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 March 31, 2002
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, 5,621,001 shares outstanding
as of April 19, 2002
1
THE PEOPLES HOLDING COMPANY
INDEX
PART 1. FINANCIAL INFORMATION PAGE
Item 1.
Condensed Consolidated Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets -
March 31, 2002 and December 31, 2001................ 3
Condensed Consolidated Statements of Income -
Three Months Ended March 31, 2002 and 2001.......... 4
Condensed Consolidated Statements of Cash Flows -
Three Months Ended March 31, 2002 and 2001.......... 5
Notes to Condensed Consolidated Financial Statements..... 6
Item 2.
Management's Discussion and Analysis of Financial
Condition and Results of Operations................. 8
Item 3.
Quantitative and Qualitative Disclosures
About Market Risk................................... 13
PART II. OTHER INFORMATION
Item 1.
Legal Proceedings....................................... 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)
MARCH 31 DECEMBER 31
2002 2001
------------ -----------
(Unaudited) (Note 1)
Assets
Cash and due from banks .................. $ 43,852 $ 41,475
Federal funds sold ....................... 7,000
Interest-bearing balances with banks ..... 8,628 22,937
---------- ---------
Cash and cash equivalents ... 52,480 71,412
Securities available-for-sale ............ 351,108 277,293
Loans, net of unearned income ............ 819,407 827,696
Allowance for loan losses ............. (11,811) (11,354)
---------- ---------
Net loans ................... 807,596 816,342
Premises and equipment, net .............. 27,948 28,346
Other assets ............................. 65,680 61,334
---------- ---------
Total assets .................... $ 1,304,812 $ 1,254,727
========== =========
Liabilities
Deposits:
Noninterest-bearing ................... $ 154,967 $ 145,690
Interest-bearing ...................... 958,447 917,365
---------- ---------
Total deposits .............. 1,113,414 1,063,055
Treasury tax and loan note account ....... 2,440 6,181
Advances from the Federal Home Loan Bank . 50,275 41,145
Other liabilities ........................ 17,697 20,764
---------- ---------
Total liabilities ........... 1,183,826 1,131,145
Shareholders' equity
Common Stock, $5 par value - 15,000,000
shares authorized, 6,212,284 shares
issued; 5,621,280 and 5,704,680 shares
outstanding at March 31, 2002 and
December 31, 2001, respectively ........ 31,061 31,061
Treasury stock, at cost .................. (15,752) (12,856)
Additional paid-in capital ............... 39,853 39,850
Retained earnings ........................ 64,741 63,391
Accumulated other comprehensive income ... 1,083 2,136
---------- ---------
Total shareholders' equity .. 120,986 123,582
---------- ---------
Total liabilities and
shareholders' equity ......... $ 1,304,812 $ 1,254,727
========== =========
See Notes to Condensed Consolidated Financial Statements
3
THE PEOPLES HOLDING COMPANY AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except share data)
THREE MONTHS ENDED MARCH 31
2002 2001
---- ----
(Unaudited)
Interest income
Loans ................................... $ 15,317 $ 18,180
Securities:
Taxable ............................ 3,053 3,117
Tax-exempt ......................... 981 1,015
Other ................................... 178 361
------- -------
Total interest income .............. 19,529 22,673
Interest expense
Deposits ................................ 6,504 11,220
Borrowings ............................. 586 371
------- -------
Total interest expense ............. 7,090 11,591
------- -------
Net interest income ................ 12,439 11,082
Provision for loan losses ..................... 1,125 1,125
------- -------
Net interest income after
provision for loan losses ...... 11,314 9,957
Noninterest income
Service charges on deposit accounts ..... 2,936 2,792
Fees and commissions .................... 2,049 1,788
Trust revenue ........................... 231 265
Securities gains ........................ 43
Other ................................... 1,393 842
------- -------
Total noninterest income ........... 6,609 5,730
Noninterest expense
Salaries and employee benefits .......... 6,929 6,077
Data processing ......................... 922 858
Net occupancy ........................... 807 828
Equipment ............................... 804 729
Other ................................... 2,836 2,563
------- -------
Total noninterest expense .......... 12,298 11,055
------- -------
Income before taxes and cumulative effect
of accounting change ...................... 5,625 4,632
Income taxes .................................. 1,560 1,330
------- -------
Income before cumulative
effect of accounting change .... 4,065 3,302
Cumulative effect of accounting change ........ (1,300)
------- -------
Net income ......................... $ 2,765 $ 3,302
======= =======
Basic and diluted earnings per share:
Income before cumulative effect of
accounting change .................... $ 0.72 $ 0.55
Cumulative effect of accounting change ... (0.23)
------- -------
Net income ............................... $ 0.49 $ 0.55
======= =======
Weighted average shares outstanding .......... 5,657,726 6,048,805
Weighted average shares outstanding - diluted . 5,660,727 6,048,805
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)
THREE MONTHS ENDED MARCH 31
2002 2001
---- ----
(Unaudited)
Operating activities
Net cash provided (used) by
operating activities .......... $ (1,100) $ 6,860
Investing activities
Purchases of securities
available-for-sale ................. (98,129) (40,425)
Proceeds from sales of securities
available-for-sale ................. 3,097 5,000
Proceeds from calls/maturities of
securities available-for-sale ...... 19,284 15,951
Net decrease in loans ................... 6,834 696
Proceeds from sales of premises
and equipment ...................... 119
Purchases of premises and equipment ..... (473) (728)
---------- ----------
Net cash used in investing
activities .................... (69,268) (19,506)
Financing activities
Net increase in
noninterest-bearing deposits ........ 9,277 15,818
Net increase (decrease) in
interest-bearing deposits ........... 41,082 (3,130)
Net (decrease)increase in
short-term borrowings ............... (3,741) 2,726
Proceeds from other borrowings .......... 13,748
Repayments of other borrowings .......... (4,618) (487)
Acquisition of treasury stock ........... (2,897) (261)
Cash dividends paid ..................... (1,415) (1,388)
---------- ----------
Net cash provided by financing
activities ................... 51,436 13,278
---------- ----------
(Decrease) increase in cash
and cash equivalents ......... (18,932) 632
Cash and cash equivalents at
beginning of period ............... 71,412 56,817
---------- ----------
Cash and cash equivalents at
end of period ..................... $ 52,480 $ 57,449
============ ============
Supplemental disclosures:
Non-cash transactions:
Transfer of loans to other real estate .. $ 787 $ 608
============ ============
See Notes to Condensed Consolidated Financial Statements
5
THE PEOPLES HOLDING COMPANY AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 2002
(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 three-month period ended March 31, 2002
are not necessarily indicative of the results that may be expected for the year
ended December 31, 2002.
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, 2001.
Note 2 Other Accounting Pronouncements
In the first quarter of 2002, the Company completed the transitional impairment
test required by Financial Accounting Standards Board (FASB) Statement No. 142,
"Goodwill and Intangible Assets." As a result of this test, the Company recorded
a goodwill impairment charge of $1,300 as a cumulative effect of a change in
accounting principle. The Company identified its reporting units as banking
operations and insurance operations for purposes of measuring impairment of
goodwill. The reason we measured in this manner is that the insurance operation
is a subsidiary of the bank. The impairment was specific to the insurance
subsidiary. The fair value of the insurance reporting unit was estimated using
the expected present value of future cash flows. The insurance subsidiary
acquisition was a tax-free exchange; therefore, there was no tax offset to the
impairment cost booked.
As of March 31, 2002
--------------------------------
Gross Carrying Accumulated
Amount Amortization
-------------- --------------
Amortized intangible assets:
Core deposit intangible assets .. $ 507 $ (318)
Other intangible assets ......... 3,282 (1,786)
---------- ----------
Total ........................... $ 3,789 $ (2,104)
========== ==========
Unamortized goodwill $ 7,190 $ (2,142)
========== ==========
6
Note 2 Other Accounting Pronouncements (continued)
Aggregate amortization expense:
For the period ended March 31, 2002 ...... $ 123
Estimated amortization expense in future years:
For the year ended December 31, 2002 ..... $ 493
For the year ended December 31, 2003 ..... 493
For the year ended December 31, 2004 ..... 422
For the year ended December 31, 2005 ..... 399
For the year ended December 31, 2006 ..... 0
The changes in the carrying amount of intangible assets for the quarter ended
March 31, 2002, are as follows:
Other
Goodwill Intangibles
----------- -----------
Balance as of January 1, 2002 .............. $ 6,348 $ 1,808
Impairment losses ........................ (1,300)
Amortization expense ..................... (123)
----------- -----------
Balance as of March 31, 2002 ............... $ 5,048 $ 1,685
=========== ===========
The table below presents net income for the prior periods as reported as well as
adjusted for the exclusion of goodwill amortization and the cumulative effect of
the transitional impairment.
Quarter ended Year ended Quarter ended
March 31, 2002 December 31, 2001 March 31, 2001
-------------- ----------------- --------------
Reported net income .................... $ 2,765 $ 14,587 $ 3,302
Goodwill amortization, net of tax ...... 407 102
Transitional impairment ................ 1,300
----------- ----------- -----------
Adjusted net income .................... $ 4,065 $ 14,994 $ 3,404
=========== =========== ===========
Basic and diluted earnings per share:
Reported net income .................... $ 0.49 $ 2.48 $ 0.55
Goodwill amortization, net of tax ...... 0.07 0.01
Transitional impairment ................ 0.23
----------- ----------- -----------
Adjusted net income .................... $ 0.72 $ 2.55 $ 0.56
=========== =========== ===========
Note 3 Comprehensive Income
For the three month periods ended March 31, 2002 and 2001, total comprehensive
income was $1,712 and $5,823, respectively. Total comprehensive income consists
of net income and the change in the unrealized gain (loss) on securities
available for sale.
7
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 our portfolio of outstanding loans, and competition in our
markets. We undertake 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 increased from $1,254,727 on
December 31, 2001, to $1,304,812 on March 31, 2002, or 3.99% for the three month
period. Most of the growth in assets occurred in the investment portfolio, which
increased from $277,293 on December 31, 2001, to $351,108 on March 31, 2002.
Federal funds sold and interest bearing bank balances decreased $21,309 as funds
were shifted to the investment portfolio. We invested $98,129 in various
securities this quarter. Purchases include mortgage-backed securities, U.S.
government agency securities, trust preferred stock issues and municipal
securities. The majority (67%) of the purchases were in the mortgage-back sector
because of the cash flow provided by the principal and interest payback each
month. We believe we are at the bottom of the rate cycle and that the cash flow
will be useful in meeting anticipated loan demand. U.S. Treasury securities that
matured this quarter were reinvested in other sectors in order to enhance yield.
Last year, we changed our investment policy, eliminating the minimum requirement
of 18% of the portfolio being invested in Treasury securities. We have steadily
replaced investments in Treasury securities with other investments since that
time. Treasury security balances have decreased approximately $6,000 since
December 31, 2001, and approximately $31,200 since March 31, 2001.
Loan balances have decreased $8,289, from $827,696 at December 31, 2001, to
$819,407 at March 31, 2002. Loan demand began to improve at the end of the
quarter. A strategic decision to curtail our sales finance division in July,
2000 continues to impact loan volume. The balance at that time was approximately
$32 million; it is currently approximately $12 million. The purpose of the
decision was twofold - to reduce risk and to enhance yield. The sales finance
balance decreased $2,743 from December 31, 2001. The majority of our loan growth
this quarter has been in real estate loans. In fact, our loan portfolio is
heavily weighted in real estate loans, with approximately 69% of the portfolio
in that type. We have experienced declines in retail installment loans and in
commercial, financial and agricultural loans. In addition, mortgage loans held
for resale are down approximately $7,000 due to a decline in origination volume
toward the end of the quarter. The average loan to deposit ratio was 74.89% and
76.68% at March 31, 2002, and December 31, 2001, respectively.
8
Total deposits for the first three months of 2001 increased from $1,063,055 on
December 31, 2001, to $1,113,414 on March 31, 2002, or an increase of 4.74%. The
majority of our growth has been in interest bearing demand (63%) and
non-interest demand deposit accounts (18%).
The equity capital to total assets ratios were 9.27% and 9.85% at March 31,
2002, and December 31, 2001, respectively. Capital decreased $2,596, or 2.10%,
from December 31, 2001, to March 31, 2002. There were a number of factors
contributing to the reduction in capital. Normal transactions such as decreases
in unrealized portfolio gains, dividends and the purchase of treasury stock all
contributed to the decrease in capital. The reduction in the unrealized gains on
the investment portfolio was due to decreasing portfolio yields. Cash dividends
declared were $.25 per share in the first quarter of 2002, unchanged from
dividends declared in the fourth quarter of 2001. We have continued to purchase
treasury stock, purchasing 83,400 shares at an average cost of $34.68 per share
over the first quarter of 2002.
Results of Operations
Our core operating income for the three month period ended March 31, 2002, was
$4,065. This represented an increase of $661, or 19.42% over comparable net
income for the three month period ended March 31, 2001. Core operating income
excluding goodwill amortization for the period ending March 31, 2001 was $3,404.
Core earnings per share for the first quarter of 2002 were $0.72, an increase of
28.57% from $0.56 for the comparable period a year ago. The increase in core
operating income for the three month period ended March 31, 2002, compared to
the same period of 2001 resulted from usual and customary deposit gathering and
lending operations and increases in noninterest income for sales of other
products such as insurance, mutual funds and annuities. The annualized return on
average assets on the same basis for the three month periods ending March 31,
2002 and 2001, was 1.19% and 1.09%, respectively. Core operating income is
defined as income before the effect of the change in accounting priciple and
excluding goodwill amortization.
Net interest income, the difference between interest earned on assets and the
cost of interest-bearing liabilities, is the largest component of our net
income. The primary concerns in managing net interest income are the mix and the
repricing of rate-sensitive assets and liabilities. We have maintained steady
growth in our asset base. Net interest income has improved due in part to a
shift from time deposits to other interest bearing deposits. Total deposits have
grown 5.11% over March 31, 2001. Time deposits, the highest cost funding source,
represented approximately 55% of total average deposits for the three month
period ended March 31, 2001, compared to approximately 50% for the same period
during 2002.
Net interest income for the three month periods ending March 31, 2002 and 2001
was $12,439 and $11,082, respectively, while earning assets for the same periods
averaged $1,162,968 and $1,119,020, respectively. The bank's repricing position
was favorable under the falling rate environment under which we have been
operating. The Federal Reserve Bank lowered rates eight times during the last
twelve months. This, coupled with our repricing strategy, increased net interest
margin.
Quarter ending Year ending Quarter ending
March 31, 2002 December 31, 2001 March 31, 2001
-------------- ----------------- --------------
Net interest margin ....... 4.59% 4.54% 4.30%
9
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 our
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 loan loss provision totaled
$1,125 for each of the three month periods ending March 31, 2002 and 2001. The
tables below present pertinent data and ratios.
Loans and Credit Quality
Nonperforming Net Charge-offs
Loans* Loans Three Months Ended
March 31 March 31 March 31
------------------ ------------------ ------------------
2002 2001 2002 2001 2002 2001
-------- -------- -------- -------- -------- --------
Commercial, financial, agricultural ... $147,982 $158,096 $ 1,501 $ 595 $ 73 $ 152
Real estate - construction ............ 31,269 25,040 150 332 87
Real estate - mortgage ................ 536,877 509,829 3,645 6,040 289 123
Consumer .............................. 103,279 120,991 403 754 219 319
-------- -------- -------- -------- -------- --------
$819,407 $813,956 $ 5,699 $ 7,721 $ 668 $ 594
======== ======== ======== ======== ======== ========
* Net of unearned income.
Allowance for Loan Losses
2002 2001
--------- ------------------------------------------
1st 4th 3rd 2nd 1st
Quarter Quarter Quarter Quarter Quarter
--------- --------- --------- --------- ---------
Balance at beginning of period .............. $ 11,354 $ 11,166 $ 11,403 $ 11,067 $ 10,536
Loans charged off ........................... 985 1,196 1,534 870 702
Recoveries of loans previously charged off .. 317 69 72 81 108
--------- --------- --------- --------- ---------
Net Charge-offs ........................ 668 1,127 1,462 789 594
Provision for loan losses ................... 1,125 1,315 1,225 1,125 1,125
--------- --------- --------- --------- ---------
Balance at end of year ...................... $ 11,811 $ 11,354 $ 11,166 $ 11,403 $ 11,067
========= ========= ========= ========= =========
Allowance for loan losses to total loans .... 1.44% 1.37% 1.35% 1.39% 1.36%
Reserve coverage ratio ...................... 207.25 178.65 218.20 191.62 143.34
Net charge-offs to total loans .............. 0.08 0.14 0.18 0.10 0.07
Nonperforming loans to total loans .......... 0.70 0.77 0.62 0.73 0.95
10
Noninterest income, excluding gains from the sales of securities, was $6,609 for
the three month period ending March 31, 2002, compared to $5,687 for the same
period in 2001, or an increase of 16.21%. While we have continued our emphasis
on sales of insurance, annuities and mutal funds, the increase in noninterest
income between 2002 and 2001 is due primarily to fees generated from ususal and
customary loan and deposit services.
Income derived from the mortgage loan business remained strong during the first
quarter of 2002, and fees generated from the sale of annuities and mutual funds
also improved compared to the first quarter of 2001. Additionally, we purchased
Bank Owned Life Insurance (BOLI) on key mangagement personnel in May of 2001.
The additional income derived from BOLI of approximately $300 has been used to
offset rising benefits costs, primarily health and life insurance.
We implemented an integration plan in 2001 aimed at improving insurance
commissions. Contingency income received through our insurance subsidiary
significantly increased over last year, due in part to the success we have had
in implementing this plan. Contingency income is a bonus received from the
insurance underwriters and is based on both commission income and claims
experience on our customers during the previous year.
Noninterest expense was $12,298 for the three month period ended March 31, 2002,
compared to $10,913 for the same period in 2001, or an increase of 12.69%.
Although expenses are up, on the whole, we have improved our efficiency ratio on
a GAAP basis. Almost 20% of the increase in noninterest expense was due to
higher employee incentive expenses linked to the improvement in net income for
the quarter. Increases in health and life insurance charges caused by higher
premiums and claims represented approximately 22% of the total increase in
noninterest expense, or $300. It was noted above that BOLI was purchased in part
to generate revenue to offset the rising cost of benefits, primarily health and
life insurance. Excluding the increases in employee incentive and health and
life insurance, noninterest expense increased 7.34% over the first quarter of
2001. In addition to recognizing a loss on the disposal of a building during the
first quarter of 2002, we also experienced greater computer equipment
depreciation and computer processing costs related to technological
enhancements. With our commitment to enhanced productivity and customer service,
we invested in computer equipment and software which increased our technology
cost.
Quarter ending Quarter ending
March 31, 2002 March 31, 2001
-------------- --------------
Efficiency ratio ................. 62.03% 62.58%
Income tax expense was $1,560 for the three month period ended March 31, 2002,
(with an effective tax rate of 27.73%) compared to $1,370 (with an effective tax
rate of 28.70%) for the same period in 2001. We continue to invest in assets
whose earnings are given favorable tax treatment.
11
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 we
continue 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 we meet the liquidity requirements deemed
necessary by management and regulators.
Another source available for meeting our 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, we maintain 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, we have 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.
Capital Resources
We are 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 our
financial statements. Under capital adequacy guidelines and the regulatory
framework for prompt corrective action, we must meet specific capital guidelines
that involve quantitative measures of our assets, liabilities, and certain
off-balance-sheet items as calculated under regulatory accounting practices. Our
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 us 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 March 31, 2002, we met all capital adequacy
requirements to which we are subject.
As of March 31, 2002, the most recent notification from the Federal Deposit
Insurance Corporation (FDIC) categorized us as well capitalized under the
regulatory framework for prompt corrective action. To be categorized as well
capitalized, we 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.
12
Actual
Amount Ratio
------ -----
As of March 31, 2002
Total Capital .................... $ 122,454 14.4%
(to Risk Weighted Assets)
Tier I Capital ................... $ 111,773 13.1%
(to Risk Weighted Assets)
Tier I Capital ................... $ 111,773 8.7%
(to Adjusted Average Assets)
As of December 31, 2001
Total Capital .................... $ 122,162 14.5%
(to Risk Weighted Assets)
Tier I Capital ................... $ 111,622 13.3%
(to Risk Weighted Assets)
Tier I Capital ................... $ 111,622 9.1%
(to Adjusted Average Assets)
Management recognizes the importance of maintaining a strong capital base. As
the above ratios indicate, we exceed the requirements for a well capitalized
bank.
Book value per share was $21.52 and $21.66 at March 31, 2002 and December 31,
2001, respectively.
Our 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, 2001. For
additional information, see our Form 10-K for the year ended December 31, 2001.
Part II. OTHER INFORMATION
Item 1. Legal Proceedings
There have been no material proceedings against us during the
quarter ending March 31, 2002.
Item 6.(b) Reports on Form 8-K
There were no reports filed on Form 8-K during the first quarter
of 2002.
13
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: April 26, 2002 /s/ E. Robinson McGraw
---------------------------
E. Robinson McGraw
President & Chief Executive Officer
14