##### Table of Contents



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, 1999

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) Yes X
       (2) No

As of June 30, 1999, there were 6,077,523 shares of common
stock outstanding.



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TABLE OF CONTENTS



|                           |                                                                                                                            |  |  |  |  |  |  | 
|-------------------------- | -------------------------------------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|                           | CAPITAL HOLDINGS, INC. CONSOLIDATED BALANCE SHEETS                                                                        
|                           | CAPITAL HOLDINGS, INC. CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)                                                      
|                           | CAPITAL HOLDINGS, INC. CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY (UNAUDITED) SIX MONTHS ENDED JUNE 30, 1999 AND 1998
|                           | CAPITAL HOLDINGS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)                                                  
|                           | Notes to Consolidated Financial Statements for the Six Months Ended June 30, 1999                                         
|                           | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS                                     
|PART II. OTHER INFORMATION
|SIGNATURES                



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CAPITAL HOLDINGS, INC.

Index

|                              |  |                                                                                             |    |        |        | 
|----------------------------- |  | ------------------------------------------------------------------------------------------- | -- | ------ | ------ | 
|                              |  |                                                                                             |    | Page  
|                              |  |                                                                                             |    | Number
|                              |  |                                                                                             |    |       
|                             
|                             
|                             
|                             
|PART I. FINANCIAL INFORMATION |  |                                                                                             |    |       
|                             
|Item 1.                       |  | Financial Statements (Unaudited):                                                           |    |        |        | 
|                              |  | Consolidated balance sheets
	   June 30, 1999 and December 31, 1998                         |    |        | 3      | 
|                              |  | Consolidated statements of income
	   Three months ended June 30, 1999 and 1998             |    |        | 4      | 
|                              |  | Six months ended June 30, 1999 and 1998                                                     |    |        |        | 
|                              |  | Consolidated statements of shareholders equity
	   Six months ended June 30, 1999 and 1998 |    |        | 5      | 
|                              |  | Consolidated statements of cash flows
	   Six months ended June 30, 1999 and 1998           |    |        | 6      | 
|                              |  | Notes to consolidated financial statements                                                  |    |        | 7      | 
|                             
|Item 2.                       |  | Managements Discussion and Analysis of Financial Condition
	and
	   Results of Operations  |    |        | 8 - 12 | 
|                             
|                             
|                             
|                             
|PART II. OTHER INFORMATION    |  |                                                                                             | 13 |       
|                             
|                             
|                             
|                             
|SIGNATURES                    |  |                                                                                             | 14 |       





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##### Table of Contents






CAPITAL HOLDINGS, INC.

CONSOLIDATED BALANCE SHEETS


|                                           |                                                                                                                                                                 |                                   |             |                   |             |   |             |             |             | 
|------------------------------------------ | --------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------- | ----------- | ----------------- | ----------- | - | ----------- | ----------- | ----------- | 
|                                           |                                                                                                                                                                 | (UNAUDITED)                       |             |                  
|                                           |                                                                                                                                                                 | JUNE 30, 1999                     |             | DECEMBER 31, 1998
|                                           |                                                                                                                                                                 |                                   |             |                  
|ASSETS                                     |                                                                                                                                                                 |                                   |             |                   |             |   |             |            
|                                           | Cash and due from banks                                                                                                                                         |                                   | $           | 19,029,898        |             |   | $           | 18,262,969  |            
|                                           | Federal funds sold                                                                                                                                              |                                   |             | 0                 |             |   |             | 11,000,000  |            
|                                           |                                                                                                                                                                 |                                   |             |                   |             |   |             |            
|                                           | Total cash and cash equivalents                                                                                                                                 |                                   |             | 19,029,898        |             |   |             | 29,262,969  |            
|                                          
|                                           | Investment securities available for sale, at fair value                                                                                                         |                                   |             | 197,027,542       |             |   |             | 184,583,020 |            
|                                          
|                                           | Loans                                                                                                                                                           |                                   |             | 662,080,539       |             |   |             | 578,369,916 |            
|                                           |                                                                                                                                                                 | Less: Allowance for credit losses |             |                   | 9,279,382   |   |             |             | 8,145,982   | 
|                                           |                                                                                                                                                                 |                                   |             |                   |             |   |             |            
|                                           | Net loans                                                                                                                                                       |                                   |             | 652,801,157       |             |   |             | 570,223,934 |            
|                                          
|                                           | Bank premises and equipment                                                                                                                                     |                                   |             | 9,738,218         |             |   |             | 9,751,447   |            
|                                           | Interest receivable and other assets                                                                                                                            |                                   |             | 11,783,901        |             |   |             | 7,806,606   |            
|                                           |                                                                                                                                                                 |                                   |             |                   |             |   |             |            
|Total Assets                               |                                                                                                                                                                 | $                                 | 890,380,716 |                   |             | $ | 801,627,976 |            
|                                           |                                                                                                                                                                 |                                   |             |                   |             |   |             |            
|                                          
|LIABILITIES AND SHAREHOLDERS EQUITY       |                                                                                                                                                                 |                                   |             |                   |             |   |             |            
|                                          
|                                          
|                                          
|                                          
|                                           | Deposits:                                                                                                                                                       |                                   |             |                   |             |   |             |             |            
|                                           |                                                                                                                                                                 | Interest bearing                  |             | $                 | 658,122,935 |   |             | $           | 606,571,823 | 
|                                           |                                                                                                                                                                 | Noninterest bearing               |             |                   | 61,552,299  |   |             |             | 56,494,624  | 
|                                           |                                                                                                                                                                 |                                   |             |                   |             |   |             |            
|                                           | Total deposits                                                                                                                                                  |                                   |             | 719,675,234       |             |   |             | 663,066,447 |            
|                                          
|                                           | Short-term borrowings                                                                                                                                           |                                   |             | 103,158,393       |             |   |             | 72,016,334  |            
|                                           | Interest payable and other liabilities                                                                                                                          |                                   |             | 9,306,949         |             |   |             | 8,122,982   |            
|                                           |                                                                                                                                                                 |                                   |             |                   |             |   |             |            
|Total Liabilities                          |                                                                                                                                                                 |                                   | 832,140,576 |                   |             |   | 743,205,763 |            
|                                          
|SHAREHOLDERS EQUITY                       |                                                                                                                                                                 |                                   |             |                   |             |   |             |            
|                                           | Common stock, no par value, $.1666666 stated value;
	20,000,000 shares authorized and 6,077,523 shares
	issued and outstanding (6,049,224 at December 31, 1998) |                                   |             | 1,012,921         |             |   |             | 1,008,204   |            
|                                           | Capital in excess of stated value                                                                                                                               |                                   |             | 34,694,907        |             |   |             | 34,201,997  |            
|                                           | Retained earnings                                                                                                                                               |                                   |             | 24,586,107        |             |   |             | 21,197,999  |            
|                                           | Other comprehensive income                                                                                                                                      |                                   |             | (2,053,795        | )           |   |             | 2,014,013   |            
|                                           |                                                                                                                                                                 |                                   |             |                   |             |   |             |            
|Total Shareholders Equity                 |                                                                                                                                                                 |                                   | 58,240,140  |                   |             |   | 58,422,213  |            
|                                           |                                                                                                                                                                 |                                   |             |                   |             |   |             |            
|Total Liabilities and Shareholders Equity |                                                                                                                                                                 | $                                 | 890,380,716 |                   |             | $ | 801,627,976 |            
|                                           |                                                                                                                                                                 |                                   |             |                   |             |   |             |            

See accompanying notes





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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         
|                                                      |         |                                |            |                 
|                                                      |         | 1999                           |            | 1998             |            | 1999 |            | 1998     
|                                                      |         |                                |            |                  |            |      |            |          
|Interest income:                                      |         |                                |            |                  |            |      |            |           |            |   |            |           |            |   |            |          
|                                                      |         | Loans, including fees          |            | $                | 12,899,319 |      |            | $         | 10,866,041 |   |            | $         | 24,975,130 |   |            | $         | 21,070,443 | 
|                                                      |         | Securities                     |            |                  | 2,963,376  |      |            |           | 2,749,164  |   |            |           | 5,861,142  |   |            |           | 5,447,198  | 
|                                                      |         | Federal funds sold             |            |                  | 26,655     |      |            |           | 93,483     |   |            |           | 107,359    |   |            |           | 208,055    | 
|                                                      |         |                                |            |                  |            |      |            |           |            |   |            |           |            |   |            |          
|Total interest income                                 |         |                                | 15,889,350 |                  |            |      | 13,708,688 |           |            |   | 30,943,631 |           |            |   | 26,725,696 |          
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|Interest expense:                                     |         |                                |            |                  |            |      |            |           |            |   |            |           |            |   |            |          
|                                                      |         | Deposits                       |            |                  | 7,722,635  |      |            |           | 7,150,435  |   |            |           | 15,031,692 |   |            |           | 14,112,511 | 
|                                                      |         | Short-term borrowings          |            |                  | 1,022,165  |      |            |           | 662,362    |   |            |           | 2,058,400  |   |            |           | 1,142,419  | 
|                                                      |         |                                |            |                  |            |      |            |           |            |   |            |           |            |   |            |          
|Total interest expense                                |         |                                | 8,744,800  |                  |            |      | 7,812,797  |           |            |   | 17,090,092 |           |            |   | 15,254,930 |          
|                                                      |         |                                |            |                  |            |      |            |           |            |   |            |           |            |   |            |          
|                                                     
|Net interest income                                   |         |                                | 7,144,550  |                  |            |      | 5,895,891  |           |            |   | 13,853,539 |           |            |   | 11,470,766 |          
|                                                     
|Provision for credit losses                           |         |                                | 600,000    |                  |            |      | 280,000    |           |            |   | 1,125,000  |           |            |   | 510,000    |          
|                                                      |         |                                |            |                  |            |      |            |           |            |   |            |           |            |   |            |          
|Net interest income after provision for credit losses |         |                                | 6,544,550  |                  |            |      | 5,615,891  |           |            |   | 12,728,539 |           |            |   | 10,960,766 |          
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|Other income:                                         |         |                                |            |                  |            |      |            |           |            |   |            |           |            |   |            |          
|                                                      |         | Securities gains, net          |            |                  | 0          |      |            |           | 7,917      |   |            |           | 29,886     |   |            |           | 21,127     | 
|                                                      |         | Other                          |            |                  | 469,865    |      |            |           | 340,054    |   |            |           | 903,779    |   |            |           | 670,794    | 
|                                                      |         |                                |            |                  |            |      |            |           |            |   |            |           |            |   |            |          
|Total other income                                    |         |                                | 469,865    |                  |            |      | 347,971    |           |            |   | 933,665    |           |            |   | 691,921    |          
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|Other expenses:                                       |         |                                |            |                  |            |      |            |           |            |   |            |           |            |   |            |          
|                                                      |         | Salaries and employee benefits |            |                  | 1,946,533  |      |            |           | 1,626,867  |   |            |           | 3,874,205  |   |            |           | 3,231,290  | 
|                                                      |         | Equipment                      |            |                  | 240,012    |      |            |           | 162,433    |   |            |           | 468,852    |   |            |           | 356,075    | 
|                                                      |         | Taxes other than income        |            |                  | 101,109    |      |            |           | 118,175    |   |            |           | 235,315    |   |            |           | 238,650    | 
|                                                      |         | Courier services               |            |                  | 176,936    |      |            |           | 152,183    |   |            |           | 343,529    |   |            |           | 295,436    | 
|                                                      |         | Net occupancy                  |            |                  | 98,444     |      |            |           | 73,108     |   |            |           | 193,905    |   |            |           | 144,377    | 
|                                                      |         | Other                          |            |                  | 1,078,403  |      |            |           | 972,532    |   |            |           | 2,086,178  |   |            |           | 1,828,606  | 
|                                                      |         |                                |            |                  |            |      |            |           |            |   |            |           |            |   |            |          
|Total other expenses                                  |         |                                | 3,641,437  |                  |            |      | 3,105,298  |           |            |   | 7,201,984  |           |            |   | 6,094,434  |          
|                                                      |         |                                |            |                  |            |      |            |           |            |   |            |           |            |   |            |          
|                                                     
|Income before provision for federal income tax        |         |                                | 3,372,978  |                  |            |      | 2,858,564  |           |            |   | 6,460,220  |           |            |   | 5,558,253  |          
|                                                     
|Provision for federal income tax                      |         |                                | 1,095,000  |                  |            |      | 960,000    |           |            |   | 2,100,000  |           |            |   | 1,840,000  |          
|                                                      |         |                                |            |                  |            |      |            |           |            |   |            |           |            |   |            |          
|                                                     
|Net income                                            |         | $                              | 2,277,978  |                  |            | $    | 1,898,564  |           |            | $ | 4,360,220  |           |            | $ | 3,718,253  |          
|                                                      |         |                                |            |                  |            |      |            |           |            |   |            |           |            |   |            |          
|                                                     
|Net income per share:(1)                              |         |                                |            |                  |            |      |            |           |            |   |            |           |            |   |            |          
|                                                      | Basic   |                                | $          | 0.37             |            |      | $          | 0.32      |            |   | $          | 0.72      |            |   | $          | 0.62      |           
|                                                      |         |                                |            |                  |            |      |            |           |            |   |            |           |            |   |            |          
|                                                      | Diluted |                                | $          | 0.36             |            |      | $          | 0.31      |            |   | $          | 0.70      |            |   | $          | 0.61      |           
|                                                      |         |                                |            |                  |            |      |            |           |            |   |            |           |            |   |            |          
|                                                     
|Average shares outstanding:(1)                        |         |                                |            |                  |            |      |            |           |            |   |            |           |            |   |            |          
|                                                      | Basic   |                                |            | 6,076,021        |            |      |            | 6,002,574 |            |   |            | 6,067,814 |            |   |            | 5,998,974 |           
|                                                      |         |                                |            |                  |            |      |            |           |            |   |            |           |            |   |            |          
|                                                      | Diluted |                                |            | 6,255,319        |            |      |            | 6,094,362 |            |   |            | 6,247,282 |            |   |            | 6,080,442 |           
|                                                      |         |                                |            |                  |            |      |            |           |            |   |            |           |            |   |            |          



|    |                                                                                      
|--- | -------------------------------------------------------------------------------------
|(1) | Numbers have been restated to reflect a 3-for-1 stock split
	effective June 30, 1999.

See accompanying notes





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##### Table of Contents






CAPITAL HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
(UNAUDITED)


SIX MONTHS ENDED JUNE 30, 1999 AND 1998


|                                                    |  |              |           |            |  |              |           |               |  |               |            |        |  |   |            |   |  |    |            |   |  |   |            |  
|--------------------------------------------------- |  | ------------ | --------- | ---------- |  | ------------ | --------- | ------------- |  | ------------- | ---------- | ------ |  | - | ---------- | - |  | -- | ---------- | - |  | - | ---------- | -
|                                                    |  |              |           |            |  |              |           |               |  |              
|                                                    |  | COMMON STOCK |           | CAPITAL IN |  |              |           | OTHER         |  | TOTAL        
|                                                    |  |              |           | EXCESS OF  |  | RETAINED     |           | COMPREHENSIVE |  | SHAREHOLDERS
|                                                    |  | SHARES       |           | AMOUNT     |  | STATED VALUE |           | EARNINGS      |  | INCOME        |            | EQUITY
|                                                    |  |              |           |            |  |              |           |               |  |               |            |       
|Balance at January 1, 1999                          |  |              | 6,049,224 |            |  | $            | 1,008,204 |               |  | $             | 34,201,997 |        |  | $ | 21,197,999 |   |  | $  | 2,014,013  |   |  | $ | 58,422,213 |  
|Net income                                          |  |              |           |            |  |              |           |               |  |               |            |        |  |   | 4,360,220  |   |  |    |            |   |  |   | 4,360,220  |  
|Unrealized gains (losses) on securities, net of tax |  |              |           |            |  |              |           |               |  |               |            |        |  |   |            |   |  |    | (4,067,808 | ) |  |   | (4,067,808 | )
|                                                    |  |              |           |            |  |              |           |               |  |               |            |        |  |   |            |   |  |   
|Comprehensive Income                                |  |              |           |            |  |              |           |               |  |               |            |        |  |   |            |   |  |    |            |   |  |   | 292,412    |  
|Exercise of common stock options                    |  |              | 14,202    |            |  |              | 2,367     |               |  |               | 211,094    |        |  |   |            |   |  |    |            |   |  |   | 213,461    |  
|Issuance of common stock shares                     |  |              | 23,097    |            |  |              | 3,850     |               |  |               | 460,316    |        |  |   |            |   |  |    |            |   |  |   | 464,166    |  
|Repurchase of treasury stock shares                 |  |              | (9,000    | )          |  |              | (1,500    | )             |  |               | (178,500   | )      |  |   |            |   |  |    |            |   |  |   | (180,000   | )
|Cash dividend declared, $.16 per share              |  |              |           |            |  |              |           |               |  |               |            |        |  |   | (972,112   | ) |  |    |            |   |  |   | (972,112   | )
|                                                    |  |             
|Balance at June 30, 1999                            |  |              | 6,077,523 |            |  | $            | 1,012,921 |               |  | $             | 34,694,907 |        |  | $ | 24,586,107 |   |  | ($ | 2,053,795  | ) |  | $ | 58,240,140 |  
|                                                    |  |              |           |            |  |              |           |               |  |               |            |        |  |   |            |   |  |    |            |   |  |   |            |  
|                                                   
|Balance at January 1, 1998                          |  |              | 5,975,766 |            |  | $            | 995,961   |               |  | $             | 33,179,413 |        |  | $ | 15,014,646 |   |  | $  | 1,356,662  |   |  | $ | 50,546,682 |  
|Net income                                          |  |              |           |            |  |              |           |               |  |               |            |        |  |   | 3,718,253  |   |  |    |            |   |  |   | 3,718,253  |  
|Unrealized gains (losses) on securities, net of tax |  |              |           |            |  |              |           |               |  |               |            |        |  |   |            |   |  |    | 60,317     |   |  |   | 60,317     |  
|                                                    |  |              |           |            |  |              |           |               |  |               |            |        |  |   |            |   |  |   
|Comprehensive Income                                |  |              |           |            |  |              |           |               |  |               |            |        |  |   |            |   |  |    |            |   |  |   | 3,778,570  |  
|Exercise of common stock options                    |  |              | 12,750    |            |  |              | 2,125     |               |  |               | 67,745     |        |  |   |            |   |  |    |            |   |  |   | 69,870     |  
|Issuance of common stock shares                     |  |              | 14,913    |            |  |              | 2,485     |               |  |               | 232,734    |        |  |   |            |   |  |    |            |   |  |   | 235,219    |  
|Cash dividend declared, $.14 per share              |  |              |           |            |  |              |           |               |  |               |            |        |  |   | (840,347   | ) |  |    |            |   |  |   | (840,347   | )
|                                                    |  |             
|Balance at June 30, 1998                            |  |              | 6,003,429 |            |  | $            | 1,000,571 |               |  | $             | 33,479,892 |        |  | $ | 17,892,552 |   |  | $  | 1,416,979  |   |  | $ | 53,789,994 |  
|                                                    |  |              |           |            |  |              |           |               |  |               |            |        |  |   |            |   |  |    |            |   |  |   |            |  

See accompanying notes





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##### Table of Contents






CAPITAL HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)


|                                                 |                                                                                    |                                                               |                                                               |              |           |            |            |             |          |            |  
|------------------------------------------------ | ---------------------------------------------------------------------------------- | ------------------------------------------------------------- | ------------------------------------------------------------- | ------------ | --------- | ---------- | ---------- | ----------- | -------- | ---------- | -
|                                                 |                                                                                    |                                                              
|                                                 |                                                                                    | SIX MONTHS ENDED                                             
|                                                 |                                                                                    | JUNE 30                                                      
|                                                 |                                                                                    |                                                              
|                                                 |                                                                                    | 1999                                                          |                                                               | 1998        
|                                                 |                                                                                    |                                                               |                                                               |             
|OPERATING ACTIVITIES:                            |                                                                                    |                                                               |                                                               |              |           |            |            |            
|                                                 | Net Income                                                                         |                                                               | $                                                             | 4,360,220    |           |            | $          | 3,718,253   |         
|                                                
|                                                
|                                                
|                                                
|                                                 | Adjustments to reconcile net income to net cash provided by
	operating activities: |                                                               |                                                               |              |           |            |            |             |         
|                                                 |                                                                                    | Provision for credit losses                                   |                                                               |              | 1,125,000 |            |            |             | 510,000  |           
|                                                 |                                                                                    | Depreciation and amortization                                 |                                                               |              | 387,122   |            |            |             | 328,366  |           
|                                                 |                                                                                    | Amortization and accretion of security premiums and discounts |                                                               |              | (22,446   | )          |            |             | (22,939  | )         
|                                                 |                                                                                    | Gain on sale of securities                                    |                                                               |              | (29,886   | )          |            |             | (21,127  | )         
|                                                 |                                                                                    | Deferred income taxes                                         |                                                               |              | (382,500  | )          |            |             | (173,400 | )         
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                    | Changes in assets and liabilities:                            |                                                               |              |           |            |            |             |          |           
|                                                 |                                                                                    |                                                               | Increase in interest receivable and other assets              |              |           | (1,499,255 | )          |             |          | (878,585   | )
|                                                 |                                                                                    |                                                               | Increase/(decrease) in interest payable and other liabilities |              |           | 1,181,703  |            |             |          | (2,326,000 | )
|                                                 |                                                                                    |                                                               |                                                               |              |           |            |            |            
|                                                 | Total adjustments                                                                  |                                                               |                                                               | 759,738      |           |            |            | (2,583,685  | )       
|                                                 |                                                                                    |                                                               |                                                               |              |           |            |            |            
|                                                 | Net cash provided by operating activities                                          |                                                               |                                                               | 5,119,958    |           |            |            | 1,134,568   |         
|                                                
|                                                
|                                                
|                                                
|                                                
|INVESTING ACTIVITIES:                            |                                                                                    |                                                               |                                                               |              |           |            |            |            
|                                                 | Purchase of securities available for sale                                          |                                                               |                                                               | (37,220,938  | )         |            |            | (30,953,845 | )       
|                                                 | Net increase in loans                                                              |                                                               |                                                               | (83,702,223  | )         |            |            | (52,492,735 | )       
|                                                 | Purchase of bank premises and equipment                                            |                                                               |                                                               | (373,892     | )         |            |            | (585,242    | )       
|                                                 | Proceeds from maturities of securities available for sale                          |                                                               |                                                               | 3,386,414    |           |            |            | 2,407,683   |         
|                                                 | Proceeds from sales of securities available for sale                               |                                                               |                                                               | 15,278,985   |           |            |            | 17,522,880  |         
|                                                 |                                                                                    |                                                               |                                                               |              |           |            |            |            
|                                                 | Net cash used in investing activities                                              |                                                               |                                                               | (102,631,654 | )         |            |            | (64,101,259 | )       
|                                                
|                                                
|                                                
|                                                
|                                                
|FINANCING ACTIVITIES:                            |                                                                                    |                                                               |                                                               |              |           |            |            |            
|                                                 | Net increase in deposits                                                           |                                                               |                                                               | 56,608,787   |           |            |            | 47,879,446  |         
|                                                 | Net increase in short-term borrowings                                              |                                                               |                                                               | 31,142,059   |           |            |            | 19,000,000  |         
|                                                 | Issuance of common stock                                                           |                                                               |                                                               | 677,627      |           |            |            | 305,089     |         
|                                                 | Repurchase of treasury stock                                                       |                                                               |                                                               | (180,000     | )         |            |            | 0           |         
|                                                 | Dividends paid                                                                     |                                                               |                                                               | (969,848     | )         |            |            | (758,539    | )       
|                                                 |                                                                                    |                                                               |                                                               |              |           |            |            |            
|                                                 | Net cash provided by financing activities                                          |                                                               |                                                               | 87,278,625   |           |            |            | 66,425,996  |         
|                                                 |                                                                                    |                                                               |                                                               |              |           |            |            |            
|                                                
|(Decrease)/increase in cash and cash equivalents |                                                                                    |                                                               | (10,233,071                                                   | )            |           |            | 3,459,305  |            
|Cash and cash equivalents at beginning of period |                                                                                    |                                                               | 29,262,969                                                    |              |           |            | 23,291,951 |            
|                                                 |                                                                                    |                                                               |                                                               |              |           |            |            |            
|Cash and cash equivalents at end of period       |                                                                                    | $                                                             | 19,029,898                                                    |              |           | $          | 26,751,256 |            
|                                                 |                                                                                    |                                                               |                                                               |              |           |            |            |            
|                                                
|Supplemental disclosures:                        |                                                                                    |                                                               |                                                               |              |           |            |            |            
|                                                 | Interest paid                                                                      |                                                               | $                                                             | 16,939,455   |           |            | $          | 15,067,274  |         
|                                                 |                                                                                    |                                                               |                                                               |              |           |            |            |            
|                                                 | Income taxes paid                                                                  |                                                               | $                                                             | 2,375,000    |           |            | $          | 1,825,000   |         
|                                                 |                                                                                    |                                                               |                                                               |              |           |            |            |            

See accompanying notes





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##### Table of Contents



CAPITAL HOLDINGS, INC.




Notes to Consolidated Financial Statements

for the Six Months Ended June 30, 1999


(UNAUDITED)

BASIS OF PRESENTATION

The unaudited consolidated financial statements include the
accounts of Capital Holdings, Inc. (the Company) and its wholly
owned subsidiaries, Capital Bank, N.A. (the Bank) and CBNA
Building Company, which is a real estate subsidiary that owns and
 leases to the Bank, its only operating facility.

The accompanying unaudited consolidated financial statements have
 been prepared in accordance with generally accepted accounting
principles for interim financial information and with the
instructions of Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted
accounting principles for complete financial statements. All
adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Significant
 intercompany balances and transactions have been eliminated in
the consolidated financial statements. For further information
refer to the consolidated financial statements and notes thereto
appearing in the Companys annual report on Form 10-K
for the year ended December 31, 1998.

The Banks maximum exposure to credit losses for loan
commitments and standby letters of credit outstanding at
June 30, 1999 was $275,351,000 and $23,035,000,
respectively, compared to $237,290,000 and $16,819,000,
respectively, at December 31, 1998. 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. Management does not
anticipate any significant losses as a result of these
commitments.





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##### Table of Contents



CAPITAL HOLDINGS, INC.




MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION

AND RESULTS OF OPERATIONS


Loan growth for the second quarter of 1999 was $40,940,000 or
6.6% and $83,711,000 or 14.5% for the first half of 1999. Of the
solid loan growth in the first half of 1999, 35% or
$29 million came from the continued strong borrowing needs
of the Banks corporate customers; while 60% or
$50 million of the growth came from commercial real estate
construction loans with a substantial percentage of these loans
supported by quality credit tenant leases or with specific
take-out financing. The allowance for credit losses at
June 30, 1999, was $9,279,000 or 1.4% of total loans,
compared to $8,146,000 or 1.4% of total loans at
December 31, 1998. The Bank had no write offs during the
first half of 1999. Nonperforming loans represented less than
 .01% of total loans at June 30, 1999. Management considers
the allowance to be adequate at this time. At June 30, 1999,
 the Bank had no impaired loans.

Securities available for sale totaled $197,028,000 or 22.1% of
total assets at June 30, 1999. The Bank continues to
maintain very high investment quality with 80.3% of total
securities in U.S. Treasury and Agency securities. The Bank has
no high-risk on or off balance-sheet derivatives. The total
market value of the portfolio decreased $4,068,000 (net of tax)
during the first half of 1999. This is a reflection of the
fluctuation in bond rates on both long and short-term security
maturities. The Banks portfolio has a weighted average life
 to maturity of approximately 2.4 years.

The Companys primary asset is its subsidiary bank, which is
 in its tenth year of operation. During the second quarter and
for the six months ended June 30, 1999, the Bank continued
to experience an increase in net deposits. Deposits increased
$21,599,000 or 3.1% for the second quarter and $56,609,000 or
8.5% during the first half of 1999.

On July 15, 1999 the Company announced a 3-for-1 stock split
 to shareholders of record as of June 30, 1999. The 3-for-1
stock split was 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.

Consolidated net income for the second quarter of 1999 was
$2,278,000 or $.36 per diluted share, and $4,360,000 or $.70 per
diluted share for the first half of 1999. This compares to
$1,899,000 or $.31 per diluted share for the second quarter of
1998, and $3,718,000 or $.61 per diluted share for the first half
 of 1998. The increase in income before provision for federal
income taxes, excluding securities gains, for the first half of
1999, represents a 16.1% increase over the same period of 1998.
This increase is a direct result of growth in earning assets,
careful attention to noninterest expenses and an increase in fees
 collected on lending transactions. The income tax provision of
approximately 33% for the first half of 1999, remained comparable
 to the same period last year.





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##### Table of Contents



CAPITAL HOLDINGS, INC.

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION

AND RESULTS OF OPERATIONS


Operating expenses of the Company continue to increase relative
to the Bank growth. Net overhead as a percentage of average
assets has increased minimally from 1.72% for the year ended
December 31, 1998, to 1.73% for the first half of 1999.
Salaries and benefits represent 53.5% of other expenses for the
second quarter of 1999, compared to 52.4% for the second quarter
of 1998. Salary expense for the first half of 1999 increased
19.9% over the same period for 1998. Staff levels have increased
from 107 to 132 (full time equivalents) over the past
12 months, to accommodate the increased growth of the bank.
Average assets per employee continues to remain high at
$6,793,000 at December 31, 1998, to $6,774,000 at
June 30, 1999.

The Companys Tier 1 Capital ratio was 8.37%, the Total
Capital ratio was 9.62%, and the Leverage ratio was 7.00% at
June 30, 1999, compared to regulatory capital requirements
of 4%, 8% and 4%, respectively. These ratios are well in excess
of the regulatory capital requirements. At the Bank level, the
Tier 1 Capital ratio was 7.33%, the Total Capital ratio was
10.52% and the Leverage ratio was 6.15% at June 30, 1999.

Shareholders equity has continued to increase from retained
earnings of net income. An $.08 per share cash dividend was
declared on March 31, 1999 and June 30, 1999, payable
April 25, 1999 and July 25, 1999, respectively. Annualized, these
 cash dividends represent 22% of the current years projected
earnings.





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##### Table of Contents



CAPITAL HOLDINGS, INC.

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS


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. If certain
conditions are met, a derivative may be specifically designated
as a fair value, cash flow, or foreign currency hedge. 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. Presently the Company does
not utilize derivative or related types of financial instruments
except for Federal agency collateralized mortgage obligations.
Therefore, this Statement is not anticipated to have a material
impact on the Company.

Year 2000

The Company initiated a company-wide project to prepare its
computer systems, application and infrastructure for Year 2000
compliance. The following discussion of the implications of the
Year 2000 issue for the Company contains numerous forward-looking
 statements based on inherently uncertain information. The cost
of the project and the date on which the Company plans to
complete the internal Year 2000 modifications are based on
managements best estimates, which management derived
utilizing a number of assumptions of future events including the
continued availability of internal and external resources,
including employees, third party modifications and other factors.
 However, there can be no guarantee that these estimates will be
achieved and actual results could differ.

In 1996, management determined that many of the Companys
critical processes might not be ready to operate normally in the
year 2000 and beyond without remediation. Since then, the Company
 completed an assessment and efforts began to correct and
validate compliance. In 1997, the Company alerted its business
customers of the Year 2000 problem and assessed the readiness
preparations of its major customers and suppliers. Resolution of
the Year 2000 problem is among the Companys highest
priorities.





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##### Table of Contents



CAPITAL HOLDINGS, INC.

MANAGEMENT S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION

AND RESULTS OF OPERATIONS


The Company prepared a project plan, identified its major
application and processing systems, and is using internal and
external resources to modify or replace nonready systems. The
Company tested identified critical systems for readiness as part
of this process. In addition, the Company evaluated customers and
 vendors who have significant relationships with the Company to
determine whether they are preparing and will be ready for the
Year 2000. The Company considered the potential failure of those
customers to be adequately prepared as part of the credit and
review process. However, there can be no guarantee that the
remediation of the systems of the Companys vendors or
customers will be completed on a timely basis.

The Company upgraded computer hardware and software during 1998
to meet its strategic plan of enhancing its products and services
 from a competitive viewpoint. This decision was not related to
Year 2000 compliance issues. The newly installed systems are Year
 2000 compliant. The cost of these systems was approximately
$600,000 which was capitalized. The Company has reviewed other
systems, including desktop computers and facilities-related items
 for Year 2000 compliance. Anticipated costs related to the
remaining hardware and software purchases, associated
reprogramming, and remedial actions did not exceed $100,000 in
1998 nor is it expected to exceed that amount in 1999 or 2000.
The Company will fund the costs through normal operating cash
flow. The project is staffed primarily with internal staff
redeployed from less time-sensitive assignments.

The Company is reliant on suppliers and customers, and we are
addressing Year 2000 issues with both groups. As of
December 31, 1998, we had identified critical vendors and
had completed formalized risk assessments of their Year 2000
readiness plans and status.

The Company is also reliant on its customers to make the
necessary preparations for Year 2000 so that their business
operations will not be interrupted, as an interruption could
threaten their ability to honor financial commitments. The
Company has identified approximately 300 relationships,
consisting of borrowers, capital market counter parties, funding
sources, and large depositors as having financial volumes
sufficiently large to warrant inquiry as to Year 2000
preparation. The Company had substantially completed a formal
assessment of risk based on these initial reports as of
December 31, 1998. Customers found to have a significant
risk of not being ready for Year 2000 are encouraged to make the
necessary effort. The Company is undertaking measures to minimize
 risk with those that appear to pose a significant risk.
Quarterly reviews and follow-up assessments of customers will
continue through 1999.





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##### Table of Contents



CAPITAL HOLDINGS, INC.

MANAGEMENT S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION

AND RESULTS OF OPERATIONS


The Companys Year 2000 change program includes the active
involvement of senior executives as well as seasoned project
managers from throughout the company. Senior executives, the
board of directors and a project steering committee regularly
review the overall program. The federal and state agencies that
regulate the banking industry also monitor the program. The
Companys outside internal audit firm also reviewed the
Companys project status.

The Company grouped the principal risks associated with the Year
2000 problem into three categories. The first is the risk that
the Company does not successfully ready its operations for the
Year 2000. The Company, like other financial institutions, is
heavily dependent on its computer systems. Year 2000 compliant
systems have already been implemented and tested and management
believes it will be able to make any additional minor necessary
corrections in a timely manner.

Computer failure of third parties may also impact the
Companys operations. The most serious impact on the
Companys operations from suppliers would result if basic
services such as telecommunications, utilities, and services
provided by other financial institutions and governmental
agencies were disrupted. While the Company has assessed its
suppliers, it does not yet have sufficient information to
estimate the likelihood of significant disruptions among its
suppliers.

Operational failures among the Companys sources of major
funding and larger borrowers could affect their ability to
continue to provide funding or meet obligations when due. It is
not possible to accurately estimate the likelihood, or potential
impact, of significant disruptions among the Companys
funding sources and obligors at this time.

The Company has developed contingency plans and business
resumption contingency plans specific to the Year 2000. Business
resumption contingency plans address the actions that would be
taken if critical business functions can not be carried out in
the normal manner due to system or supplier failure.

The Company is developing plans designed to coordinate the
efforts of its personnel and resources in addressing any Year
2000 problems that become known after December 31, 1999.





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##### Table of Contents






PART II. OTHER INFORMATION

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

At the Annual Shareholders Meeting held on May 5, 1999,
pursuant to the Notice of Annual Meeting and Proxy Statement
dated April 7, 1999:



| |    |                                                                                                                                                                                                                                                                                                                                               
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 1) | the following directors were elected based upon the votes cast as
	 indicated: George A. Issac: for  1,487,957, withheld
	-125; Bruce K. Lee: for  1,485,091,
	withheld  2,991; W. Geoffrey Lyden, III:
	for  1,482,167, withheld  5,915; James D.
	Sayre: for   1,488,082, withheld  0; John
	S. Szuch: for  1,488,082, withheld  0.
|
| | 2) | amendment to Article Fourth of the Companys Article of
	 Incorporation to increase the total number of the Companys
	 authorized no par value common
	     shares from 3,000,000 to 20,000,000
	 and to effect a 3-for-1 stock split (1,482,880 votes for, 5,202
	votes against).                                                           

Item 6. Exhibits and Reports on Form 8-K

(a)Exhibits

27  Financial Data
Schedule

(b)No reports on Form 8-K were filed for the
quarter ended June 30, 1999.





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##### Table of Contents






SIGNATURES

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



| |                       
| | ----------------------
| | CAPITAL HOLDINGS, INC.

Date  8/13/1999

| |                                             
| | --------------------------------------------
| | /S/ MICHAEL P. KILLIAN                      
| |                                             
| | Michael P. Killian, Chief Financial Officer,
| | Senior Vice President