UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended September 30, 1994
Commission File Number 0-12154
THE PEOPLES HOLDING COMPANY
(Exact name of the registrant as specified in its charter)
MISSISSIPPI 64-0676974
(State of Incorporation) (I.R.S. Employer Identification Number)
209 Troy Street, P. O. Box 709, Tupelo, Mississippi 38801
(Address of principal executive offices)
Registrant's telephone number including area code 601-680-1001
Indicate by check whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months, and (2) has
been subject to such filing requirements for the past 90 days.
YES__X__NO_____
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as to the latest practicable date.
Common stock, $5 Par Value, 2,513,534 shares outstanding
as of November 10, 1994
<PAGE>
THE PEOPLES HOLDING COMPANY
INDEX
PART 1. FINANCIAL INFORMATION PAGE
Item 1. FINANCIAL STATEMENTS (UNAUDITED)
Consolidated Balance Sheets -
September 30, 1994 and December 31, 1993...........3
Consolidated Statements of Income - Nine Months
Ended September 30, 1994 and 1993..................5
Consolidated Statements of Income - Three Months
Ended September 30, 1994 and 1993..................7
Consolidated Statements of Cash Flows
Nine Months Ended September 30, 1994 and 1993......9
Notes to Consolidated Financial Statements.............11
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations...............14
PART II. OTHER INFORMATION
Item 1. Legal Proceedings..................................26
Item 6.(b) Reports on Form 8-K..............................26
Signatures..................................................27
<PAGE>
THE PEOPLES HOLDING COMPANY AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
[CAPTION]
SEPTEMBER 30 DECEMBER 31
1994 1993
____________ ___________
(Unaudited) (Note 1)
[S] [C] [C]
Assets
Cash and due from banks $ 40,950,088 $ 35,956,431
Federal Funds Sold 4,000,000 8,000,000
----------- -----------
44,950,088 43,956,431
Interest bearing balances with banks 267,794 77,887
Securities (Market value- $228,833,515
and $234,979,483 at September
30, 1994 and December 31, 1993) 229,102,498 230,904,295
Loans 472,914,296 427,416,747
Unearned Income ( 11,149,589) ( 9,835,772)
Allowance for loan losses ( 7,704,867) ( 6,216,854)
----------- -----------
Net Loans 454,059,840 411,364,121
Bank premises and equipment 16,144,930 15,537,825
Other assets 20,697,149 16,669,428
___________ ___________
Total Assets $ 765,222,299 $ 718,509,987
=========== ===========
[S] [C] [C]
Liabilities and Shareholder's Equity
Deposits:
Non-interest bearing $ 119,991,562 $ 99,140,347
Interest bearing 545,706,451 537,598,201
----------- -----------
Total Deposits 665,698,013 636,738,548
Treasury tax and loan account 3,124,543 4,000,000
Federal Funds Purchased 12,000,000 0
Notes and debentures payable 4,760,927 59,797
Other liabilities 7,820,794 7,787,929
----------- -----------
Total Liabilities 693,404,278 648,586,274
<PAGE>
Shareholders' Equity
Common Stock, $5 par value-
4,200,000 shares authorized
2,513,354 shares issued and
outstanding at September 30, 1994
and 2,417,829 shares issued and
outstanding at December 31, 1993 12,567,670 12,089,145
Capital surplus 30,000,000 30,000,000
Retained earnings 31,439,562 27,834,568
Adjustment to unrealized losses on
available-for-sale securities, net
of tax (2,189,211) 0
----------- -----------
Total Shareholders' Equity 71,818,021 69,923,713
----------- -----------
Total Liabilities and
Shareholders' Equity $ 765,222,299 $ 718,509,987
=========== ===========
[FN]
See Notes to Consolidated Financial Statements
<PAGE>
<PAGE>
THE PEOPLES HOLDING COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
[CAPTION]
NINE MONTHS ENDED SEPTEMBER 30
1994 1993
---- ----
(Unaudited)
[S] [C] [C]
Interest Income
Interest and fees on loans $ 27,729,574 $ 25,660,820
Interest on balances with banks 87,452 70,550
Interest on federal funds sold 322,372 461,745
Interest on securities:
Taxable 7,491,821 7,365,698
Tax-exempt 1,935,584 1,630,282
---------- ----------
Total interest income 37,566,803 35,189,095
Interest Expense
Interest on time deposits of
$100,000 or more 1,503,313 1,281,108
Interest on other deposits 11,556,755 10,772,647
Interest on federal funds purchased
and other borrowed funds 256,615 73,119
---------- ----------
Total interest expense 13,316,683 12,126,871
---------- ----------
Net interest income 24,250,120 23,062,224
Provision for possible loan losses 1,475,628 2,423,895
---------- ----------
Net interest income after
provision for possible
loan losses 22,774,492 20,638,329
Other income
Service charges 4,276,903 3,742,595
Fees and commission 1,149,905 944,172
Trust department income 374,701 289,486
Trading account income 0 137,438
Net gain on investments 92,832 363,863
Other operating income 1,225,888 1,080,211
---------- ----------
Total other income 7,120,229 6,557,765
Other Expenses
Salaries and employee benefits 11,977,264 11,235,085
Occupancy of bank premises 1,514,680 1,443,748
Furniture and equipment depreciation,
rental cost, servicing, etc.. 853,440 812,801
Other operating expense 8,000,730 6,598,984
---------- ----------
Total other expenses 22,346,114 20,090,618
----------- -----------
Income before income taxes 7,548,607 7,105,476
Income taxes 1,684,882 1,904,718
---------- ----------
Income before cumulative effect of
changes in accounting principles 5,863,725 5,200,758
Cumulative effect of changes in
accounting principle, net of income
taxes 0 522,518
---------- ----------
Net income $ 5,863,725 $ 5,723,276
========== ===========
[CAPTION]
1994 1993
---- ----
[S] [C] [C]
Earnings per share:
Income before cumulative effect
of changes in accounting
principles $ 2.33 $ 2.07
Cumulative effect of changes in
accounting principles .00 .21
---- ----
Total earnings per share $ 2.33 $ 2.28
Cash dividends per share $ .71 $ .68
Earnings per share data for 1994 and 1993 are based on 2,513,534 shares
outstanding. Cash dividend per share is based on actual amounts declared.
[FN]
See Notes to Consolidated Financial Statements.
<PAGE>
<PAGE>
THE PEOPLES HOLDING COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
[CAPTION]
THREE MONTHS ENDED SEPTEMBER 30
1994 1993
---- ----
(Unaudited)
[S] [C] [C]
Interest Income
Interest and fees on loans $ 9,940,979 $ 8,722,512
Interest on balances with banks 3,884 30,721
Interest on federal funds sold 42,168 134,766
Interest on securities:
Taxable 2,597,030 2,470,122
Tax-exempt 646,272 545,854
---------- ----------
Total interest income 13,230,333 11,903,975
Interest Expense
Interest on time deposits of
$100,000 or more 500,762 450,925
Interest on other deposits 4,028,755 3,658,852
Interest on borrowed funds 106,480 29,163
---------- ----------
Total interest expense 4,635,997 4,138,940
---------- ----------
Net interest income 8,594,336 7,765,035
Provision for possible loan losses 491,927 632,451
---------- ----------
Net interest income after
provision for possible
loan losses 8,102,409 7,132,584
Other income
Service charges 1,527,425 1,319,514
Fees and commission 348,678 171,029
Trust department income 145,861 94,866
Trading account income 0 0
Net gain (loss) on investments (22,771) 274,061
Other operating income 316,162 370,059
---------- ----------
Total other income 2,315,355 2,229,529
Other Expenses
Salaries and employee benefits 4,115,277 3,805,002
Occupancy of bank premises 514,912 589,547
Furniture and equipment depreciation,
rental cost, servicing, etc.. 278,207 198,648
Other operating expense 2,824,917 2,237,249
---------- ----------
Total other expenses 7,733,313 6,830,446
----------- -----------
Income before income taxes 2,684,451 2,531,667
Income taxes 801,673 708,123
---------- ----------
Income before cumulative effect of
changes in accounting principles 1,882,778 1,823,544
Cumulative effect of changes in
accounting principle, net of income
taxes 0 0
---------- ----------
Net income $ 1,882,778 $ 1,823,544
========== ==========
[CAPTION]
1994 1993
---- ----
[S] [C] [C]
Earnings per share:
Income before cumulative effect
of changes in accounting
principles $ .75 $ .73
Cumulative effect of changes in
accounting principles .00 .00
---- ----
Total earnings per share $ .75 $ .73
Cash dividends per share $ .24 $ .23
Earnings per share data for 1994 and 1993 are based on 2,513,534 shares
outstanding. Cash dividend per share is based on actual amounts declared.
[FN]
See Notes to Consolidated Financial Statements.
<PAGE>
<PAGE>
THE PEOPLES HOLDING COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
[CAPTION]
NINE MONTHS ENDED SEPTEMBER 30
1994 1993
---- ----
(Unaudited)
[S] [C] [C]
Operating Activities
Net Income $ 5,863,725 $ 5,723,276
Adjustments to reconcile net
income to net cash provided
by operating activities:
Provision for loan losses 1,475,628 2,423,895
Provision for depreciation and
amortization 1,263,136 1,058,838
Net amortization accretion of
securities' premiums/discounts 1,275,190 401,827
Gain on sale of trading securities 0 (137,438)
Proceeds from sales of trading
securities 0 6,101,875
Purchases of trading securities (1,024,531)
Gain on sale/call of
securities held for sale (2,791) (191,804)
Increase (decrease)in other liabilities 32,866 (871,082)
Deferred income tax (682,633) (939,893)
Gain on sale of fixed assets (1,264) (3,955)
Increase in other assets (2,020,943) (1,466,891)
------------ ------------
Net Cash Provided by Operating
Activities 7,202,914 13,022,040
Investment Activities
Net increase in balances with
other banks (189,907) 63,754
Proceeds from sales of securities
held for sale 7,501,564 3,319,109
Proceeds from maturities/calls of
securities held to maturity 3,068,639 64,043,912
Proceeds from maturities/calls of
securities held for sale 54,695,444
Purchase of securities held to
maturity (2,925,000)
Purchase of securities held for sale (65,128,235) (104,404,689)
Net increase in loans (44,728,848) (28,131,343)
Proceeds from sale of fixed assets 2,505 4,626
Purchase of premises and equipment (1,510,351) (1,187,881)
----------- ----------
Net cash used in Investment
Activities (49,214,189) ( 66,292,515)
[CAPTION]
1994 1993
---- ----
[S] [C] [C]
Financing Activities
Net increase in demand and savings
deposits 39,070,295 27,689,744
Net increase (decrease) in time
deposits (10,110,830) 20,497,667
Net increase (decrease) in short-
term borrowed funds 11,124,543 487,120
Increase (decrease) in long-term debt 4,701,130 (12,811)
Acquisition of Sunburst banks (2,251,330)
Cash dividends paid (1,780,206) (1,644,124)
------------ -----------
Net Cash Provided by Financing
Activities 43,004,932 44,766,266
------------ -----------
Increase (decrease) in Cash
and Cash Equivalents 993,657 (8,504,209)
Cash and Cash Equivalents at
beginning of period 43,956,431 57,062,966
----------- -----------
Cash and Cash Equivalents at
end of period $ 44,950,088 $ 48,558,757
=========== ===========
Cash paid for:
Interest expense $ 13,050,403 $ 12,006,117
Income taxes 2,006,656 1,584,000
Non-cash transactions:
Transfer of loans to other real
estate $ 557,501
Unrealized loss on securities
held as available for sale:
Decrease in securities $ 3,316,986
Increase in deferred taxes $ 1,127,775
Decrease in equity $ 2,189,211
[FN]
See Notes to Consolidated Financial Statements
<PAGE>
THE PEOPLES HOLDING COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 Basis of Presentation
The consolidated balance sheet at December 31, 1993, has been derived from
the audited financial statements at that date. The accompanying unaudited
consolidated financial statements reflect all adjustments (consisting only
of normally recurring accruals) which are, in the opinion of management,
necessary to a fair statement of the results for the interim periods
presented. The statements should be read in conjunction with the summary
of accounting policies and notes to financial statements included in the
Registrant's annual report for the year ended December 31, 1993. Certain
information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been omitted in accordance with the rules of the Securities
and Exchange Commission.
A stock dividend was issued in the third quarter of 1994, therefore prior year
earnings per share amounts and book values have been properly restated.
In May of 1993, the Financial Accounting Standards Board issued SFAS No.
114, "Accounting by Creditors for Impairment of a Loan". This statement
requires that impaired loans that are within the scope of SFAS No. 114 be
measured on the present value of expected future cash flows, discounted at
the loans's effective interest rate or at the loan's observable market
price or the fair value of the collateral if the loan is collateral
dependent. SFAS No. 114 applies to companies with fiscal years beginning
after December 15, 1994. The Company has not made a determination as to
the effect of the adoption of this statement on the financial condition of
the Company.
Note 2 Changes in Accounting Methods
In May 1993, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 115, "Accounting for Certain Investments
in Debt and Equity Securities", effective for fiscal years beginning after
December 15, 1993. Under the new rules, debt securities that the Company
has both the positive intent and ability to hold to maturity are carried
at amortized cost. Debt securities that the Company does not have the
positive intent and ability to hold to maturity and all marketable equity
securities are classified as available-for-sale or trading and carried at
fair value. Unrealized holding gains and losses on securities classified
as available-for-sale are carried as a separate component of shareholders'
equity. Unrealized holding gains and losses on securities classified as
trading are reported in earnings.
<PAGE>
[CAPTION]
Securities are summarized as follows at September 30, 1994:
[S] [C]
Held to maturity (amortized cost) $ 43,075,546
Available for sale (estimated fair value) 186,026,952
-------------
Total securities $ 229,102,498
=============
The estimated fair value of securities held to maturity at September 30, 1994
was $42,806,563.
Note 3 Acquisition
During April, 1994, the Company entered into an agreement with The
Resolution Trust Corporation to purchase selected assets and assume certain
liabilities of the New Albany, Southaven and Hernando branches of the
Security Federal Savings and Loan Association. The acquisition was
approved by regulatory authorities and consummated on April 15, 1994. The
Company acquired approximately $18 million in loans and $32 million in
deposits.
Note 4 Income Taxes
[CAPTION]
Federal income taxes payable (receivable) were as follows at September 30:
[S] [C]
Current $ 390,113
Deferred (3,051,204)
-----------
$ (2,661,091)
===========
[CAPTION]
The components of income tax expense (credits) are presented below at September
30, 1994:
[S] [C]
Current $ 2,315,913
Deferred (631,031)
---------
$ 1,684,882
=========
PAGE
<PAGE>
[CAPTION]
The difference between income tax expense and the amount computed by
applying the statutory federal income tax rate to operating earnings
results from the following at September 30, 1994:
[S] [C]
Federal tax expense at statutory rate $2,545,827
Add (deduct) effect of:
Tax-exempt interest income ( 639,475)
Amortization of intangible assets 39,969
Dividends received deduction ( 29,049)
Other items-net ( 232,389)
----------
$1,684,882
==========
Deferred tax assets resulted largely from temporary differences arising
from the loan loss provision. Effective January 1, 1993, the Company adopted
FASB No. 109, which resulted in a deferred tax rate of 34%.
Historically, the Company has produced taxable income which can fully
utilize the deferred tax asset.
<PAGE>
<PAGE>
THE PEOPLES HOLDING COMPANY AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Financial Condition
The following provides management's discussion of the consolidated
financial condition and results of operation of The Peoples Holding Company
and Subsidiary, focusing on those factors that have had the most
significant impact for the first nine months of 1994. This commentary
should be read in conjunction with the accompanying financial statements.
Total assets of The Peoples Holding Company grew from $718,509,987 on
December 31, 1993, to $765,222,299 on September 30, 1994, or 6.50% for the nine
month period. The primary increase in assets is due to the acquisition of
approximately $33 million dollars in selected assets and liabilities from
Security Federal Savings and Loan Association during the second quarter of
1994 which was accounted for as a purchase. Accordingly, the results of
operations of this acquisition are included in the consolidated financial
statements only from the acquisition date (April 15, 1994), which affects
the comparability of the consolidated financial statements. Cash and Due
From Banks was up from $35,956,431 on December 31, 1993, to $40,950,088 on
September 30, 1994, or an increase of $4,993,657; while Federal Funds sold
decreased $4,000,000 since December 31, 1993. Loans, less unearned income and
allowance for loan loss, increased $42,695,719 or 10.38% due primarily to
assumption of loans from Security Federal Savings and Loan Association.
Securities decreased from $230,904,295 on December 31, 1993, to $229,102,498 on
September 30, 1994, which includes an unrealized loss on securities held for
sale of $3,316,986. Transaction deposit accounts, which require a 10% reserve
balance in cash or on deposit at the Federal Reserve Bank, were up from
$260,709,000 on December 31, 1993, to $368,484,723 on September 30, 1994, while
total deposits for the first nine months of 1994 grew from $636,738,548 on
December 31, 1993 to $665,698,013, or an increase of $28,959,465.
The equity capital to total assets ratio was 9.73% and 9.39% for December
31, 1993 and September 30, 1994, respectively.
Results of Operations-Nine months ended September 30, 1994 compared to 1993
The Company reported net income of $5,863,725 for the period ending September
30, 1994 compared to $5,723,276 for the same period in 1993; or an increase of
2.45%. Earnings per share for the first nine months of 1994 were $2.33 compared
to $2.28 for the first nine months in 1993. The net effect of the adoption of
SFAS No. 106, "Employer's Accounting for Postretirement Benefits Other than
Pensions" and SFAS No. 109, "Accounting for Income Taxes" in 1993 accounted
for $ .21 of the nine months earning per share on net income of $2.07 for
the nine month period ending September 30, 1993.
Net interest income is the largest component of the Company's income and
represents the amount by which interest income on earning assets exceeds
the cost of deposits. The Company's long term objective is to manage those
earning assets and interest-bearing liabilities to provide the largest
possible amount of income while balancing interest rate, credit, liquidity
and capital risk.
Net interest income after provision for loan losses was up $2,136,163 or
10.35% for the period ending September 30, 1994 compared to the same period in
1993 due to an increase in average earning assets of 9.30%. The
acquisition of approximately $18 million in earning assets from Security
Federal accounted for 30% of the increase. The fully tax-equivalent net
interest margin remained the same in 1994 and 1993 at 4.90%. The prime lending
rate for bank loans declined periodically to 6.00% early in 1993 from 6.50%
early in 1992. The prime lending rate increased in March to 6.25%; May to 6.75%
and in June to 7.25%, during 1994. The prime rate decrease in 1992 and 1993
was the primary factor in the decrease in yields for September 1994 on the loan
portfolio from 8.55% in 1993 to 8.47% in 1994.
Total interest expense was $13,316,683 for the nine months ending in 1994,
compared to $12,126,871 for same period in 1993 or an increase of $1,189,812.
Average total interest bearing deposits increased $32,731,683 or 6.17% while
the interest rate yield paid on interest bearing deposits declined
slightly to 3.09% in 1994 from 3.03% for same period in 1993.
The growth in non-interest income has become an increasingly important
component of the Company's profitability, given the uncertainty of future
loan demand and increased competition from nontraditional sources. Non-
interest income includes fees for trust services, mortgage loan servicing
fees, service charges on deposit accounts, and many other retail products.
Non-interest income for the first nine months of 1994 increased 8.58% or
$562,464 compared to the same period in 1993. The most significant increase
in non-interest income is attributable to service charges which increased
$534,308 since 1993 due mainly to addition of accounts serviced by the
Security Federal Savings and Loan Association.
<PAGE>
During recent years, the banking industry has put an increasing emphasis
on expense control and improving its efficiency and, ultimately, its
profitability. The Company has responded to the need for improved
efficiency by emphasizing its commitment to control expenses. Non-interest
expenses have increased from $20,090,618 for nine months ending September 30,
1993 to $22,346,114 in 1994 or 11.22%, mainly due to the acquisition.
Results of Operations-Three months ended September 30, 1994 compared to 1993
The Company reported net income of $1,882,778 for the quarter ended September
30, 1994 compared to $1,823,544 for the same period in 1993; or an increase
of 3.24%. Earnings per share for the third quarter of 1994 were $.75
compared to $.73 for the same quarter in 1993.
Net interest income after provision for loan losses was up $969,825 or 13.6%
for the quarter ending September 30, 1994 compared to the same period in 1993
due to an increase in average earning assets due to the acquisition of
approximately $18 million in earning assets from Security Federal. The net
interest margin for the quarter declined from 5.17% to 5.13% for 1993 and 1994
due to a decrease in the yields earned on loans attributable to the decrease of
the prime rate in 1993 and the repricing of variable loans to lower rates in
the later part of 1993, without a comparable drop in the cost of deposits.
The provision for possible loan losses decreased $140,524 for the quarter
compared to previous year's quarter. The most significant increase in
interest income was attributable to interest on loans which increased
$1,218,467 or 14%. Interest expense increased $497,057 in quarter ended
Septemer 1994 compared to same period in 1993 mainly due to acquisition of
Security Federal deposits.
Non-interest income for quarter ended September 30,1994 is $2,315,355 compared
to $2,229,529 for same period in 1993 or an increase of 3.8%. The increase
is mainly due to increased service charges relating to addition of deposits
from Security Federal. Non-interest expenses for the quarter are
$7,733,313 and $6,830,446 for September 30, 1994 and 1993, respectively. The
increase is due to growth in salaries for personnel acquired through the
Security Federal purchase and related operating expenses for the three
locations purchased.
<PAGE>
Allowance for Loan Losses:
In evaluating the adequacy of the allowance for loan losses, among the
issues the Company examines are current economic conditions, results of
quantitative analysis of the quality of commercial loans and commercial
real estate loans, and the historical rate of charge-offs on all loan
types. The provision for loan losses is the amount charged against current
earnings which management believes is necessary to maintain the reserve at
an adequate level at a point in time, giving consideration to potential
problem credits, the collateral adequacy of loans, net charge-offs, asset
quality measure, size of the loan portfolio and general trends. The
provision for the nine months ending September 30, 1994, decreased $948,267 from
the same period in the prior year which is reflective of the improvement
in the quality of the loan portfolio, decrease in non-performing loans and
the net recovery of charge offs at September 30, 1994.
[CAPTION]
September September
1994 1993
--------- ---------
[S] [C] [C]
Balance, January 1 $ 6,216,854 $ 6,462,925
Provision for Loan losses 1,475,628 2,423,895
--------- ---------
7,692,482 8,886,820
--------- ---------
Charge-offs ( 802,620) (3,209,345)
Recoveries 815,005 311,210
---------- ----------
Net (charge-off)/recovery 12,385 (2,898,135)
---------- ----------
Balance June 30 $ 7,704,867 $ 5,988,685
========= =========
[CAPTION]
September September
1994 1993
----------- -----------
[S] [C] [C]
Loan Loss Analysis:
Net loans-Average $ 436,366,262 $400,207,291
Net loans-Quarter End 461,764,707 413,984,812
Net Charge-Offs/(Recoveries) (12,385) 2,898,135
Allowance for Loan Losses 7,704,867 5,988,685
<PAGE>
Ratios:
Net Charge-Offs/(Recoveries) to:
Net Loans-Average (0.002%) 0.72%
Allowance for Loan Losses (0.16%) 48.39%
Allowance for Loan Losses to:
Net Loans-Quarter End 1.67% 1.45%
Non-Performing Loans 469.29% 161.46%
Non-Performing Loans to:
Net Loans-Quarter End 0.36% .90%
Net Loans-Average 0.37% .92%
[CAPTION]
The following table shows the principal amounts of nonaccrual loans at
September 30 for the years indicated.
September September
1994 1993
[S] [C] [C]
Non-Performing Loans
Non-Accruing $ 274,749 $ 1,841,100
Accruing Loans Past Due 1,367,047 1,868,210
90 Days or More ----------- -----------
Total Non-Performing Loans $ 1,641,796 $ 3,709,310
=========== ===========
<PAGE>
<PAGE>
Statistical Summary
SEPTEMBER 30, 1994
[CAPTION]
1994
AVERAGE
INCOME BALANCE
OR SHEET YIELDS/
EXPENSE AMOUNTS RATES
------- ------- -------
[S] [C] [C] [C]
Earnings Assets
Loans and leases, net
of unearned income 27,729,574 436,366,262 8.47%
Interest bearing bank
balances and federal
funds sold 409,824 15,278,708 3.58%
Taxable securities 7,491,821 192,581,561 5.19%
Nontaxable securities 1,935,584 42,538,730 9.19%TE
---------- ----------- ------
Total investment and
trading securities 9,427,405 235,120,291 5.91%TE
Total earning assets 37,566,803 686,765,261 7.49%TE
Cash and due from banks 43,499,347
Other assets, less allowance
for loan losses 27,039,640
-----------
Total assets 757,304,248
===========
[S] [C] [C] [C]
Interest bearing liabilities:
Interest bearing demand
deposit accounts 2,825,396 165,492,077 2.28%
Savings accounts 1,694,497 101,212,430 2.23%
Time Deposits 8,540,175 296,600,524 3.84%
---------- ----------- -------
Total interest
bearing deposits 13,060,068 563,305,031 3.09%
1994
AVERAGE
INCOME BALANCE
OR SHEET YIELDS/
EXPENSE AMOUNTS RATES
------- ------- -------
Other costing liabilities 256,615 7,523,199 4.55%
---------- ----------- -------
Total interest
bearing liabilities 13,316,683 570,828,230 3.11%
[S] [C]
Non-interest bearing sources:
Non-interest bearing
deposits 108,921,576
Other liabilities 6,880,088
Shareholders' equity 70,674,354
-----------
Total liabilities and shareholders'
equity 757,304,248
===========
[S] [C] [C]
Net interest income/Net
interest margin 24,250,120 4.90%TE
<PAGE>
<PAGE>
Statistical Summary
SEPTEMBER 30, 1993
[CAPTION]
1993
AVERAGE
INCOME BALANCE
OR SHEET YIELDS/
EXPENSE AMOUNTS RATES
------- ------- -------
[S] [C] [C] [C]
Earnings Assets
Loans and leases, net
of unearned income 25,660,820 400,207,291 8.55%
Interest bearing bank
balances and federal
funds sold 532,295 21,530,916 3.30%
Taxable investment/trading
securities 7,365,698 173,088,498 5.67%
Nontaxable investment
securities 1,630,282 33,322,137 9.88%TE
---------- -----------
Total investment and
trading securities 8,995,980 206,410,635 6.35%TE
Total earning assets 35,189,095 628,148,843 7.64%TE
Cash and due from banks 42,142,380
Other assets, less allowance
for loan losses 24,547,697
-----------
Total assets 694,838,920
===========
Interest bearing liabilities:
Interest bearing demand
deposit accounts 2,914,883 172,939,847 2.25%
Savings accounts 1,478,694 85,688,402 2.30%
Time Deposits 7,660,175 271,945,098 3.76%
---------- ----------- -------
Total interest
bearing deposits 12,053,752 530,573,348 3.03%
[CAPTION]
1993
AVERAGE
INCOME BALANCE
OR SHEET YIELDS/
EXPENSE AMOUNTS RATES
------- ------- -------
[S] [C] [C] [C]
Other costing liabilities 73,119 3,410,986 2.86%
---------- ----------- -------
Total interest
bearing liabilities 12,126,871 533,984,334 3.02%
[S] [C] [C] [C]
Non-interest bearing sources:
Non-interest bearing
deposits 87,588,026
Other liabilities 6,506,196
Shareholders' equity 66,760,364
-----------
Total liabilities and shareholders'
equity 694,838,920
===========
[C] [C]
Net interest income/Net
interest margin 23,062,224 4.90%TE
<PAGE>
<PAGE>
Liquidity and Interest Rate Sensitivity Management
The primary functions of asset/liability management are to assure adequate
liquidity and maintain an appropriate balance between interest sensitive
earning assets and interest bearing liabilities. Liquidity management
involves the ability to meet the cash flow requirements of customers who
may be either depositors wanting to withdraw or borrowers needing assurance
that sufficient funds will be available to meet their credit needs.
Interest rate sensitivity management seeks to avoid fluctuating net
interest margins and to provide for a consistent growth of net interest
income through periods of changing interest rates.
Available for sale securities, particularly those of shorter maturities,
are the principal source of asset liquidity. Securities maturing in one
year or less amounted to $70,644,000 at September 30, 1994, representing 30.84%
of the securities portfolio. Other types of assets such as interest
bearing deposits in other banks are sources of liquidity. Loans maturing
within one year represented 63.71% of the total loans, net of unearned
income, for September 30, 1994. On September 30, 1994, there were $367,315,000
in interest earning assets which will mature within one year while
$484,020,000 in interest bearing liabilities will mature or will be
repriced within one year, which results in a liability sensitive gap of
$116,705 million or 31.77%. Management believes that this range can be
effectively managed against interest rate movements while allowing
sufficient flexibility to take advantage of opportunities presented by
varying interest rate environments. The following table summarizes the
Company's gap position at September 30, 1994:
<PAGE>
Rate Sensitive Balance Sheet
September 30, 1994
[CAPTION]
(In Thousands)
ONE YEAR OVER
LESS THAN TO FIVE FIVE
ONE YEAR YEARS YEARS TOTAL
--------- --------- ----- -----
[S] [C] [C] [C] [C]
ASSETS
Securities 70,644 125,049 33,409 229,102
Loans 296,403 133,122 32,240 461,765
Interest Bearing Balances
with Banks 268 268
Other Assets 74,087 74,087
------- ------- ------- -------
Total Assets 367,315 258,171 139,736 765,222
======= ======= ======= =======
LIABILITIES
Non-Interest Bearing
Transaction Accounts 119,992 119,992
Interest Bearing
Transaction Accounts 145,469 145,469
Money Market and Savings 102,960 102,960
Time Deposits
<100,000 151,953 45,290 45 197,288
Time Deposits
>100,000 46,250 9,947 106 56,303
Individual Retirement
Account 21,419 21,894 372 43,685
Other Borrowed Funds 15,969 3,728 189 19,886
Other Liabilities 7,821 7,821
Equity 71,818 71,818
------- ------- ------- -------
Total Liabilities and
Equity 484,020 80,859 200,343 765,222
======= ======= ======= =======
GAP (116,705) 177,312 (60,607) 0
GAP/Assets (31.77%) 68.68% (9.69%) 0.00%
Cumulative GAP (116,705) 60,607 0 0
Cumulative GAP/Assets (31.77)% 9.69% 0.00% 0.00%
Historically, the overall liquidity of the Company has been enhanced by a
significant aggregate of core deposits. The Company's deposit base has
changed from a significant dependence on negotiable certificates of deposit
to increased dependence on short-term interest bearing accounts which tends
to increase the Company's negative GAP position. As a result of this shift
in types of deposits, the Company is attempting to shorten the maturity of
securities and convert loans, where possible, to a floating rate.
<PAGE>
Capital Resources
Retained earnings through operations have been the primary source of
capital over the past three months. The ratio of shareholders equity to
total assets was 9.38% as of September 30, 1994, compared to 9.73% as of
December 31, 1993, and 9.61% as of September 30, 1993.
Total shareholders' equity of the Company was $71,818,021 and $69,923,713
for September 30, 1994 and December 31, 1993, respectively. This represented
an increase of $1,894,308 or 2.71%. Guidelines define a well capitalized
bank as one whose capital to risk-based assets is at least 10%, or 6% Tier
1 capital ratio, and a 5% leverage ratio.
The table below shows the capital ratios of the Company at the dates
indicated.
[CAPTION]
(In Thousands)
September 30 December 31
1994 1993
------- --------
[S] [C] [C]
Total Tier 1 Capital $ 68,187 $ 63,425
Total Tier 2 Capital 5,729 5,355
------ ------
Total Qualifying Capital 73,916 68,780
====== ======
Risk-weighted assets on balance sheet,
net of intangibles 457,431 426,964
Excess allowance for loan losses (1,976) ( 1,108)
Risk-weighted off balance sheet exposure 932 1,422
------- -------
Total Risk-Weighted Assets Inclusive
of Off Balance Sheet Exposure and
Net of Allowance 456,387 427,278
======= =======
Tier 1 Capital Ratio 14.94% 14.84%
Total Capital Ratio 16.20% 16.10%
Leverage Ratio 9.02% 9.48%
Management recognizes the importance of maintaining a strong capital base.
As the above ratios indicate, the Company exceeds the requirements for a
well capitalized bank.
Book value per share was $28.57 and $27.31 at September 30, 1994 and 1993,
respectively. The 1993 amount has been restated for a stock dividend issued in
the third quarter of 1994. Cash dividends were raised to $.24 per quarter, up
from $.23 per share during the same quarter in 1993.
The Company's capital policy is to evaluate future needs based on growth,
earnings trends and anticipated acquisitions.
<PAGE>
Part II. OTHER INFORMATION
Item 1. Legal Proceedings
There were no material proceedings pending at September 30
1994, against the registrant or its subsidiary.
Item 6(b) Reports on Form 8-K - The Company did not file Form 8-K in the
quarter ending September 30, 1994.
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
THE PEOPLES HOLDING COMPANY
---------------------------
Registrant
---------------------------
DATE: November 14, 1994 John W. Smith
President, Chief Executive
and Financial Officer
---------------------------
DATE: November 14, 1994 E. W. Conwill
Vice President
<TABLE> <S> <C>
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<NAME> THE PEOPLES HOLDING COMPANY
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