<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1999
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number 0 - 30050
PEOPLES FINANCIAL CORPORATION
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Mississippi 64-0709834
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
Lameuse and Howard Avenues, Biloxi, Mississippi 39533
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(228)435-5511
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the last practicable date.
Peoples Financial Corporation has only one class of common stock authorized. At
October 28, 1999, there were 15,000,000 shares of $1 par value common stock
authorized, and 2,952,672 shares issued and outstanding.
Page 1 of 19
<PAGE> 2
PART I
FINANCIAL INFORMATION
PEOPLES FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
September 30, December 31, and September 30, 1999 1998 1998
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Cash and due from banks $ 35,394,245 $ 30,359,600 $ 21,752,574
Held to maturity securities, market value of
$121,682,000 - September 30, 1999;
$135,924,000 - December 31, 1998;
$127,139,000 - September 30, 1998 122,612,546 134,723,695 125,534,041
Available for sale securities, at market value 27,475,855 12,836,885 24,770,793
Federal funds sold 1,900,000 3,250,000
Loans 314,941,484 291,514,748 275,553,018
Less: Unearned income 8,525 1,850 2,715
Allowance for loan losses 4,130,145 4,382,157 4,294,844
------------ ------------ ------------
Loans, net 310,802,814 287,130,741 271,255,459
Bank premises and equipment, net of accumulated
depreciation of $9,624,000 - September 30
1999; $8,930,000 - December 31,1998; and
$8,511,000 - September 30, 1998 17,000,090 15,923,450 14,329,555
Other real estate 138,454 274,280 593,941
Accrued interest receivable 3,621,326 3,128,279 3,153,969
Other assets 3,436,748 3,794,213 3,639,989
------------ ------------ ------------
TOTAL ASSETS $522,382,078 $488,171,143 $468,280,321
============ ============ ============
</TABLE>
Page 2 of 19
<PAGE> 3
PEOPLES FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Continued)
(Unaudited)
<TABLE>
<CAPTION>
September 30, December 31, and September 30, 1999 1998 1998
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
LIABILITIES & SHAREHOLDERS' EQUITY
LIABILITIES:
Deposits:
Demand, non-interest bearing $ 99,246,828 $ 76,268,636 $ 65,237,244
Savings and demand, interest bearing 168,540,539 167,120,669 161,537,468
Time, $100,000 or more 69,657,004 68,080,406 72,988,277
Other time deposits 67,924,303 70,132,525 68,174,053
------------- ------------- ------------
Total deposits 405,368,674 381,602,236 367,937,042
Accrued interest payable 678,609 924,172 910,943
Federal funds purchased and securities sold
under agreements to repurchase 35,815,037 28,050,780 22,933,242
Notes payable 235,443 202,946 206,044
Other liabilities 4,150,411 3,845,616 4,072,834
------------- ------------- ------------
TOTAL LIABILITIES 446,248,174 414,625,750 396,060,105
SHAREHOLDERS' EQUITY:
Common Stock, $1 par value, 15,000,000 shares
authorized, 2,952,672 shares issued and
outstanding at September 30, 1999, December
31, 1998 and September 30, 1998 2,952,672 2,952,672 2,952,672
Surplus 63,711,758 63,711,758 56,711,758
Undivided profits 9,948,720 6,739,151 12,173,721
Unearned compensation (612,886) (160,900)
Accumulated other comprehensive income 133,640 302,712 382,065
------------- ------------- ------------
TOTAL SHAREHOLDERS' EQUITY 76,133,904 73,545,393 72,220,216
------------- ------------- ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 522,382,078 $ 488,171,143 $468,280,321
============= ============= ============
</TABLE>
See Selected Notes to Consolidated Financial Statements.
Page 3 of 19
<PAGE> 4
PEOPLES FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
For The Quarters Ended September 30, For The Nine Months Ended September 30,
- ------------------------------------------------------------------------------------------------------------------------
1999 1998 1999 1998
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INTEREST INCOME:
Interest and fees on loans $6,838,282 $6,311,621 $19,304,197 $18,291,832
Interest and dividends on securities:
U. S. Treasury 1,144,929 1,235,402 3,601,132 3,783,102
U. S. Government agencies and
corporations 1,000,406 744,395 2,462,643 2,362,287
States and political subdivisions 105,496 107,969 346,194 267,259
Other investments 220 88,688 14,469
Interest on federal funds sold 15,278 130,191 439,188 338,143
---------- ---------- ----------- -----------
TOTAL INTEREST INCOME 9,104,611 8,529,578 26,242,042 25,057,092
---------- ---------- ----------- -----------
INTEREST EXPENSE:
Time deposits of $100,000 or more 886,486 1,022,082 2,749,960 3,129,930
Other deposits 2,331,073 2,415,870 6,932,672 6,994,747
Mortgage indebtedness 2,630 2,799 8,019 8,518
Federal funds purchased and securities
sold under agreements to repurchases 455,897 152,350 1,104,128 258,152
---------- ---------- ----------- -----------
TOTAL INTEREST EXPENSE 3,676,086 3,593,101 10,794,779 10,391,347
---------- ---------- ----------- -----------
NET INTEREST INCOME 5,428,525 4,936,477 15,447,263 14,665,745
Provision for losses on loans 30,000 90,000
---------- ---------- ----------- -----------
NET INTEREST INCOME AFTER PROVISION FOR
LOSSES ON LOANS 5,398,525 4,936,477 15,357,263 14,665,745
---------- ---------- ----------- -----------
OTHER OPERATING INCOME:
Trust department income and fees 201,966 145,571 677,929 574,264
Service charges on deposit accounts 1,182,688 1,045,344 3,568,089 2,912,215
Other service charges, commissions an
fees 79,439 67,553 198,416 208,154
Gain on securities 31,849 57,129
Other income 85,615 286,529 270,169 5,508,989
---------- ---------- ----------- -----------
TOTAL OTHER OPERATING INCOME $1,549,708 $1,576,846 $ 4,714,603 $ 9,260,751
---------- ---------- ----------- -----------
</TABLE>
Page 4 of 19
<PAGE> 5
PEOPLES FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (Continued)
(Unaudited)
<TABLE>
<CAPTION>
For The Quarters Ended September 30, For The Nine Months Ended September 30,
- -----------------------------------------------------------------------------------------------------------------------
1999 1998 1999 1998
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OTHER OPERATING EXPENSE:
Salaries and employee benefits $2,539,742 $2,227,026 $ 7,387,584 $ 6,557,939
Net occupancy 316,781 246,710 732,593 724,820
Equipment rentals, depreciation and
maintenance 599,988 513,013 1,779,535 1,499,733
Other expense 1,299,220 1,233,502 3,597,833 4,261,518
---------- ---------- ----------- -----------
TOTAL OTHER OPERATING EXPENSE 4,755,731 4,220,251 13,497,545 13,044,010
---------- ---------- ----------- -----------
INCOME BEFORE INCOME TAXES 2,192,502 2,293,072 6,574,321 10,882,486
Income taxes 703,724 713,650 2,213,210 3,658,410
---------- ---------- ----------- -----------
NET INCOME $1,488,778 $1,579,422 $ 4,361,111 $ 7,224,076
========== ========== =========== ===========
</TABLE>
See Selected Notes to Consolidated Financial Statements.
Page 5 of 19
<PAGE> 6
PEOPLES FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(Unaudited)
<TABLE>
<CAPTION>
Accumu-
Unearned lated Other Compre-
Common Undivided Compensa- Comprehen- hensive
# of Shares Stock Surplus Profits tion sive Income Income Total
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance,
January 1,
1998, as
previously
reported 1,476,336 $1,476,336 $ 58,188,094 $ 5,924,027 $ 0 $ 183,305 $ 65,771,762
Two-for-one
stock split in
1998 1,476,336 1,476,336 (1,476,336)
--------- ---------- ------------ ----------- -------------- ------------ ------------
Balance,
January 1,
1998, as
restated 2,952,672 2,952,672 56,711,758 5,924,027 183,305 65,771,762
Comprehen-
sive Income:
Net income 7,224,076 $ 7,224,076 7,224,076
Net
unrealized
gain on
available for
sale
securities, net
of tax 225,775 225,775 225,775
Reclassifica-
tion
adjustment
for available
for sale
securities
called or sold
in current
year, net of
tax (27,015) (27,015) (27,015)
-----------
Total
comprehen-
sive income $ 7,422,836
===========
Cash
dividends,
($ .33 per
share) (974,382) (974,382)
--------- ---------- ------------ ----------- -------------- ------------ ------------
Balance,
September
30, 1998 2,952,672 $2,952,672 $ 56,711,758 $12,173,721 $ 0 $ 382,065 $ 72,220,216
========= ========== ============ =========== ============== ============ ============
</TABLE>
Page 6 of 19
<PAGE> 7
================================================================================
PEOPLES FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY ( Continued)
(Unaudited)
<TABLE>
<CAPTION>
Accumu-
Unearned lated Other Compre-
Common Undivided Compensa- Comprehen- hensive
# of Shares Stock Surplus Profits tion sive Income Income Total
--------- ---------- ----------- ----------- --------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance,
January 1,
1999 2,952,672 $2,952,672 $63,711,758 $ 6,739,151 $(160,900) $ 302,712 $ 73,545,393
Comprehen-
sive Income:
Net income 4,361,111 $ 4,361,111 4,361,111
Net
unrealized
loss on
available for
sale
securities, net
of tax (169,072) (169,072) (169,072)
-----------
Total
comprehen-
sive income $ 4,192,039
===========
Purchase of
common
shares (642,886) (642,886)
Allocation of
ESOP shares 190,900 190,900
Cash
dividends,
($ .39 per
share) (1,151,542) (1,151,542)
--------- ---------- ----------- ----------- --------- ----------- ------------
Balance,
September
30, 1999 2,952,672 $2,952,672 $63,711,758 $ 9,948,720 $(612,886) $ 133,640 $ 76,133,904
========= ========== =========== =========== ========== =========== ============
</TABLE>
See Selected Notes to Consolidated Financial Statements.
Page 7 of 19
<PAGE> 8
PEOPLES FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
For The Nine Months Ended September 30, 1999 1998
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 4,361,111 $ 7,224,076
Adjustments to reconcile net income to net cash provided
by operating activities:
Gain on sales and calls of securities (59,129)
Gain on sales of other real estate (449,529) (11,478)
Gain on sale of bank premises (5,083,867)
Depreciation and amortization 1,170,000 1,139,397
Provision for losses on other real estate 16,355 44,736
Changes in assets and liabilities:
Accrued interest receivable (493,047) 465,948
Other assets 796,531 179,065
Accrued interest payable (245,563) 184,180
Other liabilities 304,795 1,484,626
------------- -------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 5,460,653 5,567,554
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities and calls of held to maturity
securities 106,390,000 79,795,000
Investment in held to maturity securities (95,916,051) (102,488,660)
Proceeds from maturities, sales and calls of available
securities for sale 1,222,174 23,725,000
Investment in available for sale securities (14,488,796) (466,991)
Loans made (24,082,013) (24,297,883)
Proceeds from sale of bank premises 5,996,754
Acquisition of premises and equipment (2,246,640) (6,768,362)
Proceeds from sales of other real estate 569,000 289,077
Federal funds sold (1,900,000) 2,900,000
Other assets (343,286) (442,433)
------------- -------------
NET CASH USED IN INVESTING ACTIVITIES $ (30,795,612) $ (21,758,498)
------------- -------------
</TABLE>
Page 8 of 19
<PAGE> 9
PEOPLES FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(Unaudited)
<TABLE>
<CAPTION>
For The Nine Months Ended September 30, 1999 1998
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Demand and savings deposits, net increase (decrease) $ 24,407,839 $ (1,305,384)
Time deposits, net decrease (641,401) (3,312,403)
Principal payments on notes (9,549) (9,050)
Cash dividends (1,151,542) (974,382)
Federal funds purchased and securities sold under
agreements to repurchase 7,764,257 22,933,242
------------ ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 30,369,604 17,332,023
------------ ------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 5,034,645 1,141,079
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 30,359,600 20,611,495
------------ ------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 35,394,245 $ 21,752,574
============ ============
</TABLE>
See Selected Notes to Consolidated Financial Statements.
Page 9 of 19
<PAGE> 10
PEOPLES FINANCIAL CORPORATION AND SUBSIDIARIES
SELECTED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Nine Months Ended September 30, 1999 and 1998
1. The accompanying unaudited consolidated financial statements have been
prepared with the accounting policies in effect as of December 31, 1998 as set
forth in the Notes to the Consolidated Financial Statements of Peoples
Financial Corporation and Subsidiaries (the Company). In the opinion of
Management, all adjustments necessary for a fair presentation of the condensed
consolidated financial statements have been included and are of a normal
recurring nature.
The accompanying unaudited consolidated financial statements have been prepared
also in accordance with the instructions to Form 10-Q and Rule 10-01 of
Regulations S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements.
2. The results of operations for the nine months ended September 30, 1999, are
not necessarily indicative of the results to be expected for the full year.
3. Per share data is based on the weighted average shares of common stock
outstanding of 2,952,672 for the nine months ended September 30, 1999 and 1998.
4. At September 30, 1999 and 1998, the total recorded investment in impaired
loans amounted to $2,000 and $638,000. The amount of that recorded investment
in impaired loans for which there was no related allowance for loan losses was
$2,000 and $638,000 at September 30, 1999 and 1998, respectively.
5. Transactions in the allowance for loan losses were as follows:
<TABLE>
<S> <C>
Balance, January 1, 1999 $ 4,382,157
Provision for loan losses 90,000
Recoveries 61,781
Loans charged off (403,793)
-------------
Balance, September 30, 1999 $ 4,130,145
=============
</TABLE>
Page 10 of 19
<PAGE> 11
6. The Company has defined cash and cash equivalents to include cash and due
from banks. The Company paid $11,040,342 and $10,207,000 for the nine months
ended September 30, 1999 and 1998, respectively, for interest on deposits and
borrowings. Income tax payments totaled $2,315,000 and $1,920,000 for the nine
months ended September 30, 1999 and 1998, respectively. Loans transferred to
other real estate amounted to $404,000 for the nine months ended September 30,
1998.
7. The income tax effect on the accumulated other comprehensive income was
($87,000) and $103,000 at September 30, 1999 and 1998, respectively.
Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations
The following presents Management's discussion and analysis of the consolidated
financial condition and results of operations of Peoples Financial Corporation
and Subsidiaries (the Company) for the nine months ended September 30, 1999 and
1998. These comments highlight the significant events and should be considered
in combination with the Consolidated Financial Statements included in this
report on Form 10-Q.
OVERVIEW
Net income for the nine months ended September 30, 1999, was $4,361,000, which
was a decrease of $2,863,000, as compared with the nine months ended September
30, 1999. This decrease was primarily attributable to the gain recognized for
book purposes of $3,300,000, net of taxes, during the first quarter of 1998 as
the result of the sale of a branch location. During the first quarter of 1999,
the Company recognized a gain, net of taxes, of $293,000 from the sale of other
real estate.
The following schedule compares financial highlights for the nine months ended
September 30, 1999 and 1998:
<TABLE>
<CAPTION>
For the nine months ended September
30, 1999 1998
- ------------------------------------------------------------------------
<S> <C> <C>
Net income per share $ 1.48 $ 2.45
Book value per share $ 25.78 $ 24.46
Return on average total assets 1.14% 2.10%
Return on average shareholders' equity 7.83% 13.96%
Allowance for loan losses as a % of 1.31% 1.56%
loans, net of unearned discount
</TABLE>
Page 11 of 19
<PAGE> 12
FINANCIAL CONDITION
HELD TO MATURITY SECURITIES
There was no significant change in the held to maturity securities portfolio at
September 30, 1999, as compared with September 30, 1998. The Company continues
to closely manage its liquidity position by matching the maturity of investment
securities with anticipated fluctuations in deposits. Gross unrealized gains
for held to maturity securities were $428,000 and $1,624,000 and gross
unrealized losses for held to maturity securities were $1,359,000 and $19,000
at September 30, 1999 and 1998, respectively. The following schedule reflects
the mix of the held to maturity investment portfolio at September 30, 1999 and
1998:
<TABLE>
<CAPTION>
September 30, 1999 1998
- ------------------------------------------------------------------------------------------------
Amount % Amount %
--------------------------------------------------------------
<S> <C> <C> <C> <C>
U. S. Treasury securities $ 63,625,282 51.90% $ 86,247,040 68.70%
U. S. Government agencies 52,330,396 42.70% 32,912,848 26.20%
States and political
subdivisions 6,656,868 5.40% 6,374,153 5.10%
------------ ------ ------------ ------
Totals $122,612,546 100.00% $125,534,041 100.00%
============ ====== ============ ======
</TABLE>
AVAILABLE FOR SALE SECURITIES
There was no significant change in the available for sale securities portfolio
at September 30, 1999, as compared with September 30, 1998. The Company
continues to closely monitor its liquidity position as described above. Gross
unrealized gains were $919,000 and $526,000 at September 30, 1999 and 1998,
respectively, and gross unrealized losses were $722,000 at September 30, 1999.
The following schedule reflects the mix of available for sale securities at
September 30, 1999 and 1998:
<TABLE>
<CAPTION>
September 30, 1999 1998
- ----------------------------------------------------------------------------------------------
Amount % Amount %
------------------------------------------------------------
<S> <C> <C> <C> <C>
U. S. Treasury securities $ 5,858,130 21.30% $ 4,036,250 16.30%
U. S. Government agencies 16,198,234 58.90% 19,013,090 76.80%
States and political
subdivisions 2,163,328 7.90% 1,080,120 4.40%
Other securities 3,256,163 11.90% 641,333 2.50%
----------- ------ ----------- ------
Totals $27,475,855 100.00% $24,770,793 100.00%
=========== ====== =========== ======
</TABLE>
Page 12 of 19
<PAGE> 13
FEDERAL FUNDS SOLD
Federal funds sold were $1,900,000 at September 30, 1999, as compared with
$3,250,000 at September 30, 1998. This fluctuation is directly related to the
liquidity needs of the bank subsidiary.
LOANS
Loans increased $39,388,000 at September 30, 1999, as compared with September
30, 1998, as a result of the increased loan demand in the Company's trade area.
The Company anticipates that this increased demand will continue throughout the
remainder of 1999. The allowance for loan losses, as a % of loans, net of
unearned discount, has decreased from 1.56% at September 30, 1998 to 1.31% at
September 30, 1999. Management continues to monitor the volume and quality of
its loan portfolio and has determined that the allowance is adequate.
BANK PREMISES AND EQUIPMENT
Bank premises and equipment increased $2,671,000 at September 30, 1999, as
compared with September 30, 1998, as a result of the construction of two branch
facilities during this time.
DEPOSITS
Significant increases or decreases in total deposits or significant
fluctuations among the different types of deposits are anticipated by
Management as customers in the casino industry and county and municipal areas
reallocate their resources periodically. As discussed above, the Company has
managed its funds including planning the timing of investment maturities so as
to achieve appropriate liquidity.
FEDERAL FUNDS PURCHASED AND SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE
Federal funds purchased and securities sold under agreements to repurchase
increased $12,882,000 at September 30, 1999, as compared with September 30,
1998. This fluctuation is entirely due to the introduction of a new non-deposit
product during 1998.
SHAREHOLDERS' EQUITY AND CAPITAL ADEQUACY
Strength, security and stability have been the hallmark of the Company since
its founding in 1985 and of its bank subsidiary since its founding in 1896. A
strong capital foundation is fundamental to the continuing prosperity of the
Company and the security of its customers and shareholders. One measure of
capital adequacy is the primary capital ratio which was 15.75% at September 30,
1999, as compared with 16.65% at September 30, 1998. These ratios are well
above the regulatory minimum of 6.00%. Management continues to emphasize the
importance of maintaining the appropriate capital levels of the Company.
Page 13 of 19
<PAGE> 14
RESULTS OF OPERATIONS
NET INTEREST INCOME
Net interest income, the amount by which interest income on loans, investments
and other interest earning assets exceeds interest expense on deposits and
other borrowed funds, is the single largest component of the Company's income.
Management's objective is to provide the largest possible amount of income
while balancing interest rate, credit, liquidity and capital risk.
The following schedule summarizes net interest earnings and net yield on
interest earning assets:
Net Interest Earnings and Net Yield on Interest Earning Assets
<TABLE>
<CAPTION>
Nine Months Ended September 30, (In
thousands, except percentages) 1999 1998
- --------------------------------------------------------------------
<S> <C> <C> <C>
Total interest income (1) $26,420 $25,194
Total interest expense 10,795 10,391
------- -------
Net interest earnings $15,625 $14,803
======= =======
Net yield on interest earning assets 4.43% 4.72%
======= =======
</TABLE>
(1) All interest earned is reported on a taxable equivalent basis using a tax
rate of 34% in 1999 and 1998.
The schedule on page 15 provides an analysis of the change in total interest
income and total interest expense for the nine months ended September 30, 1999
and 1998.
Page 14 of 19
<PAGE> 15
Analysis of Changes in Interest Income and Interest Expense
(In Thousands)
<TABLE>
<CAPTION>
Attributable To:
-----------------------------------------
For the Nine For the Nine
Months Months
Ended Ended
September September Increase Rate/
30, 1999 30, 1998 (Decrease) Volume Rate Volume
--------------- --------------- -------------- ------------ ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
INTEREST
INCOME: (1)
Loans (2) $ 19,304 $ 18,292 $ 1,012 $ 2,265 $ (1,115) $ (138)
Federal funds sold 439 338 101 225 (74) (50)
Held to maturity:
Taxable securities 5,392 4,754 638 1,260 (492) (130)
Non-taxable
securities 405 174 231 16 196 19
Available for sale:
Taxable securities 672 1,391 (719) (722) 5 (2)
Non-taxable
securities 119 231 (112) 604 (198) (518)
Other securities 89 14 75 27 16 32
--------------- --------------- -------------- ------------ ------------ --------------
Total $ 26,420 $ 25,194 $ 1,226 $ 3,675 $ (1,662) $ (787)
=============== =============== ============== ============ ============ ==============
INTEREST
EXPENSE:
Savings and
negotiable interest
bearing deposits $ 4,144 $ 4,137 $ 7 $ 104 $ (95) $ (2)
Time deposits 5,539 5,987 (448) 571 (931) (88)
Federal funds
purchased and
securities sold under
agreements to
repurchase 1,104 258 846 1,165 (58) (261)
Mortgage
indebtedness 8 9 (1) (4) 7 (4)
--------------- --------------- -------------- ------------ ------------ --------------
Total $ 10,795 $ 10,391 $ 404 $ 1,836 $ (1,077) $ (355)
=============== =============== ============== ============ ============ ==============
</TABLE>
(1) All interest earned is reported on a taxable equivalent basis using a tax
rate of 34% in 1999 and 1998.
(2) Loan fees are included in these figures. Includes nonaccrual loans.
Page 15 of 19
<PAGE> 16
PROVISION FOR LOAN LOSSES
Management continuously monitors the Company's relationships with its loan
customers, especially those in concentrated industries such as seafood, gaming,
and hotel/motel, and their direct and indirect impact on its operations. A
thorough analysis of current economic conditions and the quality of the loan
portfolio are conducted on a quarterly basis. These analyses are utilized in
the computation of the adequacy of the allowance for loan losses. During the
period from 1993 until 1998, the Company had not recorded a provision for loan
losses. Beginning in January 1999, the Company began providing $10,000 for loan
losses on a monthly basis and expects to continue to do so throughout 1999.
This action was implemented primarily in response to the large increase in the
volume of the loan portfolio and does not indicate a deterioration of its
quality.
SERVICE CHARGES ON DEPOSIT ACCOUNTS
Service charges on deposit accounts increased $656,000 for the nine months
ended September 30, 1999, as compared with the nine months ended September 30,
1998, as the result of an increase in off-site ATM's and ATM fees at branch
locations during 1999.
OTHER INCOME
During the nine months ended September 30, 1998, the Company realized a gain of
$5,083,000 for book purposes as the result of the sale of one of its branch
locations, as mentioned previously in the Overview.
SALARIES AND EMPLOYEE BENEFITS
Salaries and employee benefits increased $830,000 for the nine months ended
September 30, 1999, as compared with the nine months ended September 30, 1998,
as the result of an increase in the number of full-time employees during this
time frame due to the opening of two new branches and significant cost of living
adjustment raises placed in January 1999.
OTHER EXPENSE
Other expense decreased $664,000 for the nine months ended September 30, 1999,
as compared with the nine months ended September 30, 1998, largely as the
result of expenses relating to the computer conversion during 1998.
LIQUIDITY
Liquidity represents the Company's ability to adequately provide funds to
satisfy demands from depositors, borrowers and other commitments by either
converting assets to cash or accessing new or existing sources of funds.
Management monitors these funds requirements in such a manner as to satisfy
these demands and provide the maximum earnings on its earning assets. Deposits,
payments of principal and interest on loans, proceeds from maturities of
investment securities and earnings on investment securities are the principal
sources of funds for the Company. At September 30, 1999, cash and due from
banks, investment securities and federal funds sold were 46% of total deposits,
as compared with 47% at September 30, 1998.
Page 16 of 19
<PAGE> 17
YEAR 2000
In response to the Year 2000 issue, the Company has established a committee,
headed by a senior officer of the Company, to review all computer-based systems
which includes all operations departments and applications as well as other
operational activities. The committee has developed and is in the process of
implementing a plan of action, which has been approved by the Board of
Directors, to ensure that its computer and information systems will function
properly in the Year 2000. This plan incorporates the awareness, assessment,
renovation, validation and implementation phases as directed by the Federal
Deposit Insurance Corporation (FDIC).
Renovation of systems for Year 2000 compliance was completed by December 31,
1998. Testing of all mission critical systems was completed by June 30, 1999.
The Company has budgeted for projected Year 2000 expenses, and the Company does
not expect the costs of achieving Year 2000 compliance to have a material
effect on the Company's financial statements. In the event of unforeseen Year
2000 problems, the Company has established a Year 2000 contingency plan, which
includes all information technology and non-information technology systems. The
Plan, which has been approved by the Board of Directors, also addresses
potential Year 2000 issues relating to core application software, trust
services software, ATM services, liquidity and other operational activities.
While the Company has taken steps to ensure that its material vendors and
customers are Year 2000 compliant, there is no guarantee that the systems of
these other companies will be Year 2000 compliant on time. As a result, the
Company could be adversely affected by the failure of other companies to become
Year 2000 compliant. The potential impact of such a failure cannot be
quantified at this time.
FORWARD LOOKING INFORMATION - Congress passed the Private Securities Litigation
Act of 1995 in an effort to encourage corporations to provide information about
a company's anticipated future financial performance. This act provides a safe
harbor for such disclosure which protects the companies from unwarranted
litigation if actual results are different from management expectations. This
report contains forward-looking statements and reflects industry conditions,
company performance and financial results. These forward-looking statements are
subject to a number of factors and uncertainties which could cause the
company's actual results and experience to differ from the anticipated results
and expectations expressed in such forward-looking statements.
Page 17 of 19
<PAGE> 18
PART II
OTHER INFORMATION
Item 5 - Other Information
None
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
27 Financial Data Schedule
(b) Reports on Form 8-K
None.
Page 18 of 19
<PAGE> 19
SIGNATURES
Pursuant to the requirement of Section 13 of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
PEOPLES FINANCIAL CORPORATION
(Registrant)
Date: October 28, 1999
--------------------------------------
By: /s/ CHEVIS C. SWETMAN
--------------------------------------
Chevis C. Swetman
Chairman, President and Chief Executive Officer
Date: October 28, 1999
--------------------------------------
By: /s/ LAURI A. WOOD
--------------------------------------
Lauri A. Wood
Chief Financial Officer and Controller
(principal financial and accounting officer)
Page 19 of 19
<PAGE> 20
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- -----------
<S> <C>
27 Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 35,394,245
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 1,900,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 27,475,855
<INVESTMENTS-CARRYING> 122,612,546
<INVESTMENTS-MARKET> 121,682,000
<LOANS> 314,941,484
<ALLOWANCE> 4,130,145
<TOTAL-ASSETS> 522,382,078
<DEPOSITS> 405,368,674
<SHORT-TERM> 0
<LIABILITIES-OTHER> 4,150,411
<LONG-TERM> 235,443
2,952,672
0
<COMMON> 0
<OTHER-SE> 73,181,232
<TOTAL-LIABILITIES-AND-EQUITY> 522,382,078
<INTEREST-LOAN> 19,304,197
<INTEREST-INVEST> 6,498,657
<INTEREST-OTHER> 439,188
<INTEREST-TOTAL> 26,242,042
<INTEREST-DEPOSIT> 9,682,632
<INTEREST-EXPENSE> 10,794,779
<INTEREST-INCOME-NET> 15,447,263
<LOAN-LOSSES> 90,000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 3,597,833
<INCOME-PRETAX> 6,574,321
<INCOME-PRE-EXTRAORDINARY> 6,574,321
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,361,111
<EPS-BASIC> 1
<EPS-DILUTED> 1
<YIELD-ACTUAL> 4.43
<LOANS-NON> 2,000
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 4,382,157
<CHARGE-OFFS> 403,793
<RECOVERIES> 61,781
<ALLOWANCE-CLOSE> 4,130,145
<ALLOWANCE-DOMESTIC> 4,130,145
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 50,000
</TABLE>
