<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
(MARK ONE)
[X] Annual Report under Section 13 or 15(d) of the Securities Exchange Act of
1934
For the fiscal year ended December 31, 1999
or
[ ] Transition Report under Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the transition period from ______ to______
Commission file no. 333-69555
FIRST CAPITAL BANCSHARES, INC.
----------------------------------------------
(Name of Small Business Issuer in Its Charter)
South Carolina 57-1070990
---------------------------- ------------------
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification No.)
207 Highway 15/401 Bypass East
Bennettsville, South Carolina 29512
- ---------------------------------------- ----------
(Address of Principal Executive Offices) (Zip Code)
(843) 454-9337
------------------------------------
Issuer's Telephone Number, Including Area Code
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for past 90 days. Yes [X] No [ ]
Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B in this form, and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [X]
The aggregate market value of the voting stock held by non-affiliates
of the registrant as of March 1, 2000, was $5,637,280. This calculation is based
upon a value of $10.00 per share, which was the average bid and asked price of
the common stock on the over-the-counter market on such date.
There were 563,728 shares of the Company's common stock issued and
outstanding as of the record date, March 24, 2000.
Transitional Small Business Disclosure Format. (Check one):
Yes [ ] No [X]
DOCUMENTS INCORPORATED BY REFERENCE
Company's 1999 Annual Report and Proxy Statement for the 2000 Annual
Shareholders Meeting.
<PAGE> 2
ITEM 1. DESCRIPTION OF BUSINESS
This Report contains statements which constitute forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933 and
the Securities Exchange Act of 1934. These statements are based on many
assumptions and estimates and are not guarantees of future performance. Our
actual results may differ materially from those projected in any forward-looking
statements, as they will depend on many factors about which we are unsure,
including many factors which are beyond our control. The words "may," "would,"
"could," "will," "expect," "anticipate," "believe," "intend," "plan," and
"estimate," as well as similar expressions, are meant to identify such
forward-looking statements. Potential risks and uncertainties include, but are
not limited to:
- - significant increases in competitive pressure in the banking and
financial services industries;
- - changes in the interest rate environment which could reduce anticipated
or actual margins;
- - changes in political conditions or the legislative or regulatory
environment;
- - general economic conditions, either nationally or regionally and
especially in primary service area, becoming less favorable than
expected resulting in, among other things, a deterioration in credit
quality;
- - changes occurring in business conditions and inflation;
- - changes in technology;
- - changes in monetary and tax policies;
- - changes in the securities markets; and
- - other risks and uncertainties detailed from time to time in our filings
with the Securities and Exchange Commission.
GENERAL
First Capital Bancshares, Inc. was incorporated as a South Carolina
corporation in June 1998 primarily to own and control all of the capital stock
of First Capital Bank. On October 29, 1999 we completed our initial public
offering of common stock at a price of $10.00 per share. We sold 563,728 shares
for a total of $5,637,280 in the offering. The net proceeds after deducting the
total offering expenses were $5,116,188.
The bank obtained a thrift charter from the Office of Thrift
Supervision and commenced operations on September 27, 1999. The bank engages in
a commercial banking business from its main office located at 207 Highway 15/401
Bypass East in the city of Bennettsville, South Carolina located in Marlboro
County, South Carolina. Deposits are insured by the FDIC. The bank chose a
thrift charter because this charter will allow the bank to operate in all fifty
states and to branch into any county in the state of South Carolina subject to
obtaining OTS approval. The thrift charter will also give us more flexibility to
pursue strategic opportunities to grow our customer base and to create
cross-selling opportunities to those same customers. 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.
We emphasize the local ownership and management and strong ties to the
community in order to capitalize on the demand for a new local bank. We offer
general commercial and consumer banking services with a focus on personalized
service and on building long-term customer relationships.
<PAGE> 3
MARKETING FOCUS
Most of the banks in the Marlboro County area are now 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 there is a void in the community banking
market in the Marlboro County area and that our bank can successfully fill this
void. As a result, we generally do not attempt to compete for the banking
relationships of large corporations, but instead concentrate our efforts on
small- to medium-sized businesses and on individuals. Our bank advertises to
emphasize our local ownership, community bank nature, and ability to provide
more personalized service than our competition. We believe that the area reacts
favorably to our emphasis on service to small businesses, individuals, and
professional concerns. However, no assurances in this respect can be given.
LOCATION AND SERVICE AREA
While not restricted by law, the bank expects initially to draw 75% of
its business from Marlboro County, South Carolina, and the surrounding areas.
Marlboro County, which will be our primary service area, is the 32nd largest
county in the state. The county's population had a slight drop in population
from 29,361 in 1990 to 29,173 in 1997, and per capita income in the county was
$11,326 as of 1997.
DEPOSITS
The bank offers 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. The transaction accounts and time certificates are
tailored to our principal market area at rates competitive to those offered in
the Marlboro County area. In addition, we offer certain retirement account
services, such as individual retirement accounts (IRAs). The bank solicits these
accounts from individuals, businesses, associations and organizations, and
governmental authorities.
LENDING ACTIVITIES
General. The bank emphasizes a range of lending services, including
real estate, commercial and consumer loans, to individuals and small-to
medium-sized businesses and professional concerns that are located in or conduct
a substantial portion of their business in our market area. The bank emphasizes
retail banking, home mortgages, real estate development, and consumer lending
needs. The bank is not permitted to make non-real estate commercial purpose
loans that exceed 20% of its assets or non-real estate consumer purpose loans
that exceed 35% of its assets. Outside of the inherent risk of the credit
worthiness of our borrowers, other risks associated with residential mortgage
loans would be the inability to move foreclosed real estate in a down market or
economy, shifts in the demographics of a given market from residential zonings
to commercial, individual customers who have been displaced due to corporate
downsizing/loss of income, and an overall economic downturn creating
unemployment due to lack of product demand.
Real Estate Loans. One of the primary components of the bank's loan
portfolio is loans secured by first or second mortgages on real estate. These
loans generally consist of commercial real estate loans, construction and
development loans, and residential real estate loans (home equity loans are
excluded as they are classified as consumer loans). Loan terms generally are
limited to five years or less, although payments may be structured on a longer
amortization basis. Interest rates may be fixed or adjustable, and will more
likely be fixed in the case of shorter term loans. The bank generally charges an
origination fee. Management attempts to reduce credit risk in the commercial
real estate portfolio by emphasizing loans on owner-occupied office and retail
buildings where the loan-to-value ratio, established by independent appraisals,
does not exceed 80%. In addition, the bank typically requires personal
guarantees of the principal owners of the collateral property, combined with a
review by the
2
<PAGE> 4
bank of the personal financial statements of the principal owners. The principal
economic risk associated with each category of anticipated loans, including real
estate loans, is the creditworthiness of our borrowers. The risks associated
with real estate loans vary with many economic factors, including employment
levels and fluctuations in the value of real estate.
Commercial Loans. The bank makes loans for commercial purposes in
various lines of businesses. Equipment loans are typically for a term of five
years or less at fixed or variable rates, with the loan fully amortized over the
term and secured by the financed equipment and with a loan-to-value ratio of 80%
or less. Working capital loans typically have terms not exceeding one year and
are usually secured by accounts receivable, inventory, or personal guarantees of
the principals of the business. For loans secured by accounts receivable or
inventory, principal is typically repaid as the assets securing the loan are
converted into cash, and in other cases principal is typically due at maturity.
The principal economic risk associated with each category of anticipated loans,
including commercial loans, is the creditworthiness of our borrowers. The risks
associated with commercial loans vary with many economic factors, including the
economy in the Marlboro County area. The well-established banks in the Marlboro
County area make proportionately more loans to medium- to large-sized businesses
than the bank. Many of our commercial loans are made to small- to medium-sized
businesses which may be less able to withstand competitive, economic, and
financial conditions than larger borrowers.
Consumer Loans. The bank makes 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 typically carry balances of less than $25,000
and, in the case of non-revolving loans, and are amortized over a period not to
exceed 48 months. Ninety-day term loans typically bear interest at a fixed rate.
The revolving loans 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 is generally the same as
applied by the bank when making a first mortgage loan, as described above, and
home equity lines of credit 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 are the established banks in the
Marlboro County area.
Loan Approval and Review. The bank's loan approval policies provide for
various levels of officer lending authority. When the amount of aggregate loans
to a single borrower exceeds that individual officer's lending authority, the
loan request is considered and approved by an officer with a higher lending
limit or the officers' loan committee. The bank has established an officers'
loan committee that has lending limits, and any loan in excess of this lending
limit is approved by the directors' loan committee. The bank does not make any
loans to any director, officer, or employee of the bank unless the loan is
approved by the board of directors of the bank and is made on terms not more
favorable to such person than would be available to a person not affiliated with
the bank.
Lending Limits. The bank's lending activities are subject to a variety
of lending limits imposed by federal law. While differing limits apply in
certain circumstances based on the type of loan or the nature of the borrower
(including the borrower's relationship to the bank), in general the bank is
subject to a loan-to-one-borrower limit. Since the enactment of FIRREA 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 is not able to meet all of the
lending needs of loan customers requiring aggregate extensions of credit above
these limits.
OTHER BANKING SERVICES
Other services our bank provides include cash management services, safe
deposit boxes, travelers checks, direct deposit of payroll and social security
checks, and automatic drafts for various accounts. The bank is
3
<PAGE> 5
associated with a shared network of automated teller machines that may be used
by our customers throughout Marlboro County and other regions. The bank also
offers MasterCard and VISA credit card services through a correspondent bank as
an agent for our bank.
COMPETITION
The banking business is highly competitive. The bank competes 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. As of June 30, 1999, there were eight
branches of five financial institutions operating in Marlboro County, holding
over $156 million 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 than
our bank and offer certain services, such as extensive and established branch
networks and trust services, that our bank either does not expect to provide or
does not yet provide. As a result of these competitive factors, our bank may
have to pay higher rates of interest to attract deposits.
EMPLOYEES
As of March 24, 2000, our bank had 11 full-time employees and no
part-time employees. The company does not have any employees other than its
officers.
SUPERVISION AND REGULATION
Thrift holding companies and federal savings banks are extensively
regulated under both federal and state law. The following is a brief summary of
banking statutes and rules and regulations that affect the company and the bank.
These laws and regulations are generally intended to protect depositors, not
shareholders. These regulations are very complex and we refer you to the
particular statutory and regulatory provisions for a thorough understanding.
GRAMM-LEACH-BLILEY ACT
On November 4, 1999, the U.S. Senate and House of Representatives each
passed the Gramm-Leach-Bliley Act, previously known as the Financial Services
Modernization Act of 1999. The Act was signed into law by President Clinton on
November 12, 1999. Among other things, the Act repeals the restrictions on banks
affiliating with securities firms contained in sections 20 and 32 of the
Glass-Steagall Act. The Act also permits bank holding companies to engage in a
statutorily provided list of financial activities, including insurance and
securities underwriting and agency activities, merchant banking, and insurance
company portfolio investment activities. The Act also authorizes activities that
are "complementary" to financial activities.
The Act 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 Office of Thrift Supervision
after May 4, 1999. However, a
4
<PAGE> 6
grandfathered unitary thrift holding company, such as the company, retains its
authority to engage in nonfinancial activities.
The Act is intended to grant to community banks certain powers as a
matter of right that larger institutions have accumulated on an ad hoc basis.
Nevertheless, the Act may have the result of increasing the amount of
competition that we face from larger institutions and other types of companies.
In fact, it is not possible to predict the full effect that the Act will have on
us. From time to time other changes are proposed to laws affecting the banking
industry, and these changes could have a material effect on our business and
prospects. We cannot predict the nature or the extent of the effect on our
business and earnings of fiscal or monetary policies, economic controls, or new
federal or state legislation.
THE COMPANY
First Capital Bancshares, Inc. is 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. The company is regulated under such acts by the Office
of Thrift Supervision. As a savings and loan holding company, First Capital
Bancshares is 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 also conducts 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 is generally 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.
The Savings and Loan Holding Company Act prohibits 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.
THE BANK
General. First Capital Bank operates as a federal savings bank
incorporated under the laws of the United States. It is subject to periodic
examination by the Office of Thrift Supervision. The Office of Thrift
Supervision regulates or monitors virtually all areas of First Capital Bank's
operations, including:
- security devices and procedures,
- adequacy of capitalization and loss reserves,
- loans,
- investments,
- borrowings,
- deposits,
- mergers,
- issuances of securities,
- payment of dividends,
- interest rates payable on deposits,
5
<PAGE> 7
- 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.
Capital Requirements. The Office of Thrift Supervision requires that
all savings institutions maintain an amount of capital in excess of certain
minimum levels and has implemented regulations imposing three different capital
tests. These regulations require that the 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, and
- excluding purchased mortgage-servicing rights.
"Core capital" in an amount not less than 3.0% of total assets. "Core
capital" generally includes:
- common shareholders' 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.
"Risk-based capital" equal to 8.0% of "risk-weighted assets."
"Risk-based capital" includes core capital plus supplementary capital, less
certain deductions. Supplementary capital includes preferred stock, subordinated
debt, and general loan and lease loss allowances up to 1.25% of risk-weighted
assets. The amount of supplementary capital included as risk-based capital
cannot exceed 100% of core capital. To determine total risk-weighted assets:
- 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.
The risk-based capital standards also take into account interest rate
risk, concentration of credit risk, risk from nontraditional activities and
actual performance, and expected risk of loss on multi-family mortgages. In
addition, the regulations require an institution to maintain a minimum ratio of
core capital to total risk-weighted assets of 4%.
The Office of Thrift Supervision may impose capital requirements which
are higher than the generally applicable minimum requirements if it determines
that our capital is or may become inadequate.
In addition, the South Carolina Department of Banking and Finance
requires thrift holding companies to maintain a 5% Tier 1 capital ratio on a
consolidated basis. Tier I capital is substantially the same as core capital.
6
<PAGE> 8
Deposit Insurance. Deposits at the 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. Increases in deposit
insurance premiums or changes in risk classification would increase the bank's
cost of funds.
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, and may suspend or terminate the deposit insurance held
by, any insured institution which does not operate in accordance with or conform
to applicable laws and regulations. The FDIC may suspend or terminate deposit
insurance if it finds that an institution has engaged in unsafe or unsound
practices or is operating in an unsafe or unsound condition. The FDIC requires
an annual audit by independent accountants and also has the authority to examine
insured institutions itself.
Transactions With Affiliates and Insiders. The bank is subject to
restrictions on the amount of loans or credit to and investments it may make
with directors and other affiliates. The aggregate of all covered transactions
is limited in amount, as to any one affiliate, to 10% of the bank's capital and
surplus and, as to all affiliates combined, to 20% of the bank's capital and
surplus. Certain covered transactions must also meet specified collateral
requirements. We must also comply with certain provisions designed to prevent us
from taking low quality assets.
The bank may not engage in transactions with affiliates unless the
transactions are on substantially the same terms, or at least as favorable to
the bank, as those prevailing at the time for comparable transactions with
non-affiliated companies. Extensions of credit to affiliates 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 is 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. As a federal savings bank, the bank does not have any
regulatory restrictions on its ability to branch in any state, 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. Federal regulations require us to maintain an average daily
balance of liquid assets based on the amount of our deposits and 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. 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%. The Federal Reserve Board has
also adopted regulations that require savings associations to maintain
nonearning reserves against their transaction accounts, primarily NOW and
regular checking accounts. These
7
<PAGE> 9
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.
Qualified Thrift Lender Requirement. In order to exercise the powers
granted to federally chartered savings associations and maintain full access to
Federal Home Loan Board advances, the bank must meet the definition of a
"qualified thrift lender." The bank will qualify as a qualified thrift lender as
long as its "qualified thrift investments" equal or exceed 65% of its "portfolio
assets" on a monthly average basis in nine out of every 12 months. Qualified
thrift investments generally consist of small business loans, as well as 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.
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 under one of the following
circumstances: for any purpose, in any amount not to exceed $500,000; or to
develop domestic residential housing units, in an amount not to exceed the
lesser of $30 million or 30% of the savings association's unimpaired capital and
unimpaired surplus, provided other conditions are satisfied.
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 20% of the savings
association's total assets. Also, the amount in excess of 10% of total assets
must be devoted to small business real property loans.
Other Regulations. Interest and certain other charges collected or
contracted for by the 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
8
<PAGE> 10
- the rules and regulations of the various federal agencies
charged with the responsibility of implementing such federal
laws.
The deposit operations of the bank are also subject to certain federal
laws, including:
- 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;
- the Electronic Funds Transfer Act and Regulation E, 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; and
- the Truth-in-Savings Act and Regulation DD, which requires
disclosure and imposes certain interest rate disclosure
requirements in connection with consumer deposit accounts.
Effect of Governmental Monetary Policies. Our earnings are affected by
domestic economic conditions and the monetary and fiscal policies of the United
States government and its agencies. The Federal Reserve 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.
ITEM 2. DESCRIPTION OF PROPERTY
The principal place of business of both the company and the bank and
the main office of the bank is currently located in a modular bank unit at 207
Highway 15/401 Bypass East in Bennettsville, South Carolina, at the site of an
old Shoney's restaurant building. The property was purchased for $350,000 with a
loan from The Bankers Bank and is scheduled to be renovated for approximately
$475,000. The terms of the loan from The Bankers Bank was for one year and was
repaid with proceeds from the offering.
We are considering moving the existing modular banking unit
approximately six miles to McColl, South Carolina in the year 2001 to become the
first branch. We are also considering opening a branch in Laurinburg, North
Carolina in the near future. We believe that these facilities will adequately
serve our needs for the first several years of operation.
ITEM 3. LEGAL PROCEEDINGS.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matter was submitted to a vote of security holders during the fourth
quarter of the fiscal year covered by this report.
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
Since the completion of its initial public offering on October 29,
1999, our common stock has been quoted on the OTC Bulletin Board under the
symbol FCPB. Our articles of incorporation authorize us to issue up to
10,000,000 shares of common stock, of which 563,728 shares, for a total of
$5,637,280, were sold in the initial public offering and are outstanding as of
March 24, 2000. We have 480 shareholders of record. To date, we have
9
<PAGE> 11
not paid cash dividends on the common stock. We currently intend to retain
earnings to support operations and finance expansion and therefore do not
anticipate paying cash dividends in the foreseeable future.
The following table sets forth the high and low sales price information
as quoted on the OTC Bulletin Board during the period indicated since our common
stock began trading publicly in December 1999.
<TABLE>
<CAPTION>
STOCK PRICE
-----------
HIGH LOW
<S> <C> <C>
1999
Fourth Quarter $10.00 $10.00
</TABLE>
All outstanding shares of common stock of our company are entitled to
share equally in dividends that are properly declared by our board of directors.
(b) Pursuant to Commission Rule 463, we are obligated to report on
the use of proceeds from our initial public offering. The information provided
below is given as of December 31, 1999.
(1) The Company's registration statement on Form SB-2
(File No. 333-69555) was declared effective by the
Commission on March 30, 1999.
(2) The offering commenced on March 30, 1999.
(3) The offering did not terminate before any securities
were sold.
(4)
(i) The offering terminated on October 29, 1999,
before the sale of all securities that the
company had registered.
(ii) Banc Stock Financial Services, Inc. served
as a sales agent for the offering. In
addition, the company's officers and
directors sold shares in the offering, but
did not receive any commissions for their
efforts.
(iii) Common stock was the only class of
securities registered in the offering.
(iv) 720,000 shares ($7,200,000) of common stock
were registered, of which 563,728 shares
($5,637,280) were sold.
(v) The company incurred approximately $521,091
in expenses (including sales commissions) in
connection with the issuance and
distribution of the common stock in the
offering. All of these expenses were paid
directly or indirectly to persons or
entities other than directors, officers,
persons owning 10% or more of the company's
securities, or affiliates of the company.
(vi) The net proceeds to the company after
deducting the total expenses described above
were $5,116,188.
(vii) Through December 31, 1999, $483,359 of the
net proceeds of the offering were invested
in cash, $4,162,084 was invested in the
company's bank subsidiary; and $23,000 was
used to pay organization costs. None of the
net proceeds have been paid directly or
indirectly to directors, officers, persons
owning 10% or more of the company's
securities, and affiliates of the
10
<PAGE> 12
company, except for an aggregate of $194,383
paid as salaries to officers of the company.
(viii) The use of proceeds described above does not
represent a material change from the use of
proceeds disclosed in the prospectus for the
offering.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATION
In response to this Item, the information contained on pages 4 through
15 of the company's Annual Report to Shareholders for the year ended December
31, 1999 is incorporated herein by reference.
ITEM 7. FINANCIAL STATEMENTS
In response to this Item, the information contained on pages 17 through
31 of the company's Annual Report to Shareholders for the year ended December
31, 1999 is incorporated herein by reference.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
In response to this Item, the information contained on page 10 of the
company's Proxy Statement for the Annual Meeting of Shareholders to be held on
April 25, 2000 is incorporated herein by reference.
Item 10. EXECUTIVE COMPENSATION
In response to this Item, the information contained on pages 7 and 8 of
the company's Proxy Statement for the Annual Meeting of Shareholders to be held
on April 25, 2000 is incorporated herein by reference.
Item 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
In response to this Item, the information contained on page 9 of the
company's Proxy Statement for the Annual Meeting of Shareholders to be held on
April 25, 2000 is incorporated herein by reference.
Item 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In response to this Item, the information contained on page 10 of the
company's Proxy Statement for the Annual Meeting of Shareholders to be held on
April 25, 2000 is incorporated herein by reference.
Item 13. EXHIBITS, LIST AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report:
3.1. Articles of Incorporation and all amendments (incorporated by reference
to Exhibit 3.1 of the Registration Statement on Form SB-2, File No.
333-69555).
3.2. Bylaws (incorporated by reference to Exhibit 3.1 of the Registration
Statement on Form SB-2, File No. 333-69555).
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 (incorporated by reference to Exhibit 3.1 of the
Registration Statement on Form SB-2, File No. 333-69555).
11
<PAGE> 13
4.2. Form of certificate of common stock (incorporated by reference to
Exhibit 3.1 of the Registration Statement on Form SB-2, File No.
333-69555).
5.1. Opinion Regarding Legality (incorporated by reference to Exhibit 3.1 of
the Registration Statement on Form SB-2, File No. 333-69555).
10.1. Revised and Restated Letter of Employment dated February 24, 1999,
between First Capital Bancshares and J. Aubrey Crosland (incorporated
by reference to Exhibit 3.1 of the Registration Statement on Form SB-2,
File No. 333-69555).
10.2. Letter of Employment dated November 2, 1998, between First Capital
Bancshares and John M. Digby (incorporated by reference to Exhibit 3.1
of the Registration Statement on Form SB-2, File No. 333-69555).
10.3 Purchase Agreement dated April 20, 1998, between First Capital
Bancshares, as buyer, and James B. Connelly, as seller (incorporated by
reference to Exhibit 3.1 of the Registration Statement on Form SB-2,
File No. 333-69555).
10.4 Form of escrow agreement among First Capital Bancshares, Banc Stock
Financial Services, Inc. and The Banker's Bank (incorporated by
reference to Exhibit 3.1 of the Registration Statement on Form SB-2,
File No. 333-69555).
10.5 Sales Agency Agreement among First Capital Bancshares and Banc Stock
Financial Services, Inc. (incorporated by reference to Exhibit 3.1 of
the Registration Statement on Form SB-2, File No. 333-69555).
10.6 An agreement for software and account processing services dated
December 7, 1998 with Fiserv Solutions, Inc. (incorporated by reference
to Exhibit 3.1 of the Registration Statement on Form SB-2, File No.
333-69555).
10.7 Revised and Restated Letter of Employment dated February 24, 1999,
between J. Randy McDonald and First Capital Bancshares (incorporated by
reference to Exhibit 3.1 of the Registration Statement on Form SB-2,
File No. 333-69555).
10.8 Form of Stock Order Form (incorporated by reference to Exhibit 3.1 of
the Registration Statement on Form SB-2, File No. 333-69555).
10.9 1999 Stock Incentive Plan
13 The Company's 1999 Annual Report
21 Subsidiaries of the Company
27.1. Financial Data Schedule (for electronic filing purposes)
(b) Reports on Form 8-K
We did not file any reports on Form 8-K during the fourth quarter of
1999.
12
<PAGE> 14
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act
of 1934 (the "Exchange Act"), the registrant caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
FIRST CAPITAL BANCSHARES, INC.
Date: March 24, 2000 By: /s/ J. Aubrey Crosland
----------------------------------
J. Aubrey Crosland
President
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints J. Aubrey Crosland, his true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities, to sign any
and all amendments to this Annual Report on Form 10-KSB, and to file the same,
with all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto attorney-in-fact and agent
full power and authority to do and perform each and every act and thing
requisite or necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
concerning all that attorney-in-fact and agent, or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
In accordance with the Exchange Act, this report has been signed below
by the following persons on behalf of the registrant in the capacities and on
the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Shoukath Ansari
- -----------------------------
Shoukath Ansari, M.D. Director 3/24/00
/s/ Wylie F. Cartrette
- -----------------------------
Wylie F. Cartrette Director 3/24/00
/s/ James Aubrey Crosland
- -----------------------------
James Aubrey Crosland, Sr. President; Director 3/24/00
/s/ Robert G. Dowdy
- -----------------------------
Robert G. Dowdy Director 3/24/00
/s/ Harry L. Howell
- -----------------------------
Harry L. Howell, Jr. Director 3/24/00
/s/ Luther D. Hutchins
- -----------------------------
Luther D. Hutchins Director 3/24/00
</TABLE>
17
<PAGE> 15
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Paul F. Rush
- -----------------------------
Paul F. Rush, M.D. Director 3/24/00
/s/ Lee C. Shortt
- -----------------------------
Lee C. Shortt Chief Executive 3/24/00
Office; Director
/s/ John M. Digby
- -----------------------------
John M. Digby Chief Financial Officer 3/24/00
</TABLE>
18
<PAGE> 16
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- -----------
<S> <C>
3.1. Articles of Incorporation and all amendments (incorporated by reference
to Exhibit 3.1 of the Registration Statement on Form SB-2, File No.
333-69555).
3.2. Bylaws (incorporated by reference to Exhibit 3.1 of the Registration
Statement on Form SB-2, File No. 333-69555).
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 (incorporated by reference to Exhibit 3.1 of the
Registration Statement on Form SB-2, File No. 333-69555).
4.2. Form of certificate of common stock (incorporated by reference to
Exhibit 3.1 of the Registration Statement on Form SB-2, File No.
333-69555).
5.1. Opinion Regarding Legality (incorporated by reference to Exhibit 3.1 of
the Registration Statement on Form SB-2, File No. 333-69555).
10.1. Revised and Restated Letter of Employment dated February 24, 1999,
between First Capital Bancshares and J. Aubrey Crosland (incorporated
by reference to Exhibit 3.1 of the Registration Statement on Form
SB-2, File No. 333-69555).
10.2. Letter of Employment dated November 2, 1998, between First Capital
Bancshares and John M. Digby (incorporated by reference to Exhibit 3.1
of the Registration Statement on Form SB-2, File No. 333-69555).
10.3 Purchase Agreement dated April 20, 1998, between First Capital
Bancshares, as buyer, and James B. Connelly, as seller (incorporated by
reference to Exhibit 3.1 of the Registration Statement on Form SB-2,
File No. 333-69555).
10.4 Form of escrow agreement among First Capital Bancshares, Banc Stock
Financial Services, Inc. and The Banker's Bank (incorporated by
reference to Exhibit 3.1 of the Registration Statement on Form SB-2,
File No. 333-69555).
10.5 Sales Agency Agreement among First Capital Bancshares and Banc Stock
Financial Services, Inc. (incorporated by reference to Exhibit 3.1 of
the Registration Statement on Form SB-2, File No. 333-69555).
10.6 An agreement for software and account processing services dated
December 7, 1998 with Fiserv Solutions, Inc. (incorporated by reference
to Exhibit 3.1 of the Registration Statement on Form SB-2, File No.
333-69555).
10.7 Revised and Restated Letter of Employment dated February 24, 1999,
between J. Randy McDonald and First Capital Bancshares (incorporated by
reference to Exhibit 3.1 of the Registration Statement on Form SB-2,
File No. 333-69555).
10.8 Form of Stock Order Form (incorporated by reference to Exhibit 3.1 of
the Registration Statement on Form SB-2, File No. 333-69555).
10.9 First Capital Bancshares, Inc. 1999 Stock Incentive Plan
13 The Company's 1999 Annual Report
21 Subsidiaries of the Company
27.1. Financial Data Schedule (for electronic filing purposes)
</TABLE>
19
<PAGE> 1
EXHIBIT 10.9
FIRST CAPITAL BANCSHARES, INC.
2000 STOCK INCENTIVE PLAN
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I DEFINITIONS ......................................................1
ARTICLE II THE PLAN ........................................................4
2.1 NAME ..............................................................4
2.2 PURPOSE ...........................................................4
2.3 EFFECTIVE DATE ....................................................4
ARTICLE III PARTICIPANTS ...................................................5
ARTICLE IV ADMINISTRATION ..................................................5
4.1 DUTIES AND POWERS OF THE COMMITTEE ................................5
4.2 INTERPRETATION; RULES .............................................5
4.3 No LIABILITY ......................................................5
4.4 MAJORITY RULE .....................................................6
4.5 COMPANY ASSISTANCE ................................................6
ARTICLE V SHARES OF STOCK SUBJECT TO PLAN ..................................6
5.1 LIMITATIONS .......................................................6
5.2 ANTIDILUTION ......................................................7
ARTICLE VI OPTIONS .........................................................8
6.1 TYPES OF OPTIONS GRANTED ..........................................8
6.2 OPTION GRANT AND AGREEMENT ........................................8
6.3 OPTIONEE LIMITATIONS ..............................................8
6.4 $100,000 LIMITATION ...............................................9
6.5 EXERCISE PRICE ....................................................9
6.6 EXERCISE PERIOD ...................................................9
6.7 OPTION EXERCISE ...................................................9
6.8 NONTRANSFERABILITY OF OPTION .....................................10
6.9 TERMINATION OF EMPLOYMENT OR SERVICE .............................11
6.10 EMPLOYMENT RIGHTS ................................................11
6.11 CERTAIN SUCCESSOR OPTIONS ........................................11
6.12 EFFECT OF A CORPORATE TRANSACTION ................................11
ARTICLE VII STOCK CERTIFICATES ............................................12
ARTICLE VIII TERMINATION AND AMENDMENT ....................................12
8.1 TERMINATION AND AMENDMENT ........................................12
8.2 EFFECT ON GRANTEE'S RIGHTS .......................................13
ARTICLE IX RELATIONSHIP TO OTHER COMPENSATION PLANS .......................13
ARTICLE X MISCELLANEOUS ...................................................13
10.1 REPLACEMENT OR AMENDED GRANTS ....................................13
10.2 FORFEITURE FOR COMPETITION .......................................13
10.3 LEAVE OF ABSENCE .................................................13
10.4 PLAN BINDING ON SUCCESSORS........................................14
</TABLE>
i
<PAGE> 2
<TABLE>
<S> <C> <C>
10.5 HEADINGS, ETC., NO PART OF PLAN ..................................14
10.6 SECTION 16 COMPLIANCE ...........................................14
</TABLE>
ii
<PAGE> 3
FIRST CAPITAL BANCSHARES, INC.
2000 STOCK INCENTIVE PLAN
ARTICLE I
DEFINITIONS
As used herein, the following terms have the following meanings unless
the context clearly indicates to the contrary:
"Board" shall mean the Board of Directors of the Company.
"Cause" (i) with respect to the Company or any subsidiary which
employs the recipient of an Option (the "recipient") or for which such
recipient primarily performs services, the commission by the recipient of an
act of fraud, embezzlement, theft or proven dishonesty, or any other illegal
act or practice (whether or not resulting in criminal prosecution or
conviction), or any act or practice which the Committee shall, in good faith,
deem to have resulted in the recipient's becoming unbondable under the
Company's or the subsidiary's fidelity bond; (ii) the willful engaging by the
recipient in misconduct which is deemed by the Committee, in good faith, to be
materially injurious to the Company or any subsidiary, monetarily or otherwise,
including, but not limited to, improperly disclosing trade secrets or other
confidential or sensitive business information and data about the Company or
any subsidiaries and competing with the Company or its subsidiaries, or
soliciting employees, consultants or customers of the Company in violation of
law or any employment or other agreement to which the recipient is a party; or
(iii) the willful and continued failure or habitual neglect by the recipient to
perform his or her duties with the Company or the subsidiary substantially in
accordance with the operating and personnel policies and procedures of the
Company or the subsidiary generally applicable to all their employees. For
purposes of this Plan, no act or failure to act by the recipient shall be
deemed to be "willful" unless done or omitted to be done by recipient not in
good faith and without reasonable belief that the recipient's action or omission
was in the best interest of the Company and/or the subsidiary. Notwithstanding
the foregoing, if the recipient has entered into an employment agreement that is
binding as of the date of employment termination, and if such employment
agreement defines "Cause," then the definition of "Cause" in such agreement
shall apply to the recipient in this Plan. Whether an act constitutes "Cause"
under either (i), (ii) or (iii) shall be determined by the Committee in its sole
discretion, and its determination shall be binding.
"Code" shall mean the United States Internal Revenue Code of 1986,
including effective date and transition rules (whether or not codified). Any
reference herein to a specific section of the Code shall be deemed to include a
reference to any corresponding provision of future law.
"Committee" shall mean a committee of at least two Directors appointed
from time to time by the Board, having the duties and authority set forth
herein in addition to any other authority granted by the Board. In selecting
the Committee, the Board shall consider (i) the benefits under Section 162(m)
of the Code of having a Committee composed of "outside directors" (as that term
is defined in the Code) for certain grants of Options to highly compensated
executives, and (ii) the benefits under Rule 16b-3 of having a Committee
composed of either the entire Board or a
<PAGE> 4
Committee of at least two Directors who are Non-Employee Directors for Options
granted to or held by any Section 16 Insider. At any time that the Board shall
not have appointed a committee as described above, any reference herein to the
Committee shall mean the Board.
"Company" shall mean First Capital Bancshares, Inc., a South Carolina
corporation.
"Change in Control" shall mean the occurrence of any of the following
events: (1) a change in the ownership, holding or power to vote more than 25%
of the Company's voting stock, (2) a change in the ownership or possession of
the ability to control the election of a majority of the Company's directors,
(3) a change in the ownership or possession of the ability to exercise a
controlling influence over the management or policies of the Company by any
person or by persons acting as a "group" (within the meaning of Section 13(d)
of the Securities Exchange Act of 1934), or (4) during any period of two
consecutive years, individuals who at the beginning of such period constitute
the Board of Directors of the Company (the "Continuing Directors") cease for
any reason to constitute at least two-thirds of the members of such Board of
Directors, provided that any individual whose election or nomination for
election as a member of such Board was approved by a vote of at least
two-thirds of the Continuing Directors then in office shall be considered a
Continuing Director. For purposes of this subparagraph only, the term "person"
refers to an individual or a corporation, partnership, trust, association,
joint venture, pool, syndicate, sole proprietorship, unincorporated
organization, or any other form of entity not specifically listed herein. The
decision of the Committee about whether a Change in Control has occurred shall
be conclusive and binding.
"Director" shall mean a member of the Board and any person who is an
advisory or honorary director of the Company.
"Employee" shall mean a person who constitutes an employee of the
Company as such term is defined in the instructions to the Form S-8
Registration Statement under the Securities Act of 1933, and also includes
non-employees to whom an offer of employment has been extended.
"Exchange Act" shall mean the Securities Exchange Act of 1934. Any
reference herein to a specific section of the Exchange Act shall be deemed to
include a reference to any corresponding provision of future law.
"Exercise Price" shall mean the price at which an Optionee may
purchase a share of Stock under a Stock Option Agreement.
"Fair Market Value" on any date shall mean (i) the closing sales price
of the Stock, regular way, on such date on the national securities exchange
having the greatest volume of trading in the Stock during the thirty-day period
preceding the day the value is to be determined or, if such exchange was not
open for trading on such date, the next preceding date on which it was open;
(ii) if the Stock is not traded on any national securities exchange, the
average of the closing high bid and low asked prices of the Stock on the
over-the-counter market on the day such value is to be determined, or in the
absence of closing bids on such day, the closing bids on the next preceding day
on which there were bids; or (iii) if the Stock also is not traded on the
over-the-counter market, the fair market value as determined in good faith by
the Board or the
<PAGE> 5
Committee based on such relevant facts as may be available to the Board, which
may include opinions of independent experts, the price at which recent sales
have been made, the book value of the Stock, and the Company's current and
future earnings.
"Grantee" shall mean a person who is an Optionee.
"Incentive Stock Option" shall mean an option to purchase any stock
of the Company, which complies with and is subject to the terms, limitations
and conditions of Section 422 of the Code and any regulations promulgated with
respect thereto.
"Non-Employee Director" shall have the meaning set forth in Rule 16b-3
under the Exchange Act, as the same may be in effect from time to time, or in
any successor rule thereto, and shall be determined for all purposes under the
Plan according to interpretative or "no-action" positions with respect thereto
issued by the Securities and Exchange Commission.
"Officer" shall mean a person who constitutes an officer of the
Company for the purposes of Section 16 of the Exchange Act, as determined by
reference to such Section 16 and to the rules, regulations, judicial decisions,
and interpretative or "no-action" positions with respect thereto of the
Securities and Exchange Commission, as the same may be in effect or set forth
from time to time.
"Option" shall mean an option, whether or not an Incentive Stock
Option, to purchase Stock granted pursuant to the provisions of Article VI
hereof.
"Optionee" shall mean a person to whom an Option has been granted
hereunder.
"Parent" shall mean any corporation (other than the Company or a
Subsidiary) in an unbroken chain of corporations ending with the Company if, at
the time of the grant (or modification) of the Option, each of the corporations
other than the Company or a Subsidiary owns stock possessing 50% or more of the
total combined voting power of the classes of stock in one of the other
corporations in such chain.
"Permanent and Total Disability" shall have the same meaning as given
to that term by Code Section 22(e)(3) and any regulations or rulings
promulgated thereunder.
"Plan" shall mean the First Capital Bancshares, Inc. 2000 Stock
Incentive Plan, the terms of which are set forth herein.
"Purchasable" shall refer to Stock which may be purchased by an
Optionee under the terms of this Plan on or after a certain date specified in
the applicable Stock Option Agreement.
"Qualified Domestic Relations Order" shall have the meaning set forth
in the Code or in the Employee Retirement Income Security Act of 1974, or the
rules and regulations promulgated under the Code or such Act.
<PAGE> 6
"Section 16 Insider" shall mean any person who is subject to the
provisions of Section 16 of the Exchange Act, as provided in Rule l6a-2
promulgated pursuant to the Exchange Act.
"Stock" shall mean the Common Stock, par value $0.01 per share, of
the Company or, in the event that the outstanding shares of Stock are hereafter
changed into or exchanged for shares of a different stock or securities of the
Company or some other entity, such other stock or securities.
"Stock Option Agreement" shall mean an agreement between the Company
and an Optionee under which the Optionee may purchase Stock hereunder.
"Subsidiary" shall mean any corporation (other than the Company) in
an unbroken chain of corporations beginning with the Company if, at the time of
the grant (or modification) of the Option, each of the corporations other than
the last corporation in the unbroken chain owns stock possessing 50% or more of
the total combined voting power of all classes of stock in one of the other
corporations in such chain.
ARTICLE II
THE PLAN
2.1 Name. This Plan shall be known as "First Capital Bancshares,
Inc. 2000 Stock Incentive Plan."
2.2 Purpose. The purpose of the Plan is to advance the interests
of the Company, its Subsidiaries, and its shareholders by affording Employees
and Directors of the Company and its Subsidiaries an opportunity to acquire or
increase their proprietary interests in the Company. The objective of the
issuance of the Options is to promote the growth and profitability of the
Company and its Subsidiaries because the Grantees will be provided with an
additional incentive to achieve the Company's objectives through participation
in its success and growth and by encouraging their continued association with
or service to the Company.
2.3 Effective Date. The Plan shall become effective on February
29, 2000; provided, however, that if the shareholders of the Company have not
approved the Plan on or prior to the first anniversary of such effective date,
then all options granted under the Plan shall be non-Incentive Stock Options.
If, at the time of any amendment to the Plan, shareholder approval is required
by the Code for Incentive Stock Options and such shareholder approval has not
been obtained (or is not obtained within 12 months thereof), any Incentive
Stock Options issued under the Plan shall automatically become options which do
not qualify as Incentive Stock Options.
<PAGE> 7
ARTICLE III
PARTICIPANTS
The class of persons eligible to participate in the Plan shall consist
of all Directors and Employees of the Company or any Subsidiary, provided that
the grant of any Option to a nonemployee to whom an offer of employment has
been extended shall be conditioned upon that individual's acceptance of
employment.
ARTICLE IV
ADMINISTRATION
4.1 Duties and Powers of the Committee. The Plan shall be
administered by the Committee. The Committee shall select one of its members
as its Chairman and shall hold its meetings at such times and places as it may
determine. The Committee shall keep minutes of its meetings and shall make such
rules and regulations for the conduct of its business as it may deem necessary.
The Committee shall have the power to act by unanimous written consent in lieu
of a meeting, and to meet telephonically. In administering the Plan, the
Committee's actions and determinations shall be binding on all interested
parties. The Committee shall have the power to grant Options in accordance with
the provisions of the Plan and may grant Options singly, in combination, or in
tandem. Subject to the provisions of the Plan, the Committee shall have the
discretion and authority to determine those individuals to whom Options will be
granted, the number of shares of Stock subject to each Option, such other
matters as are specified herein, and any other terms and conditions of a Stock
Option Agreement. The Committee shall also have the discretion and authority to
delegate to any Officer its powers to grant Options under the Plan to any
person who is an Employee of the Company but not an Officer or Director. To the
extent not inconsistent with the provisions of the Plan, the Committee may give
a Grantee an election to surrender an Option in exchange for the grant of a new
Option, and shall have the authority to amend or modify an outstanding Stock
Option Agreement, or to waive any provision thereof, provided that the Grantee
consents to such action.
4.2 Interpretation; Rules. Subject to the express provisions of
the Plan, the Committee also shall have complete authority to interpret the
Plan, to prescribe, amend, and rescind rules and regulations relating to it, to
determine the details and provisions of each Stock Option Agreement, and to
make all other determinations necessary or advisable for the administration of
the Plan, including, without limitation, the amending or altering of the Plan
and any Options granted hereunder as may be required to comply with or to
conform to any federal, state, or local laws or regulations. If an option
granted under the Plan is intended to be an Incentive Stock Option but does not
qualify as an Incentive Stock Option for any reason, then the option granted
shall remain valid but shall be a non-Incentive Stock Option.
4.3 No Liability. Neither any member of the Board nor any member
of the Committee shall be liable to any person for any act or determination
made in good faith with respect to the Plan or any Option granted hereunder.
<PAGE> 8
4.4 Majority Rule. A majority of the members of the Committee
shall constitute a quorum, and any action taken by a majority at a meeting at
which a quorum is present, or any action taken without a meeting evidenced by a
writing executed by all the members of the Committee, shall constitute the
action of the Committee.
4.5 Company Assistance. The Company shall supply full and timely
information to the Committee on all matters relating to eligible persons, their
employment, death, retirement, disability, or other termination of employment,
and such other pertinent facts as the Committee may require. The Company shall
furnish the Committee with such clerical and other assistance as is necessary
in the performance of its duties.
ARTICLE V
SHARES OF STOCK SUBJECT TO PLAN
5.1 Limitations. The maximum number of shares that may be issued
hereunder shall initially be 84,560 and thereafter shall automatically be
increased each time the Company issues additional shares of Stock so that the
total number of shares issuable hereunder shall at all times equal 15% of the
then outstanding shares of Stock, unless in any case the Board of Directors
adopts a resolution providing that the number of shares issuable under this
Plan shall not be so increased. If for any reason the total number of shares
issuable under this Plan exceeds 15% of the then outstanding shares of Stock
at any time prior to September 27, 2002 (the third anniversary of the
commencement of operations of First Capital Bank), then the number of shares
issuable under this Plan shall automatically be reduced to equal 15% of the
then outstanding shares of Stock (but only to the extent the shares are not
issuable pursuant to outstanding Options), unless the Company obtains approval
from the Office of Thrift Supervision that such a reduction is not required.
Notwithstanding the above, the total number of shares of Stock issuable
pursuant to Incentive Stock Options may not be increased to more than 84,560
(other than pursuant to antidilution adjustments) without shareholder approval.
In addition, the number of shares that may be issued hereunder shall be subject
to any antidilution adjustment pursuant to the provisions of Section 5.2
hereof. Any or all shares of Stock subject to the Plan may be issued in any
combination of Incentive Stock Options or non-Incentive Stock Options. Shares
subject to an Option may be either authorized and unissued shares or shares
issued and later acquired by the Company. The shares covered by any unexercised
portion of an Option that has terminated for any reason (except as set forth in
the following paragraph) may again be optioned under the Plan, and such shares
shall not be considered as having been optioned or issued in computing the
number of shares of Stock remaining available for option hereunder.
If Options are issued in respect of options to acquire stock of any
entity acquired, by merger or otherwise, by the Company (or any Subsidiary of
the Company), to the extent that such issuance shall not be inconsistent with
the terms, limitations and conditions of Code section 422 or Rule 16b-3 under
the Exchange Act, the aggregate number of shares of Stock for which Options may
be granted hereunder shall automatically be increased by the number of shares
subject to the Options so issued; provided, however, that the aggregate number
of shares of Stock for which
<PAGE> 9
Options may be granted hereunder shall automatically be decreased by the number
of shares covered by any unexercised portion of an Option so issued that has
terminated for any reason, and the shares subject to any such unexercised
portion may not be optioned to any other person.
5.2 Antidilution.
(a) If (x) the outstanding shares of Stock are changed
into or exchanged for a different number or kind of shares or other securities
of the Company by reason of merger, consolidation, reorganization,
recapitalization, reclassification, combination or exchange of shares, or stock
split or stock dividend, (y) any spin-off, spin-out or other distribution of
assets materially affects the price of the Company's stock, or (z) there is any
assumption and conversion to the Plan by the Company of an acquired company's
outstanding option grants, then:
(i) the aggregate number and kind of shares of
Stock for which Options may be granted hereunder shall be
adjusted proportionately by the Committee; and
(ii) the rights of Optionees (concerning the
number of shares subject to Options and the Exercise Price)
under outstanding Options shall be adjusted proportionately
by the Committee.
(b) If the Company shall be a party to any
reorganization in which it does not survive, involving merger, consolidation,
or acquisition of the stock or substantially all the assets of the Company, the
Committee, in its sole discretion, may (but is not required to):
(i) notwithstanding other provisions hereof,
declare that all Options granted under the Plan shall become
exercisable immediately notwithstanding the provisions of the
respective Stock Option Agreements regarding exercisability
and that all such Options shall terminate 30 days after the
Committee gives written notice of the immediate right to
exercise all such Options and of the decision to terminate
all Options not exercised within such 30-day period; and/or
(ii) notify all Grantees that all Options
granted under the Plan shall be assumed by the successor
corporation or substituted on an equitable basis with options
issued by such successor corporation.
(c) If the Company is to be liquidated or dissolved in
connection with a reorganization described in Section 5.2(b), the provisions of
such Section shall apply. In all other instances, the adoption of a plan of
dissolution or liquidation of the Company shall, notwithstanding other
provisions hereof, cause every Option outstanding under the Plan to terminate
to the extent not exercised prior to the adoption of the plan of dissolution or
liquidation by the shareholders.
(d) The adjustments described in paragraphs (a) through
(c) of this Section 5.2, and the manner of their application, shall be
determined solely by the Committee, and any such adjustment may provide for the
elimination of fractional share interests; provided, however, that any
adjustment made by the Board or the Committee shall be made in a manner that
will not
<PAGE> 10
cause an Incentive Stock Option to be other than an Incentive Stock Option
under applicable statutory and regulatory provisions. The adjustments required
under this Article V shall apply to any successors of the Company and shall be
made regardless of the number or type of successive events requiring such
adjustments.
ARTICLE VI
OPTIONS
6.1 Types of Options Granted. The Committee may, under this Plan,
grant either Incentive Stock Options or Options which do not qualify as
Incentive Stock Options. Within the limitations provided in this Plan, both
types of Options may be granted to the same person at the same time, or at
different times, under different terms and conditions, as long as the terms and
conditions of each Option are consistent with the provisions of the Plan.
Without limitation of the foregoing, Options may be granted subject to
conditions based on the financial performance of the Company or any other
factor the Committee deems relevant.
6.2 Option Grant and Agreement. Each Option granted hereunder
shall be evidenced by minutes of a meeting or the written consent of the
Committee and by a written Stock Option Agreement executed by the Company and
the Optionee. The terms of the Option, including the Option's duration, time or
times of exercise, exercise price, and whether the Option is intended to be an
Incentive Stock Option, shall be stated in the Stock Option Agreement. No
Incentive Stock Option may be granted more than ten years after the earlier to
occur of the effective date of the Plan or the date the Plan is approved by the
Company's shareholders. Separate Stock Option Agreements may be used for
Options intended to be Incentive Stock Options and those not so intended, but
any failure to use such separate agreements shall not invalidate, or otherwise
adversely affect the Optionee's interest in, the Options evidenced thereby.
6.3 Optionee Limitations. The Committee shall not grant an
Incentive Stock Option to any person who, at the time the Incentive Stock
Option is granted:
(a) is not an employee of the Company or any of its
Subsidiaries (as the term "employee" is defined by the Code); or
(b) owns or is considered to own stock possessing at
least 10% of the total combined voting power of all classes of stock of the
Company or any of its Parent or Subsidiary corporations; provided, however,
that this limitation shall not apply if at the time an Incentive Stock Option
is granted the Exercise Price is at least 110% of the Fair Market Value of the
Stock subject to such Option and such Option by its terms would not be
exercisable after five years from the date on which the Option is granted. For
the purpose of this subsection (b), a person shall be considered to own: (i)
the stock owned, directly or indirectly, by or for his or her brothers and
sisters (whether by whole or half blood), spouse, ancestors and lineal
descendants; (ii) the stock owned, directly or indirectly, by or for a
corporation, partnership, estate, or trust in proportion to such person's stock
interest, partnership interest or beneficial interest therein; and (iii) the
stock
<PAGE> 11
which such person may purchase under any outstanding options of the Company or
of any Parent or Subsidiary.
6.4 $100,000 Limitation. Except as provided below, the Committee
shall not grant an Incentive Stock Option to, or modify the exercise provisions
of outstanding Incentive Stock Options held by, any person who, at the time the
Incentive Stock Option is granted (or modified), would thereby receive or hold
any Incentive Stock Options of the Company and any Parent or Subsidiary, such
that the aggregate Fair Market Value (determined as of the respective dates of
grant or modification of each option) of the stock with respect to which such
Incentive Stock Options are exercisable for the first time during any calendar
year is in excess of $100,000 (or such other limit as may be prescribed by the
Code from time to time); provided that the foregoing restriction on modification
of outstanding Incentive Stock Options shall not preclude the Committee from
modifying an outstanding Incentive Stock Option if, as a result of such
modification and with the consent of the Optionee, such Option no longer
constitutes an Incentive Stock Option; and provided that, if the $100,000
limitation (or such other limitation prescribed by the Code) described in this
Section 6.4 is exceeded, the Incentive Stock Option, the granting or
modification of which resulted in the exceeding of such limit, shall be treated
as an Incentive Stock Option up to the limitation and the excess shall be
treated as an Option not qualifying as an Incentive Stock Option.
6.5 Exercise Price. The Exercise Price of the Stock subject to
each Option shall be determined by the Committee. Subject to the provisions of
Section 6.3(b) hereof, the Exercise Price of an Incentive Stock Option or a
non-Incentive Stock Option shall not be less than the Fair Market Value of the
Stock as of the date the Option is granted (or in the case of an Incentive
Stock Option that is subsequently modified, on the date of such modification).
6.6 Exercise Period. The period for the exercise of each Option
granted hereunder shall be determined by the Committee, but the Stock Option
Agreement with respect to each Option intended to be an Incentive Stock Option
shall provide that such Option shall not be exercisable after the expiration of
ten years from the date of grant (or modification) of the Option.
6.7 Option Exercise.
(a) Unless otherwise provided in the Stock Option
Agreement or Section 6.6 hereof, an Option may be exercised at any time or from
time to time during the term of the Option as to any or all full shares which
have become Purchasable under the provisions of the Option, but not at any time
as to less than 100 shares unless the remaining shares that have become so
Purchasable are less than 100 shares. The Committee shall have the authority to
prescribe in any Stock Option Agreement that the Option may be exercised only
in accordance with a vesting schedule during the term of the Option. For so
long as required by the Office of Thrift Supervision, the Committee shall
prescribe a vesting period for each Option of no less than three years, which
may be subject to acceleration in the event of a Change in Control.
(b) An Option shall be exercised by (i) delivery to the
Company at its principal office a written notice of exercise with respect to a
specified number of shares of Stock and (ii) payment to the Company at that
office of the full amount of the Exercise Price for such number of
<PAGE> 12
shares in accordance with Section 6.7(c). If requested by an Optionee, an
Option may be exercised with the involvement of a stockbroker in accordance
with the federal margin rules set forth in Regulation T (in which case the
certificates representing the underlying shares will be delivered by the
Company directly to the stockbroker).
(c) The Exercise Price is to be paid in full in cash
upon the exercise of the Option and the Company shall not be required to
deliver certificates for the shares purchased until such payment has been made;
provided, however, that in lieu of cash, in the Company's discretion all or any
portion of the Exercise Price may be paid by tendering to the Company shares of
Stock duly endorsed for transfer and owned by the Optionee, or by authorization
to the Company to withhold shares of Stock otherwise issuable upon exercise of
the Option, in each case to be credited against the Exercise Price at the Fair
Market Value of such shares on the date of exercise (however, no fractional
shares may be so transferred, and the Company shall not be obligated to make
any cash payments in consideration of any excess of the aggregate Fair Market
Value of shares transferred over the aggregate Exercise Price); provided
further, that the Board may provide in a Stock Option Agreement (or may
otherwise determine in its sole discretion at the time of exercise) that, in
lieu of cash or shares, all or a portion of the Exercise Price may be paid by
the Optionee's execution of a recourse note equal to the Exercise Price or
relevant portion thereof, subject to compliance with applicable state and
federal laws, rules and regulations. Notwithstanding the above, the Company
shall not be obligated to accept tender of shares of Stock as payment of the
Exercise Price if doing so would result in a charge to the Company's earnings
for financial reporting purposes.
(d) In addition to and at the time of payment of the
Exercise Price, the Optionee shall pay to the Company in cash the full amount
of any federal, state, and local income, employment, or other withholding taxes
applicable to the taxable income of such Optionee resulting from such exercise;
provided, however, that in the discretion of the Committee any Stock Option
Agreement may provide that all or any portion of such tax obligations, together
with additional taxes not exceeding the actual additional taxes to be owed by
the Optionee as a result of such exercise, may, upon the irrevocable election
of the Optionee, be paid by tendering to the Company whole shares of Stock duly
endorsed for transfer and owned by the Optionee, or by authorization to the
Company to withhold shares of Stock otherwise issuable upon exercise of the
Option, in either case in that number of shares having a Fair Market Value on
the date of exercise equal to the amount of such taxes thereby being paid, and
subject to such restrictions as to the approval and timing of any such election
as the Committee may from time to time determine to be necessary or appropriate
to satisfy the conditions of the exemption set forth in Rule 16b-3 under the
Exchange Act, if such rule is applicable.
(e) The holder of an Option shall not have any of the
rights of a shareholder with respect to the shares of Stock subject to the
Option until such shares have been issued and transferred to the Optionee upon
the exercise of the Option.
6.8 Nontransferability of Option. Other than as provided below,
no Option shall be transferable by an Optionee other than by will or the laws
of descent and distribution or, in the case of non-Incentive Stock Options,
pursuant to a Qualified Domestic Relations Order, and, during the lifetime of
an Optionee, Options shall be exercisable only by such Optionee (or by such
<PAGE> 13
Optionee's guardian or legal representative, should one be appointed). However,
a non-Incentive Stock Option may, in connection with the Optionee's estate
plan, be assigned in whole or in part during Optionee's lifetime to one or more
members of the Optionee's immediate family or to a trust established for the
exclusive benefit of one or more such family members. The assigned portion
shall be exercisable only by the person or persons who acquire a proprietary
interest in the Option pursuant to such assignment. The terms applicable to the
assigned portion shall be the same as those in effect for this Option
immediately prior to such assignment and shall be set forth in such documents
issued to the assignee as the Committee may deem appropriate.
6.9 Termination of Employment or Service. The Committee shall
have the power to specify, with respect to the Options granted to a particular
Optionee, the effect upon such Optionee's right to exercise an Option of
termination of such Optionee's employment or service under various
circumstances, which effect may include immediate or deferred termination of
such Optionee's rights under an Option; provided, however, that in no event may
an Incentive Stock Option be exercised after the expiration of ten years from
the date of grant thereof. Unless a Stock Option Agreement specifically
provides otherwise, in the event the recipient of an Option is terminated from
his or her employment or other service to the Company or its subsidiaries for
Cause, Options, whether vested or unvested, granted to such person shall
terminate immediately and shall not thereafter be exercisable.
6.10 Employment Rights. Nothing in the Plan or in any Stock Option
Agreement shall confer on any person any right to continue in the employ of the
Company or any of its Subsidiaries, or shall interfere in any way with the
right of the Company or any of its Subsidiaries to terminate such person's
employment at any time.
6.11 Certain Successor Options. To the extent not inconsistent
with the terms, limitations and conditions of Code section 422 and any
regulations promulgated with respect thereto, an Option issued in respect of an
option held by an employee to acquire stock of any entity acquired, by merger
or otherwise, by the Company (or any Subsidiary of the Company) may contain
terms that differ from those stated in this Article VI, but solely to the
extent necessary to preserve for any such employee the rights and benefits
contained in such predecessor option, or to satisfy the requirements of Code
section 424(a).
6.12 Effect of a Change in Control. All Options, to the extent
outstanding at the time of a Change in Control but not otherwise fully
exercisable, shall automatically accelerate so that the Options shall,
immediately prior to the effective date of the Change in Control, become
exercisable for all shares at the time subject to such Options and may be
exercised for any or all of those shares as fully vested shares of Stock.
<PAGE> 14
ARTICLE VII
STOCK CERTIFICATES
The Company shall not be required to issue or deliver any certificate
for shares of Stock purchased upon the exercise of any Option granted hereunder
or any portion thereof prior to fulfillment of all of the following conditions:
(a) The admission of such shares to listing on all stock
exchanges on which the Stock is then listed;
(b) The completion of any registration or other qualification of
such shares which the Committee shall deem necessary or advisable under any
federal or state law or under the rulings or regulations of the Securities and
Exchange Commission or any other governmental regulatory body;
(c) The obtaining of any approval or other clearance from any
federal or state governmental agency or body which the Committee shall
determine to be necessary or advisable; and
(d) The lapse of such reasonable period of time following the exercise
of the Option as the Board from time to time may establish for reasons of
administrative convenience.
Stock certificates issued and delivered to Grantees shall bear such
restrictive legends as the Company shall deem necessary or advisable pursuant
to applicable federal and state securities laws. The inability of the Company
to obtain approval from any regulatory body having authority deemed by the
Company to be necessary to the lawful issuance and sale of any Stock pursuant
to Options shall relieve the Company of any liability with respect to the
non-issuance or sale of the Stock as to which such approval shall not have been
obtained. However, the Company shall use its best efforts to obtain all such
approvals.
ARTICLE VIII
TERMINATION AND AMENDMENT
8.1 Termination and Amendment. The Board may at any time amend or
terminate the Plan; provided, however, that the Board (unless its actions are
approved or ratified by the shareholders of the Company within twelve months of
the date that the Board amends the Plan) may not amend the Plan to:
(a) Increase the total number of shares of Stock
issuable pursuant to Incentive Stock Options under the Plan, except as
contemplated in Section 5.2 hereof; or
(b) Change the class of employees eligible to receive
Incentive Stock Options that may participate in the Plan.
<PAGE> 15
8.2 Effect on Grantee's Rights. No termination, amendment, or
modification of the Plan shall affect adversely a Grantee's rights under a
Stock Option Agreement without the consent of the Grantee or his legal
representative.
ARTICLE IX
RELATIONSHIP TO OTHER COMPENSATION PLANS
The adoption of the Plan shall not affect any other stock option,
incentive, or other compensation plans in effect for the Company or any of its
Subsidiaries; nor shall the adoption of the Plan preclude the Company or any of
its Subsidiaries from establishing any other form of incentive or other
compensation plan for employees or Directors of the Company or any of its
Subsidiaries.
ARTICLE X
MISCELLANEOUS
10.1 Replacement or Amended Grants. At the sole discretion of the
Committee, and subject to the terms of the Plan, the Committee may modify
outstanding Options or accept the surrender of outstanding Options and grant
new Options in substitution for them. However no modification of an Option
shall adversely affect a Grantee's rights under a Stock Option Agreement
without the consent of the Grantee or his legal representative.
10.2 Forfeiture for Competition. If a Grantee provides services
to a competitor of the Company or any of its Subsidiaries, whether as an
employee, officer, director, independent contractor, consultant, agent, or
otherwise, such services being of a nature that can reasonably be expected to
involve the skills and experience used or developed by the Grantee while an
Employee, then that Grantee's rights under any Options outstanding hereunder
shall be forfeited and terminated, subject in each case to a determination to
the contrary by the Committee.
10.3 Leave of Absence. Unless provided otherwise in a particular
Stock Option Agreement, the following provisions shall apply upon an Optionee's
commencement of an authorized leave of absence:
(a) The exercise schedule in effect for such Option shall be
frozen as of the first day of the authorized leave, and the Option shall not
become exercisable for any additional installments of shares of Stock during
the period Optionee remains on such leave.
(b) Should the Optionee resume active Employee status within 60
days after the start date of the authorized leave, Optionee shall, for purposes
of the applicable exercise schedule, receive service credit for the entire
period of such leave. If the Optionee does not resume active Employee status
within such 60-day period, then no service credit shall be given for the entire
period of such leave.
<PAGE> 16
(c) If the Option is an Incentive Stock Option, then the
following additional provision shall apply:
If the leave of absence continues for more than
three months, then the Option shall automatically convert to a
non-Incentive Stock Option under the Federal tax laws upon the
expiration of such three-month period, unless the Optionee's
reemployment rights are guaranteed by statute or written agreement.
Following any such conversion of the Option, all subsequent exercises
of the Option, whether effected before or after Optionee's return to
active Employee status, shall result in an immediate taxable event,
and the Company shall be required to collect from Optionee the
Federal, state and local income and employment withholding taxes
applicable to such exercise.
(d) In no event shall the Option become exercisable for any
additional shares or otherwise remain outstanding if Optionee does not resume
Employee status prior to the Expiration Date of the option term.
10.4 Plan Binding on Successors. The Plan shall be binding upon
the successors and assigns of the Company.
10.5 Headings, etc., No Part of Plan. Headings of Articles and
Sections hereof are inserted for convenience and reference; they do not
constitute part of the Plan.
10.6 Section 16 Compliance. With respect to Section 16 Insiders,
transactions under this Plan are intended to comply with all applicable
conditions of Rule 16b-3 or its successors under the Exchange Act. To the
extent any provision of the Plan or action by the Committee fails to so comply,
it shall be deemed void to the extent permitted by law and deemed advisable by
the Committee. In addition, if necessary to comply with Rule 16b-3 with respect
to any grant of an Option hereunder, and in addition to any other vesting or
holding period specified hereunder or in an applicable Stock Option Agreement,
any Section 16 Insider acquiring an Option shall be required to hold either the
Option or the underlying shares of Stock obtained upon exercise of the Option
for a minimum of six months.
<PAGE> 1
EXHIBIT 13
FIRST CAPITAL BANCSHARES, INC.
Table of Contents
<TABLE>
<CAPTION>
Page
----
<S> <C>
Shareholders' Letter 2
Selected Financial Data 3
Management's Discussion and Analysis 4-15
Independent Auditors' Report 16
Consolidated Balance Sheets 17
Consolidated Statements of Income 18
Consolidated Statements of Changes in Shareholders' Equity and Comprehensive Income 19
Consolidated Statements of Cash Flows 20
Notes to Consolidated Financial Statements 21-31
Directors and Officers 32
Corporate Data 33
</TABLE>
<PAGE> 2
Dear Shareholder:
On October 27th of last year we successfully and smoothly opened our bank. We
did so by identifying, hiring, and training an experienced staff of local
bankers. Through our determination we have moved from dream to reality. We are
building a first rate community bank with which each shareholder, employee and
client can be proud to be associated. We are delivering common sense banking
with a localized approach that has the banker personally knowing and caring
about his or her customers.
Our Organizing Board of Directors stayed the course and with perseverance
succeeded in a grand endeavor where others might not have tried. With our
Federal Charter we are positioned to become a multi-state bank holding company
which will have the latitude to enter into related fields of enterprise. The
final number on the stock sale reflected the injection of additional capital
with us raising 10% above our minimum stock requirement. Further evidence of
our directors' belief in the bank is that 23% of the total stock offering is in
the hands of the Board.
We are pleased to announce that our stock is trading on the NASDASQ OTC
Bulletin Board under the symbol FCPB. The stock is readily available and quotes
can be obtained through the Internet.
Even though First Capital Bank was only open 93 days during 1999, we achieved
our goals relating to deposits and loans and ended the year "on the mark!" With
our entrance into the Year 2000 we are actively pursuing growth into markets
identified in our prospectus. Plans are on track for expansion into Laurinburg,
N.C. and McColl, S.C.
Finally, but foremost, we want to say "thank you" to our 480 shareholders.
Without your financial support and faith of project, our sign out front would
not say "First Capital Bank."
J. Aubrey Crosland Lee C. Shortt
President Chairman and Chief Executive Officer
2
<PAGE> 3
FIRST CAPITAL BANCSHARES, INC.
SELECTED FINANCIAL DATA
The following selected financial data for the year ended December 31, 1999 and
for the period December 19, 1997 to December 31, 1998 is derived from the
financial statements and other data of the Company. The financial statements
for the year ended December 31, 1999 and for the period December 19, 1997 to
December 31, 1998, were audited by Tourville, Simpson & Caskey, L.L.P,
independent auditors. The selected financial data should be read in conjunction
with the financial statements of the Company, including the accompanying notes,
included elsewhere herein.
<TABLE>
<CAPTION>
(Dollars in thousands) 1999 1998
-------- --------
<S> <C> <C>
INCOME STATEMENT DATA:
Interest income $ 174 $ --
Interest expense 64 --
-------- --------
Net interest income 110 --
Provision for loan losses 42 --
-------- --------
Net interest income after provision for loan losses 68 --
Net securities gains (losses) -- --
Noninterest income 6 --
Noninterest expense 641 163
-------- --------
Income (loss) before income taxes (567) (163)
Income tax expense (benefit) (266) --
-------- --------
Net income (loss) (301) $ (163)
======== ========
BALANCE SHEET DATA:
Assets 9,697 $ 146
Earning assets 8,095 103
Securities (1) 4,115 --
Loans (2) 3,510 --
Allowance for loan losses 42 --
Deposits 4,885 --
Shareholders' equity 4,636 137
PER SHARE DATA:
Earnings (losses) per share (.53) $ --
Book value (period end) 8.22 --
Tangible book value (period end) 8.22 --
PERFORMANCE RATIOS:
Return on average assets (6.97)% --%
Return on average equity (11.02) --
Net interest margin (3) 4.68 --
Efficiency (4) 551.09 --
CAPITAL AND LIQUIDITY RATIOS:
Average equity to average assets 63.25% --%
Leverage (4.00% required minimum) 47.97 --
Risk-based capital
Tier 1 84.17 --
Total 84.93 --
Average loans to average deposits 26.22 --
</TABLE>
- ----------------------
1. All securities are available for sale and are stated at fair value.
2. Loans are stated at gross amounts before allowance for loan losses.
3. Net interest income divided by average earning assets.
4. Noninterest expense divided by the sum of net interest income and
noninterest income, net of gains and losses on sales of assets.
3
<PAGE> 4
FIRST CAPITAL BANCSHARES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
BASIS OF PRESENTATION
The following discussion should be read in conjunction with the preceding
"Selected Financial Data" and the Company's Financial Statements and the Notes
thereto and the other financial data included elsewhere in this Annual Report.
The financial information provided below has been rounded in order to simplify
its presentation. However, the ratios and percentages provided below are
calculated using the detailed financial information contained in the Financial
Statements, the Notes thereto and the other financial data included elsewhere
in this Annual Report.
GENERAL
First Capital Bancshares, Inc. (the Company) is a bank holding company
headquartered in Bennettsville, South Carolina organized to own all of the
Common Stock of its subsidiary, First Capital Bank (the Bank). The Bank opened
for business on September 27, 1999. The principal business activity of the Bank
is to provide banking services to domestic markets, principally in Marlboro
County, South Carolina. The deposits of the Bank are insured by the Federal
Deposit Insurance Corporation.
Organizing activities for the Company began in December 1997. Upon the
completion of the application process with the Office of Thrift Supervision for
a savings bank charter and with the Federal Deposit Insurance Corporation for
deposit insurance, the Company was ready to issue stock. To fund its initial
operations, the Company sold 30,000 shares of common stock to its organizers at
$10.00 per share. On March 30, 1999, the Company commenced an initial public
offering of up to 720,000 shares of its common stock. The stock sale resulted
in the issuance of 563,728 shares at a price of $10.00 per share. The offering
resulted in capital totaling $5,116,188, net of selling expenses of $521,092.
The Bank began operations on September 27, 1999 at its temporary facility on
Highway 15/401 Bypass East in Bennettsville, South Carolina. The following
discussion should be read with an understanding of the Company's short history.
RESULTS OF OPERATIONS
For the year ended December 31, 1999
Net interest income for the year ended December 31, 1999 was $109,921. Total
interest income was $173,881 and was partially offset by interest expense of
$63,960. The primary components of interest income were interest from
investment securities of $58,313 and interest on funds in escrow during the
organizational period which totaled $46,148.
The Company's net interest spread and net interest margin were 1.86% and 4.68%,
respectively, in 1999. The largest component of average earning assets was
federal funds sold and other. Excess funds from the stock offering were
invested in federal funds until loans were generated.
The provision for loan losses was $42,309 in 1999. The charges to the provision
were primarily to maintain the allowance for loan losses at a level sufficient
to cover known and inherent losses in the loan portfolio.
Noninterest income for the year ended December 31, 1999 totaled $6,322. The
largest component of noninterest income was service charges on deposit accounts
which totaled $4,061 for the year. Other components of noninterest income
included other service charges, commissions and fees which totaled $2,261.
Noninterest expense for the year ended December 31, 1999 totaled $640,614.
Noninterest expense included $319,038 in pre-opening expenses. Salaries and
employee benefits totaled $339,379 for the period. Salaries included the cost
of key personnel employed during the organizational process. Other operating
expenses totaled $254,227 for the period. These expenses included a number of
one-time expenses associated with opening the Bank.
The Company's net loss for the year ended December 31, 1999 was $300,689. The
net loss for the year is after the recognization of an income tax benefit of
$265,991 for the period. As stated earlier, the net loss includes pre-opening
expenses of $319,038.
For the period December 19, 1997 to December 31, 1998
This period covered the initial organizational phase of the Company. Expenses
totaling $163,490 were incurred during this period to organize and form the
Company.
4
<PAGE> 5
FIRST CAPITAL BANCSHARES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
NET INTEREST INCOME
General. The largest component of the Company's net income is its net interest
income, which is the difference between the income earned on assets and
interest paid on deposits and borrowings used to support such assets. Net
interest income is determined by the yields earned on the Company's
interest-earning assets and the rates paid on its interest-bearing liabilities,
the relative amounts of interest-earning assets and interest-bearing
liabilities, and the degree of mismatch and the maturity and repricing
characteristics of its interest-earning assets and interest-bearing
liabilities. Net interest income divided by average interest-earning assets
represents the Company's net interest margin.
Average Balances, Income and Expenses and Rates. The following table sets
forth, for the period indicated, certain information related to the Company's
average balance sheet and its average yields on assets and average costs of
liabilities. Such yields are derived by dividing income or expense by the
average balance of the corresponding assets or liabilities. Average balances
have been derived from the daily balances throughout the period indicated. The
period December 19, 1997 to December 31, 1998 is not presented since this
information would not be meaningful.
AVERAGE BALANCES, INCOME AND EXPENSES AND RATES
<TABLE>
<CAPTION>
For the year ended
December 31, 1999
----------------------------------
Average Income/ Yield/
(Dollars in thousands) Balance Expense Rate
----------------------------------
<S> <C> <C> <C>
ASSETS:
Earning Assets
Loans (1) $ 328 $ 34 10.37%
Securities, taxable (2) 795 58 7.29
Federal funds sold and other 1,226 82 6.69
-------- ------
Total earning assets 2,349 174 7.41
-------- ------
Cash and due from banks 1,156
Premises and equipment 786
Other assets 43
Allowance for loan losses (16)
--------
Total assets $ 4,318
========
LIABILITIES:
Interest-Bearing Liabilities
Interest-bearing transaction accounts $ 145 $ 4 2.76%
Savings deposits 100 4 4.00
Time deposits 633 38 6.00
Other short-term borrowings 276 18 6.52%
-------- ------
Total interest-bearing liabilities 1,154 64 5.55
-------- ------
Demand deposits 373
Accrued interest and other liabilities 60
Stockholders' equity 2,731
--------
Total liabilities and stockholders' equity $ 4,318
========
Net interest spread 1.86%
Net interest income $ 110
=====
Net interest margin 4.68%
</TABLE>
(1) There were no loans in nonaccrual status and the effect of fees collected
on loans is not significant to the computations. All loans and deposits are
domestic.
(2) Average investment securities exclude the valuation allowance on securities
available for sale.
5
<PAGE> 6
FIRST CAPITAL BANCSHARES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
NET INTEREST INCOME - CONTINUED
Analysis of Changes in Net Interest Income. Due to 1999 being the year of
commencement, all interest income and expense is attributable to the volume of
earning assets and interest-bearing liabilities, respectively.
Interest Sensitivity. The Company monitors and manages the pricing and maturity
of its assets and liabilities in order to diminish the potential adverse impact
that changes in interest rates could have on its net interest income. The
principal monitoring technique employed by the Company is the measurement of
the Company's interest sensitivity "gap," which is the positive or negative
dollar difference between assets and liabilities that are subject to interest
rate repricing within a given period of time. Interest rate sensitivity can be
managed by repricing assets or liabilities, selling securities available for
sale, replacing an asset or liability at maturity, or adjusting the interest
rate during the life of an asset or liability. Managing the amount of assets
and liabilities repricing in this same time interval helps to hedge the risk
and minimize the impact on net interest income of rising or falling interest
rates.
The following table sets forth the Company's interest rate sensitivity at
December 31, 1999.
INTEREST SENSITIVITY ANALYSIS
<TABLE>
<CAPTION>
After One After Three Greater Than
Within Through Through One Year
One Three Twelve Within or Non-
(Dollars in thousands) Month Months Months One Year sensitive Total
------- --------- ----------- -------- --------- -------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Earning Assets
Loans $ 113 $ 252 $ 589 $ 954 $2,556 $3,510
Securities -- -- -- -- 4,115 4,115
Federal funds sold 470 -- -- 470 -- 470
------- ------- ------- ------- ------ ------
Total earning assets 583 252 589 1,424 6,671 8,095
------- ------- ------- ------- ------ ------
LIABILITIES
Interest-bearing liabilities
Interest-bearing deposits
Demand deposits 625 -- -- 625 -- 625
Savings deposits 551 -- -- 551 -- 551
Time deposits -- 755 2,580 3,335 -- 3,335
------- ------- ------- ------- ------ ------
Total interest-bearing 1,176 755 2,580 4,511 -- 4,511
deposits ------- ------- ------- ------- ------ ------
Federal funds purchased 140 -- -- 140 -- 140
------- ------- ------- ------- ------ ------
Total interest-bearing 1,316 755 2,580 4,651 -- 4,651
liabilities ------- ------- ------- ------- ------ ------
Period gap $ (733) $ (503) $(1,991) $(3,227) $6,671
======= ======= ======= ======= ======
Cumulative gap $ (733) $(1,236) $(3,227) $(3,227) $3,444
======= ======= ======= ======= ======
Ratio of cumulative gap to total earning
assets (9.05)% (15.27)% (39.86)% (39.86)% 42.54%
</TABLE>
The above table reflects the balances of interest-earning assets and
interest-bearing liabilities at the earlier of their repricing or maturity
dates. Overnight federal funds sold are reflected at the earliest pricing
interval due to the immediately available nature of the instruments. Debt
securities are reflected at each instrument's ultimate maturity date. Scheduled
payment amounts of fixed rate amortizing loans are reflected at each scheduled
payment date. Scheduled payment amounts of variable rate amortizing loans are
reflected at each scheduled payment date until the loan may be repriced
contractually; the unamortized balance is reflected at that point.
Interest-bearing liabilities with no contractual maturity, such as savings
deposits and interest-bearing transaction accounts, are reflected in the
earliest repricing period due to contractual arrangements which give the Company
the opportunity to vary the rates paid on those deposits within a thirty-day or
shorter period. Fixed rate time deposits, principally certificates of deposit,
are reflected at their contractual maturity date. Federal funds purchased mature
on a daily basis and are presented in the earliest pricing period.
6
<PAGE> 7
FIRST CAPITAL BANCSHARES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
NET INTEREST INCOME - CONTINUED
The Company generally would benefit from increasing market rates of interest
when it has an asset-sensitive gap position and generally would benefit from
decreasing market rates of interest when it is liability-sensitive. The Company
is liability sensitive over the one month to twelve month time frame. However,
the Company's gap analysis is not a precise indicator of its interest
sensitivity position. The analysis presents only a static view of the timing of
maturities and repricing opportunities, without taking into consideration that
changes in interest rates do not affect all assets and liabilities equally. For
example, rates paid on a substantial portion of core deposits may change
contractually within a relatively short time frame, but those rates are viewed
by management as significantly less interest-sensitive than market-based rates
such as those paid on non-core deposits. Accordingly, management believes a
liability-sensitive gap position is not as indicative of the Company's true
interest sensitivity as it would be for an organization which depends to a
greater extent on purchased funds to support earning assets. Net interest
income may be impacted by other significant factors in a given interest rate
environment, including changes in the volume and mix of earning assets and
interest-bearing liabilities.
PROVISION AND ALLOWANCE FOR LOAN LOSSES
General. The Company has developed policies and procedures for evaluating the
overall quality of its credit portfolio and the timely identification of
potential problem credits. On a quarterly basis, the Company's Board of
Directors reviews and approves the appropriate level for the Company's
allowance for loan losses based upon management's recommendations, the results
of the internal monitoring and reporting system, and an analysis of economic
conditions in its market. The objective of management has been to fund the
allowance for loan losses at approximately 1% of total loans outstanding until
a history is established.
Additions to the allowance for loan losses, which are expensed as the provision
for loan losses on the Company's income statement, are made periodically to
maintain the allowance at an appropriate level based on management's analysis
of the potential risk in the loan portfolio. Loan losses and recoveries are
charged or credited directly to the allowance. The amount of the provision is a
function of the level of loans outstanding, the level of nonperforming loans,
historical loan loss experience, the amount of loan losses actually charged
against the reserve during a given period, and current and anticipated economic
conditions.
The Company's allowance for loan losses is based upon judgments and assumptions
of risk elements in the portfolio, future economic conditions, and other
factors affecting borrowers. The process includes identification and analysis
of loss potential in various portfolio segments utilizing a credit risk grading
process and specific reviews and evaluations of significant problem credits. In
addition, management monitors the overall portfolio quality through observable
trends in delinquency, charge-offs, and general and economic conditions in the
service area. The adequacy of the allowance for loan losses and the
effectiveness of the Company's monitoring and analysis system are also reviewed
periodically by the banking regulators and the Company's independent auditors.
Based on present information and an ongoing evaluation, management considers
the allowance for loan losses to be adequate to meet presently known and
inherent risks in the loan portfolio. 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 or may not be accurate. Thus,
there can be no assurance that charge-offs in future periods will not exceed
the allowance for loan losses or that additional increases in the allowance for
loan losses will not be required. The Company does not allocate the allowance
for loan losses to specific categories of loans but evaluates the adequacy on
an overall portfolio basis utilizing a risk grading system.
The following table sets forth certain information with respect to the
Company's allowance for loan losses for the year ended December 31, 1999.
7
<PAGE> 8
FIRST CAPITAL BANCSHARES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
ALLOWANCE FOR LOAN LOSSES
<TABLE>
<CAPTION>
(Dollars in thousands) 1999
--------
<S> <C>
Total loans outstanding at end of period $ 3,510
========
Average loans outstanding $ 328
========
Balance of allowance for loan losses at beginning of year $ --
Loan losses:
Commercial, financial and agricultural --
Real estate - mortgage --
Consumer --
--------
Total loan losses --
--------
Recoveries of previous loan losses:
Commercial, financial and agricultural --
Real estate - mortgage --
Consumer --
--------
Total recoveries --
--------
Net loan losses --
Provision for loan losses 42
--------
Balance of allowance for loan losses at end of period $ 42
========
Allowance for loan losses to period end loans 1.20%
Net charge-offs to average loans --
</TABLE>
NONPERFORMING ASSETS
Nonperforming Assets. There were no nonperforming assets at December 31, 1999.
Accrual of interest is discontinued on a loan when management believes, after
considering economic and business conditions and collection efforts, that the
borrower's financial condition is such that the collection of interest is
doubtful. A delinquent loan is generally placed in nonaccrual status when it
becomes 90 days or more past due. When a loan is placed in nonaccrual status,
all interest which has been accrued on the loan but remains unpaid is reversed
and deducted from current earnings as a reduction of reported interest income.
No additional interest is accrued on the loan balance until the collection of
both principal and interest becomes reasonably certain. When a problem loan is
finally resolved, there may ultimately be an actual writedown or charge-off of
the principal balance of the loan which would necessitate additional charges to
earnings. For all periods presented, the additional interest income, which
would have been recognized into earnings if the Company's nonaccrual loans had
been current in accordance with their original terms, is immaterial.
Potential Problem Loans. At December 31, 1999, the Company had not identified
any criticized or classified loans through its internal review mechanisms. The
results of this internal review process are considered in determining
management's assessment of the adequacy of the allowance for loan losses.
However, the overall objective of the Company has been to maintain the
allowance for loan losses at approximately 1.00% of total loans to provide for
potential problem loans.
8
<PAGE> 9
FIRST CAPITAL BANCSHARES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
NONINTEREST INCOME AND EXPENSE
Noninterest Income. The largest component of noninterest income was service
charges on deposit accounts which totaled $4,061 for the year ended December 31,
1999. This amount included NSF and overdraft fees of $2,855.
The following table sets forth the principal components of noninterest income
for the year ended December 31, 1999.
<TABLE>
<CAPTION>
(Dollars in thousands) 1999
------
<S> <C>
Service charges on deposit accounts $ 4
Other income 2
------
Total noninterest income $ 6
======
</TABLE>
Noninterest Expense. Salaries and employee benefits, which totaled $339,379 for
the year ended December 31, 1999, comprised the largest component of
noninterest expense. Of this total, $265,403 related to salaries prior to the
Bank's opening on September 27, 1999. Other operating expense totaled $254,227
for the year ended December 31, 1999. Pre-opening expenses associated with
forming the Company totaling $105,563 were included in other operating expense
for the year ended December 31, 1999.
The Company incurred expenses totaling $163,490 for the period December 19,
1997 to December 31, 1998. All of these expenses were associated with the
organization and formation of the Company.
The following table sets forth the primary components of noninterest expense
for the year ended December 31, 1999 and for the period December 19, 1997 to
December 31, 1998.
<TABLE>
<CAPTION>
(Dollars in thousands) 1999 1998
--------- --------
<S> <C> <C>
Salaries and employee benefits $ 339 $ 66
Net occupancy expense 34 --
Office supplies, forms and stationery 38 --
Data processing 43 --
Professional fees 32 51
Telephone 11 --
Other 144 46
--------- --------
Total noninterest expense $ 641 $ 163
========= ========
Efficiency ratio 551.09% --
</TABLE>
EARNING ASSETS
Loans. Loans are the largest category of earning assets and typically provide
higher yields than the other types of earning assets. Associated with the
higher loan yields are the inherent credit and liquidity risks which management
attempts to control and counterbalance. Loans averaged $328,000 in 1999. At
December 31, 1999, total loans were $3,510,354.
The following table sets forth the composition of the loan portfolio by
category at the dates indicated and highlights the Company's general emphasis
on consumer and mortgage lending.
9
<PAGE> 10
FIRST CAPITAL BANCSHARES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
COMPOSITION OF LOAN PORTFOLIO
<TABLE>
<CAPTION>
December 31,
1999
-----------------------
Percent
(Dollars in thousands) Amount of Total
-------- ---------
<S> <C> <C>
Commercial and agricultural $ 582 16.58%
Real estate
Construction 65 1.85
Mortgage-residential 952 27.12
Mortgage-nonresidential 826 23.53
Consumer and other 1,085 30.92
-------- ---------
Total loans 3,510 100.00%
=========
Allowance for loan losses 42
--------
Net loans $ 3,468
========
</TABLE>
The largest component of loans in the Company's loan portfolio is consumer
loans. At December 31, 1999 consumer loans totaled $1,085,346 and represented
30.92% of the total loan portfolio.
The Company's loan portfolio is also comprised heavily of real estate mortgage
loans. At December 31, 1999, real estate mortgage loans totaled $1,778,250 and
represented 50.65% of the total loan portfolio.
In the context of this discussion, a "real estate mortgage loan" is defined as
any loan, other than loans for construction purposes, secured by real estate,
regardless of the purpose of the loan. It is common practice for financial
institutions in the Company's market area to obtain a security interest in real
estate whenever possible, in addition to any other available collateral. This
collateral is taken to reinforce the likelihood of the ultimate repayment of
the loan and tends to increase the magnitude of the real estate loan portfolio
component.
Residential mortgage loans totaled $952,266 at December 31, 1999. Residential
real estate loans consist of first and second mortgages on single or
multi-family residential dwellings. Nonresidential mortgage loans, which
include commercial loans and other loans secured by multi-family properties and
farmland, totaled $825,984 at December 31, 1999. The demand for residential and
commercial real estate loans in the Bennettsville market has remained stable.
The Company has been able to compete favorably for residential mortgage loans
with other financial institutions by offering fixed rate products having three
and five year call provisions.
Commercial and industrial loans totaled $581,758 at December 31, 1999 and
comprised 16.58% of the total portfolio.
The Company's loan portfolio reflects the diversity of its market. The
Company's home office is located in Marlboro County, South Carolina. The
economy of Bennettsville contains elements of medium and light manufacturing
and distribution facilities. Management expects the area to remain stable in
the near future. The Company plans to open future branching locations in
McColl, South Carolina and Laurinburg, North Carolina. The diversity of the
economy creates opportunities for many types of lending. The Company does not
engage in foreign lending.
The repayment of loans in the loan portfolio as they mature is also a source of
liquidity for the Company. The following table sets forth the Company's loans
maturing within specified intervals at December 31, 1999.
10
<PAGE> 11
FIRST CAPITAL BANCSHARES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LOAN MATURITY SCHEDULE AND SENSITIVITY TO CHANGES IN INTEREST RATES
<TABLE>
<CAPTION>
Over One Year
One Year Through Over Five
(Dollars in thousands) or Less Five Years Years Total
------- ----------- ----------- ---------
<S> <C> <C> <C> <C>
Commercial and industrial $ 393 $ 189 $ -- $ 582
Real estate 311 1,084 448 1,843
Consumer and other 250 745 90 1,085
------- ----------- ----------- ---------
954 2,018 538 3,510
------- ----------- ----------- ---------
Loans maturing after one year with: $ 2,556
Fixed interest rates --
---------
Floating interest rates $ 2,556
=========
</TABLE>
The information presented in the above table is based on the contractual
maturities of the individual loans, including loans which may be subject to
renewal at their contractual maturity. Renewal of such loans is subject to
review and credit approval as well as modification of terms upon their
maturity. Consequently, management believes this treatment presents fairly the
maturity and repricing structure of the loan portfolio shown in the above
table.
Investment Securities. The investment securities portfolio is the largest
component of the Company's total earning assets. Total securities averaged
$795,000 in 1999. At December 31, 1999, the total securities portfolio was
$4,114,867. All securities were designated as available for sale and were
recorded at their estimated fair value. The excess funds generated from the
stock offering were invested in investment securities until funds can be
invested in higher-yielding loans.
The following table sets forth the book value of the securities held by the
Company at December 31, 1999.
BOOK VALUE OF SECURITIES
<TABLE>
<CAPTION>
1999
--------
(Dollars in thousands)
<S> <C>
U.S. Government agencies $ 4,115
--------
Total securities $ 4,115
========
</TABLE>
The following table sets forth the scheduled maturities and average yields of
securities held at December 31, 1999.
INVESTMENT SECURITIES MATURITY DISTRIBUTION AND YIELDS
<TABLE>
<CAPTION>
After One After Five
But Within But Within
Five Years Ten Years Total
-------------- --------------- ---------------
Amount Yield Amount Yield Amount Yield
------ ----- ------ ----- ------- -----
<S> <C> <C> <C> <C> <C> <C>
(Dollars in thousands)
U.S. Government agencies $ 299 5.94% $ 1,458 7.21% $ 1,757 7.12%
------- ------ -------
Total (1) $ 299 5.94% $ 1,458 7.21% $ 1,757 7.12%
======= ====== =======
</TABLE>
(1) Excludes mortgage-backed securities totaling $2,357,520 with a yield of
7.33%.
Other attributes of the securities portfolio, including yields and maturities,
are discussed above in "---Net Interest Income--- Interest Sensitivity."
Short-Term Investments. Short-term investments, which consist primarily of
federal funds sold, averaged $1,226,000 in 1999. At December 31, 1999,
short-term investments totaled $470,000. These funds are an important source of
the Company's liquidity. Federal funds are generally invested in an earning
capacity on an overnight basis.
11
<PAGE> 12
FIRST CAPITAL BANCSHARES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
DEPOSITS AND OTHER INTEREST-BEARING LIABILITIES
Average interest-bearing liabilities totaled $1,154,000 in 1999. Average
interest-bearing deposits totaled $878,000 in 1999.
Deposits. Average total deposits totaled $1,251,000 during 1999. At December
31, 1999, total deposits were $4,884,779.
The following table sets forth the deposits of the Company by category as of
December 31, 1999.
DEPOSITS
<TABLE>
<CAPTION>
1999
------------------
Percent
(Dollars in thousands) of
Amount Deposits
------ --------
<S> <C> <C>
Demand deposit accounts $ 374 7.66%
NOW accounts 625 12.79
Money market accounts 496 10.15
Savings accounts 55 1.13
Time deposits less than $100,000 1,753 35.89
Time deposits of $100,000 or over 1,582 32.38
------------------
Total deposits $4,885 100.00%
==================
</TABLE>
DEPOSITS AND OTHER INTEREST-BEARING LIABILITIES
Core deposits, which exclude certificates of deposit of $100,000 or more,
provide a relatively stable funding source for the Company's loan portfolio and
other earning assets. The Company's core deposits were $3,302,588 at December
31, 1999.
Deposits, and particularly core deposits, have been the Company's primary
source of funding and have enabled the Company to meet successfully both its
short-term and long-term liquidity needs. Management anticipates that such
deposits will continue to be the Company's primary source of funding in the
future. The Company's loan-to-deposit ratio was 71.86% at December 31, 1999.
The maturity distribution of the Company's time deposits over $100,000 at
December 31, 1999, is set forth in the following table:
MATURITIES OF CERTIFICATES OF DEPOSIT OF $100,000 OR MORE
<TABLE>
<CAPTION>
After Three After Six
Within Through Through After
Three Six Twelve Twelve
(Dollars in thousands) Months Months Months Months Total
--------- ----------- ----------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Certificates of deposit of $100,000 or more $ 732 $ 850 $ -- $ -- $ 1,582
</TABLE>
Approximately 46.27% of the Company's time deposits over $100,000 had scheduled
maturities within three months, and all time deposits over $100,000 had
maturities within six months. Large certificate of deposit customers tend to be
extremely sensitive to interest rate levels, making these deposits less
reliable sources of funding for liquidity planning purposes than core deposits.
12
<PAGE> 13
FIRST CAPITAL BANCSHARES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
CAPITAL
The Federal Reserve Board and bank regulatory agencies require bank holding
companies and financial institutions to maintain capital at adequate levels
based on a percentage of assets and off-balance sheet exposures, adjusted for
risk weights ranging form 0% to 100%. Under the risk-based standard, capital is
classified into two tiers. Tier 1 capital of the Company consists of common
stockholders' equity minus certain intangible assets. Tier 2 capital consists
of the allowance for loan losses subject to certain limitations. A bank holding
company's qualifying capital base for purposes of its risk-based capital ratio
consists of the sum of its Tier 1 and Tier 2 capital. The regulatory minimum
requirements are 4% for Tier 1 and 8% for total risk-based capital. The holding
company and banking subsidiary are also required to maintain capital at a
minimum level based on average assets, which is known as the leverage ratio.
Only the strongest bank holding companies and banks are allowed to maintain
capital at the minimum requirement. All others are subject to maintaining
ratios 100 to 200 basis points above the minimum.
RISK-BASED CAPITAL RATIOS
<TABLE>
<CAPTION>
The Bank The Company
------------ ------------
<S> <C> <C>
Tier 1 capital:
Common shareholders' equity $ 4,162,084 $ 4,652,009
------------ ------------
Total Tier 1 capital 4,162,084 4,652,009
Tier 2 capital:
Allowable allowance for loan losses 42,309 42,309
------------ ------------
Tier 2 capital additions -- --
------------ ------------
Total capital $ 4,204,393 $ 4,694,318
============ ============
Risk adjusted assets $ 5,433,237 $ 5,527,237
============ ============
Total assets $ 9,222,697 $ 9,697,000
============ ============
Risk-based capital ratios:
Tier 1 capital 76.89% 84.17%
Total capital 77.67 84.93
Tier 1 leverage ratio 45.30 47.97
</TABLE>
LIQUIDITY MANAGEMENT AND CAPITAL RESOURCES
Liquidity management involves monitoring the Company's sources and uses of
funds in order to meet its day-to-day cash flow requirements while maximizing
profits. Liquidity represents the ability of a Company to convert assets into
cash or cash equivalents without significant loss and to raise additional funds
by increasing liabilities. Without proper liquidity management, the Company
would not be able to perform the primary function of a financial intermediary
and would, therefore, not be able to meet the needs of the communities it
serves.
Liquidity management is made more complex because different balance sheet
components are subject to varying degrees of management control. For example,
the timing of maturities of the investment portfolio is very predictable and
subject to a high degree of control at the time investment decisions are made.
However, net deposit inflows and outflows are far less predictable and are not
subject to nearly the same degree of control.
13
<PAGE> 14
FIRST CAPITAL BANCSHARES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
IMPACT OF INFLATION
Unlike most industrial companies, the assets and liabilities of financial
institutions such as the Company are primarily monetary in nature. Therefore,
interest rates have a more significant effect on the Company's performance than
do the effects of changes in the general rate of inflation and change in
prices. In addition, interest rates do not necessarily move in the same
direction or in the same magnitude as the prices of goods and services. As
discussed previously, management seeks to manage the relationships between
interest sensitive assets and liabilities in order to protect against wide
interest rate fluctuations, including those resulting from inflation.
ACCOUNTING AND FINANCIAL REPORTING ISSUES
In February 1998, the Financial Accounting Standards Board released Statement
of Financial Accounting Standards (SFAS) 132, "Employers' Disclosures about
Pensions and Other Post-retirement Benefits". SFAS 132 amends SFAS 87, 88, and
106 and revises employer's disclosures about pensions and other post-retirement
benefit plans. It does not change the measurement or recognition of those
plans. At December 31, 1999, the Company was not affected by this Statement.
In June 1998, the Financial Accounting Standards Board released Statement of
Financial Accounting Standards (SFAS) 133, "Accounting for Derivative
Instruments and Hedging Activities". SFAS 133 requires that an entity recognize
all derivatives as either assets or liabilities in the statement of financial
position and measure these instruments at fair values. The accounting for
changes in the fair value of a derivative depends on the intended use of the
derivative and the resulting designation. The Bank generally does not purchase
derivative instruments or enter into hedging activities. This Statement was
effective for fiscal years beginning after June 15, 1999, but was amended by
SFAS 137.
The Company was not affected by Financial Accounting Standards Board Statements
134, 135 or 136.
In 1999, the Financial Accounting Standards Board released Statement of
Financial Accounting Standards (SFAS) 137, "Accounting for Derivative
Instruments and Hedging Activities-Deferral of the Effective Date of FASB
Statement No. 133". As stated, this Statement delays the effective date for the
implementation of SFAS 133.
This Statement is effective for fiscal years beginning after June 15, 2000.
INDUSTRY DEVELOPMENTS
On November 4, 1999, the U.S. Senate and House of Representatives each passed
the Gramm-Leach-Bliley Act, previously known as the Financial Services
Modernization Act of 1999. The Act was signed into law by President Clinton in
November 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 creates a new "financial holding company"
under the Bank Holding Company Act, which will permit holding companies to
engage in a statutorily provided list of financial activities, including
insurance and securities underwriting and agency activities, merchant banking,
and insurance company portfolio investment activities. The Act also authorizes
activities that are "complementary" to financial activities. The Act is
intended to grant to community banks certain powers as a matter of right that
larger institutions have accumulated on an ad hoc basis. Nevertheless, the Act
may have the result of increasing the amount of competition that the Bank faces
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 the Bank.
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 Bank cannot predict whether any of these
proposals will be adopted or, if adopted, how these proposals would affect the
Bank.
14
<PAGE> 15
FIRST CAPITAL BANCSHARES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THE YEAR 2000
Like many financial institutions, we rely on computers to conduct our business
and information systems processing. Industry experts were concerned that on
January 1, 2000, some computers would not be able to interpret the new year
properly, causing computer malfunctions. Although this did not happen, some
experts remain concerned that computer malfunctions may occur on other key
dates during 2000, such as October 10, 2000.
In accordance with bank regulatory guidelines, we developed and executed a plan
to ensure that our computer and telecommunication systems do not have these
Year 2000 problems. We rely on third party vendors to supply our computer and
telecommunication systems and other office equipment, and to process our data
and account information. Because we commenced operations in 1999, we had the
ability to choose vendors which we believed to be ready for the Year 2000. Our
Year 2000 plan extends to all of our vendors, including our vendors for core
data processing system, ATM hardware, account origination software, telephone
systems, and suppliers of office equipment, such as copy and fax machines.
Under our plan, we reviewed the test results, assurances, and warranties of all
of these vendors, and we believe that all these systems are Year 2000
compliant. Our technology and processing vendors work with many other financial
institutions, all of which, like us, are required by their bank regulators to
be Year 2000 compliant. Because our systems are substantially similar to those
used in many other banks, we believe that the scrutiny imposed by our
regulatory and the banking industry in general have significantly reduced the
Year 2000 related risks we might otherwise have faced.
We incurred approximately $6,400 in expenses in 1999 to implement our Year 2000
plan. Under our plan, we will continue to monitor the situation throughout
2000. We are executing this plan under the supervision of our board of
directors.
Our agreements with each of our primary vendors include contractual assurances
and warranties regarding Year 2000 compliance. Some of these warranties are
limited by disclaimers of liability which specifically exclude special,
incidental, indirect, and consequential damages. These limitations could limit
our ability to obtain recourse against a vendor who is not Year 2000 compliant
by excluding damages for things such as lost profits and customer lawsuits.
We have also evaluated our worst case scenario and developed contingency plans
in case Year 2000 issues do arise. In the worst case, our systems would be down
for a period of time and we would be required to complete all transactions and
keep all records manually. We will have all required forms and procedures in
place for manual processing, and believe we can do this for at least a week
without serious disruption of our business. We do not believe we will encounter
any issues that cannot be resolved within this period. Any affected systems
which cannot be fixed will be replaced with alternatives, although this is
unlikely to be necessary.
The Year 2000 issue may also negatively affect the business of our customers,
but to date we are not aware of any material Year 2000 issues affecting them.
We include Year 2000 readiness in our lending criteria to minimize risk.
However, this will not eliminate the issue, and any financial difficulties our
customers' experience caused by Year 2000 issues could impair their ability to
repay loans to the bank.
We did not have any significant Year 2000 problems on January 1, 2000, and we
do not expect to experience any significant Year 2000 problems. We also believe
that we will be able to continue to operate the business if one or more of our
vendors experience unanticipated Year 2000 problems.
15
<PAGE> 16
INDEPENDENT AUDITORS' REPORT
The Board of Directors
First Capital Bancshares, Inc.
Bennettsville, South Carolina
We have audited the accompanying consolidated balance sheets of First Capital
Bancshares, Inc. as of December 31, 1999 and 1998 and the related consolidated
statements of income, changes in shareholders' equity and comprehensive income
and cash flows for the year ended December 31, 1999 and for the period December
19, 1997 to December 31, 1998. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of First Capital Bancshares, Inc.
as of December 31, 1999 and 1998 and the results of their operations and cash
flows for the year ended December 31, 1999 and for the period December 19, 1997
to December 31, 1998 in conformity with generally accepted accounting
principles.
Tourville, Simpson, & Caskey, L.L.P.
Columbia, South Carolina
February 18, 2000
16
<PAGE> 17
FIRST CAPITAL BANCSHARES, INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
-------------- --------------
<S> <C> <C>
ASSETS Cash and cash equivalents:
Cash and due from banks $ 486,492 $ 103,293
Federal funds sold 470,000 --
-------------- --------------
956,492 103,293
Securities available-for-sale 4,114,867 --
Loans receivable 3,510,354 --
Less allowance for loan losses (42,309) --
-------------- --------------
Loans, net 3,468,045 --
Premises and equipment, net 797,776 --
Accrued interest receivable 59,866 --
Other assets 299,954 42,217
-------------- --------------
Total assets $ 9,697,000 $ 145,510
============== ==============
LIABILITIES
Deposits:
Non-interest bearing transaction accounts $ 373,959 $ --
Interest bearing transaction accounts 625,052 --
Savings 550,976 --
Time deposits $100,000 and over 1,582,191 --
Other time deposits 1,752,601 --
-------------- --------------
4,884,779 --
Federal funds purchased 140,000 --
Accrued interest payable 26,762 --
Other liabilities 9,111 9,000
-------------- --------------
Total liabilities 5,060,652 9,000
-------------- --------------
Commitments and contingencies (Notes 11 and 12)
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 and 30,000 shares issued and outstanding
at December 31, 1999 and 1998, respectively 5,637 300
Capital surplus 5,110,551 299,700
Retained earnings (deficit) (464,179) (163,490)
Accumulated other comprehensive income (loss) (15,661) --
-------------- --------------
Total shareholders' equity 4,636,348 136,510
-------------- --------------
Total liabilities and shareholders' equity $ 9,697,000 $ 145,510
============== ==============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
17
<PAGE> 18
FIRST CAPITAL BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1999 AND FOR THE
PERIOD DECEMBER 19, 1997 TO DECEMBER 31, 1998
<TABLE>
<CAPTION>
INTEREST INCOME 1999 1998
-------------- --------------
<S> <C> <C>
Loans, including fees $ 34,029 $ --
Investment securities, taxable 58,313 --
Federal funds sold 35,391 --
Other interest income 46,148 --
-------------- --------------
173,881 --
-------------- --------------
INTEREST EXPENSE
Time deposits $100,000 and over 19,869 --
Other deposits 25,855 --
Federal funds purchased 77 --
Other borrowings 18,159 --
-------------- --------------
63,960 --
-------------- --------------
NET INTEREST INCOME 109,921 --
Provision for loan losses 42,309 --
-------------- --------------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 67,612 --
-------------- --------------
OTHER INCOME
Service charges on deposit accounts 4,061 --
Other service charges, commissions and fees 2,261 --
-------------- --------------
6,322 --
-------------- --------------
OTHER EXPENSE
Salaries and employee benefits 339,379 65,500
Occupancy expense 33,523 --
Furniture and equipment expense 13,485 --
Other operating expense 254,227 97,990
-------------- --------------
640,614 163,490
-------------- --------------
INCOME (LOSS) BEFORE INCOME TAXES (566,680) (163,490)
Income tax expense (benefit) (265,991) --
-------------- --------------
NET INCOME (LOSS) $ (300,689) $ (163,490)
============== ==============
PER SHARE
Average shares outstanding 563,728 --
Net income (loss) $ (.53) $ --
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
18
<PAGE> 19
FIRST CAPITAL BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
AND COMPREHENSIVE INCOME
FOR THE YEAR ENDED DECEMBER 31, 1999 AND FOR THE
PERIOD DECEMBER 19, 1997 TO DECEMBER 31, 1998
<TABLE>
<CAPTION>
Accumulated
Common Stock Retained Other
------------ Capital Earnings Comprehensive
Shares Amount Surplus (Deficit) Income Total
--------- --------- ---------- --------- --------- ----------
BALANCE,
DECEMBER 19, 1997
<S> <C> <C> <C> <C> <C> <C>
Issuance of common stock 30,000 $ 300 $ 299,700 $ $ $ 300,000
Net loss for the period (163,490) (163,490)
-------- --------- ----------- --------- ---------- -----------
BALANCE,
DECEMBER 31, 1998 30,000 300 299,700 (163,490) 136,510
Issuance of common stock 533,728 5,337 5,331,943 5,337,280
Cost of common stock issuance (521,092) (521,092)
Net income (loss) (300,689) (300,689)
Other comprehensive income,
net of tax of $8,067 (15,661) (15,661)
-----------
Comprehensive income (loss) (316,350)
-------- --------- ----------- --------- --------- -----------
BALANCE,
DECEMBER 31, 1999 563,728 $ 5,637 $ 5,110,551 $(464,179) $ (15,661) $ 4,636,348
======== ========= =========== ========= ========== ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
19
<PAGE> 20
FIRST CAPITAL BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1999 AND FOR THE
PERIOD DECEMBER 19, 1997 TO DECEMBER 31, 1998
<TABLE>
<CAPTION>
CASH FLOWS FROM OPERATING ACTIVITIES: 1999 1998
-------------- --------------
<S> <C> <C>
Net income (loss) $ (300,689) $ (163,490)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities
Provision for loan losses 42,309 -
Depreciation and amortization 21,013 -
Accretion and premium amortization (1,366) -
Deferred income tax provision (benefit) (274,253) -
Increase in interest receivable (59,866) -
Increase in interest payable 26,762 -
(Increase) decrease in other assets 41,283 (42,217)
Increase in other liabilities 111 9,000
-------------- --------------
Net cash used by operating activities (504,696) (196,707)
-------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of securities available-for-sale (4,190,782) -
Maturities and calls of securities available-for-sale 53,553 -
Net increase in loans made to customers (3,510,354) -
Purchase of premises and equipment (818,789) -
Purchases of Federal Home Loan Bank (16,700) -
-------------- --------------
Net cash used by investing activities (8,483,072) -
-------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in demand deposits, interest
bearing transaction accounts and savings accounts 1,549,987 -
Net increase in certificates of deposit
and other time deposits 3,334,792 -
Net increase in federal funds purchased 140,000 -
Issuance of common stock, net of direct costs 4,816,188 300,000
-------------- --------------
Net cash provided by financing activities 9,840,967 300,000
-------------- --------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 853,199 103,293
CASH AND CASH EQUIVALENTS, BEGINNING 103,293 -
-------------- --------------
CASH AND CASH EQUIVALENTS, ENDING $ 956,492 $ 103,293
============== ==============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
20
<PAGE> 21
FIRST CAPITAL BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION AND CONSOLIDATION - First Capital Bancshares, Inc. (the
Company) was incorporated on December 19, 1997 to organize and own all of the
common stock of First Capital Bank (the Bank). First Capital Bank, a savings
bank, opened for business on September 27, 1999. The principal business activity
of the Bank is to provide banking services to domestic markets, principally in
Marlboro County, South Carolina. The consolidated financial statements include
the accounts of the Company and the Bank. All significant intercompany balances
and transactions have been eliminated in the consolidation.
PRE-OPENING EXPENSES - The activities associated with organizing the Bank were
conducted in the name of the Company during the developmental stage period
(December 19, 1997 to September 27, 1999).
On September 27, 1999, the close of the developmental stage period, the Company
acquired the following assets and assumed the following liabilities:
<TABLE>
<S> <C>
Cash and cash equivalents $ 3,851,377
Premises and equipment 668,048
Due to investors (9,000)
Common stock subscription proceeds,
net of $491,587 expenses of offering (4,970,343)
--------------
Net pre-opening expenses $ (459,918)
==============
</TABLE>
The common stock subscription proceeds above represent those proceeds as of
September 27, 1999. The initial stock offering remained open until October 29,
1999. The final amount of proceeds from the stock issuance, net of direct costs
was $5,116,188. Net pre-opening expenses included in the statements of income
for the year ended December 31, 1999 and for the period December 19, 1997 to
December 31, 1998 was $482,528.
MANAGEMENT'S ESTIMATES - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Material estimates that are particularly susceptible to significant change
relate to the determination of the allowance for losses on loans, including
valuation allowances for impaired loans and the valuation of real estate
acquired in connection with foreclosures or in satisfaction of loans. In
connection with the determination of the allowances for losses on loans and
foreclosed real estate, management obtains independent appraisals for
significant properties. Management must also make estimates in determining the
estimated useful lives and methods for depreciating premises and equipment.
While management uses available information to recognize losses on loans and
foreclosed real estate, future additions to the allowances may be necessary
based on changes in local economic conditions. In addition, regulatory agencies,
as an integral part of their examination process, periodically review the
Company's allowances for losses on loans and foreclosed real estate. Such
agencies may require the Company to recognize additions to the allowances based
on their judgments about information available to them at the time of their
examination. Because of these factors, it is reasonably possible that the
allowances for losses on loans and foreclosed real estate may change materially
in the near term.
SIGNIFICANT GROUP CONCENTRATIONS OF CREDIT RISK - Most of the Company's
activities are with customers located within Marlboro County in South Carolina.
The types of securities that the Company invests in are discussed in Note 3. The
types of lending that the Company engages in are discussed in Note 4. The
Company does not have any significant concentrations to any one industry or
customer.
SECURITIES AVAILABLE-FOR-SALE - Securities available-for-sale are carried at
amortized cost and adjusted to estimated fair value by recognizing the aggregate
unrealized gains or losses in a valuation account. Aggregate market valuation
adjustments are recorded in stockholders' equity net of deferred income taxes.
Reductions in fair value considered by management to be other than temporary are
reported as a realized loss and a reduction in the cost basis of the security.
The adjusted cost basis of investments available-for-sale is determined by
specific identification and is used in computing the gain or loss upon sale.
21
<PAGE> 22
FIRST CAPITAL BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
LOANS - Loans are stated at their unpaid principal balance. Interest income is
computed using the simple interest method and is recorded in the period earned.
When serious doubt exists as to the collectibility of a loan or when a loan
becomes 90 days past due as to principal or interest, interest income is
generally discontinued unless the estimated net realizable value of collateral
exceeds the principal balance and accrued interest. When interest accruals are
discontinued, income earned but not collected is reversed.
Impaired loans are measured based on the present value of discounted expected
cash flows. When it is determined that a loan is impaired, a direct charge to
bad debt expense is made for the difference between the net present value of
expected future cash flows based on the contractual rate and discount rate and
the Company's recorded investment in the related loan. The corresponding entry
is to a related valuation account. Interest is discontinued on impaired loans
when management determines that a borrower may be unable to meet payments as
they become due.
ALLOWANCE FOR LOAN LOSSES - An allowance for possible loan losses is maintained
at a level deemed appropriate by management to provide adequately for known and
inherent risks in the loan portfolio. The allowance is based upon a continuing
review of past loan loss experience, current and future economic conditions
which may affect the borrowers' ability to pay and the underlying collateral
value of the loans. Loans which are deemed to be uncollectible are charged off
and deducted from the allowance. The provision for possible loan losses and
recoveries of loans previously charged off are added to the allowance.
PREMISES AND EQUIPMENT - Premises and equipment are stated at cost, less
accumulated depreciation. The provision for depreciation is computed by the
straight-line method, based on the estimated useful lives for furniture and
equipment of 5 to 10 years. Leasehold improvements are being amortized over 20
years. The cost of assets sold or otherwise disposed of, and the related
allowance for depreciation is eliminated from the accounts and the resulting
gains or losses are reflected in the income statement when incurred. Maintenance
and repairs are charged to current expense. The costs of major renewals and
improvements are capitalized.
INCOME TAXES - Income taxes are the sum of amounts currently payable to taxing
authorities and the net changes in income taxes payable or refundable in future
years. Income taxes deferred to future years are determined utilizing a
liability approach. This method gives consideration to the future tax
consequences associated with differences between financial accounting and tax
bases of certain assets and liabilities which are principally the allowance for
loan losses and depreciable premises and equipment.
RETIREMENT PLAN - The Company has a contributory 401(K) plan covering
substantially all employees. Under the plan, participants are permitted to make
discretionary contributions up to 15% of annual compensation. The Company waived
its option of matching employee contributions in 1999.
PER SHARE AMOUNTS - Income or loss per share is computed by dividing earnings by
the weighted average number of shares outstanding during the year.
STATEMENTS OF CASH FLOWS - For purposes of reporting cash flows in the financial
statements, the Company considers certain highly liquid debt instruments
purchased with a maturity of three months or less to be cash equivalents. Cash
equivalents include amounts due from banks and federal funds sold. Generally,
federal funds are sold for one day periods.
During 1999, interest paid on deposits and other borrowings totaled $37,198.
There was no interest paid during the period December 19, 1997 to December 31,
1998.
There were no income tax payments in 1999 or for the period December 19, 1997 to
December 31, 1998.
Changes in the valuation account of securities available-for-sale, including the
deferred tax effects, are considered noncash transactions for purposes of the
statement of cash flows and are presented in detail in the notes to the
financial statements.
OFF-BALANCE-SHEET FINANCIAL INSTRUMENTS - In the ordinary course of business,
the Company enters into off-balance-sheet financial instruments consisting of
commitments to extend credit and letters of credit. These financial instruments
are recorded in the financial statements when they become payable by the
customer.
22
<PAGE> 23
FIRST CAPITAL BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
COMPREHENSIVE INCOME - The Company has adopted SFAS 130, Reporting Comprehensive
Income. Accounting principles generally require that recognized revenue,
expenses, gains and losses be included in net income. Although certain changes
in assets and liabilities, such as unrealized gains and losses on
available-for-sale securities, are reported as a separate component of the
equity section of the balance sheet, such items, along with net income, are
components of comprehensive income.
The components of other comprehensive income and related tax effects are as
follows:
<TABLE>
<CAPTION>
1999
--------------
<S> <C>
Unrealized holding gains (losses) on
available-for-sale securities $ (23,728)
Reclassification adjustment for losses
(gains) realized in income -
--------------
Net unrealized gains (losses) (23,728)
Tax effect 8,067
--------------
Net-of-tax amount $ (15,661)
==============
</TABLE>
NOTE 2 - CASH AND DUE FROM BANKS
The Company is required by regulation to maintain average reserve balances with
the Federal Reserve Bank computed as a percentage of deposits. At December 31,
1999, the required cash reserve balance was satisfied by vault cash.
NOTE 3 - INVESTMENT SECURITIES
The amortized cost and estimated fair values of securities available-for-sale at
December 31, 1999 were:
<TABLE>
<CAPTION>
1999
------------------------------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
U.S. Government agencies and corporations $ 4,138,595 $ - $ 23,728 $ 4,114,867
============== ============== ============== ==============
</TABLE>
There were no sales of securities in 1999.
The following is a summary of maturities of securities available-for-sale as of
December 31, 1999. The amortized cost and estimated fair values are based on the
contractual maturity dates. Actual maturities may differ from contractual
maturities because borrowers may have the right to call or prepay obligations
with or without penalty.
<TABLE>
<CAPTION>
Amortized Estimated
Cost Fair Value
-------------- --------------
<S> <C> <C>
Due after one year but within five years $ 300,697 $ 298,917
Due after five years but within ten years 1,473,046 1,458,430
Mortgage-backed securities 2,364,852 2,357,520
-------------- --------------
$ 4,138,595 $ 4,114,867
============== ==============
</TABLE>
At December 31, 1999, securities having an amortized cost of $300,697 and an
estimated market value of $298,917 were pledged as collateral to secure public
deposits and for other purposes as required and permitted by law.
23
<PAGE> 24
FIRST CAPITAL BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4 - LOANS
Major classifications of loans receivable at December 31, 1999 are summarized as
follows:
<TABLE>
<CAPTION>
1999
--------------
<S> <C>
Real estate - construction $ 65,000
Real estate - mortgage 1,778,250
Commercial and industrial 581,758
Consumer and other 1,085,346
--------------
Total gross loans $ 3,510,354
==============
</TABLE>
Transactions in the allowance for loan losses for the year ended December 31,
1999 are summarized below:
<TABLE>
<CAPTION>
1999
--------------
<S> <C>
Balance, beginning of year $ -
Provision charged to operations 42,309
Recoveries on loans previously charged off -
Loans charged off -
--------------
Balance, end of year $ 42,309
==============
</TABLE>
There were no loans in nonaccrual status and no loans past due ninety days or
more at December 31, 1999.
NOTE 5 - PREMISES AND EQUIPMENT
Premises and equipment consisted of the following at December 31, 1999:
<TABLE>
<CAPTION>
1999
--------------
<S> <C>
Land and leasehold improvements $ 170,073
Buildings 330,081
Furniture and equipment 318,635
--------------
818,789
Less, accumulated depreciation 21,013
--------------
Premises and equipment, net $ 797,776
==============
</TABLE>
The Company has plans to renovate a building for the new corporate headquarters.
No commitments had been made at December 31, 1999 for these renovations.
NOTE 6 - DEPOSITS
The aggregate amount of time deposits in denominations of $100,000 or more at
December 31, 1999 was $1,582,191.
At December 31, 1999, the scheduled maturities of certificates of deposit were
as follows:
<TABLE>
<S> <C> <C>
2000 $ 3,334,792
==============
</TABLE>
24
<PAGE> 25
FIRST CAPITAL BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7 - SHAREHOLDERS' EQUITY
Dividends paid by the Bank are the primary source of funds available to the
Company. Banking regulations limit the amount of dividends which the Bank may
pay without obtaining prior regulatory approval. These restrictions are based on
the level of regulatory classified assets, the prior years' net earnings, and
the ratio of equity capital to total assets. At December 31, 1999, total
shareholders' equity of the Bank was $4,162,084 and was not available for
dividends.
NOTE 8 - OTHER OPERATING EXPENSE
Other operating expense for the year ended December 31, 1999 and for the period
December 19, 1997 to December 31, 1998 are summarized below:
<TABLE>
<CAPTION>
1999 1998
-------------- --------------
<S> <C> <C>
Professional fees $ 32,324 $ 51,404
Telephone 11,364 -
Office supplies, forms and stationery 37,792 -
Data processing 43,381 -
Postage and freight 5,561 -
Other 123,805 46,586
-------------- --------------
$ 254,227 $ 97,990
============== ==============
</TABLE>
NOTE 9 - INCOME TAXES
Income tax expense (benefit) for the year ended December 31, 1999 is summarized
as follows:
<TABLE>
<CAPTION>
1999
--------------
<S> <C>
Currently payable
Federal $ -
State 2,450
--------------
2,450
--------------
Deferred income taxes
Federal (221,535)
State (38,839)
--------------
(260,374)
--------------
Income tax expense (benefit) $ (257,924)
==============
Income tax expense (benefit) is allocated as follows:
To continuing operations $ (265,991)
To shareholders' equity 8,067
--------------
$ (257,924)
==============
</TABLE>
25
<PAGE> 26
FIRST CAPITAL BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 9 - INCOME TAXES - CONTINUED
The gross amounts of deferred tax assets and deferred tax liabilities as of
December 31, 1999 are as follows:
<TABLE>
<CAPTION>
1999
--------------
<S> <C>
Deferred tax assets:
Allowance for loan losses $ 16,323
Net operating loss carryforward 104,848
Organization costs 183,362
Available-for-sale securities 8,067
Contribution carryforward 50
--------------
Total deferred tax assets 312,650
Less, valuation allowance (24,717)
--------------
Net deferred tax assets 287,933
--------------
Deferred tax liabilities:
Accumulated depreciation 5,611
--------------
Net deferred tax asset $ 282,322
==============
</TABLE>
Deferred tax assets represent the future tax benefit of deductible differences
and, if its more likely than not that a tax asset will not be realized, a
valuation allowance is required to reduce the recorded deferred tax assets to
net realizable value. As of December 31, 1999, management has determined that it
is more likely than not that $274,053 of the total deferred tax asset will be
realized, and accordingly, has established a valuation allowance of $24,717.
The Company has a net operating loss for income tax purposes of $215,569 as of
December 31, 1999. This net operating loss expires in the year 2014.
A reconciliation between the income tax expense and the amount computed by
applying the federal statutory rate of 34% to income before income taxes for the
year ended December 31, 1999 follows:
<TABLE>
<CAPTION>
1999
--------------
<S> <C>
Tax expense at statutory rate $ (192,671)
State income tax, net of federal income tax benefit (34,703)
Change in the deferred tax asset valuation allowance (40,679)
Non-deductible items 2,062
--------------
$ (265,991)
==============
</TABLE>
NOTE 10 - LEASES
The Company leases a building that will be used for a future branch site in
Laurinburg, North Carolina from a third party. The initial lease term is for a
period of three years, with an option to buy the building at any time during the
lease term. The commencement date of the lease was July 1, 1999 and expires on
July 1, 2002. The monthly rental rate is $700 during the first year and $800 per
month during the second and third year. The purchase price under the option to
purchase is as follows: $165,000 during the first year of the lease, $169,950
during the second year, and $175,048 during the third year. Rental expense for
the year ended December 31, 1999 was $4,200.
Future minimum rent commitments under the noncancelable operating lease
agreement at December 31, 1999 was as follows:
<TABLE>
<S> <C>
2000 $ 9,000
2001 9,600
2002 4,800
----------
$ 23,400
==========
</TABLE>
26
<PAGE> 27
FIRST CAPITAL BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 11 - RELATED PARTY TRANSACTIONS
Certain parties (principally certain directors and executive officers of the
Company, their immediate families and business interests) were loan customers of
and had other transactions in the normal course of business with the Company.
Related party loans are made on substantially the same terms, including interest
rates and collateral, as those prevailing at the time for comparable
transactions with unrelated persons and do not involve more than the normal risk
of collectibility. As of December 31, 1999 the Bank had related party loans
totaling $393,000. During 1999, $394,000 of new loans were made to related
parties and repayments totaled $1,000.
For the year ended December 31, 1999, the Company paid a director $7,174 for
professional services relating to the sale of equipment in the building to be
used as the Company's new headquarters.
NOTE 12 - COMMITMENTS AND CONTINGENCIES
In the ordinary course of business, the Company may, from time to time, become a
party to legal claims and disputes. At December 31, 1999, management and legal
counsel are not aware of any pending or threatened litigation or unasserted
claims or assessments that could result in losses, if any, that would be
material to the financial statements.
NOTE 13 - FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
The Company is a party to financial instruments with off-balance-sheet risk in
the normal course of business to meet the financing needs of its customers.
These financial instruments consist of commitments to extend credit and standby
letters of credit. Commitments to extend credit are agreements to lend to a
customer as long as there is no violation of any condition established in the
contract. Commitments generally have fixed expiration dates or other termination
clauses and may require payment of a fee. A commitment involves, to varying
degrees, elements of credit and interest rate risk in excess of the amount
recognized in the balance sheets. The Company's exposure to credit loss in the
event of non-performance by the other party to the instrument is represented by
the contractual notional amount of the instrument. Since certain commitments are
expected to expire without being drawn upon, the total commitment amounts do not
necessarily represent future cash requirements. The Company uses the same credit
policies in making commitments to extend credit as it does for on-balance-sheet
instruments. Letters of credit are conditional commitments issued to guarantee a
customer's performance to a third party and have essentially the same credit
risk as other lending facilities.
Collateral held for commitments to extend credit and standby letters of credit
varies but may include accounts receivable, inventory, property, plant,
equipment and income-producing commercial properties.
The following table summarizes the Bank's off-balance-sheet financial
instruments whose contract amounts represent credit risk as of December 31,
1999:
<TABLE>
<CAPTION>
1999
--------------
<S> <C>
Commitments to extend credit $ 759,991
</TABLE>
Management is not aware of any significant concentrations of loans to classes of
borrowers or industries that would be affected similarly by economic conditions.
Although the Bank's loan portfolio is diversified, a substantial portion of its
borrowers' ability to honor the terms of their loans is dependent on the
economic conditions in Marlboro County and surrounding areas.
27
<PAGE> 28
FIRST CAPITAL BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 14 - REGULATORY MATTERS
The Company (on a consolidated basis) and the Bank are subject to various
regulatory capital requirements administered by the federal banking agencies.
Failure to meet minimum capital requirements can initiate certain mandatory and
possibly additional discretionary actions by regulators that, if undertaken,
could have a direct material effect on the Company's and Bank's financial
statements. Under capital adequacy guidelines and the regulatory framework for
prompt corrective action, the Company and the Bank must meet specific capital
guidelines that involve quantitative measures of their assets, liabilities and
certain off-balance-sheet items as calculated under regulatory accounting
practices. The capital amounts and classification are also subject to
qualitative judgments by the regulators about components, risk weightings, and
other factors. Prompt corrective action provisions are not applicable to bank
holding companies.
Quantitative measures established by regulation to ensure capital adequacy
require the Company and the Bank to maintain minimum amounts and ratios (set
forth in the following table) of total and Tier 1 capital (as defined in the
regulations) to risk-weighted assets (as defined) and of Tier 1 capital (as
defined) to total assets (as defined). Management believes, as of December 31,
1999, that the Company and the Bank met all capital adequacy requirements to
which they are subject.
As of December 31, 1999, the most recent notification from the Federal Deposit
Insurance Corporation categorized the Bank as well capitalized under the
regulatory framework for prompt corrective action. To be categorized as well
capitalized, an institution must maintain minimum total risk-based, Tier 1
risk-based and Tier 1 leverage ratios as set forth in the following tables.
There are no conditions or events since the notification that management
believes have changed the Bank's category. The Company's and the Bank's actual
capital amounts and ratios as of December 31, 1999 are also presented in the
table.
The following table summarizes the capital amounts and ratios and the regulatory
minimum requirements at December 31, 1999 for the Bank.
<TABLE>
<CAPTION>
To Be Well
Capitalized Under
For Capital Prompt Corrective
Actual Adequacy Purposes Action Provisions
------------------------ ------------------------ ----------------------------
Amount Ratio Amount Ratio Amount Ratio
------------ -------- ---------- ------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
DECEMBER 31, 1999
THE BANK
Total capital
(to risk weighted assets) $ 4,220,055 77.67% $ 434,659 8.00% $ 543,324 10.00%
Tier 1 capital
(to risk weighted assets) 4,177,746 76.89 217,329 4.00 325,994 6.00
Tier 1 capital
(to total assets) 4,177,746 45.30 368,908 4.00 461,135 5.00
</TABLE>
The Federal Reserve Board has similar requirements for bank holding companies.
The Company is currently not subject to these requirements because the Federal
Reserve guidelines contain an exemption for bank holding companies less than
$150,000,000 in consolidated assets.
NOTE 15 - UNUSED LINES OF CREDIT
As of December 31, 1999, the Company had unused lines of credit to purchase
federal funds from unrelated banks totaling $1,250,000. These lines of credit
are available on a one to fourteen day basis for general corporate purposes.
NOTE 16 - FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value of a financial instrument is the amount at which the asset or
obligation could be exchanged in a current transaction between willing parties,
other than in a forced or liquidation sale. Fair value estimates are made at a
specific point in time based on relevant market information and information
about the financial instruments. Because no market value exists for a
significant portion of the financial instruments, fair value estimates are based
on judgments regarding future expected loss experience, current economic
conditions, risk characteristics of various financial instruments, and other
factors.
28
<PAGE> 29
FIRST CAPITAL BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 16 - FAIR VALUE OF FINANCIAL INSTRUMENTS - CONTINUED
The following methods and assumptions were used to estimate the fair value of
significant financial instruments:
Cash and Due from Banks - The carrying amount is a reasonable estimate of fair
value.
Federal Funds Sold - Federal funds sold are for a term of one day and the
carrying amount approximates the fair value.
Securities Available-for-Sale - The fair values equal the carrying amount which
is the quoted market price. If quoted market prices are not available, fair
values are based on quoted market prices of comparable securities.
Loans - For certain categories of loans, such as variable rate loans which are
repriced frequently and have no significant change in credit risk, fair values
are based on the carrying amounts. The fair value of other types of loans is
estimated by discounting the future cash flows using the current rates at which
similar loans would be made to the borrowers with similar credit ratings and for
the same remaining maturities. Rates at December 31, 1999 approximate those in
effect during the Company's operations from September 27, 1999 through the end
of the year.
Deposits - The fair value of demand deposits, savings, and money market accounts
is the amount payable on demand at the reporting date. The fair values of
certificates of deposit are estimated using a discounted cash flow calculation
that applies current interest rates to a schedule of aggregated expected
maturities. Rates at December 31, 1999 approximate those in effect during the
Company's operations from September 27, 1999 through the end of the year.
Federal Funds Purchased - The carrying amount is a reasonable estimate of fair
value because these instruments typically have terms of one day.
Accrued Interest Receivable and Payable - The carrying value of these
instruments is a reasonable estimate of fair value.
Off-Balance Sheet Financial Instruments - The carrying amount for loan
commitments which are off-balance sheet financial instruments, approximates the
fair value since the obligations are typically based on current market rates.
The carrying values and estimated fair values of the Company's financial
instruments as of December 31, 1999 are as follows:
<TABLE>
<CAPTION>
1999
---------------------------------
Carrying Estimated
Amount Fair Value
-------------- --------------
<S> <C> <C>
FINANCIAL ASSETS:
Cash and due from banks $ 486,942 $ 486,942
Federal funds sold 470,000 470,000
Securities available-for-sale 4,114,867 4,114,867
Loans 3,510,354 3,510,354
Allowance for loan losses (42,309) (42,309)
Accrued interest receivable 59,866 59,866
FINANCIAL LIABILITIES:
Demand deposit, interest-bearing
transaction, and savings accounts $ 1,549,987 $ 1,549,987
Certificates of deposit and other time deposits 3,334,792 3,334,792
Federal funds purchased 140,000 140,000
Accrued interest payable 26,762 26,762
OFF-BALANCE SHEET FINANCIAL INSTRUMENTS:
Commitments to extend credit $ 759,991 $ 759,991
</TABLE>
29
<PAGE> 30
FIRST CAPITAL BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 17 - FIRST CAPITAL BANCSHARES, INC. (PARENT COMPANY ONLY)
Presented below are the condensed financial statements for First Capital
Bancshares, Inc. (Parent Company Only).
BALANCE SHEET
DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
------------- -------------
<S> <C> <C>
ASSETS
Cash $ 13,360 $ 103,293
Federal funds sold 470,000 -
Investment in banking subsidiary 4,162,084 -
Other assets - 42,217
------------- -------------
Total assets $ 4,645,444 $ 145,510
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Other liabilities 9,096 9,000
Shareholders' equity 4,636,348 136,510
------------- -------------
Total liabilities and shareholders' equity $ 4,645,444 $ 145,510
============= =============
</TABLE>
STATEMENTS OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1999 AND FOR THE
PERIOD DECEMBER 19, 1997 TO DECEMBER 31, 1998
<TABLE>
<CAPTION>
INCOME 1999 1998
------------- -------------
<S> <C> <C>
Interest on federal funds sold $ 8,561 $ -
Other interest income 46,148 -
Other income 1,250 -
------------- -------------
55,959 -
------------- -------------
EXPENSES
Other expenses 32,639 163,490
------------- -------------
INCOME (LOSS) BEFORE INCOME TAXES AND EQUITY IN
UNDISTRIBUTED EARNINGS (LOSSES) OF BANKING SUBSIDIARY 23,320 (163,490)
Income tax expense (benefit) 9,096 -
Equity in undistributed earnings (losses)
of banking subsidiary (314,913) -
------------- -------------
NET INCOME (LOSS) $ (300,689) $ (163,490)
============= =============
</TABLE>
30
<PAGE> 31
FIRST CAPITAL BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 17 - FIRST CAPITAL BANCSHARES, INC. (PARENT COMPANY ONLY) - CONTINUED
<TABLE>
<CAPTION>
CASH FLOWS FROM OPERATING ACTIVITIES 1999 1998
------------- -------------
<S> <C> <C>
Net income (loss) $ (300,689) $ (163,490)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities
Equity in undistributed earnings of
banking subsidiary 314,913 -
Pre-opening expenses transferred to the Bank 163,492 -
(Increase) decrease in other assets 42,217 (42,217)
Increase in other liabilities 96 9,000
------------- -------------
Net cash provided by operating activities 220,029 (196,707)
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of common stock 5,337,280 300,000
Purchase of the Bank's common stock (4,656,150) -
Costs of stock issuance (521,092) -
------------- -------------
Net cash provided by financing activities 160,038 300,000
------------- -------------
INCREASE IN CASH 380,067 103,293
CASH AND CASH EQUIVALENTS, BEGINNING 103,293 -
------------- -------------
CASH AND CASH EQUIVALENTS, ENDING $ 483,360 $ 103,293
============= =============
</TABLE>
31
<PAGE> 32
FIRST CAPITAL BANCSHARES, INC.
CORPORATE DATA
BOARD OF DIRECTORS
<TABLE>
<CAPTION>
NAME AND ADDRESS POSITION WITH COMPANY
---------------- ---------------------
<S> <C>
Shoukath Ansari, M.D. Secretary and Director
Bennettsville, SC
Wylie F. Cartrette Director
McColl, SC
James Aubrey Crosland, Sr. President and Director
Bennettsville, SC
Robert G. Dowdy Director
Bennettsville, SC
Harry L. Howell, Jr. Director
Laurinburg, NC
Luther D. Hutchins Director
Bennettsville, SC
Paul F. Rush, M.D. Director
Laurinburg, NC
Lee C. Shortt Chairman and Chief Executive Officer
Bennettsville, SC
</TABLE>
FIRST CAPITAL BANK
OFFICERS
<TABLE>
<CAPTION>
NAME POSITION
---- --------
<S> <C>
James Aubrey Crosland, Sr. President
J. Randy McDonald Chief Executive Officer
John M. Digby Chief Financial Officer and
Principal Accounting Officer
</TABLE>
32
<PAGE> 33
FIRST CAPITAL BANCSHARES, INC.
CORPORATE DATA
ANNUAL MEETING:
The Annual Meeting of Shareholders of First Capital Bancshares, Inc. will be
held at the new National Guard Armory, 725 South Parsonage Street Extension,
Bennettsville, South Carolina on Tuesday, April 25, 2000, at 2:00 p.m.
<TABLE>
<CAPTION>
CORPORATE OFFICE: GENERAL COUNSEL:
- ----------------- ----------------
<S> <C>
207 Highway 15/401 Bypass East Nelson Mullins Riley & Scarborough, L.L.P.
Bennettsville, South Carolina 29512 First Union Plaza
Phone: (843) 454-9337 999 Peachtree Street, NE/Suite 1400
Fax: (843) 454-9338 Atlanta, Georgia, 30309
STOCK TRANSFER DEPARTMENT: INDEPENDENT AUDITORS:
- -------------------------- ---------------------
Continental Stock Transfer & Trust Company Tourville, Simpson & Caskey, L.L.P.
2 Broadway 500 Taylor Street, Suite 101
New York, New York 10004 P.O. Box 1769
Columbia, S.C. 29202
STOCK INFORMATION:
- ------------------
</TABLE>
The Common Stock of First Capital Bancshares, Inc. is not listed on any
exchange. However, the stock is quoted on the NASDASQ OTC Bulletin Board under
the symbol "FCPB." The primary market maker of the Company's stock is Banc Stock
Financial Services, Inc. There were approximately 480 shareholders of record on
December 31, 1999.
COPIES OF THE COMPANY'S ANNUAL REPORT ON FORM 10-KSB FOR THE FISCAL YEAR ENDED
DECEMBER 31, 1999, AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, WILL BE
FURNISHED AT NO CHARGE TO SHAREHOLDERS AS OF THE RECORD DATE UPON WRITTEN
REQUEST TO: JOHN M. DIGBY, CHIEF FINANCIAL OFFICER, FIRST CAPITAL BANCSHARES,
INC., 207 HIGHWAY 15/401 BYPASS EAST, BENNETTSVILLE, SOUTH CAROLINA 29512.
THIS ANNUAL REPORT SERVES AS THE ANNUAL FINANCIAL DISCLOSURE STATEMENT FURNISHED
PURSUANT TO PART 350 OF THE FEDERAL DEPOSIT INSURANCE CORPORATIONS RULES AND
REGULATIONS. THIS STATEMENT HAS NOT BEEN REVIEWED, OR CONFIRMED FOR ACCURACY OR
RELEVANCE BY THE OFFICE OF THRIFT SUPERVISION.
33
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF THE COMPANY
FIRST CAPITAL BANK
22
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF FIRST CAPITAL BANCSHARES, INC. FOR THE TWELVE MONTHS
ENDED DECEMBER 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 486,492
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 470,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 4,114,867
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 3,510,354
<ALLOWANCE> 42,309
<TOTAL-ASSETS> 9,697,000
<DEPOSITS> 4,884,779
<SHORT-TERM> 140,000
<LIABILITIES-OTHER> 35,873
<LONG-TERM> 0
0
0
<COMMON> 5,637
<OTHER-SE> 4,630,711
<TOTAL-LIABILITIES-AND-EQUITY> 9,697,000
<INTEREST-LOAN> 34,029
<INTEREST-INVEST> 58,313
<INTEREST-OTHER> 81,539
<INTEREST-TOTAL> 173,881
<INTEREST-DEPOSIT> 45,724
<INTEREST-EXPENSE> 63,960
<INTEREST-INCOME-NET> 109,921
<LOAN-LOSSES> 42,309
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 640,614
<INCOME-PRETAX> (566,680)
<INCOME-PRE-EXTRAORDINARY> (566,680)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (300,689)
<EPS-BASIC> (.53)
<EPS-DILUTED> (.53)
<YIELD-ACTUAL> 4.68
<LOANS-NON> 0
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 0
<CHARGE-OFFS> 0
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 42,309
<ALLOWANCE-DOMESTIC> 42,309
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
