U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(MARK ONE) FORM 10-QSB
X QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
----- OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period ended June 30, 2000
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
------ THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the Transition Period from _________to_________
Commission File No. 333-69555
FIRST CAPITAL BANCSHARES, INC.
(Exact name of registrant as specified in its charter)
United States 57-1070990
(State or other jurisdiction (I.R.S. Employer
of incorporation) Identification No.)
207 Highway 15/401 Bypass East
Bennettsville, SC 29512
(Address of principal executive
offices, including zip code)
(843) 454-9337
(Registrant's telephone number, including area code)
------------------------------------------------
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the date of this filing.
563,728 shares of common stock, $.01 par value
Page 1 of 20
EXHIBIT INDEX ON PAGE 2
<PAGE>
FIRST CAPITAL BANCSHARES, INC.
Index
<TABLE>
<CAPTION>
<S> <C>
PART I. FINANCIAL INFORMATION Page No.
-----------------------------
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets -- June 30, 2000 and December 31, 1999.....................................3
Condensed Consolidated Statements of Income -- Six months ended June 30, 2000
and 1999 and Three months ended June 30, 2000..................................................................4
Condensed Consolidated Statements of Shareholders' Equity and Comprehensive Income -
Six months ended June 30, 2000.................................................................................5
Condensed Consolidated Statements of Cash Flows -- Six months ended June 30, 2000 and 1999.......................6
Notes to Condensed Consolidated Financial Statements.............................................................7
Review by Independent Certified Public Accountants........................................................................8
Report on Review by Independent Certified Public Accountants..............................................................9
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations..............................................................................................10-15
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders..............................................................16
Item 5. Other Matters....................................................................................................16-17
Item 6. Exhibits and Reports on Form 8-K.................................................................................17-18
(a) Exhibits....................................................................................................17-18
(b) Reports on Form 8-K.........................................................................................17-18
</TABLE>
2
<PAGE>
FIRST CAPITAL BANCSHARES, INC.
Condensed Consolidated Balance Sheets
(Unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
-------- ------------
<S> <C> <C>
Assets
Cash and cash equivalents:
Cash and due from banks $ 509,230 $ 486,492
Federal funds sold & repurchase agreements 890,000 470,000
--------- ---------
Total cash and cash equivalents 1,399,230 956,492
--------- ---------
Securities available-for-sale 4,135,444 4,114,867
---------- ----------
Loans receivable 10,128,629 3,510,354
Less allowance for loan losses (135,754) (42,309)
---------- ----------
Loans, net 9,992,875 3,468,045
---------- ----------
Accrued interest receivable 123,934 59,866
Premises and equipment, net 815,632 797,776
Other assets 495,067 299,954
---------- ----------
Total assets 16,962,182 9,697,000
========== =========
Liabilities and Shareholders' Equity
Liabilities:
Deposits:
Non-interest-bearing 982,447 373,959
Interest-bearing 1,868,993 625,052
Savings 973,016 550,976
Time deposits $100,000 and over 3,083,534 1,582,191
Other time deposits 5,619,207 1,752,601
---------- ----------
12,527,197 4,884,779
Accrued interest payable 69,085 26,762
Federal funds purchased - 140,000
Other liabilities 11,575 9,111
---------- ----------
Total liabilities 12,607,857 5,060,652
---------- ----------
Shareholders' Equity
Preferred stock, $.01 par value; 10,000,000 shares authorized
and unissued - -
Common stock, $.01 par value; 10,000,000 shares authorized,
563,728 shares issued and outstanding 5,637 5,637
Capital surplus 5,110,551 5,110,551
Accumulated other comprehensive income (loss) (77,216) (15,661)
Retained earnings (deficit) (684,647) (464,179)
---------- ----------
Total shareholders' equity 4,354,325 4,636,348
---------- ----------
Total liabilities and shareholders' equity $16,962,182 $9,697,000
========== =========
</TABLE>
See notes to condended finanacial statements.
3
<PAGE>
FIRST CAPITAL BANCSHARES, INC.
Condensed Consolidated Statements of Income
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended June 30, Three Months Ended June 30,
-------------------------- ---------------------------
2000 1999 2000 1999
----------- --------- ----------- --------
<S> <C> <C> <C> <C>
Interest income
Loans, including fees $ 362,931 $ - $ 229,299 $ -
Investment securities, taxable 155,770 - 80,459 -
Federal funds sold 20,713 - 10,709 -
----------- --------- ----------- --------
Total 539,414 - 320,467 -
----------- --------- ----------- --------
Interest expense
Time deposits $100,000 and over 82,082 - 47,446 -
Other deposits 160,804 - 100,071 -
Federal funds purchased and securities sold
under agreements to repurchase 11,787 - 9,511 -
Other interest expense - 12,403 - 9,879
----------- --------- ----------- --------
Total 254,673 12,403 157,028 9,879
----------- --------- ----------- --------
Net interest income 284,741 (12,403) 163,439 (9,879)
Provision for loan losses 97,862 - 34,494 -
----------- --------- ----------- --------
Net interest income after provision
for loan losses 186,879 (12,403) 128,945 (9,879)
----------- --------- ----------- --------
Other operating income
Service charges on deposit accounts 15,545 - 9,916 -
Credit life insurance commissions 13,327 - 11,365 -
Other charges, commissions and fees 8,202 - 1,456 -
----------- --------- ----------- --------
Total 37,074 - 22,737 -
----------- --------- ----------- --------
Other operating expenses
Salaries and employee benefits 270,009 126,999 147,587 67,610
Net occupancy expense 28,324 11,793 13,296 1,616
Furniture and equipment expense 31,912 - 16,381 -
Other operating expenses 243,220 56,156 129,157 36,965
----------- --------- ----------- --------
Total 573,465 194,948 306,421 106,191
----------- --------- ----------- --------
Income (loss) before income taxes (349,512) (207,351) (154,739) (116,070)
Income tax expense (benefit) (129,044) - (55,581) -
----------- --------- ----------- --------
Net income (loss) $ (220,468) $ (207,351) $ (99,158) $ (116,070)
----------- --------- ----------- --------
Earnings (loss) per share
Average shares outstanding 563,728 563,728 563,728 563,728
Net income (loss) $ (0.39) $ (0.37) $ (0.18) $ (0.21)
</TABLE>
See notes to condensed financial statements.
4
<PAGE>
FIRST CAPITAL BANCSHARES, INC.
Condensed Consolidated Statement of Shareholders' Equity and Comprehensive
Income for the six months ended June 30, 2000
(Unaudited)
<TABLE>
<CAPTION>
Accumulated
Common Stock Retained Other
------------ Capital Earnings Comprehensive
Shares Amount Surplus (Deficit) Income Total
------ ------ ------- --------- ------------ ------
<S> <C> <C> <C> <C> <C> <C>
Balance,
December 31, 1999 563,728 $ 5,637 $ 5,110,551 $ (464,179) $ (15,661) $ 4,636,348
Net income (loss)
for the period (220,468) (220,468)
Other comprehensive
income, net of tax
benefit of $32,256 (61,555) (61,555)
Comprehensive income - - - - - (282,023)
------- ------- ----------- ----------- ---------- -----------
Balance,
June 30, 2000 563,728 $ 5,637 $ 5,110,551 $ (684,647) $ (77,216) $ 4,354,325
======= ======= =========== =========== ========== ===========
</TABLE>
See notes to condensed financial statements.
5
<PAGE>
FIRST CAPITAL BANCSHARES, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Six Months
Ended June 30,
-------------------------
2000 1999
-------------------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (220,468) $ (207,351)
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation and amortization 48,505 -
Provision for loan losses 97,862 -
Accretion and premium amortization (3,235) -
Increase in deferred taxes (123,707) -
Increase in interest receivable (64,068) -
Increase in interest payable 42,323 -
Increase in other assets (22,750) (54,561)
Increase in other liabilities 2,464 -
--------- ---------
Net cash used by operating activities (243,074) (261,912)
--------- ---------
Cash flows from investing activities:
Purchases of securities available-for-sale (400,000) -
Maturities of securities available-for-sale 288,847 -
Net increase in loans made to customers (6,622,692) -
Purchases of premises and equipment (66,361) (389,698)
Purchase of Federal Home Loan Bank stock (16,400) -
----------- ---------
Net cash used by investing activities (6,816,606) (389,698)
----------- ---------
Cash flows from financing activities:
Net increase in demand deposits, interest-bearing transaction
accounts and savings accounts 2,274,469 -
Net increase in certificates of deposit and other time deposits 5,367,949 -
Proceeds from notes payable - 585,000
Net decrease in federal funds purchased (140,000) -
-------- -------
Net cash provided by financing activities 7,502,418 585,000
--------- -------
Net increase (decrease) in cash and cash equivalents 442,738 (66,610)
Cash and cash equivalents, beginning 956,492 103,239
--------- --------
Cash and cash equivalents, ending $ 1,399,230 $ 36,629
=========== ==========
Cash paid during the period for:
Income taxes $ 2,925 $ -
Interest $ 212,350 $ 12,403
</TABLE>
See notes to condensed financial statements.
6
<PAGE>
FIRST CAPITAL BANCSHARES, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 1 - Basis of Presentation
The accompanying financial statements have been prepared in accordance with the
requirements for interim financial statements and, accordingly, they are
condensed and omit disclosures, which would substantially duplicate those
contained in the most recent annual report to shareholders. The financial
statements as of June 30, 2000 and for the interim periods ended June 30, 2000
and 1999 are unaudited and, in the opinion of management, include all
adjustments (consisting of normal recurring accruals) considered necessary for a
fair presentation. The financial information as of December 31, 1999 has been
derived from the audited financial statements as of that date. For further
information, refer to the financial statements and the notes included in First
Capital Bancshares, Inc.'s 1999 Annual Report.
Note 2 - Comprehensive Income
Comprehensive income includes net income and other comprehensive income, which
is defined as nonowner-related transactions in equity. The following table sets
forth the amounts of other comprehensive income included in equity along with
the related tax effect for the three and six month periods ended June 30, 2000:
<TABLE>
<CAPTION>
Pre-tax (Expense) Net-of-tax
Amount Benefit Amount
--------- ----------- ----------
<S> <C> <C> <C>
For the Six Months Ended June 30, 2000:
Unrealized gains (losses) on securities:
Unrealized holding gains (losses) arising
during the period $ (93,811) $ 32,256 $ (61,555)
Plus: reclassification adjustment for
gains (losses) realized in net income - - -
--------- ----------- ----------
Net unrealized gains (losses) on securities (93,811) 32,256 (61,555)
--------- ----------- ----------
Other comprehensive income $ (93,811) $ 32,256 $ (61,555)
========= =========== ==========
Pre-tax (Expense) Net-of-tax
Amount Benefit Amount
--------- ----------- ----------
For the Three Months Ended June 30, 2000:
Unrealized gains (losses) on securities:
Unrealized holding gains (losses) arising
during the period $ 5,691 $ (1,952) $ 3,739
Plus: reclassification adjustment for
gains (losses) realized in net income - - -
--------- ----------- ----------
Net unrealized gains (losses) on securities 5,691 (1,952) 3,739
--------- ----------- ----------
Other comprehensive income $ 5,691 $ (1,952) $ 3,739
========= =========== ==========
</TABLE>
Accumulated other comprehensive income consists solely of the unrealized gain on
securities available for sale, net of the deferred tax effects.
7
<PAGE>
FIRST CAPITAL BANCSHARES, INC.
Review by Independent Certified Public Accountants
Tourville, Simpson and Caskey, L.L.P., the Company's independent certified
public accountants, have made a limited review of the financial data as of June
30, 2000, and for the three and six month periods ended June 30, 2000 and 1999
presented in this document, in accordance with standards established by the
American Institute of Certified Public Accountants.
Their report furnished pursuant to Article 10 of Regulation S-X is included
herein.
8
<PAGE>
FIRST CAPITAL BANCSHARES, INC.
Report on Review by Independent Certified Public Accountants
The Board of Directors
First Capital Bancshares, Inc.
Bennettsville, South Carolina
We have reviewed the accompanying condensed consolidated balance sheet of First
Capital Bancshares, Inc. and subsidiary (the Company) as of June 30, 2000, the
related condensed consolidated statements of income for the three and six month
periods ended June 30, 2000 and 1999, the related condensed consolidated
statement of changes in shareholders' equity and comprehensive income for the
six month period ended June 30, 2000, and the related condensed consolidated
statements of cash flows for the six month periods ended June 30, 2000 and 1999.
These financial statements are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the condensed consolidated financial statements referred to above for
them to be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet as of December 31, 1999, and the
related consolidated statements of income, changes in shareholders' equity and
comprehensive income, and cash flows for the year then ended (not presented
herein); and, in our report dated February 18, 2000, we expressed an unqualified
opinion on those consolidated financial statements. In our opinion, the
information set forth in the accompanying condensed consolidated balance sheet
as of December 31, 1999, is fairly stated, in all material respects, in relation
to the consolidated balance sheet from which it has been derived.
TOURVILLE, SIMPSON AND CASKEY, L.L.P.
Columbia, South Carolina
August 2, 2000
9
<PAGE>
FIRST CAPITAL BANCSHARES, INC.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following is a discussion of the Company's financial condition as of June
30, 2000 compared to December 31, 1999, and the results of operations for the
three and six months ended June 30, 2000 compared to the three and six months
ended June 30, 1999. It should be understood that the discussion is based on the
Bank's opening for business on September 27, 1999. All amounts prior to
September 27, 1999 related to the organizational costs necessary to open the
Bank. These comments should be read in conjunction with the Company's condensed
financial statements and accompanying footnotes appearing in this report. This
report contains "forward-looking statements" relating to, without limitation,
future economic performance, plans and objectives of management for future
operations, and projections of revenues and other financial items that are based
on the beliefs of the Company's management, as well as assumptions made by and
information currently available to the Company's management. The words "expect,"
"estimate," "anticipate," and "believe," as well as similar expressions, are
intended to identify forward-looking statements. The Company's actual results
may differ materially from the results discussed in the forward-looking
statements, and the Company's operating performance each quarter is subject to
various risks and uncertainties that are discussed in detail in the Company's
filings with the Securities and Exchange Commission.
Results of Operations
Net Interest Income
For the six months ended June 30, 2000, net interest income totaled $284,741.
Total interest income for the six months ended June 30, 2000 was $539,414. This
income was partially offset by interest expense of $254,673. The net interest
margin realized on earning assets was 4.64% for the six months ended June 30,
2000 and the interest rate spread was 2.97% for the six months ended June 30,
2000. The only interest incurred in the six months ended June 30, 1999 was
$12,403, which related to the line of credit obtained to finance organizational
costs.
Net interest income for the quarter ended June 30, 2000 was $163,439. Total
interest income for the quarter ended June 30, 2000 was $320,467. This income
was partially offset by interest expense of $157,028.
Provision and Allowance for Loan Losses
The provision for loan losses is the charge to operating earnings that
management believes is necessary to maintain the allowance for possible loan
losses at an adequate level. For the six months ended June 30, 2000, the
provision charged to expense was $97,862. The provision charged to expense was
$34,494 for the quarter ended June 30, 2000. This is a result of management's
efforts to increase the allowance for loan losses to match the growth in the
loan portfolio. There are risks inherent in making all loans, including risks
with respect to the period of time over which loans may be repaid, risks
resulting from changes in economic and industry conditions, risks inherent in
dealing with individual borrowers, and, in the case of a collateralized loan,
risks resulting from uncertainties about the future value of the collateral. The
Bank maintains an allowance for loan losses based on, among other things,
historical experience, an evaluation of economic conditions, and regular reviews
of delinquencies and loan portfolio quality. Management's judgment about the
adequacy of the allowance is based upon a number of assumptions about future
events, which it believes to be reasonable, but which may not prove to be
accurate. Thus, there is a risk that charge-offs in future periods could exceed
the allowance for loan losses or that substantial additional increases in the
allowance for loan losses could be required. Additions to the allowance for loan
losses would result in a decrease of the Bank's net income and, possibly, its
capital.
10
<PAGE>
FIRST CAPITAL BANCSHARES, INC.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations - continued
Noninterest Income
Noninterest income for the six months ended June 30, 2000 was $37,074. The
primary source of this income was from service charges on deposit accounts,
which totaled $15,545 for the six months ended June 30, 2000. Commissions on
credit life insurance totaled $13,327 for the six months ended June 30, 2000.
Noninterest income for the quarter ended June 30, 2000 totaled $22,737. For the
quarter ended June 30, 2000, credit life insurance commissions totaled $11,365.
Service charges on deposit accounts totaled $9,916 for the quarter ended June
30, 2000.
Noninterest Expense
Total noninterest expense for the six months ended June 30, 2000 was $573,465.
The primary component of noninterest expense was salaries and employee benefits,
which totaled $270,009 for the six months ended June 30, 2000. In addition,
other operating expenses totaled $243,220 for the six months ended June 30,
2000. The Company incurred noninterest expense of $194,948 for the six months
ended June 30, 1999, all of which related to organizational costs to form and
open the Bank.
Noninterest expense for the quarter ended June 30, 2000 totaled $306,421. This
was composed primarily of salaries and employee benefits which totaled $147,587
for the quarter ended June 30, 2000. In addition, other operating expenses
totaled $129,157 for the quarter ended June 30, 2000. Noninterest expense for
the quarter ended June 30, 1999 totaled $106,191, all of which related to
organizational costs to form the Bank.
Income Taxes
The income tax benefit for six months ended June 30, 2000 was $129,044 and was a
result of the Company's net operating loss. The benefit was based on an
effective tax rate of 37% at June 30, 2000.
The income tax benefit for the quarter ended June 30, 2000 was $55,581, which
represents an effective tax rate of 36%.
Net Income (Loss)
The combination of the above factors resulted in a net loss for the six months
ended June 30, 2000 of $220,468. This loss is based on the Bank being open for
business only nine full months through June 30, 2000. The Company incurred a net
loss of $207,351 for the six months ended June 30, 1999. This loss was
attributable to expenses associated with forming the Bank.
Assets and Liabilities
During the first six months of 2000, total assets increased $7,265,182, or
74.92% when compared to December 31, 1999. The primary source of growth in
assets was gross loans, which increased $6,618,275 during the first six months
of 2000. Total deposits increased $7,642,418, or 156.45%, from the December 31,
1999 amount of $4,884,779. Within the deposit area, time deposits $100,000 and
over increased $1,501,343 or 94.89%. Other time deposits also increased
$3,866,606, or 220.62%, during the first six months of 2000.
Investment Securities
Investment securities increased from $4,114,867 at December 31, 1999 to
$4,135,444 at June 30, 2000. All of the Company's investment securities were
designated as available-for-sale at June 30, 2000.
11
<PAGE>
FIRST CAPITAL BANCSHARES, INC.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations - continued
Loans
The Company experienced significant growth during the first six months of 2000,
especially in the loan area. Net loans increased $6,524,830, or 188.14%, during
the period. As shown below, the main component of growth in the loan portfolio
was real estate - mortgage loans, which increased 178.55%, or $3,175,107, from
December 31, 1999. Also, consumer and other loans increased $1,768,671, or
162.96%. Balances within the major loans receivable categories as of June 30,
2000 and December 31, 1999 are as follows:
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
------------ ------------
<S> <C> <C>
Real estate - construction $ 634,801 $ 65,000
Real estate - mortgage 4,953,357 1,778,250
Commercial and industrial 1,686,454 581,758
Consumer and other 2,854,017 1,085,346
------------ ------------
$ 10,128,629 $ 3,510,354
============ ============
Risk Elements in the Loan Portfolio
The following is a summary of risk elements in the loan portfolio:
June 30, 2000
-------------
Loans: Nonaccrual loans $ -
Accruing loans more than 90 days past due $ -
Loans identified by the internal review mechanism:
Criticized $ 374,664
Classified $ -
Activity in the Allowance for Loan Losses is as follows:
June 30, 2000
-------------
Balance, January 1, $ 42,309
Provision for loan losses for the period 97,862
Net loans (charged-off) recovered for the period (4,417)
-------------
Balance, end of period $ 135,754
=============
Gross loans outstanding, end of period $10,128,629
Allowance for loan losses to loans outstanding 1.34%
</TABLE>
12
<PAGE>
FIRST CAPITAL BANCSHARES, INC.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations - continued
Deposits
At June 30, 2000, total deposits increased by $7,642,418 or 156.45%, from
December 31, 1999. The largest increase was in other time deposits, which
increased $3,866,606, or 220.62%, from December 31, 1999 to June 30, 2000.
Expressed in percentages, noninterest-bearing deposits increased 162.72% and
interest-bearing deposits increased 155.93%.
Balances within the major deposit categories as of June 30, 2000 and December
31, 1999 are as follows:
June 30, December 31,
2000 1999
----------- -----------
Noninterest-bearing demand deposits $ 982,447 $ 373,959
Interest-bearing demand deposits 1,868,993 625,052
Savings deposits 973,016 550,976
Time deposits $100,000 and over 3,083,534 1,582,191
Other time deposits 5,619,207 1,752,601
----------- -----------
$12,527,197 $ 4,884,779
=========== ===========
Liquidity
Liquidity needs are met by the Company through scheduled maturities of loans and
investments on the asset side and through pricing policies on the liability side
for interest-bearing deposit accounts. The level of liquidity is measured by the
loan-to-total borrowed funds ratio, which was at 80.85% at June 30, 2000 and
69.9% at December 31, 1999.
Securities available-for-sale, which totaled $4,135,444 at June 30, 2000, serve
as a ready source of liquidity. The Bank also has lines of credit available with
correspondent banks to purchase federal funds for periods from one to seven
days. At June 30, 2000, unused lines of credit totaled $723,687.
Capital Resources
Total shareholders' equity decreased from $4,636,348 at December 31, 1999 to
$4,354,325 at June 30, 2000. The decrease is due to the net loss for the period
of $220,468 and a negative change of $61,555 in the fair value of securities
available-for-sale.
Thrift holding companies, such as the Company, and their banking subsidiaries
are required by banking regulators to meet certain minimum levels of capital
adequacy, which are expressed in the form of certain ratios. Capital is
separated into Tier 1 capital (essentially common shareholders' equity less
intangible assets) and Tier 2 capital (essentially the allowance for loan losses
limited to 1.25% of risk-weighted assets). The first two ratios, which are based
on the degree of credit risk in the Company's assets, provide the weighting of
assets based on assigned risk factors and include off-balance sheet items such
as loan commitments and stand-by letters of credit. The ratio of Tier 1 capital
to risk-weighted assets must be at least 4.0% and the ratio of total capital
(Tier 1 capital plus Tier 2 capital) to risk-weighted assets must be at least
8.0%. The capital leverage ratio supplements the risk-based capital guidelines.
The OTS has also established a 3.0% minimum leverage ratio requirement. The
leverage ratio is computed by dividing Tier 1 capital into average assets. For
all except the highest rated banks, the minimum leverage ratio should be 3.0%
plus an additional cushion of at least 1 to 2 percent, depending upon risk
profiles and other factors.
13
<PAGE>
FIRST CAPITAL BANCSHARES, INC.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations - continued
Capital Resources - continued
The following table summarizes the Company's risk-based capital at June 30,
2000:
Shareholders' equity $ 4,431,541
Less: intangibles -
-----------
Tier 1 capital 4,431,541
Plus: allowance for loan losses (1) 135,754
-----------
Total capital $ 4,567,295
===========
Risk-weighted assets $12,310,150
===========
Risk-based capital ratios
Tier 1 capital (to risk-weighted assets) 36.00%
Total capital (to risk-weighted assets) 37.10%
Tier 1 capital (to total assets) 26.13%
(1) limited to 1.25% of risk-weighted assets
Regulatory Matters
On November 4, 1999, the U.S. Senate and House of Representatives each passed
the Gramm-Leach-Bliley Act, previously known as the Financial Services
Modernization Act of 1999. The Act was signed into law by President Clinton on
November 12, 1999. Among other things, the Act repeals the restrictions on banks
affiliating with securities firms contained in sections 20 and 32 of the
Glass-Steagall Act. The Act also permits bank holding companies to engage in a
statutorily provided list of financial activities, including insurance and
securities underwriting and agency activities, merchant banking, and insurance
company portfolio investment activities. The Act also authorizes activities that
are "complementary" to financial activities.
The Act contains a number of provisions specifically applicable to federal
thrifts. For example, the Act repeals the Savings Association Insurance Fund
special reserve; modernizes the Federal Home Loan Bank System; provides
regulatory relief for community banks with satisfactory or outstanding Community
Reinvestment Act ratings in the form of less frequent compliance examinations;
and creates privacy provisions that address consumer needs without disrupting
necessary information sharing between community banks and their financial
services partners.
The Act also prohibits new unitary thrift holding companies from engaging in
nonfinancial activities or affiliating with nonfinancial entities. The
prohibition applies to a company that becomes a unitary thrift holding company
pursuant to an application filed with the OTS after May 4, 1999. However, a
grandfathered unitary thrift holding company, such as our Company, retains its
authority to engage in nonfinancial activities.
14
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FIRST CAPITAL BANCSHARES, INC.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations - continued
Regulatory Matters - continued
The Act is intended to grant to community banks certain powers as a matter of
right that larger institutions have accumulated on an ad hoc basis.
Nevertheless, the Act may have the result of increasing the amount of
competition that we face from larger institutions and other types of companies.
In fact, it is not possible to predict the full effect that the Act will have on
us. From time to time other changes are proposed to laws affecting the banking
industry, and these changes could have a material effect on our business and
prospects. We cannot predict the nature or the extent of the effect on our
business and earnings of fiscal or monetary policies, economic controls, or new
federal or state legislation.
From time to time, various bills are introduced in the United States Congress
with respect to the regulation of financial institutions. Certain of these
proposals, if adopted, could significantly change the regulation of banks and
the financial services industry. The Company cannot predict whether any of these
proposals will be adopted or, if adopted, how these proposals would affect the
Company.
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FIRST CAPITAL BANCSHARES, INC.
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
On April 25, 2000, the Company held its Annual Meeting of Shareholders for the
purpose of (a) approving the 2000 stock incentive plan and (b) electing three
class I directors to serve for three year terms.
The proposal for the 2000 stock incentive plan received the number of
affirmative votes of shareholders required for approval pursuant to the Bylaws
of the Company. Of the 563,728 outstanding shares of the Company, 216,099 shares
were voted for, 3,910 shares were voted against, and 100 abstained from voting
for the stock incentive plan. There were no withheld and no broker nonvotes. The
three nominees for director received the number of affirmative votes of
shareholders required for such nominee's election in accordance with the Bylaws
of the Company. Of the 563,728 outstanding shareholders of the Company
shareholders voted for the election of each director as follows: Shoukath
Ansari, M.D. received 220,099 votes for his election, 300 abstentions, and no
votes against, withheld, or broker nonvotes; Robert G. Dowdy received 220,099
votes for his election, 300 abstentions, no votes against, and no votes withheld
or broker nonvotes; Paul F. Rush, M.D. received 220,099 votes for his election,
300 abstentions, and no votes against, withheld or broker nonvotes.
Item 5. Other Information
On July 18, 2000, the Boards of Directors of the Bank and the Company voted to
terminate Mr. Crosland's employment with both the Bank and the Company. On July
26, 2000, Mr. Crosland, together with two other Board members, Mr. Lee Shortt
and Mr. Wylie Cartrette, sought and obtained an ex parte temporary restraining
order in state court to enjoin the Boards' actions, primarily on the basis that
Mr. Crosland had been excused from the meeting during the discussion about his
employment and was not present at the time of the votes. Pending a hearing on
this assertion, Mr. Crosland remained President of the Company and the Bank. On
August 2, 2000, the court heard Mr. Crosland's, Mr. Shortt's, and Mr.
Cartrette's motion for a preliminary injunction and the Company's motion to
vacate the temporary restraining order and to dismiss the lawsuit. The court
vacated the temporary restraining order and denied the plaintiffs' request for a
preliminary injunction. The court stated it would consider the Company's motion
to dismiss the lawsuit at a later date.
Although the court vacated its temporary restraining order, the Boards of
Directors of the Bank and the Company met again on August 8, 2000 to discuss the
decision to terminate Mr. Crosland and to decide whether to reaffirm the July 18
decision to terminate him or to set aside that decision. At this meeting, the
Boards of Directors of the Bank and the Company reaffirmed the decision to
terminate Mr. Crosland's employment.
In Mr. Crosland's employment agreement with the Company, Mr. Crosland agreed
that he would resign as a director upon the termination of his employment if the
Board requested that he do so. The employment agreement provides that the
resignation would be effective automatically upon the Board's request. At the
August 8 meeting, the Boards requested that Mr. Crosland resign as a director of
the Company and the Bank, and the Boards accepted Mr. Crosland's resignation as
set forth in the employment agreement. Nevertheless, through his attorney, Mr.
Crosland has indicated that he may challenge the enforceability of the provision
of his employment agreement that requires his resignation as a director upon his
termination as President.
Also at the August 8 meeting, the Boards of Directors of the Company and the
Bank appointed Charles O. ("Charlie") Rivers on an interim basis to serve as the
President and Chief Executive Officer of the Company and the Bank, pending final
approval from the OTS. The OTS has already granted its approval for the Bank to
hire Mr. Rivers on an interim basis. Charlie Rivers has over 30 years of banking
and investment experience. Most recently, he served as the Augusta, Georgia
market president for First Union National Bank where he was directly responsible
for 14 branch offices with 210 employees and over $1.5 billion in assets. Mr.
Rivers was also the President of McNair Investment Company, a diversified
agro-business company, in Laurinburg, North Carolina from 1982 until 1987.
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FIRST CAPITAL BANCSHARES, INC.
Item 5. Other Information - continued
Mr. Shortt had previously served as the chief executive officer of the Company
and Mr. Randy McDonald had served in this role at the Bank. Mr. McDonald will
remain with the Bank as its Chief Lending Officer. Mr. Shortt also resigned his
position as Chairman of the Board and has been replaced as Chairman by Paul F.
Rush, M.D., one of the founding board members of the Company.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
3.1. Articles of Incorporation and all amendments*
3.2. Bylaws*
4.1. See Exhibits 3.1 and 3.2 for provisions in First Capital
Bancshares's Articles of Incorporation and bylaws defining the
rights of holders of the common stock*
4.2. Form of certificate of common stock*
10.1. Revised and Restated Letter of Employment dated February 24,
1999, between First Capital Bancshares and J. Aubrey Crosland*
10.2. Letter of Employment dated November 2, 1998, between First
Capital Bancshares and John M. Digby*
10.3 Purchase Agreement dated April 20, 1998, between First Capital
Bancshares, as buyer, and James B. Connelly, as seller*
10.4 Form of escrow agreement among First Capital Bancshares, Banc
Stock Financial Services, Inc. and The Banker's Bank*
10.5 Sales Agency Agreement among First Capital Bancshares and Banc
Stock Financial Services, Inc.*
10.6 An agreement for software and account processing services
dated December 7, 1998 with Fiserv Solutions, Inc.*
10.7 Revised and Restated Letter of Employment dated February 24,
1999, between J. Randy McDonald and First Capital Bancshares*
10.8 Form of Stock Order Form*
10.9 1999 Stock Incentive Plan (previously filed as Exhibit 10.9 to
the Company's Form 10-KSB for the period ended December 31,
1999, SEC File No. 333-69555).
13.1 The Company's 1999 Annual Report (previously filed as Exhibit
13 to the Company's Form 10-KSB for the period ended December
31, 1999, SEC File No. 333-69555).
21.1 Subsidiaries of The Company (previously filed as Exhibit 21 to
the Company's Form 10-KSB for the period ended December 31,
1999, SEC File No. 333-69555).
27.1. Financial Data Schedule for the period ended June 30, 2000
(for electronic filing purposes)
----------------
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FIRST CAPITAL BANCSHARES, INC.
Item 6. Exhibits and Reports on Form 8-K - continued
*Incorporated by reference to our Registration Statement on Form SB-2, File No.
333-69555.
Reports on Form 8-K.
(b) Reports on Form 8-K - No reports on Form 8-K were filed during the quarter
ended June 30, 2000.
Items 1, 2, 3, and 5 are not applicable.
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FIRST CAPITAL BANCSHARES, INC.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FIRST CAPITAL BANCSHARES, INC.
Date: August 14, 2000 By: /s/ JOHN M. DIGBY
---------------------------------------------
John M. Digby
On behalf of the Company and as
Chief Financial Officer and
Principal Accounting Officer
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