LAMAR CAPITAL CORPORATION
UNITED STATES 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 the quarterly period ended September 30, 1999
Commission file number: 000-25145
LAMAR CAPITAL CORPORATION
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(Exact name of registrant as specified in its charter)
Mississippi 64-0733976
-------------------------------- -----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation of organization) Identification Number)
Registrant's telephone number, including area code: 601-794-6047
NOT APPLICABLE
-------------------------------------------------------------
(name, address and fiscal year, if changed since last report)
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.
Yes X No
------- -------
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date.
Class Outstanding as of November 11, 1999
----- ---------------------------------
Common stock ($.50 par value) 4,315,707 shares
<PAGE>
LAMAR CAPITAL CORPORATION
FORM 10-Q
INDEX
PAGE
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements and Supplementary Data
Consolidated Balance Sheets -
September 30, 1999 (Unaudited) and December 31, 1998 4
Consolidated Statements of Income and Comprehensive
Income (Unaudited) -
Three Months Ended September 30, 1999 and 1998 and
Nine Months Ended September 30, 1999 and 1998 6
Consolidated Statements of Changes in Stockholders' Equity
Nine Months Ended September 30, 1999 (Unaudited) and
year ended December 31,1998 7
Consolidated Statements of Cash Flows (Unaudited) -
Nine Months Ended September 30, 1999 and 1998 8
Notes to Consolidated Financial Statements (Unaudited) 9
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk 14
PART II. OTHER INFORMATION
ITEM 2. Changes in Securities and Use of Proceeds 16
ITEM 6. Exhibits and Reports on Form 8-K 17
SIGNATURES 18
<PAGE>
PART I. FINANCIAL INFORMATION
In addition to historical information, this report contains statements
which constitute forward-looking statements and information which are based on
management's beliefs, plans, expectations and assumptions and on information
currently available to management. The words "may," "should," "expect,"
"anticipate," "intend," "plan," "continue," "believe," "seek," "estimate," and
similar expressions used in this report that do not relate to historical facts
are intended to identify forward-looking statements. These statements appear in
a number of places in this report, including, but not limited to, statements
found in Item 2 "Management's Discussion and Analysis." All phases of the
Company's operations are subject to a number of risks and uncertainties.
Investors are cautioned that any such forward-looking statements are not
guarantees of future performance and involve risks and uncertainties, and that
actual results may differ materially from those projects in the forward-looking
statements. Among the factors that could cause actual results to differ
materially are the risks and uncertainties discussed in this report, including,
without limitation, the portions referenced above, and the uncertainties set
forth from time to time in the Company's other public reports and filings and
public statements, many of which are beyond the control of the Company, and any
of which, or a combination of which, could materially affect the results of the
Company's operations and whether forward-looking statements made by the Company
ultimately prove to be accurate.
<PAGE>
ITEM 1. FINANCIAL STATEMENTS
LAMAR CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
SEPTEMBER 30, DECEMBER 31,
1999 1998
------------- -------------
(UNAUDITED)
ASSETS
Cash and due from banks $ 14,771 $15,038
Federal funds sold 11,830 11,400
------------- -------------
Cash and cash equivalents 26,601 26,438
Securities available for sale (amortized cost -
$99,378 in 1999 and $57,159 in 1998) 95,308 57,814
Securities held to maturity (fair value -
$34,316 in 1999 and $33,512 in 1998) 34,907 33,014
Loans:
Real Estate:
Residential 68,728 62,333
Construction 11,785 9,095
Commercial 35,119 31,915
Consumer 70,208 61,686
Commercial 48,716 39,493
------------- -------------
234,556 204,522
Unearned Income (2,488) (3,862)
Allowance for loan losses (3,916) (3,564)
------------- -------------
Net loans 228,152 197,096
Accrued interest receivable 3,702 3,256
Premises and equipment 10,035 9,111
Federal Home Loan Bank stock 3,500 788
Other assets 4,671 2,999
------------- -------------
Total assets $ 406,876 $ 330,516
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits:
Non-interest bearing $ 28,107 $ 27,841
Interest bearing:
Demand 93,654 81,516
Savings 10,121 9,437
Time deposits less than $100,000 121,359 114,438
Time deposits more than $100,000 44,436 45,040
------------- -------------
Total deposits 297,677 278,272
Interest payable 832 615
Other liabilities 1,584 1,178
Other borrowed funds 74,120 19,120
------------- -------------
Total liabilities 374,213 299,185
STOCKHOLDERS' EQUITY
Common stock, $ .50 par value, 50,000,000 2,158 2,065
shares authorized, 4,315,707 shares
issued and outstanding at September 30,
1999 and 4,130,707 shares issued and
outstanding at December 31, 1998
Paid-in capital 17,513 15,885
Retained earnings 15,545 12,970
Accumulated other comprehensive income (loss) (2,553) 411
------------- -------------
Total stockholders' equity 32,663 31,331
------------- -------------
Total liabilities and stockholders'
equity $ 406,876 $ 330,516
============= =============
See accompanying notes.
<PAGE>
LAMAR CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1999 1998 1999 1998
---- ---- ---- ----
Interest income:
Loans, including fees $5,622 $ 4,835 $16,118 $13,703
Federal funds sold 118 141 314 531
Interest on securities:
Taxable 1,590 871 4,478 2,227
Non-taxable 443 405 1,309 1,102
-------- ------- ------- -------
2,033 1,276 5,787 3,329
-------- ------- ------- -------
Total interest income 7,773 6,252 22,219 17,563
Interest expense:
Deposits 3,503 3,382 10,294 9,292
Other borrowed funds 825 308 2,087 921
-------- ------- ------- -------
Total interest expense 4,328 3,690 12,381 10,213
-------- ------- ------- -------
Net interest income 3,445 2,562 9,838 7,350
Provision for loan losses 415 200 804 559
Net interest income after -------- ------- ------- -------
provision for loan losses 3,030 2,362 9,034 6,791
Other income:
Service charges on deposit
accounts 577 445 1,533 1,329
Gain on sale of securities
available for sale - 1 6 222
Other fees and operating income 364 339 1,087 986
-------- ------- ------- ------
Total other income 941 785 2,626 2,537
Other expense:
Salaries and employee benefits 1,446 1,181 4,090 3,450
Occupancy expense 188 171 534 482
Furniture and equipment expense 306 236 836 671
Other operating expense 692 552 1,934 1,578
-------- ------- ------- -------
Total other expense 2,632 2,140 7,394 6,181
-------- ------- ------- -------
Income before income taxes 1,339 1,007 4,266 3,147
Income tax expense 355 252 1,130 787
-------- ------- ------- -------
Net income 984 755 3,136 2,360
Other comprehensive income (loss),
net of income taxes:
Change in unrealized gain (loss)
on securities available for sale (677) 359 (2,964) 243
Reclassification of realized amount - - (4) (139)
-------- ------- -------- -------
Net unrealized gain (loss)
recognized in comprehensive
income (677) 359 (2,968) 104
-------- ------- -------- -------
Comprehensive income $ 307 $1,114 $ 168 $2,464
======== ======= ======== =======
Earnings per share - basic and
dilutive $ .23 $ .27 $ .73 $ .86
======== ======= ======== =======
Weighted average shares outstanding -
basic and dilutive 4,316 2,767 4,308 2,751
======== ======= ======== =======
See accompanying notes.
<PAGE>
<TABLE>
<CAPTION>
LAMAR CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT FOR SHARE AMOUNTS)
(UNAUDITED)
ACCUMULATED
OTHER TOTAL
COMMON STOCK PAID-IN RETAINED COMPREHENSIVE TREASURY STOCK STOCKHOLDERS'
SHARES AMOUNT CAPITAL EARNINGS INCOME SHARES AMOUNT EQUITY
---------------------- -------- --------- ------------- --------------------- -------------
Balance at
<S> <C> <C> <C> <C> <C> <C> <C> <C>
December 31, 1997 46,569.44 $466 $5,374 $10,283 $279 763.44 $(242) $16,160
Net income for 1998 3,049 3,049
Stock split
(60-for-1) 2,747,596.96 931 (931) 56,842.96 -----
Dividend ($.12
per share) (362) (362)
Purchase of
treasury stock 200.00 (72) (72)
Sale of treasury stock 51 (30,711.00) 174 225
Retirement of
treasury stock (27,095.40) (14) (126) (27,095.40) 140 -----
Sale of common stock 1,363,636 682 11,517 12,199
Change in unrealized
gain (loss), net
of income taxes,
on securities
available for sale 132 132
---------------------- -------- --------- ------------- --------------------- --------------
Balance at
December 31, 1998 4,130,707 2,065 15,885 12,970 411 -- -- 31,331
Net income for
nine months ended
September 30, 1999 3,136 3,136
Dividend ($.13
per share) (561) (561)
Sale of common stock 185,000 93 1,628 1,721
Change in unrealized
gain (loss), net
of income taxes,
on securities
available for sale (2,964) (2,964)
Balance at
September 30, 1999 ---------------------- -------- --------- ------------- --------------------- --------------
(Unaudited) 4,315,707 $2,158 $17,513 $15,545 $(2,553) -- $ -- $ 32,663
====================== ======== ========= ============= ===================== ==============
</TABLE>
See accompanying notes.
<PAGE>
LAMAR CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
NINE MONTHS ENDED
SEPTEMBER 30,
-------------------------
1999 1998
------ -------
Operating activities
Net income $ 3,136 $ 2,360
Adjustments to reconcile net
income to net cash provided by
operating activities:
Provision for loan losses 804 559
Provision for loan losses on
other real estate 16 11
Depreciation and amortization expense 690 489
Amortization of securities premiums 160 185
Accretion of securities discounts (36) (24)
Gain on sale of securities available for
sale (6) (222)
(Gain) loss of sales of other real estate 6 (7)
Increase in interest receivable (446) (466)
Increase (decrease) in interest payable 217 (110)
Increase in other assets (182) (270)
Increase in other liabilities 314 111
-------- -------
Net cash provided by operating activities 4,673 2,616
Investing activities
Securities held to maturity:
Proceeds from calls, maturities, and
principal reductions 1,300 3,415
Purchase of securities (2,465) (15,795)
Securities available for sale:
Proceeds from calls, maturities,
and principal reductions 3,325 7,654
Proceeds from sales of securities 10,498 7,930
Purchases of securities (56,896) (34,073)
(Purchase) sales of Federal Home Loan
Bank stock (2,712) 223
Net increase in loans (31,915) (30,045)
Proceeds from sales of other real estate 312 25
Purchases of premises and equipment (1,614) (2,783)
-------- ---------
Net cash used in investing activities (80,167) (63,449)
Financing activities
Net increase in deposits 19,405 66,120
Net increase in revolving line of credit - 100
Borrowings from banks 70,000 -
Payments on notes payable to banks (15,000) -
Purchases of treasury stock - (72)
Proceeds from sale of treasury stock - 225
Proceeds from sale of common stock 1,721 -
Dividends paid (469) (305)
--------- --------
Net cash provided by financing activities 75,657 66,068
--------- --------
Net increase in cash and
cash equivalents 163 5,235
Cash and cash equivalents at beginning
of period 26,438 15,737
--------- --------
Cash and cash equivalents at end of
period $ 26,601 $20,972
--------- --------
See accompanying notes.
<PAGE>
LAMAR CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
(UNAUDITED)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The consolidated balance sheet at December 31, 1998 and
consolidated statement of stockholders' equity for the year ended
December 31, 1998 have been derived from the audited financial
statements at that date. The accompanying unaudited consolidated
financial statements include the accounts of Lamar Capital Corporation
and subsidiaries. Intercompany profits, transactions and balances have
been eliminated in consolidation. The accompanying unaudited
consolidated financial statements have been prepared in accordance with
generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Rule 10-01 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. In the opinion of management, all
adjustments (consisting only of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results
for interim periods are not necessarily indicative of the results that
may be expected for the entire year. For further information, refer to
the consolidated financial statements and notes thereto of Lamar Capital
Corporation's 1998 Annual Report to Shareholders.
SECURITIES PORTFOLIOS
In accordance with FAS No. 115 "Accounting for Certain Investment
in Debt and Equity Securities", as of September 30, 1999 the securities
in the "Available for Sale" category included $4.1 million in unrealized
losses. Accordingly, total securities and total stockholders' equity
were decreased by $4.1 million and $2.6 million (net of taxes),
respectively, at September 30, 1999 to reflect the adjustment of the
securities portfolio to market.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
OVERVIEW
For the nine month period ended September 30, 1999, the Company's
net income increased to $3,136,000 as compared to $2,360,000 for the
same period in 1998, an increase of 32.9%. Basic and diluted earnings
per share was $0.73 in 1999 as compared to $0.86 in 1998 with an
increase in weighted average shares outstanding (basic and dilutive) to
4.3 million from 2.8 million for those periods, respectively. The 1998
net income included a one-time gain from the sale of investment
securities of $139,000 (net of tax), or $0.05 per basic and dilutive
share. The increase in net income resulted primarily from increased
volume in earning assets. The increase in net income was also due to an
increase in net interest margin from 3.65% for the nine month period
ended September 30, 1998 to 3.67% for the nine month period ended
September 30, 1999.
Total assets at September 30, 1999, increased 23.1% over year end
1998 to $406.9 million. Increases of $39.4 million in investment
securities and $31.1 million in net loans reflect this growth which was
funded in part by proceeds from bank borrowings of $55.0 million, an
increase of $19.4 million in deposits and $1.7 million in net proceeds
from the sale of the underwriters' overallotment of shares in connection
with the Company's Initial Public Offering.
For quarter ended September 30, 1999, the Company's net income
increased to $984,000 as compared to $755,000 for the same quarter in
1998, an increase of 30.3%. Basic and diluted earnings per share was
$0.23 in 1999 as compared to $0.27 in 1998 with an increase in weighted
average shares outstanding (basic and dilutive) to 4.3 million from 2.8
million for those periods, respectively. The increase in net income
resulted primarily from increased volume in earnings assets. The
increase in net income was also due to an increase in net interest
margin from 3.58% for the quarter ended September 30, 1998 to 3.71% for
the quarter ended September 30, 1999.
<PAGE>
RESULTS OF OPERATIONS
NET INTEREST INCOME
Net interest income is income produced by interest earning assets
reduced by the interest expense associated with the funding of those
assets. Changes in the mix of these interest-earning assets and
interest-bearing liabilities and their yields and rates contribute to
the levels of net interest income realized and have an impact on
earnings.
During the nine month period ended September 30, 1999, net
interest income increased 33.9% over the comparable period in 1998. The
increase in 1999 is attributable to an increase in the Company's average
interest-earning assets of 33.0%, primarily in the loan and investment
securities portfolios. Interest-bearing liabilities increased 29.0% for
the same periods primarily from increases in other borrowed funds, time
deposits and transaction accounts.
The Company's net interest margin was 3.67% for the nine month
period ended September 30, 1999 compared to 3.65% for the same period in
1998. The increase in net interest margin resulted from a decrease in
yield on interest-earning assets of .42% offset by a decline in the cost
of interest-bearing liabilities of .33%. The net interest margin may be
affected by the interest rate environment and changes in the earning
asset mix and deposit fund mix.
During the quarter ended September 30, 1999, net interest income
increased 34.5% over the comparable period in 1998. The increase in 1999
is attributable to an increase in the Company's average interest-earning
assets of 29.7%, primarily in the loan and investment securities
portfolios. Interest-bearing liabilities increased 25.8% for the same
periods primarily from increases in other borrowed funds, time deposits
and transaction accounts.
The Company's net interest margin was 3.71% for the quarter ended
September 30, 1999 compared to 3.58% for the same period in 1998. The
increase in net interest margin resulted from a decline in the cost of
interest-bearing liabilities of .38% partially offset by a decrease in
yield on interest-earning assets of .36%.
ALLOWANCE AND PROVISION FOR LOAN LOSSES
The allowance for loan losses is regularly evaluated by management
and approved by the Board of Directors and is maintained at a level
believed to be adequate to absorb future loan losses in the Company's
portfolio. The provision for loan losses is determined in part using an
internal watch list developed by a review of essentially all loans by
management.
The Company's allowance for loan losses increased $352,000 to $3.9
million at September 30, 1999 from $3.6 million at December 31, 1998.
The Company's allowance for loan losses to total loans decreased from
1.8% at December 31, 1998 to 1.7% at September 30, 1999. The increase in
allowance for loan losses is mainly attributable to increases in loan
volume.
<PAGE>
NON-INTEREST INCOME
For the nine month period ended September 30, 1999, non-interest
income was $2.6 million compared to $2.5 million for the same period in
1998, an increase of 3.5%. This increase was primarily due to the
increases in service charges on deposit accounts offset by the gain on
sale of securities available for sale of $220,000 in 1998.
For the quarter ended September 30, 1999, non-interest income was
$941,000 compared to $785,000 for the same period in 1998, an increase
of 19.9%. This increase was primarily due to both increases in volume
and service charges on deposit accounts.
NON-INTEREST EXPENSE
For the nine month period ended September 30, 1999, non-interest
expense was $7.4 million compared to $6.2 million for the same period in
1998, a 19.6% increase. Non-interest expense levels are often measured
using an efficiency ratio. The efficiency ratio measures the level of
expense required to generate one dollar of revenue. At September 30,
1999, the Company's efficiency ratio was 59.32% as compared to 62.52% at
September 30, 1998.
For the quarter ended September 30, 1999, non-interest expense was
$2.6 million compared to $2.1 million for the same quarter in 1998, a
23.0% increase. For the quarter ended September 30, 1999, the Company's
efficiency ratio was 60.00% as compared to 63.94% for the same quarter
in 1998.
Salaries and benefits is the largest component of non-interest
expense and increased 18.6% and 22.4%, respectively when compared to the
same period and quarter ended September 30, 1998. Additional staffing
has been required in several locations as a result of volume and
increased demand.
FINANCIAL CONDITION
LIQUIDITY
The Company maintains sufficient liquidity to fund loan demand,
deposit withdrawals and debt repayments. Liquidity is managed by
retaining sufficient liquid assets in the form of cash and cash
equivalents and core deposits to meet such demand. The Company also
realizes funding and cash flows from the investment securities portfolio
and pay downs from the loan portfolio. In addition, the Company has
funds available to address liquidity needs under a line of credit,
federal funds lines, the retail deposit market, and additional FHLB
borrowings.
The Company's objectives include preserving an adequate liquidity
position. Asset/liability management is designed to ensure safety and
soundness, maintain liquidity and regulatory capital standards, and
achieve an acceptable net interest margin. The Company continues to
experience strong loan demand and management continues to monitor
interest rate and liquidity risks while implementing appropriate funding
and balance sheet strategies.
<PAGE>
CAPITAL
The Company maintains risk-based capital levels well in excess of
the minimum guidelines adopted by the Federal Reserve Board for bank
holding companies. The Company's tier 1 capital and total risk-based
capital ratios at September 30, 1999 were 14.19% and 15.44%,
respectively. This compares to a tier 1 capital ratio of 14.65% and
total risk-based capital ratio of 15.90% at December 31, 1998. The
Company's leverage ratio was 8.75% at September 30, 1999 compared to
9.55% at December 31, 1998.
YEAR 2000
The Company continues to implement plans to address the Year 2000
issue. The issue arises from the fact that many existing computer
programs were written to store only two digits of date-related
information in order to more efficiently handle and store data. Thus,
the programs were unable to properly distinguish between the year 1900
and the year 2000. The Company has converted or replaced various
programs, hardware and instrumentation systems to make them Year 2000
compliant. The Company's Year 2000 project is comprised of two
components - business applications and equipment.
In addressing the Year 2000 problem, the Company has examined its
own software and equipment, potential problems with borrowers, and
potential problems with government entities and others providing
services to the Company. In addition to computer equipment, the Company
has addressed possible problems with microprocessors embedded within
operating equipment, such as telecommunication equipment, vaults,
security and alarm systems, and automated teller machines. The Company
continues to monitor the impact of the failure of a borrower's systems
or a borrower's failure to comply with debt covenant terms regarding
Year 2000 issues on the credit quality of the borrower's loan by
communicating with its significant existing and new loan customers and
ascertaining whether the customers need to include remediation and/or
replacement of systems as part of their Year 2000 program and when they
will have that completed. Presently, the Company has no reason to
believe that its borrowers will not be able to adequately address the
Year 2000 issue.
The Company's President is Chairman of its Year 2000 committee.
The Committee has devoted appropriate personnel resources to achieve
Year 2000 compliance in a timely manner. Such personnel has worked with
the Company's Board of Directors and other members of management in
completing its action, testing and contingency plans. The Company is
also subject to oversight by the FDIC, the Federal Reserve Board and the
Mississippi Department of Banking and Consumer Finance with respect to
Year 2000 compliance.
The Company has completed all phases of its Year 2000 plan.
Service provider testing of critical information systems were completed
for the majority testing required by June 30, 1999. Testing of all
critical systems and a contingency/business resumption plan was
completed by the June 30, 1999 regulatory deadline. The Company has
expended approximately $120,000 through September 30, 1999 and projects
no additional cost of remediation for the remainder of the year.
Approximately $50,000 has been capitalized because certain systems and
equipment were replaced and these costs were associated with purchasing
new systems. Corrective actions to make the Company's core operating
systems Year 2000 compliant have been made by the Company's software
providers under existing licensing agreements with the Company at no
additional expense. This plan has been tested for viability and
effectiveness. Results of the testing were satisfactory. Personnel are
being trained in the implementation of the plan.
The Year 2000 issue principally involves the installation of
selected software releases which are Year 2000 compliant. Certain of
these installations would have been scheduled for completion by the Year
2000 in the normal course of business. The Year 2000 compliance of the
Company's software suppliers will be essential for the Company's
successful implementation of its Year 2000 objectives.
The Company has examined the Year 2000 issues' impact on services
such as payroll and investment securities operations that are provided
by third parties. The capabilities and readiness for Year 2000 of other
vendors have also been reviewed. The testing phase provided the Company
with no reason to believe that its software providers, service providers
and vendors will not be able to adequately address the Year 2000 issue.
To the extent the software providers', service providers' and vendor's
responses are not satisfactory, the Company will proceed with the steps
outlined in its contingency/business resumption plan.
<PAGE>
In October of this year, Lamar Bank will host "Year 2000 Community
Awareness" meetings for its customers and area residents. These open
forums will provide the public an opportunity to meet with
representatives of the bank, local power companies and local water
associations to gain an understanding of what each had done to prepare
for Y2K. Questions will be taken from the audience and answered by the
panelists.
The contingency/business resumption plan includes critical Company
areas such as operations, personnel, network and business systems as
well as systems external to the Company. The plan addresses various
alternatives and includes assessing a variety of scenarios that could
emerge in the year 2000 and require the Company to react. As an integral
part of the plan potential liquidity challenges are being addressed.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Asset/liability management control is designed to ensure safety
and soundness, maintain liquidity and regulatory capital standards, and
achieve acceptable net interest income. Management considers interest
rate risk to be the Company's most significant market risk. Interest
rate risk is the exposure to adverse changes in the net interest income
as a result of market fluctuations in interest rates.
Management regularly monitors interest rate risk in relation to
prospective market and business conditions. The Company's Board of
Directors sets policy guidelines establishing maximum limits on the
Company's interest rate risk exposure. Management monitors and adjusts
exposure to interest rate fluctuations as influenced by the Company's
loan, investment and deposit portfolios.
The Company uses an earnings simulation model to analyze net
interest income sensitivity. Potential changes in market interest rates
and their subsequent effect on interest income are then evaluated. The
model projects the effect of instantaneous movements in interest rates
of 200 basis points. Assumptions based on the historical behavior of the
Company's deposit rates and balances in relation to changes in interest
rates are also incorporated into the model. These assumptions are
inherently uncertain, and as a result, the model cannot precisely
measure net interest income or precisely predict the impact of
fluctuations in market interest rates on net interest income. Actual
results will differ from the model's simulated results due to timing,
magnitude and frequency of interest rate changes, as well as changes in
market conditions and the application of various management strategies.
Interest rate risk management focuses on maintaining acceptable
net interest income within policy limits approved by the Board of
Directors. The Company's Board of Directors monitors and manages
interest rate risk to maintain an acceptable level of change to net
interest income resulting from market interest rate changes. The
Company's interest rate risk policy, as approved by the Board of
Directors, is stated in terms of change in net interest income given a
200 basis point immediate and sustained increase or decrease in market
interest rates. The current limits approved by the Board of Directors
are plus or minus 10% of net interest income for a 200 basis point
movement.
<PAGE>
PART II - OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
In December 1998, the Company completed its initial public
offering (the "Offering") of 1,548,636 shares of Common Stock (including
185,000 shares issued January 11, 1999 in connection with the exercise
of the underwriters' over-allotment option) at a price per share of
$10.00.
(1) Effective date of Registration Statement: December 16, 1998
(File No. 333-61355)
(2) The Offering commenced on December 16, 1998 and was
consummated on December 22, 1998.
(3) All securities registered in the Offering were sold.
(4) The managing underwriters of the Offering were Morgan
Keegan & Company, Inc. and Sterne, Agee & Leach, Inc.
(5) Common Stock, $.50 par value.
(6) Amount registered and sold: 1,548,636.
(7) Aggregate purchase price: $15,486,360.
(8) All shares were sold for the account of the Issuer.
(9) $1,084,045 in underwriting discounts and commissions were
paid to the underwriters. $483,081 of other expenses were
incurred, including estimated expenses.
(10) $13,919,234 of net Offering proceeds to the Issuer.
(11) Use of Proceeds: $3,660,288 to retire indebtedness of the
Company to Bank One, New Orleans, Louisiana; $7,500,000 was
injected into the capital of the Bank in order to improve
the capital ratios of the Bank. To date, the bank has
expended $1,230,525 for the establishment of two de novo
branches in Hattiesburg, Mississippi, one of which will
become operational during the fourth quarter of 1999 with a
temporary facility and one which the Company expects to be
operational in the first quarter of 2000. The remainder of
the Offering proceeds are being held by the Company for the
possible future acquisition of other financial institutions
or branches and the contribution of additional capital to
the Bank to support loan growth.
<PAGE>
6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit (27) Selected financial data.
(b) Reports on Form 8-K none filed.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the
Securities Exchange Act of 1934, the Registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
BY: /s/ Robert W. Roseberry
-------------------------------
ROBERT W. ROSEBERRY
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
(PRINCIPAL EXECUTIVE OFFICER)
DATE: NOVEMBER 12, 1999
BY: /s/ Donna T. Rutland
-------------------------------
DONNA T. RUTLAND
CHIEF FINANCIAL OFFICER
(PRINCIPAL FINANCIAL OFFICER AND
PRINCIPAL ACCOUNTING OFFICER)
DATE: NOVEMBER 12, 1999
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<PERIOD-START> JUL-1-1999
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