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 June 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 July 28, 1994
<PAGE>
THE PEOPLES HOLDING COMPANY
INDEX
PART 1. FINANCIAL INFORMATION PAGE
Item 1. FINANCIAL STATEMENTS (UNAUDITED)
Consolidated Balance Sheets -
June 30, 1994 and December 31, 1993................3
Consolidated Statements of Income - Six Months
Ended June 30, 1994 and 1993.......................5
Consolidated Statements of Income - Three Months
Ended June 30, 1994 and 1993.......................7
Consolidated Statements of Cash Flows
Six Months Ended June 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..................................27
Item 4. Submission of matters to a vote of shareholders....27
Item 6.(b) Reports on Form 8-K..............................27
Signatures..................................................28
<PAGE>
THE PEOPLES HOLDING COMPANY AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
[CAPTION]
JUNE 30 DECEMBER 31
1994 1993
____________ ___________
(Unaudited) (Note 1)
[S] [C] [C]
Assets
Cash and due from banks $ 46,563,587 $ 35,956,431
Federal Funds Sold 0 8,000,000
----------- -----------
46,563,587 43,956,431
Interest bearing balances with banks 560,688 77,887
Securities (Market value-
$238,565,457 and $234,979,483 at
June 30, 1994 and December 31, 1993) 238,304,623 230,904,295
Loans 457,324,756 427,416,747
Unearned Income ( 10,442,439) ( 9,835,772)
Allowance for loan losses ( 7,383,503) ( 6,216,854)
----------- -----------
Net Loans 439,498,814 411,364,121
Bank premises and equipment 16,142,355 15,537,825
Other assets 20,179,984 16,669,428
___________ ___________
Total Assets $ 761,250,051 $ 718,509,987
=========== ===========
[S] [C] [C]
Liabilities and Shareholder's Equity
Deposits:
Non-interest bearing $ 111,291,290 $ 99,140,347
Interest bearing 564,011,525 537,598,201
----------- -----------
Total Deposits 675,302,815 636,738,548
Treasury tax and loan account 3,125,607 4,000,000
Notes and debentures payable 4,968,743 59,797
Other liabilities 6,771,901 7,787,929
----------- -----------
Total Liabilities 690,169,066 648,586,274
<PAGE>
Shareholders' Equity
Common Stock, $5 par value-
4,200,000 shares authorized
2,417,829 shares issued and
outstanding at June 30, 1994
and December 31, 1993 12,089,145 12,089,145
Capital surplus 30,000,000 30,000,000
Retained earnings 30,679,135 27,834,568
Adjustment to unrealized losses on
available-for-sale securities, net
of tax (1,687,295) 0
----------- -----------
Total Shareholders' Equity 71,080,985 69,923,713
----------- -----------
Total Liabilities and
Shareholders' Equity $ 761,250,051 $ 718,509,987
=========== ===========
[FN]
See Notes to Consolidated Financial Statements
<PAGE>
<PAGE>
THE PEOPLES HOLDING COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
[CAPTION]
SIX MONTHS ENDED JUNE 30
1994 1993
---- ----
(Unaudited)
[S] [C] [C]
Interest Income
Interest and fees on loans $ 17,788,595 $ 16,938,308
Interest on balances with banks 83,568 39,829
Interest on federal funds sold 280,204 326,979
Interest on securities:
Taxable 4,894,791 4,895,576
Tax-exempt 1,289,312 1,084,428
---------- ----------
Total interest income 24,336,470 23,285,120
Interest Expense
Interest on time deposits of
$100,000 or more 1,002,551 830,180
Interest on other deposits 7,528,000 7,113,795
Interest on borrowed funds 150,135 43,956
---------- ----------
Total interest expense 8,680,686 7,987,931
---------- ----------
Net interest income 15,655,784 15,297,189
Provision for possible loan losses 983,701 1,791,444
---------- ----------
Net interest income after
provision for possible
loan losses 14,672,083 13,505,745
Other income
Service charges 2,749,478 2,423,081
Fees and commission 801,227 773,143
Trust department income 228,840 194,620
Trading account income 0 137,438
Net gain on investments 115,603 89,802
Other operating income 909,726 710,152
---------- ----------
Total other income 4,804,874 4,328,236
Other Expenses
Salaries and employee benefits 7,861,987 7,430,083
Occupancy of bank premises 999,768 854,201
Furniture and equipment depreciation,
rental cost, servicing, etc.. 575,233 614,153
Other operating expense 5,175,813 4,361,735
---------- ----------
Total other expenses 14,612,801 13,260,172
----------- -----------
Income before income taxes 4,864,156 4,573,809
Income taxes 883,209 1,196,595
---------- ----------
Income before cumulative effect of
changes in accounting principles 3,980,947 3,377,214
Cumulative effect of changes in
accounting principle, net of income
taxes 0 522,518
---------- ----------
Net income $ 3,980,947 $ 3,899,732
========== ==========
[CAPTION]
1994 1993
---- ----
[S] [C] [C]
Earnings per share:
Income before cumulative effect
of changes in accounting
principles $ 1.65 $ 1.39
Cumulative effect of changes in
accounting principles .00 .22
---- ----
Total earnings per share $ 1.65 $ 1.61
Cash dividend per share $ .47 $ .45
Earnings per share data for 1994 and 1993 are based on 2,417,829 shares
outstanding as of June 30, 1994 and December 31, 1993, respectfully. 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 JUNE 30
1994 1993
---- ----
(Unaudited)
[S] [C] [C]
Interest Income
Interest and fees on loans $ 9,318,203 $ 8,634,840
Interest on balances with banks 62,180 14,478
Interest on federal funds sold 110,062 119,619
Interest on securities:
Taxable 2,558,197 2,525,836
Tax-exempt 620,619 530,828
---------- ----------
Total interest income 12,669,261 11,825,601
Interest Expense
Interest on time deposits of
$100,000 or more 489,082 422,792
Interest on other deposits 3,897,824 3,571,760
Interest on borrowed funds 80,090 13,680
---------- ----------
Total interest expense 4,466,996 4,008,232
---------- ----------
Net interest income 8,202,265 7,817,369
Provision for possible loan losses 491,850 632,451
---------- ----------
Net interest income after
provision for possible
loan losses 7,710,415 7,184,918
Other income
Service charges 1,404,442 1,277,226
Fees and commission 422,670 352,329
Trust department income 114,420 87,475
Trading account income 0 1,719
Net gains on investments 112,813 89,202
Other operating income 310,074 424,561
---------- ----------
Total other income 2,364,419 2,232,512
Other Expenses
Salaries and employee benefits 4,003,725 3,816,009
Occupancy of bank premises 504,404 438,952
Furniture and equipment depreciation,
rental cost, servicing, etc.. 279,208 255,291
Other operating expense 2,735,703 2,315,499
---------- ----------
Total other expenses 7,523,040 6,825,751
----------- -----------
Income before income taxes 2,551,794 2,591,679
Income taxes 497,095 562,832
---------- ----------
Income before cumulative effect of
changes in accounting principles 2,054,699 2,028,847
Cumulative effect of changes in
accounting principle, net of income
taxes 0 0
---------- ----------
Net income $ 2,054,699 $ 2,028,847
========== ==========
[CAPTION]
1994 1993
---- ----
[S] [C] [C]
Earnings per share:
Income before cumulative effect
of changes in accounting
principles $ .85 $ .84
Cumulative effect of changes in
accounting principles .00 .00
---- ----
Total earnings per share $ .85 $ .84
Cash dividend per share $ .24 $ .23
Earnings per share data for 1994 and 1993 are based on 2,417,829 shares
outstanding as of June 30, 1994 and December 31, 1993, respectfully. Cash
dividend per share is based on actual amounts declared.
[FN]
See Notes to Consolidated Financial Statements.
<PAGE>
THE PEOPLES HOLDING COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
[CAPTION]
SIX MONTHS ENDED JUNE 30
1994 1993
---- ----
(Unaudited)
[S] [C] [C]
Operating Activities
Net Income $ 3,980,947 $ 3,899,732
Adjustments to reconcile net
income to net cash provided
by operating activities:
Provision for loan losses 983,701 1,791,444
Provision for depreciation and
amortization 817,931 693,395
Net amortization accretion of
securities' premiums/discounts 806,670 337,224
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) (89,802)
Increase (decrease)in other liabilities (1,016,028) (284,755)
Deferred income tax (360,940) (693,603)
Gain on sale of fixed assets (1,347) (2,625)
Increase in other assets (1,980,094) (870,711)
------------ ------------
Net Cash Provided by Operating
Activities 3,228,049 9,720,204
Investment Activities
Net increase in balances with
other banks (482,801) 94,115
Proceeds from sales of securities
held for sale 4,301,294 91,190
Proceeds from maturities/calls of
securities held to maturity 1,062,199
Proceeds from maturities/calls of
securities held for sale 39,784,414 50,853,384
Purchase of securities held to
maturity (3,033,588)
Purchase of securities held for sale (52,875,033) (76,769,970)
Net increase in loans (29,638,186) (23,372,017)
Proceeds from sale of fixed assets 2,505 2,625
Purchase of premises and equipment (1,204,137) (1,020,532)
----------- ----------
Net cash used in Investment
Activities (42,083,333) ( 50,121,205)
[CAPTION]
1994 1993
---- ----
[S] [C] [C]
Financing Activities
Net increase in demand and savings
deposits 21,903,303 22,356,295
Net increase (decrease) in time
deposits 16,660,964 (16,127,148)
Net increase (decrease) in short-
term borrowed funds (874,393) 487,120
Increase (decrease) in long-term debt 4,908,946 (10,909)
Acquisition of Sunburst banks (2,251,330)
Cash dividends paid (1,136,380) (1,088,023)
------------ -----------
Net Cash Provided by Financing
Activities 41,462,440 35,620,301
------------ -----------
Increase (decrease) in Cash
and Cash Equivalents 2,607,156 (4,780,700)
Cash and Cash Equivalents at
beginning of period 43,956,431 57,062,966
----------- -----------
Cash and Cash Equivalents at
end of period $ 46,563,587 $ 52,282,266
=========== ===========
Cash paid for:
Interest expense $ 8,310,530 $ 7,890,882
Income taxes 745,232 1,334,000
Non-cash transactions:
Transfer of loans to other real
estate $ 519,792
Unrealized loss on securities
held as available for sale:
Decrease in securities $ 2,556,507
Increase in deferred taxes $ 869,212
Decrease in equity $ 1,687,295
[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.
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 June 30, 1994:
[S] [C]
Held to maturity (amortized cost) $ 41,034,250
Available for sale (estimated fair value) 197,270,373
-------------
Total securities $ 238,304,623
=============
The estimated fair value of securities held to maturity at June 30, 1994
was $41,295,084.
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:
[S] [C]
Current $ (68,447)
Deferred (2,470,948)
-----------
$ (2,539,395)
===========
[CAPTION]
The components of income tax expense (credits) are presented below:
[S] [C]
Current $ 2,061,759
Deferred (1,178,550)
---------
$ 883,209
=========
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:
[S] [C]
Federal tax expense at statutory rate $1,653,811
Add (deduct) effect of:
Tax-exempt interest income ( 401,357)
Amortization of intangible assets 19,850
Dividends received deduction ( 27,654)
Other items-net ( 361,441)
----------
$ 883,209
==========
Deferred tax assets resulted largely from temporary differences arising
from 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 six 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 $761,250,051 on June 30, 1994, or 5.95% for the six
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 $46,563,587 on
June 30, 1994, or an increase of $10,607,156; while Federal Funds sold
decreased $8,000,000 since December 31, 1993. Loans, less unearned income,
increased $29,301,342 or 7.02% due primarily to assumption of loans from
Security Federal Savings and Loan Association. Securities grew from
$230,904,295 on December 31, 1993, to $238,304,623 on June 30, 1994, which
includes an unrealized loss on securities held for sale at June 30, 1994
of $2,556,507. 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 $319,147,270 on June 30, 1994, while
total deposits for the first six months of 1993 grew from $636,738,548 on
December 31, 1993 to $675,302,815, or an increase of $38,564,267.
The equity capital to total assets ratio was 9.73% and 9.34% for December
31, 1993 and June 30, 1994, respectively.
Results of Operations-Six months ended June 30, 1994 compared to 1993
The Company reported net income of $3,980,947 as of June 30, 1994 compared
to $3,899,732 for the same period in 1993; or an increase of 2.08%.
Earnings per share for the first six months of 1994 were $1.65 compared to
$1.61 for the first six 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 $ .22 of the six months earning per share on net income of $1.39 for
the six month period ending June 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 $1,166,338 or
8.6% for the period ending June 30, 1994 compared to the same period in
1993 due to an increase in average earning assets of 10.48%. The
acquisition of approximately $18 million in earning assets from Security
Federal accounted for 29% of the increase. The fully tax-equivalent net
interest margin decreased 33 basis points in 1994 to 4.81% compared to
5.14% for six months ending June 30, 1993. 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 June 1994 on the loan
portfolio from 8.64% in 1993 to 8.31% in 1994. At June 30, 1994, $284
million in loans or 64% of the loan portfolio is subject to repricing in
the next twelve months.
Total interest expense was $8,680,686 for the six months ending June 1994,
compared to $7,987,931 for same period in 1993 or an increase of $692,755.
Average total interest bearing deposits increased $42,086,595 or 8% while
the interest rate yield paid on interest bearing deposits declined
slightly to 3.02% in 1994 from 3.06% for same period in 1993.
The net interest spread was 4.27% for 1994 compared to 4.69% for 1993 due
to the decrease in yields on loans and securities coupled with little
change in the yield paid on interest bearing liabilities.
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 six months of 1994 increased 11.01% or
$476,638 compared to the same period in 1993. The most significant increase
in non-interest income is attributable to service charges which increased
$326,397 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 expense control. Non-interest
expenses have increased from $13,260,172 for six months ending June 30,
1993 to $14,612,801 in 1994 or 10.20%; and the efficiency ratio has
increased from 83.22% to 88.72% for 1993 and 1994, respectfully. The
efficiency ratio is non-interest expenses divided by the tax-equivalent net
interest income plus non-interest income. The increase in non-interest
expenses and the efficiency ratio is a combination between the acquisition
of the three locations of the Security Federal Savings and Loan Association
and related personnel and expenses and the decline in the yield earned on
loans and securities due to decline of interest rates in 1993.
Results of Operations-Three months ended June 30, 1994 compared to 1993
The Company reported net income of $2,054,699 for the quarter ended June
30, 1994 compared to $2,028,847 for the same period in 1993; or an increase
of 1.27%. Earnings per share for the second quarter of 1994 were $.85
compared to $.84 for the second quarter in 1993.
Net interest income after provision for loan losses was up $525,497 or 7.3%
for the quarter ending June 30, 1994 compared to the same period in 1993
due to an increase in average earning assets for the quarter of 10.52%.
The acquisition of approximately $18 million in earning assets from
Security Federal accounted for 28% of the increase. The net interest margin
for the quarter declined from 4.98% to 4.72% 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 $140,601 for the quarter
compared to previous year's quarter. The most significant increase in
interest income was attributable to interest on loans which increased
$683,363 or 7.9%. Interest expense increased $458,764 in quarter ended
June 1994 compared to same period in 1993 mainly due to acquisition of
Security Federal deposits.
Non-interest income for quarter ended June 30,1994 is $2,364,419 compared
to $2,232,512 for same period in 1993 or an increase of 5.9%. The increase
is mainly due to increased service charges relating to addition of deposits
from Security Federal. Non-interest expenses for the quarter are
$7,523,040 and $6,825,751 for June 30, 1994 and 1993, respectfully. 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 six months ending June 30, 1994, decreased $140,601 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 June 30, 1994.
[CAPTION]
June June
1994 1993
--------- ---------
[S] [C] [C]
Balance, January 1 $ 6,216,854 $ 6,462,925
Provision for Loan losses 986,701 1,791,444
--------- ---------
7,203,555 8,254,369
--------- ---------
Charge-offs ( 558,488) (3,048,271)
Recoveries 738,436 258,989
---------- ----------
Net (charge-off)/recovery 179,948 (2,789,282)
---------- ----------
Balance June 30 $ 7,383,503 $ 5,465,087
========= =========
[CAPTION]
June June
1994 1993
----------- -----------
[S] [C] [C]
Loan Loss Analysis:
Net loans-Average $ 428,109,052 $395,316,462
Net loans-Quarter End 446,882,317 409,310,339
Net Charge-Offs/(Recoveries) (179,948) 2,789,282
Allowance for Loan Losses 7,383,503 5,465,087
<PAGE>
Ratios:
Net Charge-Offs/(Recoveries) to:
Net Loans-Average (0.04%) 0.71%
Allowance for Loan Losses (2.44%) 51.04%
Allowance for Loan Losses to:
Net Loans-Quarter End 1.65% 1.34%
Non-Performing Loans 306.28% 138.60%
Non-Performing Loans to:
Net Loans-Quarter End 0.54% .96%
Net Loans-Average 0.56% 1.00%
[CAPTION]
The following table shows the principal amounts of nonaccrual loans at June
30 for the years indicated.
June June
1994 1993
[S] [C] [C]
Non-Performing Loans
Non-Accruing $ 324,461 $ 2,198,490
Accruing Loans Past Due 2,086,224 1,744,514
90 Days or More ----------- -----------
Total Non-Performing Loans $ 2,410,685 $ 3,943,004
=========== ===========
<PAGE>
<PAGE>
Statistical Summary
June 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 17,788,595 428,109,052 8.31%
Interest bearing bank
balances and federal
funds sold 363,772 20,902,026 3.48%
Taxable securities 4,894,791 193,418,088 5.10%
Nontaxable securities 1,289,312 42,352,939 9.22%TE
---------- ----------- ------
Total investment and
trading securities 6,184,103 235,771,027 5.81%TE
Total earning assets 24,336,470 684,782,105 7.30%TE
Cash and due from banks 44,042,919
Other assets, less allowance
for loan losses 26,476,747
-----------
Total assets 755,301,771
===========
[S] [C] [C] [C]
Interest bearing liabilities:
Interest bearing demand
deposit accounts 1,901,503 170,350,174 2.23%
Savings accounts 1,106,737 99,981,854 2.21%
Time Deposits 5,522,311 294,830,125 3.75%
---------- ----------- -------
Total interest
bearing deposits 8,530,551 565,162,153 3.02%
1994
AVERAGE
INCOME BALANCE
OR SHEET YIELDS/
EXPENSE AMOUNTS RATES
------- ------- -------
Other costing liabilities 150,135 6,945,775 4.27%
---------- ----------- -------
Total interest
bearing liabilities 8,680,686 572,107,928 3.03%
[S] [C]
Non-interest bearing sources:
Non-interest bearing
deposits 106,219,679
Other liabilities 6,596,289
Shareholders' equity 70,377,875
-----------
Total liabilities and shareholders'
equity 755,301,771
===========
[S] [C] [C]
Net interest income/Net
interest margin 15,655,784 4.77%TE
<PAGE>
<PAGE>
Statistical Summary
June 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 16,938,309 395,316,462 8.64%
Interest bearing bank
balances and federal
funds sold 366,808 25,699,050 2.88%
Taxable investment/trading
securities 4,828,683 165,097,268 5.85%
Nontaxable investment
securities 1,151,320 33,688,555 10.30%TE
---------- -----------
Total investment and
trading securities 5,980,003 198,785,823 6.60%TE
Total earning assets 23,285,120 619,801,335 7.75%TE
Cash and due from banks 42,227,069
Other assets, less allowance
for loan losses 24,426,487
-----------
Total assets 686,454,891
===========
Interest bearing liabilities:
Interest bearing demand
deposit accounts 1,949,153 173,633,679 2.26%
Savings accounts 939,702 81,721,370 2.32%
Time Deposits 5,055,120 267,720,509 3.81%
---------- ----------- -------
Total interest
bearing deposits 7,943,975 523,075,558 3.06%
[CAPTION]
1993
AVERAGE
INCOME BALANCE
OR SHEET YIELDS/
EXPENSE AMOUNTS RATES
------- ------- -------
[S] [C] [C] [C]
Other costing liabilities 43,956 3,166,153 2.80%
---------- ----------- -------
Total interest
bearing liabilities 7,987,931 526,241,711 3.06%
[S] [C] [C] [C]
Non-interest bearing sources:
Non-interest bearing
deposits 87,125,518
Other liabilities 6,873,673
Shareholders' equity 66,213,989
-----------
Total liabilities and shareholders'
equity 686,454,891
===========
[C] [C]
Net interest income/Net
interest margin 15,297,189 5.13%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 $56,972,000 at June 30, 1994, representing 23.91%
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 63.65% of the total loans, net of unearned
income, for June 30, 1994. On June 30, 1994, there were $341,981,000 in
interest earning assets which will mature within one year while
$494,909,000 in interest bearing liabilities will mature or will be
repriced within one year, which results in a liability sensitive gap of
$152,928 million or 44.72%. 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 June 30, 1994:
<PAGE>
Rate Sensitive Balance Sheet
June 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 56,972 109,348 71,985 238,305
Loans 284,448 141,359 21,075 446,882
Interest Bearing Balances
with Banks 561 561
Other Assets 75,502 75,502
------- ------- ------- -------
Total Assets 341,981 250,707 168,562 761,250
======= ======= ======= =======
LIABILITIES
Non-Interest Bearing
Transaction Accounts 111,291 111,291
Interest Bearing
Transaction Accounts 159,595 159,595
Money Market and Savings 100,467 100,467
Certificates of Deposit
<100,000 159,131 45,965 120 205,216
Certificates of Deposit
>100,000 50,603 4,029 54,632
Individual Retirement
Account 21,140 22,438 524 44,102
Other Borrowed Funds 3,973 3,755 366 8,094
Other Liabilities 6,772 6,772
Equity 71,081 71,081
------- ------- ------- -------
Total Liabilities and
Equity 494,909 76,187 190,154 761,250
======= ======= ======= =======
GAP (152,928) 174,520 (21,592) 0
GAP/Assets (44.72%) 69.61% (12.81%) 0.00%
Cumulative GAP (152,928) 21,592 0 0
Cumulative GAP/Assets (44.72)% 8.61% 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.
Interest rate sensitivity varies with different types of interest earning
assets and interest bearing liabilities. Overnight federal funds on which
rates change daily and loans which are tied to the prime lending rate
differ considerably from long-term investment securities and fixed rate
loans. Similarly, time deposits over $100,000 and money market
certificates are much more interest rate sensitive than savings accounts.
The shorter-term interest rate sensitivities are the key to measurement of
the interest rate sensitivity gap, or excess interest sensitive earning
assets over interest bearing liabilities.
<PAGE>
<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 9.33% as of June 30, 1994, compared to 9.73% as of
December 31, 1993, and 9.60% as of June 30, 1993.
Total shareholders' equity of the Company was $71,080,985 and $69,923,713
for June 30, 1994 and December 31, 1993, respectively. This represented
an increase of $1,157,272 or 1.66%. 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)
June 30 December 31
1994 1993
------- --------
[S] [C] [C]
Total Tier 1 Capital $ 67,951 $ 63,425
Total Tier 2 Capital 5,571 5,355
------ ------
Total Qualifying Capital 73,522 68,780
====== ======
Risk-weighted assets on balance sheet,
net of intangibles 445,292 426,964
Excess allowance for loan losses (1,813) ( 1,108)
Risk-weighted off balance sheet exposure 875 1,422
------- -------
Total Risk-Weighted Assets Inclusive
of Off Balance Sheet Exposure and
Net of Allowance 444,354 427,278
======= =======
Tier 1 Capital Ratio 15.31% 14.84%
Total Capital Ratio 16.56% 16.10%
Leverage Ratio 9.06% 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 $29.39 and $27.86 at June 30, 1994 and 1993,
respectively. 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 June 30
1994, against the registrant or its subsidiary.
Item 4. Submission of Matters to a Vote of Shareholders
The Annual Meeting of the Shareholders of The Peoples Holding Company was
held on April 12, 1994, for the purpose of electing five members to the
board of directors for a three year term and to ratify the appointment of
the independent auditors. Proxies for the meeting were solicited pursuant
to Section 14(a) of the Securities Exchange Act of 1934.
Election of Directors For Against Abstain
George H. Booth II 1,833,948 16,842 567,039
Frank B. Brooks 1,837,189 13,601 567,039
Robert C. Leake 1,840,350 10,440 567,039
David P. Searcy 1,840,350 10,440 567,039
J. Heywood Washburn 1,839,809 10,981 567,039
Ratify appointment of
Ernst & Young as the
Independent Auditors
for 1994 1,849,610 102 568,117
Item 6(b) Reports on Form 8-K - The Company filed two reports on Form 8-K
during the quarter ended June 30, 1994.
A report on Form 8-K was filed April 25, 1994 to report Item 2: Acquisition
of Assets on April 15, 1994. The Peoples Holding Company assumed the
deposits and purchased selected assets of three locations of Security
Federal Savings and Loan Association. Upon acquisition, the bank's assets
increased from approximately $760 million to $790 million.
A report on Form 8-K was filed June 20, 1994 to report Item 5: Other
Events. The Board of Directors voted to pay a 4% stock dividend to
shareholders of record June 30, 1994 to be paid July 15, 1994.
No financial statements were filed as a part of either report.
<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: July 29, 1994 John W. Smith
President, Chief Executive
and Financial Officer
---------------------------
DATE: July 29, 1994 E. W. Conwill
Vice President
