<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996
-----------------------------------------
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
incorporation or organization) Identification number)
Lameuse and Howard Avenues, Biloxi, Mississippi 39533
- -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
601-435-5511
---------------------------------------------------------------------
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange on
Title of Each Class Which Registered
------------------- ------------------------
None None
Securities registered pursuant to Section 12(g) of the Act:
NONE
---------------------------------------------
(Title of each class)
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 by check mark if disclosure of delinquent filers pursuant to item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to the Form 10-K. _____
Cover Page 1 of 2 Pages
<PAGE> 2
The aggregate market value of the voting stock held by non-affiliates of the
registrant as of March 1, 1997 was approximately $49,030,000. For purposes of
this calculation only, shares held by non-affiliates are deemed to consist of
(a) shares held by all shareholders other than directors and executive officers
plus (b) shares held by directors and executive officers as to which beneficial
ownership has been disclaimed.
On March 1, 1997 the registrant had outstanding 738,168 shares of common stock,
par value of $1.00 per share.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Annual Report to Stockholders for the year ended
December 31, 1996 are incorporated by reference into Parts I, II and III of
this report. Portions of the Registrant's Definitive Proxy Statement issued in
connection with the Annual Meeting of Shareholders to be held April 9, 1997,
are incorporated by reference into Part III of this report.
Cover Page 2 of 2 Pages
<PAGE> 3
PART I
ITEM 1 - DESCRIPTION OF BUSINESS
THE REGISTRANT
Peoples Financial Corporation (the "Company") was established as a one bank
holding company on December 18, 1984. Under a "Reorganization and Merger
Agreement" dated March 21, 1985, and approved on July 8, 1985, Peoples
Financial Corporation acquired all the outstanding stock of consenting
shareholders of The Peoples Bank of Biloxi (the "Bank") on September 30, 1985,
in exchange for 25,086 shares of its common stock. A settlement was reached
with dissenting shareholders to acquire their stock at $1,000.00 per share, and
this amount was paid during 1986, with interest at 9% per annum. The
transaction was accounted for as a pooling-of-interest. The Company is now
engaged, through its subsidiary, in the banking business. The Bank is the
Company's principal asset and primary source of revenue.
NONBANK SUBSIDIARY
On August 22, 1985, PFC Service Corp. ("PFC") was chartered and began
operations as the second wholly-owned subsidiary of Peoples Financial
Corporation on October 3, 1985. The purpose of PFC is principally the leasing
of automobiles and equipment under direct financing and sales-type leases
expiring in various periods through 1993. The Bank acquired all remaining
leases from PFC during 1990. PFC is inactive at this time.
ACQUISITIONS
On August 19, 1988, the Company acquired Gulf National Bank ("GNB") and merged
GNB into the Bank with shareholders of GNB receiving shares of 4% convertible
preferred stock. The preferred stock was mandatorily convertible into Company
common stock five years and one month after August 19, 1988, at the rate of one
share of common stock for each 24 shares of preferred stock. This conversion
was executed on September 19, 1993.
On August 16, 1991, the Company purchased certain assets and assumed the
insured deposits of the Main Office of the former Southern Federal Bank for
Savings from the Resolution Trust Corporation and merged those assets and
deposits into the Bank.
THE BANK
The Bank, which was originally chartered in 1896 in Biloxi, Mississippi,
currently offers many customary banking services to its customers including
interest bearing and non-interest bearing checking accounts; savings accounts;
certificates of deposit; IRA accounts; business, real estate, construction,
personal and installment loans; collection services; trust services; safe
deposit box facilities; night drop facilities and automated teller machines.
The Bank is a state chartered bank
1
<PAGE> 4
whose deposits are insured under the Federal Insurance Act. The Bank is not a
member of the Federal Reserve System. The legal name of the Bank was changed to
The Peoples Bank, Biloxi, Mississippi, during 1991.
The Bank has a large number of customers acquired over a period of many years
and is not dependent upon a single customer or upon a few customers. The Bank
also provides services to customers representing a wide variety of industries
including seafood, retail, hospitality, gaming and construction.
The Main Office, operations center and trust services of the Bank are located
in downtown Biloxi, MS. The Bank also has eleven (11) branches from Bay St.
Louis, MS, to Ocean Springs, MS. The Bank has automated teller machines ("ATM")
at its Main Office, all branch locations and at numerous non-proprietary
locations.
At December 31, 1996, the Bank employed 194 full-time employees and 29
part-time employees.
COMPETITION
The Bank is in direct competition with approximately eight (8) commercial banks
and three (3) non-bank institutions. These banks range in size from
approximately $13 million to approximately $4.4 billion. The Bank also competes
for deposits and loans with insurance companies, finance companies and
automobile finance companies.
TRUST SERVICES
The Bank's Asset Management and Trust Services Department offers personal
trust, agencies and estate services including living and testamentary trusts,
executorships, guardianships, and conservatorships. Benefit accounts maintained
by the Department primarily include self-directed individual retirement
accounts. Escrow management, stock transfer and bond paying agency accounts are
available to corporate customers.
MISCELLANEOUS
The Bank holds no patents, licenses (other than licenses required to be
obtained from appropriate bank regulatory agencies), franchises or concessions.
During 1994, the Bank obtained the rights to the registered trademark, "The
Mint". There has been no significant change in the kind of services offered by
the Bank during the last three fiscal years.
The Bank has not engaged in any research activities relating to the development
of new services or the improvement of existing services except in the normal
course of its business activities. The Bank presently has no plans for any new
line of business requiring the investment of a material amount of total assets.
2
<PAGE> 5
Most of the Bank's business originates from within Harrison, Hancock and west
Jackson Counties in Mississippi; however, some business is obtained from
Claiborne County and the other counties in southern Mississippi. There has been
no material effect upon the Bank's capital expenditures, earnings or
competitive position as a result of federal, state or local environmental
regulations.
REGULATION AND SUPERVISION
The Company is a registered one bank holding company under the Bank Holding
Company Act. As such, the Company is required to file periodic reports and such
additional information as the Federal Reserve may require. The Federal Reserve
Board may also make examinations of the Company and its subsidiaries. The Bank
Holding Company Act requires every bank holding company to obtain the prior
approval of the Federal Reserve Board before it may acquire substantially all
the assets of any bank or ownership or control of any voting shares of any bank
if, after the acquisition, it would own or control, directly or indirectly,
more than 5 percent of the voting shares of the bank.
A bank holding company is generally prohibited from engaging in, or acquiring
direct or indirect control of, voting shares of any company engaged in
non-banking activities. One of the principal exceptions to this prohibition is
for activities found by the Federal Reserve to be so closely related to banking
or the managing or controlling of banks as to be a proper incident thereto.
Some of the activities the Federal Reserve Board has determined by regulation
to be closely related to banking are the making and servicing of loans,
performing certain bookkeeping or data processing services, acting as fiduciary
or investment or financial advisor, making equity or debt investments in
corporations or projects designed primarily to promote community welfare,
leasing transactions if the functional equivalent of an extension of credit and
mortgage banking or brokerage.
A bank holding company and its subsidiaries are also prohibited from acquiring
any voting shares of or interest in, any banks located outside the state in
which the operations of the bank holding company's subsidiaries are located,
unless the acquisition is specially authorized by the statute of the state in
which the target is located. Certain southern states, including Mississippi,
have enacted legislation which authorizes interstate acquisitions of a banking
organization by bank holding companies within the south, subject to certain
conditions and restrictions.
The Bank is subject to the regulation of and examination by the Mississippi
Department of Banking and Consumer Finance ("Department of Banking") and the
Federal Deposit Insurance Corporation ("FDIC"). Areas subject to regulation
include reserves, investments, loans, mergers, branching, issuance of
securities, payment of dividends, capital adequacy, management practices and
all other aspects of banking operations. In addition to regular examinations,
the Bank must furnish periodic reports to its regulatory authorities containing
a full and accurate statement of affairs. The Bank is subject to deposit
insurance assessments by the FDIC and the Department of Banking.
3
<PAGE> 6
The earnings of commercial banks and bank holding companies are affected not
only by general economic conditions but also by the policies of various
governmental regulatory authorities, including the Federal Reserve Board. In
particular, the Federal Reserve Board regulates money and credit conditions,
and interest rates, primarily through open market operations in U. S.
Government securities, varying the discount rate of member and nonmember bank
borrowing, setting reserve requirements against bank deposits and regulating
interest rates payable by banks on certain deposits. These policies influence
to a varying extent the overall growth and distribution of bank loans,
investments and deposits and the interest rates charged on loans. The monetary
policies of the Federal Reserve Board have had a significant effect on the
operating results of commercial banks in the past and are expected to continue
to do so in the future.
SUPPLEMENTAL STATISTICAL INFORMATION
Schedules I-A through VII present certain statistical information regarding the
Company. This information is not audited and should be read in conjunction with
the Company's Consolidated Financial Statements and Notes to Consolidated
Financial Statements found at pages 14 - 40 of the 1996 Annual Report to
Shareholders.
DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS' EQUITY AND INTEREST RATES
AND DIFFERENTIALS
Net Interest Income, the difference between Interest Income and Interest
Expense, is the most significant component of the Company's earnings. For
interest analytical purposes, Management adjusts Net Interest Income to a
"taxable equivalent" basis using a 34% Federal Income Tax rate on tax-exempt
items (primarily interest on municipal securities).
Another significant statistic in the analysis of Net Interest Income is the
effective interest differential, also called the net yield on earning assets.
The net yield is the difference between the rate of interest earned on earning
assets and the effective rate paid for all funds, non-interest bearing as well
as interest bearing. Since a portion of the Bank's deposits do not bear
interest, such as demand deposits, the rate paid for all funds is lower than
the rate on interest bearing liabilities alone.
Recognizing the importance of interest differential to total earnings,
Management places great emphasis on managing interest rate spreads. Although
interest differential is affected by national, regional and area economic
conditions, including the level of credit demand and interest rates, there are
significant opportunities to influence interest differential through
appropriate loan and investment policies which are designed to maximize the
interest differential while maintaining sufficient liquidity and availability
of "incremental funds" for purposes of meeting existing commitments and
investment in lending and investment opportunities that may arise.
4
<PAGE> 7
The information included in Schedule I-F presents the change in interest income
and interest expense along with the reason(s) for these changes. The change
attributable to volume is computed as the change in volume times the old rate.
The change attributable to rate is computed as the change in rate times the old
volume. The change in rate/volume is computed as the change in rate times the
change in volume.
SUMMARY OF LOAN LOSS EXPERIENCE
In the normal course of business, the Bank assumes risks in extending credit.
The Bank manages these risks through its lending policies, loan review
procedures and the diversification of its loan portfolio. Although it is not
possible to predict loan losses with complete accuracy, Management constantly
reviews the characteristics of the loan portfolio to determine its overall risk
profile and quality.
Constant attention to the quality of the loan portfolio is achieved by the loan
review process. Throughout this ongoing process, Management is advised of the
condition of individual loans and of the quality profile of the entire loan
portfolio. Any loan or portion thereof which is classified "loss" by regulatory
examiners or which is determined by Management to be uncollectible because of
such factors as the borrower's failure to pay interest or principal, the
borrower's financial condition, economic conditions in the borrower's industry
or the inadequacy of underlying collateral, is charged-off.
Provisions are charged to operating expense based upon historical loss
experience, and additional amounts are provided when, in the opinion of
Management, such provisions are not adequate based upon the current factors
affecting loan collectibility.
The allocation of the allowance for loan losses by loan category is based on
the factors mentioned in the preceding paragraphs. Accordingly, since all of
these factors are subject to change, the allocation is not necessarily
indicative of the breakdown of future losses.
The comments concerning the provision for loan losses and the allowance for
loan losses presented in "Management's Discussion and Analysis" at pages 9 - 12
of the 1996 Annual Report to Shareholders are incorporated herein by reference.
RETURN ON EQUITY AND ASSETS
The information under the captions "Five-Year Comparative Summary of Selected
Financial Information" on page 8 and "Management's Discussion and Analysis" on
pages 9 - 12 of the 1996 Annual Report are incorporated herein by reference.
5
<PAGE> 8
DIVIDEND PAYOUT
<TABLE>
<CAPTION>
Years Ended December 31,
-------------------------------------------
1996 1995 1994
-------------------------------------------
<S> <C> <C> <C>
Dividend payout ratio 12.98% 11.17% 11.96%
===========================================
</TABLE>
6
<PAGE> 9
SCHEDULE I-A
Distribution of Average Assets, Liabilities and Shareholders'
Equity for the Periods Indicated (2)
<TABLE>
<CAPTION>
Years Ended December 31, (In
thousands) 1996 1995 1994
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS:
Cash and due from financial institutions $ 24,431 $ 22,580 $ 22,105
Available for sale securities:
Taxable securities 52,263 3,503
Other securities 925 319 198
Held to maturity securities:
Taxable securities 143,270 151,105 171,372
Non-taxable securities 4,717 4,501 4,180
Net loans (1) 219,652 220,095 192,926
Federal funds sold and securities purchased under
agreements to resell 11,032 11,387 9,088
Other assets 11,991 16,554 16,914
-------- -------- --------
TOTAL ASSETS $468,281 $430,044 $416,783
======== ======== ========
LIABILITIES AND SHAREHOLDERS'
EQUITY:
Non-interest bearing deposits $ 66,215 $ 72,036 $ 84,240
Interest bearing deposits 339,438 301,541 282,163
-------- -------- --------
Total deposits 405,653 373,577 366,403
Federal funds purchased and securities sold under
agreements to repurchase 1,941 1,414 1,479
Other liabilities 3,585 3,394 3,047
-------- -------- --------
Total liabilities 411,179 378,385 370,929
Shareholders' equity 57,102 51,659 45,854
-------- -------- --------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $468,281 $430,044 $416,783
======== ======== ========
</TABLE>
(1) Gross loans and discounts, net of unearned income and allowance for loan
losses.
(2) All averages are computed on a daily basis with the exception of deposits,
which were computed on a monthly basis. Daily averages were not available
for deposits.
7
<PAGE> 10
SCHEDULE I-B
Average Amount Outstanding for Major Categories of Interest Earning Assets
and Interest Bearing Liabilities for the Periods Indicated
<TABLE>
<CAPTION>
Years Ended December 31, (In thousands) 1996 1995 1994
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
INTEREST EARNING ASSETS:
Loans (1) (2) $ 224,231 $ 224,819 $ 198,044
Federal funds sold and securities
purchased under agreements to resell 11,032 11,387 9,088
Available for sale securities:
Taxable securities 52,263 3,503
Other securities 945 319 198
Held to maturity securities:
Taxable securities 143,270 151,105 171,372
Non-taxable securities 4,717 4,501 4,180
---------- ---------- ----------
TOTAL INTEREST EARNING ASSETS $ 436,458 $ 395,634 $ 382,882
========== ========== ==========
INTEREST BEARING LIABILITIES:
Savings and negotiable interest
bearing deposits $ 185,537 $ 189,454 $ 199,941
Time deposits 153,901 112,087 82,222
Federal funds purchased and securities sold
under agreements to repurchase 1,941 1,414 1,479
Other borrowed funds 232 243 253
---------- ---------- ----------
TOTAL INTEREST BEARING LIABILITIES $ 341,611 $ 303,198 $ 283,895
========== ========== ==========
</TABLE>
(1) Net of unearned income.
(2) Includes nonaccrual loans.
(3) All averages are computed on a daily basis with the exception of deposits,
which were computed on a monthly basis. Daily averages were not available
for deposits.
8
<PAGE> 11
SCHEDULE I-C
Interest Earned or Paid on the Major Categories of Interest Earning Assets
and Interest Bearing Liabilities for the Periods Indicated
<TABLE>
<CAPTION>
Years Ended December 31, (In
thousands) 1996 1995 1994
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
INTEREST EARNED ON:
Loans (2) $ 20,414 $ 21,364 $ 17,094
Federal funds sold and securities
purchased under agreements to
resell 582 667 345
Available for sale securities:
Taxable securities 3,343 198 -0-
Other securities 45 17 16
Held to maturity securities:
Taxable securities 8,460 8,840 9,296
Non-taxable securities 612 603 658
---------- ---------- ----------
TOTAL INTEREST EARNED (1) $ 33,456 $ 31,689 $ 27,409
========== ========== ==========
INTEREST PAID ON:
Savings and negotiable interest
bearing deposits $ 5,951 $ 5,879 $ 5,792
Time deposits 8,332 6,403 3,647
Federal funds purchased and securities
sold under agreements to repurchase 110 77 69
Other borrowed funds 13 13 14
---------- ---------- ----------
TOTAL INTEREST PAID $ 14,406 $ 12,372 $ 9,522
========== ========== ==========
</TABLE>
(1) All interest earned is reported on a taxable equivalent basis using a tax
rate of 34% in 1996, 1995 and 1994.
(2) Loan fees of $334,000, $444,000 and $462,000 for 1996, 1995 and 1994,
respectively, are included in these figures.
9
<PAGE> 12
SCHEDULE I-D
Average Interest Rate Earned or Paid for Major Categories of
Interest Earning Assets and Interest Bearing Liabilities for
the Periods Indicated
<TABLE>
<CAPTION>
Years Ended December 31, 1996 1995 1994
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
AVERAGE RATE EARNED ON:
Loans 9.10% 9.50% 8.63%
Federal funds sold and securities
purchased under agreements to resell 5.28 5.85 3.80
Available for sale securities:
Taxable securities 6.39 5.65 N/A
Other securities 4.76 5.33 8.08
Held to maturity securities:
Taxable securities 5.90 5.85 5.42
Non-taxable securities (2) 12.97 13.40 15.74
----- ----- -----
TOTAL (weighted average rate) (1) 7.67% 8.01% 7.16%
===== ===== =====
AVERAGE RATE PAID ON:
Savings and negotiable interest
bearing deposits 3.21% 3.10% 2.90%
Time deposits 5.41 5.71 4.44
Federal funds purchased and securities
sold under agreements to repurchase 5.67 5.45 4.67
Other borrowed funds 5.60 5.35 5.53
----- ----- -----
TOTAL (weighted average rate) 5.62% 4.08% 3.35%
===== ===== =====
</TABLE>
(1) All interest earned is reported on a taxable equivalent basis using a tax
rate of 34% in 1996, 1995 and 1994.
(2) Relates to accounting for bonds purchased at a discount prior to January
1, 1992. Such bonds were reflected on the books at cost. The effect of not
adjusting for the accretion of discount for bonds acquired prior to
January 1, 1992, is not material to the financial statements. However, the
yields are higher during the period in which these bonds mature as a
result of all accretion being recognized at maturity.
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<PAGE> 13
SCHEDULE I-E
Net Interest Earnings and Net Yield on Interest Earning Assets
<TABLE>
<CAPTION>
Years Ended December 31,
(In thousands except percentages) 1996 1995 1994
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Total interest income (1) $ 33,456 $ 31,689 $ 27,409
Total interest expense 14,406 12,372 9,522
---------- ---------- ----------
Net interest earnings $ 19,050 $ 19,317 $ 17,887
========== ========== ==========
Net yield on interest earning assets 4.36% 4.88% 4.67%
========== ========== ==========
</TABLE>
(1) All interest earned is reported on a taxable equivalent basis using a tax
rate of 34% in 1996, 1995 and 1994.
11
<PAGE> 14
SCHEDULE I-F
Analysis of Changes In Interest Income and Interest Expense
(In thousands)
<TABLE>
<CAPTION>
Attributable to:
--------------------------------------
Increase Rate /
1996 1995 (Decrease) Volume Rate Volume
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
INTEREST INCOME:(1)
Loans (2) (3) $ 20,414 $ 21,364 $ (950) $ (56) $ (896) $ 2
Federal funds sold and
securities purchased under
agreements to resell 582 667 (85) (21) (66) 2
Available for sale
securities:
Taxable securities 3,343 198 3,145 2,756 26 363
Other securities 45 17 28 33 (2) (3)
Held to maturity securities:
Taxable securities 8,460 8,840 (380) (458) 83 (5)
Non-taxable securities 612 603 9 29 (19) (1)
---------- ---------- ---------- ---------- ---------- ----------
Total $ 33,456 $ 31,689 $ 1,767 $ 2,283 $ (874) $ 358
========== ========== ========== ========== ========== ==========
INTEREST EXPENSE:
Savings and negotiable
interest bearing deposits $ 5,951 $ 5,879 $ 72 $ (118) $ 194 $ (4)
Time deposits 8,332 6,403 1,929 2,389 (335) (125)
Federal funds purchased
and securities sold under
agreements to repurchase 110 77 33 29 3 1
Other borrowed funds 13 13 -0- (1) 1 -0-
---------- ---------- ---------- ---------- ---------- ----------
Total $ 14,406 $ 12,372 $ 2,034 $ 2,299 $ (137) $ (128)
========== ========== ========== ========== ========== ==========
</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.
(3) Includes interest on nonaccrual loans.
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<PAGE> 15
SCHEDULE I-F (continued)
Analysis of Changes in Interest Income and Interest Expense
(In thousands)
<TABLE>
<CAPTION>
Attributable to:
--------------------------------------
Increase Rate/
1995 1994 (Decrease) Volume Rate Volume
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
INTEREST INCOME:(1)
Loans (2) (3) $ 21,364 $ 17,094 $ 4,270 $ 2,311 $ 1,726 $ 233
Federal funds sold and
securities purchased under
agreements to resell 667 345 322 87 186 49
Available for sale
securities:
Taxable securities 198 -0- 198 198 -0- -0-
Other securities 17 16 1 10 (5) (4)
Held to maturity securities:
Taxable securities 8,840 9,296 (456) (1,099) 730 (87)
Non-taxable securities 603 658 (55) 50 (98) (7)
---------- ---------- ---------- ---------- ---------- ----------
Total $ 31,689 $ 27,409 $ 4,280 $ 1,557 $ 2,539 $ 184
========== ========== ========== ========== ========== ==========
INTEREST EXPENSE:
Savings and negotiable
interest bearing deposits $ 5,879 $ 5,792 $ 87 $ (304) $ 412 $ (21)
Time deposits 6,403 3,647 2,756 1,325 1,050 381
Federal funds purchased
and securities sold under
agreements to repurchase 77 69 8 (3) 12 (1)
Other borrowed funds 13 14 (1) (1) (1) 1
---------- ---------- ---------- ---------- ---------- ----------
Total $ 12,372 $ 9,522 $ 2,850 $ 1,017 $ 1,473 $ 360
========== ========== ========== ========== ========== ==========
</TABLE>
(1) All interest earned is reported on a taxable equivalent basis using a tax
rate of 34% in 1995 and 1994.
(2) Loan fees are included in these figures.
(3) Includes interest on nonaccrual loans.
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<PAGE> 16
SCHEDULE II-A
Securities Portfolio
Book Value of Securities Portfolio at the Dates Indicated
<TABLE>
<CAPTION>
December 31, (In thousands): 1996 1995 1994
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
Available for sale securities:
U.S. Government, agency and corporate $ 51,921 $ 20,145 $ -0-
obligations
Other securities 1,238 685 198
---------- ---------- ----------
Total $ 53,159 $ 20,830 $ 198
========== ========== ==========
Held to maturity securities:
U.S. Government, agency and corporate $ 122,090 $ 160,656 $ 155,236
obligations
States and political subdivisions 5,780 4,486 4,262
---------- ---------- ----------
Total $ 127,870 $ 165,142 $ 159,498
========== ========== ==========
</TABLE>
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<PAGE> 17
SCHEDULE II-B
Maturity of Securities Portfolio at December 31, 1996
And Weighted Average Yields of Such Securities
<TABLE>
<CAPTION>
Maturity
(In thousands except percentage data)
--------------------------------------------------------------------------------------------------------
After one but After five but
Within one year within five years within ten years After ten years
--------------------------------------------------------------------------------------------------------
Amount Yield Amount Yield Amount Yield Amount Yield
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Available for
sale
securities:
U.S.
Government,
agency and
corporate
obligations $ 1,995 5.31% $ 23,711 5.85% $ 22,316 6.70% $ 3,899 7.13%
Other -0- N/A -0- N/A -0- N/A 1,238 22.73%
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Totals $ 1,995 5.31% $ 23,711 5.85% $ 22,316 6.70% $ 5,137 7.91%
========== ========== ========== ========== ========== ========== ========== ==========
Held to
maturity
securities:
U. S
Government,
agency and
corporate
obligations $ 53,706 8.68% $ 65,416 6.24% $ 2,968 6.79% $ -0- N/A
States and
political
subdivisions 393 5.37% 1,729 6.45% 2,060 6.49% $ 1,598 5.42%
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Totals $ 54,099 8.66% $ 67,145 6.25% $ 5,028 6.67% $ 1,598 5.42%
========== ========== ========== ========== ========== ========== ========== ==========
</TABLE>
Note: The weighted average yields are calculated on the basis of cost. Average
yields on investments in states and political subdivisions are based on
their contractual yield.
15
<PAGE> 18
SCHEDULE III-A
Loan Portfolio
Loans by Type Outstanding (1)
<TABLE>
<CAPTION>
December 31, (In thousands): 1996 1995 1994 1993 1992
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Real estate, construction $ 14,704 $ 16,473 $ 14,056 $ 5,333 $ 1,077
Real estate, mortgage 137,766 138,254 131,584 118,838 105,947
Loans to finance agricultural
production and other loans
to farmers 10,483 9,962 11,259 6,528 10,032
Commercial and industrial
loans 48,057 39,228 42,505 30,675 19,065
Loans to individuals for
household, family and
other consumer expenditures 11,179 11,903 13,114 12,533 11,963
Obligations of states and
political subdivisions 4,496 5,469 6,752 7,636 10,580
All other loans 1,824 2,780 3,572 3,599 21,837
---------- ---------- ---------- ---------- ----------
Totals $ 228,509 $ 224,069 $ 222,842 $ 185,142 $ 180,501
========== ========== ========== ========== ==========
</TABLE>
(1) No foreign debt outstanding.
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<PAGE> 19
SCHEDULE III-B
Maturities and Sensitivity to Changes in
Interest Rates of the Loan Portfolio as of December 31, 1996
<TABLE>
<CAPTION>
Maturity (In thousands)
-------------------------------------------------
Over one
One year or year through
less 5 years Over 5 years Total
-------------------------------------------------
<S> <C> <C> <C> <C>
Loans:
Real estate, construction $ 5,325 $ 8,198 $ 1,181 $ 14,704
Real estate, mortgage 32,363 96,625 8,778 137,766
Loans to finance
agricultural production
and other loans to
farmers 9,576 907 -0- 10,483
Commercial and
industrial loans 26,935 18,841 2,281 48,057
Loans to individuals for
household, family and
other consumer
expenditures 4,743 6,304 132 11,179
Obligations of states and
political subdivisions 87 1,195 3,214 4,496
All other loans 1,801 23 -0- 1,824
---------- ---------- ---------- ----------
Totals $ 80,830 $ 132,093 $ 15,586 $ 228,509
========== ========== ========== ==========
Loans with pre-
determined interest rates $ 29,800 $ 66,450 $ 6,380 $ 102,630
Loans with floating
interest rates 51,030 65,643 9,206 125,879
---------- ---------- ---------- ----------
Totals $ 80,830 $ 132,093 $ 15,586 $ 228,509
========== ========== ========== ==========
</TABLE>
17
<PAGE> 20
SCHEDULE III-C
Non-Performing Loans
<TABLE>
<CAPTION>
December 31, (In thousands): 1996 1995 1994 1993 1992
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Loans accounted for on a
non-accrual basis (1) $ 546 $ 610 $ 138 $ 1,628 $ 3,277
Loans which are contractually
past due 90 or more days as
to interest or principal
payment, but are not
included above 3,026 146 474 536 26
Loans the term of which have
been renegotiated to provide
a reduction or deferral of
interest or principal because
of a deterioration in the
financial position of the
borrower, but are not
included above (2) 2,304 2,328 2,502 2,703 2,792
</TABLE>
(1) The Bank places loans on a nonaccrual status when, in the opinion of
Management, they possess sufficient uncertainty as to timely collection of
interest or principal so as to preclude the recognition in reported
earnings of some or all of the contractual interest. The amount of
interest that would have been earned on these loans had they been on
accrual during 1996 was approximately $48,000. The Bank did receive
$16,000 in interest payments during 1996 so that the net effect of
recording income on nonaccrual loans on the cash basis was to reduce
interest income by approximately $32,000 in 1996.
(2) Foregone interest on loans whose interest rates were renegotiated was
$32,000 in 1996. These loans were renegotiated for a second time in March
of 1996 at a current market rate.
18
<PAGE> 21
SCHEDULE IV-A
Summary of Loan Loss Expenses
(In thousands except percentage data)
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Average amount of loans
outstanding (1) $ 224,231 $ 224,819 $ 198,044 $ 185,911 $ 170,761
========== ========== ========== ========== ==========
Balance of allowance for
loan losses at the
beginning of period $ 4,353 $ 4,901 $ 5,100 $ 4,206 $ 2,584
Loans charged-off:
Commercial, financial and
agricultural 77 601 79 384 1,144
Consumer and other 62 101 58 143 248
---------- ---------- ---------- ---------- ----------
Total loans charged-off 139 702 137 527 1,392
Recoveries of loans
previously charged-off:
Commercial, financial and
agricultural 403 63 142 1,045 588
Consumer and other 56 91 96 101 104
---------- ---------- ---------- ---------- ----------
Total recoveries 459 154 238 1,146 692
---------- ---------- ---------- ---------- ----------
Net loans (recovered) charged- (320) 548 (101) (619) 700
off
Provision for (reduction of) loan
losses charged to operating
expense (150) -0- (300) 275 2,322
---------- ---------- ---------- ---------- ----------
Balance of allowance for
loan losses at end
of period $ 4,523 $ 4,353 $ 4,901 $ 5,100 $ 4,206
========== ========== ========== ========== ==========
Ratio of net charge-offs
during period to average
loans outstanding (0.14)% 0.24% (0.05)% (0.33)% 0.41%
========== ========== ========== ========== ==========
</TABLE>
(1) Net of unearned income.
19
<PAGE> 22
SCHEDULE IV-B
Allocation of the Allowance for Loan Losses
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
-----------------------------------------------------------------------------------------
% of % of % of % of % of
Loans Loans Loans Loans Loans
to to to to to
Balance at December Total Total Total Total Total
31, (In thousands) Amount Loans Amount Loans Amount Loans Amount Loans Amount Loans
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Real estate,
construction $ 294 6 $ 329 7 $ 281 6 $ 107 3 $ 22 1
Real estate,
mortgage 2,755 60 2,765 62 2,561 59 3,565 64 2,649 59
Loans to finance
agricultural
production and
other loans to
farmers 210 5 199 4 225 5 131 3 200 6
Commercial and
industrial loans 961 21 785 18 1,250 19 614 17 381 10
Loans to individuals
for household,
family and other
consumer
expenditures 223 5 238 5 262 6 251 7 240 6
Obligations of states
and political
subdivisions -0- 2 -0- 3 -0- 3 -0- 4 -0- 6
All other loans 36 1 18 1 71 2 80 2 440 12
Unallocated 44 N/A 19 N/A 251 N/A 352 N/A 274 N/A
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Totals $ 4,523 100 $ 4,353 100 $ 4,901 100 $ 5,100 100 $ 4,206 100
======= ======= ======= ======= ======= ======= ======= ======= ======= =======
</TABLE>
20
<PAGE> 23
SCHEDULE V
Summary of Average Deposits and Their Yields
<TABLE>
<CAPTION>
1996 1995 1994
-----------------------------------------------------------------
Years Ended December
31, (In thousands
except for percentage
data) Amount Rate Amount Rate Amount Rate
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Demand deposits in
domestic offices $ 66,215 N/A $ 72,036 N/A $ 84,240 N/A
Negotiable interest
bearing deposits
in domestic offices 149,314 3.44% 152,639 3.30% 157,434 3.07%
Savings deposits in
domestic offices 36,223 2.25% 36,815 2.33% 42,507 2.26%
Time deposits in
domestic
offices 153,901 5.41% 112,087 5.71% 82,222 4.44%
-------- -------- -------- -------- -------- --------
Total deposits $405,653 3.52% $373,577 3.29% $366,403 2.58%
======== ======== ======== ======== ======== ========
</TABLE>
Certificates of deposit outstanding in amounts $100,000 or more (in thousands)
by the amount of time remaining until maturity as of December 31, 1996, are as
follows:
<TABLE>
<S> <C> <C>
Remaining maturity:
3 months or less $66,763
Over 3 through 6 months 8,078
Over 6 months through 12 months 7,841
Over 12 months 2,291
-------
Total $84,973
=======
</TABLE>
21
<PAGE> 24
SCHEDULE VI
Short Term Borrowings
(In thousands except percentage data)
<TABLE>
<CAPTION>
1996 1995 1994
-----------------------------------
<S> <C> <C> <C>
Amount outstanding at December 31, $ 16,500 $ 12,150 $ 15,900
Weighted average interest rate at
December 31, 6.00% 5.00% 6.00%
Maximum outstanding at any month-end
during year $ 16,500 $ 12,150 $ 15,900
Average amount outstanding during year $ 1,941 $ 1,414 $ 1,479
Weighted average interest rate 5.67% 5.45% 4.67%
</TABLE>
Note: Short term borrowings include federal funds purchased from other banks
and securities sold under agreements to repurchase.
22
<PAGE> 25
SCHEDULE VII
Interest Sensitivity/Gap Analysis
<TABLE>
<CAPTION>
December 31, 1996 (In 0 - 3 4 - 12 1 - 5 Over 5
thousands) Months Months Years Years Total
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ASSETS:
Loans $ 32,213 $ 48,374 $ 131,934 $ 15,442 $ 227,963
Available for sale
securities -0- 1,995 23,711 27,453 53,159
Held to maturity
securities 25,964 28,135 67,145 6,626 127,870
------------ ------------ ------------ ------------ ------------
Total assets $ 58,177 $ 78,504 $ 222,790 $ 49,521 $ 408,992
============ ============ ============ ============ ============
FUNDING SOURCES:
Interest bearing
deposits $ 234,147 $ 45,005 $ 15,350 $ 94 $ 294,596
Long-term funds 2 10 53 162 227
------------ ------------ ------------ ------------ ------------
Total funding sources $ 234,149 $ 45,015 $ 15,403 $ 256 $ 294,823
============ ============ ============ ============ ============
REPRICING/MATURITY
GAP:
Period $ (175,972) $ 33,489 $ 207,387 $ 49,265
Cumulative (175,972) (142,483) 64,904 114,169
Period Gap/Total Assets (43.03)% 8.19 % 50.71% 12.05%
Cumulative Gap/Total
Assets (43.03)% (34.84)% 15.87% 27.91%
</TABLE>
(1) Amounts stated include fixed and variable rate investments of the balance
sheet that are still accruing interest. Variable rate instruments are included
in the next period in which they are subject to a change in rate. The principal
portions of scheduled payments on fixed rate instruments are included in
periods in which they become due or mature.
23
<PAGE> 26
ITEM 2 - PROPERTIES
The principal properties of the Company are its 13 business locations,
including the Main Office, which is located at 152 Lameuse Street in Biloxi,
MS. All such properties are owned by the Company. The operations center is
subject to a mortgage from the Small Business Administration. The address of
the Main Office and branch locations are listed on page 43 of the Annual Report
to Shareholders.
ITEM 3 - LEGAL PROCEEDINGS
The information included in Note J to the Consolidated Financial Statements
included in the 1996 Annual Report to Shareholders is incorporated herein by
reference.
ITEM 4 - SUBMISSION OF MATTERS TO VOTE OF SECURITIES HOLDERS
None.
PART II
ITEM 5 - MARKET INFORMATION
The information provided on page 13 of the 1996 Annual Report is incorporated
herein by reference.
ITEM 6 - SELECTED FINANCIAL DATA
The information under the caption "Five Year Comparative Summary of Selected
Financial Information" on page 8 of the 1996 Annual Report is incorporated
herein by reference.
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The information under the caption "Management's Discussion and Analysis of
Financial Condition and Results of Operations" on pages 9 - 12 of the 1996
Annual Report is incorporated herein by reference.
24
<PAGE> 27
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA
The following consolidated financial statements of the Company and consolidated
subsidiaries and the independent auditors' report appearing on pages 14 - 41 of
the 1996 Annual Report are incorporated herein by reference:
Consolidated Statements of Condition on pages 14 and 15
Consolidated Statements of Income on page 16
Consolidated Statements of Shareholders' Equity on page 17
Consolidated Statements of Cash Flows on page 19
Notes to Consolidated Financial Statements on pages 20 - 40
Independent Auditors' Report on page 41
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information in Sections II and IX contained in the Proxy Statement in
connection with the Annual Meeting of Shareholders to be held April 9, 1997,
which was filed by the Company in definitive form with the Commission on March
5, 1997, is incorporated herein by reference.
ITEM 11 - EXECUTIVE COMPENSATION
The information in Section V contained in the Proxy Statement in connection
with the Annual Meeting of Shareholders to be held April 9, 1997, which was
filed by the Company in definitive form with the Commission on March 5, 1997,
is incorporated herein by reference.
25
<PAGE> 28
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information in Sections III and IV contained in the Proxy Statement in
connection with the Annual Meeting of Shareholders to be held April 9, 1997,
which was filed by the Company in definitive form with the Commission on March
5, 1997, is incorporated herein by reference.
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information in Sections V, VI, VII and VIII contained in the Proxy
Statement in connection with the Annual Meeting of Shareholders to be held
April 9, 1997, which was filed by the Company in definitive form with the
Commission on March 5, 1997, and is incorporated herein by reference.
PART IV
ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8 - K
(a) 1. Index of Financial Statements:
See Item 8.
(a) 2. Index of Financial Schedules:
All other schedules have been omitted as not applicable or not required
or because the information has been included in the financial statements or
applicable notes.
(a) 3. Index of Exhibits:
<TABLE>
<CAPTION>
Incorporated by
Reference to Exhibit
Registration or Form of Number in
Description File Number Report Date of Report Report
---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
(3.1) Articles of 33-15595 10-K 12/31/93 3.1
Incorporation
(3.2) By-Laws 33-15595 10-K 12/31/93 3.2
</TABLE>
26
<PAGE> 29
<TABLE>
<CAPTION>
Incorporated by
Reference to Exhibit
Registration or Form of Number in
Description File Number Report Date of Report Report
-----------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C>
(10.1) Description of Automobile 33-15595 10-K 12/31/88 10.1
Plan
(10.2) Description of Directors' 33-15595 10-K 12/31/88 10.2
Deferred Income Plan
(10.3) Description of Executive 33-15595 10-K 12/31/88 10.3
Supplemental Plan
(10.4) Split-Dollar Insurance 33-15595 10-K 12/31/93 10.4
Agreement
(10.5) Deferred Compensation Plan 33-15595 10-K 12/31/93 10.5
(13) Annual Report to
Shareholders for year ended
December 31, 1996 * (c)
(21) Proxy Statement for Annual
Meeting of Shareholders to
be held April 9, 1997
(22) Subsidiaries of the 33-15595 10-K 12/31/88 22
registrant
(23) Consent of Certified Public
Accountants *
(27) Financial Data Schedule *
</TABLE>
(b) No report on Form 8-K was filed during the fourth quarter of the year
ended December 31, 1996.
(c) Furnished for the information of the Commission only and not deemed
"filed" except for those portions which are specifically incorporated
herein.
* Filed herewith.
27
<PAGE> 30
SIGNATURES
Pursuant to the requirements 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: March 19, 1997
-------------------------
BY: /s/ Chevis C. Swetman
---------------------------
Chevis C. Swetman, Chairman of the Board
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<S> <C>
BY: /s/ Drew Allen BY: /s/ Chevis C. Swetman
------------------------------------- --------------------------
Date: March 19, 1997 Date: March 19, 1997
---------------------------------- ------------------------
Drew Allen Chevis C. Swetman
Director President, Chief Executive Officer and
Director
BY: /s/ William A. Barq BY: /s/ F. Walker Tucei
------------------------------------- --------------------------
Date: March 19, 1997 Date: March 19, 1997
----------------------------------- ------------------------
William A. Barq F. Walker Tucei
Director Director
BY: /s/ Andy Carpenter BY: /s/ Lauri A. Wood
------------------------------------- --------------------------
Date: March 19, 1997 Date: March 19. 1997
----------------------------------- ------------------------
Andy Carpenter Lauri A. Wood
Executive Vice President and Director Principal Financial and Accounting Officer
</TABLE>
28
<PAGE> 31
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
13 Annual Report to Shareholders for year ended
December 31, 1996
23 Consent of Certified Public Accountants
27 Financial Data Schedule
</TABLE>
<PAGE> 1
Exhibit 13: Annual Report to Shareholders
<PAGE> 2
CONSOLIDATED STATEMENTS OF CONDITION
Peoples Financial Corporation and Subsidiaries
<TABLE>
<CAPTION>
December 31, 1996 1995 1994
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Cash and due from banks $ 26,873,638 $ 24,220,348 $ 20,779,080
Available for sale securities 53,159,353 20,829,655 198,083
Held to maturity securities, fair value of
$128,879,000 - 1996; $167,384,000 - 1995;
$156,660,000 - 1994 127,870,283 165,142,083 159,498,209
Loans 228,508,895 224,069,011 222,841,508
Less: Unearned income 17,295 22,531 11,682
Allowance for loan losses 4,522,704 4,352,967 4,901,453
------------ ------------ ------------
Loans, net 223,968,896 219,693,513 217,928,373
Bank premises and equipment, net 8,626,068 8,789,642 8,636,809
Other real estate 264,962 726,838 946,526
Accrued interest receivable 3,891,465 3,169,666 3,322,214
Other assets 2,958,967 2,919,601 2,548,002
Intangible assets 495,993 813,825 1,131,657
------------ ------------ ------------
TOTAL ASSETS $448,109,625 $446,305,171 $414,988,953
============ ============ ============
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE> 3
CONSOLIDATED STATEMENTS OF CONDITION (continued)
Peoples Financial Corporation and Subsidiaries
<TABLE>
<CAPTION>
December 31, 1996 1995 1994
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
LIABILITIES & SHAREHOLDERS' EQUITY
Liabilities:
Deposits:
Demand, non-interest bearing $ 73,535,221 $ 63,255,936 $ 67,741,827
Savings and demand, interest bearing 153,596,132 174,721,683 196,772,760
Time, $100,000 or more 84,973,369 84,117,293 33,959,293
Other time deposits 56,027,287 54,076,823 49,716,535
------------- ------------- -------------
Total deposits 368,132,009 376,171,735 348,190,415
Accrued interest payable 1,005,508 1,139,768 450,156
Federal funds purchased 16,500,000 12,150,000 15,900,000
Notes payable 226,608 437,520 622,862
Other liabilities 1,891,296 1,823,743 1,384,450
------------- ------------- -------------
TOTAL LIABILITIES 387,755,421 391,722,766 366,547,883
SHAREHOLDERS' EQUITY:
Common Stock, $1 par value, 1,500,000 shares
authorized, 738,168 shares issued and
outstanding at December 31, 1996, 1995 and
1994, after giving retroactive effect to
one stock split effective October 16, 1996 and
Two for two for one stock split effective
November 22, 1995 738,168 738,168 738,168
Surplus 53,926,262 48,926,262 43,176,262
Undivided profits 5,428,068 5,075,542 4,901,640
Unrealized gain on available for sale securities,
net of tax 261,706 336,945
Additional minimum liability in excess of prior
service cost, net of tax (294,512)
Note payable offset associated with employee
stock ownership plan (200,000) (375,000)
------------- ------------- -------------
TOTAL SHAREHOLDERS' EQUITY 60,354,204 54,582,405 48,441,070
------------- ------------- -------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 448,109,625 $ 446,305,171 $ 414,988,953
============= ============= =============
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE> 4
CONSOLIDATED STATEMENTS OF INCOME
Peoples Financial Corporation and Subsidiaries
<TABLE>
<CAPTION>
Years Ended December 31, 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INTEREST INCOME:
Interest and fees on loans $ 20,414,470 $ 21,364,008 $ 17,093,692
Interest and dividends on securities:
U. S. Treasury 7,992,855 8,138,663 8,812,526
U. S. Government agencies and corporations 3,809,117 898,990 483,115
States and political subdivisions 403,698 398,584 434,683
Other investments 45,322 17,590 16,111
Interest on federal funds sold 582,321 667,429 345,468
----------------------- ----------------------- -----------------------
TOTAL INTEREST INCOME 33,247,783 31,485,264 27,185,595
----------------------- ----------------------- -----------------------
INTEREST EXPENSE:
Time deposits of $100,000 or more 5,092,411 3,315,121 1,320,796
Other deposits 9,190,266 8,967,278 8,118,392
Mortgage indebtedness 12,512 13,082 13,623
Federal funds purchased 110,324 76,757 69,498
----------------------- ----------------------- -----------------------
TOTAL INTEREST EXPENSE 14,405,513 12,372,238 9,522,309
----------------------- ----------------------- -----------------------
NET INTEREST INCOME 18,842,270 19,113,026 17,663,286
REDUCTION OF ALLOWANCE FOR LOSSES ON LOANS 150,000 300,000
----------------------- ----------------------- -----------------------
NET INTEREST INCOME AFTER REDUCTION OF
ALLOWANCE FOR LOSSES ON LOANS 18,992,270 19,113,026 17,963,286
----------------------- ----------------------- -----------------------
OTHER OPERATING INCOME:
Trust department income and fees 932,502 1,013,858 886,449
Service charges on deposit accounts 3,763,566 3,384,659 2,479,815
Other service charges, commissions and fees 246,579 262,970 281,063
Other income 621,730 578,361 314,178
----------------------- ----------------------- -----------------------
TOTAL OTHER OPERATING INCOME 5,564,377 5,239,848 3,961,505
----------------------- ----------------------- -----------------------
</TABLE>
<PAGE> 5
<TABLE>
<S> <C> <C> <C>
OTHER OPERATING EXPENSE:
Salaries and employee benefits 7,932,306 6,886,597 6,358,110
Net occupancy 780,928 940,164 801,464
Equipment rentals, depreciation and maintenance 1,633,110 1,481,108 1,528,297
Other expense 5,071,101 5,227,131 4,778,758
----------- ----------- -----------
TOTAL OTHER OPERATING EXPENSE 15,417,445 14,535,000 13,466,629
----------- ----------- -----------
INCOME BEFORE INCOME TAXES 9,139,202 9,817,874 8,458,162
Income taxes 2,993,145 3,146,577 2,842,623
----------- ----------- -----------
NET INCOME $ 6,146,057 $ 6,671,297 $ 5,615,539
=========== =========== ===========
EARNINGS PER SHARE $ 8 $ 9 $ 8
=========== =========== ===========
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE> 6
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Peoples Financial Corporations and Subsidiaries
<TABLE>
<CAPTION>
Additional
minimum
Unrealized liability in
gain on excess of Note
Number available for prior payable
of sale service offset
common 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,
1994 369,084 $369,084 $38,545,346 $4,955,066 $ -0- $ -0- $ (550,000) $43,319,496
Two-for-one stock split 369,084 369,084 (369,084)
----------------------------------------------------------------------------------------------------------
BALANCE, JANUARY 1,
1994, AS RESTATED 738,168 738,168 38,176,262 4,955,066 -0- -0- (550,000) 43,319,496
Net income 5,615,539 5,615,539
Cash dividends, common
($ .90625 per share) (668,965) (668,965)
Transfer of undivided
profits 5,000,000 (5,000,000)
Reduction to note payable
offset associated with
esop 175,000 175,000
----------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31,
1994, AS RESTATED 738,168 738,168 43,176,262 4,901,640 -0- -0- (375,000) 48,441,070
Net income 6,671,297 6,671,297
Cash dividends, common
($1.0125 per share) (747,395) (747,395)
Transfer of undivided
profits 5,750,000 (5,750,000)
Net change in unrealized
gain on available for sale
securities, net of tax 336,945 336,945
Additional minimum
liability in excess of
prior service cost, net of
tax (294,512) (294,512)
Reduction to note payable
offset associated with
esop 175,000 175,000
---------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31,
1995, AS RESTATED 738,168 738,168 48,926,262 5,075,542 336,945 (294,512) (200,000) 54,582,405
</TABLE>
<PAGE> 7
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net income 6,146,057 6,146,057
Cash dividends, common
($1.075 per share) (793,531) (793,531)
Transfer of undivided
profits 5,000,000 (5,000,000)
Net change in unrealized
gain on available for
sale securities, net of
tax (75,239) (75,239)
Additional minimum
liability in excess of
prior service cost, net
of tax 294,512 294,512
Reduction to note payable
offset associated with
esop 200,000 200,000
--------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31,
1996 738,168 $ 738,168 $ 53,926,262 $ 5,428,068 $ 261,706 $ -0- $ -0- $ 60,354,204
==========================================================================================================
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE> 8
CONSOLIDATED STATEMENTS OF CASH FLOWS
Peoples Financial Corporation and Subsidiaries
<TABLE>
<CAPTION>
Years Ended December 31, 1996 1995 1994
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 6,146,057 $ 6,671,297 $ 5,615,539
Adjustments to reconcile net income to net cash
provided by operating activities:
Proceeds from sales of other real estate
and other property 322,700 242,720 815,382
Gain on sales of other real estate and other
property (145,850) (29,071) (263,191)
Depreciation and amortization 1,322,449 1,297,275 1,359,309
Pension plan termination cost 446,230
Reduction of allowance for loan losses (150,000) (300,000)
Provision for losses on other real estate 154,376 159,247 152,637
Purchase of other real estate (100,708)
Changes in assets and liabilities:
Accrued interest receivable (721,799) 152,548 (785,704)
Other assets 112,665 (291,618) (13,043)
Accrued interest payable (134,260) 689,612 119,787
Other liabilities 67,553 335,943 133,782
-----------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 7,420,121 9,127,245 6,834,498
-----------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities and calls of
available for sale securities 19,935,000
Investment in available for sale securities (52,377,557) (20,120,942)
Proceeds from maturities and calls of held
to maturity securities 160,217,482 111,143,796 126,275,000
Investment in held to maturity securities (122,945,682) (116,787,670) (128,752,432)
Loans, net increases (4,125,383) (1,817,640) (37,975,518)
Acquisition of premises and equipment (710,393) (1,132,276) (1,527,437)
Retirement of premises and equipment 212,089
Federal funds sold 1,800,000
Other assets (266,129) (229,054) (90,642)
------------------------------------------------
NET CASH USED IN INVESTING ACTIVITIES (272,662) (28,943,786) (40,058,940)
------------------------------------------------
</TABLE>
<PAGE> 9
<TABLE>
<S> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Demand and savings deposits, net increase
(decrease) (10,846,266) (26,536,968) 15,735,820
Time deposits made, net increase 2,806,540 54,518,288 8,029,105
Principal payments on notes (10,912) (10,342) (9,801)
Cash dividends (793,531) (747,395) (668,965)
Federal funds purchased, net increase (decrease) 4,350,000 (3,750,000) 15,900,000
Pension plan additional minimum liability
contributed (215,774)
--------------------------------------------
NET CASH PROVIDED BY (USED IN) FINANCING
ACTIVITIES (4,494,169) 23,257,809 38,986,159
--------------------------------------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 2,653,290 3,441,268 5,761,717
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 24,220,348 20,779,080 15,017,363
--------------------------------------------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 26,873,638 $ 24,220,348 $ 20,779,080
============================================
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE> 10
Notes To Consolidated Financial Statements
Peoples Financial Corporation and Subsidiaries
NOTE A - ACCOUNTING POLICIES:
Business of The Company
Peoples Financial Corporation is a one-bank holding company headquartered in
Biloxi, Mississippi. Its two operating subsidiaries are The Peoples Bank,
Biloxi, Mississippi, and PFC Service Corp. Its principal subsidiary is The
Peoples Bank, Biloxi, Mississippi, which provides a full range of banking,
financial and trust services to individuals and small and commercial businesses
operating in 12 locations in Harrison, Hancock and west Jackson counties.
Principles of Consolidation
The consolidated financial statements include the accounts of Peoples
Financial Corporation and its wholly owned subsidiaries, The Peoples Bank,
Biloxi, Mississippi, and PFC Service Corp. All significant intercompany
transactions and balances have been eliminated.
Basis of Accounting
Peoples Financial Corporation and Subsidiaries recognize assets and
liabilities, and income and expense, on the accrual basis of accounting. The
preparation of financial statements in conformity with generally accepted
accounting principles requires Management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from these estimates.
Cash and Due from Banks
The Company is required to maintain average reserve balances in its vault or
on deposit with the Federal Reserve Bank. The average amount of these reserve
requirements was approximately $8,388,000, $9,193,000 and $9,770,000 for the
years ending December 31, 1996, 1995 and 1994, respectively.
The Company's bank subsidiary maintained account balances in excess of
amounts insured by the Federal Deposit Insurance Corporation. At December 31,
1996, the bank subsidiary had excess deposits of $1,951,936. These amounts were
uninsured and uncollateralized.
Securities
In May 1993, the Financial Accounting Standards Board issued SFAS 115,
"Accounting for Certain Investments in Debt and Equity Investments." SFAS 115
prescribes the accounting and reporting for certain investments in equity
securities and debt securities. Investments are to be classified in one of
three categories: held to maturity, trading or available for sale. The
classification of an investment determines its accounting treatment. This
Statement became effective for the Company on January 1, 1994.
Available for sale securities are stated at fair value. The unrealized
difference, if any, between amortized cost and fair value of these securities
is excluded from earnings and is reported, net of
<PAGE> 11
deferred taxes, as a component of shareholders' equity. Held to maturity
securities are stated at cost, adjusted for amortization of premiums and
accretion of discounts. Most of the Company's portfolio is classified as held
to maturity since it has the positive intent and ability to hold its
investments until maturity. Gains or losses, if any, are recognized as income
when realized and are computed based on the amortized cost of the specific
securities sold.
Loans
Loans are stated at the amount of unpaid principal, reduced by unearned
income and the allowance for loan losses. Interest on loans is recognized over
the terms of the loan based on the unpaid principal balances.
Loan origination fees are recognized as income when received. Revenue from
these fees is not material to the financial statements.
The Company places loans on a nonaccrual status when, in the opinion of
Management, they possess sufficient uncertainty as to timely collection of
interest or principal so as to preclude the recognition in reported earnings of
some or all of the contractual interest. Accrued interest on loans classified
as nonaccrual is reversed at the time the loans are placed on nonaccrual.
In June 1993, the Financial Accounting Standards Board issued Statement No.
114, "Accounting by Creditors for Impairment of a Loan" and in October 1994,
issued Statement No. 118, "Accounting by Creditors for Impairment of a Loan -
Income Recognition and Disclosure." These Statements became effective for the
Company on January 1, 1995. SFAS 114 and 118 address loan impairment and the
related measurement methods. The Statements stipulate that loans shall be
identified as being impaired if it is doubtful that all principal and interest
due contractually under the terms of the loan agreement will be collected. When
a loan is impaired as defined by the Statements, measurement of impairment
shall be based on the present value of the expected future cash flows
discounted at that loan's effective interest rate except that, as a practical
expedient, measurement may be based on a loan's observable market price, or the
fair value of the collateral if the loan is collateral dependent. The Company
has determined that all loans which have been classified as impaired are also
collateral dependent. Accordingly, the allowance for losses on these impaired
loans has been computed using the fair value of the underlying collateral. The
loans which have been classified as impaired under SFAS 114 had previously been
identified by the Company as loans for which a specific reserve should be
established. The Company had in prior years computed the allowance on such
loans in a similar manner as that required under SFAS 114. Therefore, no
additional allowance was required at January 1, 1995, in order to implement
SFAS 114. The provisions of SFAS 118 concerning recognition of interest income
on impaired loans allow for the Company to continue its present recognition
polices discussed above.
Allowance for Loan Losses
The allowance for loan losses is based on Management's evaluation of the loan
portfolio under current economic conditions and is an amount that Management
believes will be adequate to absorb probable losses on loans existing at the
reporting date. The evaluation includes the nature and volume of the loan
portfolio, a study of loss experience, a review of delinquencies, the estimated
value of any underlying collateral and an estimate of the possibility of loss
based on the risk characteristics of the portfolio.
<PAGE> 12
Bank Premises and Equipment
Bank premises and equipment are stated at cost, less accumulated
depreciation. Depreciation is computed primarily by the straight-line method
based on the estimated useful lives of the related assets.
Other Real Estate
Other real estate acquired through foreclosure is carried at the lower of
cost (primarily outstanding loan balance) or estimated market value, less
estimated costs to sell. If, at foreclosure, the carrying value of the loan is
greater than the estimated market value of the property acquired, the excess is
charged against the allowance for loan losses and any subsequent adjustments
are charged to expense. Costs of operating and maintaining the properties, net
of related income and gains (losses) on their disposition, are charged to
expense as incurred.
Intangible Assets
The excess of the purchase price over the value of the net tangible assets
acquired in the Gulf National Bank acquisition on August 19, 1988, was assigned
primarily to the value of core deposits and is being amortized over 10 years.
The core deposits acquired in the main branch of the Southern Federal Bank
for Savings acquisition on August 16, 1991, are being amortized over the
estimated lives of the demand deposits (72 months), savings deposits (84
months) and certificates (84 months) acquired.
Trust Department Income and Fees
Trust fees are recorded when received. These fees amounted to $932,502,
$1,013,858 and $886,449 in 1996, 1995 and 1994, respectively.
Income Taxes
The Company files a consolidated tax return with its wholly owned
subsidiaries. The tax liability of each entity is allocated based on the
entity's contribution to consolidated taxable income.
The provision for applicable income taxes is based upon reported income and
expenses as adjusted for differences between reported income and taxable
income. The primary differences are exempt income on state, county and
municipal securities; differences in provisions for losses on loans as compared
to the amount allowable for income tax purposes; directors' and officers'
insurance; depreciation for income tax purposes over that reported for
financial statements and gains reported under the installment sales method for
tax purposes.
Leases
All leases are accounted for as operating leases in accordance with the terms
of the leases.
Earnings Per Share
Primary earnings per share is computed on the basis of the weighted average
number of common shares outstanding, 738,168 in 1996, 1995 and 1994.
Statements of Cash Flows
The Company has defined cash and cash equivalents to include cash and due
from banks. The Company paid $14,539,773, $11,682,626 and $9,402,522 in 1996,
1995 and 1994,
<PAGE> 13
respectively, for interest on deposits and borrowings. Income tax payments
totaled $2,869,605, $3,498,388 and $2,787,144 in 1996, 1995 and 1994,
respectively. Loans transferred to other real estate amounted to $52,500 and
$371,750 in 1995 and 1994, respectively. No loans were transferred to other
real estate in 1996. After receiving regulatory approval, the Company
transferred property with a book value of $130,650 from other real estate into
banking premises during 1996.
Reclassifications
Certain reclassifications have been made to the prior year statements to
conform to current year presentation. The reclassifications had no effect on
prior year net income.
NOTE B - SECURITIES:
The amortized cost and estimated fair value of securities at December 31,
1996, 1995 and 1994, respectively, are as follows (in thousands):
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED ESTIMATED
DECEMBER 31, 1996 COST GAINS LOSSES FAIR VALUE
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Available for sale securities:
Debt securities:
U. S. Treasury $ 5,969 $ 2 $ (37) $ 5,934
U. S. Government agencies
and corp 46,594 41 (648) 45,987
-------- -------- -------- --------
Total debt securities 52,563 43 (685) 51,921
Equity securities 198 1,040 1,238
-------- -------- -------- --------
Total available for sale securities $ 52,761 $ 1,083 $ (685) $ 53,159
======== ======== ======== ========
Held to maturity securities:
U. S. Treasury $108,568 $ 830 $ (188) $109,210
U. S. Government agencies and
corp 13,522 34 (39) 13,517
States and political subdivisions 5,780 373 (1) 6,152
-------- -------- -------- --------
Total held to maturity securities $127,870 $ 1,237 $ (228) $128,879
======== ======== ======== ========
</TABLE>
<PAGE> 14
<TABLE>
<CAPTION>
Gross Gross
Amortized unrealized unrealized Estimated
December 31, 1995 cost gains losses fair value
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Available for sale securities:
Debt securities:
U. S. Treasury $ 2,949 $ 52 $ $ 3,001
U. S. Government agencies
and corp 17,172 3 (31) 17,144
-------- -------- -------- --------
Total debt securities 20,121 55 (31) 20,145
Equity securities 198 487 685
-------- -------- -------- --------
Total available for sale
securities $ 20,319 $ 542 $ (31) $ 20,830
======== ======== ======== ========
Held to maturity securities:
U. S. Treasury $152,632 $ 1,858 $ (182) $154,308
U. S. Government agencies and
corp 8,024 82 (22) 8,084
States and political subdivisions 4,486 509 (3) 4,992
-------- -------- -------- --------
Total held to maturity securities $165,142 $ 2,449 $ (207) $167,384
======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
Gross Gross
Amortized unrealized unrealized Estimated
December 31, 1994 cost gains losses fair value
- --------------------------------------------------------------------------------------------
Available for sale securities:
<S> <C> <C> <C> <C>
Equity securities $ 198 $ $ $ 198
-------- -------- -------- --------
Total available for sale
securities $ 198 $ $ $ 198
======== ======== ======== ========
Held to maturity securities:
U. S. Treasury $146,214 $ 183 $ (3,012) $143,385
U. S. Government agencies and
corp 9,022 (352) 8,670
States and political subdivisions 4,262 440 (97) 4,605
-------- -------- -------- --------
Total held to maturity securities $159,498 $ 623 $ (3,461) $156,660
======== ======== ======== ========
</TABLE>
<PAGE> 15
The amortized cost and estimated fair value of debt securities at December 31,
1996, (in thousands) by contractual maturity, are shown below. Expected
maturities will differ from contractual maturities because borrowers may have
the right to call or prepay obligations with or without call or prepayment
penalties.
<TABLE>
<CAPTION>
ESTIMATED FAIR
AMORTIZED COST VALUE
-----------------------------------------
<S> <C> <C>
Available for sale securities:
Due in one year or less $ 1,998 $ 1,995
Due after one year through five
years 23,935 23,711
Due after five years through ten
years 22,630 22,316
Due after ten years 4,000 3,899
------------- -------------
Totals $ 52,563 $ 51,921
============= =============
Held to maturity securities:
Due in one year or less $54,099 $54,209
Due after one year through five
years 67,145 67,722
Due after five years through ten
years 5,028 5,284
Due after ten years 1,598 1,664
------------- -------------
Totals $ 127,870 $ 128,879
============= =============
</TABLE>
Available for sale securities include equity securities of Hibernia
Corporation. The Company had acquired common and preferred shares of
Progressive Bancorporation in 1993 from a debt previously contracted and had
recorded the shares at their estimated value of $1.00. During 1995, Progressive
was acquired by Hibernia Corporation. As a result of the merger, the Company
received cash for its Progressive preferred shares and common stock of Hibernia
in exchange for the Progressive common. The Company holds the Hibernia common
as an
<PAGE> 16
available for sale security and recorded the stock at its fair value, with an
unrealized gain of $596,205 recorded, net of deferred tax, as an adjustment to
shareholders' equity.
During 1994, the Company purchased three multi-step up instruments issued by
the Federal Home Loan Bank with a total par value of $4,000,000. These
instruments had original maturity dates in 1996 and 2009 and provided for a
call option by the issuer at each interest payment date until maturity. There
was a fixed increase in the interest rate on an annual basis. The Company
purchased these instruments in the management of its interest rate exposure
since these notes carried a higher rate of interest than other agency notes
available at the time of purchase. Appropriate review of the market value and
risk associated with these investments is performed by Management. These
investments were classified as held to maturity and carried at amortized cost
in compliance with Management's positive intent and ability to hold these
investments until maturity. During 1995 and 1996, these investments were called
at par value. During 1996, the Company purchased a multi-step up instrument
issued by the Federal Home Loan Bank with a par value of $2,000,000 which
matures in 2001. This instrument, which the Company still held at December 31,
1996, has been classified as available for sale.
Proceeds from maturities and calls of held to maturity securities during
1996, 1995 and 1994 were $160,217,482, $111,143,796 and $126,275,000,
respectively. There were no sales of held to maturity securities during 1994,
1995 and 1996. Proceeds from maturities and calls of available for sale
securities were $19,935,000 during 1996. There were no maturities of available
for sale securities during 1995 and 1994. There were no sales of available for
sale securities during 1994, 1995 and 1996.
Securities with a carrying value of approximately $165,515,000, $172,802,000
and $146,350,000 at December 31, 1996, 1995 and 1994, respectively, were
pledged to secure public deposits, federal funds purchased and other balances
required by law.
NOTE C - LOANS:
The composition of the loan portfolio was as follows (in thousands):
<TABLE>
<CAPTION>
December 31, 1996 1995 1994
- ----------------------------------------------------------------
<S> <C> <C> <C>
Real estate, construction $ 14,704 $ 16,473 $ 14,056
Real estate, mortgage 137,766 138,254 131,584
Loans to finance agricultural
production and other loans to
farmers 10,483 9,962 11,259
Commercial and industrial loans 48,057 39,228 42,505
Loans to individuals for
household, family and other
consumer expenditures 11,179 11,903 13,114
</TABLE>
<PAGE> 17
<TABLE>
<S> <C> <C> <C>
Obligations of states and political
subdivisions (primarily
industrial revenue bonds and
local government tax
anticipation notes) 4,496 5,469 6,752
All other loans 1,824 2,780 3,572
--------- --------- ---------
Totals $ 228,509 $ 224,069 $ 222,842
========= ========= =========
</TABLE>
Transactions in the allowance for loan losses are as follows (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
-----------------------------------
<S> <C> <C> <C>
Balance, January 1 $ 4,353 $ 4,901 $ 5,100
Recoveries 459 154 238
Loans charged off (139) (702) (137)
Reduction of allowance for loan
losses (150) (300)
--------- --------- ---------
Balance, December 31 $ 4,523 $ 4,353 $ 4,901
========= ========= =========
</TABLE>
In the ordinary course of business, the Company extends loans to certain
officers and directors and their personal business interests at, in the opinion
of Management, terms and rates comparable to other loans of similar credit
risks. These loans do not involve more than normal risk of collectability and
do not include other unfavorable features.
An analysis of the activity with respect to such loans to related parties is
as follows (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
--------------------------------
<S> <C> <C> <C>
Balance, January 1 $ 6,857 $ 6,066 $ 8,281
January 1 balance, loans of
directors appointed in current
year 224
New loans and advances 28,599 24,908 26,612
Repayments (27,789) (24,117) (28,827)
-------- -------- --------
Balance, December 31 $ 7,891 $ 6,857 $ 6,066
======== ======== ========
</TABLE>
<PAGE> 18
Industrial revenue bonds with a carrying value of $3,318,251, $4,037,834
and $4,204,037 at December 31, 1996, 1995 and 1994, respectively, were pledged
to secure public deposits.
Nonaccrual loans amounted to approximately $546,000, $610,000 and $138,000
and renegotiated loans amounted to approximately $2,303,562, $2,327,838 and
$2,502,000 at December 31, 1996, 1995 and 1994, respectively. The Company
recognized $167,982 in interest income on renegotiated loans during 1996. The
amount of interest that would have been recognized during 1996 under the
original terms of the loan agreements was $200,203.
The total recorded investment in impaired loans amounted to $1,017,000 and
$1,443,000 at December 31, 1996 and 1995, respectively. 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 $149,000 at December 31,
1995. The amount of that recorded investment in impaired loans for which there
is no related allowance for loan losses was $1,017,000 and $1,294,000 at
December 31, 1996 and 1995, respectively.
At December 31, 1996, the average recorded investment in impaired loans was
$1,031,000. During 1996, the Company recognized $61,000 in interest income on
impaired loans and received $57,000 in interest payments on impaired loans.
NOTE D - BANK PREMISES AND EQUIPMENT:
Bank premises and equipment are shown as follows (in thousands):
<TABLE>
<CAPTION>
Estimated
December 31, useful lives 1996 1995 1994
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Land $ 1,314 $ 1,293 $ 1,303
Buildings 5-40 years 8,659 8,369 8,175
Furniture,fixtures and equipment 5-10 years 5,533 5,299 4,558
------- ------- -------
Totals, at cost 15,506 14,961 14,036
Less: Accumulated depreciation 6,880 6,171 5,399
------- ------- -------
Totals $ 8,626 $ 8,790 $ 8,637
======= ======= =======
</TABLE>
Depreciation expense charged to operations in 1996, 1995 and 1994 was
$1,004,617, $979,442 and $1,041,477, respectively.
<PAGE> 19
NOTE E - NOTES PAYABLE:
<TABLE>
<CAPTION>
December 31, 1996 1995 1994
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Small Business Administration,
outstanding mortgage on property
acquired.The note bears interest
at 5 3/8% and is payable at $1,952
monthly through January 16, 2004 $226,608 $237,520 $247,862
First Alabama Bank, $1,250,000
line of credit of Peoples
Financial Corporation Employee
Stock Ownership Plan, secured
by a pledge of 4,426 and 8,588
shares of Company common stock
at December 31, 1995 and 1994,
respectively, pledge of 36,550
shares of The Peoples Bank,
Biloxi, Mississippi, and the
guarantee of the Company; interest
rate at 85% of the base rate of
First Alabama Bancshares, Inc.
(7.225% at December 31, 1995
and 1994), plus $43,750 principal
quarterly 200,000 375,000
-------- -------- --------
Totals $226,608 $437,520 $622,862
======== ======== ========
</TABLE>
The maturities of notes payable for each of the next five years are as
follows:
<TABLE>
<S> <C>
1997 $ 11,514
1998 12,149
1999 12,819
2000 13,525
2001 14,271
THEREAFTER 162,330
---------
TOTAL $ 226,608
=========
</TABLE>
<PAGE> 20
NOTE F - INCOME TAXES:
Federal income taxes payable (or refundable) and deferred taxes (or deferred
charges) as of December 31, 1996, 1995 and 1994, included in other assets or
other liabilities, were as follows (in thousands):
<TABLE>
<CAPTION>
December 31, 1996 1995 1994
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
Deferred tax assets:
Allowance for loan losses $ 776 $ 827 $ 827
Employee benefit plans'
liabilities 444 377 289
Other 129 173 157
------- ------- -------
Deferred tax assets (1,349) (1,377) (1,273)
------- ------- -------
Deferred tax liabilities:
Accumulated depreciation 865 795 797
Installment sales 15 16 18
Unrealized gains on available
for sale securities, charged to
equity 134 174
------- ------- -------
Deferred tax liabilities 1,014 985 815
------- ------- -------
Net deferred charges (335) (392) (458)
Current (refundable) payable (183) 216
------- ------- -------
Totals $ (335) $ (575) $ (242)
======= ======= =======
</TABLE>
The Company has evaluated the need for a valuation allowance and, based on
the weight of the available evidence, has determined that it is more likely
than not that all deferred tax assets will eventually be realized.
<PAGE> 21
Income taxes consist of the following components (in thousands):
<TABLE>
<CAPTION>
Years Ended December 31, 1996 1995 1994
- -----------------------------------------------------------
<S> <C> <C> <C>
Current $ 2,936 $ 3,081 $ 2,915
Deferred 57 66 (72)
------- ------- -------
Totals $ 2,993 $ 3,147 $ 2,843
======= ======= =======
</TABLE>
Deferred income taxes (benefits) resulted from the following (in thousands):
<TABLE>
<CAPTION>
Years Ended December 31, 1996 1995 1994
- --------------------------------------------------------------------
<S> <C> <C> <C>
Depreciation $ 70 $ (2) $ (25)
Installment sales (1) (1) (130)
Provision for loan losses 51 102
Officers' and directors' life
insurance (67) (88) (3)
Unrealized gain on available for
sale securities (40) 174
Other 44 (17) (16)
----- ----- -----
Totals $ 57 $ 66 $ (72)
===== ===== =====
</TABLE>
Income taxes amounted to less than the amounts computed by applying the U.S.
Federal income tax rate of 34.0% for 1996, 1995 and 1994, to earnings before
income taxes. The reason for these differences is shown below (in thousands):
<TABLE>
<CAPTION>
Years Ended December 1996 1995 1994
31, AMOUNT % Amount % Amount %
- ----------------------------------------------------------------------------------------------------
Taxes computed at
<S> <C> <C> <C> <C> <C> <C>
statutory rate $ 3,107 34.0 $3,338 34.0 $ 2,876 34.0
Increase (decrease)
resulting from:
Tax-exempt interest
income (288) (3.2) (286) (2.8) (246) (2.9)
Deductible dividends to
ESOP (1) (0.1) (3) (0.1) (15) (0.2)
</TABLE>
<PAGE> 22
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Non-deductible interest 36 0.4 31 0.3 26 0.3
Non-deductible
amortization 100 1.1 92 1.0 92 1.1
Other, net 39 0.5 (25) (0.3) 110 1.3
------- ---- ------- ---- ------- ----
Total income taxes $ 2,993 32.7 $ 3,147 32.1 $ 2,843 33.6
======= ==== ======= ==== ======= ====
</TABLE>
During a prior year, the Internal Revenue Service began an audit of the
Company's 1994 and 1993 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.
NOTE G - SHAREHOLDERS' EQUITY:
On October 26, 1994, the Company's Board of Directors approved a two for one
stock split of the common shares of the Company. As a result of this split,
shareholders holding a total of 92,271 shares of Company stock received an
additional 92,271 common shares. On November 22, 1995, the Company's Board of
Directors approved a two for one stock split of the common shares of the
Company. As a result of this split, shareholders holding a total of 184,542
shares of Company stock received an additional 184,542 common shares. On
October 4, 1996, the Company's Board of Directors approved a two for one stock
split of the common shares of the Company. As a result of this split,
shareholders holding a total of 369,084 shares of Company stock received an
additional 369,084 common shares. The Consolidated Statements of Condition and
Shareholders' Equity have been restated to give retroactive effect to these
splits. Additionally, all share and per share data have also been given
retroactive effect for these splits.
Banking regulations limit the amount of dividends that may be paid without
prior approval of the Commissioner of Banking and Consumer Finance of the State
of Mississippi. At December 31, 1996, approximately $1,459,193 of undistributed
earnings of the bank subsidiary included in consolidated surplus and retained
earnings was available for future distribution to the Company as dividends,
subject to approval by the Board of Directors.
NOTE H - OTHER EXPENSES:
Other expenses consisted of the following:
<TABLE>
<CAPTION>
Years Ended December 31, 1996 1995 1994
- ---------------------------------------------------------------
<S> <C> <C> <C>
Amortization $317,832 $317,832 $317,832
Advertising 498,820 346,248 375,860
Data processing 841,174 919,036 648,313
</TABLE>
<PAGE> 23
<TABLE>
<CAPTION>
<S> <C> <C> <C>
FDIC and state banking
assessments 188,060 467,623 785,511
Legal and accounting 328,788 213,799 219,805
Postage and freight 160,448 111,521 136,975
Stationary, printing and supplies 242,367 284,841 207,681
Other real estate (15,465) 218,484 61,305
ATM expense 1,286,179 1,154,642 668,859
Federal Reserve service charges 96,416 91,163 90,449
Conferences and classes 110,119 138,416 147,414
Taxes and licenses 183,826 192,739 175,165
Consulting fees 27,270 23,100 25,350
Trust expense 151,223 191,175 166,729
Other 654,044 556,512 751,510
----------- ----------- -----------
Totals $ 5,071,101 $ 5,227,131 $ 4,778,758
=========== =========== ===========
</TABLE>
NOTE I - FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK:
The Company is a party to financial instruments with off-balance-sheet risk
in the normal course of business to meet the financing needs of its customers.
These financial instruments include commitments to extend credit and
irrevocable letters of credit. These instruments involve, to varying degrees,
elements of credit and interest rate risk in excess of the amount recognized in
the balance sheet. The contract amounts of those instruments reflect the extent
of involvement the bank subsidiary has in particular classes of financial
instruments. The Company's exposure to credit loss in the event of
nonperformance by the other party to the financial instrument for commitments
to extend credit and irrevocable letters of credit is represented by the
contractual amount of those instruments. The Company uses the same credit
policies in making commitments and conditional obligations as it does for
on-balance- sheet instruments.
At December 31, 1996, 1995 and 1994, the Company had outstanding irrevocable
letters of credit aggregating $1,170,107, $1,944,505 and $1,007,564,
respectively.
Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any conditions established in the agreement.
Irrevocable letters of credit written are conditional commitments issued by the
Company to guarantee the performance of a customer to a third party.
Commitments and irrevocable letters of credit generally have fixed expiration
dates or other termination clauses and may require payment of a fee. Since some
of
<PAGE> 24
the commitments and irrevocable letters of credit may expire without being
drawn upon, the total amounts do not necessarily represent future cash
requirements.
The Company evaluated each customer's creditworthiness on a case-by-case
basis. The amount of collateral obtained upon extension of credit is based on
Management's credit evaluation of the customer. Collateral obtained varies but
may include equipment, real property and inventory.
The Company generally grants loans to customers in its primary trade area of
Harrison, Hancock and west Jackson counties. The Company also grants loans on a
limited basis in Claiborne County.
NOTE J - CONTINGENCIES:
In January 1996, a class action suit was filed against the Company's bank
subsidiary related to the placement of collateral protection insurance by the
bank subsidiary. The complaint does not specify a specific dollar amount in
damages. Bank Management intends to vigorously contest the allegations of the
complaint.
The bank is involved in various other legal matters and claims which are
being defended and handled in the ordinary course of business. None of these
matters is expected, in the opinion of Management, to have a material adverse
effect upon the financial position or results of operations of the Company.
NOTE K - CONDENSED PARENT COMPANY ONLY FINANCIAL INFORMATION:
Peoples Financial Corporation began its operations September 30, 1985, when
it acquired all the outstanding stock of The Peoples Bank, Biloxi, Mississippi.
A condensed summary of its financial information is shown below.
CONDENSED BALANCE SHEETS (in thousands)
<TABLE>
<CAPTION>
December 31, 1996 1995 1994
- -------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Investments in subsidiaries,
at underlying equity:
Bank subsidiary $59,720 $54,135 $47,857
Nonbank subsidiary 55 53 52
Cash in bank subsidiary 48 74 100
Intangible assets 496 813 1,131
Other assets 656 210 214
------- ------- -------
TOTAL ASSETS $60,975 $55,285 $49,354
======= ======= =======
</TABLE>
<PAGE> 25
<TABLE>
LIABILITIES AND SHAREHOLDERS'
EQUITY
<S> <C> <C> <C>
Notes payable, nonaffiliates $ $ 200 $ 375
Deferred federal income taxes 621 503 538
------- ------- -------
Total liabilities 621 703 913
Shareholders' equity 60,354 54,582 48,441
------- ------- -------
TOTAL LIABILITIES AND $60,975 $55,285 $49,354
SHAREHOLDERS' EQUITY ======= ======= =======
</TABLE>
CONDENSED STATEMENTS OF INCOME (in thousands)
<TABLE>
<CAPTION>
Years Ended December 31, 1996 1995 1994
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
INCOME
Earnings of unconsolidated bank subsidiary:
Distributed earnings $ 800 $ 740 $ 550
Undistributed earnings 5,373 5,952 5,093
Earnings of unconsolidated
nonbank subsidiary 2 2 2
Interest income 3 3 5
Other income 12 15 18
------ ------ ------
TOTAL INCOME 6,190 6,712 5,668
------ ------ ------
EXPENSES
Other expense 59 52 68
------ ------ ------
TOTAL EXPENSES 59 52 68
------ ------ ------
INCOME BEFORE BENEFIT FROM
INCOME TAXES 6,131 6,660 5,600
Benefit from income taxes 15 11 16
------ ------ ------
NET INCOME $6,146 $6,671 $5,616
====== ====== ======
</TABLE>
<PAGE> 26
CONDENSED STATEMENTS OF CASH FLOWS (in thousands)
<TABLE>
<CAPTION>
Years Ended December 31, 1996 1995 1994
- ------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income $ 6,146 $ 6,671 $ 5,616
Adjustments to reconcile net
income to net cash provided
by operating activities:
Net income of unconsolidated
subsidiaries (6,175) (6,694) (5,645)
Changes in assets and
liabilities:
Accrued expenses (3) 4 7
------- ------- -------
NET CASH USED IN OPERATING
ACTIVITIES (32) (19) (22)
------- ------- -------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Dividends from unconsolidated
subsidiary 800 740 550
------- ------- -------
NET CASH PROVIDED BY
INVESTING ACTIVITIES 800 740 550
------- ------- -------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Dividends paid (794) (747) (669)
------- ------- -------
NET CASH USED IN FINANCING
ACTIVITIES (794) (747) (669)
------- ------- -------
NET DECREASE IN CASH (26) (26) (141)
CASH, BEGINNING OF YEAR 74 100 241
------- ------- -------
CASH, END OF YEAR $ 48 $ 74 $ 100
======= ======= =======
</TABLE>
Peoples Financial Corporation paid income taxes of $2,869,605, $3,498,388 and
$2,787,144 in 1996, 1995 and 1994, respectively. No interest was paid during
the three years ended
<PAGE> 27
December 31, 1996.
NOTE L - EMPLOYEE BENEFIT PLANS:
The Company sponsored the Peoples Financial Corporation Retirement Plan
(Pension Plan), a non-contributory defined benefit pension plan covering
substantially all salaried, full-time employees. Pension benefits are fully
vested after 7 years and are based on average compensation during years of
service, with 1985 compensation used for each year prior to 1985. A partial
reduction in benefits was provided for each year less than 30 years of service.
The Company's funding policy for years presented was to contribute no more than
the minimum funding requirement for federal income tax purposes. No
contribution was made in 1994.
The following is a summary of the components of net periodic pension cost:
<TABLE>
<CAPTION>
Years Ended December 31, 1996 1995 1994
- ---------------------------------------------------------------------
<S> <C> <C> <C>
Interest cost $ 47,827 $ 72,937 $ 72,640
Return on assets (36,147) (66,247) (66,956)
-------- -------- --------
Net periodic pension cost $ 11,680 $ 6,690 $ 5,684
======== ======== ========
</TABLE>
Net pension cost was determined for 1995 and 1994 based on expected return on
assets. Actual return on plan assets was $80,623 and $33,759 for the years
ended December 31, 1995 and 1994, respectively, resulting in $14,376 and
$33,197 differences between expected return and actual return on assets.
Effective December 31, 1991, the Pension Plan was frozen and no additional
benefits accrued under the Plan. The accrued benefit of each participant, other
than a highly compensated employee within the meaning of Section 414(q)(A) or
(B) of the Internal Revenue Code, was equal to the employee's accrued benefit
calculated as of December 31, 1991. The accrued benefit of a highly compensated
employee was equal to the employee's accrued benefit as of the December 31
preceding the Plan year in which the employee became a highly compensated
employee, but no earlier than December 31, 1988. Future credited service
counted for vesting purposes for those participants not fully vested at
December 31, 1991. All participants were notified of these events on December
14, 1991, in accordance with ERISA. No new participants entered the Plan after
December 31, 1991. The Pension Plan was amended on December 16, 1994, to comply
with the Internal Revenue Code. The amendment was retroactively effective to
January 1, 1989, unless specifically indicated to the contrary.
On June 28, 1995, the Board of Directors of the Company voted to terminate
the Plan effective September 1, 1995. The participants were notified of this
event by June 29, 1995, in accordance with ERISA. Approval was received from
the Internal Revenue Service on March 18, 1996, to terminate the Plan. Upon the
Plan's termination, each participant became 100% vested in their accrued
benefit. All assets of the Plan were distributed to participants either as a
lump sum or by the purchase of an annuity with an insurance carrier on July 18
and August 28, 1996. The lump sum distributions were calculated using the GATT
interest rate in effect as
<PAGE> 28
of January 1, 1996 (6.06%) and a 50/50 blend of the 1983 Group Annuity
Mortality for males and females. The loss realized as a result of the
termination was $426,747. The Company was obligated to make further
contributions to provide sufficient funds to settle the liabilities of the
Plan. The Company made contributions of $95,890 and $215,774 to the Plan during
1996 and 1995, respectively, to fulfill its obligation.
The following table sets forth the Pension Plan's funded status at December
31, 1995 and 1994, respectively:
<TABLE>
<CAPTION>
December 31, 1995 1994
- ----------------------------------------------------------------------------------
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit obligation $ 1,195,676 $ 887,455
Non-vested benefit obligation 2,016
----------- -----------
Accumulated and projected
benefit obligation 1,195,676 889,471
Plan assets at fair value 1,092,326 977,786
----------- -----------
Projected benefit obligation less
than (greater than) plan assets (103,350) 88,315
Unrecognized net loss from past
experience different from that
assumed and effects of
changes in assumptions 446,230 45,481
Additional minimum liability (446,230)
----------- -----------
Prepaid (accrued) pension cost $ (103,350) $ 133,796
=========== ===========
</TABLE>
A weighted average discount rate of 6.00% and 8.50% for 1995 and 1994,
respectively, and a rate of increase in future compensation levels of 5% was
used in determining the actuarial present value of the projected benefit
obligation.
The Company also sponsors the Peoples Financial Corporation Employee Stock
Ownership Plan (ESOP). Company Management curtailed the Retirement Plan in 1991
and decided to terminate the Plan in 1995 because of their intent to make the
ESOP, which is more flexible than the Pension Plan, the primary benefit plan,
and because of the high cost of administering two plans.
The employee stock ownership plan covers substantially all salaried,
full-time employees. The effective date of the ESOP is December 24, 1984. On
November 22, 1989, the plan was amended and restated effective January 1, 1989,
to comply with Internal Revenue Code of 1986 and other regulations, to adopt
401(k) provisions for the plan, and effective December 31, 1989, to merge the
former Gulf National Bank Profit Sharing Plan into the plan. On
<PAGE> 29
December 31, 1991, the plan was amended effective January 1, 1991, except where
specifically indicated to the contrary, to adjust, among other things, Employer
Discretionary Matching Contribution and Vesting Schedule. On December 16, 1994,
the plan was amended effective January 1, 1989, except where specifically
indicated to the contrary, to comply with the Internal Revenue Code and to
clarify the hardship distribution provisions. Contributions are determined by
the Board of Directors and may be paid either in cash or Peoples Financial
Corporation capital stock. Total contributions to the plan charged to operating
expense were $240,000, $300,000 and $300,000 in 1996, 1995 and 1994,
respectively.
In November 1993, Statement of Position 93-6, "Employers' Accounting for
Employee Stock Ownership Plans" was issued. This Statement prescribes the
accounting treatment for transactions involving leveraged esop's. Specifically,
the Statement applied to shares acquired by such plans after December 31, 1992
and was effective for fiscal years beginning after December 15, 1993. The ESOP
was a leveraged esop. All shares held by the ESOP were acquired before that
date. Application of the Statement is limited to disclosure of information
relating to the description and administration of the plan. At December 31,
1996, 1995 and 1994, the ESOP owned 94,280, 94,064 and 94,144 shares of common
stock of the Company. Of these shares, 4,426 and 8,588 shares were held in
suspense at First Alabama Bancshares as security on the line of credit at
December 31, 1995 and 1994, respectively. The remaining shares were allocated
to participants' accounts. The agreement with First Alabama provided for the
release of shares held as collateral as payments were made based on a fraction
applied to the total shares held as collateral. The numerator of the fraction
was the principal and interest paid during the plan year and the denominator
was the numerator plus the principal and interest to be paid during all future
years. Dividends on allocated shares are credited to participants' accounts.
Dividends on unallocated shares were used to reduce the principal on the line
of credit. The line of credit was paid off on April 18, 1996, and all shares
held as collateral were released by First Alabama.
The Company established an Executive Supplemental Income Plan and a
Directors' Deferred Income Plan in 1985. These plans provide for non-vested
pre-retirement and post-retirement benefits to certain key executives and
directors. The Company has acquired insurance policies, with the bank
subsidiary as owner and beneficiary, that it may use as a source to pay
potential benefits to the plan participants. These contracts are carried at
their cash surrender value, which amounted to $2,070,924, $1,816,846 and
$1,633,496 at December 31, 1996, 1995 and 1994, respectively. The present value
of accumulated benefits under these plans, using an interest rate of 10%, and
the projected unit cost method has been accrued. The accrual amounted to
$1,046,262, $837,469 and $599,167 at December 31, 1996, 1995 and 1994,
respectively.
The Company also has additional plans for non-vested post-retirement benefits
for certain key executives and directors. The Company has acquired insurance
policies, with the bank subsidiary as owner and beneficiary, that it may use as
a source to pay potential benefits to the plan participants. Additionally,
there are two split dollar policies of which certain executive officers are the
owners and beneficiaries, and which are assigned to the bank subsidiary for the
repayment of premiums paid by the Company. These contracts are carried at their
cash surrender value, which amounted to $281,937, $ 268,891 and $208,224 at
December 31, 1996, 1995 and 1994, respectively. The present value of
accumulated benefits under these plans using an interest rate of 8.50% and the
projected unit cost method has been accrued.
<PAGE> 30
The accrual amounted to $259,508, $258,577 and $250,907 at December 31, 1996,
1995 and 1994, respectively.
The Financial Accounting Standards Board issued SFAS 106, "Employers'
Accounting for Post-Retirement Benefits Other Than Pensions." The Statement
requires that the expected cost of providing these post-retirement benefits be
recognized during the period of active employment. The Company provides
post-retirement health insurance to certain of its retired employees. Employees
are eligible to participate in the retiree health plan if they retire from
active service no earlier than their Social Security normal retirement age,
which varies from 65 to 67 based on the year of birth. In addition, the
employee must have at least 25 continuous years of service with the Company
immediately preceding retirement. However, any active employee who is at least
age 65 as of January 1, 1995, does not have to meet the 25 years of service
requirement. Statement 106 was adopted by the Company on January 1, 1995. The
accumulated post-retirement benefit obligation at that date was $517,599, which
the Company has elected to amortize over 20 years. Through December 31, 1994,
the cost of providing these benefits was recognized on a cash basis when
premiums were paid. These premiums amounted to $22,401 for the year ended
December 31, 1994. The Company reserves the right to modify, reduce or
eliminate these health benefits.
The following is a summary of the components of the net periodic
postretirement benefit cost:
<TABLE>
<CAPTION>
Years Ended December 31, 1996 1995
- ---------------------------------------------------------------
<S> <C> <C>
Service cost $ 49,154 $ 30,841
Interest cost 49,381 42,962
Amortization of net transition
obligation 38,498 25,880
-------- --------
Net periodic postretirement benefit
cost $137,033 $ 99,683
======== ========
</TABLE>
The discount rate used in determining the accumulated postretirement benefit
obligation was 7.00% in 1996 and 1995. The assumed health care cost trend rate
used in measuring the accumulated postretirement benefit obligation was 10.03%
in 1996. The rate was assumed to decrease gradually to 6.00% for 2016 and
remain at that level thereafter. If the health care cost trend rate assumptions
were increased 1%, the accumulated postretirement benefit obligation as of
December 31, 1996, would be increased by 21.99%, and the aggregate of the
service and interest cost components of the net periodic postretirement benefit
cost for the year then ended would have increased by 27.98%.
<PAGE> 31
<TABLE>
<CAPTION>
December 31, 1996 1995
- -----------------------------------------------------------------------------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees $ 185,595 $ 242,875
Eligible to retire 101,298 116,307
Not eligible to retire 352,473 358,762
--------- ---------
Total 639,366 717,944
Plan assets at fair value -0- -0-
--------- ---------
Accumulated postretirement
benefit obligation in excess of
plan assets 639,366 717,944
Unrecognized transition
obligation (465,839) (491,719)
Prior service cost not yet
recognized in net periodic post-
retirement benefit cost 95,042
Unrecognized net loss from past
experience different from that
assumed and from changes in
assumptions (77,273) (146,962)
--------- ---------
Accrued postretirement benefit
cost $ 191,296 $ 79,263
========= =========
</TABLE>
NOTE M - FAIR VALUE OF FINANCIAL INSTRUMENTS:
In December 1991, the Financial Accounting Standards Board issued SFAS 107,
"Disclosures About Fair Value of Financial Instruments." SFAS 107 requires all
entities to disclose the fair value of financial instruments, both assets and
liabilities recognized and not recognized in the statement of condition, for
which it is practical to estimate its fair value.
SFAS 107 excluded certain financial instruments and all nonfinancial
instruments from its disclosure requirements. Accordingly, the aggregate fair
value amounts presented do not represent the underlying value of the Company.
In preparing these disclosures, Management made highly sensitive estimates
and assumptions in developing the methodology to be utilized in the computation
of fair value. These estimates and assumptions were formulated based on
judgments regarding economic conditions and risk characteristics of the
financial instruments that were present at the time the computations were
<PAGE> 32
made. Events may occur that alter these conditions and thus perhaps change the
assumptions as well. A change in the assumptions might affect the fair value of
the financial instruments disclosed in this footnote. In addition, the tax
consequences related to the realization of the unrealized gains and losses have
not been computed or disclosed herein.
Fair value estimates, methods and assumptions are set forth below for the
Company's financial instruments.
Cash and Due from Banks
The amount shown as cash and due from banks approximates fair value.
Available for Sale Securities
The fair value of available for sale securities is based on quoted market
prices.
Held to Maturity Securities
The fair value of held to maturity securities is based on quoted market
prices.
Loans
The fair value of loans is estimated by discounting the future cash flows
using the current rates at which similar loans would be made to borrowers with
similar credit ratings for the remaining maturities. The cash flows considered
in computing the fair value of such loans are segmented into categories
relating to the nature of the contract and collateral based on contractual
principal maturities. Appropriate adjustments are made to reflect probable
credit losses. Cash flows have not been adjusted for such factors as prepayment
risk or the effect of the maturity of balloon notes.
Deposits
The fair value of non-interest bearing demand and interest bearing savings
and demand deposits is the amount reported in the financial statements. The
fair value of time deposits is estimated by discounting the cash flows using
current rates of time deposits with similar remaining maturities. The cash
flows considered in computing the fair value of such deposits are based on
contractual maturities, since approximately 98% of time deposits provide for
automatic renewal at current interest rates.
Federal Funds Purchased
The amount shown as federal funds purchased approximates fair value.
Notes Payable
The fair value of notes payable is computed by discounting the cash flows
using current borrowing rates.
Irrevocable Letters of Credit
The fair value of irrevocable letters of credit is estimated using the fees
currently charged to enter into similar agreements.
<PAGE> 33
The following table presents carrying amounts and estimated fair values for
financial assets and financial liabilities at December 31, 1996, 1995 and 1994
(in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
----------------------------------------------------------------------------
CARRYING FAIR Carrying Fair Carrying Fair
AMOUNT VALUE Amount Value Amount Value
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Financial Assets:
Cash and due
from banks $ 26,874 $ 26,874 $ 24,220 $ 24,220 $ 20,779 $ 20,779
Available for sale
securities 53,159 53,159 20,830 20,830 198 198
Held to maturity
securities 127,870 128,879 165,142 167,384 159,498 156,660
Loans, net 223,969 225,492 219,694 219,269 217,928 216,954
Financial
Liabilities:
Deposits:
Non-interest
bearing 73,535 73,535 82,790 82,790 67,741 67,741
Interest bearing 294,597 294,728 293,382 293,561 280,449 280,468
-------- -------- -------- -------- -------- --------
Total deposits 368,132 368,263 376,172 376,351 348,190 348,209
Federal funds
purchased 16,500 16,500 12,150 12,150 15,900 15,900
Notes payable 227 198 438 402 623 583
Irrevocable
letters of credit -- 12 -- 19 -- 10
</TABLE>
NOTE N - REGULATORY MATTERS:
The bank subsidiary 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 the regulators that, if undertaken, could have a
direct material effect on the bank's subsidiary's financial statements. Under
capital adequacy guidelines and the regulatory framework for prompt corrective
action, the bank subsidiary must meet specific capital guidelines that involve
quantitative measures of the
<PAGE> 34
bank subsidiary's assets, liabilities and certain off-balance sheet items as
calculated under regulatory accounting practices. The bank subsidiary's capital
amounts and classification are also subject to qualitative judgements by the
regulators about components, risk weightings and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require the bank subsidiary to maintain minimum amounts and ratios of total and
Tier 1 capital to risk-weighted assets, and Tier 1 capital to average assets.
As of December 31, 1996, the most recent notification from the Federal
Deposit Insurance Corporation categorized the bank subsidiary as well
capitalized under the regulatory framework for prompt corrective action. To be
categorized as well capitalized, the bank subsidiary must have a total
risk-based capital ratio of 10% or greater, a Tier 1 risk-based capital ratio
of 6% or greater and a leverage capital ratio of 5% or greater. There are no
conditions or events since that notification that Management believes have
changed the bank subsidiary's category.
The bank subsidiary's actual capital amounts and ratios and required minimum
capital amounts and ratios for 1996, 1995 and 1994, are as follows:
<TABLE>
<CAPTION>
Actual For Capital Adequacy
Purposes
------------------------------------------------------
Amount Ratio Amount Ratio
------------------------------------------------------
<S> <C> <C> <C> <C>
DECEMBER 31, 1996:
TOTAL CAPITAL (TO RISK WEIGHTED ASSETS) $62,072,284 26.20% $18,952,160 8.00%
TIER 1 CAqPITAL (TO RISK WEIGHTED ASSETS) 59,111,009 24.95 9,476,080 4.00
TIER 1 CAPITAL (TO AVERAGE ASSETS) 59,111,009 12.63 18,713,857 4.00
December 31, 1995:
Total Capital (to Risk Weighted Assets) 56,363,238 24.89 18,112,782 8.00
Tier 1 Capital (to Risk Weighted Assets) 53,533,730 23.64 9,056,391 4.00
Tier 1 Capital (to Average Assets) 53,533,730 12.46 17,186,775 4.00
December 31, 1994:
Total Capital (to Risk Weighted Assets 49,974,389 22.73 17,587,047 8.00
Tier 1 Capital (to Risk Weighted Assets) 47,226,413 21.48 8,793,524 4.00
Tier 1 Capital (to Average Assets) 47,226,413 11.34 16,662,655 4.00
</TABLE>
<PAGE> 35
INDEPENDENT AUDITORS' REPORT
Peoples Financial Corporation and Subsidiaries
Board of Directors
Peoples Financial Corporation and Subsidiaries
Biloxi, Mississippi
We have audited the accompanying consolidated statements of condition of
Peoples Financial Corporation and Subsidiaries as of December 31, 1996, 1995
and 1994, and the related consolidated statements of income, shareholders'
equity and cash flows for the years then ended. These financial statements are
the responsibility of the Company's Management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by Management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Peoples
Financial Corporation and Subsidiaries at December 31, 1996, 1995 and 1994, and
the results of its operations and its cash flows for the years then ended, in
conformity with generally accepted accounting principles.
Certified Public Accountants
PILTZ, WILLIAMS, LAROSA & CO.
Biloxi, Mississippi
January 17, 1997
<PAGE> 36
Board of Directors
Peoples Financial Corporation
Chevis C. Swetman, Chairman of the Board
Andy Carpenter, Vice Chairman
Drew Allen, President, Allen Beverages, Inc.
William A. Barq, Former Owner and President (retired),
Barq's Bottling Co., Inc.
F. Walker Tucei, Executive Vice-President (retired),
The Peoples Bank, Biloxi, Mississippi
Officers
Peoples Financial Corporation
Chevis C. Swetman, President and CEO
Andy Carpenter, Executive Vice-President
Jeannette E. Romero, First Vice-President
Thomas J. Sliman, Second Vice-President
Robert M. Tucei, Vice-President and Secretary
David M. Hughes, Vice-President
Lauri A. Wood, Chief Financial Officer and Controller
Officers
The Peoples Bank
COMMERCIAL LENDING
A. Wes Fulmer, Vice-President
Darnell M. Hebert, Assistant Vice-President
CONSUMER LENDING
Ralph A. Seymour, Assistant Vice-President
Brian J. Kozlowski, Loan Officer
COMPLIANCE
Evelyn R. Madison, Compliance Officer
AUDIT AND ACCOUNTING
Gregory M. Batia, Assistant Auditor
Caroline B. Randolph, Assistant Auditor - Trust
Connie F. Lepoma, Accounting Officer
INVESTMENTS
Peggy M. Byrd, Vice-President
Janet H. Wood, Investment Officer
<PAGE> 37
LOAN PROCESSING
Donna F. Bessetti, Vice-President
Margaret H. Delahousey, Assistant Vice-President
Jesse J. Migues, Assistant Cashier
LOAN REVIEW
Robert E. Smith, Jr., Assistant Vice-President
F. Kay Woodbury, Loan Review Officer
PERSONNEL
Jackie L. Henson, Vice-President
Janis C. Culler, Vice-President - Employee Benefits
Patricia L. Levine, Assistant Vice-President - Personnel
MARKETING
Jeanne S. Adams, Marketing Director
ASSET MANAGEMENT & TRUST SERVICES
M. O. Lawrence, III, Vice-President - Trust
Ann F. Guice, Trust Officer
Louise C. Johns, Assistant Trust Officer
Thomas H. Wicks, Assistant Trust Officer
Diana T. Winland, Assistant Trust Officer
PROPERTY
Shirley A. Braun, Assistant Vice-President - Property
Ray I. Cross, Assistant Vice-President - Appraisals
OPERATIONS/OTHER SERVICES
Sandra L. York, Vice-President - Data Processing
Dennis J. Burke, Vice-President - Operations
Robin J. Vignes, Assistant Vice-President - Security
George S. Tranum, Assistant Vice-President - Telecommunications
Susan B. Polovich, Assistant Operations Officer
Cassandra F. Reid, Assistant Cashier
Charlotte R. Balius, Bankcard Officer
Cheryl A. Dubaz, ATM Officer
Ardell M. Roberts, Assistant Cashier
Hugh J. Kavanagh, Assistant Cashier
Janice L. Smitherman, Administrative Officer
Gloria A. Cothern, ACH/Returns Officer
Yvonne P. Owen, Assistant Cashier
Ronald L. Baldwin, Systems Support Technician
Kathy S. Comstock, Savings Officer
<PAGE> 38
BRANCH LOCATIONS AND OFFICERS
The Peoples Bank
BILOXI BRANCHES
MAIN OFFICE, 152 Lameuse Street, Biloxi, Mississippi 39530, (601) 435-5511
VETERANS AVENUE OFFICE, 186 Veterans Avenue, Biloxi, Mississippi 39531,
(601) 897-8711
R. Patrick Byrd, Branch Manager
WEST BILOXI OFFICE, 2430 Pass Road, Biloxi, Mississippi 39531, (601) 435-8203
Robert A. Brashier, Assistant Vice-President
GULFPORT BRANCHES
HANDSBORO OFFICE, 0412 E. Pass Road, Gulfport, Mississippi 39507, (601) 897-8717
Andrew M. Welter, Branch Manager
HIGHWAY 90 OFFICE, 3300 West Beach Boulevard, Gulfport, Mississippi 39501,
(601) 897-8715
David M. Hughes, Senior Vice-President
John W. McKellar, Vice-President
C. J. Tennant, Commercial Loan Officer
Diana W. Williams, Branch Manager
James P. Estrada, Loan Officer
ORANGE GROVE OFFICE, 12020 Highway 49 North, Gulfport, Mississippi 39503,
(601) 897-8718
Mark A. Chatham, Assistant Vice-President
OTHER BRANCHES
BAY ST. LOUIS OFFICE, 408 Highway 90 East, Bay St. Louis, Mississippi 39520,
(601) 897-8710
Jeannie M. Deen, Vice-President
Read H. Breeland, Assistant Branch Manager
DIAMONDHEAD OFFICE, 4408 West Aloha Drive, Diamondhead, Mississippi 39525,
(601) 897-8714
J. Patrick Wild, Assistant Vice-President
D'IBERVILLE-ST. MARTIN OFFICE, 10491 Lemoyne Boulevard, D'Iberville,
Mississippi 39532, (601) 435-8202
Douglas E. Gill, Vice-President
LONG BEACH OFFICE, 403 Jeff Davis Avenue, Long Beach, Mississippi 39560
(601) 897-8712
Brent G. Johnson, Assistant Vice-President
OCEAN SPRINGS OFFICE, 2015 Bienville Boulevard, Ocean Springs,
Mississippi 39564, (601) 435-8204
Ronnie F. Harrison, Assistant Vice-President
PASS CHRISTIAN OFFICE, 125 Henderson Avenue, Pass Christian,
Mississippi 39571, (601) 897-8719
Karen T. Boudreaux, Branch Manager
<PAGE> 39
SHAREHOLDER INFORMATION
Peoples Financial Corporation and Subsidiaries
DIVIDEND SERVICES/ADDRESS CHANGE/STOCK TRANSFER:
For complete information concerning the common stock of Peoples Financial
Corporation, inquiries should be directed to:
M. O. Lawrence, III, Vice-President, Asset Management & Trust Services
Department P. O. Box 1416, Biloxi, Mississippi 39533-1416
(601) 435-8208
INDEPENDENT AUDITORS:
Piltz, Williams, LaRosa & Company, Biloxi, Mississippi
S.E.C. FORM 10-K REQUESTS:
A copy of the Annual Report on Form 10-K, as filed with the Securities and
Exchange Commission, may be obtained without charge by directing a written
request to:
Lauri A. Wood, Chief Financial Officer/Controller, Peoples Financial
Corporation 152 Lameuse Street, P. O. Drawer 529, Biloxi, Mississippi
39533-0529, (601) 435-8412
<PAGE> 1
Exhibit 23: Consent of Certified Public Accountants
We consent to the use of our reports, dated January 17, 1997, in Form 10-K
filing of the Peoples Financial Corporation.
PILTZ, WILLIAMS, LAROSA & CO.
Biloxi, Mississippi
March 13, 1997
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 26,873,638
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 53,159,353
<INVESTMENTS-CARRYING> 127,870,283
<INVESTMENTS-MARKET> 128,879,000
<LOANS> 228,508,895
<ALLOWANCE> 4,522,704
<TOTAL-ASSETS> 448,109,625
<DEPOSITS> 368,132,009
<SHORT-TERM> 0
<LIABILITIES-OTHER> 1,891,296
<LONG-TERM> 226,608
0
0
<COMMON> 738,168
<OTHER-SE> 59,616,036
<TOTAL-LIABILITIES-AND-EQUITY> 448,109,625
<INTEREST-LOAN> 20,414,470
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<INTEREST-OTHER> 582,321
<INTEREST-TOTAL> 33,247,783
<INTEREST-DEPOSIT> 14,282,677
<INTEREST-EXPENSE> 14,405,513
<INTEREST-INCOME-NET> 18,842,270
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<EXPENSE-OTHER> 15,417,445
<INCOME-PRETAX> 9,139,202
<INCOME-PRE-EXTRAORDINARY> 9,139,202
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,146,057
<EPS-PRIMARY> 8
<EPS-DILUTED> 8
<YIELD-ACTUAL> 4.36
<LOANS-NON> 546,000
<LOANS-PAST> 3,026,000
<LOANS-TROUBLED> 2,304,000
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<ALLOWANCE-OPEN> 4,352,967
<CHARGE-OFFS> 139,000
<RECOVERIES> 458,737
<ALLOWANCE-CLOSE> 4,522,704
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<ALLOWANCE-UNALLOCATED> 50,000
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