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FILED PURSUANT TO RULE 424(b)(3)
REGISTRATION NUMBER 333-85837
Prospectus
- ----------
CAPITAL HOLDINGS, INC. [LOGO]
Up to 900,000 Shares of Common Stock
$27.00 per share
---------------------
We are offering up to 900,000 shares of common stock in this rights offering to
stockholders who owned common stock as of September 30, 1999. This is called the
rights offering and is made with the following conditions:
- - You will receive, at no cost, a right to buy 0.14 share of common stock for
every share of common stock that you owned on September 30, 1999 at a price
of $27.00 per share.
- - We will not issue fractional rights, and we will not pay cash in place of
rights or fractional shares. Your subscription rights are not transferable
and the rights will not be listed for trading on any stock exchange.
- - The subscription rights are exercisable beginning on the date of this
prospectus and continuing until 5:00 p.m., Eastern time, on November 15,
1999. If you want to participate in the rights offering, you must submit
your subscription documents to us before that deadline or to your broker or
bank at least 10 days before that deadline.
We may offer any unsubscribed shares to the general public at the same price of
$27.00 per share. This is called the community offering. If you want to
participate in the community offering, you must submit your subscription
documents to us before December 1, 1999 or later, if we extend the date, or to
your broker or bank at least 10 days before that deadline.
Both the rights offering and the community offering are subject to the following
further conditions:
- - We reserve the right to cancel the rights offering and the community
offering at any time before the expiration date.
- - Subscriptions are irrevocable once we receive them, unless we amend this
offering.
- - There is no minimum number of shares that we must sell in order to complete
the rights offering or the community offering.
- - Stockholders who do not participate in the rights offering will continue to
own the same number of shares, but may own a smaller percentage of the
total shares outstanding to the extent that other stockholders participate
in the rights offering or stock is sold in the community offering.
We are selling these shares to raise additional capital to contribute
to our bank subsidiary and fund its growth.
Our common stock is quoted on the Over-The-Counter Electronic Bulletin Board
under the symbol "CLHD."
INVESTING IN OUR SECURITIES INVOLVES RISK. SEE "RISK FACTORS" BEGINNING ON PAGE
7.
NONE OF THE SECURITIES OFFERED BY THIS PROSPECTUS ARE DEPOSITS OR ACCOUNTS. THEY
ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER
GOVERNMENTAL AGENCY.
NEITHER THE SEC NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED
OF THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS OCTOBER 7, 1999
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TABLE OF CONTENTS
PROSPECTUS SUMMARY.............................................................3
RISK FACTORS...................................................................7
USE OF PROCEEDS...............................................................10
WHERE YOU CAN FIND MORE INFORMATION........................ ..................10
SELECTED CONSOLIDATED FINANCIAL DATA..........................................11
THE OFFERING..................................................................12
FEDERAL INCOME TAX CONSIDERATIONS.............................................16
PLAN OF DISTRIBUTION..........................................................17
LEGAL MATTERS.................................................................17
EXPERTS .....................................................................17
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PROSPECTUS SUMMARY
This section summarizes the information contained in this prospectus. You should
read the following summary together with the information set forth under the
heading "Risk Factors."
We use the term "we" or "CHI" to refer to Capital Holdings, Inc., a business
corporation organized under Ohio law. We use the term "the Bank" to refer to
Capital Bank, N.A., a commercial bank organized under the laws of the United
States.
CAPITAL HOLDINGS, INC.
We are a one-bank holding company. We were formed in July 1988 to own
and organize our wholly owned subsidiary, the Bank. We are a full-service
commercial bank providing the following services to our customers:
- savings accounts and checking accounts;
- money market accounts;
- certificates of deposits;
- sweep accounts;
- personal line credit services;
- credit cards; and
- commercial, residential and real estate loans and other banking
services.
Our continued commitment to customer satisfaction has resulted in our ninth
straight year of growth and profitability, fueled by a strong loan portfolio,
excellent overhead control and advances in technology. For the year ended
December 31, 1998, we ranked among the top six percent of all banks in the
country in total assets. Since 1989, we have focused our business primarily on:
- corporate, executive and professional customers;
- pursuing a deposit gathering strategy of offering money market
checking and savings accounts;
- serving small to mid-sized businesses, professionals and their
families; and
- offering certificates of deposits at attractive rates to
mid-sized to large depositors with an emphasis on minimizing the
operating costs of obtaining these deposits.
We have experienced significant asset growth and achieved continuing
profitability:
- Total assets increased to $802 million for the year ended December
31, 1998 from $670 million for the same period in 1997 and $560
million for the same period in 1996. At June 30, 1999, our total
assets increased 11.07% from December 31, 1998 to $890 million.
- Net income increased to $7.9 million ($1.30 per share -- diluted)
for the year ended December 31, 1998 from $6.8 million ($1.14 per
share -- diluted) for the same period in 1997 and $5.7 million
($0.98 per share -- diluted) for the same period in 1996. For the
six months ended June 30, 1999, our net income was $4.4 million
($0.70 per share - diluted) as compared to $3.7 million ($0.61 per
share - diluted) for the six months ended June 30, 1998.
- For the year ended December 31, 1998 our loan
portfolio grew by 23.3%, or $109.3 million, as compared to
December 31, 1997, and increased by 14.47%, or $83.7 million at
June 30, 1999 as compared to December 31, 1998.
Our principal executive offices are located at 5520 Monroe Street, Sylvania,
Ohio. Our main telephone number is (419) 885-7379 or (800) 366-5580.
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THE OFFERING
The offering.......................... This offering consists of
both a rights offering and,
to the extent any shares
offered by this prospectus
remain unsubscribed, a
community offering.
Offering price........................ $27.00 per share.
Rights Offering:
Eligible stockholders............. You are eligible
to purchase stock in the
rights offering if you owned
shares of our common stock on
September 30, 1999.
Subscription rights............... If you are an eligible
stockholder, you will have
the right to purchase a 0.14
share of our common stock for
every share of common stock
you owned as of September 30,
1999. There is no minimum
amount of shares you must
purchase using your
subscription rights.
When determining the number
of shares we will issue,
multiply the number of shares
you own by 0.14 and round
down to the nearest whole
number. For example, if you
own 125 shares, you may
subscribe for 17 shares (125
shares x 0.14 = 17.5 shares,
rounded down to 17 shares,
the nearest whole number).
Non-transferability of rights..... Your subscription rights are
not transferable. Shares
issued upon exercise of your
subscription rights will be
issued in the same record
holder's name.
Persons wishing to exercise
rights for the benefit of
others............................ Brokers, banks, trustees, and
other individuals or entities
that hold common stock for
the account of others may, if
authorized by the beneficial
owner, complete the
subscription agreement and
submit it to us with the
proper payment.
Expiration of the rights
offering............................ The rights offering will
expire at November 15, 1999,
at 5:00 p.m., Eastern time.
After the expiration date,
you will no longer be able to
purchase shares through the
exercise of your subscription
rights. However, you will be
able to subscribe for shares
in the community offering.
Community Offering:
Community offering.................. We may offer to the general
public shares that have not
been subscribed for, if any
remain. If you wish to
participate in the community
offering, you must purchase
at least 400 shares.
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Shares available.................... We will first fill all
subscriptions received in the
rights offering. Any
remaining shares may then be
offered to the public in the
community offering, including
our current stockholders who
want to purchase additional
shares.
Expiration of the community
offering............................ The community offering will
expire at the earlier of:
- a date determined by the
board of directors; or
- December 1, 1999, unless
extended by us but not later
than January 31, 2000.
Subscription Procedures..................... To subscribe for shares in
the offering, you should
carefully complete and sign
the subscription agreement.
If you are an existing
stockholder please indicate
the number of shares you are
purchasing in the rights
offering and indicate any
additional shares you wish to
purchase in the community
offering.
Forward your completed
subscription agreement to our
main office, which address
appears below. Be sure to
include a check or money
order for the full amount of
your subscription price.
Checks and money orders will
not be cashed until we accept
your subscription.
If your subscription is not
completely filled, we will
send you a check for the
difference. No interest will
be paid on returned
subscription funds. YOUR
SUBSCRIPTION IS IRREVOCABLE
AFTER YOU SUBMIT THE
SUBSCRIPTION DOCUMENTS.
Submit subscription agreements.............. Deliver subscription
agreements to:
By mail: Capital Holdings, Inc.
P.O. Box 327
Toledo, Ohio 43691-9978
ATTN: Mr. Stephen J. Kovatch
By hand: Capital Holdings, Inc.
5520 Monroe Street
Sylvania, Ohio 43560
ATTN: Mr. Stephen J. Kovatch
By overnight courier:
Capital Holdings, Inc.
5520 Monroe Street
Sylvania, Ohio 43560
ATTN: Mr. Stephen J. Kovatch
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Ownership Limits............................ Federal law prohibits you
from directly or indirectly,
or through or in concert with
one or more persons,
acquiring "control" of CHI
(defined to include
ownership, control or the
power to vote 10% or more of
a class of CHI voting
securities) unless you
provide at least 60 days'
prior written notice to the
Federal Reserve Board. A
person is deemed to have
acquired shares that he or
she has the right to acquire
through the exercise of
options, warrants and rights.
Therefore, any subscriptions
in this offering that are
subject to such Federal laws
may, in our discretion, be
deemed void in their entirety
or in part, and not accepted
by us.
Termination................................. We may cancel the offering at
any time, in which case we
will return your subscription
payment without interest.
Stock certificates.......................... Certificates representing
shares of the common stock
will be delivered to
subscribers as soon as
practicable after the
completion of the offering.
We expect that this may take
two weeks or longer, due to
the need to allow checks to
clear.
Risk Factors................................ An investment in shares of
our common stock involves a
high degree of risk. Please
see "Risk Factors" beginning
on page 7.
Federal Income Tax Consequences............. Your receipt or exercise of
the subscription rights
should not be treated as a
taxable event for United
States federal income tax
purposes, but may have other
tax effects.
Questions................................... If you have any questions
about the rights offering,
including questions about
subscription procedures and
requests for additional
copies of this prospectus or
other documents, please
contact Mr. Stephen J.
Kovatch, our Senior Vice
President, at (419) 885-7379
or (800) 366-5580.
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RISK FACTORS
In addition to the other information in this prospectus and the
information we incorporate by reference, you should consider carefully the
following factors in evaluating CHI and our business before purchasing our
common stock.
RISKS RELATED TO THE OFFERING:
- ------------------------------
IF YOU DO NOT EXERCISE YOUR FULL SUBSCRIPTION RIGHTS, YOUR PERCENTAGE OWNERSHIP
AND VOTING RIGHTS OF CHI WILL DECREASE.
If you choose not to exercise your subscription rights in full, your
relative ownership interest in CHI will be diluted to the extent other
stockholders exercise their subscription rights. Your voting rights and
percentage interest in any of CHI's net earnings may also be diluted if you
don't exercise your rights. We are unable to determine the number of shares, if
any, that will be sold in the offering.
THE OFFERING PRICE WAS DETERMINED BY OUR BOARD OF DIRECTORS AND BEARS NO
RELATIONSHIP TO THE VALUE OF OUR ASSETS, FINANCIAL CONDITION OR OTHER
ESTABLISHED CRITERIA FOR VALUE. OUR COMMON STOCK MAY TRADE AT PRICES ABOVE OR
BELOW THIS PRICE.
Our board of directors determined the offering after considering a
number of factors, including:
- book value of our assets;
- past operations;
- cash flow;
- earnings;
- our overall financial condition; and
- our future prospects.
In addition, the board took into account the results of our recent
independent appraisal. The board did not assign weighting to any one factor in
setting the offering price. After the date of this prospectus, our common stock
may trade at prices above or below the offering price.
BECAUSE YOU MAY NOT REVOKE YOUR SUBSCRIPTION EXERCISE, YOU COULD BE COMMITTED TO
BUY SHARES ABOVE THE PREVAILING MARKET PRICE.
The public trading market price of our common stock may decline before
the subscription rights expire. If you exercise your subscription rights and,
afterwards, the public trading market price of our common stock decreases below
$27.00, then you will have committed to buy shares of common stock at a price
above the prevailing market price. Once you have exercised your subscription
rights, you may not revoke your exercise unless we amend the offering. Moreover,
you may be unable to sell your shares of common stock at a price equal to or
greater than the offering price.
BECAUSE WE MAY TERMINATE THE OFFERING AT ANY TIME, YOUR PARTICIPATION IN THE
OFFERING IS NOT ASSURED.
Once you exercise your subscription rights, you may not revoke the
exercise for any reason unless we amend the offering. We may terminate the
offering at any time. If we decide to terminate the offering, we will not have
any obligation with respect to the subscription rights except to return, without
interest, any subscription payments.
RISKS RELATED TO CHI:
- ---------------------
WE MAY NOT BE ABLE TO CONTINUE TO GROW THE BANK'S ASSETS AND EARNINGS AS FAST AS
WE HAVE SINCE WE OPENED THE BANK IN 1989 BECAUSE OF OUR LIMITED MARKET AREA.
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The Bank has experienced rapid growth in its assets and earnings since
it opened for business in 1989. In the future it may be more difficult to
continue this rate of growth for a number of reasons, including the fact that
the Bank already serves a significant percentage of its market and further
penetration of the remaining market will be more difficult.
BECAUSE OUR COMMON STOCK TRADES ON THE OVER-THE-COUNTER ELECTRONIC BULLETIN
BOARD, OUR SHARES MAY BE SUBJECT TO EXTREME PRICE FLUCTUATIONS AND YOU MAY HAVE
DIFFICULTY TRADING YOU SHARES.
Persons who purchase our common stock may be unable to readily sell the
common stock. Our common stock trades only on the Over-the-Counter Electronic
Bulletin Board and has been trading with limited volume. We are not currently
listed on the Nasdaq National Market or any national stock exchange.
Furthermore, because our common stock is not listed on the Nasdaq National
Market, trading in our common stock is also limited by SEC rules. There can be
no assurance that we will list our securities on a national securities exchange
at any time in the future.
BECAUSE WE FACE INTENSE AND SIGNIFICANT COMPETITION FROM MANY LARGE MULTI-BANK
HOLDING COMPANIES, OUR ABILITY TO ATTRACT DEPOSITS, MAKE LOANS OR DEVELOP OTHER
LINES OF BUSINESS MAY BE ADVERSELY AFFECTED.
Our ability to maintain a history of strong financial performance and
return on investment to stockholders will depend in part on our ability to
expand our available financial services. In addition to the challenge of
attracting and retaining customers for traditional banking services, our
competitors now include securities dealers, brokers, mortgage bankers,
investment advisors and finance and insurance companies who seek to offer
one-stop financial services to their customers that may include services that
banks have not been able or allowed to offer to their customers in the past. The
increasingly competitive environment is a result primarily of changes in
regulation, changes in technology and product delivery systems and the
accelerating pace of consolidation among financial services providers. If we
fail to adequately address each of the competitive pressures in the banking
industry, our financial condition and results of operations could be adversely
affected.
BECAUSE WE ARE ENGAGED IN A HEAVILY REGULATED INDUSTRY, ANY CHANGES IN
GOVERNMENTAL LAWS AND REGULATION AND POLICY COULD LIMIT OUR FUTURE GROWTH.
Any changes to federal banking laws and regulations may negatively
impact our ability to expand services and to increase the value of our business.
We are subject to extensive state and federal regulation, supervision, and
legislation that govern almost all aspects of our operations. These laws may
change from time to time and are primarily intended for the protection of
consumers, depositors and the deposit insurance funds. In addition, CHI's
earnings are affected by the monetary policies of the Federal Reserve Board.
These policies, which include regulating the national supply of bank reserves
and bank credit, can have a major effect upon the source and cost of funds and
the rates of return earned on loans and investments. The Federal Reserve
influences the size and distribution of bank reserves through its open market
operations and changes in cash reserve requirements against member bank
deposits. We cannot predict what effect any presently contemplated or future
changes in the laws or regulations or their interpretations would have on us,
but such changes could be materially adverse to our financial performance.
BECAUSE OUR PROFITABILITY IS DIRECTLY RELATED TO INTEREST RATES, ANY CHANGES IN
THESE RATES MAY ADVERSELY AFFECT OUR EARNINGS AND FINANCIAL CONDITION.
Changes in interest rates affect our operating performance and
financial condition in diverse ways. Our profitability depends in substantial
part on our "net interest spread," which is the difference between the rates we
receive on loans and investments and the rates we pay for deposits and other
sources of funds. Our net interest spread will depend on many factors that are
partly or entirely outside our control, including competition, federal economic,
monetary and fiscal policies, and economic conditions generally. Historically,
net interest spreads for other financial institutions have widened and narrowed
in response to these and other factors, which are often collectively referred to
as "interest rate risk."
BECAUSE WE DEPEND ON OUR ABILITY TO ATTRACT AND RETAIN KEY PERSONNEL, ANY LOSS
OF, OR OUR INABILITY TO ATTRACT, THESE PERSONNEL COULD ADVERSELY AFFECT US.
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Our success depends upon the continued service of our senior management
team and upon our ability to attract and retain qualified financial services
personnel. Competition for qualified employees is intense. In our experience, it
can take a significant period of time to identify and hire personnel with the
combination of skills and attributes required in carrying out our strategy. If
we lose the services of our key personnel, or are unable to attract additional
qualified personnel, our business, financial condition, results of operations
and cash flows could be materially adversely affected.
BECAUSE OUR ABILITY TO PAY DIVIDENDS IS SUBJECT TO REGULATORY LIMITATIONS, THERE
IS NO ASSURANCE THAT WE WILL CONTINUE TO PAY DIVIDENDS.
Although we have paid dividends on our common stock in the past, there
is no assurance that we may or will continue to pay dividends in the future.
Dividends are subject to determination and declaration by our board of
directors, which takes into account many factors. The declaration of dividends
by us on our common stock is subject to the discretion of our board and to
applicable federal regulatory limitations. We cannot guarantee that dividends
will not be reduced or eliminated in future periods. Our ability to pay
dividends on our common stock depends on our receipt of dividends from the Bank.
The Bank is a national bank and, as such, is subject to restrictions and
limitations in the amount and timing of the dividends it may pay to us.
WE HAVE IMPLEMENTED ANTI-TAKEOVER PROVISIONS, ANY OF WHICH MAY DISCOURAGE
TAKEOVER ATTEMPTS AND COULD REDUCE THE MARKET PRICE OF OUR COMMON STOCK.
Provisions of our Articles of Incorporation and Code of Regulations and
Ohio law could have the effect of discouraging takeover attempts which certain
stockholders might deem to be in their interest. For example, our board of
directors is divided into three classes and each class is elected for a
three-year term. This provision could make it more difficult for our
stockholders to remove members of our board of directors and may also make it
more difficult for a third party to acquire us, even if the acquisition would be
beneficial to you.
THE FAILURE OF OUR COMPUTER SYSTEMS OR THOSE OF OUR KEY VENDORS, SUPPLIERS AND
CUSTOMERS TO BE YEAR 2000 COMPLIANT COULD NEGATIVELY IMPACT OUR BUSINESS.
We are dependent, to a substantial degree, upon the proper functioning
of our computer systems as well as those of our vendors, suppliers and
customers. Most of our information and data is provided electronically and is
dependent on information systems and telecommunications. In addition, most of
our products and services rely on information and data provided by others. If:
- - our computer systems or those of our vendors and suppliers cannot
provide accurate information in a timely manner;
- - we are unable to accurately and timely process such information;
- - our customers are unable to receive and use our products and services;
or
- - a general disruption of our telecommunications and utilities occurs as
a result of the Year 2000 problem,
we could suffer financial loss and potential legal liability.
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USE OF PROCEEDS
We plan to use the net proceeds from this offering to further
capitalize Capital Bank, N.A., for working capital and general corporate
purposes.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and current reports, proxy statements and
other information with the SEC. You may read and copy any document we file at
the SEC's public reference facilities at 450 Fifth Street, N.W., Washington D.C.
20549. Please call the SEC at 1-800-SEC-0330 for further information on the
public reference room. The SEC maintains an Internet site that contains reports,
proxy and information statements, and other information regarding issuers that
file electronically with the SEC and the site address is http:\\www.sec.gov.
The SEC allows us to "incorporate by reference" the information we have
filed with them, which means that we can disclose important information to you
by referring you to those documents. The information incorporated by reference
is considered to be part of this prospectus. We incorporate by reference all
documents listed below and any future filings made with the SEC pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 until
the offering is terminated.
The documents we incorporate by reference are:
(1) Our Annual Report on Form 10-K for the year ended December 31, 1998;
(2) Our Quarterly Report on Form 10-Q for the quarter ended March 31, 1999;
(3) Our Quarterly Report on Form 10-Q for the quarter ended June 30, 1999;
(4) Our Current Report on Form 8-K dated July 27, 1999 and filed with the
Commission on August 4, 1999; and
(5) the description of our common stock contained in our registration
statement on Form 8-A filed with the SEC on April 30, 1993.
You may get copies of any of the incorporated documents (excluding
exhibits, unless the exhibits are specifically incorporated) at no charge to you
by writing Mr. Stephen J. Kovatch, our Senior Vice President, at 5520 Monroe
Street, Sylvania, Ohio 43560 or by calling (419) 885-7379 or (800) 366-5580.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Some of the information in this prospectus, including the above risk
factors section, contains "forward-looking statements" that involve risks and
uncertainties. "Forward-looking statements" are statements that relate to future
events or our future financial performance. In many cases, you can identify
forward-looking statements by terminology such as "may," "will," "should,"
"expects," "plans," "anticipates," "believes," "estimates," "predicts,"
"potential," or "continue," or the negative of such terms and other comparable
terminology.
You should not place undue reliance on these statements, which speak
only as of the date that they were made. Our actual results could differ
materially from those anticipated in these forward-looking statements as a
result of certain factors, including the risks faced by us described below and
elsewhere in this prospectus. We do not undertake any obligation to publicly
update any revisions to forward-looking statements after completion of this
offering to reflect later events or circumstances or to reflect the occurrence
of unanticipated events.
We believe it is important to communicate our expectations to our
investors. However, there may be events in the future that we are not able to
predict accurately or over which we have no control. The risk factors listed
above, as well as any cautionary language in this prospectus, provide examples
of risks, uncertainties and events that may cause our actual results to differ
materially from the expectations we describe in our forward-looking statements.
Before you invest in our common stock, you should be aware that the occurrence
of the events described in these risk factors and elsewhere in this prospectus
could have a material adverse effect on our business, operating results and
financial condition.
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SELECTED CONSOLIDATED FINANCIAL DATA
The following table presents our selected consolidated financial data as
of and for each of the years in the period ended December 31, 1998, 1997, 1996,
1995 and 1994, and as of and for each of the six month interim periods ended
June 30, 1999 and 1998. The information has been derived from our consolidated
financial statements, including our audited consolidated financial statements
incorporated in this prospectus by reference to our 1998 Form 10-K, and should
be read in conjunction with the notes to those financial statements. See "WHERE
YOU CAN FIND MORE INFORMATION."
Historical results are not necessarily indicative of results to be
expected for any future period.
<TABLE>
<CAPTION>
SELECTED FINANCIAL DATA SCHEDULE
(Dollars in thousands except per share amounts)
------------------------------------------------------------------------------------------------
As of and for the six As of and for the Year-Ended December 31
months ended June 30
------------------------------------------------------------------------------------------------
CONSOLIDATED RESULTS OF OPERATIONS: 1999 1998 1998 1997 1996 1995 1994
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
------------------------------------------------------------------------------------------------
Interest Income $ 30,944 $ 26,726 $ 55,568 $ 47,593 $ 39,639 $ 34,752 $ 26,330
Interest Expense $ 17,090 $ 15,255 31,751 27,026 22,305 19,964 13,188
------------------------------------------------------------------------------------------------
Net Interest Income $ 13,854 $ 11,471 23,817 20,567 17,334 14,788 13,142
Provision for Credit Losses $ 1,125 $ 510 1,230 1,005 980 850 993
------------------------------------------------------------------------------------------------
Net Interest Income After $ 12,729 $ 10,961 22,587 19,562 16,354 13,938 12,149
Provision for Credit Losses
Other Income $ 934 $ 692 1,681 1,205 874 753 636
Other Expense $ 7,202 $ 6,094 12,534 10,752 8,821 7,590 6,860
------------------------------------------------------------------------------------------------
Income Before Income Taxes $ 6,460 $ 5,558 11,734 10,015 8,407 7,101 5,925
Income Taxes $ 2,100 $ 1,840 3,805 3,234 2,681 2,256 1,844
------------------------------------------------------------------------------------------------
Net Income $ 4,360 $ 3,718 $ 7,929 $ 6,781 $ 5,726 $ 4,845 $ 4,081
CONSOLIDATED BALANCE SHEET DATA:
Total Assets $ 890,381 $ 737,418 $ 801,628 $ 669,540 $ 559,726 $ 483,170 $ 417,832
Cash and Cash Equivalents $ 19,030 $ 26,751 29,263 23,292 13,958 13,048 10,847
Securities Available for Sale $ 197,028 $ 178,682 184,583 167,521 159,209 140,627 77,982
Securities Held to Maturity --- --- --- --- --- --- 71,920
Loans, Net of Deferred Loan Fees $ 662,081 $ 521,494 578,370 469,036 380,160 324,788 251,184
Allowance for Credit Losses $ 9,279 $ 7,423 8,146 6,947 5,942 4,960 4,110
Deposits $ 719,675 $ 625,681 663,066 579,661 470,743 407,622 357,533
Shareholders' Equity $ 58,240 $ 53,790 58,422 50,547 41,590 36,136 27,565
PER SHARE DATA(1):
Net Income:
Basic 0.72 0.62 1.32 1.19 1.01 .86 .73
Diluted 0.70 0.61 1.30 1.14 .98 .84 .71
Book Value at Period End 9.58 8.96 9.66 8.46 7.31 6.39 4.92
Average Shares Outstanding:
Basic 6,067,814 5,998,974 6,007,458 5,699,712 5,652,834 5,607,051 5,561,568
Diluted 6,247,282 6,080,442 6,110,595 5,927,454 5,842,965 5,783,037 5,730,930
</TABLE>
(1) Capital Holdings, Inc. adopted Financial Accounting Standards No. 128,
Earnings Per Share, effective December 31, 1997. Basic per share amounts
are based upon weighted-average number of common shares outstanding for
each period, after giving retroactive effect to a 3-for-1 stock split
effective June 30, 1999 and a 6% stock dividend issued during 1996, 1995
and 1994. Diluted per share amounts are based upon weighted-average number
of common shares outstanding including dilutive effects of options,
warrants and convertible securities for each period, after giving
retroactive effect to a 3-for-1 stock split effective June 30, 1999 and a
6% stock dividend issued during 1996, 1995 and 1994. All earnings per share
amounts for all periods have been restated to conform to the Statement 128
requirements. Book value at period end per share amounts are based upon
period end shares outstanding for each period.
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THE OFFERING
THE RIGHTS OFFERING
We are offering our stockholders the right to subscribe for and
purchase up to an aggregate of 900,000 shares of common stock at $27.00 per
share. Only those stockholders who owned common stock on September 30, 1999,
will receive subscription rights to purchase stock in the rights offering.
Each subscription right provides you with the opportunity to purchase
0.14 share of common stock for every share of common stock you owned at the
close of business on September 30, 1999. In determining the number of shares of
common stock a stockholder will have the right to buy, we will round down to the
nearest whole number. We will not issue fractional subscription rights and we
will not pay cash in place of subscription rights or fractional shares.
THE COMMUNITY OFFERING
If there are any shares that are not subscribed for in the rights
offering, we may offer them to the public at $27.00 per share. This offering
will be made on the same terms as the rights offering, except that you will not
need to be a current stockholder in order to participate. You must subscribe for
at least 400 shares. We reserve the right to accept or reject, for any reason,
any subscription for shares tendered to us in the community offering. We may
also determine not to proceed with the community offering even if we have
conducted the rights offering.
If there is an oversubscription of shares in this community offering,
we will allocate the shares among you. We will be taking into account the
following factors:
- the amount of the subscription;
- our business relationship with the subscriber; and
- whether the subscriber is an existing stockholder.
It is our intention to encourage broad ownership of our stock among
persons who live or work in our primary market areas.
If you request and pay for more shares than we allocate to you, we will
refund your overpayment, without interest.
CERTIFICATES FOR SHARES
You will receive certificates representing the shares that you purchase
as soon as practicable after the closing of the offering.
EXPIRATION DATES
RIGHTS OFFERING
The rights offering will expire at 5:00 p.m., Eastern Time, on November
15, 1999. IF YOU DO NOT EXERCISE YOUR SUBSCRIPTION RIGHTS ON OR BEFORE THAT
TIME, YOUR SUBSCRIPTION RIGHTS WILL EXPIRE AND THEREFORE BE NULL AND VOID. ANY
SUBSCRIPTION AGREEMENT RECEIVED AFTER THAT TIME WILL BE TREATED AS A
SUBSCRIPTION IN THE COMMUNITY OFFERING AND WILL BE SUBJECT TO SHARE AVAILABILITY
AND OVERSUBSCRIPTION PROCEDURES IF NECESSARY.
We may reject any subscription agreement submitted in the rights
offering that we receive after 5:00 p.m. on the expiration date, regardless of
when the documents were originally mailed. Stockholders who wish to participate
in the rights offering should submit their subscription agreement to us by the
expiration date, or to their broker or bank at least 10 days before the
expiration date, to allow the broker or bank sufficient time to carry out those
instructions.
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COMMUNITY OFFERING
The community offering will commence at the same time as the rights
offering and will expire at the earlier of:
- a date selected by the board of directors; or
- December 1, 1999, unless extended by us, but no later than January
31, 2000.
DETERMINATION OF OFFERING PRICE
Our board of directors determined the offering price after considering
the following factors:
- the book value of our assets;
- our past operations;
- our cash flow;
- our earnings;
- our overall financial condition; and
- our future prospects.
In addition, the board took in account the results of the most recent
report from our regularly scheduled independent appraisals. The board did not
consider any one factor to be more important than any other in determining the
offering price.
SUBSCRIPTION PROCEDURES
The following procedures should be followed by all persons purchasing
stock in the offering. To participate in the offering, you must submit a
subscription agreement for the appropriate offering, together with full payment
of the offering price for all your desired shares. Those who hold common stock
for the account of others, such as brokers, banks, trustees or depositories,
should notify the beneficial owners of those shares as soon as possible to
ascertain the beneficial owners' intentions and to obtain instructions with
respect to the rights offering.
RIGHTS OFFERING. A subscription agreement exercising rights under the
rights offering must be properly executed and received by us, together with full
payment for these shares, before 5:00 p.m., Eastern time, on November 15, 1999.
You should also indicate on the same form the number of shares you would like to
purchase in the community offering. You must enclose full payment for all shares
ordered when submitting the subscription agreement. If received late, the entire
number of shares ordered in the subscription agreement will be treated solely as
a subscription in the community offering.
COMMUNITY OFFERING. A subscription agreement for shares in the
community offering must be properly executed and received by us, together with
full payment for these shares, before 5:00 p.m., Eastern time, on December 1,
1999, unless we extend the expiration date.
Payment of the offering price must be made by cashier's check, personal
check or bank draft drawn upon a U.S. bank or money order, in all cases payable
to "Capital Holdings, Inc."
If you wish to pay by uncertified personal check, please note that your
check may take five business days or more to clear and, therefore, we may hold
the processing of your certificates for up to ten business days following the
closing of the offering. You are urged to arrange for payment by certified,
cashier's check or money order.
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Deliver the subscription agreements and payments by mail, hand delivery
or overnight courier, as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
By mail: By hand: By overnight courier:
- -------- -------- ---------------------
Capital Holdings, Inc. Capital Holdings, Inc. Capital Holdings, Inc.
P.O. Box 327 5520 Monroe Street 5520 Monroe Street
Toledo, Ohio 43691-9978 Sylvania, Ohio 43560 Sylvania, Ohio 43560
Attention: Stephen J. Kovatch Attention: Stephen J. Kovatch Attention: Stephen J. Kovatch
</TABLE>
If you are an existing stockholder and do not indicate the number of
shares to be purchased or do not forward full payment of the offering price, you
will be deemed to have exercised your subscription rights only to the extent of
the payment received. If there are any remaining funds from your payment, we
will treat them as your payment toward a subscription in the community offering.
New investors will be deemed to have subscribed for the number of shares for
which payment is delivered.
The delivery method used for the subscription agreement and payment for
the related shares will be at your election and risk. If sent by mail, it is
recommended that your subscription agreement and payment be sent by registered
mail, properly insured, with return receipt requested, and that a sufficient
number of days be allowed to ensure delivery and clearance of payment prior to
the expiration date.
Our answers to all questions concerning the timeliness, validity, form
and eligibility of any subscription will be final and binding. We may, in our
sole discretion, waive any defect or irregularity, permit a defect or
irregularity to be corrected within any time as we may determine, or reject the
purported exercise of any right. Subscriptions are not deemed received or
accepted until all irregularities are waived or cured within the time that we
determine in our discretion. We have no duty to notify you of any defect or
irregularity in connection with the submission of your subscription agreement or
incur any liability for failure to give notification.
If you have any questions concerning the rights offering or these
subscription procedures, or if you would like additional copies of this
prospectus or other documents, please contact: Mr. Stephen J. Kovatch, Senior
Vice President at (419) 885-7379 or (800) 366-5580.
NON-TRANSFERABILITY OF SUBSCRIPTION RIGHTS
Only you may exercise your subscription rights. You may not sell, give
away or otherwise transfer your subscription rights.
NO REVOCATION AFTER EXERCISE OF RIGHTS OR SUBSCRIPTION IN COMMUNITY OFFERING
After you exercise your subscription rights or subscribe for shares in
the community offering, you may not revoke that exercise or subscription unless
we amend the terms of this offering (as described below). You should not
exercise your subscription rights or submit a subscription in the community
offering unless you are certain that you wish to purchase shares of our common
stock.
AMENDMENT AND TERMINATION OF OFFERING
We reserve the right to amend the terms and conditions of this offering
at any time. If we make an amendment that we consider significant, we will:
- mail notice of the amendment to all stockholders who owned shares
of common stock on September 30, 1999;
- extend the expiration date of the offering by at least 14 days;
and
- allow you at least 10 days to revoke any prior subscriptions, in
whole or in part.
In all other cases, subscriptions will be irrevocable.
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We also reserve the right to terminate the rights offering at any time,
in our discretion, in which case all subscriptions will be canceled, and we will
return all subscription payments to subscribers. If we terminate the rights
offering, we will also terminate the community offering. We may also determine
not to proceed with the community offering even if we have conducted the rights
offering.
Upon the occurrence of any change in or cancellation of this offering,
we will issue a press release to that effect, and we will file with the SEC a
post-effective amendment to the registration statement covering this prospectus.
SHARES OF COMMON STOCK OUTSTANDING AFTER THE OFFERING
Assuming we issue all of the 900,000 shares of common stock being
offered by this prospectus, we will then have approximately 6,979,771 shares of
common stock issued and outstanding. This would represent a 14.80% increase in
the number of outstanding shares of our common stock. If you are an existing
stockholder and you do not exercise your subscription rights, the percentage of
common stock that you hold could significantly decrease after the offering.
CERTAIN OWNERSHIP LIMITS AND REPORTING REQUIREMENTS
Federal law prohibits you from directly or indirectly, or through or in
concert with one or more persons, acquiring "control" of us (defined to include
ownership, control or the power to vote 10% or more of a class of our voting
securities) unless you provide at least 60 days' prior written notice to the
Federal Reserve Board. A person is deemed to have acquired shares that he or she
has the right to acquire through the exercise of options, warrants and rights.
Therefore, any subscriptions in this offering that are subject to such Federal
laws may, in our discretion, be deemed void in their entirety or in part, and
not accepted by us.
Any person or group that acquires direct or indirect beneficial
ownership of more than 5% of the outstanding shares of our common stock will be
subject to SEC reporting requirements under Section 13(d) or 13(g) of the
Securities Exchange Act of 1934. In addition, any person or group that acquires
direct or indirect beneficial ownership of more than 10% of the outstanding
shares of our common stock will be subject to further SEC reporting requirements
under Section 16(a) of the Exchange Act and may become liable under Section
16(b) of the Exchange Act for reimbursement of any "short-swing profits." Please
consult with your attorney to see if these rules will apply to you.
STATE AND FOREIGN SECURITIES LAWS
This offering is not being made in any state or foreign country in
which it is unlawful to do so, nor are we selling or accepting subscriptions
from holders who are residents of any such state or country. We may delay the
commencement of this offering in certain states or other jurisdictions in order
to comply with the securities law requirements of those states or other
jurisdictions. It is not anticipated that there will be any changes in the terms
of the rights offering. We may decline, in our sole discretion, to make
modifications to the terms of the offering requested by certain states or other
jurisdictions, in which case stockholders who live in those states or
jurisdictions will not be eligible to participate in the offering.
NO RECOMMENDATIONS
We are not making any recommendation as to whether or not you should
exercise your subscription rights. You should make your decision based on your
own assessment of your best interests.
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FEDERAL INCOME TAX CONSIDERATIONS
The following summarizes the material federal income tax consequences
of the rights offering. This summary is based on current law, which is subject
to change at any time, possibly with retroactive effect. This summary is not a
complete discussion of all federal income tax consequences of the rights
offering, and, in particular, may not address federal income tax consequences
applicable to stockholders subject to special treatment under federal income tax
law. In addition, this summary does not address the tax consequences of the
rights offering under applicable state, local or foreign tax laws. This
discussion assumes that your shares of CHI stock and the subscription rights and
shares issued to you pursuant to the rights offering constitute capital assets.
Receipt and exercise of the subscription rights distributed pursuant to
the rights offering is intended to be nontaxable to stockholders, and the
following summary assumes you will qualify for such nontaxable treatment. We
have not sought, nor do we intend to seek, any ruling from the IRS or an opinion
of counsel related to the tax matters described below. This discussion is
included for your general information only. You should consult your tax advisor
to determine the tax consequences to you of the rights offering in light of your
particular circumstances, including any state, local and foreign tax
consequences.
TAXATION OF STOCKHOLDERS
GAIN OR LOSS
- ------------
IT IS CHI'S INTENT THAT THE RIGHTS OFFERING WILL QUALIFY AS NONTAXABLE. YOU
SHOULD NOT RECOGNIZE ANY GAIN OR OTHER INCOME UPON RECEIPT OF A SUBSCRIPTION
RIGHT, ANY LOSS UPON THE EXPIRATION OF A SUBSCRIPTION RIGHT, OR ANY GAIN OR LOSS
ON THE EXERCISE OF A SUBSCRIPTION RIGHT.
If, contrary to CHI's intent, the rights offering does not qualify as
nontaxable, you would be treated as receiving a taxable distribution equal to
the fair market value of the subscription rights on their distribution date. The
distribution would be taxed as a dividend to the extent made out of our current
or accumulated earnings and profits; and any excess would be treated first as a
return of your basis (investment) in your CHI stock and then as a capital gain.
Expiration of the subscription rights would result in a capital loss. You
generally will not recognize gain or loss on the exercise of a subscription
right.
TAX BASIS
- ---------
YOUR TAX BASIS FOR ALL SHARES YOU PURCHASE IN THE RIGHTS OFFERING AND THE
COMMUNITY OFFERING WILL DEPEND ON WHETHER YOU EXERCISE THE SUBSCRIPTION RIGHT OR
ALLOW THE SUBSCRIPTION RIGHT TO EXPIRE.
If you exercise a subscription right and if, as CHI intends, the fair
market value of your subscription rights is determined to be less than 15% of
the fair market value of your existing shares of CHI stock, then the tax basis
of each subscription right will be deemed to be zero, unless you elect, by
attaching an election statement to your federal income tax return for 1999, to
allocate tax basis to your subscription rights.
If you exercise a subscription right and if the fair market value of
your subscription rights is determined, contrary to CHI's intent, to be greater
than 15% of the fair market value of your existing shares of CHI stock, or if
you otherwise elect to do so, your tax basis in the subscription right will be
determined by allocating the tax basis of your CHI stock on which the
subscription right is distributed between the CHI stock and the subscription
right, in proportion to their relative fair market values on the date of
distribution of the subscription right.
If you allow a subscription right to expire, it will be treated as
having no tax basis.
If, contrary to CHI's intent, the rights offering does not qualify as
nontaxable, then you would have a tax basis in the rights equal to the fair
market value of the rights on the date of the rights distribution. The tax basis
of any share of common stock that you purchase through the rights offering will
be equal to the sum of your tax basis, if any, in the subscription right
exercised and the price paid for the share.
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HOLDING PERIOD
- --------------
YOUR HOLDING PERIOD FOR A SUBSCRIPTION RIGHT SHOULD INCLUDE YOUR HOLDING PERIOD
FOR THE SHARES OF COMMON STOCK UPON WHICH THE SUBSCRIPTION RIGHT IS ISSUED, AND
THE HOLDING PERIOD OF THE SHARES OF COMMON STOCK PURCHASED THROUGH THE RIGHTS
OFFERING SHOULD BEGIN ON THE DATE THAT YOU EXERCISE YOUR SUBSCRIPTION RIGHTS.
If, contrary to CHI's intent, the rights offering does not qualify as
nontaxable, then your holding period in the rights would begin on the date of
distribution of the rights, and the holding period of the shares of common stock
purchased through the rights offering would begin on the date that you exercise
your subscription rights.
PLAN OF DISTRIBUTION
On or about October 15, 1999, we will commence the rights offering by
distributing the subscription rights and copies of this prospectus, together
with a copy of subscription agreements, to individuals who owned shares of our
common stock on September 30, 1999. If you wish to exercise your subscription
rights and purchase shares of common stock, you should complete the subscription
agreement and return it, with payment for the shares, to us. If you have any
questions, you should contact: Stephen J. Kovatch, at (419) 885-7379 or (800)
366-5580. See "The Offering - Subscription Procedures."
At the same time, we will commence the community offering by
distributing copies of this prospectus and the community offering subscription
agreements to interested investors who are not already our stockholders. Persons
who wish to purchase stock in the community offering must complete the
subscription agreement and return it, with the required payment for the shares,
to us. See "The Offering - Subscription Procedures."
We will hold all subscription agreements received in the offering and
will be responsible for processing refunds, in case of cancellation of the
offering, to stockholders. Our transfer agent, Registrar and Transfer Co., will
be responsible for delivering stock certificates at the conclusion of the
offering. We will pay all fees and expenses of our transfer agent in connection
with the offering. You are responsible for paying any other commissions, fees,
taxes or other expenses incurred in connection with the purchase of stock in
this offering.
LEGAL MATTERS
Werner & Blank Co., L.P.A., will deliver an opinion to us about the
validity of the issuance of shares of our common stock in this offering.
EXPERTS
The audited consolidated financial statements incorporated by reference
in this registration statement from our annual report on Form 10-K for the year
ended December 31, 1998 have been audited by Ernst & Young LLP and have been
included in reliance on their report given on their authority as experts in
accounting and auditing.
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[CAPITAL HOLDINGS, INC. LOGO]
5520 MONROE STREET
SYLVANIA, OHIO 43560
(419) 885-7379
- - WE HAVE NOT AUTHORIZED ANYONE TO GIVE YOU ANY INFORMATION THAT DIFFERS FROM
THE INFORMATION IN THIS PROSPECTUS. IF YOU RECEIVE ANY DIFFERENT INFORMATION,
YOU SHOULD NOT RELY ON IT.
- - THE DELIVERY OF THIS PROSPECTUS SHALL NOT, UNDER ANY CIRCUMSTANCES, CREATE AN
IMPLICATION THAT CAPITAL HOLDINGS, INC. IS OPERATING UNDER THE SAME CONDITIONS
THAT IT WAS OPERATING UNDER WHEN THIS PROSPECTUS WAS WRITTEN. DO NOT ASSUME
THAT THE INFORMATION CONTAINED IN THIS PROSPECTUS IS CORRECT AT ANY TIME PAST
THE DATE INDICATED.
- - THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR THE SOLICITATION OF
AN OFFER TO BUY, ANY SECURITIES OTHER THAN THE SECURITIES TO WHICH IT RELATES.
- - THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR THE SOLICITATION OF
AN OFFER TO BUY, THE SECURITIES TO WHICH IT RELATES IN ANY CIRCUMSTANCES IN
WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL.
