TABLE OF CONTENTS




|                              |                                                                                       |                                                      |  |  |  |  |  | 
|----------------------------- | ------------------------------------------------------------------------------------- | ---------------------------------------------------- |  |  |  |  |  | 
|PART I. FINANCIAL INFORMATION
|                              | Item 1. Financial Statements                                                         
|                              |                                                                                       | CONSOLIDATED BALANCE SHEETS                         
|                              |                                                                                       | CONSOLIDATED STATEMENTS OF INCOME                   
|                              |                                                                                       | CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY     
|                              |                                                                                       | CONSOLIDATED STATEMENTS OF CASH FLOWS               
|                              |                                                                                       | NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
|                              | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
|PART II. OTHER INFORMATION   
|SIGNATURES                   
|Exhibit 27                   



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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For Quarter Ended June 30, 2000

Commission File Number 33-46573

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

|                                                                    |  |                                                
|------------------------------------------------------------------- |  | -----------------------------------------------
|OHIO
(State or other jurisdiction of
incorporation or organization) |  | 34-1588902
(I.R.S. Employer Identification No.)

5520 Monroe Street, Sylvania, OH 43560
(Address of principal executive offices and zip code)

(419) 885-7379
(Registrants telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

|         |  |  |  |             
|-------- |  |  |  | ------------
|(1) YesX |  |  |  | (2) No _____

As of June 30, 2000, there were 7,051,425 shares of common stock outstanding.





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##### Table of Contents



CAPITAL HOLDINGS, INC.

Index

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|----------------------------- |  | ------------------------------------------------------------------------------------- |  | ----------- | ----- | 
|                              |  |                                                                                       |  | Page Number
|                              |  |                                                                                       |  |            
|PART I. FINANCIAL
INFORMATION
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|Item 1.                       |  | Financial Statements (Unaudited):                                                    
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|                              |  | Consolidated balance sheets
June 30, 2000 and December 31, 1999                       |  |             | 3     | 
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|                              |  | Consolidated statements of income                                                    
|                              |  | Three months ended June 30, 2000 and 1999                                            
|                              |  | Six months ended June 30, 2000 and 1999                                               |  |             | 4     | 
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|                              |  | Consolidated statements of shareholders equity                                      
|                              |  | Six months ended June 30, 2000 and 1999                                               |  |             | 5     | 
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|                              |  | Consolidated statements of cash flows                                                
|                              |  | Six months ended June 30, 2000 and 1999                                               |  |             | 6     | 
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|                              |  | Notes to consolidated financial statements                                            |  |             | 7     | 
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|Item 2.                       |  | Managements Discussion and Analysis of Financial
Condition and Results of Operations |  |             | 8 11 | 
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|PART II. OTHER
INFORMATION    |  |                                                                                       |  |             | 12    | 
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|SIGNATURES                    |  |                                                                                       |  |             | 13    | 

2



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##### Table of Contents











CAPITAL HOLDINGS, INC.




CONSOLIDATED BALANCE SHEETS

|                                           |                                                                                                                                        |                                                     |               |               |             |                   |             |             |             | 
|------------------------------------------ | -------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------- | ------------- | ------------- | ----------- | ----------------- | ----------- | ----------- | ----------- | 
|                                           |                                                                                                                                        |                                                     |               | (UNAUDITED)  
|                                           |                                                                                                                                        |                                                     |               | JUNE 30, 2000 |             | DECEMBER 31, 1999
|                                           |                                                                                                                                        |                                                     |               |               |             |                  
|ASSETS                                    
|                                          
|                                          
|                                          
|                                          
|                                           | Cash and due from banks                                                                                                                |                                                     | $             | 24,162,161    |             |                   | $           | 10,935,827  |            
|                                          
|                                          
|                                          
|                                          
|                                           | Interest bearing deposits in banks                                                                                                     |                                                     |               | 100,000       |             |                   |             | 4,000,000   |            
|                                          
|                                          
|                                          
|                                          
|                                           | Federal funds sold                                                                                                                     |                                                     |               | 0             |             |                   |             | 14,000,000  |            
|                                           |                                                                                                                                        |                                                     |               |               |             |                   |             |            
|                                           | Cash and cash equivalents                                                                                                              |                                                     |               | 24,262,161    |             |                   |             | 28,935,827  |            
|                                          
|                                          
|                                          
|                                          
|                                           | Investment securities available for sale, at fair value (amortized                                                                     |                                                     |               | 227,372,262   |             |                   |             | 223,817,207 |            
|                                          
|                                          
|                                          
|                                          
|                                           |                                                                                                                                        | cost $234,206,071 in 2000 and $229,704,893 in 1999)
|                                          
|                                          
|                                          
|                                          
|                                           | Loans                                                                                                                                  |                                                     |               | 812,458,855   |             |                   |             | 722,583,284 |            
|                                          
|                                          
|                                          
|                                          
|                                           | Less allowance for loan losses                                                                                                         |                                                     |               | 11,588,649    |             |                   |             | 10,448,496  |            
|                                           |                                                                                                                                        |                                                     |               |               |             |                   |             |            
|                                           | Net loans                                                                                                                              |                                                     |               | 800,870,206   |             |                   |             | 712,134,788 |            
|                                          
|                                          
|                                          
|                                          
|                                           | Bank premises and equipment                                                                                                            |                                                     |               | 10,357,466    |             |                   |             | 10,443,977  |            
|                                          
|                                          
|                                          
|                                          
|                                           | Interest receivable and other assets                                                                                                   |                                                     |               | 15,404,314    |             |                   |             | 13,880,891  |            
|                                           |                                                                                                                                        |                                                     |               |               |             |                   |             |            
|Total Assets                               |                                                                                                                                        | $                                                   | 1,078,266,409 |               |             | $                 | 989,212,690 |            
|                                           |                                                                                                                                        |                                                     |               |               |             |                   |             |            
|LIABILITIES AND SHAREHOLDERS EQUITY      
|                                          
|                                          
|                                          
|                                          
|                                           | LIABILITIES                                                                                                                           
|                                          
|                                          
|                                          
|                                          
|                                           | Deposits:                                                                                                                             
|                                          
|                                          
|                                          
|                                          
|                                           |                                                                                                                                        | Interest bearing                                    |               | $             | 773,744,655 |                   |             | $           | 736,025,803 | 
|                                          
|                                          
|                                          
|                                          
|                                           |                                                                                                                                        | Noninterest bearing                                 |               |               | 67,190,422  |                   |             |             | 66,684,718  | 
|                                           |                                                                                                                                        |                                                     |               |               |             |                   |             |            
|                                           | Total deposits                                                                                                                         |                                                     |               | 840,935,077   |             |                   |             | 802,710,521 |            
|                                          
|                                          
|                                          
|                                          
|                                           | Other borrowings                                                                                                                       |                                                     |               | 134,101,643   |             |                   |             | 90,022,716  |            
|                                          
|                                          
|                                          
|                                          
|                                           | Interest payable and other liabilities                                                                                                 |                                                     |               | 13,088,321    |             |                   |             | 10,367,489  |            
|                                           |                                                                                                                                        |                                                     |               |               |             |                   |             |            
|Total Liabilities                          |                                                                                                                                        |                                                     | 988,125,041   |               |             |                   | 903,100,726 |            
|                                          
|                                          
|                                          
|                                          
|                                           | SHAREHOLDERS EQUITY                                                                                                                  
|                                          
|                                          
|                                          
|                                          
|                                           | Common stock, no par value, $.167 stated value; 20,000,000 shares
authorized; 7,051,609 shares issued
(7,037,222 at December 31, 1999) |                                                     |               | 1,177,619     |             |                   |             | 1,175,216   |            
|                                          
|                                          
|                                          
|                                          
|                                           | Treasury stock, 184 shares                                                                                                             |                                                     |               | (5,336        | )           |                   |             | 0           |            
|                                          
|                                          
|                                          
|                                          
|                                           | Capital in excess of stated value                                                                                                      |                                                     |               | 60,512,940    |             |                   |             | 60,222,913  |            
|                                          
|                                          
|                                          
|                                          
|                                           | Retained earnings                                                                                                                      |                                                     |               | 32,967,955    |             |                   |             | 28,601,206  |            
|                                          
|                                          
|                                          
|                                          
|                                           | Accumulated other comprehensive (loss) income                                                                                          |                                                     |               | (4,511,810    | )           |                   |             | (3,887,371  | )          
|                                           |                                                                                                                                        |                                                     |               |               |             |                   |             |            
|Total Shareholders Equity                 |                                                                                                                                        |                                                     | 90,141,368    |               |             |                   | 86,111,964  |            
|                                           |                                                                                                                                        |                                                     |               |               |             |                   |             |            
|Total Liabilities and Shareholders Equity |                                                                                                                                        | $                                                   | 1,078,266,409 |               |             | $                 | 989,212,690 |            
|                                           |                                                                                                                                        |                                                     |               |               |             |                   |             |            

See accompanying notes.

3



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##### Table of Contents



CAPITAL HOLDINGS, INC.




CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

|                                                    |                         |                                     |            |                    |            |                  |            |           |            |      |            |           |            |   |            |           |            | 
|--------------------------------------------------- | ----------------------- | ----------------------------------- | ---------- | ------------------ | ---------- | ---------------- | ---------- | --------- | ---------- | ---- | ---------- | --------- | ---------- | - | ---------- | --------- | ---------- | 
|                                                    |                         |                                     |            | THREE MONTHS ENDED |            | SIX MONTHS ENDED
|                                                    |                         |                                     |            | JUNE 30            |            | JUNE 30         
|                                                    |                         |                                     |            |                    |            |                 
|                                                    |                         |                                     |            | 2000               |            | 1999             |            | 2000      |            | 1999
|                                                    |                         |                                     |            |                    |            |                  |            |           |            |     
|Interest income:                                   
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    |                         | Loans, including fees               |            | $                  | 16,636,087 |                  |            | $         | 12,898,663 |      |            | $         | 31,924,546 |   |            | $         | 24,842,514 | 
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    |                         | Securities                          |            |                    | 3,638,308  |                  |            |           | 2,963,376  |      |            |           | 7,168,457  |   |            |           | 5,861,142  | 
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    |                         | Federal funds sold                  |            |                    | 10,012     |                  |            |           | 26,655     |      |            |           | 40,443     |   |            |           | 107,359    | 
|                                                    |                         |                                     |            |                    |            |                  |            |           |            |      |            |           |            |   |            |          
|Total interest income                               |                         |                                     | 20,284,407 |                    |            |                  | 15,888,694 |           |            |      | 39,133,446 |           |            |   | 30,811,015 |          
|                                                   
|                                                   
|                                                   
|                                                   
|Interest expense:                                  
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    |                         | Deposits                            |            |                    | 10,154,139 |                  |            |           | 7,716,302  |      |            |           | 19,577,651 |   |            |           | 15,022,762 | 
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    |                         | Other borrowings                    |            |                    | 1,710,145  |                  |            |           | 1,022,165  |      |            |           | 3,003,681  |   |            |           | 2,058,400  | 
|                                                    |                         |                                     |            |                    |            |                  |            |           |            |      |            |           |            |   |            |          
|Total interest expense                              |                         |                                     | 11,864,284 |                    |            |                  | 8,738,467  |           |            |      | 22,581,332 |           |            |   | 17,081,162 |          
|                                                    |                         |                                     |            |                    |            |                  |            |           |            |      |            |           |            |   |            |          
|Net interest income                                 |                         |                                     | 8,420,123  |                    |            |                  | 7,150,227  |           |            |      | 16,552,114 |           |            |   | 13,729,853 |          
|                                                   
|                                                   
|                                                   
|                                                   
|Provision for loan losses                           |                         |                                     | 490,000    |                    |            |                  | 600,000    |           |            |      | 1,120,000  |           |            |   | 1,125,000  |          
|                                                    |                         |                                     |            |                    |            |                  |            |           |            |      |            |           |            |   |            |          
|Net interest income after provision for loan losses |                         |                                     | 7,930,123  |                    |            |                  | 6,550,227  |           |            |      | 15,432,114 |           |            |   | 12,604,853 |          
|                                                   
|                                                   
|                                                   
|                                                   
|Other income:                                      
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    |                         | Service charges on deposit accounts |            |                    | 157,998    |                  |            |           | 142,681    |      |            |           | 323,148    |   |            |           | 272,856    | 
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    |                         | Net securities (losses) gains       |            |                    | (5,200     | )                |            |           | 0          |      |            |           | 1,615      |   |            |           | 29,886     | 
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    |                         | Other                               |            |                    | 355,369    |                  |            |           | 321,507    |      |            |           | 780,431    |   |            |           | 754,609    | 
|                                                    |                         |                                     |            |                    |            |                  |            |           |            |      |            |           |            |   |            |          
|Total other income                                  |                         |                                     | 508,167    |                    |            |                  | 464,188    |           |            |      | 1,105,194  |           |            |   | 1,057,351  |          
|                                                   
|                                                   
|                                                   
|                                                   
|Other expenses:                                    
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    |                         | Salaries and employee benefits      |            |                    | 2,161,992  |                  |            |           | 1,946,533  |      |            |           | 4,395,861  |   |            |           | 3,874,205  | 
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    |                         | Occupany and equipment expense      |            |                    | 414,197    |                  |            |           | 342,205    |      |            |           | 799,222    |   |            |           | 670,965    | 
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    |                         | Other                               |            |                    | 1,539,804  |                  |            |           | 1,352,699  |      |            |           | 2,862,307  |   |            |           | 2,656,814  | 
|                                                    |                         |                                     |            |                    |            |                  |            |           |            |      |            |           |            |   |            |          
|Total other expenses                                |                         |                                     | 4,115,993  |                    |            |                  | 3,641,437  |           |            |      | 8,057,390  |           |            |   | 7,201,984  |          
|                                                    |                         |                                     |            |                    |            |                  |            |           |            |      |            |           |            |   |            |          
|Income before provision for federal income tax      |                         |                                     | 4,322,297  |                    |            |                  | 3,372,978  |           |            |      | 8,479,918  |           |            |   | 6,460,220  |          
|                                                   
|                                                   
|                                                   
|                                                   
|Provision for federal income tax                    |                         |                                     | 1,465,000  |                    |            |                  | 1,095,000  |           |            |      | 2,844,000  |           |            |   | 2,100,000  |          
|                                                    |                         |                                     |            |                    |            |                  |            |           |            |      |            |           |            |   |            |          
|Net income                                          |                         | $                                   | 2,857,297  |                    |            | $                | 2,277,978  |           |            | $    | 5,635,918  |           |            | $ | 4,360,220  |          
|                                                    |                         |                                     |            |                    |            |                  |            |           |            |      |            |           |            |   |            |          
|Per common share:                                  
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Net income             
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    |                         | Basic                               |            | $                  | 0.41       |                  |            | $         | 0.37       |      |            | $         | 0.80       |   |            | $         | 0.72       | 
|                                                    |                         |                                     |            |                    |            |                  |            |           |            |      |            |           |            |   |            |          
|                                                    |                         | Diluted                             |            | $                  | 0.39       |                  |            | $         | 0.36       |      |            | $         | 0.77       |   |            | $         | 0.70       | 
|                                                    |                         |                                     |            |                    |            |                  |            |           |            |      |            |           |            |   |            |          
|                                                    | Cash dividends declared |                                     | $          | 0.09               |            |                  | $          | 0.08      |            |      | $          | 0.18      |            |   | $          | 0.16      |           
|                                                    |                         |                                     |            |                    |            |                  |            |           |            |      |            |           |            |   |            |          
|Average shares outstanding:                        
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Basic                   |                                     |            | 7,050,629          |            |                  |            | 6,076,021 |            |      |            | 7,048,088 |            |   |            | 6,067,814 |           
|                                                    |                         |                                     |            |                    |            |                  |            |           |            |      |            |           |            |   |            |          
|                                                    | Diluted                 |                                     |            | 7,297,463          |            |                  |            | 6,255,319 |            |      |            | 7,300,356 |            |   |            | 6,247,282 |           
|                                                    |                         |                                     |            |                    |            |                  |            |           |            |      |            |           |            |   |            |          

See accompanying notes.

4



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##### Table of Contents



CAPITAL HOLDINGS, INC.




CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY (UNAUDITED)

SIX MONTHS ENDED JUNE 30, 2000 AND 1999

|                                                                                      |  |              |           |        |                |        |           |        |  |  |        |   |  |   |          |  
|------------------------------------------------------------------------------------- |  | ------------ | --------- | ------ | -------------- | ------ | --------- | ------ |  |  | ------ | - |  | - | -------- | -
|                                                                                      |  | COMMON STOCK |           |        | TREASURY STOCK
|                                                                                      |  |              |           |        |                |        |           |       
|                                                                                      |  | SHARES       |           | AMOUNT |                | SHARES |           | AMOUNT
|                                                                                      |  |              |           |        |                |        |           |       
|Balance at January 1, 2000                                                            |  |              | 7,037,222 |        |                | $      | 1,175,216 |        |  |  |        |   |  |   |          |  
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|Net income                                                                            |  |              |           |        |                |        |           |        |  |  |        |   |  |   |          |  
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|Net unrealized loss on securities available for sale,
net of tax effect of $322,000   |  |              |           |        |                |        |           |        |  |  |        |   |  |   |          |  
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                      |  |              |           |        |                |        |           |        |  |  |        |   |  |   |          |  
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|Comprehensive Income                                                                  |  |              |           |        |                |        |           |        |  |  |        |   |  |   |          |  
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|Exercise of common stock options, including tax benefit                               |  |              | 6,990     |        |                |        | 1,168     |        |  |  |        |   |  |   |          |  
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|Issuance of common stock                                                              |  |              | 7,397     |        |                |        | 1,235     |        |  |  |        |   |  |   |          |  
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|Treasury shares acquired                                                              |  |              |           |        |                |        |           |        |  |  | (184   | ) |  |   | (5,336   | )
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|Cash dividend declared, $.18 per share                                                |  |              |           |        |                |        |           |        |  |  |        |   |  |   |          |  
|                                                                                      |  |              |           |        |                |        |           |        |  |  |        |   |  |   |          |  
|Balance at June 30, 2000                                                              |  |              | 7,051,609 |        |                | $      | 1,177,619 |        |  |  | (184   | ) |  |   | ($5,336  | )
|                                                                                      |  |              |           |        |                |        |           |        |  |  |        |   |  |   |          |  
|Balance at January 1, 1999                                                            |  |              | 6,049,224 |        |                | $      | 1,008,204 |        |  |  |        |   |  |   |          |  
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|Net income                                                                            |  |              |           |        |                |        |           |        |  |  |        |   |  |   |          |  
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|Net unrealized loss on securities available for sale,
net of tax effect of $2,096,000 |  |              |           |        |                |        |           |        |  |  |        |   |  |   |          |  
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                      |  |              |           |        |                |        |           |        |  |  |        |   |  |   |          |  
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|Comprehensive Income                                                                  |  |              |           |        |                |        |           |        |  |  |        |   |  |   |          |  
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|Exercise of common stock options, including tax benefit                               |  |              | 14,202    |        |                |        | 2,367     |        |  |  |        |   |  |   |          |  
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|Issuance of common stock                                                              |  |              | 14,097    |        |                |        | 2,350     |        |  |  |        |   |  |   |          |  
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|Treasury shares acquired                                                              |  |              |           |        |                |        |           |        |  |  | (9,000 | ) |  |   | (180,000 | )
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|Treasury shares issued                                                                |  |              |           |        |                |        |           |        |  |  | 9,000  |   |  |   | 180,000  |  
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|Cash dividend declared, $.16 per share                                                |  |              |           |        |                |        |           |        |  |  |        |   |  |   |          |  
|                                                                                      |  |              |           |        |                |        |           |        |  |  |        |   |  |   |          |  
|Balance at June 30, 1999                                                              |  |              | 6,077,523 |        |                | $      | 1,012,921 |        |  |  | 0      |   |  | $ | 0        |  
|                                                                                      |  |              |           |        |                |        |           |        |  |  |        |   |  |   |          |  

[Additional columns below]

[Continued from above table, first column(s) repeated]

|                                                                                      |  |              |            |          |  |               |            |               |  |             |             |   |  |   |            |  
|------------------------------------------------------------------------------------- |  | ------------ | ---------- | -------- |  | ------------- | ---------- | ------------- |  | ----------- | ----------- | - |  | - | ---------- | -
|                                                                                      |  |              |            |          |  |               |            |               |  | ACCUMULATED
|                                                                                      |  | CAPITAL IN   |            |          |  |               |            | OTHER         |  | TOTAL      
|                                                                                      |  | EXCESS OF    |            | RETAINED |  | COMPREHENSIVE |            | SHAREHOLDERS'
|                                                                                      |  | STATED VALUE |            | EARNINGS |  | (LOSS) INCOME |            | EQUITY       
|                                                                                      |  |              |            |          |  |               |            |              
|Balance at January 1, 2000                                                            |  | $            | 60,222,913 |          |  | $             | 28,601,206 |               |  |             | ($3,887,371 | ) |  | $ | 86,111,964 |  
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|Net income                                                                            |  |              |            |          |  |               | 5,635,918  |               |  |             |             |   |  |   | 5,635,918  |  
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|Net unrealized loss on securities available for sale,
net of tax effect of $322,000   |  |              |            |          |  |               |            |               |  |             | (624,439    | ) |  |   | (624,439   | )
|                                                                                      |  |              |            |          |  |               |            |               |  |             |             |   |  |   |            |  
|Comprehensive Income                                                                  |  |              |            |          |  |               |            |               |  |             |             |   |  |   | 5,011,479  |  
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|Exercise of common stock options, including tax benefit                               |  |              | 98,340     |          |  |               |            |               |  |             |             |   |  |   | 99,508     |  
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|Issuance of common stock                                                              |  |              | 191,687    |          |  |               |            |               |  |             |             |   |  |   | 192,922    |  
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|Treasury shares acquired                                                              |  |              |            |          |  |               |            |               |  |             |             |   |  |   | (5,336     | )
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|Cash dividend declared, $.18 per share                                                |  |              |            |          |  |               | (1,269,169 | )             |  |             |             |   |  |   | (1,269,169 | )
|                                                                                      |  |              |            |          |  |               |            |               |  |             |             |   |  |   |            |  
|Balance at June 30, 2000                                                              |  | $            | 60,512,940 |          |  | $             | 32,967,955 |               |  |             | ($4,511,810 | ) |  | $ | 90,141,368 |  
|                                                                                      |  |              |            |          |  |               |            |               |  |             |             |   |  |   |            |  
|Balance at January 1, 1999                                                            |  | $            | 34,201,997 |          |  | $             | 21,197,999 |               |  | $           | 2,014,013   |   |  | $ | 58,422,213 |  
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|Net income                                                                            |  |              |            |          |  |               | 4,360,220  |               |  |             |             |   |  |   | 4,360,220  |  
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|Net unrealized loss on securities available for sale,
net of tax effect of $2,096,000 |  |              |            |          |  |               |            |               |  |             | (4,067,808  | ) |  |   | (4,067,808 | )
|                                                                                      |  |              |            |          |  |               |            |               |  |             |             |   |  |   |            |  
|Comprehensive Income                                                                  |  |              |            |          |  |               |            |               |  |             |             |   |  |   | 292,412    |  
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|Exercise of common stock options, including tax benefit                               |  |              | 211,094    |          |  |               |            |               |  |             |             |   |  |   | 213,461    |  
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|Issuance of common stock                                                              |  |              | 281,816    |          |  |               |            |               |  |             |             |   |  |   | 284,166    |  
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|Treasury shares acquired                                                              |  |              |            |          |  |               |            |               |  |             |             |   |  |   | (180,000   | )
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|Treasury shares issued                                                                |  |              |            |          |  |               |            |               |  |             |             |   |  |   | 180,000    |  
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|Cash dividend declared, $.16 per share                                                |  |              |            |          |  |               | (972,112   | )             |  |             |             |   |  |   | (972,112   | )
|                                                                                      |  |              |            |          |  |               |            |               |  |             |             |   |  |   |            |  
|Balance at June 30, 1999                                                              |  | $            | 34,694,907 |          |  | $             | 24,586,107 |               |  |             | ($2,053,795 | ) |  | $ | 58,240,140 |  
|                                                                                      |  |              |            |          |  |               |            |               |  |             |             |   |  |   |            |  

See accompanying notes.

5



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##### Table of Contents



CAPITAL HOLDINGS, INC.




CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

|                                                 |                                                                                   |                                                               |                                        |             |                  |           |             |              |           |            |  
|------------------------------------------------ | --------------------------------------------------------------------------------- | ------------------------------------------------------------- | -------------------------------------- | ----------- | ---------------- | --------- | ----------- | ------------ | --------- | ---------- | -
|                                                 |                                                                                   |                                                               |                                        |             | SIX MONTHS ENDED
|                                                 |                                                                                   |                                                               |                                        |             | JUNE 30         
|                                                 |                                                                                   |                                                               |                                        |             | 2000             |           | 1999       
|                                                 |                                                                                   |                                                               |                                        |             |                  |           |            
|OPERATING ACTIVITIES:                           
|                                                
|                                                
|                                                
|                                                
|                                                 | Net Income                                                                        |                                                               | $                                      | 5,635,918   |                  |           | $           | 4,360,220    |          
|                                                
|                                                
|                                                
|                                                
|                                                 | Adjustments to reconcile net income to net
cash provided by operating activities:
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                   | Provision for loan losses                                     |                                        |             | 1,120,000        |           |             |              | 1,125,000 |           
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                   | Depreciation and amortization                                 |                                        |             | 422,226          |           |             |              | 387,122   |           
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                   | Amortization and accretion of security premiums and discounts |                                        |             | (38,324          | )         |             |              | (22,446   | )         
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                   | Gain on sale of investment securities                         |                                        |             | (1,615           | )         |             |              | (29,886   | )         
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                   | Deferred income tax expense                                   |                                        |             | (380,800         | )         |             |              | (382,500  | )         
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                   | Changes in assets and liabilities:                           
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                   |                                                               | Interest receivable and other assets   |             |                  | (820,940  | )           |              |           | (1,499,255 | )
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                   |                                                               | Interest payable and other liabilities |             |                  | 2,719,554 |             |              |           | 1,181,703  |  
|                                                 |                                                                                   |                                                               |                                        |             |                  |           |             |             
|                                                 | Total adjustments                                                                 |                                                               |                                        | 3,020,101   |                  |           |             | 759,738      |          
|                                                 |                                                                                   |                                                               |                                        |             |                  |           |             |             
|                                                 | Net cash provided by operating activities                                         |                                                               |                                        | 8,656,019   |                  |           |             | 5,119,958    |          
|                                                
|                                                
|                                                
|                                                
|INVESTING ACTIVITIES:                           
|                                                
|                                                
|                                                
|                                                
|                                                 | Purchases of available-for-sale securities                                        |                                                               |                                        | (13,557,999 | )                |           |             | (37,220,938  | )        
|                                                
|                                                
|                                                
|                                                
|                                                 | Net increase in loans                                                             |                                                               |                                        | (89,855,418 | )                |           |             | (83,702,223  | )        
|                                                
|                                                
|                                                
|                                                
|                                                 | Purchase of bank premises and equipment                                           |                                                               |                                        | (335,714    | )                |           |             | (373,892     | )        
|                                                
|                                                
|                                                
|                                                
|                                                 | Proceeds from sales and calls of securities available-for-sale                    |                                                               |                                        | 7,501,678   |                  |           |             | 15,278,985   |          
|                                                
|                                                
|                                                
|                                                
|                                                 | Proceeds from maturities of securities available-for-sale                         |                                                               |                                        | 1,595,082   |                  |           |             | 3,386,414    |          
|                                                 |                                                                                   |                                                               |                                        |             |                  |           |             |             
|                                                 | Net cash used in investing activities                                             |                                                               |                                        | (94,652,371 | )                |           |             | (102,631,654 | )        
|                                                
|                                                
|                                                
|                                                
|FINANCING ACTIVITIES:                           
|                                                
|                                                
|                                                
|                                                
|                                                 | Net increase in deposits                                                          |                                                               |                                        | 38,224,556  |                  |           |             | 56,608,787   |          
|                                                
|                                                
|                                                
|                                                
|                                                 | Net increase in other borrowings                                                  |                                                               |                                        | 44,078,927  |                  |           |             | 31,142,059   |          
|                                                
|                                                
|                                                
|                                                
|                                                 | Issuance of common stock                                                          |                                                               |                                        | 292,430     |                  |           |             | 497,627      |          
|                                                
|                                                
|                                                
|                                                
|                                                 | Treasury shares acquired                                                          |                                                               |                                        | (5,336      | )                |           |             | (180,000     | )        
|                                                
|                                                
|                                                
|                                                
|                                                 | Treasury shares issued                                                            |                                                               |                                        | 0           |                  |           |             | 180,000      |          
|                                                
|                                                
|                                                
|                                                
|                                                 | Cash dividends paid                                                               |                                                               |                                        | (1,267,891  | )                |           |             | (969,848     | )        
|                                                 |                                                                                   |                                                               |                                        |             |                  |           |             |             
|                                                 | Net cash provided by financing activities                                         |                                                               |                                        | 81,322,686  |                  |           |             | 87,278,625   |          
|                                                 |                                                                                   |                                                               |                                        |             |                  |           |             |             
|Decrease in cash and cash equivalents            |                                                                                   |                                                               | (4,673,666                             | )           |                  |           | (10,233,071 | )           
|                                                
|                                                
|                                                
|                                                
|Cash and cash equivalents at beginning of period |                                                                                   |                                                               | 28,935,827                             |             |                  |           | 29,262,969  |             
|                                                 |                                                                                   |                                                               |                                        |             |                  |           |             |             
|Cash and cash equivalents at end of period       |                                                                                   | $                                                             | 24,262,161                             |             |                  | $         | 19,029,898  |             
|                                                 |                                                                                   |                                                               |                                        |             |                  |           |             |             
|Supplemental disclosures:                       
|                                                
|                                                
|                                                
|                                                
|                                                 | Interest paid                                                                     |                                                               | $                                      | 21,771,864  |                  |           | $           | 16,939,455   |          
|                                                 |                                                                                   |                                                               |                                        |             |                  |           |             |             
|                                                 | Income taxes paid                                                                 |                                                               | $                                      | 3,247,000   |                  |           | $           | 2,375,000    |          
|                                                 |                                                                                   |                                                               |                                        |             |                  |           |             |             

See accompanying notes.

6



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##### Table of Contents



CAPITAL HOLDINGS, INC.




NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2000

Basis Of Presentation

The unaudited consolidated financial statements include the accounts of Capital
Holdings, Inc. (the Company) and its wholly-owned subsidiaries, Capital Bank,
N.A. (the Bank) and CBNA Building Company, which is a real estate subsidiary
that owns and leases to the Bank, its only operating facility. The Bank
conducts business in northwestern Ohio and southeastern Michigan as a national
banking association and focuses on corporate, executive and professional
customers, with the primary emphasis on deposits from and commercial loans to
businesses and professionals. The Company operates primarily in one business
segment as a focused commercial business lender.

The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions of Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. All adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Certain reclassifications have been made to prior year amounts to conform to
the current year presentation. All significant intercompany balances and
transactions have been eliminated in the consolidated financial statements.
The preparation of financial statements in conformity with GAAP requires
management to make estimates and assumptions that affect amounts reported in
the financial statements. Actual results could differ from those estimates.
For further information refer to the consolidated financial statements and
notes thereto appearing in the Companys annual report on Form 10-K for the
year ended December 31, 1999.

The Bank is subject to the regulations of certain federal agencies and
undergoes periodic examinations by those regulatory authorities.

The Banks maximum exposure to credit losses for loan commitments and standby
letters of credit outstanding at June 30, 2000 was $307,064,000 and
$32,636,000, respectively, compared to $287,875,000 and $32,459,000,
respectively, at December 31, 1999. The increase in loan commitments is due to
the increased activity from corporate borrowers as well as from the increase in
owner-occupied commercial real estate construction.

7



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##### Table of Contents



CAPITAL HOLDINGS, INC.




MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

The following discussion and related financial data for the Company provides an
overview of the financial condition and results of operations of the Company
and its subsidiaries. The principal subsidiary of the Company is Capital Bank,
N.A., which is in its eleventh year of operation and had total assets of
$1,078,266,000 at June 30, 2000.

Consolidated net income for the first six months of 2000 was $5,636,000
compared to $4,360,000 for the first six months of 1999, representing a 29.3%
increase. For the second quarter, the Company had net income of $2,857,000, an
increase of 25.4% compared to earnings of $2,278,000 in the second quarter of
1999. The increase in net income was a direct result of a 21.0% growth in
earning assets from June 30, 1999 to June 30, 2000, continued high credit
quality and a continued emphasis on maintaining a high level of operating
efficiency.

For the first six months of the year compared to the same period last year,
basic and diluted earnings per share grew 11% and 10%, respectively. For the
second quarter, basic and diluted earnings per share grew 11% and 8%,
respectively, compared to the second quarter in 1999. The Company raised
additional capital through a stock offering in the fourth quarter of 1999
increasing the number of shares outstanding by 15%. As a result, the
percentage change in earnings per share was less than the percentage change in
net income. Return on average assets was 1.10% and return on average equity
was 12.97% for the quarter. This compares to 1.06% and 15.10%, respectively,
for the second quarter in 1999.

Balance Sheet Analysis

Loan growth, net of participations sold, for the second quarter of 2000 was
$39,912,000 or 5.2%. Additional loan participations of approximately $7,800,000
were sold during the quarter. On an annualized basis, loan growth was 20.8%
for the quarter. This compares to 24.8% annualized growth since December 31,
1999, and 22.7% growth since June 30, 1999. The increase in loans occurred
primarily from strong loan demand and business development efforts. The
allowance for loan losses at June 30, 2000, was $11,589,000 or 1.43% of total
loans, compared to 1.45% of total loans at December 31, 1999 and 1.40% of total
loans at June 30, 1999. The allowance for loan losses is the estimated amount,
which in the opinion of management, will be adequate to absorb potential loan
losses in the loan portfolio. No loans were charged off during the
second quarter of 2000. Loans over 90 days past due as to principal
and interest and still in an accrual status were less than $12,000 at
quarter end. There were no nonaccruing loans at quarter end.

Investment securities available for sale totaled $227,372,000 or 21.1% of total
assets at June 30, 2000, and $197,028,000 or 22.1% of total assets at June 30,
1999. The investment quality of the securities portfolio remains very high
with 83.0% of the portfolio comprised of U.S. Treasury and Agency securities.
The Bank has no

8



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##### Table of Contents



CAPITAL HOLDINGS, INC.

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS  CONTINUED

investments in high-risk derivative instruments. The Banks portfolio has a weighted average adjusted maturity of approximately 4.6
years. Due to the general rise in interest rates, the total market value of
the portfolio decreased $624,000 (net of tax) during the six months ended June
30, 2000.

The Company uses a combination of funding sources to facilitate the growth in
earning assets. Average deposits for the second quarter of 2000, excluding
brokered deposits, grew $72,007,000 over the second quarter of 1999. Average
brokered certificates of deposits for the quarter grew $49,734,000 from the
same period a year ago. The average balance of other borrowings for the
quarter grew $34,300,000 from the second quarter of last year, primarily from
an increase in federal funds purchased.

Results Of Operations

Net interest income for the second quarter of 2000 was $8,420,000 compared to
$7,150,000 for the second quarter of 1999, representing a 17.8% increase. Net
interest income for the first half of 2000 was $16,552,000 compared to
$13,730,000 for the first half of 1999, representing a 20.6% increase. The
quarter and year-to-date increases in net interest income were due largely to a
higher volume of loans in 2000 compared to the same periods last year. The net
interest margin on a fully tax equivalent basis for the first half of 2000 was
3.43%, compared to 3.46% for the first half of 1999. The modest decrease in
the margin was due principally to the rise in the average cost of liabilities,
driven by Federal Reserve rate increases since June 1999, slightly outpacing
the increase in the average yield on earning assets.

The provision for loan losses for the second quarter of 2000 was $490,000
compared to $600,000 during the second quarter of 1999. The provision expense
for the quarter maintained the loan loss reserve ratio at 1.43% at quarter-end
compared to 1.40% at the end of the second quarter last year. The provision
for loan losses for the first half of 2000 was $1,120,000 compared to
$1,125,000 during the first half of 1999.

Non-interest expenses of the Company have increased in absolute dollars to
support the continued growth of the Bank. Non-interest expenses were 13.0%
higher in the second quarter of 2000 and 11.9% higher for the first half of
2000 compared to the same periods last year. By comparison, net revenues grew
significantly more at 17.3% for the second quarter and 19.4% for the first half
of 2000 compared to the same periods last year. As a percentage of average
assets, non-interest expenses have decreased slightly from 1.66% for the year
ended December 31, 1999, to 1.59% for the six months ended June 30, 2000. The
Companys efficiency ratio was 46% for the first half of 2000,

9



---



##### Table of Contents



CAPITAL HOLDINGS, INC.

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS  CONTINUED

which is
significantly better than the national peer benchmark of 61%. Salaries and benefits represented 52.5% of other expenses for the second
quarter of 2000,
compared to 53.5% for the second quarter of 1999. Salaries and benefits
expense for the three months ended June 30, 2000 increased 11.1% over the same
period for 1999 and 13.5% for the first half of 2000 compared to the same
period last year. These increases were due to a higher staffing level to
support earning asset growth of the bank, a generally higher cost for employee
benefits and normal increases in compensation. Total assets per employee have
increased from $7,728,000 at December 31, 1999, to $8,102,000 at June 30, 2000.

Other non-interest expenses, excluding salaries and benefits, increased 15.3%
for the second quarter of 2000 and 10.0% for the first half of 2000 compared to
the same periods last year. The overall rise in these expenses has been due,
in part, to increases in volume related expenses such as deposit courier
services, FDIC premiums and merchant charge card services.

Capital

The Company places significant emphasis on the maintenance of strong capital,
which promotes investor confidence and enhances business growth opportunities.
As of June 30, 2000, the Company had a Total Risk-Based Capital ratio of
11.92%, a Tier 1 Risk-Based Capital ratio of 10.67%, and a Tier 1 Leverage
Capital ratio of 8.96%. This compares to regulatory capital requirements of
10%, 6% and 5%, respectively for a well capitalized institution. At the Bank
level, the Total Risk-Based Capital ratio was 10.97%, the Tier 1 Risk-Based
Capital ratio was 7.02%, and the Tier 1 Leverage Capital ratio was 5.92% at
June 30, 2000.

Shareholders equity has continued to increase from retained earnings of net
income. Cash dividends declared represented approximately 22.5% of net income
for the first half of 2000. A $.09 per share cash dividend was declared on
June 30 and March 31, 2000, payable July 25 and April 25, 2000, respectively.

The Company previously announced in the second quarter that the Board of
Directors had approved a common stock repurchase program. The program
authorizes the repurchase of up to $3,000,000 of the Companys common stock
over a one-year period. The Companys total market capitalization at June 30,
2000, was approximately $184.2 million. Total equity was 8.36% of total assets
at quarter end.

In June 1999, a three-for-one stock split was declared and payable July 15,
1999. All earnings per share and cash dividend per share numbers, average and
actual shares outstanding and the par value of common stock shares have been
retroactively restated to reflect this three-for-one stock split.

10



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##### Table of Contents



CAPITAL HOLDINGS, INC.

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS  CONTINUED

Other

In June 1998, the FASB issued Statement No. 133. Accounting for Derivative
Instruments and Hedging Activities. SFAS No. 133 establishes accounting and
reporting standards for hedging activities and for derivative instruments,
including certain derivative instruments embedded in other contracts. This
statement requires a company to recognize all derivatives as either assets or
liabilities in its balance sheet and measure those instruments at fair value.
The accounting for changes in the fair value of a derivative (i.e. gains and
losses) depends on the intended use of the derivative and the resulting
designation. With the issuance of FASB Statement No. 137, the effective date
of FASB Statement No. 133 changes to include all fiscal quarters of fiscal
years beginning after June 15, 2000. In June 2000, the FASB issued Statement
No. 138, Accounting for Certain Derivative Instruments and Certain Hedging
Activities  an amendment of FASB Statement No. 133 which provides various
technical clarifications to the previous guidance. Presently the Company does
not utilize derivative or related types of financial instruments except for
certain Federal agency collateralized mortgage obligations. Therefore, this
Statement is not anticipated to have a material impact on the Company.

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.

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##### Table of Contents



CAPITAL HOLDINGS, INC.




PART II. OTHER INFORMATION

Item 4. Submission of Matters to a Vote of Security Holders

At the Annual Shareholders Meeting held on May 18, 2000, pursuant to the Notice
of Annual Meeting and Proxy Statement dated April 14, 2000:

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|1) |  | the following directors were elected based upon the votes
cast as indicated: James A. Appold: for  4,996,241, withheld 
84,039; David P. Bennett: for  5,079,756, withheld  524; Yale
M. Feniger: for  5,078,594, withheld  1,686; Harley J. Kripke:
for  5,071,985, withheld  8,295; Thomas W. Noe: for 
5,019,795, withheld  60,485.
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|2) |  | To consider and vote upon the approval of a new compensation
plan, the Long-Term Incentive Compensation Plan (4,516,182 votes
for, 49,801 votes against, 7,709 votes abstained, and 506,588 votes
not voted).                                                                                                                                   

Item 6. Exhibits and Reports on Form 8-K

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|(a) |  | Exhibits                                                              
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|    |  | 27     Financial Data Schedule                                        
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|(b) |  | No reports on Form 8-K were filed for the quarter ended June 30, 2000.

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SIGNATURES

Pursuant to the requirements for the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

|     |  |                 |  |                                                             
|---- |  | --------------- |  | ------------------------------------------------------------
|     |  |                 |  | CAPITAL HOLDINGS, INC                                       
|     |  |                
|Date |  | August 14, 2000 |  | /s/ David L. Mead                                           
|     |  |                 |  | David L. Mead
Chief Financial Officer, Senior Vice President

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