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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 March 31, 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 April 26, 1995
THE PEOPLES HOLDING COMPANY AND SUBSIDIARY
INDEX
PART 1. FINANCIAL INFORMATION PAGE
Item 1. FINANCIAL STATEMENTS (UNAUDITED)
Consolidated Balance Sheets -
March 31, 1995 and December 31, 1994...............3
Consolidated Statements of Income - Three Months
Ended March 31, 1995 and 1994......................5
Consolidated Statements of Cash Flows
Three Months Ended March 31, 1995 and 1994.........7
Notes to Consolidated Financial Statements..............9
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations...............11
PART II. OTHER INFORMATION
Item 1. Legal Proceedings..................................14
Item 6.(b) Reports on Form 8-K..............................14
Signatures..................................................15
THE PEOPLES HOLDING COMPANY AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
[CAPTION]
MARCH 31 DECEMBER 31
1995 1994
____________ ___________
(Unaudited) (Note 1)
[C] [S] [S]
Assets
Cash and due from banks $ 40,492,947 $ 45,123,177
Federal funds sold 19,000,000 150,000
----------- -----------
Cash and Cash Equivalents 59,492,947 45,273,177
Interest bearing balances with banks 3,164,087 188,549
Securities (Market value- $203,208,622
and $212,169,487 at March 31, 1995
and December 31, 1994, respectively) 203,376,122 212,994,410
Loans 522,774,461 511,212,203
Unearned Income ( 12,946,146) ( 12,010,336)
Allowance for loan losses ( 8,541,058) ( 8,182,801)
----------- -----------
Net Loans 501,287,257 491,019,066
Premises and equipment 17,110,925 16,780,966
Other assets 21,388,500 20,810,320
___________ ___________
Total Assets $ 805,819,838 $ 787,066,488
=========== ===========
Liabilities and Shareholders' Equity
Liabilities
Deposits:
Non-interest bearing 114,604,959 118,711,872
Interest bearing 598,095,072 577,567,837
----------- -----------
Total Deposits 712,700,031 696,279,709
Treasury tax and loan note account 2,011,836 3,115,183
Notes and debentures payable 4,337,714 4,650,488
Other liabilities 9,583,113 9,281,726
----------- -----------
Total Liabilities $ 728,632,694 $ 713,327,106
Shareholders' Equity
Common Stock, $5 par value-
4,200,000 shares authorized
2,604,760 shares issued and
outstanding at March 31, 1995
and December 31, 1994, respectively 13,023,800 13,023,800
Capital surplus 39,875,796 29,875,796
Unrealized losses on securities,
net of tax (1,339,467) (3,529,765)
Retained earnings 25,627,015 34,369,551
----------- -----------
Total Shareholders' Equity 77,187,144 73,739,382
----------- -----------
Total Liabilities and
Shareholders' Equity $ 805,819,838 $ 787,066,488
=========== ===========
See Notes to Consolidated Financial Statements
THE PEOPLES HOLDING COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
[CAPTION]
THREE MONTHS ENDED MARCH 31
1995 1994
---- ----
(Unaudited)
[C] [S] [S]
Interest Income
Loans $ 11,542,108 $ 8,886,430
Balances with banks 26,203 22,976
Federal funds sold 135,271 184,090
Securities:
Taxable 2,334,021 2,377,163
Tax-exempt 674,900 640,833
---------- ----------
Total interest income 14,712,503 12,111,492
Interest Expense
Time deposits of
$100,000 or more 705,372 532,910
Other deposits 4,797,117 3,793,083
Borrowings 103,655 70,045
---------- ----------
Total interest expense 5,606,144 4,396,038
---------- ----------
Net interest income 9,106,359 7,715,454
Provision for loan losses 600,000 500,229
---------- ----------
Net interest income after
provision for loan losses 8,506,359 7,215,225
Non-interest income
Service charges on deposit accounts 1,482,839 1,345,036
Fees and commissions 335,444 405,127
Trust department 130,500 114,420
Securities gains(losses) (374,423) 52,569
Other 457,231 584,030
---------- ----------
Total non-interest income 2,031,591 2,501,182
Non-interest expenses
Salaries and employee benefits 4,269,779 3,930,680
Net occupancy 526,897 513,044
Equipment 337,720 281,254
Other 2,757,346 2,566,374
---------- ----------
Total non-interest expenses 7,891,742 7,291,352
----------- -----------
Income before income taxes 2,646,208 2,425,055
Income taxes 758,101 425,103
---------- ----------
Net income $ 1,888,107 $ 1,999,952
========== ==========
1995 1994
---- ----
Earnings per share:
Weighted average shares outstanding 2,604,760 2,604,760
========= =========
Net income $ 1,888,107 $ 1,999,952
========= =========
Earnings per share $ .72 $ .77
==== ====
Cash dividend per share $ .24 $ .23
==== ====
Cash dividend per share is based on actual amounts declared.
See Notes to Consolidated Financial Statements.
THE PEOPLES HOLDING COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
[CAPTION]
THREE MONTHS ENDED MARCH 31
1995 1994
---- ----
(Unaudited)
[C] [S] [S]
Operating Activities
Net Income $ 1,888,107 $ 1,999,952
Adjustments to reconcile net
income to net cash provided
by operating activities:
Provision for loan losses 600,000 500,229
Provision for depreciation and
amortization 455,067 421,428
Net amortization (accretion) of
securities premiums/discounts 2,240,233 595,354
Loss(gain) on sales/calls of securities 374,423 (2,791)
Increase (decrease) in other liabilities 295,886 (943,765)
Deferred income tax (697,734) (228,703)
Loss (gain) on sales of
premises and equipment 6,420 (653)
Increase in other assets (894,079) (319,479)
------------ ------------
Net Cash Provided by Operating
Activities 4,268,323 2,021,572
Investment Activities
Net increase in balances with
other banks (2,975,538) (197,474)
Proceeds from maturities/calls of
securities held-to-maturity 170,791
Proceeds from maturities/calls of
securities available-for-sale 14,264,636 24,310,185
Proceeds from sales of
securities available-for-sale 15,496,231
Purchases of securities
held-to-maturity (1,935,056)
Purchases of securities
available-for-sale (17,674,336) (41,043,551)
Net increase in loans (11,124,542) (7,872,561)
Proceeds from sale of premises
and equipment 107,945 1,314
Purchases of premises and equipment (757,743) (460,317)
----------- ----------
Net Cash Used in Investment
Activities (4,427,612) (25,262,404)
[CAPTION]
1995 1994
---- ----
[C] [S] [S]
Financing Activities
Net increase (decrease) in
demand and savings deposits (7,356,581) 35,799,726
Net increase (decrease) in time
deposits 23,776,903 (1,006,365)
Net decrease in short-term
borrowed funds (1,103,347) (874,393)
Increase (decrease) in long-term debt (312,774) 5,013,781
Cash dividends paid (625,142) (556,101)
------------ -----------
Net Cash Provided by Financing
Activities 14,379,059 38,376,648
------------ -----------
Increase in Cash
and Cash Equivalents 14,219,770 15,135,816
Cash and Cash Equivalents at
beginning of period 45,273,177 44,258,382
----------- -----------
Cash and Cash Equivalents at
end of period $ 59,492,947 $ 59,394,198
=========== ===========
Non-cash transactions:
Transfer of loans to other real
estate $ 256,351 $ 70,200
See Notes to Consolidated Financial Statements
THE PEOPLES HOLDING COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 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 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]
March 31, 1995 December 31, 1994
--------------------- -----------------------
Amortized Estimated Amortized Estimated
Cost Market Value Cost Market Value
----------- ----------- ----------- ------------
[C] [S] [S] [S] [S]
Available-for-sale $156,167,653 $154,138,158 $172,586,341 $167,238,212
Held-to-maturity 49,237,964 49,070,464 45,756,198 44,931,275
Note 4 Income Taxes
Federal income taxes payable (receivable) were as follows:
[C] [S]
Current $ 1,563,890
Deferred (3,429,108)
-----------
$ (1,865,218)
===========
The components of income tax expense (credits) are presented below:
[C] [S]
Current $ 464,112
Deferred 293,989
---------
$ 758,101
=========
The reconciliation of income tax attributable to continuing operations
computed at the United States federal statutory tax rates to income tax
expense is:
[C] [S]
Tax at United States statutory rate $ 899,711
Add (deduct) effect of:
Tax-exempt interest income ( 227,401)
Amortization of intangible assets 13,323
Dividends received deduction ( 8,501)
Other items-net 80,969
----------
$ 758,101
==========
Deferred tax assets resulted largely from temporary differences arising
from loan loss provision and 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.
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 $805,819,838 on March 31, 1995, or 2.38% for the
three month period. Loans, less unearned income, increased $10,626,448 or
2.13%. Securities decreased from $212,994,410 on December 31, 1994, to
$203,376,122 on March 31, 1995, due to management's decision to fund
increased loan demands.
Total deposits for the first three months of 1995 grew from $696,279,709
on December 31, 1994 to $712,700,031 on March 31, 1995, or an increase of
2.36%, with the majority of growth in certificates of deposit.
The equity capital to total assets ratio was 9.57% and 9.37% for March 31,
1995 and December 31, 1994, respectively.
Results of Operations-Quarter Ended March 31, 1995 compared to 1994
The Company's net income for the first quarter of 1995 was $1,888,107
compared to $1,999,952 from the first quarter of 1994. The decrease in net
income for 1995 compared to 1994 is primarily due to security losses
incurred based on management's decision to reinvest funds in securities
which will yield a higher rate of return for the remainder of 1995 and
beyond. The annualized returns on average assets for the first quarter of
1995 and 1994 were .96% and 1.07%, respectively.
Net interest revenue, the difference between interest earned on assets and
the cost of interest-bearing liabilities, is the largest component of the
Company's net income. For purposes of this discussion, all interest
revenue has been adjusted to a fully taxable equivalent basis. The primary
items of concern in managing net interest revenue are the mix and maturity
balance between interest-sensitive assets and related liabilities. The net
interest revenue was $14,712,503 and $12,111,492 for first quarter of 1995
and 1994, respectively. Earning assets averaged $727.9 million for first
quarter of 1995 compared to $697.7 million for the same period in 1994.
The net interest margin was 5.24% and 4.66% for the first quarter of 1995
and 1994, respectively.
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 $600,000 and
$500,229 for the first quarter of 1995 and 1994, respectively. The
allowance for credit losses as a percent of loans outstanding was 1.68% and
1.54% for the quarter ended March 31, 1995 and 1994, respectively. Net
charge-offs to average loans remain below .05% for both years.
Non-interest income, excluding security gains and losses was $2,406,014 for
1995 compared to $2,448,613 for 1994, or a decrease of $42,599. Service
charges were up $137,803, fees and commissions were down $69,683, and other
income was down $126,799. Other income in 1994 included $165,388 in life
insurance proceeds the Company received as a beneficiary of a life
insurance policy.
Non-interest expenses were $7,891,742 for 1995 compared to $7,291,352 for
1994, or an increase of 8.2%. The components of other 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 $758,101 for 1995 compared to $425,103 for 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.
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 91% 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. In addition the Company maintains a federal funds position that
provides day-to-day funds to meet liquidity needs.
Repayments and maturities of loans provide a substantial source of
liquidity. The Company has approximately 63% of the loans maturing within
the next twelve months.
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 for March 31, 1995, and December 31, 1994. The
table below shows the capital ratios of the Company at the dates indicated:
[CAPTION]
March 31 December 31 Well-
1995 1994 Capitalized
--------- ----------- -----------
[C] [S] [S] [S]
Tier 1 Risk-Based Capital 14.53% 14.86% 6% or above
Total Risk-Based Capital 15.78% 16.12% 10% or above
Leverage Ratio 9.19% 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 9.57% as of March 31, 1995, compared to 9.37% as of
December 31, 1994. Total shareholders' equity of the Company was
$77,187,144 and $73,733,881 for March 31, 1995 and December 31, 1994,
respectively. This represented an increase of $3,453,263 or 4.68%.
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 $29.63 and $28.31 at March 31, 1995 and December
31, 1994, respectively. Cash dividends paid during the quarter were $.24
per share compared to $.22 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.
Part II. OTHER INFORMATION
Item 1. Legal Proceedings
There were no material proceedings pending at March 31
1995, against the registrant or its subsidiary.
Item 6(b) Reports on Form 8-K
The Company filed a Form 8-K on January 11, 1995, stating
that on December 31, 1994, The Peoples Holding Company
merged with New South Capital Corporation and its
wholly owned subsidiary New South Bank located in
Batesville, Mississippi in an acquisition accounted for
as a pooling-of-interests. Upon completion of the
acquisition, the bank's assets increased from
approximately $765 million to $785 million.
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: May 3, 1995 /s/ John W. Smith
---------------------------
John W. Smith
President & Chief Executive Officer
9 1000 3-MOS DEC-31-1995 MAR-31-1995 40493 3164 19000 0 156642 46734 46567 509828 8541 805820 712700 2910 9583 3440 13024 0 0 64163 805820 11542 3009 161 14712 5502 5606 9106 600 (374) 7892 2646 2646 0 0 1888 .72 .72 5.24 990 1914 255 0 8183 298 56 8541 8541 0 0