<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[ x ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
------------------------------
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number 2 - 98268
-----------------------------------
PEOPLES FINANCIAL CORPORATION
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Mississippi 64-0709834
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
Lameuse and Howard Avenues, Biloxi, Mississippi 39533
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(601) 435-5511
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark 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 (or for such shorter period that the
registrant was required to file such reports), 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 of the last practicable date.
Peoples Financial Corporation has only one class of common stock authorized.
At July 22, 1996, there were 1,500,000 shares of $1 par value common stock
authorized, and 369,084 shares issued and outstanding.
Page 1 of 17
<PAGE> 2
PART I
FINANCIAL INFORMATION
PEOPLES FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
June 30, December 31, and June 30, 1996 1995 1995
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Cash and due from banks $ 25,507,817 $ 24,220,348 $ 18,874,135
Available for sale securities 53,275,512 20,829,655 198,083
Held to maturity securities, market
value of $148,230,000 - June 30,
1996; $167,384,000 - December 31,
1995; $139,458,000 - June 30,
1995 148,359,489 165,142,083 138,118,565
Federal funds sold 17,650,000
Loans 220,072,157 224,069,011 233,019,043
Less: Unearned income 22,426 22,531 33,961
Allowance for loan losses 4,609,249 4,352,967 4,899,950
------------------------------------------------------------------
Loans, net 215,440,482 219,693,513 228,085,132
Bank premises and equipment, net of
accumulated depreciation of $6,746,000 -
June 30, 1996; $6,171,000 - December 31,
1995; and $5,824,000 - June 30, 1995 8,485,353 8,789,642 8,523,220
Other real estate 609,451 726,838 912,249
Accrued interest receivable 4,082,211 3,169,666 3,147,978
Other assets 3,841,368 2,919,601 2,945,291
Intangible assets 654,909 813,825 972,741
------------------------------------------------------------------
TOTAL ASSETS $ 477,906,592 $ 446,305,171 $ 401,777,394
==================================================================
</TABLE>
Page 2 of 17
<PAGE> 3
PEOPLES FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Continued)
(Unaudited)
<TABLE>
<CAPTION>
June 30, December 31, and June 30, 1996 1995 1995
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
LIABILITIES & SHAREHOLDERS' EQUITY
LIABILITIES:
Deposits:
Demand, non-interest bearing $ 67,038,052 $ 82,790,093 $ 68,213,828
Savings and demand, interest bearing 183,602,784 155,187,526 171,183,386
Time, $100,000 or more 113,630,958 84,117,293 53,500,206
Other time deposits 54,516,523 54,076,823 52,451,564
---------------------------------------------------------
Total deposits 418,788,317 376,171,735 345,348,984
Accrued interest payable 853,971 1,139,768 854,636
Federal funds purchased 12,150,000 2,150,000
Notes payable 232,137 437,520 530,260
Other liabilities 2,200,700 1,823,743 2,004,568
---------------------------------------------------------
TOTAL LIABILITIES 422,075,125 391,722,766 350,888,448
SHAREHOLDERS' EQUITY:
Common Stock, $1 par value, 1,500,000
shares authorized, 369,084 shares
issued and outstanding at June 30,
1996, December 31, 1995 and June 30,
1995, after giving retroactive effect
to two for one stock split effective
November 22, 1995 369,084 369,084 369,084
Surplus 49,295,346 49,295,346 43,545,346
Undivided profits 7,770,784 5,075,542 7,262,016
Unrealized gain (loss) on available for sale
securities, net of tax (1,309,235) 336,945
Additional minimum liability in excess of prior
service cost, net of tax (294,512) (294,512)
Note payable offset associated with employee
stock ownership plan (200,000) (287,500)
---------------------------------------------------------
TOTAL SHAREHOLDERS' EQUITY 55,831,467 54,582,405 50,888,946
---------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 477,906,592 $ 446,305,171 $ 401,777,394
=========================================================
</TABLE>
See Selected Notes to Consolidated Financial Statements.
Page 3 of 17
<PAGE> 4
PEOPLES FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
For The Quarters Ended June 30, For The Six Months Ended June 30,
- ------------------------------------------------------------------------------------------------------------
1996 1995 1996 1995
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INTEREST INCOME:
Interest and fees on loans $4,989,544 $5,474,530 $10,150,368 $10,539,151
Interest and dividends on investments:
U. S. Treasury 2,042,508 1,903,416 4,168,968 3,815,314
U. S. Government agencies
and corporations 1,080,107 254,845 1,807,215 402,649
States and political
subdivisions 95,181 89,729 192,611 158,627
Other investments 12,982 2,332 30,900 7,043
Interest on federal funds
sold 97,678 137,793 338,801 324,464
-------------------------------------------------------------------------
TOTAL INTEREST INCOME 8,318,000 7,862,645 16,688,863 15,247,248
-------------------------------------------------------------------------
INTEREST EXPENSE:
Time deposits of $100,000 or
more 1,252,405 874,013 2,525,048 1,331,717
Other deposits 2,317,179 2,120,217 4,728,398 4,378,277
Mortgage indebtedness 3,147 3,289 6,329 6,611
Federal funds purchased 36,810 42,633 64,527 56,028
-------------------------------------------------------------------------
TOTAL INTEREST EXPENSE 3,609,541 3,040,152 7,324,302 5,772,633
-------------------------------------------------------------------------
NET INTEREST INCOME 4,708,459 4,822,493 9,364,561 9,474,615
Provision for losses on loans -0- -0- -0- -0-
-------------------------------------------------------------------------
NET INTEREST INCOME AFTER
PROVISION FOR LOSSES ON LOANS 4,708,459 4,822,493 9,364,561 9,474,615
-------------------------------------------------------------------------
OTHER OPERATING INCOME:
Trust department income and fees 112,141 139,131 339,758 408,330
Service charges on deposit accounts 945,690 913,501 1,869,931 1,578,558
Other service charges,
commissions and fees 68,316 66,782 127,599 133,663
Other income 225,528 143,818 360,587 260,012
-------------------------------------------------------------------------
TOTAL OTHER OPERATING INCOME $1,351,675 $1,263,232 $2,697,875 $2,380,563
-------------------------------------------------------------------------
</TABLE>
Page 4 of 17
<PAGE> 5
PEOPLES FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (continued)
(Unaudited)
<TABLE>
<CAPTION>
For The Quarters Ended June 30, For The Six Months Ended June 30,
- ------------------------------------------------------------------------------------------------------------
1996 1995 1996 1995
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OTHER OPERATING EXPENSE:
Salaries and employee benefits $1,877,545 $1,754,023 $3,817,971 $3,447,688
Net occupancy 177,233 208,332 357,460 395,589
Equipment rentals, depreciation and
maintenance 489,335 369,540 896,937 748,501
Other expense 1,414,487 1,396,785 2,553,743 2,577,915
-------------------------------------------------------------------------
TOTAL OTHER OPERATING EXPENSE 3,958,600 3,728,680 7,626,111 7,169,693
-------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES 2,101,534 2,357,045 4,436,325 4,685,485
INCOME TAXES 828,370 798,035 1,353,545 1,577,713
-------------------------------------------------------------------------
NET INCOME $1,273,164 $1,559,010 $3,082,780 $3,107,772
=========================================================================
</TABLE>
See Selected Notes to Consolidated Financial Statements.
Page 5 of 17
<PAGE> 6
PEOPLES FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(Unaudited)
<TABLE>
<CAPTION>
Additional
Unrealized Minimum
Gain (Loss) Liability in
on Available Excess of Note Payable
for Sale Prior Service Offset
# of Common Undivided Securities, Cost, Net of Associated
Shares Stock Surplus Profits Net of Tax Tax With ESOP Total
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1,
1995, as
previously
reported 184,542 $184,542 $43,729,888 $4,901,640 $ -0- $ -0- $(375,000) $48,441,070
Two-for-one stock
split in 1995 184,542 184,542 (184,542)
-------------------------------------------------------------------------------------------------------
Balance, January 1,
1995, as restated 369,084 369,084 43,545,346 4,901,640 -0- -0- (375,000) 48,441,070
Net income 3,107,772 3,107,772
Cash dividends,
common
($1.00 per share) (369,084) (369,084)
Dividend declared,
common ($1.025
per share) (378,312) (378,312)
Reduction to note
payable offset
associated with
esop 87,500 87,500
-------------------------------------------------------------------------------------------------------
Balance, June 30, 369,084 $369,084 $43,545,346 $7,262,016 $ -0- $ -0- $(287,500) $50,888,946
1995 =======================================================================================================
Balance, January 1,
1996 369,084 $369,084 $49,295,346 $5,075,542 $336,945 $(294,512) $(200,000) $54,582,405
Net income 3,082,780 3,082,780
Cash dividends,
common ($1.05
per share) (387,538) (387,538)
Net change in
unrealized gain
(loss) on available,
for sale securities
net of tax (1,646,180) (1,646,180)
Reduction to note
payable offset
associated with
esop 200,000 200,000
-------------------------------------------------------------------------------------------------------
Balance, June 30,
1996 369,084 $369,084 $49,295,346 $7,770,784 $(1,309,235) $(294,512) $ -0- $55,831,467
=======================================================================================================
</TABLE>
See Selected Notes to Consolidated Financial Statements.
Page 6 of 17
<PAGE> 7
PEOPLES FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
For The Six Months Ended June 30, 1996 1995
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $3,082,780 $3,107,772
Adjustments to reconcile net income to net cash
provided by operating activities:
Proceeds from sales of other real estate 52,700
Gain on sales of other real estate (10,850)
Depreciation and amortization 758,916 668,916
Provision for losses on other real estate 75,537 86,777
Changes in assets and liabilities:
Accrued interest receivable (912,545) 174,236
Other assets 50,447 (369,113)
Accrued interest payable (285,797) 404,480
Other liabilities 376,957 241,806
------------------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 3,188,145 4,314,874
------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities of held to maturity
securities 97,082,482 52,869,372
Investment in held to maturity securities (80,299,888) (31,489,728)
Proceeds from maturities of available for sale
securities 15,435,000
Investment in available for sale securities (50,374,117)
Loans repaid (made) 4,253,031 (10,209,259)
Acquisition of premises and equipment (295,711) (396,411)
Federal funds sold (17,650,000)
Other assets (125,134) (28,176)
------------------------------------------------------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES $(31,974,337) $10,745,798
------------------------------------------------------
</TABLE>
Page 7 of 17
<PAGE> 8
PEOPLES FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(Unaudited)
<TABLE>
<CAPTION>
For The Six Months Ended June 30, 1996 1995
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Demand and savings deposits, net increase (decrease) $12,663,217 $(25,117,373)
Time deposits, net increase 29,953,365 22,275,942
Principal payments on notes (5,383) (5,102)
Cash dividends (387,538) (369,084)
Federal funds purchased (12,150,000) (13,750,000)
-----------------------------------------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 30,073,661 (16,965,617)
-----------------------------------------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 1,287,469 (1,904,945)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 24,220,348 20,779,080
-----------------------------------------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $25,507,817 $18,874,135
===============================================
</TABLE>
See Selected Notes to Consolidated Financial Statements.
Page 8 of 17
<PAGE> 9
PEOPLES FINANCIAL CORPORATION AND SUBSIDIARIES
SELECTED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Six Months Ended June 30, 1996 and 1995
1. The accompanying unaudited consolidated financial statements have been
prepared with the accounting policies in effect as of December 31, 1995 as set
forth in the Notes to the Consolidated Financial Statements of Peoples
Financial Corporation and Subsidiaries (the Company). In the opinion of
Management, all adjustments necessary for a fair presentation of the condensed
consolidated financial statements have been included and are of a normal
recurring nature.
The accompanying unaudited consolidated financial statements have been prepared
also in accordance with the instructions to Form 10-Q and Rule 10-01 of
Regulations S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements.
2. The results of operations for the six months ended June 30, 1996, are not
necessarily indicative of the results to be expected for the full year.
3. Per share data is based on the weighted average shares of common stock
outstanding of 369,084 for the six months ended June 30, 1996 and 1995.
4. At June 30, 1996 and 1995, the total recorded investment in impaired loans
amounted to $1,417,000 and $1,553,000. The amount of that recorded investment
in impaired loans for which there is a related allowance for loan losses and
the amount of that allowance was $788,000 at June 30, 1995. The amount of
that recorded investment in impaired loans for which there was no related
allowance for loan losses was $1,417,000 and $765,000 at June 30, 1996 and
1995, respectively.
At June 30, 1996, the average recorded investment in impaired loans was
$1,451,000. During the first six months of 1996, the Company recognized
$31,000 in interest income on impaired loans. During the first six months of
1996, the Company received $34,000 in interest payments on impaired loans.
5. Transactions in the allowance for loan losses were as follows:
<TABLE>
<S> <C>
Balance, January 1, 1996 $4,352,967
Recoveries 342,260
Loans charged off (85,978)
----------
Balance, June 30, 1996 $4,609,249
==========
</TABLE>
Page 9 of 17
<PAGE> 10
6. At June 30, 1996 and 1995, renegotiated and restructured loans amounted to
$2,368,000 and $2,419,000. This loan is currently being serviced at a market
rate of interest with a scheduled maturity of March 15, 1999. The Company
recognized $74,000 and $47,000 in interest income on these loans during the six
months ended June 30, 1996 and 1995, respectively. The amount of interest that
would have been recognized during this period under the original terms of the
loan agreements was $101,000 and $111,000.
7. The Company has defined cash and cash equivalents to include cash and due
from banks. The Company paid $7,610,000 and $5,368,000 for the six months
ended June 30, 1996 and 1995, respectively, for interest on deposits and
borrowings. Income tax payments totaled $1,163,000 and $1,275,000 for the six
months ended June 30, 1996 and 1995, respectively. Loans transferred to other
real estate amounted to $52,500 for the six months ended June 30, 1995. No
loans were transferred to other real estate during the six months ended June
30, 1996.
Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations
The following presents Management's discussion and analysis of the consolidated
financial condition and results of operations of Peoples Financial Corporation
and Subsidiaries (the Company) for the six months ended June 30, 1996 and 1995.
These comments highlight the significant events and should be considered in
combination with the Consolidated Financial Statements included in this report
on Form 10-Q.
OVERVIEW
The significant developments during the first six months of 1996 included the
dramatic increases in securities and deposits compared with the first six
months of 1995. The entire securities portfolio increased $63 million at
June 30, 1996, as compared with June 30, 1995. This increase resulted from the
$73 million increase in deposits at June 30, 1996, as compared with June 30,
1995.
The following schedule compares financial highlights for the six months ended
June 30, 1996 and 1995:
<TABLE>
<CAPTION>
For the six months ended June 30, 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
Net income per share $ 8 $ 8
Book value per share $ 151 $ 138
Return on average total assets 1.32% 1.50%
Return on average shareholders' equit 11.17% 12.52%
Allowance for loan losses as a % of
loans, net of unearned discount 2.09% 2.10%
</TABLE>
Page 10 of 17
<PAGE> 11
FINANCIAL CONDITION
HELD TO MATURITY SECURITIES
The Company has structured its portfolio during the last 12 months to
strengthen its liquidity position. These securities generally have maturities
of 3 months, 6 months and 2 years. There were no realized gains or losses on
investments during the six months ended June 30, 1996 and 1995. Gross
unrealized gains were $906,000 and $1,940,000 and gross unrealized losses were
$1,036,000 and $601,000 for the six months ended June 30, 1996 and 1995,
respectively. The following schedule reflects the mix of the held to maturity
securities portfolio at June 30, 1996 and 1995:
<TABLE>
<CAPTION>
June 30, 1996 1995
- --------------------------------------------------------------------------------
Amount % Amount %
--------------------------------------------------
<S> <C> <C> <C> <C>
U. S. Treasury securities $130,395,316 88.0% $118,620,091 85.9%
U. S. Government agencies 13,524,323 9.1% 15,064,709 10.9%
States and political
subdivisions 4,439,850 2.9% 4,433,765 3.2%
--------------------------------------------------
Totals $148,359,489 100.00% $138,118,565 100.00%
==================================================
</TABLE>
AVAILABLE FOR SALE SECURITIES
Available for sale securities increased significantly during the first six
months of 1996 to $53 million. Until September 30, 1995, the Company had
invested primarily in held to maturity securities. This change resulted from
the management of the Company's liquidity position. Gross unrealized gains
were $493,000 and gross unrealized losses were $2,476,000 at June 30, 1996.
There were no unrealized gains or losses at June 30, 1995. The following
schedule reflects the mix of available for sale securities at June 30, 1996 and
1995:
<TABLE>
<CAPTION>
June 30, 1996 1995
- --------------------------------------------------------------------------------
Amount % Amount %
--------------------------------------------------
<S> <C> <C> <C> <C>
U. S. Treasuries $6,799,680 12.8% $ -0- -0-
U. S. Government agencies 45,784,732 85.9% -0- -0-
Other securities 691,100 1.3% 198,083 100.0%
--------------------------------------------------
Totals $53,275,512 100.00% $198,083 100.0%
==================================================
</TABLE>
Page 11 of 17
<PAGE> 12
FEDERAL FUNDS SOLD
Federal funds sold were $17,650,000 at June 30, 1996 compared with federal
funds purchased of $2,150,000 at June 30, 1995. This fluctuation is directly
related to the liquidity needs of the bank subsidiary.
ACCRUED INTEREST RECEIVABLE
Accrued interest receivable increased $934,000 or 30% at June 30, 1996, as
compared with June 30, 1995. This increase is primarily attributable to the
increase in investment securities, as discussed above.
OTHER ASSETS
Other assets increased $896,000 or 30% at June 30, 1996, as compared with June
30, 1995, as a result of deferred taxes relating to unrealized losses on
available for sale securities.
DEPOSITS
Total deposits have increased $73 million or 22% at June 30, 1996, as compared
with June 30, 1995. Significant increases or decreases in total deposits are
anticipated by Management as customers in the casino industry and county and
municipal areas reallocate their resources periodically. As discussed above,
the Company has managed its funds including planning the timing of investment
maturities so as to achieve appropriate liquidity.
SHAREHOLDERS' EQUITY AND CAPITAL ADEQUACY
Strength, security and stability have been the hallmark of the Company since
its founding in 1985 and of its bank subsidiary since its founding in 1896. A
strong capital foundation is fundamental to the continuing prosperity of the
Company and the security of its customers and shareholders. One measure of
capital adequacy is the primary capital ratio which was 12.96% at June 30,
1996, as compared with 13.50% at June 30, 1995. The decrease in this indicator
results from the significant increase in assets at June 30, 1996, as compared
with June 30, 1995, and does not reflect a softening of the Company's capital
position. These ratios are well above the regulatory minimum of 6.00%.
Management continues to emphasize the importance of maintaining the appropriate
capital levels of the Company.
RESULTS OF OPERATIONS
NET INTEREST INCOME
Net interest income, the amount by which interest income on loans, investments
and other interest earning assets exceeds interest expense on deposits and
other borrowed funds, is the single largest component of the Company's income.
Management's objective is to provide the largest possible amount of income
while balancing interest rate, credit, liquidity and capital risk.
Net interest income decreased $114,000 for the second quarter of 1996 as
compared with the second quarter of 1995. Net interest income decreased
$110,000 for the six months ended June 30, 1996, as compared with the six
months ended June 30, 1995. Total interest income increased $455,000 for the
quarter ended June 30, 1996, as compared with the quarter ended June 30, 1995.
Page 12 of 17
<PAGE> 13
Total interest income increased $1,442,000 for the six months ended June 30,
1996, as compared with the six months ended June 30, 1995. Total interest
expense increased $569,000 for the quarter ended June 30, 1996, as compared
with quarter ended June 30, 1995. Total interest expense increased $1,552,000
for the six months ended June 30, 1996, as compared with the six months ended
June 30, 1995. The following schedule summarizes net interest earnings and net
yield on interest earning assets:
NET INTEREST EARNINGS AND NET YIELD ON INTEREST EARNING ASSETS
<TABLE>
<CAPTION>
Six Months Ended June 30, (In
thousands, except percentages) 1996 1995
- ---------------------------------------------------------------------------
<S> <C> <C>
Total interest income (1) $16,788 $15,328
Total interest expense 7,324 5,773
------------------------------
Net interest earnings $ 9,464 $ 9,555
==============================
Net yield on interest earning assets 4.24% 4.97%
==============================
</TABLE>
(1) All interest earned is reported on a taxable equivalent basis using a tax
rate of 34% in 1996 and 1995.
The schedule on page 14 provides an analysis of the change in total interest
income and total interest expense for the six months ended June 30, 1996 and
1995. These changes are generally attributable to a change in volume and/or a
change in the applicable rates. The loosening by the Federal Reserve System in
the last eighteen months has lead to a decrease in prime lending rates as well
as yields earned on investments and rates paid on funds. The prime lending
rate for loans fluctuated periodically from 8.50% at January 1, 1995 to 8.25%
at June 30, 1996.
The schedule on page 14 also indicates that a major cause of the increase in
interest income, interest expense and net interest income is the increase in
volume. The fluctuation in investments and deposits have been discussed
previously. Average interest earning assets increased $61 million or 16% for
the six months ended June 30, 1996, as compared with June 30, 1995. Average
interest bearing liabilities increased $56 million or 19% for the six months
ended June 30, 1996, as compared with June 30, 1995.
Page 13 of 17
<PAGE> 14
ANALYSIS OF CHANGES IN INTEREST INCOME AND INTEREST EXPENSE
(In Thousands)
<TABLE>
<CAPTION>
Attributable To:
--------------------------------------
For the For the
Six Months Six Months
Ended June Ended June Increase Rate/
30, 1996 30, 1995 (Decrease) Volume Rate Volume
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INTEREST
INCOME: (1)
Loans (2) $10,150 $10,539 $ (389) $ 194 $ (572) $(11)
Federal funds
sold 339 324 15 74 (48) (11)
Held to
maturity:
Taxable
securities 4,416 4,218 198 140 56 2
Non-taxable
securities 292 240 52 (6) 60 (2)
Available for
sale:
Taxable
securities 1,560 -0- 1,560 1,560 -0- -0-
Other securities 31 7 24 17 2 5
------------------------------------------------------------------------------------
Total $16,788 $15,328 $1,460 $1,979 $ (502) $(17)
====================================================================================
INTEREST
EXPENSE:
Savings and
negotiable
interest
bearing
deposits $ 3,130 $ 2,919 $ 211 $41 $168 $2
Time deposits 4,123 2,791 1,332 1,500 (109) (59)
Federal funds
purchased 65 56 9 4 4 1
Mortgage
indebtedness 6 7 (1) (1) (1) 1
------------------------------------------------------------------------------------
Total $ 7,324 $ 5,773 $1,551 $1,544 $ 62 $(55)
====================================================================================
</TABLE>
(1) All interest earned is reported on a taxable equivalent basis using a tax
rate of 34% in 1996 and 1995.
(2) Loan fees are included in these figures. Includes nonaccrual loans.
Page 14 of 17
<PAGE> 15
PROVISION FOR LOAN LOSSES
The Company has not charged a provision for loan losses to operating expense
since 1993. The Company carefully monitors the quality and volume of its loan
portfolio. Based on current conditions, Management feels that the allowance
for loan losses is adequate and does not anticipate any provision for loan
losses during 1996.
SERVICE CHARGES ON DEPOSIT ACCOUNTS
Service charges on deposit accounts have increased $291,000 for the six months
ended June 30, 1996, as compared with the six months ended June 30, 1995, as a
result of fees earned on automatic teller machines (ATMs). These fees have
grown due to the increased number of ATMs in service as well as the
implementation of surcharge fees on ATM transactions at casinos beginning in
November 1993 and an increase in surcharge fees on April 1, 1995.
LIQUIDITY
Liquidity represents the Company's ability to adequately provide funds to
satisfy demands from depositors, borrowers and other commitments by either
converting assets to cash or accessing new or existing sources of funds.
Management monitors these funds requirements in such a manner as to satisfy
these demands and provide the maximum earnings on its earning assets.
Deposits, payments of principal and interest on loans, proceeds from maturities
of investment securities and earnings on investment securities are the
principal sources of funds for the Company. At June 30, 1996, cash and due
from banks, investment securities and federal funds sold were 58% of total
deposits, as compared with 46% at June 30, 1995.
Page 15 of 17
<PAGE> 16
PART II
OTHER INFORMATION
Item 5 - Other Information
The Company is the sponsor of Peoples Financial Corporation Employee Retirement
Plan. During 1995, the Company had approved a termination of the Plan.
Approval was received from the Internal Revenue Service on March 18, 1996, to
terminate the Plan. The assets of the Plan were distributed to participants
either as lump sum distribution or by the purchase of an annuity with an
insurance carrier on July 18, 1996. The Company was obligated to make a final
contribution to the Plan in order to provide sufficient funds to settle the
liabilities of the Plan. The Company made a final contribution of $70,000 to
the Plan on July 18, 1996, to fulfill its obligation.
During 1995, the Internal Revenue Service began an audit of the Company's 1993
and 1994 returns. As a result of the examination, adjustments were proposed by
the Internal Revenue Service. The Company agreed with the adjustments and paid
an assessment of $102,000 on July 23, 1996, which included interest of $17,000.
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
Schedule 27 - Financial Data Schedule.
(b) Reports on Form 8-K
None.
Page 16 of 17
<PAGE> 17
SIGNATURES
Pursuant to the requirement of Section 13 of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
PEOPLES FINANCIAL CORPORATION
(Registrant)
Date: July 24, 1996
--------------------------
By: /s/ Chevis C. Swetman
--------------------------
Chevis C. Swetman
Chairman, President and Chief Executive Officer
Date: July 24, 1996
--------------------------
By: /s/ Lauri A. Wood
--------------------------
Lauri A. Wood
Chief Financial Officer and Controller
(principal financial and accounting officer)
Page 17 of 17
<PAGE> 18
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
27 Financial Data Schedule for 10-Q
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 25,507,817
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 17,650,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 53,275,512
<INVESTMENTS-CARRYING> 148,359,489
<INVESTMENTS-MARKET> 148,230,000
<LOANS> 220,072,157
<ALLOWANCE> 4,609,249
<TOTAL-ASSETS> 477,906,592
<DEPOSITS> 418,788,317
<SHORT-TERM> 0
<LIABILITIES-OTHER> 2,200,700
<LONG-TERM> 232,137
<COMMON> 369,084
0
0
<OTHER-SE> 55,462,383
<TOTAL-LIABILITIES-AND-EQUITY> 477,906,592
<INTEREST-LOAN> 10,150,368
<INTEREST-INVEST> 6,199,694
<INTEREST-OTHER> 338,801
<INTEREST-TOTAL> 16,688,863
<INTEREST-DEPOSIT> 7,253,446
<INTEREST-EXPENSE> 7,324,302
<INTEREST-INCOME-NET> 9,364,561
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 7,626,111
<INCOME-PRETAX> 4,436,325
<INCOME-PRE-EXTRAORDINARY> 4,436,325
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,082,780
<EPS-PRIMARY> 8
<EPS-DILUTED> 8
<YIELD-ACTUAL> 4.24
<LOANS-NON> 783,000
<LOANS-PAST> 3,052,000
<LOANS-TROUBLED> 2,368,000
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 4,352,967
<CHARGE-OFFS> 85,978
<RECOVERIES> 342,260
<ALLOWANCE-CLOSE> 4,609,249
<ALLOWANCE-DOMESTIC> 4,609,249
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 250,000
</TABLE>
