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, 1995
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, 2,604,760 shares outstanding
as of November 1, 1995
<PAGE>
THE PEOPLES HOLDING COMPANY
INDEX
PART 1. FINANCIAL INFORMATION PAGE
Item 1. FINANCIAL STATEMENTS (UNAUDITED)
Consolidated Balance Sheets -
September 30, 1995 and December 31,1994.... ......3
Consolidated Statements of Income - Nine Months
Ended September 30, 1995 and 1994.................5
Consolidated Statements of Income - Three Months
Ended September 30, 1995 and 1994.................7
Consolidated Statements of Cash Flows
Nine Months Ended September 30, 1995 and 1994.....9
Notes to Consolidated Financial Statements............11
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations..............13
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.................................17
Item 6.(b) Reports on Form 8-K.............................17
Signatures.................................................18
<PAGE>
THE PEOPLES HOLDING COMPANY AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
[CAPTION]
SEPTEMBER 30 DECEMBER 31
1995 1994
____________ ___________
(Unaudited) (Note 1)
[S] [C] [C]
Assets
Cash and due from banks $ 43,684,770 $ 45,123,177
Federal Funds Sold 8,000,000 150,000
----------- -----------
51,684,770 45,273,177
Interest bearing balances with banks 678,327 188,549
Securities (Market value- $225,127,508
and $212,169,487 at September 30,
1995 and December 31, 1994) 224,454,319 212,994,410
Loans 532,116,476 511,212,203
Unearned Income ( 12,217,364) ( 12,010,336)
Allowance for loan losses ( 8,492,599) ( 8,182,801)
----------- -----------
Net Loans 511,406,513 491,019,066
Premises and equipment 18,541,945 16,780,966
Other assets 22,592,817 20,810,320
----------- -----------
Total Assets $ 829,358,691 $ 787,066,488
=========== ===========
Liabilities and Shareholders' Equity
Liabilities
Deposits:
Non-interest bearing $ 116,290,498 $ 118,711,872
Interest bearing 611,724,570 577,567,837
----------- -----------
Total Deposits 728,015,068 696,279,709
Treasury tax and loan note account 3,106,481 3,115,183
Notes and debentures payable 4,403,538 4,650,488
Other liabilities 11,111,115 9,287,227
----------- -----------
Total Liabilities 746,636,202 713,332,607
Shareholders' Equity
Common Stock, $5 par value-
7,500,000 shares authorized
2,604,760 shares issued and
outstanding at September 30, 1995
and December 31, 1994, respectively 13,023,800 13,023,800
Capital surplus 39,875,796 29,875,796
Unrealized gains (losses) on
securities, net of tax 386,472 (3,529,765)
Retained earnings 29,436,421 34,364,050
----------- -----------
Total Shareholders' Equity 82,722,489 73,733,881
----------- -----------
Total Liabilities and
Shareholders' Equity $ 829,358,691 $ 787,066,488
=========== ===========
See Notes to Consolidated Financial Statements
<PAGE>
THE PEOPLES HOLDING COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
[CAPTION]
NINE MONTHS ENDED SEPTEMBER 30
1995 1994
---- ----
(Unaudited)
[S] [C] [C]
Interest Income
Loans $ 36,520,022 $ 28,962,117
Balances with banks 120,821 101,804
Federal funds sold 537,153 341,597
Securities:
Taxable 7,429,274 7,558,550
Tax-exempt 2,042,871 1,935,584
---------- ----------
Total interest income 46,650,141 38,899,652
Interest Expense
Time deposits of
$100,000 or more 2,405,411 1,503,313
Other deposits 15,837,862 12,103,799
Borrowed funds 290,180 256,615
---------- ----------
Total interest expense 18,533,453 13,863,727
---------- ----------
Net interest income 28,116,688 25,035,925
Provision for loan losses 2,122,306 1,500,762
---------- ----------
Net interest income after
provision for loan losses 25,994,382 23,535,163
Non-interest income
Service charges on deposit accounts 4,601,460 4,276,903
Fees and commissions 521,698 608,794
Trust department 391,500 374,701
Security gains(losses) (511,221) 2,791
Other 2,984,625 2,039,221
---------- ----------
Total non-interest income 7,988,062 7,302,410
Non-interest expenses
Salaries and employee benefits 13,580,649 12,192,610
Net occupancy 1,635,728 1,576,303
Equipment 956,898 853,440
Other 7,754,335 8,328,534
---------- ----------
Total non-interest expenses 23,927,610 22,950,887
----------- -----------
Income before income taxes 10,054,834 7,886,686
Income taxes 2,989,827 1,801,849
---------- ----------
Net income $ 7,065,007 $ 6,084,837
========== ==========
[CAPTION]
1995 1994
---- ----
[S] [C] [C]
Earnings per share:
Weighted average shares outstanding 2,604,760 2,604,760
========= =========
Net income $ 7,065,007 $ 6,084,837
========= =========
Earnings per share $ 2.71 $ 2.34
==== ====
Cash dividends per share $ .77 $ .68
===== ====
See Notes to Consolidated Financial Statements.
<PAGE>
THE PEOPLES HOLDING COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
[CAPTION]
THREE MONTHS ENDED SEPTEMBER 30
1995 1994
---- ----
(Unaudited)
[S] [C] [C]
Interest Income
Loans $ 12,648,072 $ 10,350,269
Balances with banks 40,866 7,569
Federal funds sold 204,732 43,251
Securities:
Taxable 2,616,685 2,623,753
Tax-exempt 682,177 649,774
---------- ----------
Total interest income 16,192,532 13,674,616
Interest Expense
Time deposits of
$100,000 or more 866,922 633,278
Other deposits 5,649,314 4,078,587
Borrowings 92,669 106,480
---------- ----------
Total interest expense 6,608,905 4,818,345
---------- ----------
Net interest income 9,583,627 8,856,271
Provision for loan losses 922,306 500,305
---------- ----------
Net interest income after
provision for loan losses 8,661,321 8,355,966
Non-interest income
Service charges on deposit accounts 1,545,582 1,413,925
Fees and commissions 398,583 113,500
Trust department 130,500 145,861
Net security gains(losses) (97,258) (22,771)
Other 1,587,357 725,567
---------- ----------
Total non-interest income 3,564,764 2,376,082
Non-interest expenses
Salaries and employee benefits 4,728,227 4,180,550
Net occupancy 522,460 538,549
Equipment 312,909 278,207
Other 2,853,956 2,937,598
---------- ----------
Total non-interest expenses 8,417,552 7,934,904
----------- -----------
Income before income taxes 3,808,533 2,797,144
Income taxes 1,171,772 840,662
---------- ----------
Net income $ 2,636,761 $ 1,956,482
========== ==========
[CAPTION]
1995 1994
---- ----
[S] [C] [C]
Earnings per share:
Weighted average shares outstanding 2,604,760 2,604,760
========= =========
Net income $ 2,636,761 $ 1,956,482
========= =========
Earnings per share amount $ 1.01 $ .75
==== ====
Cash dividends per share $ .26 $ .24
==== ====
See Notes to Consolidated Financial Statements.
<PAGE>
THE PEOPLES HOLDING COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
[CAPTION]
NINE MONTHS ENDED SEPTEMBER 30
1995 1994
---- ----
(Unaudited)
[S] [C] [C]
Operating Activities
Net Income $ 7,065,007 $ 6,084,837
Adjustments to reconcile net
income to net cash provided
by operating activities:
Provision for loan losses 2,122,306 1,500,762
Provision for depreciation and
amortization 1,398,537 1,321,441
Net amortization of
securities premiums/discounts 1,579,392 1,264,604
Loss(gain) on sales/calls of securities 511,221 (2,791)
Increase in other liabilities 1,823,888 20,657
Deferred income tax (331,727) (682,633)
Loss (gain) on sales of
premises and equipment 13,917 (1,264)
Gain on sale of loans (585,304)
Increase in other assets (1,952,719) (1,799,297)
------------ ------------
Net Cash Provided by Operating
Activities 11,644,518 7,706,316
Investing Activities
Net increase in balances with
other banks (489,778) (189,907)
Proceeds from maturities/calls of
securities held-to-maturity 1,349,041 3,068,639
Proceeds from maturities/calls of
securities available-for-sale 52,003,805 54,695,444
Proceeds from sales of
securities available-for-sale 26,511,221 7,501,564
Purchases of securities
held-to-maturity (4,726,114) (3,025,000)
Purchases of securities
available-for-sale (82,796,018) (65,878,296)
Net increase in loans (36,526,651) (44,857,381)
Proceeds from sale of loans 12,690,078
Proceeds from sale of premises
and equipment 167,504 2,505
Purchases of premises and equipment (2,903,074) (2,058,663)
----------- ----------
Net Cash Used in Investing
Activities (34,719,986) (50,741,095)
[CAPTION]
1995 1994
---- ----
[S] [C] [C]
Financing Activities
Net increase (decrease) in
demand and savings deposits (11,770,277) 4,523,044
Net increase in time deposits 43,505,636 25,912,960
Net increase (decrease) in
short-term borrowed funds (8,702) 11,124,543
Increase (decrease) in long-term debt (246,950) 4,601,130
Cash dividends paid (1,992,646) (1,780,206)
------------ -----------
Net Cash Provided by Financing
Activities 29,487,061 44,381,471
------------ -----------
Increase in Cash
and Cash Equivalents 6,411,593 1,346,692
Cash and Cash Equivalents at
beginning of period 45,273,177 44,258,382
----------- -----------
Cash and Cash Equivalents at
end of period $ 51,684,770 $ 45,605,074
=========== ===========
Non-cash transactions:
Transfer of loans to other real
estate $ 1,912,124 $ 557,501
=========== ===========
See Notes to Consolidated Financial Statements
<PAGE>
THE PEOPLES HOLDING COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 1995
Note 1 Basis of Presentation
The consolidated balance sheet at December 31, 1994, 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 consolidated financial statements
included in the Registrant's annual report for the year ended December 31,
1994. 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.
Note 2 Changes in Accounting Methods
Effective January 1, 1995, the Company adopted Financial Accounting
Standards Board (FASB) Statement No. 114, "Accounting by Creditors for
Impairment of a Loan" and FASB Statement No. 118, "Accounting by Creditors
for Impairment of a Loan-Income Recognition and Disclosures." Under the
new standards, the allowance for credit losses related to loans that are
identified as impaired are based on discounted cash flows using the loan's
initial effective interest rate or the fair value of the collateral for
certain collateral dependent loans. The adoption of the new rules has
resulted in an immaterial effect on the Company's financial condition and
results of operations.
Note 3 Securities
Securities consist of the following:
[CAPTION]
September 30, 1995 December 31, 1994
--------------------- -----------------------
Amortized Estimated Amortized Estimated
Cost Market Value Cost Market Value
----------- ----------- ----------- ------------
[S] [C] [C] [C] [C]
Available-for-sale $170,963,453 $171,507,946 $172,586,341 $167,238,212
Held-to-maturity 52,946,373 53,619,562 45,756,198 44,931,275
<PAGE>
Note 4 Income Taxes
Federal and state income taxes payable (receivable) as of September 30,
1995, were as follows:
[S] [C]
Current $ 395,980
Deferred (2,575,015)
-----------
$ (2,179,035)
===========
The components of income tax expense (credits) for the nine months ended
September 30, 1995, are presented below:
[S] [C]
Current $ 3,321,554
Deferred (331,727)
---------
$ 2,989,827
=========
The reconciliation of income tax attributable to continuing operations
computed at the United States federal statutory tax rates to income tax
expense is:
[S] [C]
Tax at United States statutory rate $ 3,418,644
Add (deduct) effect of:
Tax-exempt interest income ( 963,757)
State of Mississippi, net of federal tax benefit 331,810
Amortization of intangible assets 54,411
Dividends received deduction ( 40,941)
Other items-net 189,660
-----------
$ 2,989,827
===========
Deferred tax assets and liabilities result largely from temporary
differences arising from the loan loss provision and the effect of SFAS No.
115, "Accounting for Certain Investments in Debt and Equity Securities."
Historically, the Company has produced taxable income which can fully
utilize the deferred tax asset.
<PAGE>
THE PEOPLES HOLDING COMPANY AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Financial Condition
Total assets of The Peoples Holding Company grew from $787,066,488 on
December 31, 1994, to $829,358,691 on September 30, 1995, or 5.37% for the
nine month period. Loans, less unearned income, increased $20,697,245 or
4.15%. Securities increased from $212,994,410 on December 31, 1994, to
$224,454,319 on September 30, 1995.
Total deposits for the first nine months of 1995 grew from $696,279,709 on
December 31, 1994 to $728,015,068 on September 30, 1995, or an increase of
4.56%, with the majority of growth in time deposits.
The equity capital to total assets ratio was 9.97% and 9.37% for September
30, 1995 and December 31, 1994, respectively.
Results of Operations
The Company's net income for the nine months ending September 30, 1995 was
$7,065,007 compared to $6,084,837 for the same period in 1994. The increase
in net income for 1995 compared to 1994 is due to the net effect of
security losses incurred based on management's decision to reinvest funds
in securities which will yield a higher rate of return for the future, the
reversal of an accrual regarding litigation previously expensed by the
Company in 1991 and a gain recognized on the sale of loans. The Company
received a refund of approximately $322,000 in the third quarter from the
Federal Deposit Insurance Corporation (FDIC) for the insurance premium.
The Company's net income for the quarter ending September 30, 1995 and 1994
was $2,636,761 and $1,956,482, respectively. The annualized return on
average assets for the nine month period ending September 30, 1995 and 1994
was 1.16% and 1.06%, respectively. The annualized return on average assets
for the quarter ending September 30, 1995 and 1994 was 1.27% and 1.00%,
respectively.
Net interest income, the difference between interest earned on assets and
the cost of interest-bearing liabilities, is the largest component of the
Company's net income. The primary items of concern in managing net
interest income are the mix and maturity balance between interest-sensitive
assets and related liabilities. Net interest income was $28,116,688 and
$25,035,925 for the nine months ending September 30, 1995 and 1994,
respectively. Net interest income was $9,583,627 for the three months
ended September 30, 1995, compared to $8,856,271 for the same period in
1994. Earning assets averaged $752.2 million in the third quarter of 1995
and $740.7 million for the first nine months of 1995, compared to $723.8
million and $712.8 for the same periods in 1994. The net interest margin
was 5.32% and 5.23% for the nine months and quarter ending September 30,
1995, compared to 4.90% and 4.65% for the same period in 1994.
The provision for credit losses charged to operating expense is an amount
which, in the judgement of management, is necessary to maintain the
allowance for credit losses at a level that is adequate to meet the present
and potential risks of losses on the Company's current portfolio of loans.
The appropriate level of the allowance is based on a quarterly analysis of
the loan portfolio including consideration of such factors as the risk
rating of individual credits, size and diversity of the portfolio, economic
conditions, prior loss experience, and the results of periodic credit
reviews by internal loan review, regulators, and the Company's independent
accounting firm. The provision for credit losses totalled $2,122,306 and
$1,500,762 for the nine months ending September 30, 1995 and 1994,
respectively. The allowance for loan losses as a percent of net loans
outstanding was 1.63% and 1.64% at September 30, 1995 and 1994,
respectively. Net charge-offs to average loans was 0.35% and 0.05% as of
September 30, 1995 and 1994, respectively.
Non-interest income, excluding security gains and losses was $8,499,283 for
nine months ended September 30, 1995 compared to $7,209,578 for same period
in 1994, or an increase of $1,289,705. Service charges were up $324,557,
fees and commissions were down $87,096, and other income was up $1,035,445.
The increase in other income is due to approximately $585,000 gain on sale
of loans and a reversal of a lawsuit decision which was recorded by the
bank in 1991 at the FDIC's direction equalling approximately $575,000.
Other income in 1994 included $165,388 in life insurance proceeds the
Company received as a beneficiary of a life insurance policy. Non-interest
income for the quarter ended September 30, 1995 and 1994 was $3,564,764 and
$2,376,082, respectively. The change in the accounts for the quarter,
correspond to the same percentage change in the nine months ending for 1995
and 1994.
Non-interest expenses were $23,927,610 for nine months ended September 30,
1995 compared to $22,950,887 for 1994, or an increase of 4.3%. The non-
interest expenses for the three months ended September 30, 1995 and 1994
were $8,417,552 and $7,934,904, respectively. The components of non-
interest expenses reflect normal increases for personnel related expenses
and general inflation in the cost of services and supplies purchased by the
Company.
Income tax expense was $2,989,827 for nine months ended September 30, 1995
compared to $1,801,849 for the same period in 1994. The Company continues
to invest in assets whose earnings are given favorable tax treatment; and
in first quarter of 1994, the Company was the beneficiary of a life
insurance policy of a key executive, that was given favorable tax
treatment. Effective in the first quarter of 1995, the Company began to
incur taxes to the State of Mississippi due to the extinguishment of a net
operating loss carryforward for state taxes.
Liquidity Risk
Liquidity management is the ability to meet the cash flow requirements of
customers who may be either depositors wishing to withdraw funds or
borrowers needing assurance that sufficient funds will be available to meet
their credit needs.
Core deposits are a major source of funds used to meet cash flow needs.
Maintaining the ability to acquire these funds as needed in a variety of
money markets is the key to assuring liquidity. The Company has worked
toward lowering its dependence on other public funds. This has added more
stability to the Company's core deposit base reducing the dependence on
highly liquid assets.
Approximately 90% of the Company's deposits are composed of accounts with
balances less than $100,000. When evaluating the movement of these funds
even during large interest rate changes, it is apparent that the Company
continues to attract deposits that can be used to meet cash flow needs.
Other sources available for meeting the Company's liquidity needs include
the securities portfolio. The portfolio is composed of securities with a
readily available market that can be used to convert to cash if the need
arises. The Company maintains a federal funds position that provides
day-to-day funds to meet liquidity needs; in addition, repayments and
maturities of loans provide a substantial source of liquidity.
Capital Resources
The Company is required to comply with the risk-based capital requirements
of the Federal Reserve Board, the FDIC and the OCC. These requirements
apply a variety of weighing factors which vary according to the level of
risk associated with the particular assets. The Company met the guidelines
for a well capitalized bank as of September 30, 1995, and December 31,
1994. The table below shows the capital ratios of the Company at the dates
indicated:
[CAPTION]
September 30 December 31 Well-
1995 1994 Capitalized
--------- ----------- -----------
[S] [C] [C] [C]
Tier 1 Risk-Based Capital 14.56% 14.86% 6% or above
Total Risk-Based Capital 15.80% 16.12% 10% or above
Leverage Ratio 9.40% 9.22% 5% or above
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 9.97% as of September 30, 1995, compared to 9.37% as of
December 31, 1994. Total shareholders' equity of the Company was
$82,722,489 and $73,733,881 for September 30, 1995 and December 31, 1994,
respectively. This represented an increase of $8,988,608 or 12.19%.
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 $31.76 and $28.31 at September 30, 1995 and
December 31, 1994, respectively. Cash dividends paid during the quarter
were $.2625 per share compared to $.24 per share during the same quarter
in 1994.
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
1995, against the registrant or its subsidiary.
Item 6(b) Reports on Form 8-K
There were was not a Form 8-K filed in the third quarter
of 1995.
<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 8, 1995 /s/ John W. Smith
---------------------------
John W. Smith
President & Chief Executive Officer
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 43685
<INT-BEARING-DEPOSITS> 678
<FED-FUNDS-SOLD> 8000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 170963
<INVESTMENTS-CARRYING> 52946
<INVESTMENTS-MARKET> 171508
<LOANS> 519899
<ALLOWANCE> 8493
<TOTAL-ASSETS> 829359
<DEPOSITS> 728015
<SHORT-TERM> 3106
<LIABILITIES-OTHER> 11111
<LONG-TERM> 4404
<COMMON> 13024
0
0
<OTHER-SE> 69699
<TOTAL-LIABILITIES-AND-EQUITY> 829359
<INTEREST-LOAN> 36520
<INTEREST-INVEST> 9472
<INTEREST-OTHER> 658
<INTEREST-TOTAL> 46650
<INTEREST-DEPOSIT> 18243
<INTEREST-EXPENSE> 18533
<INTEREST-INCOME-NET> 28117
<LOAN-LOSSES> 2122
<SECURITIES-GAINS> (511)
<EXPENSE-OTHER> 23928
<INCOME-PRETAX> 10055
<INCOME-PRE-EXTRAORDINARY> 10055
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7065
<EPS-PRIMARY> 2.71
<EPS-DILUTED> 2.71
<YIELD-ACTUAL> 5.32
<LOANS-NON> 461
<LOANS-PAST> 2294
<LOANS-TROUBLED> 243
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 8183
<CHARGE-OFFS> 1977
<RECOVERIES> 165
<ALLOWANCE-CLOSE> 8493
<ALLOWANCE-DOMESTIC> 8493
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
