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For the quarterly period ended June 30, 2000 Commission file number: 000-25145 LAMAR CAPITAL CORPORATION (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 August 9, 2000 Common stock ($.50 par value) 4,315,707 shares
PAGE PART I. FINANCIAL INFORMATION ITEM 1. Financial Statements and Supplementary Data Consolidated Balance Sheets - June 30, 2000 (Unaudited) and December 31, 1999 4 Consolidated Statements of Income and Comprehensive Income (Unaudited) - Three Months Ended June 30, 2000 and 1999 and Six Months Ended June 30, 2000 and 1999 6 Consolidated Statements of Changes in Stockholders' Equity Six Months Ended June 30, 2000 (Unaudited) and year ended December 31,1999 7 Consolidated Statements of Cash Flows (Unaudited) - Six Months Ended June 30, 2000 and 1999 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 1. Legal Proceedings 16 ITEM 6. Exhibits and Reports on Form 8-K 17 SIGNATURES 18
In addition to historical information, this report contains statements which constitute forward-looking statements and information which are based on managements 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 Managements Discussion and Analysis. All phases of the Companys 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 Companys 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 Companys operations and whether forward-looking statements made by the Company ultimately prove to be accurate.
LAMAR CAPITAL CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT SHARE AMOUNTS) JUNE 30, DECEMBER 31, 2000 1999 ----------- -------------- (UNAUDITED) ASSETS Cash and due from banks $ 15,223 $14,195 Federal funds sold 1,690 17,680 ---------- ---------- Cash and cash equivalents 16,913 31,875 Securities available for sale (amortized cost - $99,118 in 2000 and $98,438 in 1999) 93,267 91,848 Securities held to maturity (fair value - $40,705 in 2000 and $32,861 in 1999) 42,334 34,211 Loans: Real Estate: Residential 72,862 73,121 Construction 7,322 10,743 Commercial 34,683 34,559 Consumer 62,603 69,542 Commercial 56,927 49,554 ---------- ---------- 234,397 237,519 Unearned income (1,631) (2,116) Allowance for loan losses (4,542) (4,270) ---------- ---------- Net loans 228,224 231,133 Accrued interest receivable 3,896 3,901 Premises and equipment 11,384 10,450 Federal Home Loan Bank stock 3,768 3,596 Other assets 6,327 5,736 ---------- ---------- Total assets $ 406,113 $ 412,750 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY LIABILITIES Deposits: Non-interest bearing $ 30,943 $ 33,637 Interest bearing: Demand 83,774 84,875 Savings 10,491 9,448 Time deposits less than $100,000 121,308 126,123 Time deposits more than $100,000 53,828 54,381 ---------- ---------- Total deposits 300,344 308,464 Interest payable 723 947 Other liabilities 1,142 1,437 Other borrowed funds 70,000 70,000 ---------- ---------- Total liabilities 372,209 380,848
STOCKHOLDERS' EQUITY Common stock, $ .50 par value, 50,000,000 2,158 2,158 shares authorized, 4,315,707 shares issued and outstanding Paid-in capital 17,513 17,513 Retained earnings 17,902 16,364 Accumulated other comprehensive income (3,669) (4,133) ---------- ---------- Total stockholders' equity 33,904 31,902 ---------- ---------- Total liabilities and stockholders' equity $ 406,113 $ 412,750 ========== ========== See accompanying notes.
LAMAR CAPITAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) (UNAUDITED) THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, 2000 1999 2000 1999 ---- ---- ---- ---- Interest income: Loans, including fees $ 5,635 $ 5,380 11,323 10,496 Federal funds sold 73 86 225 196 Interest on securities: Taxable 1,866 1,544 3,576 2,888 Non-taxable 428 442 860 866 -------- -------- -------- -------- 2,294 1,986 4,436 3,754 -------- -------- -------- -------- Total interest income 8,002 7,452 15,984 14,446 Interest expense: Deposits 3,584 3,424 7,177 6,791 Other borrowed funds 887 688 1,774 1,262 -------- -------- -------- -------- Total interest expense 4,471 4,112 8,951 8,053 -------- -------- -------- -------- Net interest income 3,531 3,340 7,033 6,393 Provision for loan losses 276 217 667 389 Net interest income after -------- -------- -------- -------- provision for loan losses 3,255 3,123 6,366 6,004 Other income: Service charges on deposit accounts 582 549 1,121 956 Gain on sale of securities available for sale -- 4 -- 6 Other fees and operating income 384 394 630 723 -------- -------- -------- -------- Total other income 966 947 1,751 1,685 Other expense: Salaries and employee benefits 1,477 1,515 2,934 2,644 Occupancy expense 221 170 447 346 Furniture and equipment expense 298 276 566 530 Other operating expense 821 689 1,493 1,242 -------- -------- -------- -------- Total other expense 2,817 2,650 5,440 4,762 -------- -------- -------- -------- Income before income taxes 1,404 1,420 2,677 2,927 Income tax expense 371 376 707 775 -------- -------- -------- -------- Net income 1,033 1,044 1,970 2,152 Other comprehensive income (loss), net of income taxes: Change in unrealized gain (loss) on securities available for sale 196 (1,659) 464 (2,287) Reclassification of realized amount -- (3) -- (4) -------- -------- -------- -------- Net unrealized gain (loss) recognized in comprehensive income 196 (1,662) 464 (2,291) -------- -------- -------- -------- Comprehensive income (loss) $ 1,229 $ (618) $ 2,434 $ (139) ======== ======== ======== ======== Earnings per share - basic and dilutive $ .24 $ .24 $ .46 $ .50 ======== ======== ======== ======== Weighted average shares outstanding - basic and dilutive 4,316 4,316 4,316 4,304 ======== ======== ======== ======== See accompanying notes
LAMAR CAPITAL CORPORATION AND SUBSIDIARIES 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 ------ ------ ------- -------- ------ ------ December 31, 1998 4,130,707 $ 2,065 $ 15,885 $ 12,970 $ 411 $ 31,331 Net income for 1999 4,171 4,171 Dividend ($.18 per share) (777) (777) Sale of common stock 185,000 93 1,628 1,721 Change in unrealized gain (loss), net of income taxes, on securities available for sale (4,544) (4,544) Balance at ---------- ---------- ---------- ---------- ----------- ---------- December 31, 1999 4,315,707 2,158 17,513 16,364 (4,133) 31,902 Net income for six months ended June 30, 2000 1,970 1,970 Dividend ($.10 per share) (432) (432) Change in unrealized gain (loss), net of income taxes, on securities available for sale 464 464 Balance at ---------- ---------- ---------- ---------- ----------- ---------- June 30, 2000 4,315,707 $ 2,158 $ 17,513 $ 17,092 $ (3,669) $ 33,904 ========== ========== ========== ========== ========== ========== See accompanying notes.
LAMAR CAPITAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS) (UNAUDITED) SIX MONTHS ENDED JUNE 30, ------------------ 2000 1999 ------ ------- Operating activities Net income $ 1,970 $ 2,152 Adjustments to reconcile net income to net cash provided by operating activities: Provision for loan losses 667 389 Provision for loan losses on other real estate 1 5 Depreciation and amortization expense 446 438 Amortization of securities premiums 83 115 Accretion of securities discounts (211) (25) Gain on sale of securities available for sale -- (6) Loss of sales of other real estate 17 1 (Increase) decrease in interest receivable 5 (483) Increase (decrease) in interest payable (224) 229 (Increase) decrease in other assets 75 (308) Increase (decrease) in other liabilities (295) 180 -------- ------- Net cash provided by operating activities 2,534 2,687 Investing activities Securities held to maturity: Proceeds from calls, maturities, and principal reductions 5,030 580 Purchase of securities (12,962) (2,140) Securities available for sale: Proceeds from calls, maturities, and principal reductions 10,980 2,622 Proceeds from sales of securities 1,500 10,498 Purchases of securities (13,498) (56,896) Purchase of Federal Home Loan Bank stock (172) (2,398) Net increase (decrease) in loans 1,291 (24,072) Proceeds from sales of other real estate 267 267 Purchases of premises and equipment (1,380) (616) ----------- ----------- Net cash used in investing activities (8,944) (72,155) Financing activities Net increase (decrease) in deposits (8,120) 16,184 Borrowings from banks - 50,000 Payments on notes payable to banks - (5,000) Proceeds from sale of common stock - 1,721 Dividends paid (432) (297) ----------- ----------- Net cash provided by (used in) financing activities (8,552) 62,608 ----------- ----------- Net decrease in cash and cash equivalents (14,962) (6,860) Cash and cash equivalents at beginning of period 31,875 26,438 ----------- ----------- Cash and cash equivalents at end of period $ 16,913 $19,578 ---------- ----------- 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 Corporations 1999 Annual Report to Shareholders.
SECURITIES PORTFOLIOSIn accordance with FAS No. 115 Accounting for Certain Investment in Debt and Equity Securities, as of June 30, 2000 the securities in the Available for Sale category included $5,851,000 in unrealized losses. Accordingly, total securities and total stockholders equity were decreased by $5,851,000 and $3,669,000 (net of income taxes), respectively, at June 30, 2000 to reflect the adjustment of the securities portfolio to market.
For the six month period ended June 30, 2000, the Companys net income was $1,970,000 as compared to $2,152,000 for the same period in 1999. Basic and diluted earnings per share was $0.46 in 2000 as compared to $0.50 in 1999. The decrease in net income resulted primarily from an increase in the provision for loan losses and non-interest expenses offset by an increase in net interest income. The increase in net interest income was due to an increase in net interest margin from 3.65% for the six month period ended June 30, 1999 to 3.69% for the six month period ended June 30, 2000.
Total assets decreased $6.6 million from December 31, 1999 to $406.1 million at June 30, 2000. There was a decrease of $15.0 million in cash and cash equivalents and a decrease in net loans of $2.9 million that was offset by a $9.5 million increase in investment securities.
For quarter ended June 30, 2000, the Companys net income was $1,033,000 as compared to $1,044,000 for the same quarter in 1999. Basic and diluted earnings per share was $0.24 in 2000 and 1999, as the increases in net interest income was offset by an increase in the loan loss provision and non-interest expenses.
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 six month period ended June 30, 2000, net interest income increased 10.0% over the comparable period in 1999. The increase in 2000 is attributable to an increase in the Companys average interest-earning assets of 8.7%, primarily in the loan and investment securities portfolios. Interest-bearing liabilities increased 10.8% for the same periods primarily from increases in other borrowed funds, time deposits and transaction accounts.
The Companys net interest margin was 3.69% for the six month period ended June 30, 2000 compared to 3.65% for the same period in 1999. The increase in net interest margin resulted from an increase in yield on interest-earning assets of .14% offset by an increase in the cost of interest-bearing liabilities of .01%. 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 June 30, 2000, net interest income increased 5.7% over the comparable period in 1999. The increase in 2000 is attributable to an increase in the Companys average interest-earning assets of 5.8%, primarily in the loan and investment securities portfolios. Interest-bearing liabilities increased 7.3% for the same periods primarily from increases in other borrowed funds, time deposits and transaction accounts.
The Companys net interest margin was 3.72% for the quarters ended June 30, 2000 and 1999. The net interest margin remained unchanged due to an increase in yield on interest-earning assets of .12% offset by a decline in the cost of interest-bearing liabilities of .06%.
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 Companys 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 Companys allowance for loan losses increased $272,000 from December 31, 1999 to $4.5 million at June 30, 2000. The Companys allowance for loan losses to total loans increased from 1.8% at December 31, 1999 to 2.0% at June 30, 2000.
NON-INTEREST INCOMEFor the six month period ended June 30, 2000, non-interest income was $1.8 million compared to $1.7 million for the same period in 1999. This increase was primarily due to increases in service charges on deposit accounts.
For the quarter ended June 30, 2000, non-interest income was $966,000 compared to $947,000 for the same period in 1999. This increase was primarily due to the increases in service charges on deposit accounts.
NON-INTEREST EXPENSEFor the six month period ended June 30, 2000, non-interest expense was $5.4 million compared to $4.8 million for the same period in 1999, a 14.2% increase. This increase is primarily attributable to the staffing and operations of two new banking branches. 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 June 30, 2000, the Companys efficiency ratio was 61.93% as compared to 58.95% at June 30, 1999.
For the quarter ended June 30, 2000, non-interest expense was $2.8 million compared to $2.7 million for the same quarter in 1999, a 6.3% increase. The increase in non-interest expenses for quarter ended June 30, 2000 compared to quarter ended June 30, 1999 is primarily attributable to the staffing and operations of two new banking branches. For the quarter ended June 30, 2000, the Companys efficiency ratio was 62.64% as compared to 61.83% for the same quarter in 1999.
The 6.3% increase in non-interest expenses for quarter ended June 30, 2000 compared to quarter ended June 30, 1999 is primarily attributable to the staffing and operations of two new banking branches.
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 Companys 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.
CAPITALThe Company maintains risk-based capital levels well in excess of the minimum guidelines adopted by the Federal Reserve Board for bank holding companies. The Companys tier 1 capital and total risk-based capital ratios at June 30, 2000 were 14.88% and 16.14%, respectively. This compares to a tier 1 capital ratio of 14.65% and total risk-based capital ratio of 15.90% at December 31, 1999. The Companys leverage ratio was 8.93% at June 30, 2000 compared to 9.55% at December 31, 1999.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKAsset/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 Companys 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 Companys Board of Directors sets policy guidelines establishing maximum limits on the Companys interest rate risk exposure. Management monitors and adjusts exposure to interest rate fluctuations as influenced by the Companys 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 Companys 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 models 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 Companys 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 Companys 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.
No changes from legal proceedings reported in Form 10-K from December 31, 1999.
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 CHAIRMAN AND CHIEF EXECUTIVE OFFICER (PRINCIPAL EXECUTIVE OFFICER) DATE: AUGUST 14, 2000 BY: /s/ ------------------------------------ DONNA T. RUTLAND CHIEF FINANCIAL OFFICER (PRINCIPAL FINANCIAL OFFICER AND PRINCIPAL ACCOUNTING OFFICER) DATE: AUGUST 14, 2000
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