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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, 2000
Commission File Number 1-13253
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, 6,075,099 shares outstanding
as of November 13, 2000
1
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THE PEOPLES HOLDING COMPANY
INDEX
PART 1. FINANCIAL INFORMATION PAGE
Item 1.
Condensed Consolidated Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets -
September 30, 2000 and December 31, 1999............. 3
Condensed Consolidated Statements of Income - Three Months
and Nine Months Ended September 30, 2000 and 1999.... 4
Condensed Consolidated Statements of Cash Flows -
Nine Months Ended September 30, 2000 and 1999........ 5
Notes to Condensed Consolidated Financial Statements....... 6
Item 2.
Management's Discussion and Analysis of Financial
Condition and Results of Operations.................. 9
Item 3.
Quantitative and Qualitative Disclosures
About Market Risk.................................... 13
PART II. OTHER INFORMATION
Item 1.
Legal Proceedings.......................................... 13
Item 2.
Changes in Securities...................................... 13
Item 6.(a) and (b)
Exhibits and Reports on Form 8-K........................... 14
Signatures................................................... 14
2
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<TABLE>
<CAPTION>
THE PEOPLES HOLDING COMPANY AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
SEPTEMBER 30 DECEMBER 31
2000 1999
------------ -----------
(Unaudited)
<S> <C> <C>
Assets
Cash and due from banks .................. $ 40,604 $ 42,956
Interest-bearing balances with banks ..... 22 915
---------- ---------
Cash and Cash Equivalents ... 40,626 43,871
Time deposits with banks ................. 0 152
Securities available-for-sale ............ 197,402 181,133
Securities held-to-maturity (fair
value-$84,031 and $83,373 at
September 30, 2000 and December 31,
1999, respectively) ................... 84,945 85,611
Loans, net of unearned income ............ 822,168 799,085
Allowance for loan losses ............. (11,184) (10,058)
---------- ---------
Net Loans ................... 810,984 789,027
Premises and equipment, net .............. 29,855 27,730
Other assets ............................. 42,950 35,435
---------- ---------
Total Assets .................... $ 1,206,762 $ 1,162,959
========== =========
Liabilities
Deposits:
Noninterest-bearing ................... $ 136,434 $ 140,015
Interest-bearing ...................... 900,059 838,943
---------- ---------
Total Deposits .............. 1,036,493 978,958
Treasury tax and loan note account........ 10,068 12,000
Advances from the Federal Home Loan Bank . 19,975 39,269
Federal funds purchased .................. 3,600 0
Other liabilities ........................ 17,713 16,643
---------- ---------
Total Liabilities ........... 1,087,849 1,046,870
Shareholders' Equity
Common Stock, $5 par value - 15,000,000
shares authorized, 6,212,284 shares
issued, 6,076,724 and 6,204,784 shares
outstanding at September 30, 2000 and
December 31, 1999, respectively ........ 31,061 31,061
Treasury stock, at cost .................. (3,300) (230)
Additional paid-in capital ............... 39,931 40,424
Retained earnings ........................ 53,469 48,115
Accumulated other comprehensive loss ..... (2,248) (3,281)
---------- ---------
Total Shareholders' Equity .. 118,913 116,089
---------- ---------
Total Liabilities and
Shareholders' Equity ......... $ 1,206,762 $ 1,162,959
========== =========
</TABLE>
See Notes to Condensed Consolidated Financial Statements
3
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<TABLE>
<CAPTION>
THE PEOPLES HOLDING COMPANY AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except share data)
NINE MONTHS ENDED SEPTEMBER 30 THREE MONTHS ENDED SEPTEMBER 30
2000 1999 2000 1999
---- ---- ---- ----
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Interest Income
Loans ................................ $ 54,145 $ 49,621 $ 18,704 $ 16,644
Securities:
Taxable ......................... 8,949 9,207 3,019 3,093
Tax-exempt ...................... 3,099 3,081 1,017 1,052
Other ................................ 269 520 3 100
------- ------- ------- -------
Total interest income ...... 66,462 62,429 22,743 20,889
Interest Expense
Deposits ............................. 30,707 26,462 10,891 8,900
Borrowings .......................... 1,581 1,232 554 391
------- ------- ------- -------
Total interest expense ..... 32,288 27,694 11,445 9,291
---------- ---------- ---------- ----------
Net interest income ........ 34,174 34,735 11,298 11,598
Provision for loan losses .................. 4,068 2,551 1,389 530
--------- --------- --------- ---------
Net interest income after
provision for loan losses .. 30,106 32,184 9,909 11,068
Noninterest income:
Service charges on deposit accounts .. 7,302 6,190 2,479 2,188
Fees and commissions ................. 3,541 2,038 1,330 728
Trust revenue ........................ 802 630 267 210
Gains on sale of securities and loans. 150 4,197 78 39
Other ................................ 2,002 2,390 738 744
------- ------- ------- -------
Total noninterest income ... 13,797 15,445 4,892 3,909
Noninterest expenses:
Salaries and employee benefits ....... 16,811 16,353 5,860 5,754
Data processing ...................... 2,414 2,836 788 1,027
Net occupancy ........................ 2,305 2,219 840 742
Equipment ............................ 2,181 1,596 720 459
Other ................................ 7,893 7,983 2,566 2,355
--------- --------- --------- ---------
Total noninterest expenses . 31,604 30,987 10,774 10,337
---------- ---------- ---------- ----------
Income before income taxes ................. 12,299 16,642 4,027 4,640
Income taxes ............................... 3,401 5,078 1,113 1,448
--------- --------- --------- ---------
Net income ................. $ 8,898 $ 11,564 $ 2,914 $ 3,192
========== ========== ========== ==========
Basic and diluted earnings per share ...... $ 1.45 $ 1.86 $ 0.48 $ 0.51
====== ====== ====== ======
Weighted average shares outstanding ....... 6,121,553 6,203,218 6,082,559 6,222,421
========= ========= ========= =========
</TABLE>
See Notes to Condensed Consolidated Financial Statements
4
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<TABLE>
<CAPTION>
THE PEOPLES HOLDING COMPANY AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands, except share data)
NINE MONTHS ENDED SEPTEMBER 30
2000 1999
---- ----
(Unaudited)
<S> <C> <C>
Operating Activities
Net Cash Provided by Operating
Activities .................... $ 10,778 $ 11,217
Investing Activities
Purchases of securities
available-for-sale ................. (26,031) (90,504)
Proceeds from sales of securities
available-for-sale.................. 0 12,382
Proceeds from calls/maturities of
securities available-for-sale ...... 11,133 95,098
Purchases of securities
held-to-maturity ................... (2,000) (10,586)
Proceeds from calls/maturities of
securities held-to-maturity ........ 2,858 5,023
Net increase in loans ................... (55,038) (90,339)
Proceeds from sales of loans ............ 27,404 34,873
Proceeds from sales of premises
and equipment ...................... 297 235
Purchases of premises and equipment ..... (3,239) (2,886)
Business combinations.................... (518) 0
---------- ----------
Net Cash Used in Investing
Activities .................... (45,134) (46,704)
Financing Activities
Net (decrease) in
noninterest-bearing deposits ........ (3,581) (18,662)
Net increase in
interest-bearing deposits ........... 61,116 45,218
Net increase in
short-term borrowings ............... 1,668 9,389
Proceeds from other borrowings .......... 2,104 4,250
Repayments of other borrowings .......... (21,398) (1,974)
Acquisition of treasury stock............ (4,791) (373)
Cash dividends paid ..................... (4,007) (3,903)
---------- ----------
Net Cash Provided by Financing
Activities ................... 31,111 33,945
---------- ----------
(Decrease) in Cash
and Cash Equivalents ......... (3,245) (1,542)
Cash and Cash Equivalents at
beginning of period ............... 43,871 38,558
---------- ----------
Cash and Cash Equivalents at
end of period ..................... $ 40,626 $ 37,016
============ ============
Supplemental Disclosures:
Non-cash transactions:
Transfer of loans to other real
estate ............................... $ 1,458 $ 410
============ ============
</TABLE>
See Notes to Condensed Consolidated Financial Statements
5
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THE PEOPLES HOLDING COMPANY AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 2000
(in thousands, except share data)
Note 1 Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the nine-month period ended September 30,
2000 are not necessarily indicative of the results that may be expected for the
year ended December 31, 2000.
For further information, refer to the consolidated financial statements and
footnotes thereto included in The Peoples Holding Company and Subsidiary's
(collectively, the Company) annual report on Form 10-K for the year ended
December 31, 1999.
Note 2 Comprehensive Income
For the nine month periods ended September 30, 2000 and 1999, total
comprehensive income amounted to $9,931 and $8,696, respectively. For the
quarters ended September 30, 2000 and 1999, total comprehensive income amounted
to $4,187 and $3,209, respectively.
Note 3 Mergers and Acquisitions
On May 1, 2000, Reed-Johnson Insurance Agency, a subsidiary of The Peoples Bank
and Trust Company (the Bank), acquired The Southern Insurance Group with the
issuance of 70,500 shares of the Company's common stock. Located in Corinth and
Tupelo, Mississippi, The Southern Insurance Group is an independent insurance
agency representing property and casualty companies which provide personal and
business coverages and other financial services. The two agencies have been
renamed The Peoples Insurance Agency, Inc., and operate as a wholly owned
subsidiary of the Bank. The transaction has been accounted for under the
purchase method of accounting.
Effective September 1, 2000, The Dominion Insurance Agency (Dominion) of
Louisville, Mississippi, was acquired for $450 in a cash purchase by the
Bank. Dominion, an independent insurance agency representing more than
50 leading property and casualty insurance companies, is currently operating as
a wholly owned subsidiary of the Bank. Plans are to merge Dominion into The
Peoples Insurance Agency, Inc., prior to year end. The transaction has been
accounted for under the purchase method of accounting.
6
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Note 4 Segment Reporting
Segment information for the nine months ended September 30, 2000 and 1999, is
presented below.
Nine Months Ended September 30, 2000
Specialized
Branches Products All Other Total
-------- ---------- --------- ---------
Net interest income ........ $ 32,417 $ 1,725 $ 32 $ 34,174
Provision for loan loss .... 3,018 852 198 4,068
------- ------- ------- -------
Net interest income after
provision for loan loss .. 29,399 873 (166) 30,106
Non-interest income ........ 9,681 2,313 1,803 13,797
Non-interest expense ....... 18,146 2,710 10,748 31,604
------- ------- ------- -------
Income before income taxes . 20,934 476 (9,111) 12,299
Income taxes ............... 0 0 3,401 3,401
------- ------- ------- -------
Net income (loss) .......... $ 20,934 $ 476 $(12,512) $ 8,898
======= ======= ======= =======
Intersegment revenue
(expense) ................ $ 515 $ (515) $ 0 $ 0
======= ======= ======= =======
Nine Months Ended September 30, 1999
Specialized
Branches Products All Other Total
-------- ---------- --------- ---------
Net interest income ........ $ 31,726 $ 2,972 $ 37 $ 34,735
Provision for loan loss .... 1,297 1,128 126 2,551
------- ------- ------- -------
Net interest income after
provision for loan loss .. 30,429 1,844 (89) 32,184
Non-interest income ........ 8,339 5,760 1,346 15,445
Non-interest expense ....... 17,996 3,188 9,803 30,987
------- ------- ------- -------
Income before income taxes . 20,772 4,416 (8,546) 16,642
Income taxes ............... 0 0 5,078 5,078
------- ------- ------- -------
Net income (loss) .......... $ 20,772 $ 4,416 $(13,624) $ 11,564
======= ======= ======= =======
Intersegment revenue
(expense) ................ $ 411 $ (411) $ 0 $ 0
======= ======= ======= =======
7
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Segment information for the three months ended September 30, 2000 and 1999, is
presented below.
Three Months Ended September 30, 2000
Specialized
Branches Products All Other Total
-------- ---------- --------- ---------
Net interest income ........ $ 10,914 $ 542 $ (158) $ 11,298
Provision for loan loss .... 1,056 297 36 1,389
------- ------- ------- -------
Net interest income after
provision for loan loss .. 9,858 245 (194) 9,909
Non-interest income ........ 3,219 797 876 4,892
Non-interest expense ....... 6,091 822 3,861 10,774
------- ------- ------- -------
Income before income taxes . 6,986 220 (3,179) 4,027
Income taxes ............... 0 0 1,113 1,113
------- ------- ------- -------
Net income (loss) .......... $ 6,986 $ 220 $ (4,292) $ 2,914
======= ======= ======= =======
Intersegment revenue
(expense) ................ $ 116 $ (116) $ 0 $ 0
======= ======= ======= =======
Three Months Ended September 30, 1999
Specialized
Branches Products All Other Total
-------- ---------- --------- ---------
Net interest income ........ $ 10,755 $ 843 $ 0 $ 11,598
Provision for loan loss .... 451 37 42 530
------- ------- ------- -------
Net interest income after
provision for loan loss .. 10,304 806 (42) 11,068
Non-interest income ........ 2,857 499 553 3,909
Non-interest expense ....... 5,609 811 3,917 10,337
------- ------- ------- -------
Income before income taxes . 7,552 494 (3,406) 4,640
Income taxes ............... 0 0 1,448 1,448
------- ------- ------- -------
Net income (loss) .......... $ 7,552 $ 494 $ (4,854) $ 3,192
======= ======= ======= =======
Intersegment revenue
(expense) ................ $ 138 $ (138) $ 0 $ 0
======= ======= ======= =======
Note 5 Other Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued Statement No. 133,
"Accounting for Derivative Instruments and Hedging Activities," which is
required to be adopted January 1, 2001. Management does not anticipate that the
adoption of the new Statement will have a material effect on earnings or the
financial position of the Company.
8
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THE PEOPLES HOLDING COMPANY AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(in thousands, except share data)
This Form 10-Q may contain, or incorporate by reference, statements which may
constitute "forward-looking statements" within the meaning of Section 27A of
the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. Prospective investors are cautioned that
any such forward-looking statements are not guarantees for future
performance and involve risks and uncertainties, and that actual results may
differ materially from those contemplated by such forward-looking
statements. Important factors currently known to management that could cause
actual results to differ materially from those in forward-looking statements
include significant fluctuations in interest rates, inflation, economic
recession, significant changes in the federal and state legal and regulatory
environment, significant underperformance in the Company's portfolio of
outstanding loans, and competition in the Company's markets. The Company
undertakes no obligation to update or revise forward-looking statements to
reflect changed assumptions, the occurrence of unanticipated events or
changes to future operating results over time.
Financial Condition
Total assets of The Peoples Holding Company grew from $1,162,959 on December 31,
1999, to $1,206,762 on September 30, 2000, or 3.77% for the nine month period.
On September 30, 2000, average earning assets were $1,102,948, or 92.34% of
total average assets, compared to $1,059,596, or 92.41% of total average assets
on December 31, 1999.
The securities portfolio is utilized as a means of liquidity, an alternative
earning source for excess funds, and collateral on pledges for certain types of
deposits. Total securities increased from $266,744 on December 31, 1999, to
$282,347 on September 30, 2000.
The loan portfolio represents the largest component of the Company's assets.
Despite the sale of approximately $7,951 of student loans during the third
quarter, loans, net of unearned income, increased $23,083, or 2.89%, from
$799,085 at December 31, 1999 to $822,168 at September 30, 2000. Most of the
increase in the loan portfolio was accounted for in commercial loan accounts.
The Company's primary source of funding continues to be deposits generated in
the communities served by the Bank. Total deposits for the first nine months of
2000 grew from $978,958 on December 31, 1999 to $1,036,493 on September 30,
2000, or an increase of 5.88%, with the majority of growth in public fund
checking and time deposits. Short-term borrowings have also been utilized to
assist in funding loans, investments, fixed asset additions, and cash reserves.
Total shareholders' equity for the Company grew from $116,089 on December 31,
1999, to $118,913 on September 30, 2000, or 2.43% for the nine month period.
The equity capital to total assets ratios were 9.85% and 9.98% for September 30,
2000 and December 31, 1999, respectively. The repurchase of common stock
during the year has contributed to the curtailment of growth in capital.
Quarterly, cash dividends increased from $.21 per share in December 1999 to $.22
per share in 2000.
9
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Results of Operations
The Company's net income for the nine month period ending September 30, 2000,
was $8,898, representing a decrease of $2,666, or 23.05%, compared to net
income for the nine month period ending September 30, 1999, which totaled
$11,564. Earnings for 1999 were impacted by an after tax gain of $2,329
recognized on the sale and liquidation of our credit card loan portfolio, which
included approximately $18,000 in loans. The Company also recognized an
additional increase of $523 to its loan loss reserve principally related to the
sale of the credit card portfolio. Earnings for 2000 have been adversely
impacted by the pressure on net interest margin and by additions to the loan
loss reserve above the normal accrual. During the second quarter, approximately
$700 was charged to improve the level of the reserve for loan losses which had
fallen below desirable levels due to loan growth that exceeded expectations and
some credit deteriorations. An additional $400 was added over the normal
accrual during the third quarter primarily related to the impairment of two
substantial lines of credit. Without the effects of the credit card gain,
earnings of $8,898 for the nine month period ending September 30, 2000, were
down $337, or 3.65%, from the $9,235 core earnings reported for the same period
of 1999. Net income was $2,914 and $3,192 for the quarters ending September 30,
2000 and 1999, respectively. The annualized return on average assets for the
nine month periods ending September 30, 2000 and 1999, was 1.00% and 1.30%,
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 concerns in managing net interest income are the
mix and the maturities of rate-sensitive assets and liabilities. Net interest
margins were 4.43% and 4.67% for the nine month periods ending September 30,
2000 and 1999, respectively. While the Company has grown its asset base
significantly, the decrease in net interest income has been due to an increase
in costing liabilities and a reduction of the spread, over prime, on loans as
rates have risen. Net interest income for the nine month periods ending
September 30, 2000 and 1999, was $34,174 and $34,735, respectively. For the
three month periods ending September 30, 2000 and 1999, net interest income was
$11,298 and $11,598, respectively.
The provision for loan losses charged to operating expense is an amount which,
in the judgement of management, is necessary to maintain the allowance for loan
losses at a level that is adequate to meet the inherent 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 and regulators. The provision
for loan losses totaled $4,068 and $2,551 for the nine month periods ending
September 30, 2000 and 1999, respectively. For the quarters ending September 30,
2000 and 1999, the provision for loan losses totaled $1,389 and $530,
respectively. The allowance for loan losses as a percentage of loans
outstanding was 1.36% and 1.26% as of September 30, 2000 and December 31, 1999,
respectively. Net charge-offs to average loans were .36% and .24% for the nine
month periods ending September 30, 2000 and 1999, respectively.
10
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Excluding the pre-tax gain of $3,715 on the sale of the credit card portfolio
during 1999, noninterest income increased $2,067, or 17.62%, to $13,797 for the
nine month period ending September 30, 2000, when compared to the core
noninterest income of $11,730 for the same period in 1999. Excluding all gains
from the sales of securities and loans, noninterest income was $4,814 for the
three month period ending September 30, 2000, compared to $3,870 for the same
period in 1999, or an increase of 24.39%. The increase between core noninterest
income for 2000 and 1999 is due in large part to fees associated with the
increases in loans and deposits and the continued emphasis in sales of
miscellaneous services and products. While non-sufficient fund fees accounted
for the majority of the increase in service charges, changes made to our fee
structure on different account types created a substantial boost to service
charge income. Fees and commissions increased as a result of agency and direct
bill insurance commissions, loan origination fees, Handy Check income, and ATM
usage fees. Other noninterest income decreased from the prior year primarily as
the result of the elimination of credit card interchange fees associated with
the sale of the credit card portfolio in 1999.
Noninterest expenses were $31,604 for the nine month period ending September 30,
2000, compared to $30,987 for the same period in 1999, or an increase of
1.99%. Depreciation expense related to the recent placement of new premises,
equipment, and other technology enhancements has been the most significant
increase in noninterest expense between these periods. The increase in
noninterest expense has been minimized by the reduction of acquisition costs and
credit card processing costs incurred during the first six months of 1999. The
remaining components of noninterest expense reflect increases due to the
acquired insurance companies as well as normal increases for banking related
expenses and general inflation in the cost of services and supplies purchased
by the Company. Noninterest expenses for the quarter ending September 30, 2000,
increased $437, or 4.23%, compared to the same period in 1999.
Income tax expense was $3,401 for the nine month period ending September 30,
2000, compared to $5,078 for the same period in 1999. Income taxes for 1999
reflect a non-recurring charge associated with the gain realized on the sale of
the credit card portfolio. The Company also continues to invest in assets whose
earnings are given favorable tax treatment.
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 a key to assuring liquidity. When evaluating the movement of these
funds even during times of large interest rate changes, it is apparent that the
Company continues to attract deposits that can be used to meet cash flow needs.
Management continues to monitor the liquidity and potentially volatile
liabilities ratios to ensure compliance with Asset-Liability Committee targets.
These targets are set to ensure that the Company meets the liquidity
requirements deemed necessary by management and regulators.
11
<PAGE>
Another source available for meeting the Company's liquidity needs is
available-for-sale securities. The available-for-sale portfolio is composed of
securities with a readily available market that can be used to convert to cash
if the need arises. In addition, the Company maintains a federal funds
position that provides day-to-day funds to meet liquidity needs and may also
obtain advances from the Federal Home Loan Bank (FHLB) or the treasury tax and
loan note account. Historically, the Company has not relied upon these sources
to meet long-term liquidity needs. Sources of funds derived from the FHLB are
used primarily to match mortgage loan originations in order to minimize
interest rate risk, but may be used to provide short-term funding.
Capital Resources
The Bank is subject to various regulatory capital requirements administered by
the federal banking agencies. Failure to meet minimum capital requirements can
initiate certain mandatory, and possibly additional discretionary, actions by
regulators that, if undertaken, could have a direct material effect on the
Bank's financial statements. Under capital adequacy guidelines and the
regulatory framework for prompt corrective action, the Bank must meet specific
capital guidelines that involve quantitative measures of the Bank's assets,
liabilities, and certain off-balance-sheet items as calculated under regulatory
accounting practices. The Bank's capital amounts and classification are also
subject to qualitative judgments by the regulators about components, risk
weightings, and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Bank to maintain minimum balances and ratios. All banks are required
to have core capital (Tier I) of at least 4% of risk-weighted assets (as
defined), 4% of average assets (as defined), and total capital of 8% of
risk-weighted assets (as defined). As of September 30, 2000, the Bank has met
all capital adequacy requirements to which it is subject.
As of September 30, 2000, the most recent notification from the Federal Deposit
Insurance Corporation (FDIC) categorized the Bank as well capitalized under the
regulatory framework for prompt corrective action. To be categorized as well
capitalized, the Bank must maintain minimum total risk-based, Tier I risk-based,
and Tier I leverage ratios of 10%, 6%, and 5%, respectively. In the opinion of
management, there are no conditions or events since the last notification that
have changed the institution's category. The Bank's actual capital amounts and
applicable ratios are as follows:
Actual
Amount Ratio
------ -----
(000)
As of September 30, 2000
Total Capital .................... $ 121,144 14.9%
(to Risk Weighted Assets)
Tier I Capital ................... $ 110,944 13.6%
(to Risk Weighted Assets)
Tier I Capital ................... $ 110,944 9.3%
(to Adjusted Average Assets)
As of December 31, 1999
Total Capital .................... $ 123,208 15.5%
(to Risk Weighted Assets)
Tier I Capital ................... $ 113,294 14.3%
(to Risk Weighted Assets)
Tier I Capital ................... $ 113,294 9.9%
(to Adjusted Average Assets)
12
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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 $19.57 and $18.71 at September 30, 2000 and
December 31, 1999, respectively. Quarterly cash dividends were $.22 per share
during the first three quarters of 2000, up from $.21 per share during the
fourth quarter of 1999.
The Company's capital policy is to evaluate future needs based on growth,
earnings trends and anticipated acquisitions.
THE PEOPLES HOLDING COMPANY AND SUBSIDIARY
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no significant changes to our disclosure on quantitative and
qualitative disclosures about market risk since December 31, 1999. For
additional information, see the Company's Form 10-K for the year ended
December 31, 1999.
Part II. OTHER INFORMATION
Item 1. Legal Proceedings
There have been no material proceedings against the Company
during the quarter ended September 30, 2000.
Item 2. Changes in Securities
On May 1, 2000, the Company purchased the business of
The Southern Insurance Group with the issuance of 70,500
shares of the Company's common stock. The transaction is being
accounted for under the purchase method of accounting.
The Company repurchased 198,560 shares of its common stock
during the first nine months of 2000 at an average price of
$24.13 per share. Of these shares, 70,500 were later reissued
to purchase The Southern Insurance Group. Subsequent to
September 30, 2000, 1,625 additional shares have been
repurchased, bringing the total shares repurchased to 200,185
with an average cost of $24.10 per share.
Together these transactions reduced the outstanding shares of
common stock of the Company from 6,204,784 to 6,075,099.
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Item 6(a) Exhibit 27 - Financial Data Schedule
Item 6(b) Reports on Form 8-K
There were no reports filed on Form 8-K during the third quarter
of 2000. However, a report on Form 8-K was filed October 2,
2000, to report Item 5: Other Events. At a special called
meeting Friday, September 22, 2000, the Board of Directors of
The Peoples Holding Company elected E. Robinson McGraw President
and Chief Executive Officer of the Company and its subsidiary,
The Peoples Bank and Trust Company. Mr. McGraw will succeed John
W. Smith, 65, who is retiring October 31, 2000, after 29 years
of service with the Bank, the last seven as President and Chief
Executive Officer. Mr. Smith will remain on the Board of
Directors of both the Company and the Bank. Mr. McGraw has been
with the Bank since 1974, serving as Executive Vice President
since 1993. The transition will start immediately and Mr. McGraw
will assume the responsibilities of the office November 1, 2000.
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 13, 2000 /s/ E. Robinson McGraw
---------------------------
E. Robinson McGraw
President & Chief Executive Officer
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