<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended JUNE 30, 1996
COMMISSION FILE NUMBER 33-46573
--------
CAPITAL HOLDINGS, INC.
----------------------
(Exact name of registrant as specified in its Charter)
OHIO 34-1588902
---- ----------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
5520 MONROE STREET, SYLVANIA, OH 43560
--------------------------------------
(Address of principal executive offices and zip code)
(419) 885-7379
--------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
(1) YES X (2) NO
----- -----
As of June 30, 1996, there were 1,884,051 shares of common stock outstanding.
<PAGE> 2
CAPITAL HOLDINGS, INC.
INDEX
<TABLE>
<CAPTION>
PAGE NUMBER
-----------
<S> <C> <C>
PART I. FINANCIAL INFORMATION
- ------------------------------
Item 1. Financial Statements (Unaudited):
Consolidated balance sheets
June 30, 1996 and December 31, 1995 3
Consolidated statements of income
Three months ended June 30, 1996 and 1995;
Six months ended June 30, 1996 and 1995 4
Consolidated statement of shareholders' equity
Six months ended June 30, 1996 and 1995 5
Consolidated statements of cash flows
Six months ended June 30, 1996 and 1995 6
Notes to consolidated financial statements 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 8 - 9
PART II. OTHER INFORMATION 10
- ---------------------------
SIGNATURES 11
- ----------
</TABLE>
2
<PAGE> 3
CAPITAL HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
<TABLE>
<CAPTION>
JUNE 30 DECEMBER 31
1996 1995
------------- ------------
<S> <C> <C>
ASSETS
Cash and due from banks $ 13,545,197 $ 13,047,891
Federal funds sold 1,000,000 --
------------- ------------
Total cash and cash equivalents 14,545,197 13,047,891
Investment Securities Available for sale, at fair value 149,876,618 140,626,604
Loans 333,465,000 324,788,467
Less: Allowance for credit losses 5,400,000 4,960,000
------------- ------------
Net loans 328,065,000 319,828,467
Bank premises and equipment 4,432,516 4,483,154
Interest receivable and other assets 7,204,322 5,184,311
------------- ------------
Total Assets $ 504,123,653 $483,170,427
============= ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Interest bearing $ 395,761,577 $368,109,187
Noninterest bearing 34,772,229 39,512,336
------------- ------------
Total deposits 430,533,806 407,621,523
Short-term borrowings 31,355,031 35,202,708
Interest payable and other liabilities 6,011,663 4,210,134
------------- ------------
Total Liabilities 467,900,500 447,034,365
SHAREHOLDERS' EQUITY
Common stock, no par value, $.50 stated value;
3,000,000 shares authorized and 1,884,051 shares
issued and outstanding (1,777,727 in 1994) 942,025 888,864
Capital in excess of stated value 30,459,168 27,136,543
Retained earnings 6,319,030 6,878,138
Unrealized net holding gains (losses) on securities available for sale (1,497,070) 1,232,517
------------- ------------
Total Shareholders' Equity 36,223,153 36,136,062
------------- ------------
Total Liabilities and Shareholders' Equity $ 504,123,653 $483,170,427
============= ============
</TABLE>
3
See Accompanying Notes
<PAGE> 4
CAPITAL HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
1996 1995 1996 1995
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Interest income:
Loans, including fees $7,269,067 $6,226,890 $14,404,668 $11,899,550
Securities 2,326,313 2,267,845 4,545,589 4,730,363
Federal funds sold 46,869 90,813 55,078 106,706
---------- ---------- ----------- -----------
Total interest income 9,642,249 8,585,548 19,005,335 16,736,619
Interest expense:
Deposits 4,884,358 4,581,359 9,709,441 8,806,040
Short-term borrowings 455,548 401,350 960,343 777,723
---------- ---------- ----------- -----------
Total interest expense 5,339,906 4,982,709 10,669,784 9,583,763
Net interest income 4,302,343 3,602,839 8,335,551 7,152,856
Provision for credit losses 230,000 240,000 440,000 510,000
---------- ---------- ----------- -----------
Net interest income after provision for credit losses 4,072,343 3,362,839 7,895,551 6,642,856
Other income:
Securities gains, net 1,403 69,759 27,926 81,185
Other 237,668 164,514 437,976 348,296
---------- ---------- ----------- -----------
Total other income 239,071 234,273 465,902 429,481
Other expenses:
Salaries and employee benefits 1,127,684 938,029 2,199,339 1,853,215
FDIC premiums 500 198,228 1,000 396,456
Equipment 101,421 95,853 201,027 188,909
Taxes other than income 131,900 100,700 263,900 204,600
Courier services 120,664 110,292 237,094 169,449
Net occupancy 37,019 35,667 72,584 67,355
Other 663,998 480,454 1,241,049 987,080
---------- ---------- ----------- -----------
Total other expenses 2,183,186 1,959,223 4,215,993 3,867,064
Income before provision for federal income tax 2,128,228 1,637,889 4,145,460 3,205,273
Provision for federal income tax 667,000 521,000 1,318,000 1,023,000
---------- ---------- ----------- -----------
Net income $1,461,228 $1,116,889 $ 2,827,460 $ 2,182,273
========== ========== =========== ===========
Net income per share $0.75 $0.61 $1.46 $1.20
========== ========== =========== ===========
Average number of common shares and
common stock equivalents outstanding 1,940,695 1,819,268 1,940,714 1,819,287
========== ========== =========== ===========
</TABLE>
See Accompanying Notes
4
<PAGE> 5
CAPITAL HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (UNAUDITED)
SIX MONTHS ENDED JUNE 30, 1996 AND 1995
<TABLE>
<CAPTION>
COMMON STOCK CAPITAL IN UNREALIZED TOTAL
------------------------ EXCESS OF RETAINED NET HOLDING SHAREHOLDERS'
SHARES AMOUNT STATED VALUE EARNINGS GAINS/(LOSSES) EQUITY
---------- -------- ------------- ---------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1995 1,777,727 $888,864 $27,136,543 $6,878,138 $1,232,517 $36,136,062
Net income 2,827,460 $2,827,460
Change in unrealized gains and
(losses), net of tax (2,729,587) ($2,729,587)
6% Stock Dividend 106,324 53,161 3,322,625 (3,386,568) ($10,782)
-----------------------------------------------------------------------------------
Balance at June 30, 1996 1,884,051 $942,025 $30,459,168 $6,319,030 $1,497,070 $36,223,153
===================================================================================
Balance at December 31, 1994 1,663,433 $831,717 $23,953,756 $4,852,695 $2,073,575 $27,564,593
Net income 2,182,273 $2,182,273
Change in unrealized gains and
(losses), net of tax 2,572,388 $2,572,388
6% Stock Dividend 99,455 49,727 2,759,876 (2,819,518) ($9,915)
-----------------------------------------------------------------------------------
Balance at June 30, 1995 1,762,888 $881,444 $26,713,632 $4,215,450 $498,813 $32,309,339
===================================================================================
</TABLE>
See Accompanying Notes
5
<PAGE> 6
CAPITAL HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30
1996 1995
------------ ------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net Income $2,827,460 $2,182,273
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for credit losses 440,000 510,000
Depreciation and amortization 147,554 145,995
Amortization and accretion of security premiums and discounts (18,895) (45,544)
Gain on sale of securities (27,926) (81,185)
Deferred income taxes (149,600) (173,400)
Changes in assets and liabilities:
Increase in interest receivable and other assets (464,261) (248,440)
Increase in interest payable and other liabilities 1,801,529 769,279
------------ ------------
Total adjustments 1,728,401 876,705
------------ ------------
Net cash provided by operating activities 4,555,861 3,058,978
INVESTING ACTIVITIES:
Purchase of securities available for sale (42,421,478) (9,561,046)
Purchase of securities held to maturity -- (980,000)
Net increase in loans (8,676,533) (30,340,844)
Purchase of bank premises and equipment (96,916) (128,004)
Proceeds from maturities of securities held to maturity -- 2,279,269
Proceeds from maturities of securities available for sale 2,066,156 --
Proceeds from sales of securities available for sale 27,016,392 30,044,038
------------ ------------
Net cash used in investing activities (22,112,379) (8,686,587)
FINANCING ACTIVITIES:
Net increase in deposits 22,912,283 18,880,462
Net decrease in short-term borrowings (3,847,677) (4,827,583)
Dividends paid on fractional shares (10,782) (9,915)
------------ ------------
Net cash provided by financing activities 19,053,824 14,042,964
------------ ------------
(Decrease) increase in cash and cash equivalents 1,497,306 8,415,355
Cash and cash equivalents at beginning of period 13,047,891 10,846,733
------------ ------------
Cash and cash equivalents at end of period $14,545,197 $19,262,088
============ ============
Supplemental disclosures:
Interest paid $10,567,581 $9,583,763
Income taxes paid $1,500,000 $1,275,000
</TABLE>
See Accompanying Notes
6
<PAGE> 7
CAPITAL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 1996
(UNAUDITED)
BASIS OF PRESENTATION
- ---------------------
The unaudited consolidated financial statements include the accounts of Capital
Holdings, Inc. (the Company) and its wholly owned subsidiaries, Capital Bank,
N.A. (the Bank) and CBNA Building Company, which is a real estate subsidiary
that owns and leases to the Bank, its only operating facility.
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions of Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. All adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. Significant
intercompany balances and transactions have been eliminated in the consolidated
financial statements. For further information refer to the consolidated
financial statements and notes thereto appearing in the Company's annual report
on Form 10-K for the year ended December 31, 1995.
Net income per share has been computed by dividing net income by the weighted
average number of common shares and common stock equivalents outstanding, after
giving retroactive effect to a six percent stock dividend issued during June
1996 and June 1995.
The Bank's maximum exposure to credit losses for loan commitments and standby
letters of credit outstanding at June 30, 1996 was $121,231,000 and $9,088,000,
respectively, compared to $83,534,000 and $8,657,000, respectively, at December
31, 1995. The increase in loan commitments is due to owner-occupied real estate
construction to take place within the next twelve months. Management does not
anticipate any significant losses as a result of these commitments.
7
<PAGE> 8
CAPITAL HOLDINGS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The Company's primary asset is its subsidiary bank, which is in its seventh year
of operation. During the second quarter and for the six months ended June 30,
1996, the Bank experienced moderate growth in net deposits. Deposits increased
$21,180,000 or 5.2% for the second quarter and $22,912,000 or 5.6% during the
first half of 1996.
Loan growth for the second quarter was $4,752,000 or 1.4% and $8,677,000 or 2.7%
for the first half of 1996. The allowance for credit losses at June 30, 1996,
was $5,400,000 compared to $4,960,000 at December 31, 1995. The Bank had no
write offs during the first half of 1996, and has nonperforming loans of less
than 1% of total loans at June 30, 1996. Management considers the allowance to
be adequate at this time. At June 30, 1996, the Bank had no impaired loans.
Effective January 1, 1995, the Company adopted the provisions of Financial
Accounting Standards Board Statements No. 114 and No. 118 (FAS No. 114 and FAS
No. 118), which relate to accounting by creditors for loan impairment. The
impact of these new pronouncements was not material to the Company.
Securities available for sale totaled $149,877,000 or 29.7% of total assets at
June 30, 1996. The Bank continues to maintain very high investment quality with
77.9% of total securities in U.S. Treasury and Agency securities. The Bank has
no high-risk on or off balance-sheet derivatives. Fair values of the securities
available for sale portfolio dropped below their amortized cost during the
second quarter of 1996. The total market value of the portfolio declined
$1,590,000 (net of tax) during the second quarter. This is a reflection of the
increase in bond rates on both long and short-term security maturities. During
the first half of 1996, the Company repositioned approximately 16% of the
securities portfolio by selling callable and/or short-term maturity securities,
and investing in longer maturity securities to take advantage of the increase in
rates. The Bank's portfolio has a weighted average life to maturity of
approximately 2.1 years.
Consolidated net income for the second quarter of 1996 was $1,461,000 or $.75
per share, and $2,827,000 or $1.46 per share for the first half of 1996, after
giving retroactive effect to a six percent stock dividend issued during June
1996. This compares to $1,117,000 or $.61 per share for the second quarter of
1995, and $2,182,000 or $1.20 per share for the first half of 1995, after giving
retroactive effect to a six percent stock dividend issued during June 1995. The
increase in income before provision for federal income taxes, excluding
securities gains, for the first half of 1996, represents a 33.2% increase over
the same period of 1995. This increase is a direct result of growth in earning
assets and careful attention to noninterest expenses. The income tax provision
of 32% for the first half of 1996 remained the same when compared to the same
period last year.
8
<PAGE> 9
CAPITAL HOLDINGS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The net interest margin continues to improve as deposit rates have decreased
slightly and the prime lending rate has stabilized. This trend should continue
for the next few months, however the repricing of maturing deposits will level
off and so should the net interest margin improvements.
Other expenses continue to increase as the Bank grows. Net overhead as a
percentage of average assets has increased only slightly from 1.73% for the year
ended December 31, 1995, to 1.74% for the first half of 1996. Salaries and
benefits represent 51.7% of other expenses for the second quarter of 1996
compared to 47.9% for the second quarter of 1995. Salary expense for the first
half of 1996, increased 18.7% over the same period for 1995. Staff levels have
increased from 67 to 76 (full time equivalents) over the past 12 months. Average
assets per employee continues to increase to $6,713,000 at June 30, 1996,
compared to $6,660,000 at December 31, 1995.
On August 8, 1995, The Federal Deposit Insurance Corporation (FDIC) voted to
reduce the premiums banks pay on deposits. The Bank's 1996 assessment rate is
zero; however, the FDIC has mandated that Bank's with a zero assessment rate
must pay a minimum semiannual assessment of $1,000.
The Tier I Capital ratio was 10.49%, the Total Capital ratio was 11.74%, and the
Leverage ratio was 7.49% at June 30, 1996, compared to regulatory capital
requirements of 4%, 8% and 4%, respectively. These ratios are well in excess of
the regulatory capital requirements.
Shareholders equity has continued to increase from retained earnings of net
income. The $2.7 million negative change in the unrealized gain on the
securities available for sale portfolio, net of tax, for the first half of 1996,
is due to the relative short average life of the bond portfolio and the rising
rates in the bond market for both short and long-term security maturities.
9
<PAGE> 10
CAPITAL HOLDINGS, INC.
PART II. OTHER INFORMATION
- ---------------------------
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Annual Shareholders Meeting held on April 25, 1996, pursuant to the
attached Notice of Annual Meeting and Proxy Statement dated March 27, 1996:
1) each of the five nominees were elected as directors
(1,226,916 votes for and 550,811 votes not voted).
2) the Capital Holdings, Inc. Nonemployee Director Stock
Option Plan was adopted
(1,170,455 votes for, 71,831 votes against, 24,525
votes abstained and 510,916 votes not voted).
3) the Capital Holdings, Inc. Incentive Stock Option Plan
and amendment of the Capital Holdings, Inc. 1988
Incentive Stock Option Plan was adopted
(1,242,227 votes for, 1,500 votes against, 23,084
votes abstained and 510,916 votes not voted).
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.7 Capital Holdings, Inc. Incentive Stock Option Plan
27 Financial Data Schedule
(b) No reports on Form 8-K were filed for the quarter ended
June 30, 1996.
10
<PAGE> 11
SIGNATURES
Pursuant to the requirements for the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CAPITAL HOLDINGS, INC.
Date 8/6/96 /s/ Michael P. Killian
-------------- ---------------------------------------------
Michael P. Killian, Chief Financial Officer,
Senior Vice President
11
<PAGE> 1
EXHIBIT 10.7
------------
CAPITAL HOLDINGS, INC.
INCENTIVE STOCK OPTION PLAN
Capital Holdings, Inc. a corporation organized and existing under the laws
of the State of Ohio (hereinafter referred to as the "Company"), hereby adopts
the following Incentive Stock Option Plan for certain of its officers and key
employees:
1. PURPOSE
This Stock Option Plan (hereinafter referred to as the "Plan") is intended
to advance the interests of the Company by providing officers and other key
employees having substantial responsibility for the direction and management of
the Company and its subsidiaries, whether now owned or hereafter acquired
(hereinafter referred to as a "subsidiary"), with an opportunity to acquire a
proprietary interest in the Company as an additional incentive to promote its
success and to encourage them to remain in the employ of the company or a
subsidiary of the Company. The Plan is intended to permit stock options granted
under the Plan to qualify as incentive stock options ("Incentive Stock Options")
under Section 422 of the Internal Revenue Code of 1986, as amended (the
"Internal Revenue Code"). All options granted under the Plan, including
Incentive Stock Options, are referred to as "Options."
2. ADMINISTRATION OF PLAN
The Plan shall be administered by the Board of Directors (the "Board"). The
Board may adopt rules and regulations from time to time for carrying out the
Plan. The interpretation and construction of any provision of the Plan by the
Board shall be final and conclusive. The Board may consult with counsel, who may
be counsel to the Company, and shall not incur any liability for any action
taken in good faith in reliance upon the advice of counsel.
3. ELIGIBILITY
The Board shall grant Options only to officers and other key employees of
the Company and its subsidiaries who perform services of major importance in the
management, operation and development of the business of the Company or of any
subsidiary of the Company, and it shall determine the number of shares to be
allocated to each Option. The Company shall effect the grant of Options under
the Plan in accordance with determinations made by the Board pursuant to the
provisions of the Plan by execution and delivery of written instruments in a
form approved by the Board.
4. STOCK
Upon the approval of this Stock Option Plan by the Board and the Company's
shareholders, one hundred-fifty thousand (150,000) shares of the Company's
authorized common shares shall be set aside for the purposes outlined in this
Plan. Options to purchase any shares issued
<PAGE> 2
pursuant to the Plan that, for any reason, expire or are terminated unexercised
may be reissued under the Plan. The Company shall not be required to issue or
deliver any certificate for shares of its stock purchased upon the exercise of
any part of an Option before: (i) completion of any registration or other
qualification of such shares under any state or federal law or ruling or
regulation of any governmental regulatory body that the Company shall, in its
sole discretion, determine is necessary or advisable; and (ii) the Board shall
have been advised by counsel that all applicable legal requirements have been
complied with.
5. TAX CHARACTER OF OPTIONS
The Board shall have discretion to designate whether Options shall be
Incentive Stock Options or nonstatutory options. All Options granted shall be
Incentive Stock Options, subject to the limitations described in Section 10,
unless the Board determines otherwise. To the extent that an Option exceeds the
limitations described in Section 10, the Option shall not be an Incentive Stock
Option.
6. PRICE
The purchase price per share for those shares for which Options have been
granted pursuant to this Plan shall be:
A. The fair market value per share of the Company's common stock on
the date the Option is granted; or
B. In the event the person to whom an Option is granted hereunder
shall own ten percent (10%) or more of the Company's common stock
or that of any of its subsidiaries, the purchase price per share
shall be one hundred and ten percent (110%) of the fair market
value of the shares on which the Option is granted and any Option
so granted must be exercised not later than five (5) years from
the date it is granted.
7. Duration and Exercise of Options
A. Unless otherwise specifically noted in the grant of such options,
the Option period shall be ten (10) years from the date the Option
is granted, except as outlined in 6.B. above and provided that
such period shall be reduced with respect to any Options, as
outlined below, in the event of death or termination of employment
or retirement of the Optionee; provided that in the case of
merger, consolidation, dissolution or liquidation, the expiration
date and the dates on which any part of the Option shall be
exercisable for all of the shares covered thereby, shall be
accelerated, but the effectiveness of such acceleration, and any
exercise of the Option pursuant thereto in excess of the number of
shares for which it would have been exercisable in the absence of
such acceleration, shall be conditioned upon the consummation of
such merger, consolidation, dissolution or liquidation.
2
<PAGE> 3
B. The exercise of any Option and delivery of the optioned shares
shall be contingent upon receipt by the Company of the full
purchase price in cash, or, if authorized by the Board of
Directors in the Option Grant, in whole or in part in common
shares of the Company valued at fair market value, as determined
by the Board.
C. No Option may be exercised after termination of employment of the
Optionee except as hereinafter provided.
D. Except as otherwise provided herein, and except as further
restricted in the Grant of such option, no Option shall be
exercisable for a five-year period following the date of grant.
E. In the case of termination of employment or retirement, Options
granted under the Plan may only be exercised, if otherwise timely,
(i) within three (3) months after termination of employment for
any reason other than by reason of disability; and (ii) within one
(1) year after retirement or termination occurring by reason of
disability (where disability shall mean and be limited to
disability within the meaning of Section 22(e)(3) of the Internal
Revenue Code). In any such case, the Option may not be exercised
for more than the number of shares, if any, as to which it was
exercisable by the Optionee immediately before such termination or
retirement.
F. Options may be exercised in whole or in part, but only with
respect to whole shares of stock.
8. NONTRANSFERABILITY OF OPTIONS
An Option, by its terms, shall not be transferable otherwise than by will
or by the laws of descent and distribution, and an Option may be exercised
during the lifetime of the Optionee only by him.
9. EFFECT OF STOCK DIVIDENDS, ETC.
The Board shall make appropriate adjustments in the price of the shares and
the number allotted or subject to allotment if there are any changes in the
common stock of the Company by reason of stock dividends, stock splits, reverse
stock splits, recapitalizations, mergers or consolidations.
10. LIMITATIONS ON INCENTIVE STOCK OPTIONS
Notwithstanding anything in this Plan to the contrary, the aggregate fair
market value (determined at the time of grant) of stock for which Incentive
Stock Options are exercisable for the first time under the terms of the Plan, by
any employee during any calendar year, cannot exceed $100,000.
3
<PAGE> 4
11. EXPIRATION AND TERMINATION OF THE PLAN
Options may be granted under the Plan at any time until the Plan is
terminated by the Board or until such earlier date when termination of the Plan
shall be required by applicable law. If not sooner terminated, the Plan shall
terminate automatically on February 13, 2006 which is ten years from the date on
which the Plan was originally approved by the Board.
12. AMENDMENTS
The Board may from time to time make such changes in and additions to the
Plan as it may deem proper; provided that no change shall be made that increases
(except pursuant to Section 9) the total number of shares covered by the plan or
effects any change in who may receive Options under the plan or materially
increase the benefits accruing to optionees hereunder unless such change is
authorized by a majority of the holders of the common stock of the Company.
Notwithstanding the foregoing, the Board may amend the Plan, without stockholder
approval, to the extent necessary to cause Incentive Stock Options granted under
the Plan to meet the requirements of Section 422 of the Internal Revenue Code.
13. INTERPRETATION
The terms of this Plan are subject to all present and future regulations
and rulings of the Secretary of the Treasury or his delegate relating to the
qualifications of Incentive Stock Options under Section 422 of the Internal
Revenue Code. If any provision of the Plan conflicts with any such regulation or
ruling, then that provision of the Plan shall be void and of no effect.
14. EFFECTIVE DATE OF THE PLAN
This Plan shall become effective upon adoption by the Board and approval by
the shareholders of the Company.
Date of adoption by Board of Directors: February 13, 1996
Date of approval by Shareholders: April 25, 1996
4
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM JUNE 30,
1996 CAPITAL HOLDINGS, INC. FORM 10Q AND JUNE 30, 1996 CAPITAL BANK, N.A. CALL
REPORT AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 13,545,102
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 1,000,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 149,876,618
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 333,465,000
<ALLOWANCE> 5,400,000
<TOTAL-ASSETS> 504,123,558
<DEPOSITS> 430,533,806
<SHORT-TERM> 31,355,031
<LIABILITIES-OTHER> 6,011,663
<LONG-TERM> 0
<COMMON> 942,024
0
0
<OTHER-SE> 35,281,034
<TOTAL-LIABILITIES-AND-EQUITY> 504,123,558
<INTEREST-LOAN> 14,404,668
<INTEREST-INVEST> 4,545,589
<INTEREST-OTHER> 55,078
<INTEREST-TOTAL> 19,005,335
<INTEREST-DEPOSIT> 9,709,441
<INTEREST-EXPENSE> 10,669,784
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</TABLE>
