemnification
between us and the sales agent against certain liabilities in connection with
this offering, including liabilities under the securities laws. The SEC has
advised us that it believes that such indemnification is against public policy
and may be unenforceable. We
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have also granted the sales agent a right of first refusal to serve as managing
underwriter on any future financing or to act as an adviser on any merger or
similar transaction occurring within one year after this offering. In any such
transaction, we will agree on compensation that is reasonable and customary
within the industry.
MARKET FOR COMMON STOCK
As of the date of this prospectus, there is no public market for the
shares. Following the offering, we intend that the common stock be quoted on
the OTC Bulletin Board. We have applied for the trading symbol "FRST." Although
the sales agent intends to act as a market maker in the common stock, we do not
anticipate that an active market will develop for the shares anytime soon.
Making a market in securities involves maintaining bid and ask quotations and
being able, as principal, to effect transactions in reasonable quantities at
those quoted prices, subject to various securities laws and other regulatory
requirements. The development of a public trading market depends on the
existence of an adequate number of willing buyers and sellers. We will have a
relatively small number of shareholders and shares outstanding and therefore
may not have an adequate number of buyers and sellers at any time. Based on our
discussions with the sales agent, we expect that a secondary market may
eventually develop for the shares, but we cannot be sure.
In general, if a secondary market does develop, the shares will be
freely transferable and assignable, and nonaffiliate shareholders may sell any
number of shares in such secondary market. Shareholders who are affiliates,
including officers, directors, and 10% shareholders, will have restrictions on
their ability to resell shares imposed by the securities laws. See "Description
of the Capital Stock of First Capital Bancshares - Shares Eligible for Future
Sale" on page 33. In addition, we cannot assure you that the market makers will
continue to maintain the secondary market indefinitely. This will depend on
many factors, including those beyond our control such as the volume of activity
in the secondary market.
We have agreed with the sales agent not to sell any shares for a
period of six months after the date of this prospectus without the sales
agent's prior written consent. The sales agent anticipates that its affiliates
will purchase up to 9.9% of shares at the public offering price for their own
accounts.
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USE OF PROCEEDS
We expect to raise between $5 million and $7.2 million in this
offering. The following two tables summarize our anticipated use of the funds,
or proceeds, which we receive in this offering. These figures are estimates and
projections based on information currently available. Actual numbers will vary,
possibly quite a bit. We believe that the minimum proceeds of $5 million from
the offering will satisfy the cash requirements for the first three years for
both First Capital Bancshares and First Capital Bank, but we cannot be sure.
Because this is a new enterprise, we cannot predict our future revenue or cash
flow or whether it will be sufficient to sustain continued operation.
Therefore, we do not know how much money we will actually spend or need. To
date our expenses have been funded by the initial $300,000 investment of the
organizers and by a line of credit with The Bankers Bank guaranteed by the
organizers.
USE OF FUNDS BY FIRST CAPITAL BANCSHARES
The following table shows the anticipated use of proceeds by First
Capital Bancshares based on the sale of the minimum number and maximum number
of shares in this offering. The investment in First Capital Bank will be $4.5
million plus 25% of the amount by which the net proceeds of the offering exceed
$4.5 million. Net proceeds are the proceeds of the offering less our sales
commissions and offering expenses.
<TABLE>
<CAPTION>
Minimum Maximum
Offering Offering
500,000 Shares 720,000 Shares
-------------- --------------
<S> <C> <C>
Gross proceeds from offering ........................... $ 5,000,000 $ 7,200,000
Sales agent's commission ............................... (315,160) (469,160)
Expense of organizing First Capital Bancshares ......... (23,000) (23,000)
Offering expenses ...................................... (127,000) (127,000)
Investment in capital stock of First Capital Bank ...... $(4,500,000) $(5,025,960)
----------- -----------
Remaining proceeds ..................................... $ 34,840 $ 1,554,880
=========== ===========
</TABLE>
USE OF PROCEEDS BY FIRST CAPITAL BANK
The following table shows the anticipated use of proceeds by First
Capital Bank. All proceeds received by First Capital Bank will be in the form
of an investment by First Capital Bancshares in First Capital Bank's capital
stock. We have already purchased the bank site with a loan from The Bankers
Bank for $350,000. We will use proceeds of the offering to repay this loan.
<TABLE>
<CAPTION>
Minimum Maximum
Offering Offering
500,000 Shares 720,000 Shares
-------------- --------------
<S> <C> <C>
Investment from First Capital Bancshares ............... $ 4,500,000 $ 5,025,960
Organizational and pre-opening expenses of First Capital
Bank ................................................... (300,000) (300,000)
Furniture, fixtures and equipment ...................... (344,000) (344,000)
Purchase of temporary facilities ....................... (74,000) (74,000)
Purchase of bank site and offices ...................... (350,000) (350,000)
Renovation of bank offices ............................. $ (475,000) $ (475,000)
----------- -----------
Remaining proceeds ..................................... $ 2,957,000 $ 3,482,960
=========== ===========
</TABLE>
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<PAGE> 13
CAPITALIZATION
The following table shows First Capital Bancshares' capitalization as
of December 31, 1998, and the pro forma consolidated capitalization of First
Capital Bancshares and First Capital Bank, as adjusted to give effect to the
sale of the minimum and maximum number of shares in this offering. The bank has
targeted the second quarter of 1999 for opening First Capital Bank. "Additional
paid-in capital" shown in the "As Adjusted" columns was calculated by
subtracting the estimated expenses of the offering, including sales agent
commissions, and legal, accounting, printing and other expenses. We estimate
these expenses to be approximately $442,160 in the minimum offering and
$596,160 in the maximum offering. The "Deficit accumulated in the pre-opening
stage" reflects actual expenses incurred through December 31, 1998, and the "As
Adjusted" columns reflect expenses estimated to be incurred to organize and
prepare to open First Capital Bancshares and First Capital Bank. Refer to "Use
of Proceeds" above for more information about these expenses. Please note that
you are likely to experience additional dilution due to operating losses
expected to be incurred during the initial years of First Capital Bank's
operations.
<TABLE>
<CAPTION>
As Adjusted
for As Adjusted
Minimum For
December 31, 1998 Offering Maximum Offering
----------------- ----------- ----------------
<S> <C> <C> <C>
SHAREHOLDERS' EQUITY:
Common Stock, par value $.01 per share; 10,000,000 shares
authorized; 30,000 shares issued and outstanding; 530,000 shares
issued and outstanding as adjusted (minimum offering); 750,000
shares issued and outstanding (maximum offering) ................... 300 5,300 7,500
Preferred Stock, par value $.01 per share; 10,000,000 shares
authorized; no shares issued and outstanding ....................... 0 0 0
Additional paid-in capital ......................................... 299,700 4,852,540 6,896,340
Deficit accumulated during the pre-opening stage ................... (163,490) (323,000) (323,000)
--------- ----------- -----------
Total shareholders' equity ...................................... $ 136,510 $ 4,534,840 $ 6,580,840
========= =========== ===========
</TABLE>
DIVIDEND POLICY
We do not expect to pay any dividends in the near term, and may never
pay dividends. Initially we plan to retain earnings and use them to operate and
expand the business. As First Capital Bancshares will initially act primarily
as a holding company for First Capital Bank and will not generate any
independent revenue, First Capital Bancshares' ability to pay dividends will
depend on the payment of dividends by First Capital Bank. In order to pay
dividends to First Capital Bancshares, First Capital Bank must comply with the
requirements of all applicable laws and regulations. See "Supervision and
Regulation - Capital Requirements" on page 21 and "Supervision and Regulation -
Dividends" on page 23. In addition to the availability of funds from First
Capital Bank, the future dividend policy of First Capital Bancshares is subject
to the discretion of the board of directors and will depend upon a number of
factors, including future earnings, financial condition, cash needs, and
general business conditions.
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<PAGE> 14
PROPOSED BUSINESS AND PLAN OF OPERATION
ORGANIZATION AND GENERAL OPERATION
We incorporated First Capital Bancshares as a South Carolina
corporation in June 1998, primarily to own and control all of the capital stock
of First Capital Bank. First Capital Bancshares initially will engage only in
the business of owning and managing First Capital Bank. As discussed below, we
have applied for a federal savings bank, or thrift, charter for the bank. As a
federally chartered savings bank, First Capital Bank will have general
authority to originate and purchase loans secured by real estate, secured or
unsecured loans for commercial, corporate, business, or agricultural purposes,
and loans for personal, family, or household purposes. We will emphasize retail
banking, home mortgages, real estate loans, and consumer lending needs. We will
not be permitted to make non-real estate commercial purpose loans that exceed
20% of the assets of the bank or non-real estate consumer purpose loans that
exceed 35% of the assets of the bank. While not restricted by law, we expect
initially to limit our lending activities primarily to Marlboro County and the
surrounding communities, including the neighboring towns of McColl, South
Carolina and Laurinburg, North Carolina.
The thrift charter will allow First Capital Bank to operate in all 50
states and to branch into any county in the state of South Carolina without any
additional regulatory approval. The thrift charter will also give First Capital
Bancshares more flexibility to pursue strategic opportunities to grow its
customer base and to create cross-selling opportunities to those same
customers.
We have chosen a holding company structure under which First Capital
Bancshares will own all of the capital stock of First Capital Bank. We believe
the holding company structure will provide flexibility that would not otherwise
be available to the bank alone, including the ability to acquire other
financial institutions and the ability to provide other non-banking services
such as insurance. We do not have any current plans to this effect.
REGULATORY APPROVALS REQUIRED TO OPEN THE BANK
We filed an application with the Office of Thrift Supervision on
August 4, 1998 to charter First Capital Bank as a federal savings bank. The
issuance of a charter will depend, among other things, upon compliance with
certain legal requirements that may be imposed by the Office of Thrift
Supervision, including capitalization of the bank with a minimum amount of
capital which we believe will be $4.5 million. Additionally, we must obtain the
approval of the Office of Thrift Supervision for First Capital Bancshares to
become a thrift holding company before acquiring the capital stock of First
Capital Bank. We also filed an application with the FDIC for deposit insurance
for the bank and obtained preliminary approval of this application on February
5, 1999. We expect to receive all other regulatory approvals by the second
quarter of 1999.
OFFICES, FACILITIES AND SERVICE AREA
Our office is currently located in a modular bank unit at 207 Highway
15/401 Bypass East, in Bennettsville, South Carolina, at the site of a former
Shoney's restaurant. We purchased this property for $350,000 on March 1, 1999,
with a loan from The Bankers Bank for $335,000. This loan has a term of one
year and carries interest at the prime rate minus 1%. We intend to repay this
loan from the proceeds of the offering.
We will renovate the existing 5,200 square foot building for use as
our principal office and have budgeted $475,000 for that purpose. We intend to
commence construction in early 1999 and anticipate that the office will be
ready by October 1999. We have contracted with Spectrum Financial Systems, Inc.
to purchase the modular bank unit for approximately $100,000. Upon completion
of the office space, we will move the temporary unit six miles to McColl, South
Carolina to become our first branch. We are also considering opening a branch
in neighboring Laurinburg, North Carolina in the near future. We believe that
these facilities will adequately serve our needs for the first several years of
operation.
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<PAGE> 15
We expect initially to draw virtually all of our business from
Marlboro County and the surrounding areas in South Carolina. The county's
population had a slight drop in population from 29,361 in 1990 to 29,173 in
1997, making it the 32nd largest county in the state. Per capita income in the
county was $11,326 as of 1997.
MARKETING FOCUS
There are currently seven branches of financial institutions operating
in Marlboro County, none of which are locally owned. Most are local branches of
large regional banks. Although size gives the larger banks certain advantages
in competing for business from large corporations, including higher lending
limits and the ability to offer services in other areas of South Carolina and
the Marlboro County area, we believe that these banks cannot provide the
customer service and individual attention of a locally owned bank. We believe
this leaves a void in the market which we hope to fill. As a result, we
generally will not attempt to compete for the banking relationships of large
corporations, but will concentrate our efforts on building relationships with
small- to medium-sized businesses and on individuals.
We plan to emphasize our local ownership, community based nature, and
ability to provide more personalized service than our competition. Our
directors, as long-time residents and businessmen in the Marlboro County area,
have determined the credit needs of the area through personal experience and
communications with their business colleagues. We believe that the proposed
focus on the community is likely to succeed in the market and that the area
will react favorably to our emphasis on service to small businesses,
individuals, and professional concerns.
DEPOSITS
We intend to offer a full range of deposit services that are typically
available in most banks and savings and loan associations, including:
- checking accounts,
- commercial accounts,
- savings accounts, and
- other time deposits of various types, ranging from daily
money market accounts to longer-term certificates of deposit.
We will tailor accounts and time certificates to our principal market area at
rates competitive to those offered in the Marlboro County area. In addition, we
intend to offer certain retirement account services, such as IRAs. We will
solicit these accounts from individuals, businesses, associations,
organizations, and governmental authorities.
CAPITALIZATION AND EXPENSES
As of December 31, 1998, we had total assets of $145,510, consisting
of $103,293 in cash, an option on real estate valued at $15,000, and $27,217 in
prepaid organizational costs. We incurred a net loss of $163,490 for the period
from inception December 19, 1997 through December 31, 1998.
After we complete the offering and open the bank, we expect we will
have incurred the following expenses:
- $23,000 in expenses to organize First Capital Bancshares.
- $155,000 in expenses to organize First Capital Bank,
including legal fees for incorporation and legal and
consulting fees for obtaining regulatory approval.
- $145,000 in expenses to open First Capital Bank, including
salaries, overhead and other operating expenses.
- $127,000 in expenses of the offering.
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<PAGE> 16
All expenses will be charged against operating results, except expenses of the
offering which will be deducted from the funds received in the offering.
LENDING ACTIVITIES
General. We intend to offer a range of lending services, including
real estate, commercial, and consumer loans. We will target 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 will
initially emphasize retail banking, home mortgages, real estate, and consumer
lending needs. We will not be permitted to make non-real estate commercial
purpose loans that exceed 20% of the bank's assets or non-real estate consumer
purpose loans that exceed 35% of the bank's assets.
Real Estate Loans. We expect that loan secured by first or second
mortgages on real estate will make up a significant portion of the bank's loan
portfolio. These loans will generally fall into one of three categories:
commercial real estate loans, construction and development loans, or
residential real estate loans. Each of these categories is discussed in more
detail below, including their specific risks. Home equity loans are not
included because they are classified as consumer loans, which are discussed
below under a separate heading. Interest rates for all categories may be fixed
or adjustable, and will more likely be fixed for shorter term loans. The bank
will generally charge an origination fee for each loan.
The principal economic risk associated with real estate loans is the
creditworthiness of the borrowers. Other risks associated with real estate
loans vary with many economic factors, including employment levels, strength of
local and national economy, and fluctuations in the value of real estate. We
will compete for these loans with competitors who are well established in the
Marlboro County area and have greater resources and lending limits. As a
result, we may have to charge lower interest rates to attract borrowers.
We will require a valid mortgage lien on all real property loans along
with a title lien policy which insures the validity and priority of the lien.
We will also require borrowers to obtain hazard insurance policies and flood
insurance if applicable.
We will have the ability to originate real estate loans for sale into
the secondary market. We may be able to limit our interest rate and credit risk
on these loans by locking the interest rate for each loan with the secondary
investor and receiving the investor's underwriting approval prior to
originating the loan.
Commercial Real Estate Loans. Commercial real estate loans will
generally have terms of five years or less, although payments may be structured
on a longer amortization basis. The primary risk associated with commercial
real estate loans include the general risk of the failure of each commercial
borrower, which will be different for each type of business and commercial
entity. We will evaluate each business on an individual basis and attempt to
determine its business risks and credit profile. We may or may not be
successful. We will 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%. We will also generally require that debtor cash flow exceed 120% of
monthly debt service obligations. We will typically review of the personal
financial statements of the principal owners of each borrower and require their
personal guarantees. Such reviews generally reveal secondary sources of payment
and liquidity to support a loan request.
Construction and Development Real Estate Loans. We will offer
adjustable and fixed rate residential and commercial construction loans to
builders and developers and to consumers who wish to build their own homes. The
term of construction and development loans will generally be limited to one
year, although payments may be structured on a longer amortization basis. These
loans are generally interim loans and are refinanced as general commercial real
estate loans upon completion of the project or paid off on the sale of the
property. Construction and development loans generally carry a higher degree of
risk than long term financing of existing properties. Repayment depends on the
ultimate completion of the project and usually on the sale of the property.
Risks include:
16
<PAGE> 17
- cost overruns,
- mismanaged construction,
- inferior or improper construction techniques,
- economic changes or downturns during construction,
- a downturn in the real estate market,
- rising interest rates which may prevent sale of the property,
and
- failure to sell completed projects in a timely manner.
We will attempt to reduce risk by obtaining personal guarantees where possible,
and by keeping the loan to value ratio of the completed project below specified
percentages. We may also reduce risk by selling participations in larger loans
to other institutions when possible.
Residential Real Estate Loans. Residential real estate loans will
generally have longer terms up to 30 years. We will offer fixed and adjustable
rate mortgages. Adjustable rate mortgages offer more protection against
interest rate fluctuation, but carry other risks because as interest rates
increase, the borrower's payments increase, increasing the risk of default.
Risks associated with residential real estate loans include:
- the inability to resell foreclosed real estate in a down
market or economy,
- shifts in the demographics of a given market from residential
zonings to commercial,
- displacement of individual borrowers due to corporate
downsizing or loss of income,
- loss of borrowers' jobs due to an overall economic downturn
or an economic downturn in a specific industry, and
- drops in the real estate market in general.
We will attempt to limit risk by requiring loan-to-value ratios of 80% or less
and co-signers when we believe it is necessary, and by generally assessing the
credit worthiness of each borrower on an individual basis.
Commercial Loans. We will make loans for commercial purposes in
various lines of businesses. Equipment loans will typically have a term of five
years or less at fixed or variable rates, be fully amortized over the term, be
secured by the financed equipment, and have a loan-to-value ratio of 80% or
less. Working capital loans will typically have terms of one year or less and
will usually be secured by accounts receivable, inventory, or personal
guarantees of the principals of the business. Loans secured by accounts
receivable or inventory will typically require repayment as the assets securing
the loan are converted into cash, and in other cases principal will typically
be due at maturity. The principal economic risk associated with each category
of anticipated loans, including commercial loans, is the creditworthiness of
the borrowers. The risks associated with commercial loans vary with many
economic factors, including the economy in the Marlboro County area. The risks
associated with commercial loans are generally higher than the risks associated
with residential or commercial real estate loans. The well-established banks in
the Marlboro County area will make proportionately more loans to medium- to
large-sized businesses than we will. Many of our anticipated commercial loans
will likely be 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 will make a variety of loans to individuals for
personal and household purposes, including secured and unsecured installment
and term loans, home equity loans and lines of credit, and revolving lines of
credit such as credit cards. These loans will typically carry balances of less
than $25,000 and, in the case of non-revolving loans, will either be amortized
over a period of 48 months or structured as 90-day term loans. In each case
loans will have a fixed interest rate. Revolving loans will typically bear
interest at a fixed rate and require monthly payments of interest and a portion
of the principal balance. The underwriting criteria for home equity loans and
lines of credit will generally be the same as for first mortgage loans, as
described above, and home equity lines of credit will typically expire ten
years or less after origination. 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 will be the
established banks in the Marlboro County area.
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<PAGE> 18
Loan Approval and Review. The bank's loan approval policies will
assign a different level of lending authority to each officer of the bank. Each
officer will have an individual lending limit. When the amount of aggregate
loans to a single borrower exceeds that individual officer's lending authority,
we will escalate the loan request for approval to an officer with a higher
lending limit. We anticipate that the lending limit of the chief executive
officer of First Capital Bank will initially be set at $100,000. We will
establish an officers' loan committee to consider loans which exceed the
lending authority of any individual officer, and a directors' loan committee to
consider loans which exceed the lending authority of the officers' committee.
The bank will not be allowed to make any loans to any of its directors,
officers, or employees unless the loan is approved by the bank's board of
directors and has terms no more favorable than terms available to a person who
is not affiliated with the bank.
Lending Limits. Federal law imposes a variety of lending limits on the
bank. The circumstances of a loan, including the type of loan, the nature of
the borrower, and the borrower's relationship to the bank determine the
particular lending limits which will be applicable to the loan. In general, the
bank will be subject to limits on the amount it can loan to any one borrower.
Since the enactment of the Financial Institution Reform Recovery and
Enforcement Act in 1989, a savings association generally may not make loans to
one borrower and related entities in an amount which exceeds 15% of its
unimpaired capital and surplus, although loans in an amount equal to an
additional 10% of unimpaired capital and surplus may be made to a borrower if
the loans are fully secured by readily marketable securities. Unless the bank
is able to sell participations in its loans to other financial institutions,
the bank will not be able to meet all of the lending needs of loan customers
requiring aggregate extensions of credit above these limits. We do not
anticipate that the bank will have an initial loan loss reserve when it
commences operations.
OTHER BANKING SERVICES
We anticipate that the bank will provide other bank services
including:
- cash management services,
- safe deposit boxes,
- travelers checks,
- direct deposit of payroll,
- social security checks, and
- automatic drafts for various accounts.
We plan to become associated with a shared network of automated teller
machines that our customers may use throughout Marlboro County and other
regions. We believe that an association with a shared ATM network will enable
us to better serve our customers and attract customers who are accustomed to
the convenience of ATMs. We do not believe that maintaining this association
will be critical to our success. We intend to begin offering these services
shortly after we open the bank. We also plan to offer MasterCard and VISA
credit card services through a correspondent bank as agent. We do not expect
the bank to exercise trust powers during its initial years of operation.
COMPETITION
The banking business is highly competitive. The bank will compete as a
financial intermediary with other commercial banks, savings and loan
associations, credit unions, and money market mutual funds operating in the
Marlboro County area and elsewhere. In 1997, there were more than seven
branches of financial institutions operating in Marlboro County, holding over
$154,163,000 in deposits. These include branches of Wachovia, First Citizens
Bank, Carolina First Bank, and Carolina Bank & Trust. A number of these
competitors are well established in the Marlboro County area and throughout the
state. Most of them have substantially greater resources and lending limits and
offer certain services, such as extensive and established branch networks and
trust services, that we do not expect to provide or do not expect to provide
initially. As a result of these competitive factors, the bank may have to pay
higher rates of interest to attract deposits.
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<PAGE> 19
EMPLOYEES
We anticipate that, upon opening, the bank will have approximately 10
full-time employees in the modular unit. We estimate that we will increase the
number of employees to 14 once the bank moves into its permanent facilities.
First Capital Bancshares will not have any employees other than its officers.
LEGAL PROCEEDINGS
Neither First Capital Bancshares nor First Capital Bank or any of
their properties are subject to any material legal proceedings.
YEAR 2000 CONCERNS
Like many financial institutions, we will rely upon computers for the
daily conduct of our business and for information systems processing. There is
concern among industry experts that on January 1, 2000, computers will be
unable to "read" the new year and there may be widespread computer
malfunctions. We will be generally relying on software and hardware developed
by independent third parties for our information systems. We are a new company
and therefore, despite our reliance upon third parties for many of our
information systems, we believe that by following the procedures that are
outlined below, we have the ability to minimize our year 2000 risk.
We have entered into an agreement with Fiserv Solutions, Inc. to
provide our mission critical hardware and software and to perform all overnight
processing and reconciliation of our daily transaction data. Fiserv is a well
established company which provides similar systems and services to thousands of
financial institutions in the United States. Fiserv has completed testing the
system we will be using with generic data which has been artificially "aged" to
simulate all critical year 2000 related dates. We have reviewed these tests and
are satisfied that the system tested is similar to ours and that the Fiserv
system did not encounter any year 2000 problems. We therefore do not expect to
encounter any year 2000 issues in the Fiserv system. Our agreements with Fiserv
include warranties that their system is year 2000 compliant in all respects,
although the remedies available under such agreements are limited and
specifically exclude special, incidental, indirect, and consequential damages.
We will require all other vendors to provide similar test results and
warranties regarding year 2000 compliance. Because we have chosen our
information systems and software with the year 2000 in mind, we do not believe
we will have any significant expenses associated with that year 2000 separate
from the expense of choosing and acquiring these systems. We have hired our
accountants to assist us in assessing our year 2000 risks and worst case
scenario and to prepare a year 2000 contingency plan to address the possibility
that Fiserv or any of our other vendors encounter material problems related to
the year 2000. We will complete this analysis before May 30, 1999. We cannot
assure you that this plan will mitigate any losses we might have or resolve
year 2000 issues which may arise.
We may also incur losses if our loan customers encounter year 2000
problems which would prevent them from repaying loans. We intend to require
certification from our larger commercial borrowers that their systems are year
2000 compliant and that they do not expect to be adversely affected by the year
change. Although these certifications will be helpful, it would be very
difficult for us to accurately assess the year 2000 readiness of any borrower.
We may therefore suffer loan losses from customers who have significant year
2000 problems.
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<PAGE> 20
SUPERVISION AND REGULATION
First Capital Bancshares and First Capital Bank are subject to state
and federal banking laws and regulations which impose requirements and
restrictions on virtually all aspects of operations. These regulations also
provide for regulatory oversight of the bank and its operations. These laws and
regulations are generally intended to protect depositors, not shareholders. The
following summary briefly describes certain statutory and regulatory
provisions. These regulations are very complex and we refer you to the
particular statutory and regulatory provisions for a thorough understanding.
Changes in applicable laws or regulations may have a material effect on our
business and prospects. With the enactment of the Financial Institution Reform
Recovery and Enforcement Act in 1989 and the FDIC Improvement Act in 1991,
numerous additional regulatory requirements have been placed on the banking
industry in the past several years, and additional changes have been proposed.
The banking industry is also likely to change significantly as a result of the
passage of the Riegle-Neal Interstate Banking and Branching Efficiency Act of
1994. We cannot predict the nature or the extent of the effect on our business
and earnings of fiscal or monetary policies, economic controls, or new federal
or state legislation.
SUPERVISION OF FIRST CAPITAL BANCSHARES
We will be a registered holding company under the Savings and Loan
Holding Company Act set forth in Section 10 of the Home Owners Loan Act of
1933. We will be regulated under such acts by the Office of Thrift Supervision.
As a savings and loan holding company, First Capital Bancshares will be
required to file an annual report with the Office of Thrift Supervision and
such additional information as they may require from time to time. The Office
of Thrift Supervision will also conduct periodic examinations of First Capital
Bancshares and each of its subsidiaries, including First Capital Bank.
As a savings and loan holding company owning only one savings
institution, First Capital Bancshares will generally be allowed to engage and
invest in a broad range of business activities not permitted to commercial bank
holding companies or multiple savings and loans holding companies, provided
that First Capital Bank continues to qualify as a "qualified thrift lender."
See "Qualified Thrift Lender Requirements" on page 24.
The Savings and Loan Holding Company Act will prohibit First Capital
Bancshares from acquiring control of another savings association or another
savings and loan holding company without prior approval from the Office of
Thrift Supervision. However, savings and loan holding companies are allowed to
acquire or to retain as much as 5% of the voting shares of another savings
institution or savings and loan holding company without regulatory approval.
The Office of Thrift Supervision may not approve an acquisition that
would result in the formation of certain types of interstate holding company
networks. For instance, the Office of Thrift Supervision may not approve an
acquisition that would result in the formation of multiple holding companies
controlling institutions in more than one state unless each acquisition in each
additional state is authorized under Section 13(k) of the Federal Deposit
Insurance Act or by the statutes of each state in which the target institutions
are located.
SUPERVISION OF FIRST CAPITAL BANK
General. Subject to receipt of the necessary approvals of its pending
applications, First Capital Bank will operate as a federal savings bank
incorporated under the laws of the United States. It will be subject to
periodic examination by the Office of Thrift Supervision. The Office of Thrift
Supervision will regulate or monitor virtually all areas of First Capital
Bank's operations, including:
- security devices and procedures,
- adequacy of capitalization and loss reserves,
- loans,
- investments,
- borrowings,
- deposits,
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<PAGE> 21
- 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 Thrift Supervision will require First Capital Bank to
maintain certain capital ratios and will impose limitations on the bank's
aggregate investment in real estate, bank premises, and furniture and fixtures.
The Office of Thrift Supervision will require the bank to prepare quarterly
reports on its financial condition and to conduct an annual audit of its
financial affairs in compliance with their minimum standards and procedures.
Office of Thrift Supervision regulations generally provide that each federal
savings bank must be examined at least every 18 months. The bank is also
subject to assessments by the Office of Thrift Supervision to cover the costs
of such examinations.
As a federally-chartered savings institution, First Capital Bank
generally will not be subject to the provisions of South Carolina law governing
state chartered financial institutions or to the jurisdiction of the South
Carolina Board which governs banking.
Various state usury laws will apply to loans made by the bank,
generally depending on the state where each borrower is located. South Carolina
law establishes a ceiling of 6% on interest rates except in transactions
involving written agreements which may establish any interest rate.
As a subsidiary of a savings and loan holding company, First Capital
Bank will be subject to certain restrictions imposed by the Federal Reserve Act
on extensions of credit to First Capital Bancshares or any of its subsidiaries,
on investments in the stock or other securities of First Capital Bancshares,
and on taking any stock or securities of First Capital Bancshares as collateral
for any loan. In addition, First Capital Bancshares and First Capital Bank will
be prohibited from engaging in tying arrangements in connection with extensions
of credit or provision of any property or services.
Capital Requirements. Office of Thrift Supervision regulations will
require that First Capital Bank maintain:
"Tangible capital" in an amount of not less than 1.5% of total assets.
"Tangible capital" generally is defined as:
- core capital
- less intangible assets and investments in certain
subsidiaries
- excluding purchased mortgage-servicing rights.
"Core capital" in an amount not less than 3.0% of total assets. "Core capital"
generally includes:
- common stockholders' equity,
- noncumulative perpetual preferred stock and related surplus,
- minority interests in the equity accounts of consolidated
subsidiaries less unidentifiable intangible assets (other
than certain amounts of supervisory goodwill)
- certain investments in certain subsidiaries, and
- 90% of the fair market value of readily marketable purchased
mortgage-servicing rights and purchased credit card
relationships.
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<PAGE> 22
"Risk-based capital" equal to 8.0% of "risk-weighted assets." In determining
total risk-weighted assets for purposes of the risk-based requirement:
- each off-balance sheet asset must be converted to its
on-balance sheet credit equivalent amount by multiplying the
face amount of each such item by a credit conversion factor
ranging from 0% to 100% (depending upon the nature of the
asset);
- the credit equivalent amount of each off-balance sheet asset
and each on-balance sheet asset must be multiplied by a risk
factor ranging from 0% to 200% (again depending upon the
nature of the asset); and
- the resulting amounts are added together and constitute total
risk-weighted assets.
"Total capital" - risk-based capital requirement equals the sum of core capital
plus supplementary capital (which, as defined, includes the sum of, among other
items, perpetual preferred stock not counted as core capital, limited life
preferred stock, subordinated debt, and general loan and lease loss allowances
up to 1.25% of risk-weighted assets) less certain deductions. The amount of
supplementary capital that may be counted towards satisfaction of the total
capital requirement may not exceed 100% of core capital, and Office of Thrift
Supervision regulations require the maintenance of a minimum ratio of core
capital to total risk-weighted assets of 4%.
Office of Thrift Supervision regulations also includes an
interest-rate risk component in the risk-based capital requirement. Under this
regulation, an institution is considered to have excess interest rate-risk if,
based upon a 200-basis point change in market interest rates, the market value
of an institution's capital changes by more than 2%. The Office of Thrift
Supervision risk-based capital standards also provide for concentration of
credit risk, risk from nontraditional activities and actual performance, and
expected risk of loss on multi-family mortgages.
The Office of Thrift Supervision may impose capital requirements which
are higher than the generally applicable minimum requirement if it determines
that our capital is or may become inadequate.
Deposit Insurance. Deposits at First Capital Bank are insured by the
FDIC up to $100,000 for each insured depositor. The FDIC establishes rates for
the payment of premiums by federally insured commercial banks and savings
banks, or thrifts, for deposit insurance. The FDIC maintains a separate Bank
Insurance Fund for banks and Savings Association Insurance Fund for savings
banks and thrifts. Insurance premiums are charged to financial institutions in
each category and are used to offset losses from insurance payouts when banks
and thrifts fail. Since 1993, insured banks and thrifts have paid for deposit
insurance under a risk-based premium system, with higher risk institutions
paying higher premiums. Risk is determined by each institution's federal
regulator on a semi-annual basis and based on its capital reserves and other
factors. Until mid-1995 deposit institutions paid the Bank Insurance Fund or
Savings Association Insurance Fund from $0.23 to $0.31 per $100 of insured
deposits depending on its risk profile. Once the Bank Insurance Fund reached
its legally mandated reserve ratio in mid-1995, the FDIC lowered premiums for
well-capitalized banks, eventually to $.00 per $100, with a minimum semiannual
assessment of $1,000. Most recently, Congress enacted the Deposit Insurance
Funds Act of 1996, which eliminated even the minimum assessment. It also
separated the Financial Corporation (FICO) assessment to service the interest
on its bond obligations. The amount assessed on individual institutions by FICO
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 First Capital Bank's cost of
funds, and we cannot be sure that we can pass such cost on to our customers.
As an insurer, the FDIC issues regulations, conducts examinations and
generally supervises the operations of its insured institutions. The FDIC has
the power to sanction any insured institution which does not operate in
accordance with or conform to FDIC regulations, policies and directives. The
FDIC may suspend or terminate deposit insurance if it finds that an institution
has engaged in unsafe or unsound practices, is operating in an unsafe or
unsound condition, or has violated any applicable law, regulation, rule, order,
or condition imposed by the FDIC. The FDIC continues to insure deposits for two
years following termination. The FDIC requires an annual audit by independent
accountants and also periodically makes its own examinations of insured
institutions.
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<PAGE> 23
In addition to deposit insurance premiums, First Capital Bank as a
savings institution must bear a portion of the administrative costs of the
Office of Thrift Supervision through an assessment based on its total assets
and based on whether it is classified as a troubled or nontroubled savings
institutions. Additionally, the Office of Thrift Supervision assesses fees for
the processing of various applications.
Transactions With Affiliates and Insiders. The bank is subject to the
provisions of Section 23A of the Federal Reserve Act, which place limits on
transactions with officers, directors, large shareholders, subsidiaries and
other insiders on the amount of loans or credit to and investments in such
persons. They also limit the amount of advances to third parties collateralized
by the securities or obligations of such persons. The aggregate of all covered
transactions is limited in amount, as to any one affiliate, to 10% of a bank's
capital and surplus and, as to all affiliates combined, to 20% of a bank's
capital and surplus. Furthermore, within the foregoing limitations as to
amount, each covered transaction must meet specified collateral requirements.
We must also comply with certain provisions designed to prevent us from taking
low quality assets.
First Capital Bank will also be subject to the provisions of Section
23B of the Federal Reserve Act which, among other things, prohibits an
institution from engaging in transactions with affiliates unless the
transactions are on substantially the same terms, or at least as favorable to
such institution, as those prevailing at the time for comparable transactions
with non-affiliated companies. The bank is subject to certain restrictions on
extensions of credit to executive officers, directors, certain principal
shareholders, and their related interests. Such extensions of credit 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 must not involve more than the normal risk of repayment or present other
unfavorable features.
Dividends. The bank will be subject to regulatory restrictions on the
payment of dividends, including a prohibition on payment of dividends from its
capital. All dividends may only be paid out of the bank's currently available
profits less expenses, including losses and bad debts. The bank must notify the
Office of Thrift Supervision prior to the payment of any dividends. In
addition, under the FDIC Improvement Act, the bank may not pay a dividend if it
would cause the bank to become undercapitalized.
Branching. Because we will be a federal savings bank, we will not have
any regulatory restrictions on our ability to branch within or outside the
State of South Carolina, except that we must first obtain the approval of the
Office of Thrift Supervision.
Community Reinvestment Act. The Community Reinvestment Act requires
the Office of Thrift Supervision to evaluate our record of meeting the credit
needs of our local community, including low and moderate-income neighborhoods.
The Office of Thrift supervision must also consider these factors when it
evaluates mergers, acquisitions, and applications to open a branch or facility.
Failure to meet these standards could result in restrictions on our operations.
Liquidity. Under applicable federal regulations, we will be required
to maintain an average daily balance of liquid assets equal to the monthly
average of not less than a specified percentage of the average daily balance of
the savings association's net withdrawable deposits plus short-term borrowings.
Liquid assets include cash, certain time deposits, certain bankers'
acceptances, certain corporate debt securities and highly rated commercial
paper, securities of certain mutual funds and specified United States
government, state or federal agency obligations. Under HOLA, this liquidity
requirement may be changed from time to time by the Office of Thrift
Supervision to any amount from 4% to 10% depending upon economic conditions and
the deposit flows of member institutions. The current number is 5%. We will
also be required to maintain an average daily balance of short-term liquid
assets at a specified percentage (currently 1%) of the total of the average
daily balance of our net withdrawable deposits and short-term borrowings.
Equity Investments. The Office of Thrift Supervision has revised its
risk-based capital regulations to modify the treatment of certain equity
investments and to clarify the treatment of other equity investments. They will
no longer deduct permissible equity investments from our calculations of total
capital over a five-year period. Instead, permissible equity investments will
be placed in the 100% risk-weight category, mirroring the capital
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<PAGE> 24
treatment prescribed for those investments when made by national banks under
the regulations of the Office of the Comptroller of the Currency. Equity
investments held by savings associations that are not permissible for national
banks must still be deducted from assets and total capital.
Qualified Thrift Lender Requirement. We will qualify as a "qualified
thrift lender" as long as our "qualified thrift investments" equal or exceed
65% of our "portfolio assets" on a monthly average basis in 9 out of every 12
months. Qualified thrift investments generally consist of various housing
related loans and investments such as residential construction and mortgage
loans, home improvement loans, mobile home loans, home equity loans and
mortgage-backed securities, certain obligations of the FDIC, and shares of
stock issued by any Federal Home Loan Board, the FHLMC, or the FNMA. Qualified
thrift investments also include certain other specified investments, subject to
a percentage of portfolio assets limitation. For purposes of the qualified
thrift lender test, the term "portfolio assets" means the savings institution's
total assets minus goodwill and other intangible assets, the value of property
used by the savings institution to conduct its business, and liquid assets held
by the savings institution in an amount up to 20% of its total assets.
Office of Thrift Supervision regulations provide that any savings
association that fails to meet the definition of a qualified thrift lender must
either convert to a national bank charter or limit its future investments and
activities (including branching and payments of dividends) to those permitted
for both savings associations and national banks. Further, within one year of
the loss of qualified thrift lender status, a holding company of a savings
association that does not convert to a bank charter must register as a bank
holding company and will be subject to all statutes applicable to bank holding
companies. In order to exercise the powers granted to federally chartered
savings associations and maintain full access to Federal Home Loan Board
advances, First Capital Bank must meet the definition of a qualified thrift
lender.
Loans to One Borrower Limitations. The Home Owners Loan Act will
generally require that we comply with the limitations on loans to a single
borrower applicable to national banks. National banks generally may make loans
to a single borrower in amounts up to 15% of their unimpaired capital and
surplus, plus an additional 10% of capital and surplus for loans secured by
readily marketable collateral. The Home Owners Loan Act provides exceptions
under which a savings association may make loans to one borrower in excess of
the generally applicable national bank limits. A savings association may make
loans to one borrower in excess of such limits under one of the following
circumstances: for any purpose, in any amount less than $500,000; or to develop
domestic residential housing units, in an amount less than the lesser of $30
million or 30% of the savings association's unimpaired capital and unimpaired
surplus, provided other conditions are satisfied. We anticipate that First
Capital Bank's lending limit would initially be approximately $500,000.
Commercial Real Property Loans. The Home Owners Loan Act limits the
aggregate amount of commercial real estate loans that a federal savings
association may make to an amount not in excess of 400% of the savings
association's capital.
Elimination of Federal Savings Association Charter. In 1998, Congress
considered legislation that would eliminate the federal savings association
charter. Although such legislation did not pass, similar legislation may be
proposed again in 1999. If such legislation is enacted, First Capital Bank
would be required to convert its federal savings bank charter either to a
national bank charter or to a state depository institution charter. Such
conversion could prevent First Capital Bank from opening or operating any
branches in another state, including the branch planned for North Carolina. If
First Capital Bank opens a branch in North Carolina prior to such legislation,
it may or may not be allowed to continue to operate in North Carolina,
depending on the provisions of such legislation. Various legislative proposals
may also result in the restructuring of federal regulatory oversight,
including, for example, consolidation of the Office of Thrift Supervision into
another agency, or creation of a new Federal banking agency to replace the
various agencies which presently exist. We cannot predict whether such
legislation will be enacted or what the effect of such legislation might be.
Federal Home Loan Bank System. The Federal Home Loan Board System
consists of 12 regional Federal Home Loan Boards, each subject to supervision
and regulation by the Federal Housing Finance Board. The Federal Home Loan
Boards provide a central credit facility for member savings associations. The
maximum amount that the Federal Home Loan Board of Atlanta will advance
fluctuates from time to time in accordance
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<PAGE> 25
with changes in policies of the Federal Home Finance Board and the Federal Home
Loan Board of Atlanta. Borrowings from any other source will generally reduce
the maximum amount. In addition, the amount of Federal Home Loan Board advances
becomes restricted if an institution fails to qualify as a qualified lender.
Federal Reserve System. The Federal Reserve Board has adopted
regulations that require savings associations to maintain nonearning reserves
against their transaction accounts, primarily NOW and regular checking
accounts. These reserves may be used to satisfy liquidity requirements imposed
by the Office of Thrift Supervision. Because required reserves must be
maintained in the form of cash or a non-interest-bearing account at a Federal
Reserve Bank, this reserve requirement will reduce the amount of the bank's
interest-earning assets.
Savings institutions also have the authority to borrow from the
Federal Reserve "discount window." Federal Reserve Board regulations, however,
require savings associations to exhaust all Federal Home Loan Board sources
before borrowing from a Federal Reserve bank.
Other Regulations. Interest and certain other charges collected or
contracted for by First Capital Bank are subject to state usury laws and
certain federal laws concerning interest rates. The bank's loan operations are
also subject to certain federal laws applicable to credit transactions,
including the following:
- 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 will be 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 First Capital Bank are also 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.
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 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 have greater flexibility to
commence enforcement actions against institutions and institution-affiliated
parties. Possible enforcement actions include the termination of deposit
insurance. Furthermore, the Financial Institution Reform Recovery and
Enforcement Act expanded the appropriate banking agencies' power to issue
cease-and-desist orders that 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.
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The banking agencies may also order a financial institution to restrict its
growth, dispose of certain assets, rescind agreements or contracts, or take
other actions as such agency determines are appropriate.
RECENT LEGISLATIVE DEVELOPMENTS
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. We cannot predict whether any of these
proposals will be adopted or, if adopted, how these proposals would affect
First Capital Bancshares or First Capital Bank.
EFFECT OF GOVERNMENTAL MONETARY POLICIES
Our earnings will be affected by domestic economic conditions and the
monetary and fiscal policies of the United States government and its agencies.
The Federal Reserve Board's monetary policies have had, and will likely
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.
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MANAGEMENT
GENERAL
The following table shows the number and percentage of outstanding
shares of common stock beneficially owned as of the date of this prospectus by
the organizers of First Capital Bancshares. Beneficial ownership of common
stock is based upon "beneficial ownership" concepts set forth in rules of the
SEC under Section 13(d) of the Securities Exchange Act of 1934. Under these
rules a person is a "beneficial owner" of a security if that person has or
shares "voting power," which includes the power to vote or direct the voting of
each security, or "investment power," which includes the power to dispose of or
to direct the disposition of such security. A person is also a beneficial owner
of any security of which that person has the right to acquire beneficial
ownership within 60 days, including, without limitation, shares of common stock
subject to currently exercisable options. Under the rules, more than one person
may be deemed to be a beneficial owner of the same securities, and a person may
be deemed to be a beneficial owner of securities as to which he has no
beneficial interest. For instance, beneficial ownership includes spouses, minor
children, and other relatives residing in the same household, and trusts,
partnerships, corporations or deferred compensation plans which are affiliated
with the principal. This table also reflects the anticipated purchases by the
organizers in the offering. The organizers purchased shares prior to the
offering at a price of $10.00 per share, the same price at which shares are
being offered to the public.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED SHARES ANTICIPATED TO BE OWNED FOLLOWING
PRIOR TO THE OFFERING THE OFFERING
------------------------- ----------------------------------------
PERCENTAGE OF PERCENTAGE
MINIMUM OF MAXIMUM
NAME OF BENEFICIAL OWNER NUMBER PERCENTAGE NUMBER OFFERING OFFERING
- ------------------------ ------ ---------- ------ ------------- ----------
<S> <C> <C> <C> <C> <C>
Shoukath Ansari, M.D. 4,000 13.3% 12,500 2.36% 1.67%
Wylie F. Cartrette 4,000 13.3% 10,000 1.89% 1.33%
James Aubrey Crosland* 4,000 13.3% 10,000 1.89% 1.33%
Robert G. Dowdy 1,600 5.3% 10,000 1.89% 1.33%
Harry L. Howell, Jr. 4,200 14.0% 12,700 2.40% 1.69%
Luther D. Hutchins 4,000 13.3% 10,000 1.89% 1.33%
Paul F. Rush, M.D. 4,200 14.0% 10,000 1.89% 1.33%
Lee C. Shortt 4,000 13.3% 10,000 1.89% 1.33%
Total 30,000 100% 85,200 16.10% 11.34%
</TABLE>
* These numbers do not reflect options to be granted to Mr. Crosland under
the terms of his employment agreement to purchase up to 8,000 shares of
common stock.
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EXECUTIVE OFFICERS AND DIRECTORS OF FIRST CAPITAL BANCSHARES
Below we provide information about our officers and directors as of
the date of this prospectus. Our articles of incorporation provide for a
classified board of directors, so that, as nearly as possible, one-third of the
directors are elected each year to serve three-year terms. The terms of office
of the classes of directors expire as follows: Class I at the 1999 annual
meeting of shareholders, Class II at the 2000 annual meeting of shareholders,
and Class III at the 2001 annual meeting of shareholders. Executive officers of
First Capital Bancshares serve at the discretion of First Capital Bancshares's
board of directors.
<TABLE>
<CAPTION>
NAME AGE POSITION WITH FIRST CAPITAL BANCSHARES
- ---- --- --------------------------------------
<S> <C> <C>
Shoukath Ansari, M.D 50 Director, Class I
Wylie F. Cartrette 45 Director, Class II
James Aubrey Crosland, Sr 48 Director, Class III, President
Robert G. Dowdy 37 Director, Class I
John M. Digby 52 Chief Financial Officer
Harry L. Howell, Jr. 29 Director, Class II
Luther D. Hutchins 38 Director, Class III
J. Randy McDonald 51 Chief Executive Officer, First Capital Bank
Paul F. Rush, M.D. 43 Director, Class I
Lee C. Shortt 55 Director, Class II, Chief Executive Officer, First
Capital Bancshares
</TABLE>
Shoukath Ansari, M.D., Class I director, has been the president and a
physician of Marlboro Gastroenterology Association, P.A. in Bennettsville,
South Carolina since 1983. He served as chief of staff of Marlboro Park
Hospital. He graduated in 1964 from SRI Parama Kalyani College in Alwarkurichi,
Tamilnadu, India and earned an M.D. degree from Tirunelveli Medical College in
Tirunelveli, Tamilnadu, India in 1971. He is a certified internist and
gastroenterologist and has practiced gastroenterology for approximately 18
years, having opened his own practice in 1983. Dr. Ansari was born in 1948 in
India and has been a resident and citizen of the United States since 1981.
Wylie F. Cartrette, Class II director, is currently a resident in
McColl, South Carolina. Since 1986, he has been the owner and operator of Wylie
Enterprises in McColl, South Carolina, a laundry and coin operated machine
business, and he has also handled some real estate rentals. Mr. Cartrette is a
member of the masonic lodge of McColl. Mr. Cartrette holds a South Carolina
constable's commission, and is a former member of the McColl City Council. He
was born in 1953 in Laurinburg, North Carolina.
James Aubrey Crosland, Sr., Class III director, is the president of
First Capital Bancshares and will be the president of First Capital Bank. Mr.
Crosland, a native of Bennettsville, South Carolina, received a B.A. degree
from Pembroke State University in 1972. He is also a graduate of both the South
Carolina Bankers School at the University of South Carolina and Louisiana State
University's Graduate School of Banking. From May 1997 until he joined First
Capital Bancshares in June 1998, Mr. Crosland served as the financial manager
for Marlboro Constructors, Inc. From August 1993 through May 1997, he served as
the Pee Dee area executive for Carolina First Bank, where he was responsible
for Carolina First branches located in Bennettsville, McColl, and Lake City,
South Carolina. From 1988 until 1993, Mr. Crosland was the community banking
director of NationsBank in Florence, South Carolina, from 1984 until 1988, he
was the city executive of Carolina Bank & Trust in Bennettsville, and from 1977
to 1984 he served as an operations officer and commercial lender for First
National Bank of South Carolina in Bennettsville. Mr. Crosland began his
banking career with Wachovia Bank, serving as a credit manager in Wachovia's
Laurinburg, North Carolina office from 1973 to 1977. Mr. Crosland is a member
of Saint Paul's Episcopal Church in Bennettsville and the Bennettsville Rotary
Club. He was also the chairman of the Marlboro County Department of Social
Services and a board member of the Marlboro County Chamber of Commerce. Mr.
Crosland was born in 1950 in Bennettsville, South Carolina.
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<PAGE> 29
John M. Digby will serve as the chief financial officer for First
Capital Bancshares and First Capital Bank. He graduated from Georgia College in
Milledgeville, Georgia in 1970, and he received his certificates from the
Georgia Banker's School in 1984 and from the Georgia Banker's Commercial
Lending School in 1987. Mr. Digby has ten years of experience as a chief
financial officer from his employment with a community bank in Georgia. He also
served as the chief financial officer for Clemson Bank & Trust, a start-up de
novo bank, in Clemson, South Carolina, from 1995 to 1997. Mr. Digby recently
served as vice president for Community Capital Corporation in Greenwood, South
Carolina. Mr. Digby was born in 1946 in Hawkinsville, Georgia.
Robert G. Dowdy, Class I director, graduated with a pre-pharmacy
degree from Francis Marion University in 1982. He then graduated from the
Medical University of South Carolina with a B.S. in pharmacy in 1985. Mr. Dowdy
obtained his license as a registered pharmacist in 1985 from the South Carolina
Board of Pharmacy. He served as the director of pharmacy at Marlboro Park
Hospital from 1986 to December 1994 when he left to work as director of
pharmacy for Grim-Smith Hospital in Missouri from 1994 to April 1996. Mr. Dowdy
moved back to Marlboro Park Hospital in April 1996 and is currently director of
pharmacy. He was born in 1961 in Bennettsville, South Carolina.
Harry L. Howell, Jr., Class II director, graduated from Flora McDonald
Academy in North Carolina in 1987. He is majority owner and has served as
president of Scotland Motors, Inc. in Laurinburg, North Carolina since December
1984. Mr. Howell owns Scotland Leasing & Rental, Inc., an auto rental business
as well as Lee Howell, Inc., a real estate rental business in Laurinburg. Mr.
Howell is a member of the First Baptist Church in Laurinburg. He was born in
1969 in Laurinburg, North Carolina.
Luther D. Hutchins, Class III director, graduated from Bennettsville
High School in 1979 and attended Wake Forest University in North Carolina. Mr.
Hutchins has been the sole owner of Marlboro Appliance Center and Marlboro
Frame Shoppe. He also owns a farm and a farm implement services company. Mr.
Hutchins was born in 1960 in Winston-Salem, North Carolina.
J. Randy McDonald will be the chief executive officer of First Capital
Bank. Mr. McDonald has been in banking since 1979. He most recently served as
the loan and asset management officer of The Citizens Bank and as the city
executive of the Lake City, South Carolina office of Carolina First Bank. Mr.
McDonald has also served as the office manager of the Florence, South Carolina
office of Southern National Bank and the vice president and city executive of
the Lake City, South Carolina office of Security Federal Savings Bank. Mr.
McDonald was a director of the Lake City Tobacco Festival, the Lake City
Chamber, the Florence County Progress Committee, and Florence County Economic
Development. He was born in 1947 in Lake City, South Carolina.
Paul F. Rush, M.D., Class I director, graduated with a B.S. in Biology
from Presbyterian College in South Carolina in 1978. He received his M.D. from
the University of South Carolina School of Medicine in 1982 and received his
physician's license from the state of North Carolina in 1982 and from the State
of South Carolina in 1987. Dr. Rush has held the position of senior physician
at Scotland Orthopedic, P.A. in Laurinburg, South Carolina, since August 1987.
He has been a 25% owner of Scotland Orthopedic, P.A. since 1987, as well as
Scotland Orthopedic Properties since 1989. Dr. Rush served as an advisory board
member of BB&T in Laurinburg from 1989 to May 1998, is the chairman of the
Scotland County Board of Education, and serves on the board of trustees of
Scotland Memorial Hospital and the board of trustees of Scotia Village. Dr.
Rush is also a fellow of the American Academy of Orthopedic Surgeons and a
member of the First United Methodist Church in Laurinburg, North Carolina. Dr.
Rush was born in 1956 in Charleston, South Carolina.
Lee C. Shortt, Class II director, is the chairman and chief executive
officer of First Capital Bancshares. Mr. Shortt has been in the auction
business since 1975 and has served as president and owner of Shortt Auction and
Realty Co., Inc. since 1976. Mr. Shortt holds real estate brokers licenses and
auctioneer licenses in each of South Carolina, North Carolina, and Virginia. He
is a member of the Bennettsville Rotary Club. Mr. Shortt was born in 1943 in
Pitsylvania County, Virginia.
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<PAGE> 30
EMPLOYMENT AGREEMENTS
We have entered into employment agreements with Mr. McDonald, Mr.
Crosland, and Mr. Digby. Each is summarized below.
Employment Agreement with J. Aubrey Crosland. Mr. Crosland's
employment agreement has a three-year term, pursuant to which Mr. Crosland will
serve as the president of First Capital Bancshares and First Capital Bank. Mr.
Crosland will be paid a salary of $85,000, plus his yearly medical insurance
premium. Mr. Crosland will be eligible to participate in any management
incentive program of First Capital Bank or any long-term equity incentive
program and will be eligible for grants of stock options and other awards
thereunder. Upon the closing of the offering (or as soon thereafter as an
appropriate stock option plan is adopted by First Capital Bancshares), Mr.
Crosland will be granted an option to purchase 8,000 shares of common stock at
$10.00 per share. The options will vest over a six-year period and will have a
term of ten years. Additionally, Mr. Crosland will participate in First Capital
Bank's retirement, welfare and other benefit programs and is entitled to a life
insurance policy and an accident liability policy and reimbursement for
automobile expenses, club dues, and travel and business expenses. The agreement
also provides that following termination of his employment with First Capital
Bank and for a period of twelve months thereafter, Mr. Crosland may not compete
with First Capital Bancshares, the bank, or any of its affiliates by, directly
or indirectly, forming, serving as an organizer, director or officer of, or
consultant to, or acquiring or maintaining more than 1% passive investment in,
a depository financial institution or holding company thereof if such
depository institution or holding company has one or more offices or branches
in the territory, solicit major customers of First Capital Bank for the purpose
of providing financial services, or solicit employees of First Capital Bank for
employment. If Mr. Crosland's employment is terminated other than for cause,
First Capital Bancshares will be obligated to pay Mr. Crosland six months'
severance plus bonus earned through such date.
Employment Agreement with J. Randy McDonald. Mr. McDonald's employment
agreement provides that he will serve as the chief executive officer and chief
lending officer of First Capital Bank. He will be paid a consulting fee of
$4,000 per month by First Capital Bancshares until the bank opens. Thereafter
the bank will pay him an annual salary of $60,000 per year, plus a bonus to
gross up his salary prior to the opening of the bank as if he had been paid
$60,000 from the date of hire on January 4, 1999. Mr. McDonald will also
participate in any other benefit programs offered by the bank to its employees
in general, and will have an officer's liability insurance policy and two
week's vacation. The agreement also provides that following termination of his
employment with First Capital Bank and for a period of twelve months
thereafter, Mr. McDonald may not compete with First Capital Bancshares, the
bank, or any of its affiliates by, directly or indirectly, forming, serving as
an organizer, director or officer of, or consultant to, or acquiring or
maintaining more than 1% passive investment in, a depository financial
institution or holding company thereof if such depository institution or
holding company has one or more offices or branches in the territory, solicit
major customers of First Capital Bank for the purpose of providing financial
services, or solicit employees of First Capital Bank for employment.
Employment Agreement with John M. Digby. Mr. Digby's employment
agreement is essentially the same as Mr. McDonald's, except that his title is
chief financial officer of First Capital Bancshares and First Capital Bank.
DIRECTOR COMPENSATION
Initially, neither First Capital Bancshares nor First Capital Bank
will pay directors' fees. After the offering, First Capital Bancshares expects
to adopt a stock option plan which will permit First Capital Bancshares to
grant options to officers, directors, and employees of First Capital
Bancshares. We anticipate that the plan will initially authorize the issuance
of a number of shares equal to 15% of the shares outstanding after the
offering. The option plan will provide that the exercise price for an option
cannot be less than the common stock's fair market value on the date of grant.
30
<PAGE> 31
INTERESTS OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS
We expect that First Capital Bancshares and First Capital Bank will
have banking and other transactions in the ordinary course of business with
their organizers, directors, and officers, including members of their families
or corporations, partnerships, or other organizations in which such organizers,
officers, or directors have a controlling interest. We do not expect that such
transactions will involve more than the normal risk of collectibility nor
present other unfavorable features. Loans to individual directors and officers
must also comply with the bank's lending policies and statutory lending limits,
and directors with a personal interest in any loan application will be excluded
from the consideration of such loan application. Transactions with organizers
and other related parties will be on terms no less favorable than transactions
with unaffiliated third parties and will be approved by a majority of our
disinterested directors.
The bank's property was purchased through Shortt Auction and Realty.
Lee C. Shortt is the chief executive officer and the chairman of First Capital
Bancshares and the president and owner of Shortt Auction and Realty. Mr. Shortt
will receive a commission as the listing agent to be paid by the seller of the
property, and therefore removed himself from the vote in the selection of the
site. All of the other directors approved the purchase and its terms. The
purchase price for the site and building was less than the most recent tax
assessment for the property.
EXCULPATION AND INDEMNIFICATION
Our articles of incorporation contain a provision which, subject to
certain limited exceptions, limits the liability of a director to First Capital
Bancshares or its shareholders for any breach of duty as a director. There is
no limitation of liability for any of the following:
- a breach of duty involving appropriation of a business
opportunity of First Capital Bancshares;
- an act or omission which involves intentional misconduct
or a knowing violation of law;
- any transaction from which the director derives an improper
personal benefit; or
- as to any payments of a dividend or any other type of
distribution that is illegal under Section 33-8-330 of the
South Carolina Business Corporation Act of 1988.
If the laws governing officers and directors indemnification are amended to
authorize further elimination or limitation of the liability of directors, then
the liability of each director of First Capital Bancshares will be eliminated
or limited to the fullest extent permitted by such provisions. We will not seek
shareholder consent for such expanded obligations unless it is required. The
provisions do not limit the right of First Capital Bancshares or its
shareholders to seek injunctive or other equitable relief against officers and
directors not involving monetary payments.
Our bylaws contain certain provisions which provide indemnification to
directors of First Capital Bancshares that is broader than the protection
expressly mandated in Sections 33-8-510 and 33-8-520 of the South Carolina
Business Corporation Act. To the extent that a director or officer of First
Capital Bancshares has been successful, on the merits or otherwise, in the
defense of any action or proceeding brought against such person because he or
she is or was a director or officer of First Capital Bancshares, Sections
33-8-510 and 33-8-520 would require First Capital Bancshares to indemnify such
persons against expenses (including attorney's fees) actually and reasonably
incurred. The Corporation Act expressly allows First Capital Bancshares to
provide for greater indemnification rights to its officers and directors,
subject to shareholder approval.
The board of directors also has the authority to extend the same
indemnification rights held by directors to officers, employees, and agents,
subject to all of the accompanying conditions and obligations. The board of
directors intends to extend indemnification rights to all of its executive
officers.
The SEC has advised us that it believes that indemnification of
directors, officers, and controlling persons of First Capital Bancshares and
First Capital Bank for matters under the securities laws is against public
policy and may be unenforceable.
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<PAGE> 32
DESCRIPTION OF CAPITAL STOCK
GENERAL
The authorized capital stock of First Capital Bancshares consists of
10,000,000 shares of common stock, par value $.01 per share, and 10,000,000
shares of preferred stock, par value $.01 per share. The following summary
describes the material terms of First Capital Bancshares's capital stock.
Please refer to the articles of incorporation of First Capital Bancshares for a
detailed description of the provisions summarized below. The articles were
filed as an exhibit to the registration statement of which this prospectus is a
part.
COMMON STOCK
The board of directors may choose to pay dividends to the holders of
common stock. We do not plan to declare any dividends in the foreseeable
future. Holders of common stock are entitled to one vote per share on all
matters on which they are entitled to vote. Voting rights are not cumulative.
Shareholders have no preemptive, conversion, redemption or sinking fund rights.
In the event of a liquidation, dissolution or winding-up of First Capital
Bancshares, holders of common stock are entitled to share equally and ratably
in the assets of First Capital Bancshares, if any, remaining after the payment
of all debts and liabilities of First Capital Bancshares. If preferred stock is
outstanding at the time of liquidation, it may have preferential rights to
receive liquidation funds. The rights of the common stock holders will be
subject to such preferred rights. All shares of common stock currently
outstanding are and all shares issuable in this offering will be fully paid and
nonassessable. The rights, preferences and privileges of holders of common
stock are subject to any classes or series of preferred stock that First
Capital Bancshares may issue in the future.
Prior to this offering there has been no market for the common stock.
We intend that the common stock be quoted on the OTC Bulletin Board and have
applied for the trading symbol "FRST." However, we cannot be sure that a liquid
market will develop for the common stock, or that the holders of common stock
will be able to freely sell or trade their shares. The public offering price of
the shares offered hereby has been determined solely by negotiations between
First Capital Bank and Banc Stock Financial Services, Inc. and may bear no
relationship to the market price of the common stock after this offering. See
"The Offering - Plan of Distribution" on page 10.
PREFERRED STOCK
The articles provide that the board of directors is authorized,
without further action by the holders of the common stock, to issue any number
of shares of one or more classes or series of preferred stock, up to 10,000,000
shares. The director may fix the designations, powers, preferences, and
relative, participating, optional and other rights, qualifications,
limitations, and restrictions of such shares, including the dividend rate,
conversion rights, voting rights, redemption price, and liquidation preference.
Such preferred stock may be senior to the common stock with respect to the
payment of dividends or amounts upon liquidation, dissolution or winding-up, or
both. In addition, any such shares of preferred stock may have class or series
voting rights. Issuance of preferred stock, while providing First Capital
Bancshares with flexibility in connection with general corporate purposes, may,
among other things, have an adverse effect on the rights of holders of common
stock and in certain circumstances such issuances could have the effect of
decreasing the market price of the common stock. For example, preferred stock
with voting or conversion rights may adversely affect the voting power of the
holders of common stock. Upon completion of this offering, First Capital
Bancshares will not have any shares of preferred stock outstanding and we do
not have any plans to issue preferred stock. We will not issue preferred stock
to organizers on terms more favorable than terms offered to other shareholders.
ANTITAKEOVER EFFECTS
The provisions of First Capital Bancshares's articles, bylaws and
South Carolina law summarized in the following paragraphs may have antitakeover
effects. They may delay, defer, or prevent a tender offer or other attempt to
takeover or purchase First Capital Bancshares, even though you may believe that
such a takeover or
32
<PAGE> 33
purchase might be in your best interest, including those attempts that might
result in a premium over the market price for our stock. Such provisions may
also make removal of management more difficult.
Authorized but Unissued Stock. Authorized but unissued shares of
common stock and preferred stock are available for future issuance without
shareholder approval. These additional shares may be used for a variety of
corporate purposes, including future public offerings to raise additional
capital, corporate acquisitions, and employee benefit plans. The existence of
authorized but unissued and unreserved shares of common stock and preferred
stock may enable the board of directors to issue shares to persons friendly to
current management, which could make it more difficult or discourage any
attempt to obtain control of First Capital Bancshares by means of a proxy
contest, tender offer, merger or otherwise. This ability thereby acts to
entrench First Capital Bancshares's management.
Number of Directors. The bylaws provide that the number of directors
shall be fixed from time to time by a majority of the directors then in office.
The number of directors may not be fewer than five nor more than fifteen.
Individuals affiliated with competitors may not serve on our board of
directors.
Classified board of directors. The articles and bylaws divide the
board of directors into three classes of directors serving staggered three-year
terms. As a result, approximately one-third of the board of directors will be
elected at each annual meeting of shareholders. The classification of
directors, together with the provisions in the articles and bylaws described
below that limit the ability of shareholders to remove directors and that
permit the remaining directors to fill any vacancies on the board of directors,
will have the effect of making it more difficult for shareholders to change the
composition of the board of directors. As a result, at least two annual
meetings of shareholders may be required for the shareholders to change a
majority of the directors, whether or not a change in the board of directors
would be beneficial to First Capital Bancshares and its shareholders and
whether or not a majority of First Capital Bancshares's desire to make such a
change.
Removal of Directors and Filling Vacancies. The bylaws provide that
all vacancies on the board of directors, including those resulting from an
increase in the number of directors, may be filled by a majority of the
remaining directors, even if they do not constitute a quorum. When one or more
directors resign from the board of directors effective at a future date, a
majority of directors then in office, including the directors who are to
resign, may vote on filling the vacancy.
Advance Notice Requirements for Shareholder Proposals and Director
Nominations. The bylaws establish advance notice procedures for shareholders to
make proposals and to nominate candidates for directors. All notices of
shareholder proposals and shareholder nominations for the election of directors
at a shareholders meeting must be in writing and be received by each director
not later than twenty-four hours prior to the meeting when delivered personally
or by telecopy or at least two days prior thereto when delivered by mail. We
may reject a shareholder proposal or nomination that is not made in accordance
with such procedures.
Nomination Requirements. The bylaws establish requirements for
nominating directors. The nominating party must provide First Capital
Bancshares within a specified time prior to the meeting: (i) notice that such
party intends to nominate a proposed director; (ii) the name of and certain
biographical information about the nominee; and (iii) a statement that the
nominee has consented to the nomination. The chairman of any shareholders'
meeting may waive these provisions. These provisions could reduce the
likelihood that a third party would nominate and elect individuals to serve on
the board of directors.
SHARES ELIGIBLE FOR FUTURE SALE
The shares sold in this offering will be freely tradable, without
restriction or registration under the Securities Act, except for shares
purchased by "affiliates" of First Capital Bancshares. Shares held by
affiliates will be subject to resale restrictions under the Securities Act. An
affiliate of the issuer is defined in Rule 144 under the Securities Act as a
person that directly or indirectly, through one or more intermediaries,
controls, is controlled by, or is under common control with the issuer. Rule
405 under the Securities Act defines the term "control" to mean the possession,
direct or indirect, of the power to direct or cause the direction of the
management and policies of the person whether through the ownership of voting
securities, by contract or
33
<PAGE> 34
otherwise. Officers and directors of First Capital Bancshares and First Capital
Bank are affiliates under these rules.
Affiliates may sell securities without registration only in accordance
with Rule 144 or another exemption from registration. Rule 144 requires persons
holding restricted securities to hold the shares for at least one year prior to
sale. Thereafter, Rule 144 provides that an affiliate or other person holding
restricted shares may sell, within any three-month period, a number of shares
no greater than 1% of the then outstanding shares of the common stock or the
average weekly trading volume of the common stock during the four calendar
weeks preceding the sale, whichever is greater. Rule 144 also requires that the
securities be sold in "brokers' transactions," as defined in the Securities
Act, and that the person selling the securities may not solicit orders or make
any payment in connection with the offer or sale of securities to any person
other than the broker who executes the order to sell the securities. These
requirements may make it difficult for affiliates to sell their shares after
the offering if no trading market develops in the common stock.
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<PAGE> 35
LEGAL MATTERS
Nelson Mullins Riley & Scarborough, L.L.P., Atlanta, Georgia will pass
upon the validity of the common stock offered hereby. Igler & Dougherty, P.A.,
Tallahassee, Florida will pass upon certain legal matters in connection with
the offering by the sales agent.
EXPERTS
The financial statements of First Capital Bancshares dated December
31, 1998 and for the period from December 17, 1997 (inception) until December
31, 1998 have been audited by Tourville, Simpson & Henderson, L.L.P., as stated
in their report appearing elsewhere herein. These financial statements have
been included in reliance on the report of such firm given upon their authority
as an expert in accounting and auditing.
ADDITIONAL INFORMATION
We have filed a registration statement on Form SB-2 with the SEC under
the Securities Act of 1933 for the registration of the common stock offered
hereby. This prospectus forms a part of the registration statement and does not
contain all of the information set forth in the registration statement. For
further information with respect to First Capital Bancshares and the common
stock, you should refer to the registration statement and the exhibits thereto.
The registration statement may be examined at, and copies of the
registration statement may be obtained at prescribed rates from, the Public
Reference Section of the SEC, Room 1024, 450 Fifth Street, N.W., Washington,
D.C. 20549. The SEC also maintains a Web site at http://www.sec.gov that
contains reports, proxy and information statements and other information
regarding First Capital Bancshares and other registrants that file
electronically with the SEC.
We have filed applications with the Office of Thrift Supervision and
the Federal Deposit Insurance Corporation which may contain similar information
to that in this prospectus. Prospective investors should rely only on
information contained in this prospectus and in First Capital Bancshares'
related registration statement in making an investment decision. This
prospectus supersedes all other available information, including information
available from First Capital Bancshares and information in public files and
records maintained by the Office of Thrift Supervision and the Federal Deposit
Insurance Corporation. Projections appearing in our applications were estimates
based on assumptions that we believed to be reasonable at the time. We
specifically disaffirm those projections for purposes of this prospectus and
cautions prospective investors against placing reliance on them for making an
investment decision. Statements contained in this prospectus as to the contents
of any contract or other document referred to herein are not necessarily
complete. If such contract or document is an exhibit to the registration
statement, please refer to that document for a complete disclosure of its
contents.
As a result of this offering, First Capital Bancshares will become a
reporting company subject to the full informational requirements of the
Securities Exchange Act of 1934. We will fulfill our obligations with respect
to such requirements by filing periodic reports and other information with the
SEC. We will furnish our shareholders with annual reports containing audited
financial information for each fiscal year and will distribute quarterly
reports for the first three quarters of each fiscal year containing unaudited
summary financial information. Our fiscal year ends on December 31.
35
<PAGE> 36
FIRST CAPITAL BANCSHARES, INC.
(A Company in the Development Stage)
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Independent Accountants' Report F-2
Financial Statements:
Balance Sheet as of December 31, 1998 F-3
Statement of Operations and Accumulated Deficit For the Period
December 19, 1997 to December 31, 1998 F-4
Statement of Changes in Stockholders' Equity For the Period
December 19, 1997 to December 31, 1998 F-5
Statement of Cash Flows For the Period December 19, 1997
to December 31, 1998 F-6
Notes to Financial Statements F-7
</TABLE>
F-1
<PAGE> 37
INDEPENDENT ACCOUNTANTS' REPORT
To the Organizers
First Capital Bancshares, Inc.
We have audited the accompanying balance sheet of First Capital Bancshares,
Inc., (a Company in the development stage) as of December 31, 1998 and related
statements of operations and accumulated deficit, stockholders' equity and cash
flows for the period from inception December 19, 1997 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 audit.
We conducted our audit 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 audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of First Capital Bancshares,
Inc., (a Company in the development stage) as of December 31, 1998, and the
results of its operations and its cash flows for the period from inception
December 19, 1997 to December 31, 1998 in conformity with generally accepted
accounting principles.
/s/ Tourville, Simpson & Henderson, L.L.P.
Tourville, Simpson & Henderson, L.L.P.
Columbia, South Carolina
February 18, 1999
F-2
<PAGE> 38
FIRST CAPITAL BANCSHARES, INC.
(A Company in the Development Stage)
BALANCE SHEET
DECEMBER 31, 1998
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Cash $ 103,293
Option on real estate 15,000
Prepaid stock issuance costs 8,145
Other prepaid costs 19,072
----------
Total assets $ 145,510
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES -
Accounts payable $ 9,000
----------
STOCKHOLDERS' EQUITY--
Common stock, par value $.01 per share; 10,000,000 shares authorized;
30,000 shares issued and outstanding 300
Preferred stock - 10,000,000 shares authorized and unissued,
par value $.01 per share --
Paid-in-capital 299,700
Deficit accumulated in the development stage (163,490)
----------
Total stockholders' equity 136,510
----------
Total liabilities and stockholders' equity $ 145,510
==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE> 39
FIRST CAPITAL BANCSHARES, INC.
(A Company in the Development Stage)
STATEMENT OF OPERATIONS AND ACCUMULATED DEFICIT
FOR THE PERIOD DECEMBER 19, 1997 (INCEPTION) TO DECEMBER 31, 1998
<TABLE>
<S> <C>
Income $ -
----------
Expenses:
Management fees 65,500
Consultant fees 51,404
Professional fees 22,975
Other 23,611
----------
Total expenses 163,490
----------
Net loss and accumulated deficit $ (163,490)
==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE> 40
FIRST CAPITAL BANCSHARES, INC.
(A Company in the Development Stage)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE PERIOD DECEMBER 19, 1997 (INCEPTION) TO DECEMBER 31, 1998
<TABLE>
<CAPTION>
Deficit
Common Stock Accumulated In
----------------- Paid-In The Develop-
Shares Amount Capital ment Stage Total
------ ------ --------- -------------- ----------
<S> <C> <C> <C> <C> <C>
Issuance of common stock 30,000 $ 300 $ 299,700 $ $ 300,000
Net loss for the period
December 19, 1997
to December 31, 1998 (163,490) (163,490)
------ ------ --------- ---------- ----------
Balance, December 31, 1998 30,000 $ 300 $ 299,700 $ (163,490) $ 136,510
====== ====== ========= ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE> 41
FIRST CAPITAL BANCSHARES, INC.
(A Company in the Development Stage)
STATEMENT OF CASH FLOWS
FOR THE PERIOD DECEMBER 19, 1997 (INCEPTION) TO DECEMBER 31, 1998
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES--
Net loss and accumulated deficit $ (163,490)
Adjustments to reconcile net loss and accumulated deficit to
cash provided by operating activities -
Increase in accounts payable 9,000
----------
Cash used by operating activities (154,490)
----------
CASH FLOWS FROM INVESTING ACTIVITIES--
Option on real estate (15,000)
Other prepaid costs (19,072)
----------
Cash used by investing activities (34,072)
----------
CASH FLOWS FROM FINANCING ACTIVITIES--
Prepaid stock issuance costs (8,145)
Issuance of common stock 300,000
----------
Cash provided by financing activities 291,855
----------
CASH BALANCE AT END OF PERIOD $ 103,293
==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE> 42
FIRST CAPITAL BANCSHARES, INC.
(A Company in the Development Stage)
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - ORGANIZATION
First Capital Bancshares, Inc. was formed to organize and own all of the
capital stock of First Capital Bank. The organizers of First Capital Bancshares
filed an application with the Office of Thrift Supervision to charter First
Capital Bank as a savings bank. Provided the necessary capital is raised and
the necessary regulatory approvals are received, it is expected that operations
will commence in the second quarter of 1999.
First Capital Bancshares plans to raise a minimum of $5,000,000 by offering for
sale 500,000 shares of its common stock. The organizers, directors, and members
of their immediate families expect to purchase a total of 85,200 shares at an
aggregate purchase price of approximately $852,000.
Upon the completion of the sale of common stock and the opening of First
Capital Bank, incurred organization and pre-opening costs will be charged
against the initial period's operating results. It is estimated that First
Capital Bancshares will incur approximately $23,000 in organizational expenses,
and First Capital Bank will incur approximately $300,000 in organizational and
pre-opening expenses.
The expenses related to the stock offering will be deducted from the proceeds
of the offering. These expenses are estimated to be approximately $442,160,
consisting principally of commissions and other directly related expenses of
the stock offering.
NOTE 2 - LIQUIDITY
First Capital Bancshares incurred a net loss of $163,490 the period from
December 19, 1997 to December 31, 1998. Activities since inception have
consisted of organizational activities necessary to obtain regulatory approvals
and to otherwise prepare to commence business as a financial institution.
At December 31, 1998, First Capital Bancshares had been primarily funded by the
$300,000 received from the issuance of 30,000 shares of its common stock to the
organizers.
Management believes that the level of expenditures is well within the financial
capabilities of the organizers and is adequate to meet existing obligations and
fund current operations, but commencement banking operations is dependent upon
the successful completion of the stock offering and receipt of regulatory
approval.
To provide for permanent funding, First Capital Bancshares is currently
anticipating offering for sale a minimum of 500,000 and a maximum of 720,000
shares of its common stock at a sales price of $10 per share. Costs related to
the organization and registration of First Capital Bancshares common stock will
be paid from the gross proceeds of the offering. Should subscriptions for the
minimum offering not be obtained, amounts paid by subscribers with their
subscriptions will be returned, net of expenses, and the offer will be
withdrawn.
F-7
<PAGE> 43
FIRST CAPITAL BANCSHARES, INC.
(A Company in the Development Stage)
NOTES TO FINANCIAL STATEMENTS
NOTE 3 - INCOME TAXES
As of December 31, 1998, First Capital Bancshares had a net operating loss
carryforward of $163,490.
There was no provision (benefit) for income taxes for the period from December
19, 1997 to December 31, 1998, since a 100% valuation reserve is being
maintained for the net operating loss carryforward.
NOTE 4 - EMPLOYMENT CONTRACT AND STOCK OPTIONS
First Capital Bancshares has entered into a three-year employment contract with
its President beginning June 4, 1998. The contract provides that the President
will receive an initial annual salary of $60,000, which shall be increased to
not less than $85,000 per annum on the date the First Capital Bank opens. This
contract may be extended for additional time periods by mutual agreement of the
President and First Capital Bancshares.
Upon completion of the sale of its common stock, First Capital Bancshares shall
grant to the President an option to purchase 8,000 shares of common stock. The
stock option agreement will provide that the option will have a ten-year term
and will vest over a six-year period provided that the President is still
employed by First Capital Bancshares on each anniversary and that certain
performance goals for each year are met.
Annually, the Board of Directors agrees to set performance goals for First
Capital Bancshares and may grant to the President a cash bonus at the end of
each fiscal year in which such performance goals are met. The amount of any
such bonus will be determined by the Board.
Beginning on the date First Capital Bank opens, First Capital Bank shall
provide the President with a leased automobile with a lease rate not to exceed
$400 per month.
NOTE 5 - OPTION ON REAL ESTATE
As of December 31, 1998, First Capital Bancshares had paid $15,000 for an
option to purchase real estate in Bennettsville, South Carolina for the purpose
of building its main banking office. The option provides for a purchase price
of $350,000 payable in cash and expires March 1, 1999.
F-8
<PAGE> 44
FIRST CAPITAL BANCSHARES, INC.
(A Company in the Development Stage)
NOTES TO FINANCIAL STATEMENTS
NOTE 6 - STOCKHOLDERS' EQUITY
COMMON STOCK - First Capital Bancshares has the authority to issue up to
10,000,000 shares of voting common stock, par value $.01 per share.
PREFERRED STOCK - First Capital Bancshares has the authority to issue up to
10,000,000 shares of preferred stock, par value $.01 per share. Also, First
Capital Bancshares has the right to establish and designate from time to time
any part or all of the shares by filing an amendment to First Capital
Bancshares's articles of incorporation, which is effective without shareholder
action, in such series and with such preferences, limitations, and relative
rights as may be determined by the Board of Directors. The number of authorized
shares of preferred stock may be increased or decreased by the affirmative vote
of the holders of the majority of the shares of common stock, without a vote of
the holders of the shares of preferred stock.
CUMULATIVE VOTING RIGHTS - First Capital Bancshares has elected not to have
cumulative voting, and no shares issued by First Capital Bancshares may be
cumulatively voted.
PREEMPTIVE RIGHTS - The stockholders of First Capital Bancshares shall not have
any preemptive rights regarding any issuance of First Capital Bancshares's
capital stock.
NOTE 7 - DATA PROCESSING
As of December 31, 1998 First Capital Bancshares has entered into an agreement
with Fiserv Solutions, Inc. ("Fiserv") to electronically process First Capital
Bancshares's daily transactions. Upon receiving regulatory approval to open
First Capital Bank, First Capital Bancshares will have to pay Fiserv
approximately $226,000 for computer hardware and software.
Like many financial institutions, First Capital Bancshares will rely upon
computers for the daily conduct of its business and for information processing.
There is concern among industry experts that on January 1, 2000 computers will
be unable to "read" the new year and there may be widespread computer
malfunctions. Generally, First Capital Bancshares will be relying on software
and hardware developed by independent third parties for its information
systems.
The agreement with Fiserv includes a warranty that its system is year 2000
compliant in all respects. While management believes that the information
systems they agreed to acquire and the network connections that will be
maintained will comply with the year 2000 requirements, there is a risk that
they will not comply as they have been developed by others.
F-9
<PAGE> 45
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Summary ...................................................3
Note Regarding Forward Looking Statements..................5
Risk Factors...............................................6
The Offering...............................................9
Market for Common Stock...................................11
Use of Proceeds ..........................................12
Capitalization............................................13
Dividend Policy ..........................................13
Proposed Business and Plan of Operation...................14
Supervision and Regulation................................20
Management................................................27
Description of Capital Stock..............................32
Legal Matters.............................................35
Experts...................................................35
Additional Information ...................................35
Index to Financial Statements ...........................F-1
</TABLE>
720,000 SHARES
Common Stock
FIRST CAPITAL BANCSHARES, INC.
A Holding Company For
[First Capital Bank logo here]
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT. WE
HAVE NOT AUTHORIZED ANYONE TO GIVE ANY INFORMATION THAT IS DIFFERENT. THIS
PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IS NOT SOLICITING AN
OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS ILLEGAL.
THE INFORMATION IN THIS PROSPECTUS IS COMPLETE AND ACCURATE AS OF THE DATE ON
THE COVER, BUT THE INFORMATION MAY CHANGE IN THE FUTURE.
UNTIL JUNE 28, 1999, ALL DEALERS THAT EFFECT TRANSACTIONS IN THESE
SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO
DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE DEALER'S OBLIGATION TO DELIVER
A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
[architect's rendering of the plans for First Capital Bank's main office in
Bennettsville, S.C. here]
[Banc Stock Financial Services, Inc. logo here]
