<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, 2000
---------------------------
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)
<TABLE>
<S> <C>
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)
</TABLE>
(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 27, 2000, there were 15,000,000 shares of $1 par value common stock
authorized, and 5,823,982 shares issued and outstanding.
<PAGE> 2
PART I
FINANCIAL INFORMATION
PEOPLES FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
September 30, December 31, and September 30, 2000 1999 1999
-------------------------------------------- ------------ ------------ ------------
<S> <C> <C> <C>
ASSETS
Cash and due from banks $ 33,062,113 $ 35,540,978 $ 35,394,245
Held to maturity securities, market value of
$100,965,000 - September 30, 2000;
$113,709,000 - December 31, 1999;
$121,682,000 - September 30, 1999 101,976,213 115,272,790 122,612,546
Available for sale securities, at market value 43,944,913 33,075,555 27,475,855
Federal Home Loan Bank Stock, at cost 1,647,300 1,647,300
Federal funds sold 1,900,000
Loans 368,010,640 332,516,552 314,941,484
Less: Unearned income 11,349 6,985 8,525
Allowance for loan losses 7,025,868 4,338,149 4,130,145
------------ ------------ ------------
Loans, net 360,973,423 328,171,418 310,802,814
Bank premises and equipment, net of accumulated
depreciation of $11,017,000 - September 30,
2000; $10,090,000 - December 31, 1999; and
$9,624,000 - September 30, 1999 18,439,156 16,960,986 17,000,090
Other real estate 167,530 94,502 138,454
Accrued interest receivable 4,614,368 3,785,623 3,621,326
Other assets 6,480,163 3,423,266 3,436,748
------------ ------------ ------------
TOTAL ASSETS $571,305,179 $537,972,418 $522,382,078
============ ============ ============
</TABLE>
<PAGE> 3
PEOPLES FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Continued)
(Unaudited)
<TABLE>
<CAPTION>
September 30, December 31, and September 30, 2000 1999 1999
-------------------------------------------- ------------- ------------- -------------
<S> <C> <C> <C>
LIABILITIES & SHAREHOLDERS' EQUITY
LIABILITIES:
Deposits:
Demand, non-interest bearing $ 75,826,785 $ 77,980,244 $ 99,246,828
Savings and demand, interest bearing 152,428,470 160,605,623 168,540,539
Time, $100,000 or more 118,660,031 91,575,980 69,657,004
Other time deposits 71,849,359 64,519,310 67,924,303
------------- ------------- -------------
Total deposits 418,764,645 394,681,157 405,368,674
Accrued interest payable 876,751 768,943 678,609
Federal funds purchased and securities sold
under agreements to repurchase 64,109,843 60,833,677 35,815,037
Borrowings from Federal Home Loan Bank 5,117,100
Notes payable 308,930 274,129 235,443
Other liabilities 3,692,554 3,647,626 4,150,411
------------- ------------- -------------
TOTAL LIABILITIES 492,869,823 460,205,532 446,248,174
SHAREHOLDERS' EQUITY:
Common Stock, $1 par value, 15,000,000 shares
authorized, 5,833,982 shares issued and
outstanding at September 30, 2000, 5,905,344
shares issued and outstanding at December 31,
1999 and September 30, 1999 5,833,982 5,905,344 5,905,344
Surplus 65,780,254 65,759,086 60,759,086
Undivided profits 7,264,807 6,837,628 9,948,720
Unearned compensation (579,840) (624,842) (612,886)
Accumulated other comprehensive income 136,153 (110,330) 133,640
------------- ------------- -------------
TOTAL SHAREHOLDERS' EQUITY 78,435,356 77,766,886 76,133,904
------------- ------------- -------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 571,305,179 $ 537,972,418 $ 522,382,078
============= ============= =============
</TABLE>
See Selected Notes to Consolidated Financial Statements.
<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,
------------------------------------ ---------------------------------------
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
INTEREST INCOME:
Interest and fees on loans $ 8,658,054 $ 6,838,282 $24,487,327 $19,304,197
Interest and dividends on securities:
U. S. Treasury 673,368 1,144,929 2,382,342 3,601,132
U. S. Government agencies and
corporations 1,306,913 1,000,406 3,750,681 2,462,643
States and political subdivisions 133,643 105,496 402,875 346,194
Other investments 62,320 220 158,351 88,688
Interest on federal funds sold 70,225 15,278 106,416 439,188
----------- ----------- ----------- -----------
TOTAL INTEREST INCOME 10,904,523 9,104,611 31,287,992 26,242,042
----------- ----------- ----------- -----------
INTEREST EXPENSE:
Time deposits of $100,000 or more 1,969,185 886,486 4,216,428 2,749,960
Other deposits 2,393,239 2,331,073 6,790,690 6,932,672
Borrowing from Federal Home Loan
Bank 247,445 673,959
Mortgage indebtedness 2,452 2,630 7,371 8,019
Federal funds purchased and securities
sold under agreements to repurchase 787,688 455,897 2,208,066 1,104,128
----------- ----------- ----------- -----------
TOTAL INTEREST EXPENSE 5,400,009 3,676,086 13,896,514 10,794,779
----------- ----------- ----------- -----------
NET INTEREST INCOME 5,504,514 5,428,525 17,391,478 15,447,263
Provision for losses on loans 2,735,000 30,000 2,840,000 90,000
----------- ----------- ----------- -----------
NET INTEREST INCOME AFTER PROVISION FOR
LOSSES ON LOANS 2,769,514 5,398,525 14,551,478 15,357,263
----------- ----------- ----------- -----------
OTHER OPERATING INCOME:
Trust department income and fees 206,921 201,966 689,000 677,929
Service charges on deposit accounts 1,339,990 1,182,688 3,858,776 3,568,089
Other service charges, commissions and
fees 75,182 79,439 222,804 198,416
Other income 339,375 85,615 608,332 270,169
----------- ----------- ----------- -----------
TOTAL OTHER OPERATING INCOME $ 1,961,468 $ 1,549,708 $ 5,378,912 $ 4,714,603
----------- ----------- ----------- -----------
</TABLE>
<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,
------------------------------------ ---------------------------------------
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
OTHER OPERATING EXPENSE:
Salaries and employee benefits $ 2,629,269 $ 2,539,742 $ 7,913,925 $ 7,387,584
Net occupancy 329,009 316,781 832,606 732,593
Equipment rentals, depreciation and
maintenance 769,114 599,988 2,069,090 1,779,535
Other expense 1,314,660 1,299,220 3,962,812 3,597,833
----------- ----------- ----------- -----------
TOTAL OTHER OPERATING EXPENSE 5,042,052 4,755,731 14,778,433 13,497,545
----------- ----------- ----------- -----------
INCOME (LOSS) BEFORE INCOME TAXES (311,070) 2,192,502 5,151,957 6,574,321
Income taxes (benefit) (82,000) 703,724 1,685,500 2,213,210
----------- ----------- ----------- -----------
NET INCOME (LOSS) $ (229,070) $ 1,488,778 $ 3,466,457 $ 4,361,111
=========== =========== =========== ===========
</TABLE>
See Selected Notes to Consolidated Financial Statements.
<PAGE> 6
PEOPLES FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(Unaudited)
<TABLE>
<CAPTION>
Accumulated
Other
Common Undivided Unearned Comprehensive
# of Shares Stock Surplus Profits Compensation Income
------------ ------------ ------------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Balance,
January 1,
1999, as
previously
reported 2,952,672 $ 2,952,672 $ 63,711,758 $ 6,739,151 $ (160,900) $ 302,712
Two-for-one
stock split in
2000 2,952,672 2,952,672 (2,952,672)
------------ ------------ ------------ ------------ ------------ ------------
Balance,
January 1,
1999, as
restated 5,905,344 5,905,344 60,759,086 6,739,151 (160,900) 302,712
Comprehensive
Income:
Net income 4,361,111
Net
unrealized
loss on
available for
sale
securities, net
of tax (169,072)
Total
comprehensive
income
Purchase of
shares by
ESOP (642,886)
Allocation of
ESOP shares 190,900
Cash
dividends,
($.195 per
share) (1,151,542)
------------ ------------ ------------ ------------ ------------ ------------
Balance,
September 30,
1999 5,905,344 $ 5,905,344 $ 60,759,086 $ 9,948,720 $ (612,886) $ 133,640
============ ============ ============ ============ ============ ============
<CAPTION>
Comprehensive
Income Total
------------- -----------
<S> <C> <C>
Balance,
January 1,
1999, as previously
reported $ 73,545,393
Two-for-one
stock split in
2000
------------
Balance,
January 1,
1999, as
restated 73,545,393
Comprehensive
Income:
Net income $ 4,361,111 4,361,111
Net
unrealized
loss on
available for
sale
securities, net
of tax (169,072) (169,072)
-------------
Total
comprehensive
income $ 4,192,039
=============
Purchase of
shares by
ESOP (642,886)
Allocation of
ESOP shares 190,900
Cash
dividends,
($.195 per
share) (1,151,542)
------------
Balance,
September 30,
1999 $ 76,133,904
============
</TABLE>
<PAGE> 7
PEOPLES FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Continued)
(Unaudited)
<TABLE>
<CAPTION>
Accumulated
Other
Common Undivided Unearned Comprehensive Comprehensive
# of Shares Stock Surplus Profits Compensation Income Income
------------ ------------ ------------- ------------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance,
January 1,
2000, as
previously
reported 2,952,672 $ 2,952,672 $ 68,711,758 $ 6,837,628 $ (624,842) $ (110,330)
Two-for-one
stock split in
2000 2,952,672 2,952,672 (2,952,672)
------------ ------------ ------------ ------------ ------------ ------------
Balance,
January 1,
2000, as
restated 5,905,344 5,905,344 65,759,086 6,837,628 (624,842) (110,330)
Comprehensive
Income:
Net income 3,466,457 $ 3,466,457
Net
unrealized
gain on
available for
sale
securities, net
of tax 246,483 246,483
------------
Total
comprehensive
income $ 3,712,940
============
Purchase of
common
shares (83,068)
Allocation of
ESOP shares 128,070
Retirement
of stock (71,362) (71,362) 21,168 (1,803,850)
Cash
dividends,
($.21 per
share) (1,235,428)
------------ ------------ ------------ ------------ ------------ ------------
Balance,
September 30,
2000 5,833,982 $ 5,833,982 $ 65,780,254 $ 7,264,807 $ (579,840) $ 136,153
============ ============ ============ ============ ============ ============
<CAPTION>
Total
------------
<S> <C>
Balance,
January 1,
2000, as
previously
reported $ 77,766,886
Two-for-one
stock split in
2000
------------
Balance,
January 1,
2000, as
restated 77,766,886
Comprehensive
Income:
Net income 3,466,457
Net
unrealized
gain on
available for
sale
securities, net
of tax 246,483
Total
comprehensive
income
Purchase of
common
shares (83,068)
Allocation of
ESOP shares 128,070
Retirement
of stock (1,854,044)
Cash
dividends,
($.21 per
share) (1,235,428)
------------
Balance,
September 30,
2000 $ 78,435,356
============
</TABLE>
See Selected Notes to Consolidated Financial Statements.
<PAGE> 8
PEOPLES FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
For The Nine Months Ended September 30, 2000 1999
--------------------------------------- ------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 3,466,457 $ 4,361,111
Adjustments to reconcile net income to net cash provided
by operating activities:
Gain on sales of other real estate (449,529)
Gain on sale of bank premises (317,690)
Depreciation and amortization 1,359,000 1,170,000
Provision for losses on loans 2,840,000 90,000
Provision for losses on other real estate 1,677 16,355
Changes in assets and liabilities:
Accrued interest receivable (828,745) (493,047)
Other assets (413,739) 10,925
Accrued interest payable 107,808 (245,563)
Other liabilities (83,502) 400,575
------------- -------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 6,131,266 4,860,827
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities and calls of held to maturity
securities 48,600,000 106,390,000
Investment in held to maturity securities (35,303,423) (95,916,051)
Proceeds from maturities, sales and calls of available
for sale securities 172,294 1,222,174
Investment in available for sale securities (10,666,739) (14,488,796)
Loans made (35,646,144) (24,172,013)
Proceeds from sale of bank premises 469,065
Acquisition of premises and equipment (2,969,111) (2,246,640)
Proceeds from sales of other real estate 569,000
Federal funds sold (1,900,000)
Other assets (2,643,158) 346,540
------------- -------------
NET CASH USED IN INVESTING ACTIVITIES $ (37,987,216) $ (30,195,786)
------------- -------------
</TABLE>
<PAGE> 9
PEOPLES FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(Unaudited)
<TABLE>
<CAPTION>
For The Nine Months Ended September 30, 2000 1999
--------------------------------------- ------------- -------------
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Demand and savings deposits, net increase (decrease) $(10,330,612) $ 24,407,839
Time deposits, net increase (decrease) 34,414,100 (641,401)
Principal payments on notes (10,197) (9,549)
Cash dividends (1,235,428) (1,151,542)
Retirement of stock (1,854,044)
Federal funds purchased and securities sold under
agreements to repurchase 3,276,166 7,764,257
Borrowings from Federal Home Loan Bank 5,117,100
------------ ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 29,377,085 30,369,604
------------ ------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (2,478,865) 5,034,645
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 35,540,978 30,359,600
------------ ------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 33,062,113 $ 35,394,245
============ ============
</TABLE>
See Selected Notes to Consolidated Financial Statements.
<PAGE> 10
PEOPLES FINANCIAL CORPORATION AND SUBSIDIARIES
SELECTED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Nine Months Ended September 30, 2000 and 1999
1. The accompanying unaudited consolidated financial statements have been
prepared with the accounting policies in effect as of December 31, 1999 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, 2000, 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 5,874,958 and 5,905,344 for the nine months ended September 30,
2000 and 1999, respectively.
4. At September 30, 2000 and 1999, the total recorded investment in impaired
loans amounted to $8,720,000 and $2,000. The amount of that recorded investment
in impaired loans for which there is a related allowance for loan losses was
$2,500,000 at September 30, 2000. The amount of that recorded investment in
impaired loans for which there was no related allowance for loan losses was
$6,220,000 and $2,000 at September 30, 2000 and 1999, respectively. Interest not
accrued on these loans did not have a significant effect on earnings for the
nine months September 30, 2000 and 1999.
5. Transactions in the allowance for loan losses were as follows:
<TABLE>
<S> <C>
Balance, January 1, 2000 $ 4,338,149
Provision for loan losses 2,840,000
Recoveries 227,928
Loans charged off (380,209)
-----------
Balance, September 30, 2000 $ 7,025,868
===========
</TABLE>
6. The Company has defined cash and cash equivalents to include cash and due
from banks. The Company paid $13,788,706 and $11,040,342 for the nine months
ended September 30, 2000 and 1999, respectively, for interest on deposits and
borrowings. Income tax payments totaled $2,590,000 and $2,315,000 for the nine
months ended September 30, 2000 and 1999, respectively. Loans transferred to
other real estate amounted to $94,000 for the nine months ended September 30,
2000. After receiving regulatory approval, the Company transferred property with
a book value of $19,000 from ORE to banking premises during the nine months
ended September 30, 2000.
7. The income tax effect on the accumulated other comprehensive income was
$127,000 and ($87,000) at September 30, 2000 and 1999, respectively.
<PAGE> 11
Independent Accountants' Review Report
Board of Directors
Peoples Financial Corporation
Biloxi, Mississippi
We have reviewed the accompanying consolidated balance sheets - Securities and
Exchange Commission Form 10-Q of Peoples Financial Corporation as of September
30, 2000, September 30, 1999 and December 31, 1999, and the related consolidated
statements of income, retained earnings, and cash flows - Securities and
Exchange Commission Form 10-Q, for the nine months ended September 30, 2000 and
September 30, 1999, in accordance with Statements on Standards for Accounting
and Review Services issued by the American Institute of Certified Public
Accountants. All information included in these financial statements is the
representation of management of Peoples Financial Corporation.
A review consists principally of inquires of Company personnel and analytical
procedures applied to financial data. It is substantially less in scope than an
audit in accordance with generally accepted auditing standards, the objective of
which is the expression of an opinion regarding the financial statements taken
as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying financial statements in order for them to be in
conformity with Securities and Exchange Commission instructions for Form 10-Q
and Rule 10-01 of Regulations S-X.
/s/ Piltz, Williams, LaRosa & Co.
PILTZ, WILLIAMS, LAROSA & CO.
November 10, 2000
Biloxi, Mississippi
<PAGE> 12
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, 2000 and
1999. 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.
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.
OVERVIEW
Net income for the nine months ended September 30, 2000 was $3,466,000 as
compared with $4,361,000 for the nine months ended September 30, 1999. During
2000, the Company recognized a gain, net of taxes, of $208,000 from the sale of
bank premises, which is an unusual, non-recurring transaction. Loan demand has
continued to be strong throughout 2000, with the volume of the Company's loan
portfolio reaching record levels during the second and third quarters. The
Company recorded a provision for loan losses of $2.7 million during the third
quarter of 2000. This represents a significant charge to income based on past
provision levels. This significant increase is due to the deterioration of
several specific loans. Refer to the Provision for Loan Losses on page 17, for
further discussion of the events that caused Management to record this
provision.
The following schedule compares financial highlights for the nine months ended
September 30, 2000 and 1999:
<TABLE>
<CAPTION>
For the nine months ended September 30, 2000 1999
--------------------------------------- ---- ----
<S> <C> <C>
Net income per share $ 0.59 $ 0.74
Book value per share $13.44 $12.89
Return on average total assets 0.82% 1.14%
Return on average shareholders' equity 5.92% 7.77%
Allowance for loan losses as a % of 1.91% 1.31%
loans, net of unearned discount
</TABLE>
<PAGE> 13
FINANCIAL CONDITION
HELD TO MATURITY SECURITIES
Held to maturity securities decreased $20,636,000 at September 30, 2000, as
compared with September 30, 1999, as a result of the management of the Company's
liquidity position. Funds available from the maturity of these securities were
generally invested in available for sale securities. Gross unrealized gains for
held to maturity securities were $196,000 and $428,000 and gross unrealized
losses for held to maturity securities were $1,207,000 and $1,359,000 at
September 30, 2000 and 1999, respectively. The following schedule reflects the
mix of the held to maturity investment portfolio at September 30, 2000 and 1999:
<TABLE>
<CAPTION>
September 30, 2000 1999
------------- --------------------------- ---------------------------
Amount % Amount %
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
U. S. Treasury securities $ 33,694,770 33.00% $ 63,625,282 51.90%
U. S. Government agencies 62,127,942 60.90% 52,330,396 42.70%
States and political
subdivisions 6,153,501 6.10% 6,656,868 5.40%
------------ ------------ ------------ ------------
Totals $101,976,213 100.00% $122,612,546 100.00%
============ ============ ============ ============
</TABLE>
AVAILABLE FOR SALE SECURITIES
Available for sale securities increased $16,469,000 at September 30, 2000, as
compared with September 30, 1999, as the result of the management of the
Company's liquidity position, as discussed above. Gross unrealized gains were
$1,030,000 and $919,000 and gross unrealized losses were $825,000 and $722,000
at September 30, 2000 and 1999, respectively. The following schedule reflects
the mix of available for sale securities at September 30, 2000 and 1999:
<TABLE>
<CAPTION>
September 30, 2000 1999
------------- --------------------------- ---------------------------
Amount % Amount %
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
U. S. Treasury securities $ 6,860,020 15.60% $ 5,858,130 21.30%
U. S. Government agencies 28,012,446 63.70% 16,198,234 58.90%
States and political subdivisions 4,203,585 9.60% 2,163,328 7.90%
Other securities 4,868,862 11.10% 3,256,163 11.90%
----------- ----------- ----------- -----------
Totals $43,944,913 100.00% $27,475,855 100.00%
=========== =========== =========== ===========
</TABLE>
<PAGE> 14
LOANS
Loans increased $53,069,000 at September 30, 2000, as compared with September
30, 1999, 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 2000.
ACCRUED INTEREST RECEIVABLE
Accrued interest receivable increased $993,000 at September 30, 2000, as
compared with September 30, 1999, as a result of the increase in loan volume.
OTHER ASSETS
Other assets increased $3,043,000 at September 30, 2000, as compared with
September 30, 1999, primarily as a result of the investment in whole life
insurance owned by the bank subsidiary.
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. During the third quarter of 2000, the Company acquired $30,000,000 in
brokered certificates of deposit in the management of the bank subsidiary's
liquidity position.
FEDERAL FUNDS PURCHASED AND SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE
Federal funds purchased and securities sold under agreements to repurchase
increased $28,295,000 at September 30, 2000, as compared with September 30,
1999. This fluctuation is due to the liquidity needs of the bank subsidiary and
periodic reallocation by customers of funds in non-deposit accounts.
BORROWINGS FROM FEDERAL HOME LOAN BANK
The Company acquired funds from the Federal Home Loan Bank during 2000 in the
management of its liquidity position.
SHAREHOLDERS' EQUITY AND CAPITAL ADEQUACY
On March 22, 2000, 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, which was
effective April 17, 2000, shareholders holding a total of 2,952,672 shares of
the Company stock received an additional 2,952,672 shares of the Company. 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 this split.
On May 24, 2000, the Company's Board of Directors approved the repurchase of up
to 2.50% of the outstanding shares of the Company's common stock. As of
September 30, 2000, 71,362 shares had been repurchased and retired.
<PAGE> 15
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 15.25% at September 30,
2000, as compared with 15.75% at September 30, 1999. These ratios are well above
the regulatory minimum of 6.00%. Management continues to emphasize the
importance of maintaining the appropriate capital levels of the Company.
RESULTS OF OPERATIONS
NET INTEREST INCOME
Net interest income, the amount by which interest income on loans, investments
and other interest earning assets exceeds interest expense on deposits and other
borrowed funds, is the single largest component of the Company's income.
Management's objective is to provide the largest possible amount of income while
balancing interest rate, credit, liquidity and capital risk.
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) 2000 1999
---------------------------------- ------- -------
<S> <C> <C>
Total interest income (1) $31,494 $26,420
Total interest expense 13,897 10,795
------- -------
Net interest earnings $17,597 $15,625
======= =======
Net yield on interest earning assets 4.98% 4.43%
======= =======
</TABLE>
(1) All interest earned is reported on a taxable equivalent basis using a tax
rate of 34% in 2000 and 1999.
The schedule on page 16 provides an analysis of the change in total interest
income and total interest expense for the nine months ended September 30, 2000
and 1999.
<PAGE> 16
Analysis of Changes in Interest Income and Interest Expense
(In Thousands)
<TABLE>
<CAPTION>
Attributable To:
------------------------------------
For the Nine For the Nine
Months Ended Months Ended
September 30, September 30, Increase Rate/
2000 1999 (Decrease) Volume Rate Volume
-------------- -------------- -------------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
INTEREST
INCOME: (1)
Loans (2) $24,487 $19,304 $ 5,183 $ 3,655 $ 1,285 $ 243
Federal funds sold 106 439 (333) (357) 132 (108)
Held to maturity:
Taxable securities 4,654 5,392 (738) (1,126) 491 (103)
Non-taxable securities 392 405 (13) (34) 23 (2)
Available for sale:
Taxable securities 1,479 672 807 671 68 68
Non-taxable 218 119 99 79 12 8
securities
Other securities 158 89 69 219 (43) (107)
------- ------- ------- ------- ------- -------
Total $31,494 $26,420 $ 5,074 $ 3,107 $ 1,968 $ (1)
======= ======= ======= ======= ======= =======
INTEREST EXPENSE:
Savings and negotiable $ 3,962 $ 4,144 $ (182) $ (224) $ 44 $ (2)
interest bearing
deposits
Time deposits 7,046 5,539 1,507 504 919 84
Borrowings from FHLB 674 674 674
Federal funds
purchased and
securities sold under
agreements to repurchase 2,208 1,104 1,104 851 143 110
Mortgage
indebtedness 7 8 (1) (1) 1 (1)
------- ------- ------- ------- ------- -------
Total $13,897 $10,795 $ 3,102 $ 1,804 $ 1,107 $ 191
======= ======= ======= ======= ======= =======
</TABLE>
(1) All interest earned is reported on a taxable equivalent basis using a tax
rate of 34% in 2000 and 1999.
(2) Loan fees are included in these figures. Includes nonaccrual loans.
<PAGE> 17
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 using the latest available
information. 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 due to its favorable credit
loss experience. Since January of 1998, the Company began providing for loan
losses on a monthly basis. These monthly provisions were recorded in response to
the large increase in the volume of the loan portfolio during the last several
years.
The Company has provided $2.7 million for its loan loss provision for the third
quarter, which represents a significant increase from the prior quarters of
2000. This increase is entirely related to specific events which have negatively
impacted one commercial customer, who is contemplating bankruptcy, and several
personal customers, whose loans are secured by the stock of one unrelated
corporation. These events, which the Company believes may result in significant
potential losses, came to Management's attention subsequent to September 30,
2000. Since these potential losses existed at that date and are reasonably
estimable, the Company provided for these losses for the quarter ended September
30, 2000.
The reserve for possible loan losses as a percentage of gross loans was 1.91% at
September 30, 2000, compared to 1.30% at the end of 1999. Consistent with its
policy, at year end 1999, the Company had no commercial loans 90 days or more
past due that were not on nonaccrual status, and the Company expects to continue
to adhere to this policy. Management will continue to evaluate the
collectability of these loans and, if necessary, additional reserves will be
recorded during the fourth quarter of 2000 to cover estimated losses on these
specific loans.
OTHER INCOME
During the nine months ended September 30, 2000, the Company realized a gain of
$316,000 for book purposes as the result of the sale of one of bank premises, as
mentioned previously in the Overview.
SALARIES AND EMPLOYEE BENEFITS
Salaries and employee benefits increased $526,000 for the nine months ended
September 30, 2000, as compared with the nine months ended September 30, 1999,
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.
EQUIPMENT RENTALS, DEPRECIATION AND MAINTENANCE
Equipment rentals, depreciation and maintenance increased $290,000 for the nine
months ended September 30, 2000, as compared with the nine months ended
September 30, 1999, as a result of increased depreciation expense in the current
year resulting from the placement of new branch locations and equipment into
service during 1999 and 2000.
OTHER EXPENSE
Other expense increased $365,000 for the nine months ended September 30, 2000,
as compared with the nine months ended September 30, 1999, primarily due to the
gain from the sale of other real estate of $443,000 included in other expense in
1999.
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, 2000, cash and due from
banks, investment securities and federal funds sold were 43% of total deposits,
as compared with 46% at September 30, 1999.
<PAGE> 18
PART II
OTHER INFORMATION
ITEM 5 - OTHER INFORMATION
None.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
Exhibit 23 Consent of Certified Public Accountants
Exhibit 27 Financial Data Schedule
(b) REPORTS ON FORM 8-K
None.
<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: November 14, 2000
-------------------------------------
By: /s/ CHEVIS C. SWETMAN
-------------------------------------
Chevis C. Swetman
Chairman, President and Chief Executive Officer
Date: November 14, 2000
-------------------------------------
By: /s/ LAURI A. WOOD
-------------------------------------
Lauri A. Wood
Chief Financial Officer and Controller
(principal financial and accounting officer)
<PAGE> 20
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
-------- -----------
<S> <C>
23 Consent of Certified Public Accountants
27 Financial Data Schedule
</TABLE>
