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MISSISSIPPI 64-0733976
(State or other jurisdiction of incorporation of organization) (I.R.S. Employer Identification Number)
401 Shelby Speights Drive, Purvis , MS 39475
(Address of principal executive offices) (Zip Code)
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 if 1934 during the preceding 12 months (or for such shorted 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 ( )
4,315,707 shares of the Registrant's Common stock, $.50 par value, were outstanding as of May 8, 2000.
LAMAR CAPITAL CORPORATION
FORM 10-Q
INDEX
PAGE
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements and Supplementary Data
Consolidated Balance Sheets -
March 31, 2000 (Unaudited) and December 31, 1999 3
Consolidated Statements of Income and Comprehensive Income (Unaudited)
Three Months Ended March 31, 2000 and 1999 5
Consolidated Statements of Changes in Stockholders' Equity
Three Months Ended March 31, 2000 (Unaudited) and year ended December 31,1999 6
Consolidated Statements of Cash Flows (Unaudited) -
Three Months Ended March 31, 2000 and 1999 7
Notes to Consolidated Financial Statements (Unaudited) 8
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings 12
ITEM 4. Submission of Matters to a Vote of Security Holders 13
ITEM 6. Exhibits and Reports on Form 8-K 13
SIGNATURES ___
LAMAR CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)
March 31, December 31,
2000 1999
(Unaudited)
ASSETS
Cash and due from banks $ 12,618 $ 14,195
Federal funds sold 12,620 17,680
-------- --------
Cash and cash equivalents 25,238 31,875
Securities available for sale (amortized cost-$102,552 in 2000 and
$98,438 in 1999) 96,388 91,848
Securities held to maturity (fair value-$41,219 in 2000 and
$32,861 in 1999) 42,547 34,211
Loans:
Real estate:
Residential 72,240 73,121
Construction 9,494 10,743
Commercial 34,590 34,559
Consumer 65,757 69,542
Commercial 51,403 49,554
------ ------
233,484 237,519
Unearned income (1,736) (2,116)
Allowance for loan losses (4,450) (4,270)
------- -------
Net loans 227,298 231,133
Accrued interest receivable 3,546 3,901
Premises and equipment 11,314 10,450
Federal Home Loan Bank stock 3,651 3,596
Other assets 6,646 5,736
----- -----
Total assets $ 416,628 $ 412,750
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Deposits:
Non-interest bearing $ 35,131 $ 33,637
Interest bearing:
Demand 89,780 84,875
Savings 10,471 9,448
Time deposits less than $100,000 123,634 126,123
Time deposits more than $100,000 52,362 54,381
------ ------
Total deposits 311,378 308,464
Interest payable 1,011 947
Other liabilities 1,348 1,437
Other borrowed funds 70,000 70,000
-------- --------
Total liabilities 383,737 380,848
Stockholders' equity
Common stock, $ .50 par value, 50,000,000 shares authorized, 4,315,707 2,158 2,158
shares issued and outstanding at March 31, 2000 and December 31, 1999
Paid-in capital 17,513 17,513
Retained earnings 17,085 16,364
Accumulated other comprehensive loss (3,865) (4,133)
------- -------
Total stockholders' equity 32,891 31,902
------- -------
Total liabilities and stockholders' equity $416,628 $412,750
======== ========
See accompanying notes.
LAMAR CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (UNAUDITED)
(in thousands, except per share amounts)
Three Months Ended
2000 1999
---- ----
Interest income:
Loans, including fees $5,688 $5,116
Federal funds sold 152 110
Interest on securities:
Taxable 1,710 1,344
Non-taxable 432 424
--- ---
2,142 1,768
----- -----
Total interest income 7,982 6,994
Interest expense:
Deposits 3,593 3,367
Other borrowed funds 887 574
--- ---
Total interest expense 4,480 3,941
----- -----
Net interest income 3,502 3,053
Provision for loan losses 391 172
--- ---
Net interest income after provision for loan losses 3,111 2,881
Other income:
Service charges on deposit accounts 539 407
Gain on sale of securities available for sale -- 2
Other fees and operating income 246 329
--- ---
Total other income 785 738
Other expense:
Salaries and employee benefits 1,457 1,129
Occupancy expense 226 176
Furniture and equipment expense 268 254
Other operating expense 672 553
Total other expense 2,623 2,112
----- -----
Income before income taxes 1,273 1,507
Income tax expense 336 399
--- ---
Net income 937 1,108
Other comprehensive income (loss), net of income taxes:
Change in unrealized gain (loss) on securities available for sale 268 (628)
Reclassification of realized amount -- (1)
Net unrealized gain (loss) recognized in
Comprehensive income $ 1,205 $ 479
======= =======
Earnings per share-basic and dilutive $ .22 $ .26
======= =======
Weighted average shares outstanding - basic and dilutive 4,316 4,293
======= =======
See accompanying notes.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(in thousands, except for share amounts)
Accumulated
Other Total
Common Stock Paid-in Retained Comprehensive Stockholders'
Shares Amount Capital Earnings Income Equity
Balance at December 31, 1998 4,130,707 $ 2,065 $15,885 $12,970 $ 411 $31,331
Net income for 1999 4,171 4,171
Dividend ($.18 per share) (777) (777)
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 (4,544) (4,544)
--------- ----- ------ ------ ------- -------
Balance at December 31, 1999 4,315,707 2,158 17,513 16,364 (4,133) 31,902
Net income for three months ended
March 31, 2000 937 937
Dividend ($.05 per share) (216) (216)
Change in unrealized gain (loss), net
of income taxes, on securities 268 268
available for sale --------- ------- -------- ------- -------- -------
Balance at March 31, 2000 (Unaudited) 4,315,707 $ 2,158 $ 17,513 $17,085 $ (3,865) $32,891
========= ======= ======== ======= ========= =======
See accompanying notes.
LAMAR CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands)
Three Months Ended
------------------
March 31,
---------
2000 1999
---- ----
Operating activities
Net income $ 937 $ 1,108
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses 391 172
Depreciation and amortization expense 230 195
Amortization of securities premiums 43 65
Accretion of securities discounts (82) (13)
Gain on sale of securities available for sale -- (2)
Loss on sales of other real estate 17 1
Decrease in interest receivable 355 855
Increase (decrease) in interest payable 64 (25)
Increase in other assets (595) (658)
Increase (decrease) in other liabilities (89) 53
---- --
Net cash provided by operating activities 1,271 1,751
Investing activities
Securities held to maturity:
Proceeds from calls, maturities, and 696 411
principal reductions
Purchase of securities (8,034) (745)
Securities available for sale:
Proceeds from calls, maturities, and principal 6,756 1,463
reductions
Proceeds from sales of securities -- 2,052
Purchases of securities (11,987) (44,463)
Purchase of Federal Home Loan Bank stock (55) (2,362)
Net (increase) decrease in loans 3,015 (11,759)
Proceeds from sales of other real estate 97 70
Purchases of premises and equipment (1,094) (251)
------- -----
Net cash used in investing activities (10,606) (55,584)
Financing activities
Net increase in deposits 2,914 13,548
Borrowings from banks -- 40,000
Payments on notes payable to banks -- (5,000)
Proceeds from sale of common stock -- 1,721
Dividends paid (216) (124)
----- -----
Net cash provided by financing activities 2,698 50,145
----- ------
Net decrease in cash and cash equivalents (6,637) (3,688)
Cash and cash equivalents at beginning of period 31,875 26,438
------ ------
Cash and cash equivalents at end of period $25,238 $22,750
------- -------
See accompanying notes.
The consolidated balance sheet at December 31, 1999 and consolidated statement of stockholders equity for the year ended December 31, 1999 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 1999 Annual Report to Shareholders.
SECURITES PORTFOLIOSIn accordance with FAS No. 115 “Accounting for Certain Investment in Debt and Equity Securities”, as of March 31, 2000, the securities in the “Available for Sale” category included $6.2 million in unrealized losses. Accordingly, total securities and total stockholders’ equity were decreased by $6.2 million and $3.9 million (net of taxes), respectively, at March 31, 2000 to reflect the adjustment of the securities portfolio to market.
For the quarter ended March 31, 2000, the Company reported net income of $937,000 as compared to $1,108,000 for the same period in 1999. Basic and diluted earnings per share was $0.22 in 2000 as compared to $0.26 in 1999. The decrease in net income was primarily due to an increase in non-interest expenses related to the Company’s expansion and growth. The increase in net interest margin from 3.58% for the quarter ended March 31, 1999 to 3.67% for the quarter ended March 31, 2000 was offset by an increase in operating expenses and provision for loan losses.
Total assets at March 31, 2000, increased $3.9 million over year end 1999 to $416.6 million. An increase of $12.9 million in securities and a decrease of $3.8 million in loans are attributed to this change.
The return on average assets for the quarter ended March 31, 2000 was .91% as compared to year end 1999 of 1.07%; the return on average equity in 2000 was 12.11% as compared to 12.57% for 1999.
RESULTS OF OPERATIONSNet 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 quarter ended March 31, 2000, net interest income increased 14.7% over the comparable period in 1999. The increase in 2000 is attributable to an increase in the Company’s average interest-earning assets of 11.8%, primarily in the securities portfolios. Interest-bearing liabilities increased 15.2% for the same periods primarily from increases in time deposits and transaction accounts.
The Company’s net interest margin was 3.67% for the quarter ended March 31, 2000 compared to 3.58% for the same period in 1999. The increase in net interest margin resulted from an increase in yield on interest-earning assets of .17% and a decline in the cost of interest-bearing liabilities of .07%.
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 $180,000 to $4.5 million at March 31, 2000 compared to December 31, 1999. The Company’s allowance for loan losses to total loans increased from 1.81% at December 31, 1999 to 1.92% for the quarter ended March 31, 2000.
For the quarter ended March 31, 2000, non-interest income was $785,000 compared to $738,000 for the same period in 1999, an increase of 6.4%. This increase was primarily due to the increases in service charges on deposit accounts.
For the quarter ended March 31, 2000, non-interest expense was $2.6 million compared to $2.1 million for the same period in 1999, a 24.2% 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 March 31, 2000, the Company’s efficiency ratio was 61.2% as compared to 55.7% at March 31, 1999.
Salaries and benefits comprise the largest portion of non-interest expense and increased 29.1% when compared to the same period in 1999. Additional staffing has been added as a result of the Company’s new banking branches.
FINANCIAL CONDITIONThe 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. Funding and cash flows can also be realized from the investment securities portfolio and pay downs from the loan portfolio. The Bank also provides access to the retail deposit market. In addition, the Company has funds available through federal funds lines and from additional FHLB borrowings to address liquidity needs.
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.
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 March 31, 2000 were 14.63% and 15.89%, respectively. This compares to a tier 1 capital ratio of 14.38% and total risk-based capital ratio of 15.57% at December 31, 1999. The Company’s leverage ratio was 8.90% at March 31, 2000 compared to 9.23% at December 31, 1999.
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.
Southern financial Services, Inc. (“SFSI”) is a defendant in a case filed on June 11, 1998, in the Circuit Court of Forrest County, Mississippi. The complaint alleges that the plaintiff was not given any choice with respect to the purchase of credit life and credit disability insurance and that SFSI improperly forced placed property insurance on the collateral for the plaintiff’s loan with SFSI. The plaintiff asks for actual damages of $50,000 and punitive damages of $500,000. This case is ready for trial. SFSI is also a defendant in another case filed on March 23, 1999, in the Circuit Court of Jefferson Davis County, Mississippi. The allegations contained in the complaint in this suit are substantially similar to those in the case filed in Forrest County. The plaintiff asks for actual damages of $100,000 and punitive damages of $1,000,000. This case is in the discovery stage. While the ultimate outcome of these lawsuits cannot be predicted with certainty, management believes the cases are without merit, denies all liability and believes that the ultimate resolution of these matters will not have a material adverse effect on the Company’s consolidated financial position or operations.
In addition, in the ordinary course of operation, the Company’s subsidiaries are parties to various legal proceedings. In the opinion of management, there is no proceeding pending, or to the knowledge of management threatened, in which an adverse decision would have a material adverse effect on the Company’s financial condition.
A. Annual Meeting held April 26, 2000.
B. Directors elected at the Annual Meeting:
Votes Cast
Affirmed Withheld
1. Robert W. Roseberry 4,021,198 6,900
2. Jane P. Roberts 4,020,078 8,020
3. Kenneth M. Lott 4,021,128 6,970
4. O. B. Black, Jr. 4,021,398 6,700
5. William H. Jordan 4,021,128 6,970
6. James R. Pylant 4,020,828 7,270
7. Monty C. Roseberry 4,021,398 6,700
C. Approval of Ernst & Young LLP as the independent public accountants of the Company. Approval
was made with a favorable vote of 93.26%.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibit (27) Selected financial data.
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. Rosseberry
------------------------------------
ROBERT W. ROSEBERRY
CHAIRMAN AND
CHIEF EXECUTIVE OFFICER
(PRINCIPAL EXECUTIVE OFFICER)
DATE: MAY 15, 2000
BY: /s/ DONNA T. RUTLAND
---------------------------
DONNA T. RUTLAND
CHIEF FINANCIAL OFFICER
(PRINCIPAL FINANCIAL OFFICER AND
PRINCIPAL ACCOUNTING OFFICER)
DATE: MAY 15, 2000
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