-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, BBtgKYlX09KIXF59atHnb6HCd8DsJ3+kkoyplrisojyRsaOoa/FXTqe6c2TdtZV+ DXTRDbObcyOgrbYbUaOWTw== /in/edgar/work/0000715072-00-000011/0000715072-00-000011.txt : 20001115 0000715072-00-000011.hdr.sgml : 20001115 ACCESSION NUMBER: 0000715072-00-000011 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000930 FILED AS OF DATE: 20001114 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PEOPLES HOLDING CO CENTRAL INDEX KEY: 0000715072 STANDARD INDUSTRIAL CLASSIFICATION: [6022 ] IRS NUMBER: 640676974 STATE OF INCORPORATION: MS FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-13253 FILM NUMBER: 763219 BUSINESS ADDRESS: STREET 1: 209 TROY ST STREET 2: P O BOX 709 CITY: TUPELO STATE: MS ZIP: 38802 BUSINESS PHONE: 6016801001 MAIL ADDRESS: STREET 1: 209 TROY ST STREET 2: P O BOX 709 CITY: TUPELO STATE: MS ZIP: 38802 10-Q 1 0001.txt 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 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
THE PEOPLES HOLDING COMPANY AND SUBSIDIARY CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except share data) SEPTEMBER 30 DECEMBER 31 2000 1999 ------------ ----------- (Unaudited) 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 ========== =========
See Notes to Condensed Consolidated Financial Statements 3
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) 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 ========= ========= ========= =========
See Notes to Condensed Consolidated Financial Statements 4
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) 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 ============ ============
See Notes to Condensed Consolidated Financial Statements 5 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 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 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 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 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 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 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 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. 13 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 14 EX-27 2 0002.txt
9 1,000 9-MOS DEC-31-2000 SEP-30-2000 40,604 22 0 0 197,402 84,945 84,031 822,168 11,184 1,206,762 1,036,493 13,668 17,713 19,975 0 0 31,061 87,852 1,206,762 54,145 12,048 269 66,462 30,707 32,288 34,174 4,068 0 31,604 12,299 12,299 0 0 8,898 1.45 1.45 4.43 774 8,191 112 0 10,058 3,357 415 11,184 11,184 0 0
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