TABLE OF CONTENTS




|         |                                                                                               |  |  |  |  |  |  | 
|-------- | --------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART I  
|         | ITEM 1. BUSINESS                                                                             
|         | ITEM 2. PROPERTIES                                                                           
|         | ITEM 3. LEGAL PROCEEDINGS                                                                    
|         | ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                  
|PART II 
|         | ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED SHAREHOLDER MATTERS                
|         | ITEM 6. SELECTED FINANCIAL DATA                                                              
|         | ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|         | ITEM 7A. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK                          
|         | ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                                          
|         | ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE 
|PART III
|         | ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT                                  
|         | ITEM 11. EXECUTIVE COMPENSATION                                                              
|         | ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT                      
|         | ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                                      
|         | ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORT ON FORM 8-K                      



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UNITED STATES SECURITIES
AND EXCHANGE COMMISSION
Washington, DC 20549

FORM 10-K

(Mark One)

|  |  |                                                                                                   
|- |  | --------------------------------------------------------------------------------------------------
|X |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934(FEE REQUIRED)

For the fiscal year ended DECEMBER 31, 1999

| |  |                                                                                                          
| |  | ---------------------------------------------------------------------------------------------------------
| |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934(NO FEE REQUIRED)

Commission file number 33-46573





CAPITAL HOLDINGS, INC.
(Exact name of Registrant as specified in its Charter)

|                         |  |                                  
|------------------------ |  | ---------------------------------
|OHIO                     |  | 34-1588902                       
|(State of incorporation) |  | (IRS Employer Identification No.)

5520 Monroe St., Sylvania, OH 43560
(Address of principal executive offices, including zip code)

(419) 885-7379
(Registrant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, without par value
(Title of Class)

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not 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-K or any
amendment to this Form 10-K. X

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. YESX     NO

The aggregate market value of the voting stock held by non-affiliates of
the Registrant at February 29, 2000 was $159,619,074.

The number of shares of Registrants Common Stock outstanding on February
29, 2000 was 7,050,193.

Documents Incorporated by Reference

Annual Report to Shareholders for fiscal year ended December 31, 1999  Parts
II and IV.
      Definitive Proxy Statement for the Annual Meeting of Shareholders to be held
May 18, 2000  Part III.

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##### Table of Contents



CAPITAL HOLDINGS, INC.

1999 FORM 10-K ANNUAL REPORT

TABLE OF CONTENTS

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|           |  |                                                                                       |  | NUMBER
|           |  |                                                                                       |  |       
|           |  | PART I                                                                               
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|           |  |                                                                                      
|Item 1.    |  | Business                                                                              |  |        | 3  | 
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|Item 2.    |  | Properties                                                                            |  |        | 4  | 
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|Item 3.    |  | Legal Proceedings                                                                     |  |        | 4  | 
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|Item 4.    |  | Submission of Matters to a Vote of Security Holders                                   |  |        | 4  | 
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|           |  |                                                                                      
|           |  | PART II                                                                              
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|Item 5.    |  | Market for Registrants Common Equity and Related
Shareholder Matters                 |  |        | 4  | 
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|Item 6.    |  | Selected Financial Data                                                               |  |        | 5  | 
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|Item 7.    |  | Managements Discussion and Analysis of Financial
Condition and Results of Operations |  |        | 6  | 
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|Item 7A    |  | Qualitative and Quantitative Disclosures About
Market Risk                            |  |        | 19 | 
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|Item 8.    |  | Financial Statements and Supplementary Data                                           |  |        | 20 | 
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|Item 9.    |  | Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure  |  |        | 20 | 
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|           |  |                                                                                      
|           |  | PART III                                                                             
|           |  |                                                                                      
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|Item 10.   |  | Directors and Executive Officers of the Registrant                                    |  |        | 20 | 
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|Item 11.   |  | Executive Compensation                                                                |  |        | 21 | 
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|Item 12.   |  | Security Ownership of Certain Beneficial Owners
and Management                        |  |        | 21 | 
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|Item 13.   |  | Certain Relationships and Related Transactions                                        |  |        | 21 | 
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|           |  |                                                                                      
|           |  | PART IV                                                                              
|          
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|          
|           |  |                                                                                      
|Item 14.   |  | Exhibits, Financial Statement Schedules and Reports
on Form 8-K                       |  |        | 21 | 
|          
|          
|          
|          
|Signatures |  |                                                                                       |  |        | 23 | 

2



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##### Table of Contents






PART I.




ITEM 1. BUSINESS

General

Capital Holdings, Inc. (the Company) is a one-bank holding company with
headquarters in Sylvania, Ohio. The Company was formed in July, 1988, for the
purpose of owning and organizing Capital Bank, N.A. (the Bank), a national
banking association which is a wholly-owned subsidiary of the Company.

The Bank opened for business on August 24, 1989, with $12.4 million in
equity capital contributed by the Company. As of December 31, 1999, the total
assets of the Company were $989.2 million and equity capital was $86.1 million.
At December 31, 1998, the total assets of the Company were $801.6 million and
equity capital was $58.4 million.

The Bank has focused its business on the borrowing needs of corporate,
executive and professional customers. It pursues a deposit gathering strategy
of offering money market checking, savings accounts, and certificates of
deposits at attractive rates to mid-sized and large depositors with an emphasis
on minimizing the operating costs of obtaining these deposits. The bank has
one facility and utilizes an extensive courier system to service its customers.

The Bank is located in Sylvania, Ohio, a suburban community northwest of
Toledo, Ohio. In addition to drawing customers from Sylvania, the Bank also
draws customers from Lucas and Wood counties in Ohio as well as southeast
Michigan. The Bank has defined its market niche as serving small to mid-sized
businesses, professionals and their families.

The Company owns its main office facility located at 5520 Monroe Street,
Sylvania, Ohio through a wholly-owned subsidiary, CBNA Building Company.

Competition

The Banks primary competition for banking services comes from other
financial institutions located in Lucas and Wood counties. There are
currently 14 commercial banks and 5 savings and loans believed to be operating
physical facilities in these counties. Many of these institutions are
affiliates of companies which have significantly greater assets than the Bank.
As of June 30, 1999 (the most recent date for which information is readily
available), total deposits held by financial institutions in Lucas and Wood
counties approximated $6.4 billion. The assets of the Bank have grown to
$989.1 million as of December 31, 1999, from $12.4 million since its opening on
August 24, 1989. The management of the Bank believes the primary reason for
the Banks success in deposit and loan growth is tied directly to its niche
orientation, and the fact that its products are delivered through highly
personalized service, as well as being very competitive with other financial
institutions in its market area.

Employees

As of December 31, 1999, the Company and the Bank had 128 employees on a
full-time equivalent basis.

Regulation

The Company is a registered bank holding company under the Bank Holding
Company Act of 1956 (the Banking Act) as amended, and as such is subject to
regulation by the Federal Reserve Board. A bank holding company is required to
file with the Federal Reserve Board annual reports and other information
regarding its business operations and those of its subsidiaries. A bank
holding company and its subsidiary banks are also subject to examination by the
Federal Reserve Board.

The Bank is regulated by the Office of the Comptroller of the Currency
(OCC) as a National Banking Association. Additionally, the Bank is
regulated by the Board of Governors of the Federal Reserve System (FRS) as a
member of the Federal Reserve System. The regulatory agencies have the
authority to regularly examine the Bank and the Bank is subject to the
regulations promulgated by its supervisory agencies. In addition, the deposits
of the Bank are insured by the Federal Deposit Insurance Corporation (FDIC)
and, therefore, the Bank is subject to FDIC regulations.

3



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##### Table of Contents






ITEM 2. PROPERTIES

The Company, through its wholly-owned subsidiary, CBNA Building Company,
owns real estate at 5520 Monroe Street which includes a 50,000 square foot main
office facility used by the Bank. The facility contains retail lobby and Class
A office space that provides an atmosphere for highly effective, personalized
banking service consistent with the Banks market focus. The Company acquired
one acre of vacant land adjacent to the existing facility in 1999 for
additional parking spaces. An additional 15,000 square foot building was
purchased in 1999 and is used partially for storage and is partially leased.




ITEM 3. LEGAL PROCEEDINGS

The Company and the Bank from time to time become involved in such legal
proceedings as are incurred in and incidental to the ordinary course of
business. In the opinion of management, any losses resulting from such
proceedings will not be material to the financial condition, liquidity, or
results of operations of the Company or the Bank.




ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

NONE.




PART II.




ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED SHAREHOLDER MATTERS

The Common Stock of the Company is traded in the over the counter market
on the NASDAQ bulletin board system under the symbol CLHD.

The Company completed a stock offering in December 1999 and issued 900,000
additional shares of Common Stock at $27.00 per share. There were 1,614
shareholders of record as of December 31, 1999.

The Common Stock has historically not been actively traded. Prior to
initiating the stock offering in 1999, a quarterly valuation of the Companys
Common Stock was determined by an independent financial consulting firm
experienced in appraisals of commercial banking organizations. The appraised
fair value of the Companys Common Stock was $20.00 and $15.67 per share,
respectively, at December 31, 1998 and December 31, 1997. The high and low
market prices of the Companys Common Stock during the fourth quarter of 1999
were $32.00 and $26.00, respectively. The Company declared the following
quarterly cash dividends per share during 1999 and 1998:

|               |       |   |      |     |      |   |     |     | 
|-------------- | ----- | - | ---- | --- | ---- | - | --- | --- | 
|               |       |   | 1999 |     | 1998
|               |       |   |      |     |     
|First quarter  |       | $ | .08  |     |      | $ | .07 |    
|              
|              
|              
|              
|Second quarter |       |   | .08  |     |      |   | .07 |    
|              
|              
|              
|              
|Third quarter  |       |   | .08  |     |      |   | .07 |    
|              
|              
|              
|              
|Fourth quarter |       |   | .09  |     |      |   | .08 |    
|               |       |   |      |     |      |   |     |    
|               | Total |   | $    | .33 |      |   | $   | .29 | 
|               |       |   |      |     |      |   |     |    

4



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##### Table of Contents






ITEM 6. SELECTED FINANCIAL DATA

(Dollars in thousands except Per Share Data)
As of and for the Year-Ended December 31

|                                                      |                |             |         |  |      |           |         |  |      |           |         |  |      |           |         |  |   |           |         |  |   |           | 
|----------------------------------------------------- | -------------- | ----------- | ------- |  | ---- | --------- | ------- |  | ---- | --------- | ------- |  | ---- | --------- | ------- |  | - | --------- | ------- |  | - | --------- | 
|                                                      |                |             |         |  | 1999 |           | 1998    |  | 1997 |           | 1996    |  | 1995
|                                                      |                |             |         |  |      |           |         |  |      |           |         |  |     
|CONSOLIDATED RESULTS                                 
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | OF OPERATIONS:
|                                                     
|                                                     
|                                                     
|                                                     
|Interest income                                       |                | $           | 65,786  |  |      | $         | 55,568  |  |      | $         | 47,593  |  |      | $         | 39,639  |  |   | $         | 34,752  | 
|                                                     
|                                                     
|                                                     
|                                                     
|Interest expense                                      |                |             | 36,818  |  |      |           | 31,751  |  |      |           | 27,026  |  |      |           | 22,305  |  |   |           | 19,964  | 
|                                                      |                |             |         |  |      |           |         |  |      |           |         |  |      |           |         |  |   |           |         | 
|Net interest income                                   |                |             | 28,968  |  |      |           | 23,817  |  |      |           | 20,567  |  |      |           | 17,334  |  |   |           | 14,788  | 
|                                                     
|                                                     
|                                                     
|                                                     
|Provision for credit losses                           |                |             | 2,310   |  |      |           | 1,230   |  |      |           | 1,005   |  |      |           | 980     |  |   |           | 850     | 
|                                                      |                |             |         |  |      |           |         |  |      |           |         |  |      |           |         |  |   |           |         | 
|Net interest income after
provision for credit losses |                |             | 26,658  |  |      |           | 22,587  |  |      |           | 19,562  |  |      |           | 16,354  |  |   |           | 13,938  | 
|                                                     
|                                                     
|                                                     
|                                                     
|Other income                                          |                |             | 2,232   |  |      |           | 1,681   |  |      |           | 1,205   |  |      |           | 874     |  |   |           | 753     | 
|                                                     
|                                                     
|                                                     
|                                                     
|Other expense                                         |                |             | 14,787  |  |      |           | 12,534  |  |      |           | 10,751  |  |      |           | 8,821   |  |   |           | 7,590   | 
|                                                      |                |             |         |  |      |           |         |  |      |           |         |  |      |           |         |  |   |           |         | 
|Income before income taxes                            |                |             | 14,103  |  |      |           | 11,734  |  |      |           | 10,016  |  |      |           | 8,407   |  |   |           | 7,101   | 
|                                                     
|                                                     
|                                                     
|                                                     
|Income taxes                                          |                |             | 4,608   |  |      |           | 3,805   |  |      |           | 3,234   |  |      |           | 2,681   |  |   |           | 2,256   | 
|                                                      |                |             |         |  |      |           |         |  |      |           |         |  |      |           |         |  |   |           |         | 
|Net income                                            |                | $           | 9,495   |  |      | $         | 7,929   |  |      | $         | 6,782   |  |      | $         | 5,726   |  |   | $         | 4,845   | 
|                                                      |                |             |         |  |      |           |         |  |      |           |         |  |      |           |         |  |   |           |         | 
|CONSOLIDATED BALANCE                                 
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      |                | SHEET DATA:
|                                                     
|                                                     
|                                                     
|                                                     
|Total assets                                          |                | $           | 989,213 |  |      | $         | 801,628 |  |      | $         | 669,540 |  |      | $         | 559,726 |  |   | $         | 483,170 | 
|                                                     
|                                                     
|                                                     
|                                                     
|Cash and cash equivalents                             |                |             | 28,936  |  |      |           | 29,263  |  |      |           | 23,292  |  |      |           | 13,958  |  |   |           | 13,048  | 
|                                                     
|                                                     
|                                                     
|                                                     
|Securities available-for-sale                         |                |             | 223,817 |  |      |           | 184,583 |  |      |           | 167,521 |  |      |           | 159,209 |  |   |           | 140,627 | 
|                                                     
|                                                     
|                                                     
|                                                     
|Loans, net of deferred loan
fees                      |                |             | 722,583 |  |      |           | 578,370 |  |      |           | 469,036 |  |      |           | 380,160 |  |   |           | 324,788 | 
|                                                     
|                                                     
|                                                     
|                                                     
|Allowance for credit losses                           |                |             | 10,448  |  |      |           | 8,146   |  |      |           | 6,947   |  |      |           | 5,942   |  |   |           | 4,960   | 
|                                                     
|                                                     
|                                                     
|                                                     
|Deposits                                              |                |             | 802,711 |  |      |           | 663,066 |  |      |           | 579,661 |  |      |           | 470,743 |  |   |           | 407,622 | 
|                                                     
|                                                     
|                                                     
|                                                     
|Shareholders equity                                  |                |             | 86,112  |  |      |           | 58,422  |  |      |           | 50,547  |  |      |           | 41,590  |  |   |           | 36,136  | 
|                                                     
|                                                     
|                                                     
|                                                     
|PER SHARE DATA (1):                                  
|                                                     
|                                                     
|                                                     
|                                                     
|Net income:                                          
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      |                |             | Basic   |  | $    | 1.55      |         |  | $    | 1.32      |         |  | $    | 1.19      |         |  | $ | 1.01      |         |  | $ | 0.86      | 
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      |                |             | Diluted |  |      | 1.50      |         |  |      | 1.30      |         |  |      | 1.14      |         |  |   | 0.98      |         |  |   | 0.84      | 
|                                                     
|                                                     
|                                                     
|                                                     
|Book value at period end                              |                |             | 12.24   |  |      |           | 9.66    |  |      |           | 8.46    |  |      |           | 7.31    |  |   |           | 6.39    | 
|                                                     
|                                                     
|                                                     
|                                                     
|Average shares outstanding:                          
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      |                |             | Basic   |  |      | 6,135,009 |         |  |      | 6,007,458 |         |  |      | 5,699,712 |         |  |   | 5,652,834 |         |  |   | 5,607,051 | 
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      |                |             | Diluted |  |      | 6,324,889 |         |  |      | 6,110,595 |         |  |      | 5,927,454 |         |  |   | 5,842,965 |         |  |   | 5,783,037 | 



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|(1) |  | The Company 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 during 1999 and a
6% stock dividend issued during 1996 and 1995. Diluted per share amounts
are based upon weighted-average number of common shares outstanding
including dilutive effects of options for each period, after giving
retroactive effect to a 3-for-1 stock split during 1999 and a 6% stock
dividend issued during 1996 and 1995. 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
year-end shares outstanding for each period.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following narrative presents Managements discussion and analysis of
the Companys financial position and results of operations for the past three
years. The objective of this financial review is to enhance the readers
understanding of the accompanying tables, consolidated financial statements,
the related notes thereto, and statistical information presented elsewhere in
this report.

The Company was organized in July 1988 and commenced banking operations in
August 1989. The Company achieved profitable operations during 1990 and
continued to experience significant growth in assets, deposits and
profitability during the three years-ended December 31, 1999.

Managements discussion and analysis may contain forward-looking
statements that are provided to assist in the understanding of anticipated
future financial performance. However, such performance involves risks and
uncertainties that may cause results to differ materially from those expressed
in forward-looking statements. See the section captioned Forward-Looking
Statements for a full discussion of such factors.

RESULTS OF OPERATIONS

Net Interest Income

Net interest income, the difference between revenue generated from earning
assets and the interest cost of funding those assets, is the Companys primary
source of earnings. Net interest income increased 22%, 16%, and 19% in 1999,
1998, and 1997, respectively. Table 1is an analysis of factors affecting this
change. Table 2sets forth an analysis of the changes in interest earned and
interest paid resulting from changes in volume and rates during each of the two
years in the period ended December 31, 1999. Net interest margin (net interest
income divided by average earning assets) was 3.43% for 1999, 3.45% for 1998,
and 3.61% for 1997.

Average loans outstanding increased 26%, 23%, and 23% in 1999, 1998, and
1997, respectively. Average yield on these loans was 8.13%, 8.53%, and 8.88%,
respectively. The changes in yield are reflective of the change in market
rates and the refinancing opportunities available during these periods.
Securities represented 23% of the total average earning assets of the Company
during 1999, and the average yields were 6.41%, 6.47%, and 6.62% for 1999,
1998, and 1997, respectively. The changes in yield are due to changes in
market rates and portfolio mix.

Average total interest bearing liabilities increased to $ 757 million in
1999 compared with $616 million in 1998 and $517 million in 1997. The average
cost of interest bearing liabilities was 4.86%, 5.16%, and 5.23% for the same
periods. The decrease in yield is a direct reflection of falling short and
long term rates.

Provision for Credit Losses

The provision for credit losses was $2,310,000, $1,230,000, and $1,005,000
for the years ended December 31, 1999, 1998, and 1997, respectively. The
increase in the provision for credit losses in 1999 was due to the growth in
the loan portfolio during the year. Total allowance for credit losses as a
percentage of total loans outstanding at year end was 1.45%, 1.41%, and 1.48%
for the years ended December 31, 1999, 1998, and 1997, respectively.

Management maintains the allowance for credit losses at a level adequate
to absorb losses inherent in the portfolio. The allowance for loan losses is
the estimated amount which in the opinion of management will be adequate to
absorb potential credit losses in the loan portfolio. The balance in the
allowance is evaluated quarterly by management. The balance is determined by
applying varied estimated loss rates to each loan type by credit quality
classification. Additional allowance allocations are estimated for loan
concentrations, loan to value considerations, portfolio seasoning and other
factors. While management believes it uses the best information available to
make evaluations, future adjustments to the allowance for loan losses may be
necessary in circumstances that differ substantially from assumptions in making
the evaluations.

6



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##### Table of Contents



Due to its focus on credit quality, the Company has experienced minimal
problems with asset quality and loan charge offs. The Company has had a total
of only $272,000 in charge offs since its inception in 1989, $20,000 of which
were in 1999. The Company was able to operate four consecutive years, 1994
through 1997, without a loan charge off. Additional information regarding the
provision and allowance for credit losses is contained in the Earning Assets
narrative.

TABLE 1  CONSOLIDATED AVERAGE BALANCE SHEETS AND
ANALYSIS OF NET INTEREST INCOME
(Dollars in thousands)

|                                   |                                  |                                      |         |         |         |           |        |          |        |         |      |           |      |          |         |          |         |           |        |          |        |  |      |          |      |         |         |         |         |   |        |        |        |  |      |      |       |  
|---------------------------------- | -------------------------------- | ------------------------------------ | ------- | ------- | ------- | --------- | ------ | -------- | ------ | ------- | ---- | --------- | ---- | -------- | ------- | -------- | ------- | --------- | ------ | -------- | ------ |  | ---- | -------- | ---- | ------- | ------- | ------- | ------- | - | ------ | ------ | ------ |  | ---- | ---- | ----- | -
|                                   |                                  |                                      |         | 1999    |         | 1998      |        | 1997    
|                                   |                                  |                                      |         |         |         |           |        |         
|                                   |                                  |                                      |         |         |         |           |        | Interest |        | Average |      |           |      |          |         | Interest |         | Average   |        |          |        |  |      | Interest |      | Average
|                                   |                                  |                                      |         | Average |         | Earned or |        | Yield or |        | Average |      | Earned or |      | Yield or |         | Average  |         | Earned or |        | Yield or
|                                   |                                  |                                      |         | Balance |         | Paid      |        | Cost     |        | Balance |      | Paid      |      | Cost     |         | Balance  |         | Paid      |        | Cost    
|                                   |                                  |                                      |         |         |         |           |        |          |        |         |      |           |      |          |         |          |         |           |        |         
|Interest-Earning Assets:           |                                  |                                      |         |         |         |           |        |          |        |         |      |           |      |          |         |          |         |           |        |          |        |  |      |          |     
|                                  
|                                  
|                                  
|                                  
|                                   | Securities:                      |                                      |         |         |         |           |        |          |        |         |      |           |      |          |         |          |         |           |        |          |        |  |      |          |      |        
|                                  
|                                  
|                                  
|                                  
|                                   |                                  | Taxable                              |         | $       | 187,629 |           |        | $        | 11,852 |         |      |           | 6.32 | %        |         | $        | 166,321 |           |        | $        | 10,594 |  |      |          | 6.37 | %       |         | $       | 148,361 |   |        | $      | 9,671  |  |      |      | 6.52  | %
|                                  
|                                  
|                                  
|                                  
|                                   |                                  | Tax exempt                           |         |         | 14,515  |           |        |          | 1,112  |         |      |           | 7.66 | %        |         |          | 13,928  |           |        |          | 1,076  |  |      |          | 7.73 | %       |         |         | 13,623  |   |        |        | 1,058  |  |      |      | 7.77  | %
|                                  
|                                  
|                                  
|                                  
|                                   | Loans:                           |                                      |         |         |         |           |        |          |        |         |      |           |      |          |         |          |         |           |        |          |        |  |      |          |      |        
|                                  
|                                  
|                                  
|                                  
|                                   |                                  | Taxable                              |         |         | 645,346 |           |        |          | 52,424 |         |      |           | 8.12 | %        |         |          | 510,244 |           |        |          | 43,467 |  |      |          | 8.52 | %       |         |         | 413,003 |   |        |        | 36,581 |  |      |      | 8.86  | %
|                                  
|                                  
|                                  
|                                  
|                                   |                                  | Tax exempt                           |         |         | 5,153   |           |        |          | 492    |         |      |           | 9.55 | %        |         |          | 4,015   |           |        |          | 392    |  |      |          | 9.76 | %       |         |         | 5,026   |   |        |        | 520    |  |      |      | 10.35 | %
|                                  
|                                  
|                                  
|                                  
|                                   | Federal funds sold               |                                      |         | 8,642   |         |           |        | 451      |        |         |      | 5.22      | %    |          |         | 9,970    |         |           |        | 537      |        |  |      | 5.39     | %    |         |         | 5,268   |         |   |        | 300    |        |  |      | 5.69 | %    
|                                   |                                  |                                      |         |         |         |           |        |          |        |         |      |           |      |          |         |          |         |           |        |          |        |  |      |          |      |         |         |         |         |   |        |       
|Total Interest-Earning Assets      |                                  |                                      | 861,285 |         |         |           | 66,331 |          |        |         | 7.70 | %         |      |          | 704,478 |          |         |           | 56,066 |          |        |  | 7.96 | %        |      |         | 585,281 |         |         |   | 48,130 |        |        |  | 8.22 | %   
|                                  
|                                  
|                                  
|                                  
|Noninterest-Earning Assets:        |                                  |                                      |         |         |         |           |        |          |        |         |      |           |      |          |         |          |         |           |        |          |        |  |      |          |     
|                                  
|                                  
|                                  
|                                  
|                                   | Cash and due from banks          |                                      |         | 17,603  |         |           |        |          |        |         |      |           |      |          |         | 15,247   |         |           |        |          |        |  |      |          |      |         |         | 13,191  |        
|                                  
|                                  
|                                  
|                                  
|                                   | Bank premises and
equipment-net  |                                      |         | 9,883   |         |           |        |          |        |         |      |           |      |          |         | 9,675    |         |           |        |          |        |  |      |          |      |         |         | 8,723   |        
|                                  
|                                  
|                                  
|                                  
|                                   | Other assets                     |                                      |         | 10,738  |         |           |        |          |        |         |      |           |      |          |         | 7,282    |         |           |        |          |        |  |      |          |      |         |         | 7,073   |        
|                                  
|                                  
|                                  
|                                  
|                                   | Less allowance for credit losses |                                      |         | (9,156  | )       |           |        |          |        |         |      |           |      |          |         | (7,408   | )       |           |        |          |        |  |      |          |      |         |         | (6,388  | )      
|                                   |                                  |                                      |         |         |         |           |        |          |        |         |      |           |      |          |         |          |         |           |        |          |        |  |      |          |      |         |         |        
|                                   |                                  | $                                    | 890,353 |         |         |           |        |          |        |         |      |           |      | $        | 729,274 |          |         |           |        |          |        |  |      |          |      | $       | 607,880 |        
|                                   |                                  |                                      |         |         |         |           |        |          |        |         |      |           |      |          |         |          |         |           |        |          |        |  |      |          |      |         |         |        
|Interest-Bearing Liabilities:     
|                                  
|                                  
|                                  
|                                  
|                                   | Interest checking                |                                      | $       | 199,326 |         |           |        | 7,682    |        |         |      | 3.85      | %    |          | $       | 168,190  |         |           |        | 6,945    |        |  |      | 4.13     | %    |         | $       | 138,910 |         |   |        | 5,847  |        |  |      | 4.21 | %    
|                                  
|                                  
|                                  
|                                  
|                                   | Savings deposits                 |                                      |         | 18,050  |         |           |        | 452      |        |         |      | 2.50      | %    |          |         | 17,474   |         |           |        | 490      |        |  |      | 2.80     | %    |         |         | 17,671  |         |   |        | 509    |        |  |      | 2.88 | %    
|                                  
|                                  
|                                  
|                                  
|                                   | Time deposits                    |                                      |         | 449,091 |         |           |        | 24,142   |        |         |      | 5.38      | %    |          |         | 376,350  |         |           |        | 21,587   |        |  |      | 5.74     | %    |         |         | 333,114 |         |   |        | 19,296 |        |  |      | 5.79 | %    
|                                  
|                                  
|                                  
|                                  
|                                   | Other borrowings                 |                                      |         | 90,898  |         |           |        | 4,543    |        |         |      | 5.00      | %    |          |         | 53,538   |         |           |        | 2,729    |        |  |      | 5.10     | %    |         |         | 26,849  |         |   |        | 1,374  |        |  |      | 5.12 | %    
|                                   |                                  |                                      |         |         |         |           |        |          |        |         |      |           |      |          |         |          |         |           |        |          |        |  |      |          |      |         |         |         |         |   |        |       
|Total Interest-Bearing Liabilities |                                  |                                      | 757,365 |         |         |           | 36,819 |          |        |         | 4.86 | %         |      |          | 615,552 |          |         |           | 31,751 |          |        |  | 5.16 | %        |      |         | 516,544 |         |         |   | 27,026 |        |        |  | 5.23 | %   
|                                  
|                                  
|                                  
|                                  
|Noninterest-Bearing Liabilities:   |                                  |                                      |         |         |         |           |        |          |        |         |      |           |      |          |         |          |         |           |        |          |        |  |      |          |     
|                                  
|                                  
|                                  
|                                  
|                                   | Demand deposits                  |                                      |         | 60,145  |         |           |        |          |        |         |      |           |      |          |         | 51,646   |         |           |        |          |        |  |      |          |      |         |         | 42,372  |        
|                                  
|                                  
|                                  
|                                  
|                                   | Other                            |                                      |         | 10,918  |         |           |        |          |        |         |      |           |      |          |         | 7,462    |         |           |        |          |        |  |      |          |      |         |         | 4,404   |        
|                                   |                                  |                                      |         |         |         |           |        |          |        |         |      |           |      |          |         |          |         |           |        |          |        |  |      |          |      |         |         |        
|Total Liabilities                  |                                  |                                      | 828,428 |         |         |           |        |          |        |         |      |           |      |          | 674,660 |          |         |           |        |          |        |  |      |          |      |         | 563,320 |        
|                                  
|                                  
|                                  
|                                  
|Shareholders Equity               |                                  |                                      | 61,925  |         |         |           |        |          |        |         |      |           |      |          | 54,614  |          |         |           |        |          |        |  |      |          |      |         | 44,560  |        
|                                   |                                  |                                      |         |         |         |           |        |          |        |         |      |           |      |          |         |          |         |           |        |          |        |  |      |          |      |         |         |        
|                                   |                                  | $                                    | 890,353 |         |         |           |        |          |        |         |      |           |      | $        | 729,274 |          |         |           |        |          |        |  |      |          |      | $       | 607,880 |        
|                                   |                                  |                                      |         |         |         |           |        |          |        |         |      |           |      |          |         |          |         |           |        |          |        |  |      |          |      |         |         |        
|Net Interest Income                |                                  |                                      |         |         |         | $         | 29,512 |          |        |         |      |           |      |          |         |          |         | $         | 24,315 |          |        |  |      |          |      |         |         |         |         | $ | 21,104 |       
|                                   |                                  |                                      |         |         |         |           |        |          |        |         |      |           |      |          |         |          |         |           |        |          |        |  |      |          |      |         |         |         |         |   |        |       
|                                   |                                  | Net Yield on Interest-Earning Assets |         |         |         |           |        |          |        |         |      |           | 3.43 | %        |         |          |         |           |        |          |        |  |      |          | 3.45 | %       |         |         |         |   |        |        |        |  |      |      | 3.61  | %
|                                   |                                  |                                      |         |         |         |           |        |          |        |         |      |           |      |          |         |          |         |           |        |          |        |  |      |          |      |         |         |         |         |   |        |        |        |  |      |     

|      |  |                                                                                                                                                                                                                                                                                                                                               
|----- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|NOTE: |  | Nonaccrual loans are included in average loan balances. Interest
income includes the effect of tax equivalent adjustments amounting to $545
in 1999, $499 in 1998 and $537 in 1997, using a 34% tax rate. This rate
is based upon the statutory rate and is not necessarily intended to
represent the Companys effective or incremental rate.

7



---



##### Table of Contents



TABLE 2  ANALYSIS OF NET INTEREST INCOME CHANGES
(Dollars in thousands)

|                                         |                    |   |                       |        |                       |   |        |        |        |   |        |       |     |   |       |       |  |   |        |        |   |   |       |       | 
|---------------------------------------- | ------------------ | - | --------------------- | ------ | --------------------- | - | ------ | ------ | ------ | - | ------ | ----- | --- | - | ----- | ----- |  | - | ------ | ------ | - | - | ----- | ----- | 
|                                         |                    |   | 1999 compared to 1998 |        | 1998 compared to 1997
|                                         |                    |   | Increase (Decrease)   |        | Increase (Decrease)  
|                                         |                    |   |                       |        |                      
|                                         |                    |   | Volume                |        | Rate                  |   | Net    |        | Volume |   | Rate   |       | Net
|                                         |                    |   |                       |        |                       |   |        |        |        |   |        |       |    
|Interest on Earning Assets:             
|                                        
|                                        
|                                        
|                                        
|                                         | Securities         |   | $                     | 1,386  |                       |   | $      | (92    | )      |   | $      | 1,294 |     |   | $     | 1,163 |  |   | $      | (222   | ) |   | $     | 941   | 
|                                        
|                                        
|                                        
|                                        
|                                         | Loans              |   |                       | 10,995 |                       |   |        | (1,938 | )      |   |        | 9,057 |     |   |       | 8,127 |  |   |        | (1,369 | ) |   |       | 6,758 | 
|                                        
|                                        
|                                        
|                                        
|                                         | Federal funds sold |   |                       | (70    | )                     |   |        | (16    | )      |   |        | (86   | )   |   |       | 252   |  |   |        | (15    | ) |   |       | 237   | 
|                                         |                    |   |                       |        |                       |   |        |        |        |   |        |       |     |   |       |       |  |   |        |        |   |   |       |      
|Total Interest Income Changes            |                    | $ | 12,311                |        |                       | $ | (2,046 | )      |        | $ | 10,265 |       |     | $ | 9,542 |       |  | $ | (1,606 | )      |   | $ | 7,936 |      
|                                         |                    |   |                       |        |                       |   |        |        |        |   |        |       |     |   |       |       |  |   |        |        |   |   |       |      
|Expense on Interest Bearing
Liabilities:
|                                        
|                                        
|                                        
|                                        
|                                         | Deposits           |   | $                     | 4,961  |                       |   | $      | (1,707 | )      |   | $      | 3,254 |     |   | $     | 3,655 |  |   | $      | (285   | ) |   | $     | 3,370 | 
|                                        
|                                        
|                                        
|                                        
|                                         | Other borrowings   |   |                       | 1,866  |                       |   |        | (52    | )      |   |        | 1,814 |     |   |       | 1,360 |  |   |        | (5     | ) |   |       | 1,355 | 
|                                         |                    |   |                       |        |                       |   |        |        |        |   |        |       |     |   |       |       |  |   |        |        |   |   |       |      
|Total Interest Expense Changes           |                    | $ | 6,827                 |        |                       | $ | (1,759 | )      |        | $ | 5,068  |       |     | $ | 5,015 |       |  | $ | (290   | )      |   | $ | 4,725 |      
|                                         |                    |   |                       |        |                       |   |        |        |        |   |        |       |     |   |       |       |  |   |        |        |   |   |       |      
|Net Interest Income                      |                    | $ | 5,484                 |        |                       | $ | (287   | )      |        | $ | 5,197  |       |     | $ | 4,527 |       |  | $ | (1,316 | )      |   | $ | 3,211 |      
|                                         |                    |   |                       |        |                       |   |        |        |        |   |        |       |     |   |       |       |  |   |        |        |   |   |       |      

|      |  |                                                                                                                                                                                                                                           
|----- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|NOTE: |  | The change in interest not due solely to volume or rate has been
allocated between the factors in proportion to the absolute dollar amounts
of the change in each. Changes in securities and loans reflect taxable
equivalent adjustments.

Other Income

Other income consists primarily of merchant fees, credit card and debit
card interchange fees and service fees on deposit accounts. Total other income
of approximately $2,232,000 for 1999 increased approximately $551,000 or 33%
when compared to 1998. Total other income grew 39% in 1998 compared to 1997.
Merchant and credit card interchange fees combined were approximately
$1,142,000, $962,000, and $777,000 in 1999, 1998, and 1997, respectively.
Service charges on deposit accounts were approximately $569,000, $395,000, and
$313,000 in 1999, 1998, and 1997, respectively.

Other Expenses

Noninterest expense increased 18% in 1999 and 17% in 1998. The Companys
efficiency ratio, computed by dividing other expenses by net interest income
plus other income, was 47.4% for 1999 and 49.2% for 1998. The Companys low
ratio is indicative of efficient overhead cost control from operating a single
facility.

Salaries and benefits, which accounted for 53% in both 1999 and 1998 of
noninterest expenses, increased by 19% in 1999 and 17% in 1998. Full-time
equivalent employees increased 20% in 1999 and 9% in 1998. The increase in
full-time equivalent employees was attributable to the growth in the Companys
balance sheet and earning assets. Management continues to control overhead
expense without impairing the quality of service provided to customers.
Operating from a single location has proven both efficient and effective. The
Companys total assets per employee approximated $7.7 million and $7.5 million
at December 31, 1999 and 1998, respectively; this compares very favorably to
banks of similar asset size.

8



---



##### Table of Contents



Occupancy and equipment expense increased by 28% in 1999 and 32% in 1998,
due primarily to the increase in costs associated with hardware and software
upgrades in both years, and increased real estate tax expense in 1999.

Provision for Federal Income Taxes

The Federal income tax expense was $4,608,000, $3,805,000, and $3,234,000
in 1999, 1998, and 1997, respectively. During each of these years, the Company
realized tax savings from tax-free municipal bonds and from tax-exempt loans.
The effective tax rate was 32.7%, 32.4%, and 32.3% in 1999, 1998, and 1997,
respectively.

FINANCIAL CONDITION

The following discussions address key elements of financial condition,
including earning assets, the sources of funds supporting earning assets,
credit quality and experience, asset and liability management, and capital
adequacy.

EARNING ASSETS

Loans

Loans comprised 76%, 73%, and 71% of the Companys average earning assets
in 1999, 1998, and 1997, respectively. Loans increased $144 million, or 25%,
in 1999 reflecting both continued strong sales efforts and loan demand in the
local market served by the Company. Similarly, loans increased 23% in both
1998 and 1997.

The commercial loan portfolio represents loans to business interests,
located primarily within the Companys defined market area, with no significant
industry concentration. The residential real estate portfolio is primarily
adjustable rate mortgages that qualify for sale into the secondary market;
however, the Company has chosen to retain all residential mortgage loans in its
portfolio.

Tables 3and 4show the composition of the loan portfolio at the end of
each of the last five years and the loan maturities and rate sensitivity at
December 31, 1999.

TABLE 3  LOAN PORTFOLIO AT DECEMBER 31
(Dollars in thousands)

|                                      |                            |   |         |         |      |   |         |         |      |   |         |         |  |   |         |         |  |   |         |        | 
|------------------------------------- | -------------------------- | - | ------- | ------- | ---- | - | ------- | ------- | ---- | - | ------- | ------- |  | - | ------- | ------- |  | - | ------- | ------ | 
|                                      |                            |   | 1999    |         | 1998 |   | 1997    |         | 1996 |   | 1995   
|                                      |                            |   |         |         |      |   |         |         |      |   |        
|Commercial                            |                            | $ | 146,072 |         |      | $ | 124,643 |         |      | $ | 103,061 |         |  | $ | 79,492  |         |  | $ | 74,347  |       
|                                     
|                                     
|                                     
|                                     
|Real Estate:                         
|                                     
|                                     
|                                     
|                                     
|                                      | Residential-first mortgage |   |         | 136,425 |      |   |         | 121,358 |      |   |         | 104,659 |  |   |         | 86,750  |  |   |         | 70,969 | 
|                                     
|                                     
|                                     
|                                     
|                                      | Commercial-owner occupied  |   |         | 138,700 |      |   |         | 118,560 |      |   |         | 99,537  |  |   |         | 76,673  |  |   |         | 70,121 | 
|                                     
|                                     
|                                     
|                                     
|                                      | Commercial-investment      |   |         | 65,949  |      |   |         | 182,888 |      |   |         | 130,108 |  |   |         | 105,275 |  |   |         | 78,531 | 
|                                      |                            |   |         |         |      |   |         |         |      |   |         |         |  |   |         |         |  |   |         |       
|                                      |                            |   | 541,074 |         |      |   | 422,806 |         |      |   | 334,304 |         |  |   | 268,698 |         |  |   | 219,621 |       
|                                     
|                                     
|                                     
|                                     
|Consumer                              |                            |   | 28,474  |         |      |   | 27,261  |         |      |   | 27,849  |         |  |   | 26,995  |         |  |   | 25,653  |       
|                                     
|                                     
|                                     
|                                     
|Other                                 |                            |   | 8,130   |         |      |   | 4,571   |         |      |   | 4,507   |         |  |   | 5,614   |         |  |   | 5,767   |       
|                                      |                            |   |         |         |      |   |         |         |      |   |         |         |  |   |         |         |  |   |         |       
|Total Loans                           |                            |   | 723,750 |         |      |   | 579,281 |         |      |   | 469,721 |         |  |   | 380,799 |         |  |   | 325,388 |       
|                                     
|                                     
|                                     
|                                     
|Less deferred loan fees               |                            |   | 1,167   |         |      |   | 911     |         |      |   | 685     |         |  |   | 639     |         |  |   | 600     |       
|                                      |                            |   |         |         |      |   |         |         |      |   |         |         |  |   |         |         |  |   |         |       
|Total loans net of deferred
loan fees |                            |   | 722,583 |         |      |   | 578,370 |         |      |   | 469,036 |         |  |   | 380,160 |         |  |   | 324,788 |       
|                                     
|                                     
|                                     
|                                     
|Less allowance for credit losses      |                            |   | 10,448  |         |      |   | 8,146   |         |      |   | 6,947   |         |  |   | 5,942   |         |  |   | 4,960   |       
|                                      |                            |   |         |         |      |   |         |         |      |   |         |         |  |   |         |         |  |   |         |       
|Net Loans                             |                            | $ | 712,135 |         |      | $ | 570,224 |         |      | $ | 462,089 |         |  | $ | 374,218 |         |  | $ | 319,828 |       
|                                      |                            |   |         |         |      |   |         |         |      |   |         |         |  |   |         |         |  |   |         |       

9



---



##### Table of Contents



The maturity distribution and sensitivity to interest rates of the loan
portfolio are two factors in managements evaluation of the risk
characteristics and the future profitability of the portfolio.

TABLE 4  LOAN MATURITIES AND RATE SENSITIVITY AT DECEMBER 31, 1999
(Dollars in thousands)

|                               |                     |                            |        |         |         |       |        |         |         |       |         |        |         |  |         |         |         | 
|------------------------------ | ------------------- | -------------------------- | ------ | ------- | ------- | ----- | ------ | ------- | ------- | ----- | ------- | ------ | ------- |  | ------- | ------- | ------- | 
|                               |                     |                            |        | Within  |         | 1 - 5 |        | Over 5 
|                               |                     |                            |        | 1 Year  |         | Years |        | Years   |         | Total
|                               |                     |                            |        |         |         |       |        |         |         |      
|Loan maturities by type (A,C):
|                              
|                              
|                              
|                              
|                               | Commercial          |                            | $      | 15,856  |         |       | $      | 109,562 |         |       | $       | 20,654 |         |  | $       | 146,072 |        
|                              
|                              
|                              
|                              
|                               | Real Estate:       
|                              
|                              
|                              
|                              
|                               |                     | Residential-first mortgage |        |         | 408     |       |        |         | 1,355   |       |         |        | 134,662 |  |         |         | 136,425 | 
|                              
|                              
|                              
|                              
|                               |                     | Commercial-owner occupied  |        |         | 10,024  |       |        |         | 12,557  |       |         |        | 116,119 |  |         |         | 138,700 | 
|                              
|                              
|                              
|                              
|                               |                     | Commercial-investment      |        |         | 31,315  |       |        |         | 65,439  |       |         |        | 169,195 |  |         |         | 265,949 | 
|                               |                     |                            |        |         |         |       |        |         |         |       |         |        |         |  |         |        
|                               |                     |                            | 41,747 |         |         |       | 79,351 |         |         |       | 419,976 |        |         |  | 541,074 |        
|                              
|                              
|                              
|                              
|                               | Consumer            |                            |        | 12,631  |         |       |        | 15,697  |         |       |         | 146    |         |  |         | 28,474  |        
|                              
|                              
|                              
|                              
|                               | Other               |                            |        | 795     |         |       |        |        |         |       |         | 7,335  |         |  |         | 8,130   |        
|                               |                     |                            |        |         |         |       |        |         |         |       |         |        |         |  |         |        
|                               |                     | TOTAL                      |        | $       | 71,029  |       |        | $       | 204,610 |       |         | $      | 448,111 |  |         | $       | 723,750 | 
|                               |                     |                            |        |         |         |       |        |         |         |       |         |        |         |  |         |        
|Rate Sensitivity (B,C):       
|                              
|                              
|                              
|                              
|                               | Fixed-Rate Loans    |                            | $      | 20,383  |         |       | $      | 78,827  |         |       | $       | 26,129 |         |  | $       | 125,339 |        
|                              
|                              
|                              
|                              
|                               | Variable-Rate Loans |                            |        | 223,545 |         |       |        | 347,483 |         |       |         | 27,383 |         |  |         | 598,411 |        
|                               |                     |                            |        |         |         |       |        |         |         |       |         |        |         |  |         |        
|                               |                     | TOTAL                      |        | $       | 243,928 |       |        | $       | 426,310 |       |         | $      | 53,512  |  |         | $       | 723,750 | 
|                               |                     |                            |        |         |         |       |        |         |         |       |         |        |         |  |         |        
|Percent of Total               |                     |                            | 33.7   | %       |         |       | 58.9   | %       |         |       | 7.4     | %      |         |  | 100     | %      
|                               |                     |                            |        |         |         |       |        |         |         |       |         |        |         |  |         |        



---

|(A) |  | Maturities based on ending contractual maturity dates.                                                                                                                                                                                                 
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|   
|   
|   
|(B) |  | Loans are reported at the earliest of maturity or repricing opportunity.                                                                                                                                                                               
|   
|   
|   
|   
|(C) |  | Occasionally extensions or renewals of loan obligations are requested.
These are reviewed on an individual basis and granted if deemed
appropriate. Such extensions, however, do not materially alter the
anticipated loan maturity tables as reported.

The Banks credit policy establishes guidelines to manage credit risk and
asset quality. These guidelines include loan review and early identification
of problem loans to ensure sound credit decisions. The Banks credit policies
and procedures are meant to minimize the risk and uncertainties inherent in
lending. In following these policies and procedures, management must rely on
estimates, appraisals and evaluations of loans and the possibility that changes
in these could occur quickly because of changing economic conditions.

Nonperforming assets consist of loans on nonaccrual and loans over 90-days
past due as to principal and interest and still in an accrual status.
Nonaccrual loans are loans which are 90-days past due and with respect to
which, in managements opinion, collection of interest is doubtful. These
loans no longer accrue interest and are accounted for on a cash basis. Loans
which are 90-days or more past due and still accruing interest are loans which,
in managements opinion, are well secured and are in the process of collection.
Nonperforming loans amounted to $6,000, $570,000, $673,000, and $454,000 at
December 31, 1999, 1998, 1997, and 1996, respectively, which consistently
represent less than .15% of total loans for the same periods.

Potential problem loans are those loans which are on the Banks Watch
List and exhibit characteristics that could cause the loans to become
nonperforming or require restructuring in the future. Management reviews this
list regularly and adjusts for changing conditions.

10



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##### Table of Contents



Table 5is a summary of credit loss experience for the five
years ending December 31, 1999.

TABLE 5  ALLOWANCE FOR CREDIT LOSSES
(Dollars in thousands)

|                                                                           |                                      |                         |                       |      |      |    |         |      |      |     |         |      |      |   |         |      |   |   |         |      |   |   | 
|-------------------------------------------------------------------------- | ------------------------------------ | ----------------------- | --------------------- | ---- | ---- | -- | ------- | ---- | ---- | --- | ------- | ---- | ---- | - | ------- | ---- | - | - | ------- | ---- | - | - | 
|                                                                           |                                      |                         |                       |      | 1999 |    | 1998    |      | 1997 |     | 1996    |      | 1995
|                                                                           |                                      |                         |                       |      |      |    |         |      |      |     |         |      |     
|Balance at beginning of year                                               |                                      | $                       | 8,146                 |      |      | $  | 6,947   |      |      | $   | 5,942   |      |      | $ | 4,960   |      |   | $ | 4,110   |     
|                                                                          
|                                                                          
|                                                                          
|                                                                          
|Loans charged off:                                                        
|                                                                          
|                                                                          
|                                                                          
|                                                                          
|                                                                           | Commercial                           |                         |                       | (15  | )    |    |         | (21  | )    |     |         |     |      |   |         |     |   |   |         |     |  
|                                                                          
|                                                                          
|                                                                          
|                                                                          
|                                                                           | Residential real estate              |                         |                       |     |      |    |         | (13  | )    |     |         |     |      |   |         |     |   |   |         |     |  
|                                                                          
|                                                                          
|                                                                          
|                                                                          
|                                                                           | Consumer and other                   |                         |                       | (5   | )    |    |         | (2   | )    |     |         |     |      |   |         |     |   |   |         |     |  
|                                                                           |                                      |                         |                       |      |      |    |         |      |      |     |         |      |      |   |         |      |   |   |         |     
|                                                                           |                                      | Total loans charged off |                       |      | (20  | )  |         |      | (36  | )   |         |      |     |   |         |      |  |   |         |      |  |  
|                                                                          
|                                                                          
|                                                                          
|                                                                          
|Recoveries:                                                               
|                                                                          
|                                                                          
|                                                                          
|                                                                          
|                                                                           | Commercial                           |                         |                       | 12   |      |    |         | 3    |      |     |         |     |      |   |         |     |   |   |         |     |  
|                                                                          
|                                                                          
|                                                                          
|                                                                          
|                                                                           | Residential real estate              |                         |                       | 1    |      |    |         |     |      |     |         |     |      |   |         |     |   |   |         |     |  
|                                                                          
|                                                                          
|                                                                          
|                                                                          
|                                                                           | Consumer and other                   |                         |                       |     |      |    |         | 2    |      |     |         |     |      |   |         | 2    |   |   |         |     |  
|                                                                           |                                      |                         |                       |      |      |    |         |      |      |     |         |      |      |   |         |      |   |   |         |     
|                                                                           |                                      |                         | Total recoveries      |      |      | 13 |         |      |      | 5   |         |      |      |  |         |      |   | 2 |         |      |   |  | 
|                                                                           |                                      |                         |                       |      |      |    |         |      |      |     |         |      |      |   |         |      |   |   |         |     
|                                                                           |                                      |                         | Net loans charged off |      |      | (7 | )       |      |      | (31 | )       |      |      |  |         |      |   | 2 |         |      |   |  | 
|                                                                          
|                                                                          
|                                                                          
|                                                                          
|Provision for credit losses                                                |                                      |                         | 2,310                 |      |      |    | 1,230   |      |      |     | 1,005   |      |      |   | 980     |      |   |   | 850     |     
|                                                                           |                                      |                         |                       |      |      |    |         |      |      |     |         |      |      |   |         |      |   |   |         |     
|Balance at end of year                                                     |                                      | $                       | 10,449                |      |      | $  | 8,146   |      |      | $   | 6,947   |      |      | $ | 5,942   |      |   | $ | 4,960   |     
|                                                                           |                                      |                         |                       |      |      |    |         |      |      |     |         |      |      |   |         |      |   |   |         |     
|Total loans outstanding
at year-end, net of deferred fees                  |                                      | $                       | 722,583               |      |      | $  | 578,370 |      |      | $   | 469,036 |      |      | $ | 380,160 |      |   | $ | 324,788 |     
|                                                                           |                                      |                         |                       |      |      |    |         |      |      |     |         |      |      |   |         |      |   |   |         |     
|Average loans                                                              |                                      | $                       | 650,499               |      |      | $  | 514,259 |      |      | $   | 418,029 |      |      | $ | 340,035 |      |   | $ | 283,577 |     
|                                                                           |                                      |                         |                       |      |      |    |         |      |      |     |         |      |      |   |         |      |   |   |         |     
|As a percent of average loans:                                            
|                                                                          
|                                                                          
|                                                                          
|                                                                          
|                                                                           | Net charge-offs                      |                         |                       | Nil  |      |    |         | Nil  |      |     |         | N/A  |      |   |         | N/A  |   |   |         | N/A  |  
|                                                                          
|                                                                          
|                                                                          
|                                                                          
|                                                                           | Provision for credit losses          |                         |                       | .36  | %    |    |         | 0.24 | %    |     |         | 0.24 | %    |   |         | 0.29 | % |   |         | 0.30 | %
|                                                                          
|                                                                          
|                                                                          
|                                                                          
|As a percent of total loans outstanding
at year-end, net of deferred fees:
|                                                                          
|                                                                          
|                                                                          
|                                                                          
|                                                                           | Year-end allowance
for credit losses |                         |                       | 1.45 | %    |    |         | 1.41 | %    |     |         | 1.48 | %    |   |         | 1.56 | % |   |         | 1.53 | %

11



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##### Table of Contents



Table 6is an allocation of the allowance for credit losses for the five years
ended December 31, 1999:

TABLE 6  ALLOCATION OF THE ALLOWANCE FOR CREDIT LOSSES
(Dollars in thousands)

|                   |                              |   |        |       |           |  |          |    |           |   |       |       |           |  |      |    |           |   |          |       |           |  |     |    |          |   |       |       |  |  |          |    |   |   |       |     |  |  |     |    |  
|------------------ | ---------------------------- | - | ------ | ----- | --------- |  | -------- | -- | --------- | - | ----- | ----- | --------- |  | ---- | -- | --------- | - | -------- | ----- | --------- |  | --- | -- | -------- | - | ----- | ----- |  |  | -------- | -- | - | - | ----- | --- |  |  | --- | -- | -
|                   |                              |   | 1999   |       | 1998      |  | 1997     |    | 1996      |   | 1995 
|                   |                              |   |        |       |           |  |          |    |           |   |      
|                   |                              |   |        |       |           |  | % of     |    |           |   |       |       | % of      |  |      |    |           |   | % of     |       |           |  |     |    | % of     |   |       |       |  |  | % of    
|                   |                              |   |        |       |           |  | loans to |    |           |   |       |       | loans to  |  |      |    |           |   | loans to |       |           |  |     |    | loans to |   |       |       |  |  | loans to
|                   |                              |   | Amt.   |       | ttl loans |  | Amt.     |    | ttl loans |   | Amt.  |       | ttl loans |  | Amt. |    | ttl loans |   | Amt.     |       | ttl loans
|                   |                              |   |        |       |           |  |          |    |           |   |       |       |           |  |      |    |           |   |          |       |          
|Commercial         |                              | $ | 1,466  |       |           |  | 20       | %  |           | $ | 1,158 |       |           |  | 22   | %  |           | $ | 714      |       |           |  | 22  | %  |          | $ | 720   |       |  |  | 21       | %  |   | $ | 957   |     |  |  | 23  | % 
|                  
|                  
|                  
|                  
|Real Estate:       |                              |   |        |       |           |  |          |    |           |   |       |       |           |  |      |    |           |   |          |       |           |  |     |    |          |   |       |       |  |  |          |    |  
|                  
|                  
|                  
|                  
|                   | Residential  first mortgage |   |        | 340   |           |  |          | 19 | %         |   |       | 415   |           |  |      | 21 | %         |   |          | 362   |           |  |     | 22 | %        |   |       | 240   |  |  |          | 23 | % |   |       | 179 |  |  |     | 22 | %
|                  
|                  
|                  
|                  
|                   | Commercial  owner occupied  |   |        | 781   |           |  |          | 19 | %         |   |       | 636   |           |  |      | 20 | %         |   |          | 573   |           |  |     | 21 | %        |   |       | 542   |  |  |          | 20 | % |   |       | 422 |  |  |     | 22 | %
|                  
|                  
|                  
|                  
|                   | Commercial  investment      |   |        | 2,778 |           |  |          | 37 | %         |   |       | 1,900 |           |  |      | 32 | %         |   |          | 1,464 |           |  |     | 28 | %        |   |       | 1,263 |  |  |          | 28 | % |   |       | 844 |  |  |     | 24 | %
|                   |                              |   |        |       |           |  |          |    |           |   |       |       |           |  |      |    |           |   |          |       |           |  |     |    |          |   |       |       |  |  |          |    |   |   |       |     |  |  |     |   
|                   |                              |   | 3,899  |       |           |  | 75       | %  |           |   | 2,951 |       |           |  | 73   | %  |           |   | 2,399    |       |           |  | 71  | %  |          |   | 2,045 |       |  |  | 71       | %  |   |   | 1,445 |     |  |  | 68  | % 
|                  
|                  
|                  
|                  
|Consumer and other |                              |   | 285    |       |           |  | 5        | %  |           |   | 274   |       |           |  | 5    | %  |           |   | 275      |       |           |  | 7   | %  |          |   | 293   |       |  |  | 8        | %  |   |   | 318   |     |  |  | 9   | % 
|                   |                              |   |        |       |           |  |          |    |           |   |       |       |           |  |      |    |           |   |          |       |           |  |     |    |          |   |       |       |  |  |          |    |   |   |       |     |  |  |     |   
|Total allocated    |                              |   | 5,650  |       |           |  | 100      | %  |           |   | 4,383 |       |           |  | 100  | %  |           |   | 3,388    |       |           |  | 100 | %  |          |   | 3,058 |       |  |  | 100      | %  |   |   | 2,720 |     |  |  | 100 | % 
|                   |                              |   |        |       |           |  |          |    |           |   |       |       |           |  |      |    |           |   |          |       |           |  |     |    |          |   |       |       |  |  |          |    |   |   |       |     |  |  |     |   
|Total unallocated  |                              |   | 4,799  |       |           |  |          |    |           |   | 3,763 |       |           |  |      |    |           |   | 3,559    |       |           |  |     |    |          |   | 2,884 |       |  |  |          |    |   |   | 2,240 |    
|                   |                              |   |        |       |           |  |          |    |           |   |       |       |           |  |      |    |           |   |          |       |           |  |     |    |          |   |       |       |  |  |          |    |   |   |       |    
|Total              |                              | $ | 10,449 |       |           |  |          |    |           | $ | 8,146 |       |           |  |      |    |           | $ | 6,947    |       |           |  |     |    |          | $ | 5,942 |       |  |  |          |    |   | $ | 4,960 |    
|                   |                              |   |        |       |           |  |          |    |           |   |       |       |           |  |      |    |           |   |          |       |           |  |     |    |          |   |       |       |  |  |          |    |   |   |       |    

The loan portfolio contains no foreign loans nor any concentration to
identified borrowers engaged in the same or similar industries exceeding 10% of
total loans.

Securities

Securities available-for-sale are stated at fair value, with the
unrealized gains and losses, net of income tax, reported as a separate
component of shareholders equity. The unrealized loss recorded at December
31, 1999, approximated $3,887,000 (net of $2,002,000 in deferred income taxes);
the unrealized gain recorded at December 31, 1998, approximated $2,014,000 (net
of $1,040,000 in deferred income taxes); and the unrealized gain recorded at
December 31, 1997, approximated $1,357,000 (net of $698,000 in deferred income
taxes).

The securities available-for-sale (SAFS) portfolio at December 31, 1999,
is composed primarily of U.S. Treasury (10.4%) and U.S. Government Agency
Securities (71.8%). The remaining 17.8% is composed of certain other
securities. The quality of this portfolio is 88% AAA rated bonds with an
average adjusted maturity of 2.8 years. The SAFS portfolio represented 23% of
total assets at December 31, 1999, and 23% at December 31, 1998.

The SAFS portfolio at December 31, 1999, includes securities issued by the
State of Ohio and the State of Michigan with the following values:

|                  |  |                        |       |           |  |   |       | 
|----------------- |  | ---------------------- | ----- | --------- |  | - | ----- | 
|                  |  | Fair                   |       | Amortized
|                  |  | Value                  |       | Cost     
|                  |  |                        |       |          
|                  |  | (Dollars in thousands)
|State of Ohio     |  | $                      | 9,941 |           |  | $ | 9,894 | 
|                 
|                 
|                 
|                 
|State of Michigan |  |                        | 4,316 |           |  |   | 4,284 | 

12



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##### Table of Contents



Tables 7and 8set forth the carrying value of the SAFS portfolio at the
dates indicated, and provide an analysis of the maturities and average yields
on a fully taxable equivalent basis (assuming a 34% tax rate) as of December
31, 1999. Classification by maturity is determined by the earlier of maturity
date or call date.

TABLE 7  SECURITIES AVAILABLE FOR SALE
(Dollars in thousands)

CARRYING VALUE AT DECEMBER 31,

|                                                  |       |   |         |         |      |   |         |         |      |   |         |         |  |   |         |         |  |   |         |         | 
|------------------------------------------------- | ----- | - | ------- | ------- | ---- | - | ------- | ------- | ---- | - | ------- | ------- |  | - | ------- | ------- |  | - | ------- | ------- | 
|                                                  |       |   | 1999    |         | 1998 |   | 1997    |         | 1996 |   | 1995   
|                                                  |       |   |         |         |      |   |         |         |      |   |        
|U.S. government securities
and agency obligations |       | $ | 182,598 |         |      | $ | 146,007 |         |      | $ | 130,023 |         |  | $ | 121,195 |         |  | $ | 107,759 |        
|                                                 
|                                                 
|                                                 
|                                                 
|Corporate debt securities                         |       |   | 17,100  |         |      |   | 16,180  |         |      |   | 15,614  |         |  |   | 17,494  |         |  |   | 13,685  |        
|                                                 
|                                                 
|                                                 
|                                                 
|Municipal obligations                             |       |   | 14,611  |         |      |   | 15,074  |         |      |   | 14,038  |         |  |   | 13,661  |         |  |   | 13,619  |        
|                                                 
|                                                 
|                                                 
|                                                 
|Mortgage-backed securities                        |       |   | 1,346   |         |      |   | 1,661   |         |      |   | 3,088   |         |  |   | 3,087   |         |  |   | 3,163   |        
|                                                 
|                                                 
|                                                 
|                                                 
|Other securities                                  |       |   | 8,162   |         |      |   | 5,661   |         |      |   | 4,758   |         |  |   | 3,772   |         |  |   | 2,401   |        
|                                                  |       |   |         |         |      |   |         |         |      |   |         |         |  |   |         |         |  |   |         |        
|                                                  | TOTAL |   | $       | 223,817 |      |   | $       | 184,583 |      |   | $       | 167,521 |  |   | $       | 159,209 |  |   | $       | 140,627 | 
|                                                  |       |   |         |         |      |   |         |         |      |   |         |         |  |   |         |         |  |   |         |        

TABLE 8  MATURITY ANALYSIS AT DECEMBER 31, 1999
(Dollars in thousands)

|                                                  |       |   |        |        |         |   |                  |         |                   |   |        |        |  |   |       |       |  |   |         |         |  
|------------------------------------------------- | ----- | - | ------ | ------ | ------- | - | ---------------- | ------- | ----------------- | - | ------ | ------ |  | - | ----- | ----- |  | - | ------- | ------- | -
|                                                  |       |   |        |        |         |   | After 1 Year But |         | After 5 Years But
|                                                  |       |   | Within |        | Within  |   | Within           |         | After            
|                                                  |       |   | 1 Year |        | 5 Years |   | 10 Years         |         | 10 Years          |   | Total 
|                                                  |       |   |        |        |         |   |                  |         |                   |   |       
|U.S. government securities
and agency obligations |       | $ | 55,364 |        |         | $ | 102,354          |         |                   | $ | 24,880 |        |  |   |      |       |  | $ | 182,598 |        
|                                                 
|                                                 
|                                                 
|                                                 
|Corporate debt securities                         |       |   | 1,898  |        |         |   | 13,775           |         |                   |   | 1,427  |        |  |   |      |       |  |   | 17,100  |        
|                                                 
|                                                 
|                                                 
|                                                 
|Municipal obligations                             |       |   | 3,222  |        |         |   | 8,304            |         |                   |   | 2,887  |        |  | $ | 198   |       |  |   | 14,611  |        
|                                                 
|                                                 
|                                                 
|                                                 
|Mortgage-backed securities                        |       |   | 608    |        |         |   |                 |         |                   |   |       |        |  |   | 738   |       |  |   | 1,346   |        
|                                                 
|                                                 
|                                                 
|                                                 
|Other securities                                  |       |   |       |        |         |   |                 |         |                   |   |       |        |  |   | 8,162 |       |  |   | 8,162   |        
|                                                  |       |   |        |        |         |   |                  |         |                   |   |        |        |  |   |       |       |  |   |         |        
|                                                  | TOTAL |   | $      | 61,092 |         |   | $                | 124,433 |                   |   | $      | 29,194 |  |   | $     | 9,098 |  |   | $       | 223,817 |  
|                                                  |       |   |        |        |         |   |                  |         |                   |   |        |        |  |   |       |       |  |   |         |        
|Weighted average yield:                          
|                                                 
|                                                 
|                                                 
|                                                 
|U.S. government securities
and agency obligations |       |   | 6.34   | %      |         |   | 6.22             | %       |                   |   | 6.36   | %      |  |   |      |       |  |   | 6.27    | %      
|                                                 
|                                                 
|                                                 
|                                                 
|Corporate debt securities                         |       |   | 6.48   | %      |         |   | 6.42             | %       |                   |   | 6.17   | %      |  |   |      |       |  |   | 6.41    | %      
|                                                 
|                                                 
|                                                 
|                                                 
|Municipal obligations                             |       |   | 7.64   | %      |         |   | 7.29             | %       |                   |   | 6.89   | %      |  |   | 8.08  | %     |  |   | 7.30    | %      
|                                                 
|                                                 
|                                                 
|                                                 
|Mortgage-backed securities                        |       |   | 6.09   | %      |         |   |                 |         |                   |   |       |        |  |   | 6.64  | %     |  |   | 6.39    | %      
|                                                 
|                                                 
|                                                 
|                                                 
|Other securities                                  |       |   |       |        |         |   |                 |         |                   |   |       |        |  |   | 6.32  | %     |  |   | 6.32    | %      
|                                                  |       |   |        |        |         |   |                  |         |                   |   |        |        |  |   |       |       |  |   |         |        
|                                                  | TOTAL |   |        |        |         |   |                  |         |                   |   |        |        |  |   |       |       |  |   |         | 6.35    | %
|                                                  |       |   |        |        |         |   |                  |         |                   |   |        |        |  |   |       |       |  |   |         |        

13



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##### Table of Contents



Federal Funds Sold

Short-term federal funds sold are used to manage interest rate sensitivity
and to meet liquidity needs. During 1999, 1998, and 1997, the average balance
of these funds represented less than 2.0% of average total assets for the same
periods. As the Bank has grown, the ability to manage daily liquidity needs
has become stable and the use of daily federal funds sold has been maintained
at a very manageable level.

Deferred Federal Income Taxes

Deferred federal income taxes represent a net asset of $4,701,000 at
December 31, 1999. This amount is comprised primarily of deferred taxes
relating to the nondeductible portion of the allowance for credit losses plus
the unrealized losses on available-for-sale securities which total $3,324,000
and $2,002,000, respectively. Certain limits exist for deduction of the
provision related to credit losses that exceeds actual experience. Because of
the low level of loan charge offs, the Companys tax deduction to date, has
been minimal. Sufficient taxable income in prior years exists to realize the
deferred tax assets that are recorded.

SOURCES OF FUNDS

Deposits

The Companys major source of funds is from deposits. Total deposits grew
$140 million, or 21%, in 1999 compared to $83 million, or 14% in 1998.
Transaction accounts, money market accounts, savings accounts and certificates
of deposit less than $100,000 grew $39 million in 1999. Certificates of
deposit equal to or greater than $100,000 increased $101 million in 1999, which
included $71 million from deposit brokers. The Company continued to have
significant success in obtaining deposits from customers located within the
market area. Growth of in-market deposits, however, has been exceeded by
growth in earning assets which has necessitated the acquisition of funds
through deposit brokers. As this market has matured, it has become a viable
source of funding.

Average deposits increased 18% in 1999, 15% in 1998, and 23% in 1997.
Table 10is a summary of the average amount of, and the average rate paid on,
each of the Banks deposit categories. Table 11 provides an analysis of
maturities of certificates of deposit of $100,000 or more.

TABLE 10  AVERAGE DEPOSITS
(Dollars in thousands)

|                             |       |   |         |         |      |  |        |   |      |   |         |         |      |  |      |   |  |   |         |         |  |  |      |   | 
|---------------------------- | ----- | - | ------- | ------- | ---- |  | ------ | - | ---- | - | ------- | ------- | ---- |  | ---- | - |  | - | ------- | ------- |  |  | ---- | - | 
|                             |       |   | 1999    |         | 1998 |  | 1997  
|                             |       |   |         |         |      |  |       
|                             |       |   | Amount  |         | Rate |  | Amount |   | Rate |   | Amount  |         | Rate
|                             |       |   |         |         |      |  |        |   |      |   |         |         |     
|Noninterest bearing deposits |       | $ | 60,145  |         |      |  |        |   |      | $ | 51,646  |         |      |  |      |   |  | $ | 42,372  |        
|                            
|                            
|                            
|                            
|Money Market accounts        |       |   | 199,326 |         |      |  | 3.85   | % |      |   | 168,190 |         |      |  | 4.13 | % |  |   | 138,910 |         |  |  | 4.21 | %
|                            
|                            
|                            
|                            
|Savings                      |       |   | 18,050  |         |      |  | 2.50   | % |      |   | 17,474  |         |      |  | 2.80 | % |  |   | 17,671  |         |  |  | 2.88 | %
|                            
|                            
|                            
|                            
|Other time deposits          |       |   | 449,091 |         |      |  | 5.38   | % |      |   | 376,350 |         |      |  | 5.74 | % |  |   | 333,114 |         |  |  | 5.79 | %
|                             |       |   |         |         |      |  |        |   |      |   |         |         |      |  |      |   |  |   |         |        
|                             | TOTAL |   | $       | 726,612 |      |  |        |   |      |   | $       | 613,660 |      |  |      |   |  |   | $       | 532,067 | 
|                             |       |   |         |         |      |  |        |   |      |   |         |         |      |  |      |   |  |   |         |        

The increase in average deposits by category for 1999 was as follows:
Noninterest-bearing deposits, 16%; money market accounts, 19%; savings, 3% and
other time deposits, 19%.

14



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##### Table of Contents



TABLE 11  CERTIFICATES OF DEPOSIT OF $100,000 OR MORE AT DECEMBER 31
(Dollars in thousands)

|                    |       |   |        |         |      |   |        |         |  |   |        |         | 
|------------------- | ----- | - | ------ | ------- | ---- | - | ------ | ------- |  | - | ------ | ------- | 
|                    |       |   | 1999   |         | 1998 |   | 1997  
|                    |       |   |        |         |      |   |       
|MATURING:          
|                   
|                   
|                   
|                   
|3 months or less    |       | $ | 98,011 |         |      | $ | 97,329 |         |  | $ | 93,831 |        
|                   
|                   
|                   
|                   
|Over 3 to 6 months  |       |   | 71,034 |         |      |   | 36,632 |         |  |   | 34,268 |        
|                   
|                   
|                   
|                   
|Over 6 to 12 months |       |   | 98,712 |         |      |   | 47,462 |         |  |   | 34,534 |        
|                   
|                   
|                   
|                   
|Over 12 months      |       |   | 51,761 |         |      |   | 37,264 |         |  |   | 43,819 |        
|                    |       |   |        |         |      |   |        |         |  |   |        |        
|                    | TOTAL |   | $      | 319,518 |      |   | $      | 218,687 |  |   | $      | 206,452 | 
|                    |       |   |        |         |      |   |        |         |  |   |        |        

Other Borrowings

Other borrowings were $90 million, $72 million, and $30 million at
December 31, 1999, 1998, and 1997, respectively.

Advances from The Federal Home Loan Bank represented approximately 54% of
other borrowings at December 31, 1999. The remaining is composed of repurchase
agreements, federal funds borrowings, and demand notes issued under the U.S.
Treasury Tax and Loan Note program. Additional information regarding
repurchase agreements is summarized below:

SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE

|                                                 |  |                        |        |      |  |      |        |   |  |   |        |  
|------------------------------------------------ |  | ---------------------- | ------ | ---- |  | ---- | ------ | - |  | - | ------ | -
|                                                 |  | 1999                   |        | 1998 |  | 1997
|                                                 |  |                        |        |      |  |     
|                                                 |  | (Dollars in thousands)
|Weighted-average interest rate at year-end       |  |                        | 4.35   | %    |  |      | 4.37   | % |  |   | 4.20   | %
|                                                
|                                                
|                                                
|                                                
|Amount outstanding at year-end                   |  | $                      | 17,327 |      |  | $    | 14,626 |   |  | $ | 14,395 |  
|                                                
|                                                
|                                                
|                                                
|Maximum amount outstanding at any month-end      |  | $                      | 18,316 |      |  | $    | 22,068 |   |  | $ | 14,395 |  
|                                                
|                                                
|                                                
|                                                
|Daily average amount outstanding during the year |  | $                      | 17,006 |      |  | $    | 17,790 |   |  | $ | 12,926 |  
|                                                
|                                                
|                                                
|                                                
|Weighted-average interest rate for the year      |  |                        | 4.44   | %    |  |      | 4.61   | % |  |   | 4.57   | %

Capital Resources and Dividends

Shareholders equity is a stable, noninterest bearing source of funds
which provides support for asset growth and is the primary component of
capital. Shareholders equity at December 31, 1999, 1998, and 1997 was $86.1
million, $58.4 million, and $50.5 million, respectively.

The Company completed a stock offering in December 1999 and issued 900,000
additional shares of Common Stock at $27.00 per share. A three-for-one stock
split was declared for shareholders of record as of June 30, 1999, payable July
15, 1999. The Company previously issued a 6% stock dividend in 1996 and 1995.
The Company began paying cash dividends in 1997. Total dividends declared in
1999 were $2,091,968 and in 1998 were $1,745,339.

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##### Table of Contents



The following shows consolidated operating and capital ratios of the
Company for each of the past three years-ended December 31:

|                                 |  |      |       |      |  |      |       |   |  |  |       |  
|-------------------------------- |  | ---- | ----- | ---- |  | ---- | ----- | - |  |  | ----- | -
|                                 |  | 1999 |       | 1998 |  | 1997
|                                 |  |      |       |      |  |     
|Return on average assets         |  |      | 1.07  | %    |  |      | 1.09  | % |  |  | 1.12  | %
|                                
|                                
|                                
|                                
|Return on average equity         |  |      | 15.33 | %    |  |      | 14.52 | % |  |  | 15.22 | %
|                                
|                                
|                                
|                                
|Average equity to average assets |  |      | 6.96  | %    |  |      | 7.49  | % |  |  | 7.33  | %
|                                
|                                
|                                
|                                
|Tier 1 Capital (1)               |  |      | 11.49 | %    |  |      | 9.11  | % |  |  | 9.81  | %
|                                
|                                
|                                
|                                
|Tier 2 Capital (2)               |  |      | 12.74 | %    |  |      | 10.36 | % |  |  | 11.06 | %
|                                
|                                
|                                
|                                
|Leverage (3)                     |  |      | 9.31  | %    |  |      | 7.20  | % |  |  | 7.67  | %



---

|(1) |  | Shareholders equity less the effect of securities available-for-sale
market value adjustment per FAS No. 115 and intangibles, if applicable,
computed as a ratio to risk-adjusted assets, as defined in the 1994
risk-based capital guidelines.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|   
|   
|   
|(2) |  | Tier 1 capital plus qualifying credit loss allowance, computed as a ratio
to risk-adjusted assets, as defined in the 1994 risk-based capital
guidelines.                                                                                        
|   
|   
|   
|   
|(3) |  | Tier 1 capital, computed as a ratio to the latest quarters average assets,
less goodwill, if applicable.                                                                                                                                       

The Companys capital ratios are well in excess of the minimum regulatory
risk-based capital requirements of 4% for Tier 1 capital and leverage and 8%
for Tier 2 capital.

LIQUIDITY, INTEREST RATE SENSITIVITY AND MARKET RISK

Liquidity

Liquidity is measured by the Companys ability to raise funds through
deposits, borrowed funds, capital or cash flow from the repayment of loans.
These funds are used to meet deposit withdrawals, maintain reserve
requirements, fund loans and operate the Company. Liquidity is achieved
through the growth of deposits (both local and out-of-market) and liquid
assets, including securities available-for-sale, matured securities and federal
funds sold. Additional liquidity is provided by unused borrowing capacity.
Asset and liability management is the process of managing the balance sheet to
achieve a mix of earning assets and liabilities that maximizes profitability,
while providing adequate liquidity.

The Companys major source of funds is a substantial base of local
deposits plus shareholders equity and other liabilities. The Company also has
the ability to borrow money on a daily basis through correspondent banks and
the Federal Home Loan Bank to satisfy short-term liquidity needs. At December
31, 1999 and 1998, the Company had $86.6 million and $24.3 million,
respectively, of unused lines of credit. The Companys available line of credit
with the Federal Home Loan Bank was $75.9 million at December 31, 1999. The
Company currently holds $6.7 million in Federal Home Loan Bank stock.

In addition to normal loan funding and deposit flow, the Company also
needs to maintain liquidity to meet the demands of certain unfunded loan
commitments and standby letters of credit. As of December 31, 1999, the
Company had a total of $287.9 million in unfunded loan commitments and $32.5
million in unfunded standby letters of credit. Of the total unfunded loan
commitments, $248.9 million were commitments available as lines of credit to be
drawn at any time as customers cash needs vary, and $39.0 million were for
loan commitments scheduled to close and become funded within the next six
months. The Company monitors fluctuations in balances and manages its overall
liquidity, taking into account these unfunded commitments.

On a parent company basis, the Companys primary source of funds is
dividends paid by the subsidiary Bank. The ability of the Bank to pay
dividends is subject to limitations under various laws and regulations and to
prudent and sound banking principles. The amount of unrestricted retained
earnings available to be paid by the Bank to the Company was approximately
$9,121,000 at January 1, 2000.

16



---



##### Table of Contents



TABLE 12  INTEREST RATE SENSITIVITY ANALYSIS
(Dollars in thousands)

|                                          |                                     |   |                   |         |           |   |           |         |         |   |         |         |  |   |          |        |  |   |         |         | 
|----------------------------------------- | ----------------------------------- | - | ----------------- | ------- | --------- | - | --------- | ------- | ------- | - | ------- | ------- |  | - | -------- | ------ |  | - | ------- | ------- | 
|                                          |                                     |   | December 31, 1999
|                                          |                                     |   |                  
|                                          |                                     |   | 1 to 4            |         | 4 Months  |   | 1 to 5    |         | Over   
|                                          |                                     |   | Months            |         | To 1 Year |   | Years     |         | 5 Years |   | Total  
|                                          |                                     |   |                   |         |           |   |           |         |         |   |        
|Assets:                                  
|                                         
|                                         
|                                         
|                                         
|                                          | Loans, gross                        |   | $                 | 211,619 |           |   | $         | 32,309  |         |   | $       | 426,310 |  |   | $        | 53,512 |  |   | $       | 723,750 | 
|                                         
|                                         
|                                         
|                                         
|                                          | Securities available-for-sale (1)   |   |                   | 19,376  |           |   |           | 41,717  |         |   |         | 124,432 |  |   |          | 38,292 |  |   |         | 223,817 | 
|                                         
|                                         
|                                         
|                                         
|                                          | Other assets                        |   |                   |         |           |   |           |         |         |   |         |         |  |   |          | 41,646 |  |   |         | 41,646  | 
|                                          |                                     |   |                   |         |           |   |           |         |         |   |         |         |  |   |          |        |  |   |         |        
|Total Assets                              |                                     | $ | 230,995           |         |           | $ | 74,026    |         |         | $ | 550,742 |         |  | $ | 133,450  |        |  | $ | 989,213 |        
|                                          |                                     |   |                   |         |           |   |           |         |         |   |         |         |  |   |          |        |  |   |         |        
|Liabilities:                             
|                                         
|                                         
|                                         
|                                         
|                                          | Savings, time and interest
checking |   | $                 | 281,330 |           |   | $         | 106,971 |         |   | $       | 28,207  |  |   |          |        |  |   | $       | 416,508 | 
|                                         
|                                         
|                                         
|                                         
|                                          | CDs $100,000 and over              |   |                   | 124,201 |           |   |           | 143,556 |         |   |         | 51,761  |  |   |          |        |  |   |         | 319,518 | 
|                                         
|                                         
|                                         
|                                         
|                                          | Borrowed funds                      |   |                   | 45,231  |           |   |           |         |         |   |         | 5,892   |  |   | $        | 38,900 |  |   |         | 90,023  | 
|                                         
|                                         
|                                         
|                                         
|                                          | Other liabilities                   |   |                   |         |           |   |           |         |         |   |         |         |  |   |          | 77,052 |  |   |         | 77,052  | 
|                                          |                                     |   |                   |         |           |   |           |         |         |   |         |         |  |   |          |        |  |   |         |        
|Total Liabilities                         |                                     |   | 450,762           |         |           |   | 250,527   |         |         |   | 85,860  |         |  |   | 115,952  |        |  |   | 903,101 |        
|                                         
|                                         
|                                         
|                                         
|Shareholders Equity                      |                                     |   |                   |         |           |   |           |         |         |   |         |         |  |   | 86,112   |        |  |   | 86,112  |        
|                                          |                                     |   |                   |         |           |   |           |         |         |   |         |         |  |   |          |        |  |   |         |        
|Total Sources of Funds                    |                                     | $ | 450,762           |         |           | $ | 250,527   |         |         | $ | 85,860  |         |  | $ | 202,064  |        |  | $ | 989,213 |        
|                                          |                                     |   |                   |         |           |   |           |         |         |   |         |         |  |   |          |        |  |   |         |        
|Maturity/rate sensitivity GAP             |                                     |   | ($219,767         | )       |           |   | ($176,501 | )       |         | $ | 464,882 |         |  |   | ($68,614 | )     
|                                         
|                                         
|                                         
|                                         
|Cumulative GAP                            |                                     |   | (219,767          | )       |           |   | (396,268  | )       |         |   | 68,614  |        
|                                         
|                                         
|                                         
|                                         
|Percent of cumulative GAP to
total assets |                                     |   | -22               | %       |           |   | -40       | %       |         |   | 7       | %      

(1) This table classifies securities according to sensitivity to changes
in interest rates.

17



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##### Table of Contents



TABLE 12  INTEREST RATE SENSITIVITY ANALYSIS

(Dollars in thousands)

|                                          |                                     |   |                   |         |           |   |          |        |         |   |         |         |  |   |          |        |  |   |         |         |  |  |  |  | 
|----------------------------------------- | ----------------------------------- | - | ----------------- | ------- | --------- | - | -------- | ------ | ------- | - | ------- | ------- |  | - | -------- | ------ |  | - | ------- | ------- |  |  |  |  | 
|                                          |                                     |   | December 31, 1998
|                                          |                                     |   |                  
|                                          |                                     |   | 1 TO 4            |         | 4 MONTHS  |   | 1 TO 5   |        | OVER   
|                                          |                                     |   | MONTHS            |         | TO 1 YEAR |   | YEARS    |        | 5 YEARS |   | TOTAL  
|                                          |                                     |   |                   |         |           |   |          |        |         |   |        
|Assets:                                  
|                                         
|                                         
|                                         
|                                         
|                                          | Loans, gross                        |   | $                 | 182,086 |           |   | $        | 24,344 |         |   | $       | 332,696 |  |   | $        | 40,155 |  |   | $       | 579,281 | 
|                                         
|                                         
|                                         
|                                         
|                                          | Securities available-for-sale (1)   |   |                   | 11,990  |           |   |          | 22,286 |         |   |         | 132,268 |  |   |          | 18,039 |  |   |         | 184,583 | 
|                                         
|                                         
|                                         
|                                         
|                                          | Other assets                        |   |                   |         |           |   |          |        |         |   |         |         |  |   |          | 37,764 |  |   |         | 37,764  | 
|                                          |                                     |   |                   |        
|Total Assets                              |                                     | $ | 194,076           |         |           | $ | 46,630   |        |         | $ | 464,964 |         |  | $ | 95,958   |        |  | $ | 801,628 |        
|                                          |                                     |   |                   |        
|Liabilities:                             
|                                         
|                                         
|                                         
|                                         
|                                          | Savings, time and interest
checking |   | $                 | 296,531 |           |   | $        | 66,060 |         |   | $       | 25,294  |  |   | $        | 0      |  |   | $       | 387,885 | 
|                                         
|                                         
|                                         
|                                         
|                                          | CDs $100,000 and over              |   |                   | 112,529 |           |   |          | 68,895 |         |   |         | 37,147  |  |   |          | 116    |  |   |         | 218,687 | 
|                                         
|                                         
|                                         
|                                         
|                                          | Borrowed funds                      |   |                   | 31,729  |           |   |          | 0      |         |   |         | 11,387  |  |   |          | 28,900 |  |   |         | 72,016  | 
|                                         
|                                         
|                                         
|                                         
|                                          | Other liabilities                   |   |                   |         |           |   |          |        |         |   |         |         |  |   |          | 64,618 |  |   |         | 64,618  | 
|                                          |                                     |   |                   |        
|Total Liabilities                         |                                     |   | 440,789           |         |           |   | 134,955  |        |         |   | 73,828  |         |  |   | 93,634   |        |  |   | 743,206 |        
|                                         
|                                         
|                                         
|                                         
|Shareholders Equity                      |                                     |   |                   |         |           |   |          |        |         |   |         |         |  |   | 58,422   |        |  |   | 58,422  |        
|                                          |                                     |   |                   |        
|Total Sources of Funds                    |                                     | $ | 440,789           |         |           | $ | 134,955  |        |         | $ | 73,828  |         |  | $ | 152,056  |        |  | $ | 801,628 |        
|                                          |                                     |   |                   |        
|Maturity/rate sensitivity GAP             |                                     |   | ($246,713         | )       |           |   | ($88,325 | )      |         | $ | 391,136 |         |  |   | ($56,098 | )      |  |   |         |        
|                                         
|                                         
|                                         
|                                         
|Cumulative GAP                            |                                     |   | (246,713          | )       |           |   | (335,038 | )      |         |   | 56,098  |         |  |   |          |        |  |   |         |        
|                                         
|                                         
|                                         
|                                         
|Percent of cumulative GAP to
total assets |                                     |   | -31               | %       |           |   | -42      | %      |         |   | 7       | %       |  |   |          |        |  |   |         |        



---

|(1) |  | This table classifies securities according to sensitivity to changes in
interest rates.
|--- |  | ---------------------------------------------------------------------------------------

18



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Interest Rate Risk

Balance sheet structure and interest rate changes play important roles in
the growth of net interest income. The Company seeks to manage its balance
sheet in a way that enables it to maintain a relatively stable level of net
interest income within the constraints of optimum earning asset mix, capital
adequacy, liquidity and safety. The Companys Asset/Liability Committee (ALCO)
manages the overall rate sensitivity and mix of the balance sheet to anticipate
and minimize the effects of interest rate fluctuations and maintain a
consistent net interest margin. A number of measures are used to monitor and
manage interest rate risk. An income simulation model is managements primary
tool used to assess the direction and magnitude of variations in net interest
income resulting from changes in interest rates. Key assumptions in the model
include prepayment speeds on various loan and investment assets; cash flows and
maturities of financial instruments held for purposes other than trading;
changes in market conditions, loan volumes, and pricing; deposit sensitivity;
client preferences; and managements financial capital plans. These
assumptions are inherently uncertain, subject to fluctuation and revision in a
dynamic environment and , as a result, the model cannot precisely estimate net
interest income or exactly predict the impact of higher or lower interest rates
on net interest income. Actual results will differ from simulated results due
to timing, magnitude, and frequency of interest rate changes and changes in
market conditions and management strategies, among other factors.

Results of simulations done as of December 31, 1999, suggest that the
Company could expect net interest income to decrease by less than 1% (if
interest rates gradually decline by 100 basis points over the next twelve
months) and, to decrease by approximately 3% (if interest rates gradually
increase by 100 basis points over the next twelve months) compared to net
interest income assuming no change in interest rates. These variances in net
interest income were well within the Companys policy parameters established to
manage such risk. In addition to changes in interest rates, the level of
future net interest income is also dependent on a number of other variables,
including the growth, composition and absolute levels of deposits, loans, and
other earning assets and interest bearing liabilities, economic and competitive
conditions, client preferences and other factors.

The relative measure of assets and liabilities that will mature or are
scheduled to reprice within various time categories is known as interest rate
sensitivity gap or GAP. Because the Company has more liabilities than assets
repricing within one year at December 31, 1999, it has a negative GAP and is
considered liability sensitive. In a rising-rate environment, this liability
surplus would most likely detract from net interest income. In a
declining-rate environment, the effect would most likely be favorable.
Experience has shown that this generalization does not fully capture the true
dynamics of interest rate changes since asset and liability rates do not adjust
equally. Table 12, Interest Rate Sensitivity Analysis, shows as of December
31, 1999 and 1998, assets and liabilities which are maturing at various periods
in time and which will be subject to repricing.

Year 2000

The Company completed its preparations in 1999 for the Year 2000 date change. This process addressed
all systems, software, hardware, and infrastructure components. The process also addressed various
third-party vendors and service providers to ensure that continued service was in place for core
business activities. Furthermore, the process included the update of all of the Companys contingency
plans in the event that problems related to the Year 2000 date change arose. To date, the Company
has not experienced any business disruptions or corruptions of its systems. The Company will
continue to monitor its systems and third party relationships throughout 2000 to address unanticipated
problems (which may include problems associated with non-Year 2000 compliant third parties and disruptions
to the economy in general) and ensure that all processes continue to function properly.

Identifiable costs for the Year 2000 project incurred
through year-end 1999 did not exceed $200,000. These costs incorporated not only incremental
third-party expenses but also included the salary and benefit costs of employees who
worked on the project. Additional costs to be incurred in 2000 for ongoing monitoring
and support activities are not expected to be material.

Forward-Looking Statements

The Private Securities Litigation Reform Act of 1995 was passed by
Congress to encourage corporations to provide investors with information about
its anticipated future financial performance, goals and strategies. The act
provides a safe harbor for such disclosure, or in other words, protection from
unwarranted litigation if actual results are not the same as managements
expectations.

The Company desires to provide its shareholders with sound information
about past performance and future trends. Consequently, this report, including
Managements Discussion and Analysis of Financial Condition and Results of
Operations, contains forward-looking statements including certain plans,
expectations, goals, and projections that are subject to numerous assumptions,
risks, and uncertainties. Actual results could differ materially from those
contained in or implied by the Companys statements due to a variety of factors
including: changes in economic conditions; movements in interest rates;
competitive pressures on product pricing and services; success and timing of
business strategies; material unforeseen changes in the financial condition or
results of operations of the Companys customers; and the nature, extent, and
timing of governmental actions and reforms. The management of the Company
encourages readers of this report to understand forward-looking statements to
be strategic objectives rather than absolute targets of performance.




ITEM 7A. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK

Disclosures regarding market risk have been included in Item 7 -
Managements Discussion and Analysis.

19



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##### Table of Contents






ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The Report of Independent Auditors and Consolidated Financial Statements
included in the 1999 Annual Report to Shareholders are incorporated herein by
reference.




ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

NONE.




PART III




ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The following table lists the Non-Director, Executive Officers of the
Company and its subsidiary, Capital Bank, N.A., and certain other information
with respect to each individual, as of December 31, 1999. The information
required by this item with respect to Directors of the Company and its
subsidiary, Capital Bank, N.A., is incorporated herein by reference to the
information under the heading Election of Directors and Information with
Respect to Directors and Officers in the definitive Proxy Statement of the
Company for its May 18, 2000 Annual Shareholders Meeting.

|                   |  |     |    |                                       |  |                                                                                                                     
|------------------ |  | --- | -- | ------------------------------------- |  | --------------------------------------------------------------------------------------------------------------------
|NAME               |  | AGE |    | PRINCIPAL OCCUPATION AND DIRECTORSHIP
|                   |  |     |    |                                      
|Michael P. Killian |  |     | 48 |                                       |  | Chief Operations Officer of the Company, Senior Vice President  Operations
and Chief Operations Officer of the Bank
|                  
|                  
|                  
|                  
|Stephen J. Kovatch |  |     | 57 |                                       |  | Assistant Secretary of the Company, Senior Vice President of the Bank                                               
|                  
|                  
|                  
|                  
|David L. Mead      |  |     | 44 |                                       |  | Chief Financial Officer of the Company, Senior Vice President and
Chief Financial Officer of the Bank               
|                  
|                  
|                  
|                  
|Robert A. Walters  |  |     | 41 |                                       |  | Senior Vice President  Retail of the Bank                                                                          

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ITEM 11. EXECUTIVE COMPENSATION

Information required by this item is incorporated herein by reference to
the information under the heading Executive Compensation and Other
Information in the definitive Proxy Statement of the Company for its May 18,
2000 Annual Shareholders Meeting.




ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Information required by this item is incorporated herein by reference to
the information under the heading Security Ownership of Certain Beneficial
Owners and Management in the definitive Proxy Statement of the Company for its
May 18, 2000 Annual Shareholders Meeting.




ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Information required by this item is incorporated herein by reference to
the information under the heading Certain Relationships and Related
Transactions in the definitive Proxy Statement of the Company for its May 18,
2000 Annual Shareholders Meeting.

PART IV.




ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORT ON FORM 8-K

(a) Index to Consolidated Financial Statements and Schedules

The following consolidated financial statements included in the 1999
Annual Report to Shareholders of Capital Holdings, Inc., are incorporated by
reference in Item 8:



| |  |  | Consolidated Balance Sheets at December 31, 1999 and 1998.                                            
| |  |  | ------------------------------------------------------------------------------------------------------
|
| |  |  | Consolidated Statements of Income for the years ended December 31, 1999, 1998, and 1997.              
|
| |  |  | Consolidated Statements of Shareholders Equity for the years ended December 31, 1999, 1998, and 1997.
|
| |  |  | Consolidated Statements of Cash Flows for the years ended December 31, 1999, 1998, and 1997.          
|
| |  |  | Notes to Consolidated Financial Statements.                                                           

Schedules are omitted because they are inapplicable, not required, or the
information is included in the consolidated financial statements or notes thereto.

(b) Reports on Form 8-K

A report on Form 8-K was filed with the Securities and Exchange Commission
on August 4, 1999, related to the three-for-one stock split payable July 15,
1999.

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##### Table of Contents



(c) Exhibits

|            |  |                                                                                                                                                                                                                                             |  |  
|----------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -
|Exhibit No.
|           
|3.1         |  | Articles of Incorporation of Capital Holdings, Inc.                                                                                                                                                                                         |  | *
|           
|           
|           
|           
|3.2         |  | Code of Regulations of Capital Holdings, Inc.                                                                                                                                                                                               |  | *
|           
|           
|           
|           
|3.3         |  | Articles of Incorporation of Capital Holdings, Inc., as amended
May 18, 1993                                                                                                                                                                |  | +
|           
|           
|           
|           
|4.0         |  | Certificate for Common Shares of Capital Holdings, Inc.                                                                                                                                                                                     |  | *
|           
|           
|           
|           
|10          |  | Nonemployee Director Stock Option Plan
of Capital Holdings, Inc., as amended June 9, 1998                                                                                                                                                   |  | &
|           
|           
|           
|           
|10.4        |  | 1988 Incentive Stock Option Plan of Capital Holdings, Inc.                                                                                                                                                                                  |  | *
|           
|           
|           
|           
|10.5        |  | Lease between Capital Bank, N.A. and CBNA Building Company,
a wholly-owned subsidiary of Capital Holdings, Inc.                                                                                                                             |  | *
|           
|           
|           
|           
|10.6        |  | Supplemental Executive Retirement Plan of Capital Holdings, Inc.                                                                                                                                                                            |  | $
|           
|           
|           
|           
|10.7        |  | Long-Term Incentive Compensation Plan effective December 14, 1999                                                                                                                                                                          
|           
|           
|           
|           
|13          |  | The Companys 1999 Annual Report to Shareholders  Except
for the portions of the report expressly incorporated by
reference, the Report is furnished solely for the information
of the Commission and is not deemed filed as part hereof
|           
|           
|           
|           
|21          |  | List of Subsidiaries                                                                                                                                                                                                                        |  | *

| |  |      |  |                                                                                                                                   
| |  | ---- |  | ----------------------------------------------------------------------------------------------------------------------------------
| |  | (i)  |  | Capital Bank, N.A., a national banking
association chartered by the Office of the
Comptroller of the Currency of the United States
|
|
|
|
| |  | (ii) |  | CBNA Building Company, an Ohio corporation                                                                                        

|     |  |                                 |  | 
|---- |  | ------------------------------- |  | 
|23.1 |  | Consent of Independent Auditors |  | 
|27   |  | Financial Data Schedule         |  | 



---

|* |  | Documents incorporated by reference from the Companys S-1 Registration
Statement, File Number 33-46573, effective May 8, 1992.
|- |  | -------------------------------------------------------------------------------------------------------------------------------
| 
| 
| 
| 
|+ |  | Document incorporated by reference from the Companys Annual Report on Form
10-K for the year ended December 31, 1993.         
| 
| 
| 
| 
|$ |  | Document incorporated by reference from the Companys Annual Report on Form
10-K for the year ended December 31, 1995.         
| 
| 
| 
| 
|& |  | Document incorporated by reference from the Companys Annual Report on Form
10-K for the year ended December 31, 1998.         

(d) Financial Statement Schedules

None required.

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##### Table of Contents



SIGNATURES

Pursuant to the requirements of Section 15(d) of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized, on the dates indicated.

CAPITAL HOLDINGS, INC.

|   |  |                                                                   |  |                   
|-- |  | ----------------------------------------------------------------- |  | ------------------
|  
|By |  | /s/ John S. Szuch                                                 |  | March 10, 2000    
|   |  | ________________________________                                  |  | __________________
|  
|   |  | John S. Szuch
Chairman and Chief Executive Officer
Director       |  | Date              
|  
|By |  | /s/ Robert A. Sullivan                                            |  | March 10, 2000    
|   |  | ________________________________                                  |  | __________________
|  
|   |  | Robert A. Sullivan
President and Chief Operating Officer
Director |  | Date              





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##### Table of Contents



Pursuant to the requirements of Section 15(d) of the Securities Exchange Act of
1934, this report has been signed below by the following persons on behalf of
Capital Holdings, Inc. and Subsidiaries and in the capacities and on the dates
indicated.

|   |  |                                                |  |                   
|-- |  | ---------------------------------------------- |  | ------------------
|  
|By |  | /s/ James M. Appold                            |  | March 10, 2000    
|   |  | ________________________________               |  | __________________
|  
|   |  | James M. Appold
Director                       |  | Date              
|  
|By |  | /s/ David P. Bennett                           |  | March 10, 2000    
|   |  | ________________________________               |  | __________________
|  
|   |  | David P. Bennett
Director                      |  | Date              
|  
|By |  | /s/ Yale M. Feniger                            |  | March 10, 2000    
|   |  | ________________________________               |  | __________________
|  
|   |  | Yale M. Feniger
Director                       |  | Date              
|  
|By |  | /s/ George A. Isaac, III                       |  | March 10, 2000    
|   |  | ________________________________               |  | __________________
|  
|   |  | George A. Isaac, III
Director                  |  | Date              
|  
|By |  | /s/ Harley J. Kripke                           |  | March 10, 2000    
|   |  | ________________________________               |  | __________________
|  
|   |  | Harley J. Kripke
Director                      |  | Date              
|  
|By |  | /s/ Michael C. Landin                          |  | March 10, 2000    
|   |  | ________________________________               |  | __________________
|  
|   |  | Michael C. Landin
Director                     |  | Date              
|  
|By |  | /s/ Ronald R. Langenderfer                     |  | March 10, 2000    
|   |  | ________________________________               |  | __________________
|  
|   |  | Ronald R. Langenderfer
Director                |  | Date              
|  
|By |  | /s/ Bruce K. Lee                               |  | March 10, 2000    
|   |  | ________________________________               |  | __________________
|  
|   |  | Bruce K. Lee
Executive Vice President
Director |  | Date              
|  
|By |  | /s/ Joel A. Levine                             |  | March 10, 2000    
|   |  | ________________________________               |  | __________________
|  
|   |  | Joel A. Levine
Director                        |  | Date              

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|   |  |                                                          |  |                   
|-- |  | -------------------------------------------------------- |  | ------------------
|  
|By |  | /s/ W. G. Lyden, III                                     |  | March 10, 2000    
|   |  | ________________________________                         |  | __________________
|  
|   |  | W. G. Lyden, III
Director                                |  | Date              
|  
|By |  | /s/ Thomas W. Noe                                        |  | March 10, 2000    
|   |  | ________________________________                         |  | __________________
|  
|   |  | Thomas W. Noe
Director                                   |  | Date              
|  
|By |  | /s/ Noel Romanoff                                        |  | March 10, 2000    
|   |  | ________________________________                         |  | __________________
|  
|   |  | Noel Romanoff
Director                                   |  | Date              
|  
|By |  | /s/ Scott J. Savage                                      |  | March 10, 2000    
|   |  | ________________________________                         |  | __________________
|  
|   |  | Scott J. Savage
Director                                 |  | Date              
|  
|By |  | /s/ James D. Sayre                                       |  | March 10, 2000    
|   |  | ________________________________                         |  | __________________
|  
|   |  | James D. Sayre
Director                                  |  | Date              
|  
|By |  | /s/ David L. Mead                                        |  | March 10, 2000    
|   |  | ________________________________                         |  | __________________
|  
|   |  | David L. Mead
Principal Accounting
and Financial Officer |  | Date              

25