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`Lamar Bank has had a very good earnings growth track record,` analyst says

Lamar bucks small-bank trend and goes public

PURVIS — While many community banks are being courted by bigger financial institutions, Lamar Bank remains decidedly unattached.

Last December, Lamar Capital Corp. (Nasdaq: LCCO), a holding company for Purvis-based Lamar Bank, offered 1.3 million shares of stock at $10 per share in an IPO through Sterne, Agee & Leach in conjunction with Morgan Keegan.

“Lamar Bank has had a very good earnings growth track record,” said Peyton Green, senior analyst for Sterne, Agee & Leach in Atlanta. “The company has done a really good job of keeping expenses under control even though they’ve grown significantly over the past six years.”

Founded in 1904, Lamar Bank has been in the Pine Belt market for 95 years. In the last decade, the bank has prospered. As of Dec. 31, 1992, the bank listed total assets of $121 million. For the quarter ending June 30, 1999, assets totaled $393 million. Lamar Bank has offices in six southeastern Mississippi counties

“We decided to go public for several reasons,” said Kenneth M. Lott, president and COO. “Our assets had grown tremendously and we wanted to do this for our customers. Also, we’ve got older directors that are in the midst of estate planning. They’ve got stock that will eventually pass on to succeeding generations. We wanted a vehicle for them.”

In their home county of Lamar, the bank has a 70% market share. In neighboring Jefferson Davis County, their position in the marketplace is No. 2. In Forrest County, where Lamar Bank ranks No. 6 in market share, two new offices will be open within a year.

“Right now, all we have on Forrest County soil is our branch in Petal that we opened in 1996,” Lott said. “Even though it had close to $30 million in deposits and loans, Forrest County has over $1 billion in bankable deposits. That makes us look like a small fish. Because we were located on the extreme east and extreme west of the county, we needed a couple of locations inside the city proper to make banking more convenient for our customers.”

Lamar Bank’s increased market share is primarily because of recent mergers, Lott said.

“We’ve been able to take advantage of the buyouts in the market,” he said. “Deposit Guaranty has been sold a couple of times. Magnolia Federal was big in this market and was bought by Union Planters. I respect our bigger bank colleagues, but frankly, we’ve been able to increase market share because of the fallout of those mergers.”

Hometown folks don’t like change, said Bradford O. Sipes, senior vice president of Sterne, Agee & Leach Inc. of Ridgeland.

“Even though change may be for the good, when it comes to financial dealings, consumers like stability,” Sipes said. “Lamar Bank has capitalized on that.”

Of three counties in Lamar Bank’s market, Lamar County has the lowest unemployment rate at 2.9%; Forrest County’s is slightly higher at 3.3%. By comparison, the neighboring county of Jefferson Davis County has an 18% unemployment rate, a barrier that “merely represents opportunity,” said Green.

“Lamar Bank has done well with challenges,” he said. “For example, Lamar Bank recently came out with an Internet banking offering with Howard Computers. I’ve seen other banks do it with their employee base but not their customer base.”

Through a partnership with Cellular One and Howard Industries, Lamar Bank instituted a program where customers can get a package deal that includes a computer and local Internet access.

“Experts predict that over 50 million households will buy and use personal computers over the next four years,” said Lott. “Nearly 40 million of these homes will be connected to the Internet, most for the first time. By far, the fastest growing group of new users will be rural families, which is exactly the community that Lamar Bank is dedicated to serving.”

From 1998 to 1999, the bank’s net income increased from $676,000 to $1.04 million. During the same time period, net income rose from $1.6 million to $2.1 million, said Sipes.

“Compared to other banks, Lamar Bank’s stock is trading relatively cheap,” he said. “Acquisition multiples continue around rough medians of 24 times earnings and 3.4 times book value.”

Assets and earnings have grown at about 18% since 1990, when the company began growing in outlying areas of Hattiesburg, said Green, originally from Laurel.

“From 1992 to 1998, Lamar Bank’s asset growth was an average compounded annual rate of 18.3%,” he said. “Earnings at the same time period grew at 17% on an annual basis, which represents triple the asset base. For the first six months of 1999, the efficiency ratio, which measures non-interest expenses as a percent of the company’s revenue, was 59%. They’ve done very well.”

Contact MBJ contributing writer Lynne Wilbanks Jeter at lwjeter@yahoo.com or mbj@msbusiness.com.

About Lynne W. Jeter

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