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 quarterly period ended June 30, 2001
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 38802-0709
------------------------------------------------------------
(Address of principal executive offices)
Registrant's telephone number including area code 662-680-1001
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, 5,803,843 shares outstanding
as of August 13, 2001
1
THE PEOPLES HOLDING COMPANY
INDEX
PART 1. FINANCIAL INFORMATION PAGE
Item 1.
Condensed Consolidated Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets -
June 30, 2001 and December 31, 2000................. 3
Condensed Consolidated Statements of Income - Three
Months and Six Months Ended June 30, 2001 and 2000.. 4
Condensed Consolidated Statements of Cash Flows -
Six Months Ended June 30, 2001 and 2000............. 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 4.
Submission of Matters to a Vote of Shareholders......... 13
Item 6.(b)
Exhibits and Reports on Form 8-K........................ 13
Signatures.................................................. 14
2
THE PEOPLES HOLDING COMPANY AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
JUNE 30 DECEMBER 31
2001 2000
------------ -----------
(Unaudited) (Note 1)
Assets
Cash and due from banks .................. $ 46,879 $ 27,676
Interest-bearing balances with banks ..... 10,342 29,141
---------- ---------
Cash and Cash Equivalents ... 57,221 56,817
Securities available-for-sale ............ 283,993 192,916
Securities held-to-maturity (fair
value - $0 and $85,981 at
June 30, 2001 and December 31,
2000, respectively) ................... 85,658
Loans, net of unearned income ............ 820,475 815,854
Allowance for loan losses ............. (11,403) (10,536)
---------- ---------
Net Loans ................... 809,072 805,318
Premises and equipment, net .............. 29,637 30,105
Other assets ............................. 60,151 41,126
---------- ---------
Total Assets .................... $ 1,240,074 $ 1,211,940
========== =========
Liabilities
Deposits:
Noninterest-bearing ................... $ 148,700 $ 131,718
Interest-bearing ...................... 919,155 914,887
---------- ---------
Total Deposits .............. 1,067,855 1,046,605
Treasury tax and loan note account ....... 9,926 4,603
Advances from the Federal Home Loan Bank . 19,970 19,946
Other liabilities ........................ 19,635 19,125
---------- ---------
Total Liabilities ........... 1,117,386 1,090,279
Shareholders' Equity
Common Stock, $5 par value - 15,000,000
shares authorized, 6,212,284 shares
issued; 5,807,568 and 6,056,899 shares
outstanding at June 30, 2001 and
December 31, 2000, respectively ........ 31,061 31,061
Treasury stock, at cost .................. (9,487) (3,688)
Additional paid-in capital ............... 39,850 39,931
Retained earnings ........................ 58,531 54,423
Accumulated other comprehensive income ... 2,733 (66)
---------- ---------
Total Shareholders' Equity .. 122,688 121,661
---------- ---------
Total Liabilities and
Shareholders' Equity ......... $ 1,240,074 $ 1,211,940
========== =========
See Notes to Condensed Consolidated Financial Statements
3
THE PEOPLES HOLDING COMPANY AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except share data)
SIX MONTHS ENDED JUNE 30 THREE MONTHS ENDED JUNE 30
2001 2000 2001 2000
---- ---- ---- ----
(Unaudited) (Unaudited)
Interest Income
Loans ................................ $ 36,146 $ 35,441 $ 17,966 $ 17,918
Securities:
Taxable ......................... 6,350 5,930 3,233 3,115
Tax-exempt ...................... 2,013 2,082 998 1,033
Other ................................ 586 266 225 49
------- ------- ------- -------
Total interest income ...... 45,095 43,719 22,422 22,115
Interest Expense
Deposits ............................. 21,728 19,816 10,508 10,243
Borrowings .......................... 731 1,027 360 561
------- ------- ------- -------
Total interest expense ..... 22,459 20,843 10,868 10,804
---------- ---------- ---------- ----------
Net interest income ........ 22,636 22,876 11,554 11,311
Provision for loan losses .................. 2,250 2,679 1,125 1,690
--------- --------- --------- ---------
Net interest income after
provision for loan losses .. 20,386 20,197 10,429 9,621
Noninterest income:
Service charges on deposit accounts .. 5,608 4,823 2,816 2,390
Fees and commissions ................. 3,434 2,172 1,646 1,319
Trust revenue ........................ 530 535 265 268
Gains on sale of securities .......... 45 2
Other ................................ 1,959 1,375 1,117 545
------- ------- ------- -------
Total noninterest income ... 11,576 8,905 5,846 4,522
Noninterest expenses:
Salaries and employee benefits ....... 12,423 10,951 6,346 5,455
Data processing....................... 1,727 1,626 869 792
Net occupancy ........................ 1,605 1,465 777 732
Equipment ............................ 1,462 1,461 733 761
Other ................................ 5,213 5,327 2,650 2,672
--------- --------- --------- ---------
Total noninterest expenses . 22,430 20,830 11,375 10,412
---------- ---------- ---------- ----------
Income before income taxes ................. 9,532 8,272 4,900 3,731
Income taxes ............................... 2,643 2,288 1,313 1,015
--------- --------- --------- ---------
Net income ................. $ 6,889 $ 5,984 $ 3,587 $ 2,716
========== ========== ========== ==========
Basic and diluted earnings per share ...... $ 1.15 $ 0.97 $ 0.60 $ 0.44
====== ====== ====== ======
Weighted average shares outstanding ....... 5,992,167 6,141,264 5,935,987 6,077,744
========= ========= ========= =========
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)
SIX MONTHS ENDED JUNE 30
2001 2000
---- ----
(Unaudited)
Operating Activities
Net Cash Provided by Operating
Activities .................... $ (8,837) $ 4,662
Investing Activities
Purchases of securities
available-for-sale ................. (50,854) (19,647)
Proceeds from sales of securities
available-for-sale ................. 7,004
Proceeds from calls/maturities of
securities available-for-sale ...... 42,974 7,317
Proceeds from calls/maturities of
securities held-to-maturity ........ 1,975
Net increase in loans ................... (45,239) (41,579)
Proceeds from sales of loans ............ 38,338 11,043
Proceeds from sales of premises
and equipment ...................... 16 219
Purchases of premises and equipment ..... (934) (2,219)
Business combinations ................... (69)
---------- ----------
Net Cash Used in Investing
Activities .................... (8,695) (42,960)
Financing Activities
Net increase in
noninterest-bearing deposits ........ 16,982 16,209
Net increase in
interest-bearing deposits ........... 4,268 48,539
Net increase (decrease) in
short-term borrowings ............... 5,323 (1,320)
Proceeds from other borrowings .......... 1,000 2,104
Repayments of other borrowings .......... (976) (20,922)
Acquisition of treasury stock ........... (5,798) (4,619)
Cash dividends paid ..................... (2,782) (2,688)
Other financing activities .............. (81)
---------- ----------
Net Cash Provided by Financing
Activities ................... 17,936 37,303
---------- ----------
Increase (Decrease) in Cash
and Cash Equivalents ......... 404 (995)
Cash and Cash Equivalents at
beginning of period ............... 56,817 43,871
---------- ----------
Cash and Cash Equivalents at
end of period ..................... $ 57,221 $ 42,876
============ ============
Supplemental Disclosures:
Non-cash transactions:
Transfer of loans to other real estate .. $ 1,167 $ 863
============ ============
See Notes to Condensed Consolidated Financial Statements
5
THE PEOPLES HOLDING COMPANY AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 2001
(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 six month period ended June 30, 2001
are not necessarily indicative of the results that may be expected for the year
ended December 31, 2001.
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, 2000.
Note 2 Comprehensive Income
For the six month periods ended June 30, 2001 and 2000, total comprehensive
income amounted to $9,688 and $5,744, respectively. For the quarters ended June
30, 2001 and 2000, total comprehensive income amounted to $3,865 and $3,315,
respectively. Total comprehensive income consists of net income and the change
in the unrealized gain (loss) on securities available for sale.
Note 3 Segment Reporting
The operating segments for the three months ended and the six months ended June
30, 2001 are the same as prior years. However, the Company changed its internal
reporting mechanism to more closely match expenses with the revenues generated
by each segment. Accordingly, prior periods' segment information has been
adjusted to reflect the current method of management reporting as though it had
been in place for all periods presented.
Segment information for the six months ended June 30, 2001 and 2000, is
presented below.
Six Months Ended June 30, 2001
Specialized
Branches Products All Other Total
-------- ---------- --------- ---------
Net interest income ........ $ 21,291 $ 854 $ 491 $ 22,636
Provision for loan loss .... 2,197 0 53 2,250
------- ------- ------- -------
Net interest income after
provision for loan loss .. 19,094 854 438 20,386
Non-interest income ........ 7,334 3,803 439 11,576
Non-interest expense ....... 15,170 3,499 3,761 22,430
------- ------- ------- -------
Income before income taxes . 11,258 1,158 (2,884) 9,532
Income taxes ............... 0 0 2,643 2,643
------- ------- ------- -------
Net income ................. $ 11,258 $ 1,158 $ (5,527) $ 6,889
======= ======= ======= =======
6
Six Months Ended June 30, 2000
Specialized
Branches Products All Other Total
-------- ---------- --------- ---------
Net interest income ........ $ 21,037 $ 1,037 $ 802 $ 22,876
Provision for loan loss .... 2,410 54 215 2,679
------- ------- ------- -------
Net interest income after
provision for loan loss .. 18,627 983 587 20,197
Non-interest income ........ 6,252 2,362 291 8,905
Non-interest expense ....... 14,097 2,348 4,385 20,830
------- ------- ------- -------
Income before income taxes . 10,782 997 (3,507) 8,272
Income taxes ............... 0 0 2,288 2,288
------- ------- ------- -------
Net income ................. $ 10,782 $ 997 $ (5,795) $ 5,984
======= ======= ======= =======
Segment information for the three months ended June 30, 2001 and 2000, is
presented below.
Three Months Ended June 30, 2001
Specialized
Branches Products All Other Total
-------- ---------- --------- ---------
Net interest income ........ $ 10,818 $ 498 $ 238 $ 11,554
Provision for loan loss .... 1,079 0 46 1,125
------- ------- ------- -------
Net interest income after
provision for loan loss .. 9,739 498 192 10,429
Non-interest income ........ 3,596 1,944 306 5,846
Non-interest expense ....... 7,764 1,787 1,824 11,375
------- ------- ------- -------
Income before income taxes . 5,571 655 (1,326) 4,900
Income taxes ............... 0 0 1,313 1,313
------- ------- ------- -------
Net income ................. $ 5,571 $ 655 $ (2,639) $ 3,587
======= ======= ======= =======
Three Months Ended June 30, 2000
Specialized
Branches Products All Other Total
-------- ---------- --------- ---------
Net interest income ........ $ 10,486 $ 408 $ 417 $ 11,311
Provision for loan loss .... 1,520 34 136 1,690
------- ------- ------- -------
Net interest income after
provision for loan loss .. 8,966 374 281 9,621
Non-interest income ........ 3,014 1,320 188 4,522
Non-interest expense ....... 7,140 1,299 1,973 10,412
------- ------- ------- -------
Income before income taxes . 4,840 395 (1,504) 3,731
Income taxes ............... 0 0 1,015 1,015
------- ------- ------- -------
Net income ................. $ 4,840 $ 395 $ (2,519) $ 2,716
======= ======= ======= =======
7
Note 4 Other Accounting Pronouncements
On January 1, 2001, the Company adopted Financial Accounting Standards Board
Statement No. 133, "Accounting for Derivative Instruments and Hedging
Activities." As permitted with the adoption of this Statement, the Company
transferred its held-to-maturity securities to securities available-for-sale on
January 1, 2001. At the time of the transfer, the held-to-maturity securities
had a carrying value of $85,658 and a market value of $85,981. The adoption of
the new Statement did not have a material impact on the earnings or the
financial position of the Company.
In June 2001, the Financial Accounting Standards Board issued Statements of
Financial Accounting Standards No. 141, "Business Combinations," and No. 142,
"Goodwill and Other Intangible Assets," effective for fiscal years beginning
after December 15, 2001. Under the new rules, goodwill will no longer be
amortized but will be subject to annual impairment tests in accordance with the
Statements. Other intangible assets will continue to be amortized over their
useful lives.
The Company will apply the new rules on accounting for goodwill and other
intangible assets beginning in the first quarter of 2002. The Company is
currently evaluating the impact of the application of the nonamortization
provisions of the Statement. During 2002, the Company will perform the first of
the required impairment tests of goodwill as of January 1, 2002, and has not yet
determined what the effect of these tests will be on the earnings and financial
position of the Company.
Note 5 Subsequent Events
As of June 30, 2001, the Company had repurchased 249,331 shares of its common
stock during the year. Subsequent to that time, the Company purchased an
additional 3,725 shares of its common stock. As of August 13, 2001, the Company
had repurchased a total of 253,056 shares of the Company's stock during the
year.
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 $1,211,940 on December 31,
2000, to $1,240,074 on June 30, 2001, or 2.32% for the six month period. On June
30, 2001, average earning assets were $1,119,623, or 91.38% of total average
assets, compared to $1,104,549, or 92.26% of total average assets on December
31, 2000. Growth in average fixed assets and other real estate owned, along with
the purchase of bank owned life insurance, contributed to the reduction of
average earning assets as a percentage of average total assets.
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. Securities increased from $278,574 on December 31, 2000, to $283,993
on June 30, 2001. The growth was primarily due to mortgage backed securities. As
permitted with the adoption of Financial Accounting Standards Board Statement
No. 133, "Accounting for Derivative Instruments and Hedging Activities," all
held-to-maturity securities were transferred to the available-for-sale portfolio
at the beginning of the year which improved the Company's liquidity and provided
more flexibility in asset management.
The loan portfolio represents the largest component of the Company's assets.
Loans, net of unearned income, increased $4,621, or 0.57%, from $815,854 at
December 31, 2000, to $820,475 at June 30, 2001. Most of the increase in the
loan portfolio was attributable to commercial loans.
The Company's primary source of funding continues to be deposits generated in
the communities served by the Bank. Total deposits for the first six months of
2001 grew from $1,046,605 on December 31, 2000, to $1,067,855 on June 30, 2001,
or an increase of 2.03%, with the majority of growth in time deposits.
Total shareholders' equity for the Company grew from $121,661 on December 31,
2000, to $122,688 on June 30, 2001, or 0.84% for the six month period. The
equity capital to total assets ratios were 9.89% and 10.04% at June 30, 2001,
and December 31, 2000, respectively. Growth in capital as a result of net income
and changes in unrealized portfolio gains attributable to recent decreases in
interest rates was offset by the repurchase of approximately 221,000 shares of
common stock through a tender offer during the second quarter of 2001. Cash
dividends declared increased from $.23 per share in the first quarter of 2001 to
$.24 per share in the second quarter of 2001.
9
Results of Operations
The Company's net income for the six month period ended June 30, 2001, was
$6,889, representing an increase of $905, or 15.12% over net income for the six
month period ended June 30, 2000, which totaled $5,984. For the three month
periods ended June 30, 2001 and 2000, net income was $3,587 and $2,716,
respectively. The increase in net income for the three and six month periods
ended June 30, 2001, compared to the same periods for 2000, resulted from
continued emphasis on improving net interest margin and loan quality,
diversifying sources of noninterest income, and maintaining noninterest expense
control. The annualized return on average assets for the six month periods
ending June 30, 2001 and 2000, was 1.11% and 1.06%, respectively, while the
annualized return on average equity over the same periods was 10.91% and 10.82%,
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 repricing of rate-sensitive assets and liabilities. The recent decline in
economic activity resulted in slower demand for loans. In the third quarter of
2000, the Company intentionally curtailed its indirect loan portfolio, reducing
the average loan to average deposit ratio from 79.17% at June 30, 2000, to
76.64% at June 30, 2001. As a result, more funds were shifted to the investment
portfolio. Net interest income was also adversely impacted by time deposits, a
higher cost funding source, which represented approximately 55% of total average
deposits for the six month period ended June 30, 2001, compared to approximately
51% for the same period during 2000.
Net interest income for the six month periods ended June 30, 2001 and 2000, was
$22,636 and $22,876, respectively. Although net interest margin for the six
month period ended June 30, 2001, was 4.37% compared to 4.47% for the same
period during 2000, recent changes in the pricing environment coupled with the
pricing strategies enacted by management have improved the Company's net
interest margin, which was 4.43% for the three month period ended June 30, 2001,
compared to 4.30% for the three month period ended March 31, 2001. The
improvement in net interest margin contributed to a higher net interest income
for the three month period ended June 30, 2001, of $11,554, compared to $11,311
for the same period of 2000.
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 $2,250 and $2,679 for the six month periods ended June
30, 2001 and 2000, respectively. For the three month periods ended June 30, 2001
and 2000, the provision for loan losses totaled $1,125 and $1,690, respectively.
An additional $700 was charged to the provision for loan losses during the
second quarter of 2000 to improve the allowance for loan losses, which had
fallen below desirable levels due to loan growth and some credit deteriorations.
The allowance for loan losses as a percentage of loans outstanding was 1.39% and
1.29% as of June 30, 2001 and December 31, 2000, respectively. Net charge-offs
to average loans was .17% and .23% for the six month periods ending June 30,
2001 and 2000, respectively.
Noninterest income, excluding gains from the sales of securities, was $11,531
for the six month period ending June 30, 2001, compared to $8,905 for the same
period in 2000, or an increase of 29.49%. For the three month periods ended June
30, 2001 and 2000, noninterest income, excluding gains from the sales of
securities, was $5,844 and $4,522, respectively. The Company's continued
10
emphasis on sales of specialized products and services accounted for the
majority of the increase in noninterest income between 2001 and 2000. The
increase also reflects monthly insurance commissions that were not recognized
until the second and fourth quarters of 2000 with the acquisitions of The
Southern Insurance Group and The Dominion Insurance Agency, respectively.
Excluding gains from the sales of securities and the additional fee income
related to the insurance companies, growth in noninterest income was 18.73% for
the six month period ended June 30, 2001, compared to the same period in 2000.
Non-sufficient fund fees accounted for the majority of the increase in service
charges while improvements within fees and commissions included mortgage loan
fees, loan document preparation fees, PC banking fees, and cash management fees.
Other noninterest income reflects the June 2001 purchase of bank owned life
insurance and gains on the sale of mortgage loans.
Noninterest expense was $22,430 for the six month period ended June 30, 2001,
compared to $20,830 for the same period in 2000, or an increase of 7.68%.
Excluding the impact of the acquisition of the insurance companies, the Company
experienced a modest 3.62% growth in noninterest expense, which was due largely
to the Company's employee incentive plan and normal salary increases. The
remaining components of noninterest expense reflect normal increases for banking
related expenses and general inflation in the cost of services and supplies
purchased by the Company. Noninterest expense for the three month period ended
June 30, 2001, was $11,375, compared to $10,412 for the same period during 2000.
Income tax expense was $2,643 for the six month period ended June 30, 2001,
(with an effective tax rate of 27.73%) compared to $2,288 (with an effective tax
rate of 27.66%) for the same period in 2000. The Company continues to monitor
its tax position and its impact on future earnings.
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 appropriate by management and regulators.
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. Funds obtained 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.
On April 16, 2001, the Company announced a tender offer to repurchase up to
604,312 shares of its common stock at $23.00 per share. On May 15, 2001, the
Company funded the repurchase of approximately 221,000 shares of its common
stock under this tender offer from cash and the liquidation of short-term
investments.
11
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 June 30, 2001, the Bank met all capital
adequacy requirements to which it is subject.
As of June 30, 2001, 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 and do not differ materially from that of the
Company.
Actual
Amount Ratio
------ -----
(in thousands)
As of June 30, 2001
Total Capital .................... $ 121,353 14.6%
(to Risk Weighted Assets)
Tier I Capital ................... $ 110,970 13.4%
(to Risk Weighted Assets)
Tier I Capital ................... $ 110,970 9.1%
(to Adjusted Average Assets)
As of December 31, 2000
Total Capital .................... $ 122,165 15.1%
(to Risk Weighted Assets)
Tier I Capital ................... $ 112,022 13.8%
(to Risk Weighted Assets)
Tier I Capital ................... $ 112,022 9.4%
(to Adjusted Average Assets)
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 $21.13 and $20.09 at June 30, 2001, and December 31,
2000, respectively. Earnings per share for the six month periods ended June 30,
2001 and 2000, were $1.15 and $0.97, respectively. Quarterly cash dividends were
$0.23 per share during the first quarter of 2001, up from $0.22 per share during
the fourth quarter of 2000. Dividends were increased again during the second
quarter of 2001 to $0.24 per share.
The Company's capital policy is to evaluate future needs based on growth,
earnings trends and anticipated acquisitions.
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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, 2000. For
additional information, see the Company's Form 10-K for the year ended December
31, 2000.
Part II. OTHER INFORMATION
Item 1. Legal Proceedings
There have been no material proceedings against the Company
during the quarter ending June 30, 2001.
Item 2. Changes in Securities
On April 16, 2001, the Company filed Form SC TO-I with the
Securities and Exchange Commission announcing a tender offer to
repurchase up to 604,312 shares of its common stock at $23.00
per share. The Company repurchased 220,556 shares of its common
on May 15, 2001, through the tender offer.
Excluding the shares of common stock repurchased through the
tender offer, the Company repurchased an additional 32,500 shares
of its common stock through August 13, 2001, at an average price
of $25.91 per share.
These transactions reduced the outstanding shares of common stock
of the Company from 6,056,899 at December 31, 2000, to 5,803,843
at August 13, 2001.
Item 4. Submission of Matters to a Vote of Shareholders
The annual meeting of the shareholders of The Peoples Holding
Company was held on April 17, 2001, for the purpose of electing
five members to the board of directors for a three year term and
to ratify the appointment of the independent auditors. Proxies
for the meeting were solicited pursuant to Section 14(a) of the
Securities Exchange Act of 1934.
Election of Directors For Withheld Not Voting
THREE-YEAR TERM
John M. Creekmore 5,299,567 51,851 860,866
E. Robinson McGraw 5,305,455 45,963 860,866
John W. Smith 5,267,720 83,698 860,866
Robert H. Weaver 5,299,439 51,979 860,866
J. Larry Young 5,299,439 51,979 860,866
For Against Abstain
Ratify appointment of
Ernst & Young LLP as
independent auditors
for 2001 5,345,883 0 866,401
Item 6.(b) Reports on Form 8-K
There were no reports filed on Form 8-K during the second quarter
of 2001.
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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: August 13, 2001 /s/ E. Robinson McGraw
---------------------------
E. Robinson McGraw
President & Chief Executive Officer
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