# UNITED STATES
                                                             SECURITIES AND EXCHANGE COMMISSION
                                                                  WASHINGTON, D. C. 20549
                                                                         FORM 10-K

# 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 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

Securities registered pursuant to Section 12(b) of the Act:

                                                                        Name of Each Exchange on
            Title of Each Class                                                  Which Registered

                        None                                                     None

Securities registered pursuant to section 12(g) of the Act:

            Common Stock,  $.50 par value                                        (Title of Class)`

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  (   )

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not
contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X]

The aggregate market value of the voting stock held by nonaffiliates of the Registrant on March 17, 2000
was $26,500,000.

Indicate the number of shares outstanding of each of the Registrant's classes of common stock, as of the
latest practicable date.

`Class                                                                         Outstanding at March 17, 2000
            Common stock, $.50 par value                                                                  4,315,707 Shares`

# DOCUMENTS INCORPORATED BY REFERENCE

Portions of the following documents are incorporated by reference to Part I, II, and III of the Form 10-K
report:  Proxy Statement dated March 29, 2000 for Registrant's Annual Meeting of Stockholders to be held April 26,
2000 (Part III).

---

# LAMAR CAPITAL CORPORATION
FORM 10-K
INDEX

`PART I


         ITEM 1.    BUSINESS                                                          1
         ITEM 2.    PROPERTIES                                                        10
         ITEM 3.    LEGAL PROCEEDINGS                                                 12
         ITEM 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS               12

                                                   PART II
         ITEM 5.    MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
                    STOCKHOLDER MATTERS                                               12
         ITEM 6.    SELECTED FINANCIAL DATA                                           14
         ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                    AND RESULTS OF OPERATIONS                                         15
         ITEM 7A.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
                    RISKS                                                             15
        ITEM 8.     FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                       31

                                                   PART III
         ITEM 10.   DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT                55
         ITEM 11.   EXECUTIVE COMPENSATION                                            55
         ITEM 12.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
                    MANAGEMENT                                                        55
         ITEM 13.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                    55

                                                   PART IV
         ITEM 14.   EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
                    FORM 8-K                                                          55

                     SIGNATURES                                                       57`

# i

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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 1 "Business" and in Item 7 "Management's Discussion
and Analysis of Financial Conditions and Results of Operations."  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 projections 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.

## Background

Lamar Capital Corporation (the "Company") was formed in 1986 to serve as a holding company
for Lamar Bank (the "Bank"). The Company conducts its business activities through the Bank and
the other subsidiaries described below.

Since the establishment of the Bank (then called Lamar County Bank) in 1904 in Purvis,
Mississippi, the Bank has grown to seven banking facilities in three southeastern Mississippi
counties.  Most of this growth has occurred in the last decade as management responded to
opportunities presented by the growth of the Lamar County and Hattiesburg, Mississippi market
areas.

In 1935, the Bank expanded outside of Purvis by acquiring the Sumrall Bank, located in the
extreme north end of Lamar County. In 1980, the Bank moved into its current main office facilities.
In response to the rapid growth of northeast Lamar County, the Bank built a branch on Highway 98
West in Hattiesburg in 1989, marking the Bank's initial entry into the Hattiesburg market area. In
1991, the Bank expanded for the first time into another county by purchasing the Prentiss branch of
a failed savings and loan association from the Resolution Trust Corporation. In 1994, the Bank
opened a second Hattiesburg branch in the newly constructed Turtle Creek Mall. This opening was
followed by the Bank's first entry into Forrest County, Mississippi with the opening of the Petal
branch in 1996. In December of 1999, the Bank opened its third branch office in Hattiesburg at 2007
Lincoln Road in the cloverleaf area. A modular branch is being
utilized until plans for a permanent facility are finalized, with construction
expected to begin in approximately two years.  In March of 2000, the Bank opened its fourth
branch in Hattiesburg, Mississippi on Hardy Street, a major thoroughfare, near the main campus of
the University of Southern Mississippi.

# 1

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During the 1990's, the Company also expanded its financial products and its customer base. In
1992, the Bank established a consumer finance subsidiary, Southern Financial Services, Inc.
( "SFSI "), which makes consumer loans to persons who may not be eligible for financing from the
Bank. SFSI, has offices in Purvis, Hattiesburg, Petal, Prentiss, Monticello, Poplarville and Gulfport,
Mississippi. In 1997, the Company founded The Mortgage Shop, Inc. ( "MSI "), located in
Hattiesburg, Mississippi. MSI originates B and C grade mortgage loans which are sold in the
secondary market. In 1998, the Bank further expanded the range of services offered by entering an
arrangement with Robert Thomas Securities, Inc. to provide stock and other securities trading
services for customers of the Bank and other investors. These services are provided in Hattiesburg
and by appointment at other locations. With the addition of these services, the Company is executing
its strategy of offering a broad range of banking and financial services with the personalized focus
of a community banking organization.

The Company continues to look for additional expansion opportunities, either by establishing
de novo banking offices or by acquiring existing institutions in the financial services industry. The
Company intends to consider various strategic acquisitions of banks or banking assets in those areas
that management believes would complement and increase the Company's existing business, or
expand in market areas or product lines that management considers attractive.

## Lines of Business

Historically, the Company has extended credit and provided general banking services through
its banking center network to individuals and small and medium-sized businesses. During the past
several years the Company has sought new lines of business to diversify its asset mix and further
enhance its profitability. While each new line of business reflects the Company's efforts to enrich
its asset mix, each of these lines of business is an outgrowth of the community banking and lending
services that the Company has performed over the years. In keeping with the Company's operating
philosophy, each of these businesses has been carefully developed and is subject to various quality
controls. The Company's principal lines of business are:

`°    Real Estate Lending. The Banks real estate loans consist of
          residential first and second mortgage loans,  residential construction
          loans and home equity lines of credit and term loans  secured by first
          and  second   mortgages  on  the  residences  of  borrowers  for  home
          improvements,  education  and other  personal  expenditures.  The Bank
          makes  mortgage  loans  with a variety of terms,  including  fixed and
          floating  rates.  These loans are made consistent with the Banks
          appraisal  policy  and real  estate  lending  policy  which  prescribe
          maximum  loan-to-value ratios and maturities.  Management expects that
          these   loan-to-value   ratios  are   sufficient  to  compensate   for
          fluctuations  in the real estate  market and to  minimize  the risk of
          loss that could result from a downturn in that market.  Generally, the
          Bank  retains real estate  loans with  maturities  under ten years and
          sells  mortgage loans with longer  maturities.  MSI originates B and C
          grade mortgage loans which are sold in the secondary market.`

# 2

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`°     Consumer  Lending.  The Bank and SFSI offer consumer  installment
          loans to business owners and other  individuals  for personal,  family
          and  household  purposes.  Consumer  loan  repayments  depend  upon  a
          borrowers   financial  stability  and  are  more  likely  to  be
          adversely  affected by job loss,  divorce,  illness and other personal
          hardships.  In  addition,  collateral  such as  automobiles  and other
          personal  property  securing  consumer loans  depreciates  rapidly and
          sometimes is an inadequate repayment source if a borrower defaults. In
          evaluating  these loans,  the Bank  requires  its lending  officers to
          review the borrowers  level and stability of income, past credit
          history and the impact of these factors on the borrowers ability
          to repay the loan in a timely manner.  In addition,  the Bank requires
          that its banking officers  maintain an appropriate  margin between the
          loan amount and collateral value.

    °     Commercial Lending. The Banks  commercial loan portfolio is
          dispersed   among   various   business   lines   such  as   commercial
          construction,  trucking,  timber,  utilities,  auto  and  recreational
          vehicles, farm supplies and heavy equipment.  Such loans are primarily
          for the financing of accounts receivable,  property,  plant, equipment
          and  inventory.  The Bank also offers  Small  Business  Administration
          loans.  Commercial  lending  entails  greater risks than  traditional,
          single family residential lending.  Commercial loans typically involve
          larger loan balances concentrated in fewer borrowers.  The analysis of
          commercial loans,  which requires expertise in evaluating a commercial
          enterprise  and its  collateral,  is  generally  more complex than the
          analysis required for single family residential lending. Like consumer
          loans,  commercial  loans are  subject  to adverse  conditions  in the
          economy,  as well as the market for the  specific  goods and  services
          sold by the  commercial  borrower.  Loans secured by  commercial  real
          estate can also be affected by trends in the local real estate market.
          In making  these  loans,  the Bank manages its credit risk by actively
          monitoring such measures as advance rate, cash flow,  collateral value
          and other appropriate credit factors.

    °     Deposits and Other  Borrowings.  Deposits are a key  component of
          the  Company's  banking  business,  serving as a source of funding for
          lending as well as for increasing customer account relationships.  The
          Company offfers competitively priced deposit products, including checking,
          savings and time deposit  accounts,  seeking to increase core deposits
          and market share.  Borrowings,  principally from the Federal Home Loan
          Bank (FHLB), and lines of credit with other banks, provide
          other sources of liquidity.

   °      Brokerage Services.  The Bank provides brokerage services through
          a joint arrangement with Robert Thomas Securities,  Inc., a subsidiary
          of Raymond James & Associates, Inc. These services are provided in
          Hattiesburg  and  by  appointment  at  other  locations.  The  Company
          developed brokerage services to (1) help retain existing customers who
          were  seeking   alternative   investments,   (2)  attract  additional,
          sophisticated  customers from its market areas, and (3) to enhance the
          Companys  franchise  by  offering a broader  scope of  financial
          services.

   °      Investments.  The Companys investment securities,  together
          with  cash  and cash  equivalents,  provide  an  important  source  of
          liquidity.   The  Company  uses  its  investments  as  collateral  for
          borrowings  and  to  secure  public  fund  deposits.   The  investment
          portfolio is managed by a committee consisting of executive management
          in accordance  with policies approved by the Companys Board of
          Directors. The committee is advised by Smith  Shellnut  Wilson,  LLC,
          an  independent investment  counsel and  management firm.

       The Company's operating revenues are derived primarily from interest earned from its loan and investment
securities portfolios and fee income from loan and deposit products. The Company is not dependent upon a single
customer, or a few customers, the loss of any one or more of which would have a material adverse effect on the
statement of condition or results of operations.`

# 3

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## Competition

The Company competes with several local and regional commercial banks, thrifts, credit unions and mortgage
companies for deposits, loans and other banking related financial services. There is intense competition in the Bank's
markets from other financial institutions as well as other  "non-bank"  companies which engage in similar activities. Some
of the Company's competitors are not subject to the degree of regulatory review and restrictions which apply to the
Bank. In addition, the Company must compete with much larger financial institutions which have greater financial
resources than the Company and aggressively compete for market share in the Lamar/Forrest County market. These
competitors attempt to gain market share through their financial products mix, pricing strategies and banking center
locations. Legislative developments related to interstate branching and banking in general, by providing large banking
institutions easier access to a broader marketplace, are creating more competitive pressure on smaller financial
institutions. The Company also competes with insurance companies, savings banks, consumer finance companies,
investment banking firms, brokerage houses, mutual fund managers, investment advisors and credit unions. Retail
establishments compete for loans by offering credit cards and retail installment contracts for the purchase of goods and
merchandise. It is anticipated that competition from both bank and non-bank entities will continue to grow.

## Employees

As of December 31, 1999, the Bank had 145 employees of whom 133 were full-time and 12 part-time. MSI has
three full-time employees and SFSI has 19 employees of whom 18 were full-time and one part-time. In addition to a
bonus program, the Bank currently maintains an employee benefit program providing, among other benefits, a self-
insured medical plan, a profit sharing and 401(k) retirement plan, employee stock ownership plan and life and disability
insurance. The Company also adopted a stock incentive plan under which it plans to grant stock options for selected
employees. These employee benefits, as a whole, are considered by management to be generally competitive with
employee benefits provided by other employers in Mississippi. The Company believes the future success of its
subsidiaries will depend, in part, on its ability to continue to attract and retain skilled retail, technical, and managerial
personnel in order to maintain its quality delivery of financial and banking services. None of the Company's employees
are subject to a collective bargaining agreement, and the Company has never experienced a work stoppage.

## Supervision and Regulation

The supervision and regulation of bank holding companies and their subsidiaries is intended primarily for the
protection of depositors, the deposit insurance funds of the Federal Deposit Insurance Corporation (the "FDIC") and
the banking system as a whole, and not for the protection of the bank holding company shareholders or creditors. The
banking agencies have broad enforcement power over bank holding companies and banks including the power to impose
substantial fines and other penalties for violations of laws and regulations. The following description summarizes some
of the laws to which the Company and the Bank are subject. References herein to applicable statutes and regulations

are brief summaries thereof, do not purport to be complete, and are qualified in their entirety by reference to such
statutes and regulations.

The Company.  The Company is a bank holding company registered under the Bank Holding Company Act of
1956, as amended (the "BHCA"), and it is subject to supervision, regulation and examination by the Board of Governors
of the Federal Reserve System (the "Federal Reserve Board"). The BHCA and other federal laws subject bank holding
companies to particular restrictions on the types of activities in which they may engage, and to a range of supervisory
requirements and activities, including regulatory enforcement actions for violations of laws and regulations.

*Regulatory Restrictions on Dividends; Source of Strength.*   It is the policy of the Federal Reserve Board that bank
holding companies should pay cash dividends on common stock only out of income available over the past year and
only if prospective earnings retention is consistent with the organization's expected future needs and financial condition.
The policy provides that bank holding companies should not maintain a level of cash dividends that undermines the bank
holding company's ability to serve as a source of strength to its banking subsidiaries.

Under Federal Reserve Board policy, a bank holding company is expected to act as a source of financial strength
to each of its banking subsidiaries and to commit resources to their support. Such support may be required at times
when, absent this Federal Reserve Board policy, a holding company may not be inclined to provide it. As discussed
below, a bank holding company in certain circumstances could be required to guarantee the capital plan of an
undercapitalized banking subsidiary.

In the event of a bank holding company's bankruptcy under Chapter 11 of the U.S. Bankruptcy Code, the trustee
will be deemed to have assumed and is required to cure immediately any deficit under any commitment by the debtor
holding company to any of the federal banking agencies to maintain the capital of an insured depository institution, and
any claim for breach of such obligation will generally have priority over most other unsecured claims.

*Activities  "Closely Related"  to Banking.*   The BHCA prohibits a bank holding company, with certain limited
exceptions, from acquiring direct or indirect ownership or control of any voting shares of any company which is not
a bank or from engaging in any activities other than those of banking, managing or controlling banks and certain other
subsidiaries, or furnishing services to or performing services for its subsidiaries. One principal exception to these
prohibitions allows the acquisition of interests in companies whose activities are found by the Federal Reserve Board,
by order or regulation, to be so closely related to banking or managing or controlling banks, as to be a proper incident
to banking. Some of the activities that have been determined by regulation to be closely related to banking are making
or servicing loans, performing certain data processing services, acting as an investment or financial advisor to certain
investment trusts and investment companies, and providing securities brokerage services. Other activities approved by
the Federal Reserve Board include consumer financial counseling, tax planning and tax preparation, futures and options
advisory services, check guaranty services, collection agency and credit bureau services, and personal property
appraisals. In approving acquisitions by bank holding companies of companies engaged in banking-related activities,
the Federal Reserve Board considers a number of factors, and weighs the expected benefits to the public (such as greater
convenience and increased competition or gains in efficiency) against the risks of possible adverse effects (such as
undue concentration of resources, decreased or unfair competition or conflicts of interest). The Federal Reserve Board
is also empowered to differentiate between activities commenced de novo and activities commenced through acquisition
of a going concern. Despite prior approval, the Federal Reserve may order a holding company or its subsidiaries to
terminate any activity, or terminate its ownership or control of any subsidiary, when it has reasonable cause to believe
that continuation of such activity constitutes a serious risk to the financial safety, soundness or stability of any bank
subsidiary of the bank holding company.

*Securities Activities*.  The Federal Reserve Board has approved applications by bank holding companies to engage,
through nonbank subsidiaries, in certain securities-related activities (underwriting of municipal revenue bonds,
commercial paper, consumer receivable-related securities and one-to-four family mortgage-backed securities), provided
that the affiliates would not be  "principally engaged"  in such activities for purposes of Section 20 of the Glass-Steagall
Act. In limited situations, holding companies may be able to use such subsidiaries to underwrite and deal in corporate
debt and equity securities.

*Safe and Sound Banking Practices.*   Bank holding companies are not permitted to engage in unsafe and unsound
banking practices. The Federal Reserve Board's Regulation Y, for example, generally requires a holding company to
give the Federal Reserve Board prior notice of any redemption or repurchase of its own equity securities, if the
consideration to be paid, together with the consideration paid for any repurchases or redemptions in the preceding year,
is equal to 10% or more of the company's consolidated net worth. The Federal Reserve Board may oppose the

# 4

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The Federal Reserve Board has broad authority to prohibit activities of bank holding companies and their
nonbanking subsidiaries which represent unsafe and unsound banking practices or which constitute violations of laws
or regulations, and can assess civil money penalties for certain activities conducted on a knowing and reckless basis,
if those activities caused a substantial loss to a depository institution. The penalties can be as high as $1,000,000 for each
day the activity continues.

*Anti-tying Restrictions.*   With certain limited exceptions, bank holding companies and their affiliates are prohibited
from tying the provision of certain services, such as extensions of credit, to other services offered by a holding company
or its affiliates.

*Capital Adequacy Requirements.* The Federal Reserve Board has adopted a system using risk-based capital
guidelines to evaluate the capital adequacy of bank holding companies. Under the guidelines, specific categories of
assets are assigned different risk weights, based generally on the perceived credit risk of the asset. These risk weights
are multiplied by corresponding asset balances to determine a  "risk-weighted"  asset base. The guidelines require a
minimum total risk-based capital ratio of 8.0% (of which at least 4.0% is required to consist of Tier 1 capital elements).
Total capital is the sum of Tier 1 and Tier 2 capital. As of December 31, 1999, the Company's ratio of Tier 1 capital to
total risk-weighted assets was 14.38% and its ratio of total capital to total risk-weighted assets was 15.57%.  See Note
11 to the Consolidated Financial Statements.

In addition to the risk-based capital guidelines, the Federal Reserve Board uses a leverage ratio as an additional
tool to evaluate the capital adequacy of bank holding companies. The leverage ratio is a company's Tier 1 capital divided
by its average total consolidated assets (less goodwill and certain other intangible assets). Certain highly-rated bank
holding companies may maintain a minimum leverage ratio of 3.0%, but other bank holding companies may be required
to maintain a leverage ratio of up to 200 basis points above the regulatory minimum. As of December 31, 1999, the
Company's leverage ratio was 9.23%.

The federal banking agencies' risk-based and leverage ratios are minimum supervisory ratios generally applicable
to banking organizations that meet certain specified criteria, assuming that they have the highest regulatory rating.
Banking organizations not meeting these criteria are expected to operate with capital positions well above the minimum
ratios. The federal bank regulatory agencies may set capital requirements for a particular banking organization that are
higher than the minimum ratios when circumstances warrant. Federal Reserve Board guidelines also provide that
banking organizations experiencing internal growth or making acquisitions will be expected to maintain strong capital
positions substantially above the minimum supervisory levels, without significant reliance on intangible assets.

*Imposition of Liability for Undercapitalized Subsidiaries.*  Bank regulators are required to take  "prompt corrective
action"  to resolve problems associated with insured depository institutions whose capital declines below certain levels.
In the event an institution becomes  "undercapitalized,"  it must submit a capital restoration plan. The capital restoration
plan will not be accepted by the regulators unless each company having control of the undercapitalized institution
guarantees the subsidiary's compliance with the capital restoration plan up to a certain specified amount. Any such
guarantee from a depository institution's holding company is entitled to a priority of payment in bankruptcy.

The aggregate liability of the holding company of an undercapitalized bank is limited to the lesser of 5% of the
institution's assets at the time it became undercapitalized or the amount necessary to cause the institution to be
 "adequately capitalized."  The bank regulators have greater power in situations where an institution becomes
 "significantly"  or  "critically"  undercapitalized or fails to submit a capital restoration plan. For example, a bank holding
company controlling such an institution can be required to obtain prior Federal Reserve Board approval of proposed
dividends, or might be required to consent to a consolidation or to divest the troubled institution or other affiliates.

*Acquisitions by Bank Holding Companies.*  The BHCA requires every bank holding company to obtain the prior
approval of the Federal Reserve Board before it may acquire all or substantially all of the assets of any bank, or
ownership or control of any voting shares of any bank, if after such acquisition it would own or control, directly or
indirectly, more than 5% of the voting shares of such bank. In approving bank acquisitions by bank holding companies,
the Federal Reserve Board is required to consider the financial and managerial resources and future prospects of the
bank holding company and the banks concerned, the convenience and needs of the communities to be served, and
various competitive factors.

# 5

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*Control Acquisitions.*   The Change in Bank Control Act prohibits a person or group of persons from acquiring
 "control"  of a bank holding company unless the Federal Reserve Board has been notified and has not objected to the
transaction. Under a rebuttable presumption established by the Federal Reserve Board, the acquisition of 10% or more
of a class of voting stock of a bank holding company with a class of securities registered under Section 12 of the
Exchange Act, such as proposed by the Company, would, under the circumstances set forth in the presumption,
constitute acquisition of control of the Company.

In addition, any company is required to obtain the approval of the Federal Reserve Board under the BHCA before
acquiring 25% (5% in the case of an acquiror that is a bank holding company) or more of the outstanding Common
Stock of the Company, or otherwise obtaining control or a  "controlling influence"  over the Company.

**The Bank**.  The Bank is a Mississippi chartered banking corporation, the deposits of which are insured by the Bank
Insurance Fund ( "BIF ") and by the Savings Association Insurance Fund ( "SAIF ") of the FDIC. The SAIF insurance
funds resulted from the acquisition of thrift deposits in Purvis and Prentiss. The Bank is not a member of the Federal
Reserve System; the Bank is subject to supervision and regulation by the FDIC and the Mississippi Department of
Banking and Consumer Finance. Such supervision and regulation subjects the Bank to special restrictions, requirements,
potential enforcement actions and periodic examination by the FDIC and the Mississippi Department of Banking and
Consumer Finance. Because the Federal Reserve Board regulates the bank holding company parent of the Bank, the
Federal Reserve Board also has supervisory authority which directly affects the Bank.

*Equivalence to National Bank Powers.*  To the extent that the Mississippi laws and regulations may have allowed
state-chartered banks to engage in a broader range of activities than national banks, the Federal Deposit Insurance Act
has been amended to limit this authority. Under the Federal Deposit Insurance Act, no state bank or subsidiary thereof
may engage as principal in any activity not permitted for national banks, unless the institution complies with applicable
capital requirements and the FDIC determines that the activity poses no significant risk to the insurance fund. In general,
statutory restrictions on the activities of banks are aimed at protecting the safety and soundness of depository
institutions. However, the provisions of Miss. Code Ann.ss.81-5-1(10) provide state-chartered banks the right to engage
in activities approved for national banks by the Comptroller of the Currency to provide parity between state chartered
and nationally chartered banks.

*Branching.*   Mississippi law permits a Mississippi chartered bank, with prior regulatory approval, to establish a
branch office in any county in Mississippi. In addition, a Mississippi chartered bank is permitted to combine with any
other bank or thrift regardless of its location, provided the Mississippi institution has been in operation for at least five
years. The Mississippi banking statutes also permit a Mississippi bank, with prior regulatory approval, to engage in an
interstate merger transaction, and thereby establish a branch office outside of Mississippi. In any case, the transaction
must also be approved by the FDIC, which considers a number of factors, including financial history, capital adequacy,
earnings prospects, character of management, needs of the community and consistency with corporate powers.

*Restrictions on Transactions with Affiliates and Insiders.*   Transactions between the Bank and its nonbanking
affiliates, including the Company, are subject to Section 23A of the Federal Reserve Act. In general, Section 23A
imposes limits on the amount of such transactions, and also requires certain levels of collateral for loans to affiliated
parties. It also limits the amount of advances to third parties which are collateralized by the securities or obligations of
the Company or its subsidiaries.

Affiliate transactions are also subject to Section 23B of the Federal Reserve Act which generally requires that
certain transactions between the Bank and its affiliates be on terms substantially the same, or at least as favorable to the
Bank, as those prevailing at the time for comparable transactions with or involving other nonaffiliated persons.

The restrictions on loans to directors, executive officers, principal shareholders and their related interests
(collectively referred to herein as  "insiders ") contained in the Federal Reserve Act and Regulation O apply to all insured
institutions and their subsidiaries and holding companies. These restrictions include limits on loans to one borrower and
conditions that must be met before such a loan can be made. There is also an aggregate limitation on all loans to insiders
and their related interests. These loans cannot exceed the institution's total unimpaired capital and surplus, and the FDIC
may determine that a lesser amount is appropriate. Insiders are subject to enforcement actions for knowingly accepting
loans in violation of applicable restrictions.

*Restrictions on Distribution of Subsidiary Bank Dividends and Assets.*   Dividends paid by the Bank have provided
a substantial part of the Company's operating funds and for the foreseeable future it is anticipated that dividends paid
by the Bank to the Company will continue to be the Company's principal source of operating funds. Under Mississippi

# 6

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law, the payment of dividends by the Bank must be approved by
the Mississippi Department of Banking and Consumer Finance. Capital adequacy
requirements also serve to limit the amount of dividends that may be paid by the
Bank. Under federal law, the Bank cannot pay a dividend if, after paying the
dividend, the Bank will be undercapitalized. The FDIC may declare a
dividend payment to be unsafe and unsound even though the Bank would continue to
meet its capital requirements after the dividend.

Because the Company is a legal entity separate and distinct from its subsidiaries, its right to participate in the
distribution of assets of any subsidiary upon the subsidiary's liquidation or reorganization will be subject to the prior
claims of the subsidiary's creditors. In the event of a liquidation or other resolution of an insured depository institution,
the claims of depositors and other general or subordinated creditors are entitled to a priority of payment over the claims
of holders of any obligation of the institution to its shareholders, including any depository institution holding company
(such as the Company) or any shareholder or creditor thereof.

*Examinations.*   The FDIC periodically examines and evaluates insured banks. Based upon such an evaluation, the
FDIC may revalue the assets of the institution and require that it establish specific reserves to compensate for the
difference between the FDIC-determined value and the book value of such assets. The Mississippi Department of
Banking and Consumer Finance also conducts examinations of state banks but may accept the results of a federal
examination in lieu of conducting an independent examination.

*Audit Reports.*   Insured institutions with total assets of $500 million or more must submit annual audit reports
prepared by independent auditors to federal and state regulators. In some instances, the audit report of the institution's
holding company can be used to satisfy this requirement. Auditors must receive examination reports, supervisory
agreements and reports of enforcement actions. In addition, financial statements prepared in accordance with generally
accepted accounting principles, management's certifications concerning responsibility for the financial statements,
internal controls and compliance with legal requirements designated by the FDIC, and an attestation by the auditor
regarding the statements of management relating to the internal controls must be submitted. For institutions with total
assets of more than $3 billion, independent auditors may be required to review quarterly financial statements. The
Federal Deposit Insurance Act requires that independent audit committees be formed, consisting of outside directors
only. The committees of such institutions must include members with experience in banking or financial management,
must have access to outside counsel, and must not include representatives of large customers.

*Capital Adequacy Requirements.*   The FDIC has adopted regulations establishing minimum requirements for the
capital adequacy of insured institutions. The FDIC may establish higher minimum requirements if, for example, a bank
has previously received special attention or has a high susceptibility to interest rate risk.

The FDIC's risk-based capital guidelines generally require state banks to have a minimum ratio of Tier 1 capital
to total risk-weighted assets of 4% and a ratio of total capital to total risk-weighted assets of 8%. The capital categories
have the same definitions for the Bank as for the Company. As of December 31, 1999, the Bank's ratio of Tier 1 capital
to total risk-weighted assets was 13.14% and its ratio of total capital to total risk-weighted assets was 14.40%.

The FDIC's leverage guidelines require state banks to maintain Tier 1 capital of no less than 5% of average total
assets, except in the case of certain highly rated banks for which the requirement is 3% of average total assets. As of
December 31, 1999, the Bank's ratio of Tier 1 capital to average total assets (leverage ratio) was 8.42%.

*Corrective Measures for Capital Deficiencies.*   The federal banking regulators are required to take  "prompt
corrective action"  with respect to capital-deficient institutions. Agency regulations define, for each capital category, the
levels at which institutions are  "well capitalized,"   "adequately capitalized,"   "undercapitalized,"   "significantly
undercapitalized"  and  "critically undercapitalized."  A  "well capitalized"  bank has a total risk-based capital ratio of 10%
or higher; a Tier 1 risk-based capital ratio of 6% or higher; a leverage ratio of 5% or higher; and is not subject to any
written agreement, order or directive requiring it to maintain a specific capital level for any capital measure. An
 "adequately capitalized"  bank has a total risk-based capital ratio of 8% or higher; a Tier 1 risk-based capital ratio of 4%
or higher; a leverage ratio of 4% or higher (3% or higher if the bank was rated a CAMEL 1 in its most recent
examination report and is not experiencing significant growth); and does not meet the criteria for a well capitalized bank.
A bank is  "undercapitalized"  if it fails to meet any one of the ratios required to be adequately capitalized.

In addition to requiring undercapitalized institutions to submit a capital restoration plan, agency regulations contain
broad restrictions on certain activities of undercapitalized institutions including asset growth, acquisitions, branch
establishment, and expansion into new lines of business. With certain exceptions, an insured depository institution is

# 7

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prohibited from making capital distributions, including
dividends, and is prohibited from paying management fees to control persons if
the institution would be undercapitalized after any such distribution or
payment.

As an institution's capital decreases, the FDIC's enforcement powers become more severe. A significantly
undercapitalized institution is subject to mandated capital raising activities, restrictions on interest rates paid and
transactions with affiliates, removal of management, and other restrictions. The FDIC has only very limited discretion
in dealing with a critically undercapitalized institution and is virtually required to appoint a receiver or conservator.

Banks with risk-based capital and leverage ratios below the required minimums may also be subject to certain
administrative actions, including the termination of deposit insurance upon notice and hearing, or a temporary
suspension of insurance without a hearing in the event the institution has no tangible capital.

*Deposit Insurance Assessments.*   The Bank must pay assessments to the FDIC for federal deposit insurance
protection. The FDIC has adopted a risk based assessment system as required by amendments made to the Federal
Deposit Insurance Act. Under this system, FDIC-insured depository institutions pay insurance premiums at rates based
on their risk classification. Institutions assigned to higher-risk classifications (that is, institutions that pose a greater risk
of loss to their respective deposit insurance funds) pay assessments at higher rates than institutions that pose a lower
risk. An institution's risk classification is assigned based on its capital levels and the level of supervisory concern the
institution poses to the regulators. In addition, the FDIC can impose special assessments in certain instances.

After the one-time SAIF assessment in 1996, the assessment rate disparity between BIF and SAIF members was
eliminated. The current range of BIF and SAIF assessments is between 0% and .27% of deposits. Institutions which
qualify for the 0% assessment category, however, still have to pay the $1,000 minimum semi-annual assessment
required by federal statute.

The FDIC established a process for raising or lowering all rates for insured institutions semi-annually if conditions
warrant a change. Under this new system, the FDIC has the flexibility to adjust the assessment rate schedule twice a year
without seeking prior public comment, but only within a range of five cents per $100 above or below the premium
schedule adopted. Changes in the rate schedule outside the five cent range above or below the current schedule can be
made by the FDIC only after a full rulemaking with opportunity for public comment.

On September 30, 1996, a law was enacted that contained a comprehensive approach to recapitalizing the SAIF
and to assure the payment of the Financing Corporation's ( "FICO ") bond obligations that were issued by FICO to help
shore up the ailing Federal Savings and Loan Insurance Corporation in 1987. Under this new act, banks insured under
the BIF are required to pay a portion of the interest due on the FICO bonds. The BIF rate must equal one-fifth of the
SAIF rate through year-end 1999, or until the insurance funds are merged, whichever occurs first. Thereafter BIF and
SAIF payers will be assessed pro rata for the FICO bond obligations. With regard to the assessment for the FICO
obligation, the current BIF rate is 0.0212% of annual deposits and the SAIF rate is 0.0212% of annual deposits.

*Enforcement Powers.*   The FDIC and the other federal banking agencies have broad enforcement powers, including
the power to terminate deposit insurance, impose substantial fines and other civil and criminal penalties and appoint a
conservator or receiver. Failure to comply with applicable laws, regulations and supervisory agreements could subject
the Company or its banking subsidiaries, as well as officers, directors and other institution-affiliated parties of these
organizations, to administrative sanctions and potentially substantial civil money penalties. The appropriate federal
banking agency may appoint the FDIC as conservator or receiver for a banking institution (or the FDIC may appoint
itself, under certain circumstances) if any one or more of a number of circumstances exist, including, without limitation,
the fact that the banking institution is undercapitalized and has no reasonable prospect of becoming adequately
capitalized; fails to become adequately capitalized when required to do so; fails to submit a timely and acceptable capital
restoration plan; or materially fails to implement an accepted capital restoration plan.

*Brokered Deposit Restrictions.*  Well capitalized institutions may solicit and accept, renew or roll over brokered
deposits without restriction. Institutions which are adequately capitalized, but not well capitalized, cannot accept, renew
or roll over brokered deposits except with a waiver from the FDIC, and are subject to restrictions on the interest rates
that can be paid on such deposits. Undercapitalized institutions may not accept, renew, or roll over brokered deposits.

*Cross-guarantee Provisions.*   The Financial Institutions Reform, Recovery and Enforcement Act of 1989
( "FIRREA ") contains a  "cross-guarantee"  provision which generally makes commonly controlled insured depository
institutions liable to the FDIC for any losses incurred in connection with the failure of a commonly controlled depository
institution.

# 8

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*Community Reinvestment Act.*   The Community Reinvestment Act of 1977 ( "CRA ") and the regulations issued
thereunder are intended to encourage banks to help meet the credit needs of their service area, including low and
moderate income neighborhoods, consistent with the safe and sound operations of the banks. These regulations also
provide for regulatory assessment of a bank's record in meeting the needs of its service area when considering
applications to establish banking centers, merger applications and applications to acquire the assets and assume the
liabilities of another bank. FIRREA requires federal banking agencies to make public a rating of a bank's performance
under the CRA. In the case of a bank holding company, the CRA performance record of the banks involved in the
transaction are reviewed in connection with the filing of an application to acquire ownership or control of shares or
assets of a bank or to merge with any other bank holding company. An unsatisfactory record can substantially delay or
block the transaction.

*Consumer Laws and Regulations.*   In addition to the laws and regulations discussed herein, the Bank is also subject
to certain consumer laws and regulations that are designed to protect consumers in transactions with banks. While the
list set forth herein is not exhaustive, these laws and regulations include the Truth in Lending Act, the Truth in Savings
Act, the Electronic Funds Transfer Act, the Expedited Funds Availability Act, the Equal Credit Opportunity Act, the
Real Estate Settlement Procedures Act and the Fair Housing Act, among others. These laws and regulations mandate
certain disclosure requirements and regulate the manner in which financial institutions must deal with customers when
taking deposits or making loans to such customers. The Bank must comply with the applicable provisions of these
consumer protection laws and regulations as part of its ongoing customer relations.

## Recent Legislative Developments

On November 12,
1999, President Clinton signed into law the Gramm- Leach-Bliley Act of 1999 (the
Financial Services Modernization Act). The Financial Services
Modernization Act repeals the two affiliation provisions of the Glass-Steagall
Act: Section 20, which restricted the affiliation of Federal Reserve Member
Banks with firms engaged principally in specified securities
activities; and Section 32, which restricts officer, director, or employee
interlocks between a member bank and any company or person primarily
engaged in specified securities activities. In addition, the Financial
Services Modernization Act also contains provisions that expressly preempt any
state law restricting the establishment of financial affiliations, primarily
related to insurance. The general effect of the law is to establish a
comprehensive framework to permit affiliations among commercial banks, insurance
companies, securities firms, and other financial service providers by revising
and expanding the BHCA framework to permit a holding company system to engage in
a full range of financial activities through a new entity known as a Financial
Holding Company. Financial activities is broadly defined to include
not only banking, insurance, and securities activities, but also merchant
banking and additional activities that the Federal Reserve, in consultation with
the Secretary of the Treasury, determines to be financial in nature, incidental
to such financial activities, or complementary activities that do not pose a
substantial risk to the safety and soundness of depository institutions or the
financial system generally.

`Generally, the Financial Services Modernization Act:

         o        Repeals historical restrictions on, and eliminates many federal and state law barriers to,
                  affiliations among banks, securities firms, insurance companies, and other financial service
                  providers;

         o        Provides a uniform framework for the functional regulation of the activities of banks,
                  savings institutions, and their holding companies;

         o        Broadens the activities that may be conducted by national banks, banking subsidiaries of
                  bank holding companies, and their financial subsidiaries;

         o        Provides an enhanced framework for protecting the privacy of consumer information;

         o        Adopts a number of provisions related to the capitalization, membership, corporate
                  governance, and other measures designed to modernize the Federal Home Loan Bank
                  system;

         o        Modifies the laws governing the implementation of the Community Reinvestment Act
                  ("CRA"); and

         o        Addresses a variety of other legal and regulatory issues affecting both day-to-day operations
                  and long-term activities of financial institutions.`

# 9

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In order for the
Company to take advantage of the ability to affiliate with other financial
services providers, the Company must become a Financial Holding
Company as permitted under an amendment to the BHCA. To become a Financial
Holding Company, the Company would file a declaration with the Federal Reserve,
electing to engage in activities permissible for Financial Holding Companies and
certifying that it is eligible to do so because all of its insured depository
institution subsidiaries are well-capitalized and

well-managed. In addition, the Federal Reserve must also
determine that each insured depository institution subsidiary of the Company has
at least a satisfactory CRA rating. The Company currently meets the
requirements to make an election to become a Financial Holding Company.

The Financial
Services Modernization Act also permits national banks to engage in expanded
activities through the formation of financial subsidiaries. A national bank may
have a subsidiary engaged in any activity authorized for national banks directly
or any financial activity, except for insurance underwriting, insurance
investments, real estate investment or development, or merchant banking, which
may only be conducted through a subsidiary of a Financial Holding Company.
Financial activities include all activities permitted under new sections of the
BHCA or permitted by regulation.

A national bank
seeking to have a financial subsidiary, and each of its depository institution
affiliates, must be well-capitalized and well-managed.
The total assets of all financial subsidiaries may not exceed the lesser of 45%
of a banks total assets, or $50 billion. A national bank must exclude from
its assets and equity all equity investments, including retained earnings, in a
financial subsidiary. The assets of the subsidiary may not be consolidated with
the banks assets. The bank must also have policies and procedures to
assess financial subsidiary risk and protect the bank from such risks and
potential liabilities.

The Financial
Services Modernization Act also includes a new section of the Federal Deposit
Insurance Act governing subsidiaries of state banks that engage in
activities as principal that would only be permissible for a
national bank to conduct in a financial subsidiary. It expressly preserves the
ability of a state bank to retain all existing subsidiaries. Because Mississippi
permits commercial banks chartered by the state to engage in any activity
permissible for national banks, the state bank competitors of the Hattiesburg
Bank and the Laurel Bank will be permitted to form subsidiaries to engage in the
activities authorized by the Financial Services Modernization Act, to the same
extent as the Hattiesburg Bank and the Laurel Bank. In order to form a financial
subsidiary, a state bank must be well-capitalized, and the state bank would be
subject to the same capital deduction, risk management and affiliate transaction
rules as applicable to national banks.

# 10

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The
Companys management has not determined at this time whether it will seek
an election to become a Financial Holding Company or will seek to form a
financial subsidiary. The Company is examining its strategic business plan to
determine whether, based on market conditions, the relative financial conditions
of the Company and its subsidiaries, regulatory capital requirements, general
economic conditions, and other factors, the Company desires to utilize any of
its expanded powers provided in the Financial Services Modernization Act.

The Company and
the Banks do not believe that the Financial Services Modernization Act will have
a material adverse effect on operations in the near-term. However, to the extent
that it permits banks, securities firms, and insurance companies to affiliate,
the financial services industry may experience further consolidation. The
Financial Services Modernization Act is intended to grant to community banks
certain powers as a matter of right that larger institutions have accumulated on
an ad hoc basis. Nevertheless, this act may have the result of increasing the
amount of competition that the Company and the Banks face from larger
institutions and other types of companies offering financial products, many of
which may have substantially more financial resources than the Company and the
Banks.

`Name                  Age                           Positions with the Company

Robert W. Roseberry                      49   Chairman and Chief Executive Officer, Director
Jane P. Roberts                          63   Vice Chairman and Secretary, Director
Kenneth M. Lott                          45   President and Chief Operating Officer, Director
W. H. Macko                              49   Senior Vice President
Donna T. Rutland                         33   Chief Financial Officer and Treasurer
Sam B. Kendricks                         40   Chief Credit Officer`

*Robert W. Roseberry*   began his career with the Bank in 1971 and has served in numerous positions. In 1986, he
became Chief Executive Officer of the Bank and the Company. He has served as a director of the Bank since 1971 and
as a director of the Company since its formation in 1986. Robert W. Roseberry and Monty C. Roseberry are half-
brothers.

*Jane P. Roberts*   has worked with the Bank for 36 years. She assumed her current position of Vice Chairman in
1998. She has served as Secretary since 1986 and was the Secretary/Treasurer from 1986 to July of 1998. She has served
as a director of the Bank since 1981 and as a director of the Company since its formation in 1986. Ms. Roberts and
James R. Pylant are first cousins.

*Kenneth M. Lott*   began his banking career at First Mississippi National Bank in Hattiesburg in 1976. In 1988, he
joined the Bank as Senior Vice President. He assumed his present position of President and Chief Operating Officer of
the Company in July of 1998. He has served as a director of the Company since 1992.

*W. H. Macko*   has 23 years of banking experience, including loan collections, commercial and consumer lending,
branch administration and loan operations. He joined the Bank in 1989 as Vice President and Branch Manager and
assumed his present position of Senior Vice President of the Company in July of 1998.

*Donna T. Rutland, C.P.A.*,   worked as a staff accountant with the accounting firm of McArthur, Thames, Slay and
Dews, PLLC from 1988 to 1993. In 1993, she joined the Bank as Internal Auditor. In 1995, Ms. Rutland became Vice
President and Controller of the Bank. In July of 1998, she assumed her present position as Chief Financial Officer and
Treasurer of the Company.

# 11

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*Sam B. Kendricks*   has 20 years of banking experience, 15 of which was with the largest bank holding company
headquartered in Mississippi.  His experience has primarily been in commercial lending, but also includes management
of a community bank region.  Sam joined the Bank in December of 1999 as Chief Credit Officer.

`Quarterly Results of Operations (Unaudited)
                                                                                    Quarter

In thousands, except per share amounts             First                    Second                   Third                   Fourth
1999:                                              -----                    ------                   -----                   ------
Interest income                                $   6,994                 $   7,453               $   7,773                $   7,938
Interest expense                                   3,941                     4,113                   4,328                    4,427
                                               ---------                 ---------               ---------                ---------
Net interest income                                3,053                     3,340                   3,445                    3,511
Provision for loan losses                            172                       217                     415                      618
Other income                                         736                       943                     941                      901
Securities gains                                       2                         4                                                _
Other expenses                                     2,112                     2,650                   2,632                    2,394
                                               ---------                 ---------               ---------                ---------
Income before income taxes                         1,507                     1,420                   1,339                    1,400
Income taxes                                         399                       376                     355                      365
                                               ---------                 ---------               ---------                ---------
Net income                                    $    1,108                $    1,044                $    984                $   1,035
                                              ==========                ==========                ========                =========
Net income per common share:
     Basic and diluted                         $    0.26                  $   0.24                $   0.23                 $   0.24
                                              ==========                ==========                ========                =========
1998:
Interest income                                $   5,356                 $   5,955               $   6,252                $   6,353
Interest expense                                   3,023                     3,500                   3,690                    3,690                                         ---------                 ---------               ---------                ---------Net interest income                                2,333                     2,455                   2,562                    2,663
Provision for loan losses                            169                       190                     200                      226
Other income                                         726                       805                     784                      929
Securities gains                                     217                         4                       1                       92
Other expenses                                     1,869                     2,172                   2,140                    2,551
                                               ---------                 ---------               ---------                ---------
Income before income taxes                         1,238                       902                   1,007                      907
Income taxes                                         309                       226                     252                      218
                                               ---------                 ---------               ---------                ---------
Net income                                     $     929                $      676               $     755                 $    689
                                              ==========                ==========                ========                =========
Net income per common share:
     Basic and diluted                         $    0.34                $     0.25               $    0.27                 $   0.24
                                              ==========                ==========                ========                =========

ITEM 2.                 PROPERTIES

            The Company's executive offices and principal support and operational functions are located at 401 Shelby
Speights Drive, Purvis, Mississippi 39475. All of the offices of the subsidiaries of the Company are located in
Mississippi.`

# 12

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`Deposits
                                                                                                           --------
                                           Square         Owned (O)/            Loans as of                  as of
Bank Offices                               ------         ----------            -----------                  -----
------------                               Footage        Leased (L)         December 31, 1999          December 31, 1999
                                           -------        ----------         -----------------          -----------------
                                                                              (in thousands)             (in thousands)


Purvis
 Main Office
 401 Shelby Speights Drive, Purvis         19,600                 O            $72,355                     $87,521

#4 Highway 589, Purvis                     11,203                 O             10,670                      11,850

Sumrall
 1193 Highway 42 East, Sumrall              5,000                 O             26,259                      41,653


Hattiesburg
 6052 Highway 98 West, Hattiesburg*        16,308                 O             50,531                      84,730

Turtle Creek Mall Branch Office
 1000 Turtle Creek Drive, Space 125,
Hattiesburg                                   667                 L              __                          4,882

2007 Lincoln Rd, Hattiesburg                  900                 L              8,434                       1,131


3301 Hardy Street, Hattiesburg              5,000                 O              __                            __


Petal
 535 Highway 42, Petal                     16,810                 O             46,367                      36,272

Prentiss
 965 South Columbia Avenue, Prentiss        4,822                 O             14,921                      40,425

*Includes Mortgage & Investment Center located
at 6042 Highway 98 West, Hattiesburg

                                           Square              Owned (O)/       Loans as of
                                           ------              ----------       -----------
Offices of SFSI                            Footage             Leased (L)    December 31, 1999
---------------                            -------             ----------    -----------------
                                                                               (in thousands)
Hattiesburg
 1715 Hardy St, Suite 10, Hattiesburg       1,500                 L            $    683

Petal
 300 New Richton Road, Petal                1,440                 L                 479

Prentiss
 1705 Columbia Avenue, Prentiss             1,440                 O                 527

Purvis
 70 Shelby Speights Drive, Purvis           2,160                 O               1,800

Monticello
863 Highway 84 West, Monticello             1,100                 O                 835

Poplarville
 1235 South Main Street, Poplarville        1,500                 O                 803

Gulfport
 1010 Pass Road, Gulfport                   1,100                 L                 739`

# 13

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`Square       Owned (O)/
                                                                    ------       ----------
The Mortgage Shop, Inc.                                            Footage       Leased (L)
-----------------------                                            -------       ----------
Hattiesburg
1715 Hardy St, Suite 10, Hattiesburg                                 950             L`

The agreements for the leased facilities have unexpired terms ranging from April 2000 to the year 2003,
including renewal options. In June of 1998, the Bank aquired property in
Hattiesburg, Mississippi on Hardy Street, a major thoroughfare, near the main campus of the University of Southern
Mississippi.  This property was used to open a new branch . This branch was opened in March 2000.  The Bank also aquired property on Lincoln Road in
Hattiesburg, near the Cloverleaf area in August of 1999.  A modular branch is currently in operation with plans for a
permanent facility to begin construction in approximately 2 years.

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 in is 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 operations, 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.

There were no matters submitted to the Company's shareholders during the fourth quarter of 1999.

# PART II

## Price Range of Common Stock

The Company's common stock is traded on The Nasdaq National Market under the symbol "LCCO."  The
following table presents the high and low sales prices of the Company's common stock for the periods indicated
during 1999, as reported by The Nasdaq National Market.  The Company completed its initial public offering in the
fourth quarter of 1998 at a price of $10.00 per share.

`Sales Price Per Share
                                                              ---------------------
                                                --------------------------------------------------
                                                 High                                         Low
                                                 ----                                        ----
1999
First Quarter                                   10 1/4                                       8 1/4
Second Quarter                                  10 1/8                                       9
Third Quarter                                   12 3/4                                       9 1/2`

# 14

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`Fourth Quarter                                  11 3/4                                      10 1/4

1998
First Quarter                               Not traded
Second Quarter                              Not traded
Third Quarter                               Not traded
Fourth Quarter                                      10                                       9 3/4

***

Dividends

       The Company's dividend policy is for holders of Common Stock to be entitled to receive dividends when, as
and if declared by the Company's Board of Directors out of funds legally available therefore.  During 1999 and
1998, the Company declared and paid cash dividends per share on its Common Stock as follows:

       For Three Month Period Ended(1)               Date Paid                              Dividends Per Share
       -------------------------------               ---------                              -------------------
       December 31, 1999                          January 14, 2000                                $.0500
       September 30, 1999                         October 15, 1999                                $.0500
       June 30, 1999                              July 15, 1999                                   $.0400
       March 31, 1999                             April 15, 1999                                  $.0400
       December 31, 1998                          January 15, 1999                                $.0300
       September 30, 1998                         October 9, 1998                                 $.0300

       For Six Month Period Ended
       --------------------------
       June 30, 1998                              July 1, 1998                                    $.0567

       (1) The Company began the regular payment of quarterly cash dividends on the Common Stock in the third
quarter of 1998.`

While historically the Company has paid regular cash dividends, there is no assurance that the Company will
pay dividends on the Common Stock in the future.  The declaration and payment of dividends on the Common
Stock will depend upon the earnings and financial condition of the Company, its liquidity and capital requirements,
the general economic and regulatory climate, the Company's ability to service any equity or debt obligations senior
to the Common Stock and other factors deemed relevant by the Company's Board of Directors.  It is the policy of
the Federal Reserve Board that bank holding companies should pay cash dividends on Common Stock only out of
income available over the past year and only if prospective earnings retention is consistent with the organization's
expected future needs and financial condition.  The policy provides that bank holding companies should not
maintain a level of cash dividends that undermines the bank holding company's ability to serve as a source of
strength to its banking subsidiaries.

The Company's principal source of funds to pay dividends will be cash dividends that the Company receives
from the Bank.  The payment of dividends by the Bank to the Company is subject to certain restrictions imposed by
federal and state banking laws, regulations and authorities.  Dividends by the Bank must be approved by the
Mississippi Department of Banking and Consumer Finance.

The federal banking statutes prohibit federally insured banks from making any capital distributions (including a
dividend payment) if, after making the distribution, the institution would be "undercapitalized" as defined by statute.
In addition, the relevant federal regulatory agencies also have authority to prohibit an insured bank from engaging
in an unsafe or unsound practice, as determined by the agency, in conducting an activity.  The payment of dividends
could be deemed to constitute such an unsafe or unsound practice, depending on the financial condition of the Bank.
Regulatory authorities could impose stricter limitations on the ability of the Bank to pay dividends to the Company
if such limits were deemed appropriate to preserve certain capital adequacy requirements.

## Holders of Record

# 15

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`ITEM 6.   SELECTED FINANCIAL DATA
                                                                      As of and for the Years Ended December 31,
                                                                      ------------------------------------------

                                                             1999           1998           1997           1996           1995
                                                             ----           ----           ----           ----           ----
                                                                          (in thousands, except per share data)


Income Statement Data:

Interest income                                             $30,158       $23,916        $19,442        $16,190        $13,903

Interest expense                                             16,809        13,903         10,536          8,429          7,100
Net interest income                                          13,349        10,013          8,906          7,761          6,803
Provision for loan losses                                     1,422           785            725            557            517
Non-interest income                                           3,527         3,558          2,689          2,325          1,751
Non-interest expense                                          9,788         8,732          7,677          6,890          6,146

Income before taxes                                           5,666         4,054          3,193          2,639          1,891

Net income                                                    4,171         3,049          2,339          2,028          1,474

Balance Sheet Data:

Total assets                                               $412,750      $330,516       $247,022       $207,330       $169,636


Total securities                                            126,059        90,828         58,921         41,562         33,037
Total loans, net                                            231,133       197,096        159,552        140,318        119,556
Allowance for loan losses                                     4,270         3,564          3,101          2,837          2,529
Total deposits                                              308,464       278,272        211,498        185,404        156,631


Other borrowed funds                                         70,000        19,120         17,620          7,000         --


Total stockholders' equity                                   31,902        31,331         16,160         13,473         11,765


Per Share Data:

Net income per share-basic and diluted                    $     .97    $     1.09     $     0.87     $     0.75     $     0.54
Book value                                                     7.39          7.58           5.88           4.97           4.34
Cash dividends per share                                     0.1800        0.1167         0.1002         0.0923         0.0923

Performance Ratios:

Return on average assets                                       1.07%         1.03%          1.02%          1.06%          0.90%
Return on average equity                                      12.51         17.65          15.69           15.88         13.56
Net interest margin                                            3.69          3.65           4.20            4.41          4.50
Efficiency ratio                                                 58            65             66              68            72

Asset Quality Ratios:

Allowance for loan losses to nonperforming loans                216%          323%           777%           360%           295%
Allowance for loan losses to total loans                       1.81          1.74           1.87           1.93           2.01
Nonperforming assets to total loans                            1.06          0.90           0.49           1.06           0.93
Net loan charge-offs to average loans                          0.32          0.18           0.30           0.19           0.38

Capital Ratios:

Leverage ratio                                                 9.23%         9.55%          6.87%          7.11%          7.19%
Average stockholders' equity to average total assets           8.56          5.82           6.49           6.69           6.63
Tier 1 risk-based capital ratio                               14.38         14.65           9.84           9.67          10.21
Total risk-based capital ratio                                15.57         15.90          11.09          10.92          11.47
Dividend payout ratio                                            16             5             12             12             17`

# 14

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# Overview

Since 1997, the Company's net income, earning assets and deposits have increased substantially. Net income
grew 36.8% from $3.0 million in 1998 to $4.2 million in 1999. Net income increased 30.4% from $2.3 million in
1997 to $3.0 million in 1998. Total loans rose 44.9% from $159.6 million at December 31, 1997, to $231.1 million
at December 31, 1999. Total securities increased 113.9% from $58.9 million at December 31, 1997, to $126.1
million at December 31, 1999. Total deposits increased 45.8% from $211.4 million at December 31, 1997, to
$308.5 million at December 31, 1999.

The growth in net income has been caused primarily by higher income resulting from increased volume in
earning assets. Loans have increased because of greater market penetration and strong loan demand in the
Company's market area due to economic growth. Securities have risen because of additional funds available for
investment resulting from increased deposits and other borrowed funds. Deposits increased because of the
Company's strategies to attract new deposits and the continued strong economic growth in the region. The net
interest margin has declined from 4.20% for 1997 to 3.69% for 1999 as a result of decreases in yields on interest-
earning assets that have not been offset by similar decreases in cost of interest-bearing liabilities.

# For the Years Ended December 31, 1999, 1998 and 1997

# Net Interest Income

The principal source of the Company's revenue is net interest income. Net interest income is the difference between
interest income on interest-earning assets, principally loans and investment securities, and the interest expense on
interest-bearing deposits and borrowings used to fund those assets. Net interest income is affected by both changes in
the amount and composition of interest-earning assets and interest-bearing liabilities and the level of interest rates. The
change in net interest income is typically measured by net interest spread and net interest margin. Net interest spread
is the difference between the average yield on interest-earning assets and the average cost of interest-bearing liabilities.
Net interest margin is determined by dividing net interest income by average interest-earning assets.

Net interest income increased 33.3% in 1999 compared with 1998, following a 12.4% increase in 1998 compared
with 1997. The increase in 1999 and 1998 is attributable to an increase in the Company's average interest-earning assets
of 31.9% and 29.3%, respectively, principally in the loan and investment securities portfolios.

During 1999, average interest-bearing liabilities increased $69.7 million to $321.3 million, an increase of 27.7%
over 1998. This was primarily from increases in other borrowed funds, time deposits and transaction accounts. In 1998,
average interest-bearing liabilities increased 30.1% to $251.6 million. This increase of $58.2 million was primarily in
time deposits and transaction accounts.

The Company's net interest margin was 3.69% in 1999, 3.65% in 1998, and 4.20% in 1997.  The increase in net
interest margin in 1999 from 1998 resulted from a decrease in yield on interest-earning assets of .40% while the
Company's cost of interest-bearing liabilities decreased .30%.  The net reduction in net interest margin in 1998 compared
with 1997 resulted from a decrease in yield on interest-earning assets of .45% and an increase in cost of interest-bearing
liabilities of .08%.

The net interest margin may be negatively affected by the interest rate environment and changes in the earning asset
mix and deposit funding mix.  Increased rates may have a negative impact on the Company's borrowing and deposit
funding costs.

# 16

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`Table 1-Average Balance Sheets and Rates for December 31, 1999, 1998 and 1997


                                                   1999                            1998                          1997
                                       ----------------------------   ---------------------------   ----------------------------
                                       Average              Average   Average             Average   Average              Average
                                       -------              -------   -------             -------   -------              -------
                                       Balance   Interest    Rate     Balance  Interest    Rate     Balance   Interest    Rate
                                       -------   --------    ----     -------  --------    ----     -------   --------    ----
                                                                            (in thousands)

ASSETS
Earning assets:
U.S. Treasury securities and
      Obligations of U.S. agencies      $39,755  $ 2,590    6.51%     $32,753  $ 2,171    6.63%  $ 22,110   $  1,493      6.75%
Obligations of state and political
      Subdivisions (1)                   39,029    2,852     7.31      32,903    2,433    7.39      24,139      1,844     7.64
Mortgage-backed securities               49,556    3,204     6.47      14,868      794    5.34       5,985        399     6.66
Federal Home Loan Bank stock              3,152      181     5.74         822       50    6.08         818         52     6.36
Federal funds sold                        8,478      422     4.98      10,721      589    5.49       5,478        297     5.42
Total loan and fees                     222,148   21,879     9.85     182,395   18,706   10.26     153,656     15,984    10.40
                                        -------  -------              -------  -------             -------    -------
Total earning assets (1)                362,118   31,128     8.60     274,462   24,743    9.02     212,186     20,069     9.46
Less: Allowance for loan losses          (3,805)                       (3,416)                      (3,020)

Nonearning assets
Cash and due from banks                  14,686                        11,598                        7,915
Premises and equipment, net               9,566                         8,004                        6,476
Other assets                              7,079                         6,298                        6,043
                                        -------                       -------                      -------
Total assets                           $389,644                     $ 296,946                    $ 229,600
                                       ========                      ========                     ========
LIABILITIES AND
   STOCKHOLDERS' EQUITY
Interest-bearing liabilities:
Transaction accounts                   $ 85,955    4,185     4.87   $  74,973    3,581    4.78   $  53,344      2,387     4.47
Savings accounts                          9,909      262     2.64       9,214      243    2.64       8,881        243     2.74
Time deposits                           165,251    9,297     5.63     149,435    8,861    5.93     120,269      7,169     5.96
Other borrowed funds                     60,153    3,065     5.10      17,985    1,218    6.77      10,866        737     6.78
                                        -------  -------              -------   ------             -------    -------
Total interest-bearing liabilities      321,268   16,809     5.23     251,607   13,903    5.53     193,360     10,536     5.45
                                                 -------    -----               ------    ----                -------    -----
Noninterest-bearing liabilities:
Noninterest-bearing deposits             33,660                        25,938                       19,524
Other liabilities                         1,378                         2,127                        1,813
Stockholders' equity                     33,338                        17,274                       14,903
                                        -------                       -------                      -------
Total liabilities and
stockholders' equity                   $389,644                     $ 296,946                    $ 229,600
                                       ========                      ========                     ========
Net interest income (1)                          $14,319                      $ 10,840                        $ 9,533
                                                 =======                      ========                        =======
Net interest spread (1)                                      3.37%                         3.49%                          4.01%
                                                           ======                         =====                          =====
Net interest margin (1)                                      3.95%                         3.95%                          4.49%
                                                           ======                         =====                          =====

Note:   Calculations include non-accruing loans in the average loan amounts outstanding.

(1)         The interest earned on non-taxable securities is reflected on a tax equivalent basis assuming a federal
income tax rate of 34% for all years presented.

       Table 2 presents the extent to which changes in interest rates and changes in the volume of interest-earning
assets and interest-bearing liabilities affected the Company's interest income and interest expense during the years`

# 17

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`Table 2-Volume/Rate Variance Analysis


                                                          Year Ended December 31,                Year Ended December 31,
                                                          -----------------------                -----------------------
                                                                   1999                                   1998
                                                                   ----                                   ----
                                                              Compared with                           Compared with
                                                              -------------                           -------------
                                                          Year Ended December 31,                Year Ended December 31,
                                                          -----------------------                -----------------------
                                                                   1998                                   1997
                                                                   ----                                   ----
                                                           INCREASE/(DECREASE)                     INCREASE/(DECREASE)
                                                           -------------------                     -------------------
                                                                 due to                                  due to
                                                                 ------                                  ------
                                                          Total Net                             Total Net
                                                          ---------                             ---------
                                                           Change        Volume      Rate       Change        Volume      Rate
                                                           ------        ------      ----       ------        ------      ----
                                                                                      (in thousands)

Interest income(1):
U.S. Treasury securities and obligations of U. S.
               Agencies                               $    419       $    456                $   678       $   705      $ (27)
                                                                                 $  (37)
Obligations of state and political subdivisions            419            448       (29)         589           648        (59)
Mortgage-backed securities                               2,410          2,244       166          395           474        (79)
Federal Home Loan Bank stock                               131            134        (3)          (2)          ---         (2)
Federal funds sold                                        (167)          (112)      (55)         292           288          4
Total loans and fees                                     3,173          3,915      (742)       2,722         2,947       (225)
                                                        ------         ------     ------      ------        ------      -----
Total increase (decrease) in interest income             6,385          7,085      (700)       4,674         5,062       (388)

Interest expense:
Interest-bearing liabilities:
Transaction accounts                                       604            535        69        1,194         1,033        161
Saving accounts                                             19             19        ---         ---             8         (8)
Time deposits                                              436            889      (453)       1,692         1,729        (37)
Other borrowed funds                                     1,847          2,149      (302)         481           482         (1)
                                                        ------         ------     ------      ------        ------      -----
Total increase (decrease) in interest expense            2,906          3,592      (686)       3,367         3,252        115
                                                        ------         ------     ------      ------        ------      -----
Increase (decrease) in net interest income            $  3,479        $ 3,493     $ (14)    $  1,307      $  1,810      $(503)
                                                      ========        =======     ======    ========      ========      =====


       (1)             Interest income for loans on non-accrual status has been excluded from interest income.


Noninterest Income

       Table 3 illustrates the Company's primary sources of noninterest income. Noninterest income decreased 0.9% to
$3.5 million in 1999 from $3.6 million in 1998. This decrease was principally due to a decline in mortgage loan fees
and other operating income.  The noninterest income for 1998 increased $869,000 or 32.3% from $2.7 million in 1997.


Table 3-Analysis of Noninterest Income

                                                                                                      Percent
                                                                                                      -------
                                                                                                      Increase
                                                                                                      --------
                                                                Year Ended December 31,               (Decrease)
                                                                -----------------------               ----------
                                                          1999        1998           1997         1999/98      1998/97
                                                          ----        ----           ----         -------      -------
                                                                       (in thousands)


Service charges on deposit accounts                      $2,116     $1,777         $1,670          19.1%         6.4%
Mortgage loan fees                                          544        639            362         (14.9)        76.5
Commissions on credit life insurance                        369        439            391         (15.9)        12.3
Other operating income                                      498        703            266         (29.2)       164.3
                                                          -----      -----          -----
Total                                                    $3,527     $3,558         $2,689          (0.9)        32.3
                                                         ======     ======         ======         ======       ======`

Service charges
on deposit accounts increased in 1999 compared with 1998 and in 1998 compared
with 1997 from an increase in the number of transaction accounts and in the fee
structure.

Mortgage loan
fees declined in 1999 compared with 1998. The increase in mortgage loan rates
during 1999 resulted in fewer secondary market residential loan originations and
a decrease in mortgage loan fees. Mortgage loan fees in 1998 were positively
influenced by a decline in mortgage loan rates.

Decreases in
commissions on credit life insurance in 1999 compared with 1998 were due to a
slight decrease in the insurance commission structure. Increases in 1998
compared with 1997 were due to increased loan originations.

Other operating
income declined from 1998 to 1999 as a result of $314 of trading account gains
and gains on sales of securities available for sale realized in 1998 as compared
to $6 in 1999.

## Noninterest Expense

As shown in
Table 4, total noninterest expense increased by 12.1% to $9.8 million in 1999,
compared with $8.7 million in 1998. The noninterest expense in 1998 increased
$1.1 million or 13.7% from $7.7 million in 1997.

Noninterest
expense levels are often measured using an efficiency ratio (noninterest expense
divided by the sum of net interest income and noninterest income). The
efficiency ratio measures the level of expense required to generate one dollar
of revenue. Improvement in the ratio is measured by a reduction in the
percentage reported. The Companys efficiency ratios for 1999, 1998 and
1997 were 58.0%, 64.3% and 66.2%, respectively.

# 18

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`Table 4-Analysis of Noninterest Expense


                                                                                                Percent
                                                                                                -------
                                                                                               Increase
                                                                                               --------
                                                       Year Ended December 31,                 (Decrease)
                                                      ------------------------                 ----------
                                                1999           1998           1997        1999/98       1998/97
                                                ----           ----           ----        -------       -------
                                                          (in thousands)


Salaries and employee benefits                 $5,342         $4,906         $4,173          8.9%       17.6%
Occupancy expense                                 720            653            610         10.3         7.0
Furniture and equipment expense                 1,159          1,007            878         15.1        14.7
Other operating expenses                        2,567          2,166          2,016         18.5         7.4
                                               ------         ------         ------
Total                                          $9,788         $8,732         $7,677         12.1        13.7
                                               ======         ======         ======         ====        ====`

Salary and employee benefits expense increased $436,000, or 8.9%, in 1999 compared with 1998. The increase
was related primarily to staffing requirements at the new Lincoln Road and Hardy Street banking branches.  Salary
and employee benefit expense increased $733,000, or 17.6%, in 1998 compared with 1997. The increase reflected
the cost of additional staffing at the Petal banking branch, SFSI Petal office, MSI and the brokerage services
department.  In addition, these increases also reflected annual cost of living and merit increases for all employees.

Occupancy expenses rose $67,000 or 10.3% in 1999 compared with 1998 and $43,000, or 7.0%, in 1998
compared with 1997. These increases were primarily due to additional depreciation and building maintenance
expenses attributable to the two new banking branches in Hattiesburg.

Furniture and equipment expense increased $152,000, or 15.1%, for 1999 from $1.0 million in 1998. The
increase was primarily due to depreciation and equipment maintenance expenses related to additional furniture and
equipment for the two new banking branches in Hattiesburg.

## Income Tax Expense

The Company's effective income tax rates were 26.7% in 1997, 24.8% in 1998 and 26.4% in 1999. The fluctuations
in the effective income tax rate from 1997 through 1999 are primarily attributable to the change in non-taxable income
as a percentage of pretax income.

## Loan Portfolio

The Company continued to experience loan growth throughout its markets in 1999 and 1998. Total loans increased
16.1% to $237.5 million at December 31, 1999, compared with $204.5 million at December 31, 1998. The increase in
loans in 1998 was $38.4 million, or 23.1%, compared with 1997.

The Company's real estate loan portfolio increased 14.6% to $118.4 million at December 31, 1999, from $103.3
million at December 31, 1998. In 1997, the real estate portfolio increased $14.7 million, or 16.6%, from December 31,
1997. The increased real estate loan demand was principally for residential mortgages in the Bank's market areas.
Residential loans increased $11.4 million from December 31, 1998, to December 31, 1999, and $5.9 million from
December 31, 1997, to December 31, 1998.  As a result of this increased loan demand, the Company hired additional
lending personnel and placed emphasis on acquiring the deposit relationships from these loan customers.

The Company's commercial loans increased by 25.5% to $49.6 million at December 31, 1999, from $39.5 million
at December 31, 1998. The increase in commercial loans was $13.9 million, or 54.5%, at December 31, 1998, compared

# 19

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The Company's consumer loans increased to $69.5 million, including $5.9 million from SFSI, at December 31,
1999, from $61.7 million, including $5.7 million from SFSI at December 31, 1998. The increase in consumer loans was
$9.7 million, or 18.7%, from 1997 to 1998. These increases are attributable to increased customer demands and the
Company's marketing efforts to increase the number of consumer loan customers. Substantially all of the consumer loan
portfolio consists of secured loans, the majority of which are collateralized by automobiles and personal property.

`Table 5-Loans by Type


                                                                                  December 31,
                                                   ----------------------------------------------------------------------
                                                       1999            1998           1997           1996          1995
                                                   -----------     -----------    -----------    -----------   ----------
                                                                                 (in thousands)

Real estate:
            Residential                              $ 72,695       $ 61,280       $ 55,406       $ 48,062       $ 41,151
            Mortgage loans held for sale                  426          1,053            421            361          1,245
            Construction                               10,743          9,095          4,226          4,680          4,479
            Commercial                                 34,559         31,915         28,591         26,125         24,946
Consumer                                               69,542         61,686         51,965         45,555         36,678
Commercial                                             49,554         39,493         25,556         21,992         17,082
                                                     --------       --------       --------       --------       --------
Total loans                                          $237,519       $204,522       $166,165       $146,775       $125,581
                                                     ========       ========       ========       ========       ========

    The table below illustrates the Company's fixed rate maturities and repricing frequency for the loan portfolio:

Table 6-Selected Loan Distribution


                                                                      December 31, 1999
                                             ------------------------------------------------------------------

                                                                                   Over One
                                                                                   --------
                                                              One Year             Through           Over Five
                                                              --------             -------           ---------
                                                Total         or Less            Five Years            Years
                                              --------        -------            ----------            -----
                                                                       (in thousands)
Fixed rate maturities                         $221,164       $102,726              $111,184           $ 7,254
Variable rate repricing frequency               16,355          9,204                 5,474             1,677
                                               -------        -------               -------            ------
Total                                         $237,519       $111,930              $116,658           $ 8,931
                                              ========       ========              ========           =======`

At December 31, 1999, 93.1% of the Company's loans had fixed rate maturities. Of the fixed rate portfolio, 46.4%
of those loans have maturities of one year or less when originated or renewed. Such maturities allow the Company to
reprice its portfolio frequently.

## 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. Loans are assigned a rating based on credit quality as determined by the borrower's payment history, the
financial strength of the borrower or guarantor as measured by the balance sheet, earnings and cash flow quality,
collateral values, and the liquidity and quality of the collateral and assets of the borrower. Loans with a deterioration
of credit quality are placed on the watch list. The provision for loan losses pertaining to the rated loans is determined
by the amount of loans on the watch list and an allocation for loans that are not on the watch list based on the Company's

# 20

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historical charge-off percentage. In addition, management
considers the potential adverse impact of the economic trends in the
Companys trade area on certain borrowers that are in cyclical businesses
and the loan growth resulting from new loan customers. Management believes that
the allowance for loan losses at December 31, 1999, was adequate. Although
management believes it uses the best information available to make allowance
provisions, future adjustments which could be material may be necessary if
managements assumptions differ from the loan portfolios actual
future performance.

The allowance for loan losses increased $706,000 to $4.3 million from December 31, 1998, to December 31, 1999.
The increase was primarily attributable to an increase in the volume of loans. The Company's allowance for loan losses
to total loan ratio decreased from 1.87% at December 31, 1997, to 1.74% at December 31, 1998, and increased to 1.81%
at December 31, 1999.

Net charge-offs were $716,000 during 1999 compared with $322,000 and $461,000 for 1998 and 1997,
respectively. Of these net charge-offs for the same years, $324,000, $182,000 and $151,000, respectively, pertained to
SFSI. The Company's consumer loan portfolio accounted for the majority of net loan charge-offs for the years ended
December 31, 1999, 1998 and 1997, respectively.

`Table 7-Summary of Loan Loss Experience


                                                                              As of and for the Year Ended December 31,
                                                                       -------------------------------------------------------
                                                                       1999         1998         1997         1996        1995
                                                                    ----------   ---------    ---------    ---------   ---------
                                                                                            (in thousands)

Allowance for loan losses at beginning of year                       $ 3,564      $ 3,101      $ 2,837       $ 2,529     $ 2,427
Charge-offs:
                  Real estate                                            (72)          --         ----           (50)        (28)
                  Consumer                                              (841)        (475)        (400)         (270)       (516)
                  Commercial                                            (145)         (51)        (238)         (168)        (88)
                                                                     --------     --------     --------      --------    --------
                                          Total                       (1,058)        (526)        (638)         (488)       (632)
Recoveries:
                  Real estate                                           ----           24           10           ---           4
                  Consumer                                               323          142          127           229         167
                  Commercial                                              19           38           40            10          46
                                                                     --------     --------     --------      --------    --------
                                          Total                          342          204          177           239         217
                                                                     --------     --------     --------      --------    --------
Net loan charge-offs                                                    (716)        (322)        (461)         (249)       (415)
Provision for loan losses                                              1,422          785          725           557         517
                                                                     --------     --------     --------      --------    --------
Allowance for loan losses at end of year                             $ 4,270     $  3,564      $ 3,101       $ 2,837     $ 2,529
                                                                     =======     ========      =======       =======      =======
Ratios:
            Allowance for loan losses to total loans                    1.81%        1.74%        1.87%         1.93%       2.01%
            Net loan charge-offs to average loans outstanding for the
                     year                                               0.32         0.18         0.30          0.19        0.38
            Allowance for loan losses to non-performing loans            216          323          777           360         295`

The following table is management's allocation of the allowance for loan losses by loan type. Allowance
allocation is based on management's assessment of economic conditions, past loss experience, loan volume, loan
quality, past due history and other factors. Since these factors are subject to change, the allocation is not
necessarily predictive of future portfolio performance.

# 21

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`December 31,
                                                                    ------------
                        1999                   1998                    1997                    1996                    1995
               ---------------------   ---------------------  ---------------------- -----------------------   --------------------
                           Percent                  Percent                 Percent                 Percent                Percent
                           -------                  -------                 -------                 -------                -------
                           of Loans                 of Loans                of Loans                of Loans               of Loans
                           --------                 --------                --------                --------               --------
               Allocated   to Total     Allocated   to Total    Allocated   to Total    Allocated   to Total   Allocated   to Total
               ---------   --------     ---------   --------    ---------   --------    ---------   --------   ---------   --------
               Allowance     Loans      Allowance    Loans      Allowance     Loans     Allowance    Loans     Allowance    Loans
               ---------     -----      ---------    -----      ---------     -----     ---------    -----     ---------    -----
                                                                   (in thousands)

Real Estate     $   1,058      49.8%    $   997       50.5%    $   936      53.3%     $    881      54.0%       $   817      57.2%
Consumer            1,980      29.3       1,577       30.2       1,355      31.3         1,293      31.0          1,268      29.2
Commercial            975      20.9         705       19.3         546      15.4           357      15.0            160      13.6
Unallocated           257       ---         285         --         264        --           306        --            284        --
                 --------     ------    -------      ------    -------     ------     --------     ------       -------     ------
Total           $   4,270     100.0%    $ 3,564      100.0%    $ 3,101     100.0%     $  2,837     100.0%       $ 2,529     100.0%
                =========     ======    =======      ======    =======     ======     ========     ======       =======     ======`

# 21

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## Asset Quality

Loans (including any impaired loans under SFAS 114 and 118) are placed on non-accrual status when they
become past due 90 days or more as to principal or interest, unless they are adequately secured and in the process
of collection. When loans are placed on non-accrual status, all unpaid accrued interest is reversed. These loans
remain on non-accrual status until the borrower demonstrates the ability to remain current or the loan is deemed
uncollectible and is charged off. SFSI consumer loans are charged off when they reach 120 days past due.

Table 9 provides information related to non-performing assets and loans 90 days or more past due. Accruing
loans contractually 90 days or more past due increased from $172,000 at December 31, 1998, to $450,000 at
December 31, 1999. Should the underlying collateral be determined to be insufficient to satisfy the obligation, the
loan is classified and the Company's allowance is increased accordingly. Historically, the Company's security in
residential loans has been adequate and has acted to limit the Company's exposure to loss. Loans on non-accrual
status increased from $931,000 to $1.5 million from December 31, 1998, to December 31, 1999.

`Table 9-Non-Performing Assets


                                                                                    December 31,
                                                             ----------------------------------------------------------
                                                               1999       1998          1997         1996        1995
                                                             --------   --------     --------      -------     --------                                                                                  (in thousands)
                                                                                   (in thousands)

Loans on non-accrual status(1)(2)                             $1,525     $ 931        $  147        $  400       $  645
Loans past due 90 days or more                                   450       172           252           387          211
                                                              ------     -----        ------        ------       ------
Total non-performing loans                                     1,975     1,103           399           787          856
Other real estate owned                                          541       742           411           767          309
                                                              ------     -----        ------        ------       ------
Total non-performing assets                                   $2,516    $1,845        $  810        $1,554       $1,165
                                                              ======    ======        ======        ======       ======
Percentage of non-performing loans to total loans               0.83%     0.54%         0.24%         0.54%        0.68%
Percentage of non-performing assets to total loans              1.06      0.90          0.49          1.06         0.93


(1)         There were no impaired loans for the years indicated.
(2)         The interest income that would have been earned and received on non-accrual loans was not material.`

## Investment Securities

The investment
securities portfolio consists of U.S. Treasury securities, obligations of U.S.
government agencies, obligations of states and political subdivisions and
mortgage-backed securities (MBS). MBS consist of 15-year and 30-year fixed and
7-year balloon mortgage securities, underwritten and guaranteed by FNMA, FHLMC
and GNMA, government-sponsored agencies.

Securities,
including those classified as held to maturity and available for sale, increased
from $58.9 million at December 31, 1997, to $90.8 million at December 31, 1998,
to $126.1 million at December 31, 1999.

# 22

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`Table 10-Securities Available For Sale


                                                                                            December 31, 1999
                                                                                            -----------------
                                                                                           Estimated      Average        Weighted
                                                                                           ---------      -------        --------
                                                                             Carrying         Fair        Maturity       Average
                                                                             --------         ----        --------       -------
                                                                              Value          Value        in Years        Yield
                                                                              -----          -----        --------        -----
                                                                                             (in thousands)

U. S. Treasury securities and obligations of U.S. government agencies:
                        Over one through five years                           $ 2,362        $ 2,362         3.9           5.27%
                        Over five through ten years                            15,390         15,390         8.2           6.55
                        Over ten years                                         14,364         14,364        13.7           6.95
                                                                               ------         ------
                                                Total                          32,116         32,116                       6.64
Obligations of states and political subdivision:
                        Within one year                                           915            915         0.7           6.74(1)
                        Over one through five years                             3,138          3,138         3.2           7.50(1)
                        Over five through ten years                             4,059          4,059         6.4           7.76(1)
                        Over ten years                                          1,619          1,619        11.3           8.20(1)
                                                                               ------         ------
                                                Total                           9,731          9,731                       7.65(1)
Mortgage-backed securities                                                     46,608         46,608                       6.46
Equity securities                                                               3,393          3,393
                                                                                -----          -----
Total securities available for sale                                           $91,848        $91,848
                                                                              =======        =======

Table 11--Securities Held to Maturity


                                                                                           December 31, 1999
                                                                                           -----------------
                                                                                          Estimated        Average      Weighted
                                                                                          ---------        -------       --------
                                                                              Carrying      Fair          Maturity       Average
                                                                              --------      ----          --------       -------
                                                                               Value        Value         in Years        Yield
                                                                               -----        -----         --------        -----
                                                                                             (in thousands)

U. S. Treasury securities and obligations of U.S. government agencies:
                        Over one through five years                           $ 4,047        $ 4,011         1.3           5.65%
Obligations of states and political subdivisions:
                        Within one year                                         1,344          1,345         0.4           6.85(1)
                        Over one through five years                             6,875          6,814         2.8           7.06(1)
                        Over five through ten years                             9,393          9,050         7.6           7.29(1)
                        Over ten years                                         11,659         10,739        12.1           7.23(1)
                                                                               ------         ------
                                                Total                          29,271         27,948                       7.20(1)
Mortgage-backed securities                                                        893            902                       7.57
                                                                                 ----           ----
Total securities held to maturity                                             $34,211        $32,861
                                                                              =======        =======

       (1)             The weighted average yield on non-taxable securities is reflected on a tax equivalent basis assuming a federal
       income tax rate of 34% for all periods presented.`

# 23

---

`Table 11A-Analysis of Securities


                                                                                                  December 31,
                                                                                                  ------------
                                                                                       1999           1998          1997
                                                                                     --------       --------      --------
                                                                                                 (in thousands)

U.S. Treasury securities and obligations of U.S. government agencies                  $32,116        $28,094    $  23,696
Obligations of states and political subdivision                                         9,731         10,485        9,758
Mortgage-backed securities                                                             46,608         19,235        3,356
Equity securities                                                                       3,393              -            -
                                                                                       ------        -------       ------
Total securities available for sale                                                   $91,848        $57,814      $36,810
                                                                                      =======        =======      =======

                                                                                                  December 31,
                                                                                                  ------------
                                                                                       1999           1998          1997
                                                                                     --------       --------      --------
                                                                                                 (in thousands)

U.S. Treasury securities and obligations of U.S. government agencies                  $ 4,047       $  4,076     $  4,911
Obligations of states and political subdivision                                        29,271         27,520       14,913
Mortgage-backed securities                                                                893          1,418        2,287
                                                                                       ------        -------       ------
Total securities held to maturity                                                     $34,211        $33,014      $22,111
                                                                                      =======        =======      =======


Deposits

       Total deposits increased from $278.3 million at December 31, 1998, to $308.5 million at December 31, 1999.
Of that increase, time deposits increased by $18.9 million from 1998 to 1999. Management continues to seek retail
and commercial deposits through its marketing initiatives for transaction and savings accounts and competitive rates
for time deposits. As of December 31, 1999, public funds deposits totaled $41.3 million or 13.4% of total deposits.
These deposits are considered to be a stable source of funds and are targeted in the Company's deposit marketing
initiatives.

Table 12-Deposits


                                                                                  December 31,
                                                                                 --------------
                                                                              1999           1998
                                                                           -----------    -----------
                                                                                   (in thousands)

Demand (NOW, SuperNOW and money market)                                    $ 84,875       $  81,516
Savings                                                                       9,448           9,437
Individual retirement accounts                                               16,279          14,127
Time deposits, $100,000 and over                                             65,389          45,040
Other time deposits                                                          98,836         100,311
                                                                            -------        --------
Total interest-bearing deposits                                             274,827         250,431
Total noninterest-bearing deposits                                           33,637          27,841
                                                                            -------        --------
Total                                                                      $308,464        $278,272
                                                                           ========        ========
Table 13--Maturity of Time Deposits $100,000 and over


                                                                                      As of
                                                                                      -----
                                                                                 December 31, 1999
                                                                               ---------------------
                                                                                  (in thousands)
Three months or less                                                               $  14,805
Over three months through six months                                                   9,748
Over six months through twelve months                                                 18,081
Over twelve months                                                                    22,775
                                                                                      ------
Total                                                                              $  65,389
                                                                                   =========`

## Other Borrowed Funds

Other borrowed funds increased from $17.6 million at December 31, 1997, to $19.1 million at December 31,
1998, to $70.0 million at December 31, 1999. In 1999, the Company borrowed $40.0 million from the FHLB to
purchase debt securities resulting in a favorable interest rate spread. An additional $20 million was borrowed from
the FHLB to fund the Bank's loan growth and liquidity needs.  The $5.0 million revolving line of credit ($4.1
million outstanding at December 31, 1998) with Bank of America matured in 1999.  SFSI's
funding has been provided by the Bank since the maturity of the line of credit. Additional borrowings by the bank
above current levels will be evaluated by management, with consideration given to the growth of the Bank's loan
portfolio, liquidity needs, cost of retail deposits, market conditions, and other factors.

## 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. 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 under the Bank's  federal funds lines and 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.

Net cash provided by operating activities and deposits from customers have historically been primary sources
of liquidity for the Company. Net cash provided by operating activities totaled $6.8 million, $6.8 million and $3.6
million in 1999, 1998 and 1997, respectively. The net cash provided by increases in deposits was $30.2 million,
$66.8 million and $26.1 million in 1999, 1998 and 1997, respectively. Net cash used in investing activities has been
primarily for funding the net increase in loans of $36.2 million, $38.1 million and $19.9 million in 1999, 1998 and
1997, respectively, and in securities of $42.6 million, $35.2 million and $16.9 million in 1999, 1998 and 1997,
respectively. The Company also had net bank borrowings of $55.0 million in 1999, $1.4 million in 1998 and $6.6
million in 1997.

## Capital

Regulatory agencies measure capital adequacy within a framework that makes capital requirements, in part,
dependent on the individual risk profiles of financial institutions. The Company raised $12.2 million in 1998 and
$1.7 million in 1999 in connection with its initial public offering.  The Company's capital to average assets ratio
was 8.30% at December 31, 1999 compared with 10.55% at December 31, 1998. At December 31, 1999, the
Company exceeded the Federal Reserve Board's regulatory definition of a "well capitalized" institution. See Note
11 to the Consolidated Financial Statements.

# 25

---

## Asset/Liability Management and 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 the 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.

In August of 1996 and January of 1997, the Company purchased interest rate "floors" for three years in
notional amounts of $10 million each, which effectively converted less than 1% of the Company's loans at
December 31, 1999, to a minimum fixed rate basis. A premium of $258,500 was paid for the floors and amortized
over the terms of each.  The index used is the three-month LIBOR rate with a 6% floor rate. The three-month
LIBOR rate was 6.00% at December 31, 1999. Through December 31 1999, the Bank has amortized $256,487 of
the premium and received $286,020, which has been recognized as adjustments to net interest income.

`The following table illustrates the Company's estimated annualized earnings sensitivity profile as of December
31, 1999:`

# 26

---

`Table 14-Interest Rate Sensitivity


                                          Decrease                                 Increase
                                          --------                                 --------
                                         in Rates--                               in Rates--
                                         ----------                               ----------
                                      200 Basis Points          BASE           200 Basis Points
                                      ----------------          ----           ----------------
                                                           (in thousands)

Projected interest income:
Loans                                      $22,690           $24,512                $26,333
Investment securities                        9,017             9,603                  9,834
Federal funds sold                             405               360                    474
                                            ------            ------                 ------
Total interest income                       32,112            34,475                 36,641

Projected interest expense:
Deposits                                    13,765            15,523                 17,329
Other borrowed funds                         4,198             4,209                  4,261
                                            ------            ------                 ------
Total interest expense                      17,963            19,732                 21,590
                                            ------            ------                 ------
Net interest income                        $14,149           $14,743                $15,051
                                           =======           =======                =======
Change from base                           $  (594)                                 $   308
% Change from base                           (4.03) %                                  2.09  %`

Given an immediate, sustained 200-basis point increase to the yield curve used in the simulation model, it
is estimated net interest income would increase 2.09%.  A 200-basis point immediate, sustained decrease to the
yield curve would decrease net interest income by an estimated 4.03%.  These potential changes in net interest
income are within the policy guidelines established by the Company's Board of Directors.

These interest
rate sensitivity profiles of the Company at any point in time will be affected
by a number of factors. These factors include the mix of interest sensitive
assets and liabilities and may not be a precise measurement of the effect of
changing interest rates on the Company in the future.

In prior years, the Company discussed the nature and progress of its plans to become Year 2000 ready.  In
1999, the Company completed its remediation and testing of systems.  As a result of those planning and
implementation efforts, the Company experienced no significant disruptions in mission critical information
technology and non-information technology systems and believes those systems successfully responded to the Year
2000 date change.  The total project cost was approximately $120,000 for the purchase of new software and
hardware and the modification of existing software and hardware with $50,000 of the total capitalized and the
remaining $70,000 expensed during 1999.  The Company is not aware of any material
problems resulting from Year 2000 issues, either with its products, its internal systems, or the products and services
of third parties.  The Company will continue to monitor its mission critical computer applications and those of its
suppliers and vendors throughout the year 2000 to ensure that any latent Year 2000 matters that may arise are
addressed promptly.

In response to this Item, the information set forth in Item 7 under the caption Asset/Liability Management and
Market Risk and in Table 14 on pages 28 and 29 is incorporated herein by reference.

# 27

---

`ITEM 8.                 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA


                                                      INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


Report of Independent Auditors                                                                                 32

Consolidated Balance Sheets as of December 31, 1999 and 1998                                                   33

Consolidated Statements of Income and Comprehensive Income for the years ended December 31, 1999, 1998
and 1997                                                                                                       35

Consolidated Statements of Changes in Stockholders' Equity for the years ended December 31, 1999, 1998 and
1997                                                                                                           37

Consolidated Statements of Cash Flows for the years ended December 31, 1999, 1998 and 1997                     38

Notes to Consolidated Financial Statements                                                                     40`

# 28

# REPORT OF INDEPENDENT AUDITORS

The Board of Directors and
Stockholders
LamarCapital Corporation

We have audited the accompanying consolidated balance sheets of Lamar Capital Corporation and subsidiaries
as of December 31, 1999 and 1998, and the related consolidated statements of income and comprehensive income,
stockholders' equity, and cash flows for each of the three years in the period ended December 31, 1999.  These
financial statements are the responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States.  Those
standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the
consolidated financial position of Lamar Capital Corporation and subsidiaries at December 31, 1999 and 1998, and
the results of their operations and their cash flows for each of the three years in the period ended December 31,
1999 in conformity with accounting principles generally accepted in the United States.

`/s/Ernst & Young LLP`

# 29

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`LAMAR CAPITAL CORPORATION AND SUBSIDIARIES

                                                             CONSOLIDATED BALANCE SHEETS
                                                  (in thousands, except share and per share amounts)




                                                                                                 December 31,
                                                                                                 ------------
                                                                                               1999           1998
                                                                                            ----------     ----------


                                                  ASSETS
Cash and due from banks                                                                    $   14,195     $  15,038
Federal funds sold                                                                             17,680        11,400
                                                                                             --------      --------
Cash and cash equivalents                                                                      31,875        26,438
Securities available for sale (amortized cost--$98,438 in 1999 and
            $57,159 in 1998)                                                                   91,848        57,814
Securities held to maturity (fair value--$32,861 in 1999 and
            $33,512 in 1998)                                                                   34,211        33,014
Loans (less allowance for loan losses of $4,270 in 1999 and
            $3,564 in 1998)                                                                   231,133       197,096
Accrued interest receivable                                                                     3,901         3,256
Premises and equipment, net                                                                    10,450         9,111
Other real estate                                                                                 541           742
Federal Home Loan Bank stock                                                                    3,596           788
Cash surrender value of life insurance                                                          1,362         1,298
Deferred income taxes                                                                           3,666           760
Other assets                                                                                      167           199
                                                                                             --------      --------
                        Total assets                                                        $ 412,750      $330,516
                                                                                            =========      ========
                                   LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Deposits:
Non-interest bearing                                                                        $  33,637     $  27,841
Interest bearing                                                                              274,827       250,431
                                                                                             --------      --------
                        Total deposits                                                        308,464       278,272
Interest payable                                                                                  947           615
Dividends payable                                                                                 216           124
Other liabilities                                                                               1,221         1,054
Other borrowed funds                                                                           70,000        19,120
                                                                                             --------      --------
                        Total liabilities                                                     380,848       299,185
                                                                                             ========      ========
Stockholders' equity
Common Stock, $.50 par value, 50,000,000 shares authorized;
       4,315,707 shares issued and outstanding at December 31, 1999,
       4,130,707 shares issued and outstanding at December 31, 1998                             2,158          2,065
Paid-in capital                                                                                17,513         15,885
Retained earnings                                                                              16,364         12,970
Accumulated other comprehensive income (loss)                                                  (4,133)           411
                                                                                              --------      --------
                        Total stockholders' equity                                             31,902         31,331
                                                                                              --------      --------
                        Total liabilities and stockholders' equity                           $412,750       $330,516
                                                                                             ========       ========
See accompanying notes.`

# 30

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`LAMAR CAPITAL CORPORATION AND SUBSIDIARIES

                                              CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
                                                       (in thousands, except per share amounts)

                                                                                               Year ended December 31,
                                                                                       ------------------------------------
                                                                                         1999           1998         1997
                                                                                       --------       --------     --------


Interest income
Loans, including fees                                                                   $21,879       $18,706       $15,984
Federal funds sold                                                                          422           589           297
Interest on securities:
Taxable                                                                                   6,107         3,039         1,956
Non-taxable                                                                               1,750         1,582         1,205
                                                                                         ------        ------        ------
                                                                                          7,857         4,621         3,161
                                                                                         ------        ------        ------
                        Total interest income                                            30,158        23,916        19,442
Interest expense
Deposits                                                                                 13,744        12,685         9,799
Other borrowed funds                                                                      3,065         1,218           737
                                                                                         ------        ------        ------
                        Total interest expense                                           16,809        13,903        10,536
                                                                                         ------        ------        ------
Net interest income                                                                      13,349        10,013         8,906
Provision for loan losses                                                                 1,422           785           725
                                                                                         ------        ------        ------
Net interest income after provision for loan losses                                      11,927         9,228         8,181
Other income
Service charges on deposit accounts                                                       2,116         1,777         1,670
Mortgage loan fees                                                                          544           639           362
Commissions on credit life insurance                                                        369           439           391
Gain (loss) on sale of securities available for sale                                          6           191           (13)
Trading account gains                                                                       ---           123            --
Other operating income                                                                      492           389           279
                                                                                         ------        ------        ------
                        Total other income                                                3,527         3,558         2,689
Other expense
Salaries and employee benefits                                                            5,342         4,906         4,173
Occupancy expense                                                                           720           653           610
Furniture and equipment expense                                                           1,159         1,007           878
Other operating expense                                                                   2,567         2,166         2,016
                                                                                         ------       -------        ------
                        Total other expense                                               9,788         8,732         7,677
                                                                                         ------       -------        ------
Income before income taxes                                                                5,666         4,054         3,193
Income tax expense                                                                        1,495         1,005           854
                                                                                         ------        ------        ------
Net income                                                                                4,171         3,049         2,339
Other comprehensive income (loss), net of income taxes
Change in unrealized gain (loss) on securities available for
            sale                                                                         (4,544)          132           377
Reclassification of realized amount                                                          (4)         (120)            8
                                                                                         ------        ------        ------
Net unrealized gain (loss) recognized in comprehensive
            income (loss)                                                                (4,548)           12           385
                                                                                         ------        ------        ------
                        Comprehensive income (loss)                                    $   (377)     $  3,061      $  2,724
                                                                                       =========     ========      ========
Earnings per share--basic and diluted                                                  $    .97      $   1.09      $    .87
                                                                                       =========      ========     ========
Weighted average shares outstanding - basic and diluted                                   4,310         2,793         2,687
                                                                                       =========      ========     ========

See accompanying notes.`

# 31

---

`LAMAR CAPITAL CORPORATION AND SUBSIDIARIES

                                              CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                                                (in thousands, except for share and per share amounts)





                                                                                Accumulated
                                                                                -----------
                                                                                   Other                                Total
                                                                                   -----                                -----
                                     Common Stock       Paid-in     Retained  Comprehensive     Treasury Stock       Stockholders'
                                     ------------       -------     --------  -------------     --------------       ------------
                                    Shares    Amount    Capital     Earnings  Income (Loss)     Shares   Amount        Equity
                                    ------    ------    -------     --------  -------------     ------   ------        ------
Balance at January 1, 1997        46,569.44  $ 466     $ 5,227    $   8,219      $   (98)      1,417.44  $ (341)       $ 13,473
Net income for 1997                                                   2,339                                               2,339
Dividend ($.10 per share)                                              (275)                                               (275)
Purchase of treasury stock                                                                     1,374.00    (436)           (436)
Sale of treasury stock                                     147                                (2,028.00)    535             682
Change in unrealized gain (loss), net
    of income taxes, on securities
    available for sale
                                                                                     377                                    377
                                 ----------  -----     -------    ---------      -------    -----------    -----         ------
Balance at December 31, 1997      46,569.44    466       5,374       10,283          279         763.44    (242)         16,160
Net income for 1998                                                   3,049                                               3,049
Stock Split (60-for-1)         2,747,596.96    931        (931)                               56,842.96                     ---
Dividend ($.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 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                                             (4,544)                                (4,544)

    of income taxes, on securities
    available for sale           ----------  -----     -------    ---------      -------    -----------    -----        ------
Balance at December 31, 1999      4,315,707 $2,158    $ 17,513    $  16,364      $(4,133)             -   $    -     $  31,902
                                 ========== ======    ========    ==========     =======    ===========   ======     =========`

# 32

---

`CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)



                                                                                         Year ended December 31,
                                                                                         -----------------------
                                                                                     1999         1998           1997
                                                                                   -------       ------         ------


Operating Activities
            Net income                                                           $   4,171     $   3,049     $   2,339
            Adjustments to reconcile net income to net cash
                     Provided by operating activities:
                        Provision for loan losses                                    1,422           785           725
                        Provision for losses on other real estate                       16            11            44
                        Deferred income tax benefit                                   (204)         (149)          (89)
                        Depreciation and amortization expense                          955           836           726
                        Amortization of securities premiums                            203           254           167
                        Accretion of securities discounts                              (48)          (34)          (69)
                        Increase in cash surrender value of life
                                 Insurance                                             (64)          (65)          (64)
                            Federal Home Loan Bank dividend                           (173)          (48)          (49)
                        (Gain) loss on sales of securities available
                                  for sale                                              (6)         (191)           13
                        Trading account gains                                            -          (123)            -
                        Proceeds from sales of trading securities                        -         3,619             -
                        (Gain) loss on sales of other real estate                        6            (7)          (12)
                        Mortgage loan originations                                 (17,142)      (20,730)      (13,568)
                        Proceeds from sales of mortgage loans                       17,769        20,099        13,508
                           Gain on sale of premises and equipment                      (10)            -             -
                        Increase in interest receivable                               (645)         (865)         (401)
                        Increase (decrease) in interest payable                        332          (197)          120
                        Decrease in other assets                                        32           288            79
                        Increase in other liabilities                                  167           272           146
                                                                                    ------        ------        ------
                           Net cash provided by operating activities                 6,781         6,804         3,615
Investing activities
            Securities held to maturity:
                        Proceeds from calls, maturities, and
                                 principal reductions                                1,963         4,672         2,821
                        Purchases of securities                                     (2,465)      (18,480)       (2,115)
            Securities available for sale:
                        Proceeds from calls, maturities, and
                                 principal reductions                                4,274        14,725         3,554
                        Proceeds from sales of securities                           10,498         9,966        19,618
                        Purchases of securities                                    (56,896)      (46,105)      (40,746)
            (Purchases) sales of Federal Home Loan Bank stock                       (2,635)          223          (375)
            Net increase in loans                                                  (36,220)      (38,058)      (19,899)
            Proceeds from sales of other real estate                                   313            25           324
              Proceeds from sales of premises and equipment                             53             -             -`

# 33

---

`Purchases of premises and equipment                                   (2,337)       (3,309)            (1,146)
                                                                                    -------       -------            -------


            Net cash used in investing activities                                  (83,452)      (76,341)    (37,964)
Financing activities
            Net increase in deposits                                                30,192        66,774      26,094
            Net increase (decrease) in revolving line of credit                     (4,120)          100       4,020
            Borrowings from banks                                                   70,000         5,000      10,000
            Payments on notes payable to banks                                     (15,000)       (3,600)     (3,400)
            Proceeds from sales of Common Stock                                      1,721        12,199           -
            Purchases of treasury stock                                                  -           (72)       (436)
            Proceeds from sales of treasury stock                                        -           225         682
            Dividends paid                                                            (685)         (388)       (250)
                                                                                    ------        ------      ------
            Net cash provided by financing activities                               82,108        80,238      36,710
                                                                                    ------        ------      ------
            Net increase in cash and cash equivalents                                5,437        10,701       2,361
            Cash and cash equivalents at beginning of year                          26,438        15,737      13,376
                                                                                    ------        ------      ------
            Cash and cash equivalents at end of year                             $  31,875      $ 26,438    $ 15,737
                                                                                  ========      ========    ========`

# 34

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# LAMAR CAPITAL CORPORATION AND SUBSIDIARIES

                                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                  (in thousands, except share and per share amounts)

                                                     Years ended December 31, 1999, 1998 and 1997

## 1. Summary of Significant Accounting Policies

The consolidated financial statements include the accounts of Lamar Capital Corporation (the "Company")
and its wholly-owned subsidiaries, The Mortgage Shop, Inc. ("MSI"), Lamar Bank (the "Bank") and Southern
Financial Services, Inc. ("SFSI"). All significant intercompany balances and transactions have been eliminated in
consolidation.

The Company is a one-bank holding company headquartered in Purvis, Mississippi. The Company operates
eight full service banking locations in retail banking predominantly in Lamar and Forrest counties in southeastern
Mississippi. SFSI operates a finance company in seven locations in southeastern Mississippi to provide consumer
loans to customers who may not be eligible to obtain financing from the Bank. The Company's consolidated results
of operations are dependent upon net interest income, which is the difference between the interest income on
interest-earning assets and the interest expense on interest-bearing liabilities. Principal interest-earning assets are
securities, real estate and consumer and commercial loans. Interest-bearing liabilities consist of interest-bearing
deposit accounts and other borrowed funds.

Other sources of income include fees charged to customers for a variety of banking services such as deposit
account fees and commissions on credit life insurance. The Company also generates fees in its mortgage banking
activities from the origination and sale of loans and servicing rights of 15-year and 30-year fixed rate loans in the
secondary market.

The Company's operating expenses consist primarily of salaries and employee benefits, occupancy, furniture
and equipment expenses, communications costs and other general and administrative operating expenses. The
Company's results of operations are significantly affected by general economic and competitive conditions,
particularly changes in market interest rates, government policies and actions of regulatory agencies.

The preparation of financial statements in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.

# 35

---

Cash and cash equivalents are stated at cost. Federal funds sold have maturities generally of one day. The Bank
is required to maintain average balances with the Federal Reserve Bank. The required reserve balance at December
31, 1999, was $1,204.  Cash paid for interest during the years ended December 31, 1999, 1998 and 1997, was
$16,477, $14,100 and $10,416, respectively.

Securities available for sale are carried at estimated fair value in accordance with Statement of Financial
Accounting Standards (SFAS) No. 115 "Accounting for Certain Investment in Debt and Equity Securities." The
amortized cost of securities classified as available for sale is adjusted for amortization of premiums and accretion
of discounts to maturity. Unrealized gains or losses on these securities are included in stockholders' equity net of
income taxes. Securities which the Bank has the ability and the intent to hold until maturity are stated at cost,
adjusted for amortization of premiums and accretion of discounts. The adjusted cost of the specific securities sold
is used to compute gains or losses on the sale of securities. Premiums and discounts are recognized in interest
income using the interest method over the period to maturity.  Trading account securities consist of securities held
for resale in anticipation of short-term market movements and are carried at estimated fair value.  Trading account
gains include the effects of adjustments to fair values.  The adjusted cost of the specific securities sold is used to
compute gains or losses on the sale of securities.

The Company originates first mortgage loans (traditional 15-year and 30-year fixed and variable rate loans)
for sale, with the servicing rights, in the secondary market. The Company limits its interest rate risk on such loans
originated by selling individual loans immediately after the customers lock into their rate. Origination fees and any
gains or losses on the sale of the mortgage loans and servicing rights, which are not material to the consolidated
operations for the years presented, are included in mortgage loan fees. Mortgage loans originated and intended for
sale in the secondary market are carried at the lower of aggregate cost or market value, based on the subsequent
sales prices of such loans.

The Company accounts for the mortgage loan sales in accordance with SFAS No. 125, "Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of Liabilities," which requires an entity to
recognize the financial and servicing assets it controls and the liabilities it has incurred and to cease to recognize
them as financial assets when control has been surrendered in accordance with the criteria provided in SFAS No.
125.

Loans, other than mortgage loans held for sale, are stated at the principal amounts outstanding, less unearned
income and the reserve for possible loan losses. Interest on loans and accretion of unearned income are computed

# 36

---

by methods which approximate a level rate of return on recorded
principal. Loan origination fees and certain direct loan origination costs are
deferred and recognized over the average lives of the loans as an adjustment to
yield.

Commercial and real estate loans are placed on non-accrual status when they become past due 90 days or more
as to principal or interest unless they are adequately secured and in the process of collection. All commercial and
real estate nonaccrual loans are considered to be impaired in accordance with SFAS No. 114, "Accounting by
Creditors for Impairment of a Loan." Consumer loans generally are not placed on nonaccrual status but are
reviewed periodically and charged off when deemed uncollectible or any payment of principal or interest is more
than 120 days delinquent. Interest payments received on nonaccrual loans are applied to principal if in
management's opinion there is doubt as to the collectibility of the principal; otherwise, these receipts are recorded
as interest income. A loan remains on nonaccrual status until it is current as to principal and interest and the
borrower demonstrates the ability to fulfill the contractual obligation.

The allowance for loan losses is maintained at a level considered adequate by management and approved by
the Board of Directors to provide for potential loan losses. Management's determination of the adequacy is based
on an evaluation of the portfolio, past loan loss experience, growth and composition of the loan portfolio, economic
conditions and other relevant factors; actual losses may vary from the current estimate. The allowance is increased
by provisions for loan losses charged against income. Actual loan losses are deducted from and subsequent
recoveries are added to the allowance.

Premises and equipment are stated at cost less accumulated depreciation. Depreciation is computed by the
modified accelerated cost recovery method for financial reporting purposes based upon the estimated useful lives
of the assets. Expenditures for major renewals and betterments are capitalized, and those for maintenance and
repairs are charged to expense when incurred.

Other real estate is stated at the lower of fair value, based on current market appraisals, or the recorded
investment in the related loan.

The Company accounts for impairment losses on long-lived assets used in operations when indicators of
impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the
assets' carrying amount in accordance with SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets
and Assets to be Disposed Of."  The Company also accounts for long-lived assets that are expected to be disposed
of in accordance with SFAS No. 121.

# 37

---

The Company and its subsidiaries file a consolidated federal and state income tax return. The Company
accounts for income taxes using the liability method. Temporary differences occur between the financial reporting
and tax bases of assets and liabilities. Deferred tax assets and liabilities are recorded for these differences based on
enacted tax rates and laws that will be in effect when the differences are expected to reverse.

SFAS No. 130 requires the presentation of comprehensive income and establishes standards for reporting its
components (revenue, expenses, gains and losses) in a full set of general purpose financial statements.

Effective October 1, 1998, the Company adopted the provisions of SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities."  SFAS No. 133 requires the Company to recognize all derivatives on the
balance sheet at fair value.  Derivatives that are not hedges must be adjusted to fair value through income.  If the
derivative is a hedge, depending on the nature of the hedge, changes in the fair value of derivatives are either offset
against the change in fair value of assets, liabilities, or firm commitments through income or recognized in other
comprehensive income until the hedged item is recognized in income.  The ineffective portion of a derivative's
change in fair value will be immediately recognized in income.  The fair value of the derivatives held at October
1, 1998, was not material to the Company's consolidated financial position.

SFAS No. 133 also allowed, upon adoption, the reclassification of held-to-maturity securities to the available-
for-sale or trading portfolios without tainting the remaining securities in the held-to-maturity portfolio.  The
Company reclassified $3,497 of held-to-maturity securities to trading account securities as of October 1, 1998.  The
unrealized gain of the transferred securities was not material to the Company's consolidated financial position or
operations, thus the adoption of SFAS No. 133 did not result in a cumulative effect adjustment.

Effective May 13, 1998, the Board of Directors adopted and the shareholders approved an amendment to the
Company's Articles of Incorporation to increase the authorized shares to 2,000,000 shares of Common Stock with
a par value of $.50 per share and completed a 20-for-1 stock split of its Common Stock. On August 3, 1998, the
Board of Directors approved a 3-for-1 stock split of its Common Stock and an amendment to the Company's
Articles of Incorporation to increase the authorized shares to 50,000,000 shares of Common Stock with a par value
of $.50 per share. The shareholders approved the amendment to increase the authorized shares on August 25, 1998.
Consolidated net income per basic and diluted common share and dividends per share has been restated in the accompanying consolidated statements of income and changes in stockholders' equity to reflect the stock
splits described above.

# 38

---

## 2. Initial Public Offering

In December 1998, the Company sold 1,363,636 shares of its Common Stock at $10 per share in an
underwritten initial public offering (the "Offering").  Net proceeds from the Offering were $12,199.  In January
1999 the underwriters exercised their overallotment option, and the Company sold 185,000 shares at $10 per share.
Net proceeds from the sale of these shares were $1,721.

## 3. Securities

`The aggregate carrying amounts and estimated fair value of securities were as follows:

                                                                                              December 31, 1999
                                                                                -----------------------------------------------
                                                                                          Gross          Gross       Estimated
                                                                                          -----          -----        ---------
                                                                          Amortized     Unrealized     Unrealized      Fair
                                                                          ---------     ----------     ----------       ----
                                                                            Cost          Gains         Losses        Value
                                                                            ----          -----         ------         -----


Securities available for sale
   U.S. Treasury securities and obligations of U.S. government agencies  $34,415       $    ---       $(2,299)       $32,116
   Obligations of states and political subdivisions                        9,770             29           (68)         9,731
   Mortgage-backed securities                                             49,891              5        (3,288)        46,608
                                                                         -------        -------       -------        -------
Total debt securities                                                     94,076             34        (5,655)        88,455
   Equity securities                                                       4,362            ---          (969)         3,393
                                                                         -------        -------       -------        -------
Total securities available for sale                                      $98,438       $     34       $(6,624)       $91,848
                                                                         =======        =======       =======        =======
Securities held to maturity:
   U.S. Treasury securities and obligations of U.S. government agencies  $ 4,047       $    ---     $     (36)       $ 4,011
   Obligations of states and political subdivisions                       29,271             32        (1,355)        27,948
   Mortgage-backed securities                                                893             15            (6)           902
                                                                         -------        -------       -------        -------
Total securities held to maturity                                        $34,211       $     47       $(1,397)       $32,861
                                                                         =======        =======       =======        =======


                                                                                              December 31, 1998
                                                                                -------------------------------------------------
                                                                                        Gross          Gross       Estimated
                                                                                        -----          -----       ---------
                                                                            Amortized  Unrealized     Unrealized       Fair
                                                                            ---------  ----------     ----------       ----
                                                                               Cost       Gains         Losses         Value
                                                                               ----       -----         ------         -----
Securities available for sale:
   U.S. Treasury securities and obligations of U.S.
               government agencies                                      $ 27,781      $     332     $     (19)      $28,094
   Obligations of states and political subdivisions                       10,177            308           ----       10,485
   Mortgage-backed securities                                             19,201             81           (47)       19,235
                                                                         -------        -------       -------        -------
Total securities available for sale                                     $ 57,159      $     721     $     (66)      $57,814
                                                                         =======        =======       =======        =======

Securities held to maturity:
   U.S. Treasury securities and obligations of U.S.
               government agencies                                      $  4,076      $      59     $     ----     $  4,135
   Obligations of states and political subdivisions                       27,520            497           (95)       27,922
   Mortgage-backed securities                                              1,418             37            ---        1,455
                                                                         -------        -------       -------        -------
Total securities held to maturity                                       $ 33,014      $     593     $     (95)      $33,512
                                                                         =======        =======       =======        =======



       During the years ended December 31, 1999, 1998 and 1997, available-for-sale securities with a fair value at
the date of sale of $10,498, $9,966 and $19,618, respectively, were sold. The gross realized gains or losses on such
sales totaled $6, $191 and $(13), respectively. The amortized cost and estimated fair value of securities as of
December 31, 1999, by contractual maturity, are shown below. Expected maturities may differ from contractual
maturities because borrowers may have the right to call or prepay certain obligations with or without call or
prepayment penalties.


                                                                                         Estimated
                                                                                         ---------
                                                                           Amortized        Fair
                                                                           ---------        ----
                                                                              Cost          Value
                                                                              ----          -----
            Securities available for sale:
                        Due in one year or less                           $   915        $    915
                        Due after one year through five
                                   years                                    5,631          5,500
                        Due after five years through ten
                                   years                                   20,515          19,449
                        Due after ten years                                17,124          15,983
                        Mortgage-backed securities                         49,891          46,608
                            Equity securities                               4,362           3,393
                                                                           ------          ------
                                                                         $ 98,438        $ 91,848
                                                                         ========        ========
            Securities held to maturity:
                        Due in one year or less                          $  1,344        $  1,345
                        Due after one year through five
                                   years                                   10,922          10,825
                        Due after five years through ten
                                   years                                    9,393           9,050
                        Due after ten years                                11,659          10,739
                        Mortgage-backed securities                            893             902
                                                                           ------          ------
                                                                         $ 34,211        $ 32,861
                                                                         ========        ========
       Securities having carrying amounts of $97,894 and $64,539 at December 31, 1999 and 1998, respectively,
were pledged to secure public deposits and for other purposes required or permitted by law.


4.   Loans

       Loans consisted of the following:



                                                                       December 31,
                                                                       ------------
                                                                  1999              1998
                                                                  ----              ----


            Real estate:
                        Residential                             $ 72,695       $  61,280
                        Mortgage loans held for
                                  sale                               426           1,053`

# 39

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`Construction                              10,743           9,095
                        Commercial                                34,559          31,915
            Consumer                                              69,542          61,686
            Commercial                                            49,554          39,493
                                                                 -------         -------
                                                                 237,519         204,522
            Unearned income                                       (2,116)         (3,862)
            Allowance for loan losses                             (4,270)         (3,564)
                                                                 -------         -------
            Net loans                                           $231,133        $197,096
                                                                ========        ========
       Loans are made principally to customers in the Company's trade area. The economy in this trade area is
primarily retail, service and medical based. The Company's loan portfolio is primarily centered in consumer loans
and real estate; therefore, the collections of such loans are dependent on the trade area economy. The Company's
lending policy provides that loans collateralized by real estate are normally made with loan-to-value ratios of 80%
or less. Commercial loans are typically collateralized by property, equipment, inventories and/or receivables with
loan-to-value ratios from 50% to 80%. Consumer loans are typically collateralized by automobiles and personal
property.


                                                                                      As of and for the year ended
                                                                                      ----------------------------
                                                                                              December 31,
                                                                                              ------------
                                                                           1999                    1998                1997
                                                                           ----                    ----                ----



            Balance at beginning of year                                 $ 3,564                $ 3,101             $  2,837
            Provision for loan losses                                      1,422                    785                  725
            Loans charged off                                             (1,058)                  (526)                (638)
            Recoveries of loans previously charged
                     off                                                     342                    204                  177
                                                                         -------                -------              -------
            Balance at end of year                                       $ 4,270                $ 3,564             $  3,101
                                                                         =======                =======             =========

       Non-accrual loans at December 31, 1999 and 1998 were $1,525 and $931, respectively.

       Certain directors, executive officers, principal shareholders, their immediate family members and entities in
which they or their immediate family members have principal ownership interests, are customers of and have
transactions with the Company in the ordinary course of business. Loans to these parties are made on substantially
the same terms, including interest rates and collateral, as those prevailing at the time for comparable third-party
transactions and do not involve more than normal risks of collectibility or present other unfavorable features.

       These related-party loan transactions are summarized as follows:


                                                                                     Year ended
                                                                                     ----------
                                                                                    December 31,
                                                                                    ------------
                                                                               1999                1998
                                                                               ----                ----

            Balance at beginning of year                                   $    1,468         $    1,436`

# 40

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`New loans                                                           1,170              1,283



            Repayments                                                         (1,183)            (1,251)
                                                                             ---------            -------

            Balance at end of year                                           $  1,455         $    1,468
                                                                             ========         ==========`

# 45

`5.   Premises and Equipment

       Premises and equipment consisted of the following at:



                                                                     December 31,
                                                                     ------------

                                                                1999           1998
                                                                ----           ----



            Land                                              $ 2,915        $ 2,301
            Bank premises                                       7,046          6,400
            Furniture, fixtures and equipment                   5,339          4,614
            Computer software                                   1,039            798
            Accumulated depreciation                           (5,889)        (5,002)
                                                              -------        -------
                                                             $ 10,450        $ 9,111
                                                             ========        =======


6.   Other Real Estate

       Other real estate transactions consisted of the following:




                                                         As of and for the year ended
                                                         ----------------------------
                                                                 December 31,
                                                                 ------------
                                                 1999                 1998              1997
                                                 ----                 ----              ----



            Beginning balance                $    742               $   411           $   767
            Transfers of loans                    134                   360                24
            Sales                                (319)                  (18)             (336)
            Provision for losses                  (16)                  (11)              (44)
                                             --------               -------            -------
            Ending balance                   $    541               $   742           $   411
                                             ========               =======           =======`

# 41

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`7.   Interest-Bearing Deposits

       Interest-bearing deposits consisted of the following:


                                                                                    December 31,
                                                                                    ------------

                                                                                1999             1998
                                                                                ----             ----



            Demand (Now, SuperNow and money market)                           $ 84,875       $ 81,516
            Savings                                                              9,448          9,437
            Individual retirement accounts                                      16,279         14,127
            Time deposits, $100,000 and over                                    65,389         45,040
            Other time deposits                                                 98,836        100,311
                                                                              --------       --------
                                                                              $274,827       $250,431
                                                                              ========       ========

       Scheduled maturities of time deposits, including individual retirement accounts, outstanding at December 31,
1999, are as follows:


            2000                               $ 126,153
            2001                                  37,808
            2002                                   5,573
            2003                                   9,804
            2004                                   1,166
                                                 -------
                                                $180,504
                                                ========`

In the normal course of business, the Company has accepted deposits from certain directors, executive
officers, principal shareholders and other related parties on substantially the same terms, including interest
rates, as those prevailing at the time of comparable transactions with third-party customers. Such deposits were
$791and $746 at December 31, 1999 and 1998, respectively.

## 8. Other Borrowed Funds

Other borrowed funds include advances of $70,000 and $15,000 at December 31, 1999 and 1998, respectively,
from Federal Home Loan Bank ("FHLB"). The advances include $30,000 which accrue interest at fixed rates
varying from 4.75% through 6.29% with interest paid monthly and maturities through November 2008.  The Bank
has a $40,000 advance from the FHLB at a 4.49% interest rate (fixed for a three-year term) that matures January
21, 2009.  Interest is due monthly and the note is callable quarterly beginning April 22, 2002.  The proceeds from
this advance were used by the Company to purchase securities, which have been classified as available for sale.
The advances are collateralized by the Bank's investment in FHLB stock, which totaled $3,596 and $788 at
December 31, 1999 and 1998, respectively, and by a blanket pledge of the Bank's eligible real estate loans. The
Bank had available collateral to borrow an additional $2,000 from the FHLB at December 31, 1999.

Other borrowed funds included borrowings $4,120 under a revolving line of credit at December 31, 1998.
The revolving line of credit with an unrelated bank matured in December of 1999.

# 42

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`9.   Income Taxes

       Income tax expense (benefit) consisted of the following:


                                        Year ended December 31,
                                        ------------------------
                                     1999           1998          1997
                                     ----           ----          ----
            Current:
            Federal                $ 1,470        $   999       $  831
            State                      229            155          112
                                    ------         ------       ------
                                     1,699          1,154          943
            Deferred                  (204)          (149)         (89)
                                    ------         ------       ------
                                   $ 1,495        $ 1,005       $  854
                                   =======        =======       =======

       The differences between the Bank's actual income tax expense and amounts computed at the statutory rates
are summarized as follows:



                                                                                             Year ended December 31,
                                                                                             -----------------------
                                                                                    1999              1998            1997
                                                                                    ----              ----            ----


            Amount computed at statutory rate on income before
                        income taxes                                              $ 1,926         $  1,379          $ 1,086
            Increase (decrease) in income taxes resulting from:
                        State income taxes, net of federal benefit                    133               89               66
                        Income from non-taxable securities                           (517)            (447)            (323)
                        Other                                                         (47)             (16)              25
                                                                                   ------           ------           ------
                                                                                  $ 1,495          $ 1,005          $   854
                                                                                  =======          =======          =======`

# 43

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Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of
assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant
components of the Company's deferred tax assets consisted of the following:

`December 31,
                                                                                                    ------------
                                                                                                 1999         1998
                                                                                                 ----         ----
            Allowance for loan losses                                                           $1,117       $ 878
            Other real estate                                                                       32          26
            Deferred compensation                                                                  160         131
            Net unrealized (gain) loss on securities available for sale                          2,458        (244)
            Other                                                                                 (101)        (31)
                                                                                                ------        -----
            Total net deferred tax assets                                                       $3,666       $ 760
                                                                                                ======       =====`

## 10. Employment Benefit Plans

The Company has a defined contribution 401(k) plan with a profit sharing feature which covers substantially
all employees. Participants in the 401(k) plan may contribute up to the maximum allowed by Internal Revenue
Service regulations. The Company matches participants' contributions to the 401(k) plan up to 3% of each
participant's annual salary. The Company may make a profit sharing contribution as determined by the Company's
Board of Directors. The Company's matching and profit sharing contributions vest 20% annually beginning with
the participant's third year of service. The Company's contributions to the 401(k) plan were $144, $88 and $85 for
the years ended December 31, 1999, 1998 and 1997, respectively.

The Company has an employee stock ownership plan ("ESOP") which covers substantially all employees. The
Company may make contributions to the ESOP at the discretion of its Board of Directors and may be made in cash
or common stock. The contributions vest 20% annually beginning with the participant's third year of service. The
Company's contributions to the ESOP were $60, $165 and $150 for the years ended December 31, 1999, 1998 and
1997, respectively. On July 30, 1998, the ESOP purchased 18,711 shares  of the Company's Common Stock
included in treasury stock.

In August of 1998, the Company adopted a stock incentive plan under which it plans to grant stock options
for selected employees. As of December 31, 1999, no stock options had been granted under the plan.

The Company maintains a self-insured medical plan. Under this plan, the Company self-insures, in part,
coverage for substantially all full-time employees with coverage by insurance carriers for certain stop-loss
provisions for losses greater than $30 for each occurrence up to a maximum benefit of $1,000. The Company's
expenses pertaining to the self-insured medical plan, including accruals for incurred but not reported claims, were
$405, $436 and $323 for the years ended December 31, 1999, 1998 and 1997, respectively.

The Company has deferred compensation agreements with certain officers for payments to be made over
specified periods beginning when the officers reach age 65. Amounts accrued for these agreements are based upon
deferred compensation earned, discounted over the estimated remaining service life of each officer. Deferred
compensation expense totaled $76, $71 and $66 for the years ended December 31, 1999, 1998 and 1997,
respectively.

## 11. Regulatory Matters

# 44

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The Federal Reserve Board has adopted a system using risk-based capital guidelines to evaluate the capital
adequacy of bank holding companies. These guidelines require a minimum total risk-based capital ratio of 8.0%
(of which at least 4.0% is required to consist of Tier 1 capital elements). The Federal Reserve Board also utilizes
a leverage ratio (Tier 1 capital divided by average total consolidated assets) to evaluate the capital adequacy of bank
holding companies. The Company's current regulatory ratios placed it in the "well-capitalized category.

`December 31,
                                                                                                          ------------

                                                                                                  1999                   1998
                                                                                                  ----                   ----


            Capital:
            Stockholders' equity                                                                 $31,902               $31,331
            Less unrealized (gain) loss on securities, net of
                        Income taxes                                                               4,133                  (411)
            Intangible asset                                                                         (87)                  (94)
                                                                                                 -------               -------
            Tier 1 capital                                                                        35,948                30,826
            Qualifying allowance for loan losses                                                   3,138                 2,642
                                                                                                 -------               -------
            Total capital                                                                        $39,086               $33,468
                                                                                                 =======               =======
            Ratios:
            Total capital to risk-weighted assets                                                  15.57%              15.90%
            Tier 1 capital to risk-weighted assets                                                 14.38               14.65
            Tier 1 capital to total average assets (leverage ratio)                                 9.23               10.38`

State banking regulations require the Mississippi Department of Banking and Consumer Finance to approve
the payment of any dividends.

# 12.   Off-Balance Sheet Risks, Commitments and Contingent Liabilities

Loan commitments are made to accommodate the financial needs of the Company's customers. Standby letters
of credit commit the Company to make payments on behalf of customers when certain specified future events occur.
They primarily are issued to support customers' trade transactions. Both arrangements have credit risk essentially
the same as that involved in extending loans to customers and are subject to the Company's normal credit policies.
Collateral is obtained based on management's credit assessment of the customer. The Company's maximum
exposure to credit losses for loan commitments (unused lines of credit) outstanding at December 31, 1999 and
expiring during 2000 is $14,800.

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 in is 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.

The Company is also involved in certain legal actions and claims arising in the ordinary course of business.
Although the ultimate outcome of these other actions and claims cannot be ascertained at this time, it is the opinion
of management (based on advice of legal counsel) that such litigation and claims should be resolved without
material effect on the Company's consolidated financial position or operating results.

# 45

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## 13. Parent Company Condensed Financial Information

`Balance Sheets
                                                                                       December 31,
                                                                                       ------------
                                                                                   1999           1998
                                                                                   ----           ----
            Assets:
            Cash and cash equivalents                                           $  1,878     $   8,500
            Investment in subsidiaries                                            28,984        21,729
            Due from subsidiaries                                                     76           164
            Premises and equipment                                                 1,161         1,170
            Other                                                                     19            19
                                                                                 -------       -------
                        Total assets                                            $ 32,118      $ 31,582
                                                                                ========      ========
            Liabilities                                                         $    216      $    251


            Stockholders' equity:
            Common stock                                                           2,158         2,065
            Paid-in capital                                                       17,513        15,885
            Retained earnings                                                     16,364        12,970
            Accumulated other comprehensive income (loss)                         (4,133)          411
                                                                                 -------       -------
                        Total stockholders' equity                                31,902        31,331
                                                                                 -------       -------
                        Total liabilities and stockholders' equity              $ 32,118      $ 31,582
                                                                                ========      ========`

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`Statements of Income                                                                 Year ended December 31,
                                                                                                 -----------------------
                                                                                          1999          1998           1997
                                                                                          ----          ----           ----

            Income:
            Dividends from subsidiaries                                                 $   ---      $  750         $  1,110
            Other                                                                            22          22               23
                                                                                         ------      ------         --------
                        Total income                                                         22         772            1,133
            Expenses:
            Interest expense                                                                ---         342              392
            Other                                                                           204          55               60
                                                                                         ------      ------         --------
                        Total expenses                                                      204         397              452
            Income (loss) before income taxes                                              (182)        375              681
            Income tax benefit                                                               54         146              160
                                                                                         ------      ------         --------
            Income (loss) before equity in undistributed net income of
                      Subsidiaries                                                         (128)        521              841
            Equity in undistributed net income of subsidiaries                            4,299       2,528            1,498
                                                                                         ------      ------         --------
            Net income                                                                   $4,171      $3,049           $2,339
                                                                                         ======      ======          =======


            Statements of Cash Flows                                                             Year ended December 31,
                                                                                                 -----------------------
                                                                                          1999          1998           1997
                                                                                          ----          ----           ----
            Operating activities:
            Net income                                                                   $4,171      $3,049           $2,339
            Adjustments to reconcile net income to net cash provided
                     by (used in) operating activities:
                        Undistributed net income of subsidiaries                         (4,299)     (2,528)          (1,498)
                        Depreciation expense                                                  9           9                9
                        (Increase) decrease in due from subsidiaries                         88        (514)            (298)
                        Increase (decrease) in other liabilities                           (127)        126                -
                                                                                         ------      ------         --------
                        Net cash provided by (used in) operating activities                (158)        142              552
            Investment activities:
                          Capital contribution to subsidiary                             (7,500)           -            (150)
                           Purchases of premises and equipment                                -          (6)            (182)
                                                                                         ------      ------          -------
                           Net cash used in investing activities                         (7,500)         (6)            (332)
            Financing activities:
                           Dividends paid                                                  (685)       (388)            (250)
                           Payments on note payable to a bank                                 -      (3,600)            (400)
                           Proceeds from sale of common stock                             1,721      12,199                -
                           Purchases of treasury stock                                        -         (72)            (436)
                           Proceeds from sales of treasury stock                              -         225              682
                                                                                         ------      ------         --------
                           Net cash provided by (used in) financing activities            1,036       8,364             (404)
                                                                                         ------      ------         --------
                           Net increase (decrease) in cash and cash equivalents          (6,622)      8,500             (184)
                           Cash and cash equivalents at beginning of year                 8,500           -              184
                                                                                         ------      ------         --------
                           Cash and cash equivalents at end of year                     $ 1,878     $ 8,500        $       -
                                                                                        =======     =======         ========`

# 47

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## 14. Fair Values of Financial Instruments

Generally accepted accounting principles require disclosure of fair value information about financial
instruments for which it is practicable to estimate fair value, whether or not the financial instruments are recognized
in the financial statements. When quoted market prices are not available, fair values are based on estimates using
present value or other valuation techniques. Those techniques are significantly affected by the assumptions used,
including the discount rate and estimates of future cash flows. The derived fair value estimates cannot be
substantiated through comparison to independent markets and, in many cases, could not be realized in immediate
settlement of the instrument. Certain financial instruments and all non-financial instruments are excluded from these
disclosure requirements. Accordingly, the aggregate fair value amounts presented do not represent the underlying
value of the Company. The use of different market assumptions and estimation methodologies may have a material
effect on the estimated fair value amounts.

The carrying amount of cash and cash equivalents, non-interest bearing deposits, other borrowed funds and
interest rate floors approximates the estimated fair value of these financial instruments. The estimated fair value
of securities is based on quoted market prices, dealer quotes and prices obtained from independent pricing services.
The estimated fair value of loans and interest-bearing deposits is based on present values using applicable risk-
adjusted spreads to the appropriate yield curve to approximate current interest rates applicable to each category of
these financial instruments. The fair value of the loan commitments to extend credit is based on the difference
between the interest rate at which the Company's committed to make the loans and the current rates at which similar
loans would be made to borrowers with similar credit ratings and the same maturities. The fair value is not material.

Variances between the carrying amount and the estimated fair value of loans reflect both credit risk and interest
rate risk. The Company is protected against changes in credit risk by the allowance for loan losses.

The fair value estimates presented are based on information available to management as of December 31, 1999
and 1998. Although management is not aware of any factors that would significantly affect the estimated fair value
amounts, these amounts have not been revalued for purposes of these financial statements since those dates.
Therefore, current estimates of fair value may differ significantly from the amounts presented.

`December 31,
                                                    -----------------------------------------------------
                                                               1999                          1998
                                                    ------------------------      -----------------------
                                                      Carrying         Fair         Carrying         Fair
                                                      --------         ----         --------         ----
                                                       Amount          Value         Amount         Value
                                                       ------          -----         ------         -----
            Securities available for sale             $91,848        $91,848       $ 57,814       $ 57,814
            Securities held to maturity                34,211         32,861         33,014         33,512
            Loans                                     231,133        231,460        197,096        194,672
            Interest-bearing deposits                 274,827        276,584        250,431        252,188`

# 48

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# PART III

Information on the directors and executive officers of the Registrant can be found under Item 1
Description of Business of this Report on Form 10-K and under the headings "Election of Directors" and
Executive Compensation" in the Proxy Statement to shareholders dated March 29, 2000, and is incorporated
herein by reference.

Information required by this item can be found under the heading "Executive Compensation" in the Proxy
Statement dated March 29, 2000, and is incorporated herein by reference.

Information regarding security ownership of certain beneficial owners and the officers and directors
can be found under the headings "Stock Ownership of Principal Stockholder" and "Stock Ownership of
Directors and Officers" in the Proxy Statement dated March 29, 2000, and is incorporated herein by reference.

Information regarding certain relationships and related transactions can be found under the caption
"Other Transactions with Management," in the Proxy Statement dated March 29, 2000, and is incorporated
herein by reference.

# 49

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`PART IV

ITEM 14.                EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON                                                            FORM 8-K

A-1. Financial Statements

Report of Independent Auditors

Consolidated Balance Sheets as of December 31, 1999 and 1998

Consolidated Statements of Income and Comprehensive Income for the years ended December 31, 1999, 1998
and 1997

Consolidated Statements of Changes in Stockholders' Equity for the years ended December 31, 1999, 1998 and
1997

Consolidated Statements of Cash Flows for the years ended December 31, 1999, 1998 and 1997

Notes to Consolidated Financial Statements

A-2. Financial Statement Schedules

            None.

A-3.        Exhibits Required by Item 601 of Regulation S-K


3.1         Articles of Incorporation of Registrant, as amended (1)(2)

3.3         Bylaws of Registrant, as amended(1)

4.1         Provisions  of  Articles  of   Incorporation  of  Registrant
            defining rights of security holders (see Articles of Incorporation, as
            amended, of Registrant filed as Exhibits 3.1 and 3.3 herein)(1)

4.2         Shareholder Rights Plan(1)


4.3         Specimen Stock Certificate(2)


10.1        Executive Salary Continuation Agreements(1)


10.2        Stock Incentive Plan(2)


21          Subsidiaries of the Registrant(1)


23          Consent of Ernst & Young LLP


27          Financial Data Schedule

            (1) Filed an as an exhibit to the S-1 Registration Statement of the Company (File No. 333-61355) filed
on August 13, 1998 and incorporated by reference herein.
            (2) Filed an as an exhibit to Amendment No. 1 to the S-1 Registration Statement of the Company (File No.
333-61355) filed on October 1, 1998 and incorporated by reference herein.

B.           Reports on Form 8-K

             None`

# 50

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## 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:  MARCH 29, 2000

                                                                        By:/s/ Donna T. Rutland
                                                                             DONNA T. RUTLAND
                                                                             CHIEF FINANCIAL OFFICER
                                                                             (PRINCIPAL FINANCIAL OFFICER AND
                                                                             PRINCIPAL ACCOUNTING OFFICER)`

# 51

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# SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:

`SIGNATURES                                                              CAPACITIES                                                  DATE


/s/ O. B. Black, Jr.                                                    Director                                              March 29, 2000
O. B. Black, Jr.

/s/ William H. Jordan                                                   Director                                              March 29, 2000
William H. Jordan

/s/ Kenneth M. Lott                                                     Director                                              March 29, 2000
Kenneth M. Lott

/s/ James R. Pylant                                                     Director                                              March 29, 2000
James R. Pylant

/s/ Jane P. Roberts                                                     Director                                              March 29, 2000
Jane P. Roberts

/s/ Monty C. Roseberry                                                  Director                                              March 29, 2000
Monty C. Roseberry

/s/ Robert W. Roseberry                                                 Director (Principal                                   March 29, 2000
Robert W. Roseberry                                                     Executive Officer)

/s/ Donna T. Rutland                                                    Chief Financial Officer                               March 29, 2000
Donna T. Rutland                                                        (Principal Accounting and
                                                                        Financial Officer)`

# 52

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`INDEX TO EXHIBITS


3.1            Articles of Incorporation of Registrant, as amended (1)(2)

3.3            Bylaws of Registrant, as amended(1)



4.1            Provisions of Articles of Incorporation of Registrant defining rights of
               security holders (see Articles of Incorporation, as amended, of Registrant filed
               as Exhibits 3.1 and 3.3 herein)(1)

4.2            Shareholder Rights Plan(1)


4.3            Specimen Stock Certificate(2)


10.1           Executive Salary Continuation Agreements(1)


10.2           Stock Incentive Plan(2)


21             Subsidiaries of the Registrant(1)

23             Consent of Ernst & Young LLP


27             Financial Data Schedule

            (1) Filed an as an exhibit to the S-1 Registration Statement of the Company (File No. 333-61355) filed
on August 13, 1998 and incorporated by reference herein.

            (2) Filed an as an exhibit to Amendment No. 1 to the S-1 Registration Statement of the Company (File
No. 333-61355) filed on October 1, 1998 and incorporated by reference herein.`

# 53

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