<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, 1999
-----------------
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
incorporation or organization) Identification number)
Lameuse and Howard Avenues, Biloxi, Mississippi 39533
-----------------------------------------------------
(Address of principal executive offices) (Zip code)
228-435-5511
----------------------------------------------------
(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:
Common, $1.00 Par Value
-----------------------
(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. X
---
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, 2000 was approximately $144,400,000. 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, 2000 the registrant had outstanding 2,952,672 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, 1999 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 5, 2000, 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. The Company is headquartered in Biloxi,
Mississippi. At December 31, 1999, the Company operated in the state of
Mississippi through its wholly-owned subsidiary, The Peoples Bank, Biloxi,
Mississippi ("the Bank"). The Company is now engaged, through this 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 was principally the leasing of automobiles
and equipment under direct financing and sales-type leases that expired in
various periods through 1993. The Bank acquired all remaining leases from PFC
during 1990. PFC is inactive at this time.
THE BANK SUBSIDIARY
The Company's wholly-owned bank subsidiary is The Peoples Bank, which was
originally chartered in 1896 in Biloxi, Mississippi. The Bank is a state
chartered bank whose deposits are insured under the Federal Deposit 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 currently offers a variety of loan and deposit services to individuals
and small to middle market businesses within its trade area. Deposit services
include interest bearing and non-interest bearing checking accounts, savings
accounts, certificates of deposit, and IRA accounts. The Bank also offers a
non-deposit funds management account, which is not insured by the FDIC. Loan
services include business, real estate, construction, personal and installment
loans, with an emphasis
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<PAGE> 4
on commercial lending. The Bank also offers a variety of other functions
including collection services, asset management and trust services, wire
services, safe deposit box facilities, night drop facilities, cash management
and automated teller machines. During 2000, the Bank will introduce Internet, or
home, banking.
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. While the
Company has pursued external growth strategies on a limited basis, its primary
focus has been on internal growth by the Bank through the establishment of new
branch locations and an emphasis on strong customer relationships.
The Main Office, operations center and asset management and trust services of
the Bank are located in downtown Biloxi, MS. At December 31, 1999, the Bank also
had thirteen (13) branches located throughout Harrison, Hancock, Jackson and
Stone Counties. During 1999, the Bank opened new branch locations in Saucier,
MS, and Wiggins, MS. The Bank has automated teller machines ("ATM") at its Main
Office, all branch locations and at numerous non-proprietary locations.
At December 31, 1999, the Bank employed 229 full-time employees and 27 part-time
employees.
COMPETITION
The Bank is in direct competition with numerous local and regional commercial
banks as well as other non-bank institutions. Interest rates paid and charged on
deposits and loans are the primary competitive factors within the Bank's trade
area. The Bank also competes for deposits and loans with insurance companies,
finance companies and automobile finance companies. Recent legislation may
further impact the competitors in this trade area. The Bank intends to continue
its strategy of being a local, community bank offering traditional bank services
and providing quality service in its local trade area.
ASSET MANAGEMENT AND 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.
Most of the Bank's business originates from within Harrison, Hancock, Stone 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.
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<PAGE> 5
REGULATION AND SUPERVISION
The Company is required to file certain reports with, and otherwise comply with
the rules and regulations of, the Securities and Exchange Commission under
federal securities laws.
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 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. Mississippi has enacted legislation which authorizes
interstate acquisitions of banking organizations by bank holding companies
outside of Mississippi, and also interstate branching transactions 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.
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.
3
<PAGE> 6
RECENT REGULATION AND SUPERVISION LEGISLATION
During 1999, the Gramm-Leach-Bliley Act (the "Act") was signed into law. The Act
allows bank holding companies to engage in a wider range of financial
activities. In order to engage in such activities, which, among others, include
underwriting and selling insurance, providing financial, investment or economic
advisory services, and underwriting, dealing in or making a market in, services,
a bank holding company must elect to become a financial holding company. The Act
also authorized the establishment of financial subsidiaries in order to engage
in such financial activities, with certain limitations.
The Act also contains a number of other provisions affecting the Company's
operations. One of the most important of these provisions relates to the issue
of privacy. Federal banking regulators have been authorized by the Act to adopt
rules designed to protect the financial privacy of consumers. These rules will
implement notice requirements and restrictions on a financial institution's
ability to disclose nonpublic personal information about consumers to
non-affiliated third parties.
As of the date of this Form 10-K, the Company has not taken any action to adopt
either the financial holding company or the financial subsidiary structures that
were authorized by the Act.
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 13 - 35 of the 1999 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,
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<PAGE> 7
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.
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 7 - 12 of
the 1999 Annual Report to Shareholders are incorporated herein by reference.
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<PAGE> 8
RETURN ON EQUITY AND ASSETS
The information under the captions "Five-Year Comparative Summary of Selected
Financial Information" on page 6 and "Management's Discussion and Analysis" on
pages 7 - 12 of the 1999 Annual Report are incorporated herein by reference.
DIVIDEND PAYOUT
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------------
1999 1998 1997
------ ------ ------
<S> <C> <C> <C>
Dividend payout ratio 18.40% 11.08% 13.89%
====== ====== ======
</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) 1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
ASSETS:
Cash and due from financial institutions $ 33,866 $ 30,547 $ 24,324
Available for sale securities:
Taxable securities 17,500 27,202 50,522
Non-taxable securities 2,334 790
Other securities 2,623 641 730
Held to maturity securities:
Taxable securities 127,750 111,257 98,110
Non-taxable securities 6,685 6,301 5,838
Net loans (1) 299,952 264,047 230,306
Federal funds sold 10,411 8,601 9,216
Other assets 23,978 21,370 16,802
---------- ---------- ----------
TOTAL ASSETS $ 525,099 $ 470,756 $ 435,848
========== ========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY:
Non-interest bearing deposits $ 82,910 $ 79,028 $ 67,835
Interest bearing deposits 323,796 304,617 299,625
---------- ---------- ----------
Total deposits 406,706 383,645 367,460
Federal funds purchased and securities sold under
agreements to repurchase 37,432 11,343 1,624
Other liabilities 5,339 5,035 3,931
---------- ---------- ----------
Total liabilities 449,477 400,023 373,015
Shareholders' equity 75,622 70,733 62,833
---------- ---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $ 525,099 $ 470,756 $ 435,848
========== ========== ==========
</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 (2) 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) 1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
INTEREST EARNING ASSETS:
Loans (1) $ 304,201 $ 268,393 $ 234,744
Federal funds sold 10,411 8,601 9,216
Available for sale securities:
Taxable securities 17,500 27,202 50,522
Non-taxable securities 2,334 790
Other securities 2,623 641 730
Held to maturity securities:
Taxable securities 127,750 111,257 98,110
Non-taxable securities 6,685 6,301 5,838
---------- ---------- ----------
TOTAL INTEREST EARNING ASSETS $ 471,504 $ 423,185 $ 399,160
========== ========== ==========
INTEREST BEARING LIABILITIES:
Savings and negotiable interest bearing deposits $ 169,461 $ 153,839 $ 161,635
Time deposits 154,335 150,778 137,990
Federal funds purchased and securities sold
under agreements to repurchase 37,432 11,343 1,624
Other borrowed funds 196 209 220
---------- ---------- ----------
TOTAL INTEREST BEARING LIABILITIES $ 361,424 $ 316,169 $ 301,469
========== ========== ==========
</TABLE>
(1) Net of unearned income. Includes nonaccrual loans.
(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.
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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) 1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
INTEREST EARNED ON:
Loans (2) $ 26,426 $ 24,412 $ 21,777
Federal funds sold 504 493 500
Available for sale securities:
Taxable securities 1,049 1,673 3,270
Non-taxable securities 152 68
Other securities 98 27 297
Held to maturity securities:
Taxable securities 6,908 6,426 5,976
Non-taxable securities 536 528 628
---------- ---------- ----------
TOTAL INTEREST EARNED (1) $ 35,673 $ 33,627 $ 32,448
========== ========== ==========
INTEREST PAID ON:
Savings and negotiable interest bearing
deposits $ 5,390 $ 5,457 $ 5,091
Time deposits 7,519 7,968 7,757
Federal funds purchased and securities
sold under agreements to repurchase 1,521 553 97
Other borrowed funds 11 12 12
---------- ---------- ----------
TOTAL INTEREST PAID $ 14,441 $ 13,990 $ 12,957
========== ========== ==========
</TABLE>
(1) All interest earned is reported on a taxable equivalent basis using a tax
rate of 34% in 1999, 1998 and 1997.
(2) Loan fees of $563, $501 and $395 for 1999, 1998 and 1997, respectively, are
included in these figures.
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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, (In thousands) 1999 1998 1997
------ ------ ------
<S> <C> <C> <C>
AVERAGE RATE EARNED ON:
Loans 8.69% 9.10% 9.28%
Federal funds sold 4.84 5.73 5.43
Available for sale securities:
Taxable securities 5.99 6.15 6.47
Non-taxable securities 6.51 8.61
Other securities (2) 3.74 4.21 40.70
Held to maturity securities:
Taxable securities 5.41 5.78 6.07
Non-taxable securities 8.02 8.38 10.76
------ ------ ------
TOTAL (weighted average rate) (1) 7.57% 7.95% 8.13%
====== ====== ======
AVERAGE RATE PAID ON:
Savings and negotiable interest bearing
deposits 3.18% 3.55% 3.15%
Time deposits 4.87 5.28 5.62
Federal funds purchased and securities
sold under agreements to repurchase 4.06 4.88 5.97
Other borrowed funds 5.61 5.74 5.43
------ ------ ------
TOTAL (weighted average rate) 4.10% 4.42% 4.30%
====== ====== ======
</TABLE>
(1) All interest earned is reported on a taxable equivalent basis using a tax
rate of 34% in 1999, 1998 and 1997.
(2) In 1997, a dividend of $270 was received on stock held as available for sale
at a market value of $640.
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SCHEDULE I-E
Net Interest Earnings and Net Yield on Interest Earning Assets
<TABLE>
<CAPTION>
Years Ended December 31,
(In thousands except percentages) 1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
Total interest income (1) $ 35,673 $ 33,627 $ 32,448
Total interest expense 14,441 13,990 12,957
---------- ---------- ----------
Net interest earnings $ 21,232 $ 19,637 $ 19,491
========== ========== ==========
Net yield on interest earning assets 4.50% 4.64% 4.88%
========== ========== ==========
</TABLE>
(1) All interest earned is reported on a taxable equivalent basis using a tax
rate of 34% in 1999, 1998 and 1997.
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<PAGE> 14
SCHEDULE I-F
Analysis of Changes In Interest Income and Interest Expense
(In thousands)
<TABLE>
<CAPTION>
Attributable to:
------------------------------------------
Increase Rate /
1999 1998 (Decrease) Volume Rate Volume
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
INTEREST INCOME:(1)
Loans (2) (3) $ 26,426 $ 24,412 $ 2,014 $ 3,257 $ (1,097) $ (146)
Federal funds sold 504 493 11 104 (76) (17)
Available for sale securities:
Taxable securities 1,049 1,673 (624) (597) (42) 15
Non-taxable securities 152 68 84 133 (17) (32)
Other securities 98 27 71 83 (3) (9)
Held to maturity securities:
Taxable securities 6,908 6,426 482 953 (410) (61)
Non-taxable securities 536 528 8 32 (23) (1)
---------- ---------- ---------- ---------- ---------- ----------
Total $ 35,673 $ 33,627 $ 2,046 $ 3,965 $ (1,668) $ (251)
========== ========== ========== ========== ========== ==========
INTEREST EXPENSE:
Savings and negotiable
interest bearing deposits $ 5,390 $ 5,457 $ (67) $ 551 $ (561) $ (57)
Time deposits 7,519 7,968 (449) 188 (622) (15)
Federal funds purchased and
securities sold under
agreements to repurchase 1,521 553 968 1,272 (92) (212)
Other borrowed funds 11 12 (1) (1) (1) 1
---------- ---------- ---------- ---------- ---------- ----------
Total $ 14,441 $ 13,990 $ 451 $ 2,010 $ (1,276) $ (283)
========== ========== ========== ========== ========== ==========
</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.
(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 /
1998 1997 (Decrease) Volume Rate Volume
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
INTEREST INCOME:(1)
Loans (2) (3) $ 24,412 $ 21,777 $ 2,635 $ 3,122 $ (426) $ (61)
Federal funds sold 493 500 (7) (33) 28 (2)
Available for sale securities:
Taxable securities 1,673 3,270 (1,597) (1,509) (163) 75
Other securities 68 68 68
Held to maturity securities: 27 297 (270) (36) (266) 32
Taxable securities 6,426 5,976 450 801 (309) (42)
Non-taxable securities 528 628 (100) 50 (139) (11)
---------- ---------- ---------- ---------- ---------- ----------
Total $ 33,627 $ 32,448 $ 1,179 $ 2,463 $ (1,275) $ (9)
========== ========== ========== ========== ========== ==========
INTEREST EXPENSE:
Savings and negotiable
interest bearing deposits $ 5,457 $ 5,091 $ 366 $ (243) $ 639 $ (30)
Time deposits 7,968 7,757 211 719 (465) (43)
Federal funds purchased and
securities sold under
agreements to repurchase 553 97 456 580 (18) (106)
Other borrowed funds 12 12
---------- ---------- ---------- ---------- ---------- ----------
Total $ 13,990 $ 12,957 $ 1,033 $ 1,056 $ 156 $ (179)
========== ========== ========== ========== ========== ==========
</TABLE>
(1) All interest earned is reported on a taxable equivalent basis using a tax
rate of 34% in 1998 and 1997.
(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): 1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
Available for sale securities:
U. S. Government, agency and corporate
obligations $ 24,743 $ 9,921 $ 46,442
States and political subdivisions 3,705 2,275 595
Other securities 4,628 641 641
---------- ---------- ----------
Total $ 33,076 $ 12,837 $ 47,678
========== ========== ==========
Held to maturity securities:
U. S. Government, agency and corporate
obligations $ 109,005 $ 128,175 $ 97,161
States and political subdivisions 6,268 6,549 5,674
---------- ---------- ----------
Total $ 115,273 $ 134,724 $ 102,835
========== ========== ==========
</TABLE>
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<PAGE> 17
SCHEDULE II-B
Maturity of Securities Portfolio at December 31, 1999
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 $ 1,990 5.58% $ 16,141 5.71% $ 5,719 6.40% $ 893 6.40%
States and
political
subdivisions 175 4.55% 2,876 4.69% 654 5.04%
Other 4,628 3.74%
---------- ---------- ---------- ---------- ---------- --------- --------- ---------
Totals $ 1,990 5.58% $ 16,316 5.71% $ 8,595 5.93% $ 6,175 4.48%
========== ========== ========== ========== ========== ========= ========= =========
Held to
maturity
securities:
U. S.
Government,
agency and
corporate
obligations $ 39,219 5.38% $ 66,786 5.82% $ 3,000 6.36% $
States and
political
subdivisions 176 5.68% 2,037 5.79% 2,060 5.33% 1,995 5.24%
---------- ---------- ---------- ---------- ---------- --------- --------- ---------
Totals $ 39,395 5.39% $ 68,823 5.82% $ 5,060 5.98% $ 1,995 5.24%
========== ========== ========== ========== ========== ========= ========= =========
</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): 1999 1998 1997 1996 1995
- ---------------------------- --------- --------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Real estate, construction $ 24,793 $ 24,836 $ 14,819 $ 14,704 $ 16,473
Real estate, mortgage 215,726 179,123 154,653 137,766 138,254
Loans to finance agricultural
production and other loans
to farmers 8,441 13,493 12,501 10,483 9,962
Commercial and industrial
loans 63,104 49,633 50,224 48,057 39,228
Loans to individuals for
household, family and other
consumer expenditures 16,476 15,717 13,125 11,179 11,903
Obligations of states and
political subdivisions 2,723 6,809 5,257 4,496 5,469
All other loans 1,254 1,904 1,219 1,824 2,780
--------- --------- -------- -------- --------
Totals $ 332,517 $ 291,515 $251,798 $228,509 $224,069
========= ========= ======== ======== ========
</TABLE>
(1) No foreign debt outstanding.
16
<PAGE> 19
SCHEDULE III-B
Maturities and Sensitivity to Changes in
Interest Rates of the Loan Portfolio as of December 31, 1999
<TABLE>
<CAPTION>
Maturity (In thousands)
-----------------------------------------------------------
Over one year
One year or through 5
less years Over 5 years Total
----------- -------------- ------------ --------------
<S> <C> <C> <C> <C>
Loans:
Real estate, construction $ 16,509 $ 6,830 $ 1,454 $ 24,793
Real estate, mortgage 39,930 166,183 9,613 215,726
Loans to finance
agricultural production and
other loans to farmers 8,072 369 8,441
Commercial and industrial
loans 37,895 24,976 233 63,104
Loans to individuals for
household, family and
other consumer
expenditures 6,499 9,977 16,476
Obligations of states and
political subdivisions 240 252 2,231 2,723
All other loans 708 546 1,254
-------- -------- ------- --------
Totals $109,853 $209,133 $13,531 $332,517
======== ======== ======= ========
Loans with pre-determined
interest rates $ 49,435 $136,121 $ 5,478 $191,034
Loans with floating
interest rates 60,418 73,012 8,053 141,483
-------- -------- ------- --------
Totals $109,853 $209,133 $13,531 $332,517
======== ======== ======= ========
</TABLE>
17
<PAGE> 20
SCHEDULE III-C
Non-Performing Loans
<TABLE>
<CAPTION>
December 31, (In thousands): 1999 1998 1997 1996 1995
- ---------------------------- -------- -------- -------- --------- ----------
<S> <C> <C> <C> <C> <C>
Loans accounted for on a
non-accrual basis (1) $ 100 $ 490 $1,167 $ 546 $ 610
Loans which are contractually
past due 90 or more days as to
interest or principal payment,
but are not included above 1,238 718 2,882 3,026 146
</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 not accrued on
these loans did not have a significant effect on earnings in the years
presented.
18
<PAGE> 21
SCHEDULE IV-A
Summary of Loan Loss Expenses
(In thousands except percentage data)
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995
--------- --------- -------- --------- ---------
<S> <C> <C> <C> <C> <C>
Average amount of loans
outstanding (1) $ 304,201 $ 268,393 $ 234,744 $ 224,231 $ 224,819
========= ========= ========= ========= =========
Balance of allowance for loan
losses at the beginning of period $ 4,382 $ 4,435 $ 4,523 $ 4,353 $ 4,901
Loans charged-off:
Commercial, financial and
agricultural 334 406 379 77 601
Consumer and other 74 60 56 62 101
--------- --------- --------- --------- ---------
Total loans charged-off 408 466 435 139 702
Recoveries of loans previously
charged-off:
Commercial, financial and
agricultural 190 361 294 403 63
Consumer and other 54 52 53 56 91
--------- --------- --------- --------- ---------
Total recoveries 244 413 347 459 154
--------- --------- --------- --------- ---------
Net loans (recovered) charged-off 164 53 88 (320) 548
Provision for (reduction of) loan
losses charged to operating
expense 120 (150)
--------- --------- --------- --------- ---------
Balance of allowance for
loan losses at end of period $ 4,338 $ 4,382 $ 4,435 $ 4,523 $ 4,353
========= ========= ========= ========= =========
Ratio of net charge-offs during
period to average loans
outstanding 0.05% 0.02% 0.04% (0.14)% 0.24%
========= ========= ========= ========= =========
</TABLE>
(1) Net of unearned income.
19
<PAGE> 22
SCHEDULE IV-B
Allocation of the Allowance for Loan Losses
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995
------------------- ------------------- -------------------- ------------------- --------------------
% of
% of % of Loans % of % of
Loans Loans to Loans Loans
Balance at December to Total to Total Total to Total to 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 $ 289 7 $ 292 9 $ 296 6 $ 294 6 $ 329 7
Real estate,
mortgage 2,647 65 2,674 61 2,706 61 2,755 60 2,765 62
Loans to finance
agricultural
production and
other loans to
farmers 245 3 247 5 250 5 210 5 199 4
Commercial and
industrial loans 859 18 868 17 878 20 961 21 785 18
Loans to individuals
for household,
family and other
consumer
expenditures 256 5 259 5 262 5 223 5 238 5
Obligations of states
and political
subdivisions -0- 1 -0- 2 -0- 2 -0- 2 -0- 3
All other loans 23 1 23 1 24 1 36 1 18 1
Unallocated 19 N/A 19 N/A 19 N/A 44 N/A 19 N/A
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Totals $4,338 100 $4,382 100 $4,435 100 $4,523 100 $4,353 100
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
</TABLE>
20
<PAGE> 23
SCHEDULE V
Summary of Average Deposits and Their Yields
<TABLE>
<CAPTION>
1999 1998 1997
--------------------- ----------------------- ---------------------
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 $ 82,910 N/A $ 79,028 N/A $ 67,835 N/A
Negotiable interest
bearing deposits
in domestic offices 140,891 3.21% 127,191 3.64% 126,108 3.43%
Savings deposits in
domestic offices 28,570 3.06% 26,648 3.09% 35,527 2.18%
Time deposits in
domestic offices 154,335 4.87% 150,778 5.28% 137,990 5.62%
-------- ---- -------- ---- -------- ----
Total deposits $406,706 3.17% $383,645 3.50% $367,460 3.50%
======== ==== ======== ==== ======== ====
</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, 1999, are as
follows:
<TABLE>
<S> <C>
Remaining maturity:
3 months or less $ 61,618
Over 3 through 6 months 18,047
Over 6 months through 12 months 10,910
Over 12 months 1,001
--------
Total $ 91,576
========
</TABLE>
21
<PAGE> 24
SCHEDULE VI
Short Term Borrowings
(In thousands except percentage data)
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Amount outstanding at December 31, $60,834 $28,151 $
Weighted average interest rate at
December 31, 4.34% 4.11% N/A
Maximum outstanding at any month-end
during year $60,834 $28,151 $9,325
Average amount outstanding during year $37,432 $11,343 $1,624
Weighted average interest rate 4.06% 4.88% 5.97%
</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, 1999 (In 0 - 3 4 - 12 1 - 5 Over 5
thousands) Months Months Years Years Total
- --------------------- ---------- --------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C>
ASSETS:
Loans(1) $ 162,546 $ 28,372 $ 136,071 $ 5,428 $ 332,417
Available for sale securities 1,990 16,316 14,770 33,076
Held to maturity securities 15,925 23,470 68,823 7,055 115,273
--------- --------- --------- --------- ---------
Total assets $ 178,471 $ 53,832 $ 221,210 $ 27,253 $ 480,766
========= ========= ========= ========= =========
FUNDING SOURCES:
Interest bearing deposits $ 239,163 $ 63,685 $ 13,834 $ 19 $ 316,701
Long-term funds 4 10 260 274
--------- --------- --------- --------- ---------
Total funding sources $ 239,167 $ 63,695 $ 14,094 $ 19 $ 316,975
========= ========= ========= ========= =========
REPRICING/MATURITY
GAP:
Period $ (60,696) $ (9,863) $ 207,116 $ 27,234
Cumulative (60,696) (70,559) 136,557 163,791
Period Gap/Total Assets (12.62)% (2.05)% 43.08% 5.66%
Cumulative Gap/Total
Assets (12.62)% (14.67)% 28.41% 34.07%
</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 14 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 38 of the Annual Report to Shareholders.
ITEM 3 - LEGAL PROCEEDINGS
The information included in Note J to the Consolidated Financial Statements
included in the 1999 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 5 of the 1999 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 6 of the 1999 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 7 - 12 of the 1999
Annual Report is incorporated herein by reference.
ITEM 7a - QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
The information under the caption "Quantitative and Qualitative Disclosures
about Market Risk" on pages 10 - 12 of the 1999 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 13 - 36 of
the 1999 Annual Report are incorporated herein by reference:
Consolidated Statements of Condition on pages 13 and 14
Consolidated Statements of Income on page 15
Consolidated Statements of Shareholders' Equity on page 16 - 17
Consolidated Statements of Cash Flows on page 18
Notes to Consolidated Financial Statements on pages 19 - 35
Independent Auditors' Report on page 36
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 5, 2000,
which was filed by the Company in definitive form with the Commission on March
3, 2000, 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 5, 2000, which was filed by
the Company in definitive form with the Commission on March 3, 2000, 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 5, 2000,
which was filed by the Company in definitive form with the Commission on March
3, 2000, is incorporated herein by reference.
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information in Sections V, VI, VII and IX contained in the Proxy Statement
in connection with the Annual Meeting of Shareholders to be held April 5, 2000,
which was filed by the Company in definitive form with the Commission on March
3, 2000, 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 0-30050 10/a 6/21/99 3.1
Incorporation
(3.2) By-Laws 0-30050 10/a 6/21/99 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
--------------------- ---------------- --------- -------------- -----------
<S> <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, 1999 * (c)
(21) Proxy Statement for Annual
Meeting of Shareholders to be
held April 5, 2000
(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) Reports on Form 8-K:
No Form 8-K was filed during the fourth quarter of the year ended December 31,
1999. A Form 8-K was filed on March 20, 2000.
(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 22, 2000
----------------------------------------
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 22, 2000 Date: March 22, 2000
---------------------------------- ------------------------------
Drew Allen Chevis C. Swetman
Director President, Chief Executive Officer and
Director
BY: /s/ William A. Barq BY: /s/ F. Walker Tucei
------------------------------------ --------------------------------
Date: March 22, 2000 Date: March 22, 2000
---------------------------------- ------------------------------
William A. Barq F. Walker Tucei
Director Director
BY: /s/ Andy Carpenter BY: /s/ Lauri A. Wood
---------------------------------- -------------------------------
Date: March 22, 2000 Date: March 22, 2000
----------------------------------- ------------------------------
Andy Carpenter Lauri A. Wood
Executive Vice President and Director Principal Financial and Accounting Officer
</TABLE>
28
<PAGE> 31
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
(13) Annual Report to Shareholders for year ended December 31,
1999*(c)
(23) Consent of Certified Public Accountants*
(27) Financial Data Schedule*
</TABLE>
- -------------
* Filed herewith.
<PAGE> 1
EXHIBIT 13
Market Information
Peoples Financial Corporation and Subsidiaries
The common stock of Peoples Financial Corporation is not listed or traded on an
exchange or over- the-counter. Trading in the stock is very limited. Most
transactions in Company stock occur between existing shareholders or members of
the family of existing shareholders. The prices listed in the table below are
based on sale prices as stated to the transfer agent. These do not represent all
sales.
<TABLE>
<CAPTION>
Dividend per
Year Quarter High Low share
- ---- ------- ---- ---- ------------
<S> <C> <C> <C> <C>
1999 1st $ 61 $ 58 $ .19
2nd 61 59
3rd 61 55 .20
4th 62 61
1998 1st 48 47 .16
2nd 48 47
3rd 47 47 .17
4th 61 47
</TABLE>
There were 664 holders of record of common stock of the Company at January 28,
2000, and 2,952,672 shares issued and outstanding. The principal source of funds
to the Company for payment of dividends is the earnings of the bank subsidiary.
The Commissioner of Banking and Consumer Finance of the State of Mississippi
must approve all dividends paid to the Company by its bank subsidiary. Although
Management cannot predict what dividends, if any, will be paid in the future,
the Company has paid regular semiannual cash dividends since its founding in
1985.
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
Five-Year Comparative Summary 6
Management's Discussion and Analysis 7
(Company Logo) Consolidated Financial Statements 13
Notes to Consolidated Financial Statements 19
Independent Auditors' Report 36
Board of Directors and Officers 37
Branch Locations and Officers 38
Shareholder Information 39
</TABLE>
<PAGE> 2
Five-Year Comparative Summary of Selected Financial Information (in thousands
except per share data) Peoples Financial Corporation and Subsidiaries
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET SUMMARY
Total assets $ 537,972 $ 488,171 $ 441,759 $ 448,110 $ 446,305
Available for sale securities 33,076 12,837 47,678 53,159 20,830
Held to maturity securities 115,273 134,724 102,836 127,870 165,142
Loans, net of unearned discount 332,510 291,513 251,796 228,492 224,046
Deposits 394,681 381,602 372,555 368,132 376,172
Long term notes payable 274 203 215 227 438
Shareholders' equity 77,767 73,545 65,772 60,354 54,582
SUMMARY OF OPERATIONS
Interest income $ 35,440 $ 33,425 $ 32,235 $ 33,248 $ 31,485
Interest expense 14,441 13,990 12,956 14,406 12,372
----------- ----------- ----------- ----------- -----------
Net interest income 20,999 19,435 19,279 18,842 19,113
Provision for loan losses 120 (150)
----------- ----------- ----------- ----------- -----------
Net interest income after provision 20,879 19,435 19,279 18,992 19,113
for loan losses
Non-interest income 6,767 11,220 6,241 5,564 5,240
Non-interest expense (18,438) (17,274) (16,065) (15,417) (14,535)
----------- ----------- ----------- ----------- -----------
Income before taxes 9,208 13,381 9,455 9,139 9,818
Applicable income taxes 2,958 4,591 3,088 2,993 3,147
----------- ----------- ----------- ----------- -----------
Net income $ 6,250 $ 8,790 $ 6,367 $ 6,146 $ 6,671
=========== =========== =========== =========== ===========
PER SHARE DATA
Basic and diluted earnings per share $ 2.12 $ 2.98 $ 2.16 $ 2.08 $ 2.26
Dividends per share 0.39 0.33 0.30 0.28 0.26
Book value 26.34 24.91 22.28 20.44 18.49
Weighted average number of shares 2,952,672 2,952,672 2,952,672 2,952,672 2,952,672
SELECTED RATIOS
Return on average assets 1.21% 1.87% 1.42% 1.36% 1.53%
Return on average equity 8.26% 12.62% 10.10% 10.69% 12.94%
Capital formation rate 5.74% 11.82% 8.98% 10.57% 12.68%
Primary capital to average 15.86% 16.60% 15.62% 14.36% 13.54%
assets
Risk-based capital ratios:
Tier 1 22.45% 24.65% 25.58% 24.95% 23.64%
Total 23.69% 25.90% 26.83% 26.20% 24.89%
</TABLE>
NOTE: ALL SHARE AND PER SHARE DATA HAVE BEEN GIVEN RETROACTIVE EFFECT FOR THE
TWO FOR ONE STOCK SPLIT EFFECTIVE OCTOBER 16, 1996, THE TWO FOR ONE STOCK SPLIT
EFFECTIVE SEPTEMBER 15, 1997 AND THE TWO FOR ONE STOCK SPLIT EFFECTIVE NOVEMBER
16, 1998.
<PAGE> 3
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Peoples Financial Corporation and Subsidiaries
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 years ended December 31, 1999, 1998 and
1997. These comments highlight the significant events for these years and should
be considered in combination with the Consolidated Financial Statements and
Notes to Consolidated Financial Statements included in this annual report.
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 was $6,250,000 for the year ended December 31, 1999, as compared to
$8,790,000 for the year ended December 31, 1998. The decrease in earnings was
primarily attributable to the gain realized for book purposes of $3,300,000, net
of taxes, from the sale of a branch location during 1998. The transaction was
structured for tax purposes to qualify the transaction as a like-kind exchange,
and thus minimize the current tax payment associated with the sale. The proceeds
of the transaction were invested in replacement properties, which the Company
plans to use for future branch locations. The exchange was completed on August
4, 1998.
FINANCIAL CONDITION
AVAILABLE FOR SALE SECURITIES
Available for sale securities increased $20,239,000 at December 31, 1999 as
compared with December 31, 1998 primarily as a result of the management of the
bank subsidiary's liquidity position as the Company meets the current and
continuing strong loan demand in its trade area. Specifically, approximately
$20,000,000 received in proceeds from maturities of held to maturity securities
was generally reinvested in available for sale securities.
Gross unrealized gains were $918,000, $522,000 and $492,000 and gross unrealized
losses were $1,090,000, $63,000 and $215,000 for available for sale securities
at December 31, 1999, 1998 and 1997, respectively. A realized gain of $668,000
was the result of the sale of shares of Hibernia Corporation and call of other
debt securities during 1997. There were no significant realized gains or losses
from calls or sales of available for sale securities during 1998 and 1999.
HELD TO MATURITY SECURITIES
Held to maturity securities decreased $19,451,000 at December 31, 1999, compared
with December 31, 1998. The decrease in these securities is directly
attributable to the management by the Company of its liquidity position, as
discussed above.
<PAGE> 4
Gross unrealized gains were $253,000, $1,392,000 and $1,067,000, while gross
unrealized losses were $1,817,000, $192,000 and $109,000, at December 31, 1999,
1998 and 1997, respectively. There were no significant realized gains or losses
from calls of these investments for the years ended December 31, 1999, 1998 and
1997.
The Company's held to maturity portfolio consists primarily of U. S. Treasury
and U. S. Government Agency securities, which is indicative of Management's
conservative investment policy of maximizing return on investments while
maintaining proper liquidity and risk factors.
FEDERAL HOME LOAN BANK STOCK
During 1999, the Company acquired common stock issued by the Federal Home Loan
Bank as a prerequisite for participating in their loan programs.
LOANS
The Company's loan portfolio increased $41,002,000 at December 31, 1999, as
compared with December 31, 1998, and $39,717,000 at December 31, 1998, as
compared with December 31, 1997. The portfolio includes commercial and consumer
loans primarily in its trade area of Harrison, Hancock, Stone and west Jackson
counties. The continued growth in the portfolio is primarily a product of the
increased real estate and commercial and industrial loan demand as a result of
improved economic conditions in the trade area. The increases in these
categories are illustrated in the schedule summarizing loans included in Note C
to the Consolidated Financial Statements. The Company anticipates that this
demand will remain steady into 2000 and, as previously mentioned, has managed
its liquidity position accordingly.
OTHER REAL ESTATE
The Other Real Estate (ORE) portfolio decreased $180,000 at December 31, 1999 as
compared with December 31, 1998 due to the sale of several properties during
1999. Gains realized on sales of ORE were $459,529, $335,768 and $1,999 for the
years ended December 31, 1999, 1998 and 1997, respectively.
DEPOSITS
Total deposits increased $13,079,000 at December 31, 1999, as compared with
December 31, 1998, and $9,047,000 at December 31, 1998, as compared with
December 31, 1997. Significant increases or decreases in total deposits and/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. 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 $32,783,000 at December 31, 1999, as compared with December 31, 1998.
This fluctuation is directly related to the introduction of a non-deposit
product during the prior year and the management of the Company's liquidity
position.
SHAREHOLDERS' EQUITY
During 1998 and 1997, there were significant events that impacted the components
of shareholders' equity. These events are detailed in Note G to the Consolidated
Financial Statements included in this report.
<PAGE> 5
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. There are numerous
indicators of capital adequacy including primary capital ratios and capital
formation rates. The Five-Year Comparative Summary of Selected Financial
Information presents these ratios for those periods. This summary is included in
the annual report to shareholders. The Company's total risk-based capital ratio
at December 31, 1999, 1998 and 1997 was 23.69%, 25.90% and 26.83% as compared
with the required standard of 8.00%. The Five-Year Comparative Summary of
Selected Financial Information presents these figures.
Bank regulations limit the amount of dividends that may be paid by the bank
subsidiary without prior approval of the Commissioner of Banking and Consumer
Finance of the State of Mississippi. At December 31, 1999, approximately
$2,411,000 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.
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.
Total interest income increased $2,015,000 for the year ended December 31, 1999,
as compared with the year ended December 31, 1998, and had increased $1,189,000
for the year ended December 31, 1998, as compared with the year ended December
31, 1997. These fluctuations in interest income are primarily due to the
increases in volume in loans.
Total interest expense increased $451,000 for the year ended December 31, 1999,
as compared with the year ended December 31, 1998, and had increased $1,033,000
for the year ended December 31, 1998, as compared with the year ended December
31, 1997. The increases were the result of both increases in interest bearing
deposits as well as the increase in rates paid on these deposits.
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. 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. Based on these same factors, the Company expects
to provide approximately $17,000 per month for loan losses during 2000.
SERVICE CHARGES ON DEPOSIT ACCOUNTS
Service charges on deposit accounts increased $747,000 for the year ended
December 31, 1999, as compared with the year ended December 31, 1998. This was
the result of increased volume of ATM transactions during 1999 at casino and
bank locations.
<PAGE> 6
GAIN ON SALE OF SECURITIES
During 1997, the Company sold the shares of common stock of Hibernia Corporation
it had carried in its available for sale portfolio at a realized gain of
$640,000.
GAIN ON SALE OF BANK PREMISES
Gain on sale of bank premises reflects the gain realized for book purposes of
$5,083,000 as a result of the sale of one of the branch locations during 1998.
SALARIES AND EMPLOYEE BENEFITS
Salaries and employee benefits increased $998,000 for the year ended December
31, 1999, as compared with the year ended December 31, 1998, and had increased
$1,073,000 for the year ended December 31, 1998, as compared with the year ended
December 31, 1997. The increase in 1999 was the result of an increase in the
number of full-time employees during this time frame due to the opening of two
new branch locations and significant cost of living adjustment raises. The
increase during 1998 was the result of an increase in the cost of health
insurance and an increase in employee salaries.
EQUIPMENT, RENTALS, DEPRECIATION AND MAINTENANCE
Equipment, rentals, depreciation and maintenance increased $320,000 for the year
ended December 31, 1999, as compared with the year ended December 31, 1998, and
had increased $496,000 for the year ended December 31, 1998, as compared with
the year ended December 31, 1997. These increases were primarily due to
increased depreciation on the computer hardware and software acquired during the
prior twenty-four months.
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,
payment 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 December 31, 1999, cash and due from banks,
investment securities and federal funds sold were 47% of total deposits, as
compared with 47% and 48% at December 31, 1998 and 1997, respectively.
NEW ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board has issued several statements during
the current year which are not required to be adopted until future periods. The
Company has evaluated the implementation of adopting these new pronouncements
and has determined that their adoption will not have a material effect on its
financial statements. Statement 133, "Accounting for Derivative Instruments and
Hedging Activities," was effective for the current year but had no effect on the
Company's financial statements.
<PAGE> 7
YEAR 2000
The Company began addressing Year 2000 issues in early 1997. Since that time,
significant resources have been committed to developing and implementing a plan
of action, which was approved by the Board of Directors, to ensure that its
computer and information systems would function properly in the Year 2000. This
plan incorporated the awareness, assessment, renovation, validation and
implementation phases as directed by the Federal Deposit Insurance Corporation
(FDIC) and included FDIC-enforced mandatory deadlines for completion of key
phases of the plan. Deadlines for assessment, renovation and validation were met
by the Company. There was no significant effect on the financial statements as a
result of costs associated with the Company's Year 2000 efforts.
The Company experienced no significant problems as a result of the century date
change on January 1, 2000. If any unforeseen Year 2000 problems had occurred,
the Company had established a Year 2000 contingency plan, which included all
information technology and non-information technology systems. The Plan, which
was approved by the Board of Directors, also addressed potential Year 2000
issues relating to core application software, trust services software, ATM
services, liquidity and other operational activities. The Plan will continue to
be in place should subsequent Year 2000 issues occur.
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. As a result, the Company
could be adversely affected by the failure of other companies due to Year 2000
issues. The potential impact of such a failure cannot be quantified at this
time.
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Market risk is the risk of loss arising from adverse changes in market prices
and rates. Interest rate risk is the most significant market risk affecting the
Company. Other types of market risk, such as foreign currency exchange rate risk
and commodity price risk, do not arise in the normal course of the Company's
business activities. Also, the Company does not currently and has no plans to
engage in trading activities or use derivative or off-balance sheet instruments
to manage interest rate risk.
The Company has risk management policies in place to monitor and limit exposure
to market risk. The Asset/Liability Committee (ALCO), consisting of the
President and Investment Officers, is responsible for the day-to-day operating
guidelines, approval of strategies affecting net interest income and
coordination of activities within policy limits established by the Board of
Directors based on the Company's tolerance for risk. Specifically, the key
objectives of the Company's asset/liability management program are to manage the
exposure of planned net interest margins to unexpected changes due to interest
rate fluctuations. These efforts will also affect loan pricing policies, deposit
interest rate policies, asset mix and volume guidelines and liquidity. The ALCO
committee reports to the Board of Directors on a quarterly basis.
The Company has implemented a conservative approach to its asset/liability
management. The net interest margin is managed on a daily basis largely as a
result of the management of the liquidity needs of the bank subsidiary. The
Company generally follows a policy of investing in short term U. S. Government
securities with maturities of two years or less. The loan portfolio consists of
a 50% - 50% blend of fixed and floating rate loans. It is the general loan
policy to offer loans with maturities of five years or less. On the liability
side, more than 60% of the deposits are demand and savings transaction accounts.
Additionally, the vast majority of the certificates of deposit mature within
eighteen months. Since the Company's deposits are generally not rate- sensitive,
they are considered to be core deposits. The short term nature of the financial
assets and liabilities allows the Company to meet the dual requirements of
liquidity and interest rate risk management.
<PAGE> 8
The interest rate sensitivity tables below provide additional information about
the Company's financial instruments that are sensitive to changes in interest
rates. The negative gap in 2000 is mitigated by the nature of the Company's
deposits, whose characteristics have been previously described. The tabular
disclosure reflects contractual interest rate repricing dates and contractual
maturity dates. Loan maturities have been adjusted for reserve for loan losses.
There have been no adjustments for such factors as prepayment risk, early calls
of investments, the effect of the maturity of balloon notes or the early
withdrawal of deposits. The Company does not believe that the aforementioned
factors have a significant impact on expected maturity.
Interest rate sensitivity at December 31, 1999 was as follows (in thousands):
<TABLE>
<CAPTION>
12/31/99
Fair
2000 2001 2002 2003 2004 Beyond Total Value
----------- ----------- ----------- ----------- ----------- ----------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Loans, net $ 108,413 $ 37,037 $ 38,541 $ 64,847 $ 65,979 $ 13,354 $ 328,171 $327,962
Average 8.61% 8.61% 8.61% 8.28% 8.28% 8.58% 8.48%
rate
Investment 41,385 27,189 16,979 21,208 19,763 23,472 149,996 148,432
securities
Average 5.40 5.62 5.95 5.62 6.10 5.53 5.67
rate
Total 149,798 64,226 55,520 86,055 85,742 36,826 478,167 476,394
Financial
Assets
Average 7.99 7.64 7.99 7.80 7.89 6.96 7.82
rate
Deposits 302,848 7,914 2,473 2,068 1,379 19 316,701 316,636
Average 4.38 4.87 5.49 5.15 5.14 4.72 4.41
rate
Long-term 14 14 15 15 216 274 256
funds
Average rate 5.38 5.38 5.38 5.38 5.38 5.38
Total 302,862 7,928 2,488 2,083 1,595 19 316,975 316,892
Financial
Liabilities
Average 4.38 4.87 5.49 5.15 5.17 4.72 4.41
rate
</TABLE>
<PAGE> 9
Interest rate sensitivity at December 31, 1998 was as follows (in thousands):
<TABLE>
<CAPTION>
12/31/98
Fair
1999 2000 2001 2002 2003 Beyond Total Value
----------- ----------- ----------- ----------- ----------- ----------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Loans, net $ 110,407 $ 19,252 $ 48,974 $ 40,458 $ 50,524 $ 17,516 $ 287,131 $288,425
Average 8.18% 8.49% 8.24% 8.12% 8.45% 8.56% 8.15%
rate
Investment 67,066 19,212 20,259 9,043 18,321 13,660 147,561 148,761
securities
Average 5.20 5.66 6.12 6.04 6.04 4.84 5.39
rate
Total 177,473 38,464 69,233 49,501 68,845 31,176 434,692 437,186
Financial
Assets
Average 7.35 7.36 7.73 7.82 7.95 7.42 7.44
rate
Deposits 294,724 4,417 1,882 2,586 1,724 305,333 306,006
Average 4.29 5.39 5.25 5.54 5.49 4.44
rate
Long-term 13 14 14 15 16 131 203 185
funds
Average 5.38 5.38 5.38 5.38 5.38 5.38 5.38
rate
Total 294,737 4,431 1,896 2,601 1,740 131 305,536 306,191
Financial
Liabilities
Average 4.29 5.39 5.25 5.54 5.49 5.38 4.44
rate
</TABLE>
<PAGE> 10
Summary of Quarterly Results of Operations (in thousands except per share data)
Peoples Financial Corporation and Subsidiaries
<TABLE>
<CAPTION>
QUARTER ENDED, 1999 MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
- -------------------------- ---------- ---------- ------------ -----------
<S> <C> <C> <C> <C>
Interest income $ 8,303 $ 8,835 $ 9,105 $ 9,197
Net interest income 4,770 5,249 5,428 5,552
Provision for loan losses 30 30 30 30
Income before income taxes 2,235 2,147 2,193 2,633
Net income 1,459 1,414 1,489 1,888
Basic and diluted earnings 0.49 0.48 0.50 0.65
per share
Quarter Ended, 1998 March 31 June 30 September 30 December 31
- -------------------------- ---------- ---------- ------------ -----------
Interest income $ 8,184 $ 8,343 $ 8,530 $ 8,368
Net interest income 4,868 4,862 4,936 4,769
Income before income taxes 6,623 1,967 2,293 2,498
Net income 4,360 1,284 1,579 1,567
Basic and diluted earnings 1.48 0.44 0.53 0.53
per share
</TABLE>
<PAGE> 11
CONSOLIDATED STATEMENTS OF CONDITION
Peoples Financial Corporation and Subsidiaries
<TABLE>
<CAPTION>
December 31, 1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
ASSETS
Cash and due from banks $ 35,540,978 $ 30,359,600 $ 20,611,495
Federal funds sold 6,150,000
Available for sale securities 33,075,555 12,836,885 47,677,562
Held to maturity securities, fair value of
$113,709,000 - 1999; $135,924,000 - 1998
$103,793,000 - 1997 115,272,790 134,723,695 102,835,564
Federal Home Loan Bank Stock, at cost 1,647,300
Loans 332,516,552 291,514,748 251,797,566
Less: Unearned income 6,985 1,850 1,314
Allowance for loan losses 4,338,149 4,382,157 4,434,770
------------ ------------ ------------
Loans, net 328,171,418 287,130,741 247,361,482
Bank premises and equipment, net 16,960,986 15,923,450 9,424,080
Other real estate 94,502 274,280 512,370
Accrued interest receivable 3,785,623 3,128,279 3,619,917
Other assets 3,423,266 3,794,213 3,376,662
Intangible assets 189,397
------------ ------------ ------------
TOTAL ASSETS $537,972,418 $488,171,143 $441,758,529
============ ============ ============
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE> 12
CONSOLIDATED STATEMENTS OF CONDITION (continued)
Peoples Financial Corporation and Subsidiaries
<TABLE>
<CAPTION>
December 31, 1999 1998 1997
------------- ------------- -------------
<S> <C> <C> <C>
LIABILITIES & SHAREHOLDERS' EQUITY
LIABILITIES:
Deposits:
Demand, non-interest bearing $ 77,980,244 $ 76,268,636 $ 67,580,617
Savings and demand, interest bearing 160,605,623 167,120,669 160,499,479
Time, $100,000 or more 91,575,980 68,080,406 83,700,139
Other time deposits 64,519,310 70,132,525 60,774,594
------------- ------------- -------------
Total deposits 394,681,157 381,602,236 372,554,829
Accrued interest payable 768,943 924,172 726,763
Federal funds purchased and securities
sold under agreements to repurchase 60,833,677 28,050,780
Notes payable 274,129 202,946 215,094
Other liabilities 3,647,626 3,845,616 2,490,081
------------- ------------- -------------
TOTAL LIABILITIES 460,205,532 414,625,750 375,986,767
SHAREHOLDERS' EQUITY:
Common Stock, $1 par value, 15,000,000
shares authorized, 2,952,672 shares
issued and outstanding at December
31, 1999, 1998 and 1997, after
giving retroactive effect to two for
one stock split effective November 16,
1998 2,952,672 2,952,672 2,952,672
Surplus 68,711,758 63,711,758 56,711,758
Undivided profits 6,837,628 6,739,151 5,924,027
Unearned compensation (624,842) (160,900)
Accumulated other comprehensive income,
net of tax (110,330) 302,712 183,305
------------- ------------- -------------
TOTAL SHAREHOLDERS' EQUITY 77,766,886 73,545,393 65,771,762
------------- ------------- -------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 537,972,418 $ 488,171,143 $ 441,758,529
============= ============= =============
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE> 13
CONSOLIDATED STATEMENTS OF INCOME
Peoples Financial Corporation and Subsidiaries
<TABLE>
<CAPTION>
Years Ended December 31, 1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
INTEREST INCOME:
Interest and fees on loans $ 26,425,625 $ 24,411,619 $ 21,776,773
Interest and dividends on securities:
U. S. Treasury 4,446,038 5,086,243 5,342,196
U. S. Government agencies and
corporations 3,511,373 3,013,102 3,904,276
States and political subdivisions 454,577 393,269 415,011
Other investments 98,806 27,130 297,494
Interest on federal funds sold 503,882 493,488 499,722
------------ ------------ ------------
TOTAL INTEREST INCOME 35,440,301 33,424,851 32,235,472
------------ ------------ ------------
INTEREST EXPENSE:
Time deposits of $100,000 or more 3,832,318 4,097,194 4,290,114
Other deposits 9,076,985 9,328,234 8,557,223
Mortgage indebtedness 10,605 11,275 11,910
Federal funds purchased and securities
sold under agreements to repurchase 1,520,997 552,935 97,115
------------ ------------ ------------
TOTAL INTEREST EXPENSE 14,440,905 13,989,638 12,956,362
------------ ------------ ------------
NET INTEREST INCOME 20,999,396 19,435,213 19,279,110
PROVISION FOR ALLOWANCE FOR LOSSES ON LOANS 120,000
------------ ------------ ------------
NET INTEREST INCOME AFTER PROVISION
FOR ALLOWANCE FOR LOSSES ON LOANS 20,879,396 19,435,213 19,279,110
------------ ------------ ------------
OTHER OPERATING INCOME:
Trust department income and fees 1,366,288 1,262,348 1,105,776
Service charges on deposit accounts 4,720,293 3,973,627 3,828,586
Other service charges, commissions and
fees 268,370 258,955 266,973
Gain on sale and calls of securities 115,494 667,728
Gain on sale of bank premises 5,228,741
Other income 411,645 380,344 372,232
------------ ------------ ------------
TOTAL OTHER OPERATING INCOME 6,766,596 11,219,509 6,241,295
------------ ------------ ------------
OTHER OPERATING EXPENSE:
Salaries and employee benefits 9,945,753 8,947,361 7,874,492
Net occupancy 864,694 994,740 964,890
Equipment rentals, depreciation and
maintenance 2,564,186 2,244,288 1,748,030
Other expense 5,062,970 5,087,267 5,478,256
------------ ------------ ------------
TOTAL OTHER OPERATING EXPENSE 18,437,603 17,273,656 16,065,668
------------ ------------ ------------
INCOME BEFORE INCOME TAXES 9,208,389 13,381,066 9,454,737
Income taxes 2,958,370 4,591,560 3,087,740
------------ ------------ ------------
NET INCOME $ 6,250,019 $ 8,789,506 $ 6,366,997
============ ============ ============
BASIC AND DILUTED EARNINGS PER SHARE $ 2.12 $ 2.98 $ 2.16
============ ============ ============
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE> 14
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Peoples Financial Corporation and Subsidiaries
<TABLE>
<CAPTION>
Accumulated
Other
Number of Unearned Comprehen- Comprehen-
Common Common Undivided Compensa- sive sive
Shares Stock Surplus Profits tion Income Income Total
--------- ---------- ----------- ---------- ---------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE,
JANUARY
1, 1997 2,952,672 $2,952,672 $51,711,758 $5,428,068 $ 0 $ 261,706 $60,354,204
Compre-
hensive
Income:
Net
income 6,366,997 $ 6,366,997 6,366,997
Net
unrealized
gain on
available
for sale
securities,
net of tax 334,640 334,640 334,640
Reclassifi-
cation
adjustment
for
available
for sale
securities
called or
sold in
current
year, net of
tax (413,041) (413,041) (413,041)
------------
Total
compre-
hensive
income $ 6,288,596
============
Cash
dividends
($.295 per
share) (871,038) (871,038)
Transfer of
undivided
profits 5,000,000 (5,000,000)
--------- ---------- ----------- ---------- ---------- ----------- -----------
BALANCE,
DECEMBER
31, 1997 2,952,672 2,952,672 56,711,758 5,924,027 0 183,305 65,771,762
Compre-
hensive
Income:
Net
income 8,789,506 $ 8,789,506 8,789,506
</TABLE>
<PAGE> 15
<TABLE>
<CAPTION>
Accumulated
Other
Number of Unearned Comprehen- Comprehen-
Common Common Undivided Compensa- sive sive
Shares Stock Surplus Profits tion Income Income Total
--------- ---------- ----------- ---------- ---------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net
unrealized
gain on
available
for sale
securities,
net of tax 183,683 183,683 183,683
Reclassifi-
cation
adjustment
for
available
for sale
securities
called or
sold in
current
year, net of
tax (64,276) (64,276) (64,276)
------------
Total
compre-
hensive
income $ 8,908,913
============
Purchase of
common
shares by
ESOP (220,900) (220,900)
Allocation
of ESOP
shares 60,000 60,000
Cash
dividends
($.33 per
share) (974,382) (974,382)
Transfer of
undivided
profits 7,000,000 (7,000,000)
--------- ---------- ----------- ---------- ---------- ----------- -----------
BALANCE,
DECEMBER 31,
1998 2,952,672 2,952,672 63,711,758 6,739,151 (160,900) 302,712 73,545,393
Compre-
hensive
Income:
Net
income 6,250,019 $ 6,250,019 6,250,019
Net
unrealized
loss on
available
for sale
securities,
net of tax (413,042) (413,042) (413,042)
------------
Total
compre-
hensive
income $ 5,836,977
============
Purchase of (684,842) (684,842)
common
shares by
ESOP
Allocation 220,900 220,900
of ESOP
shares
Cash (1,151,542) (1,151,542)
dividends
($.39 per
share)
Transfer of
undivided
profits 5,000,000 (5,000,000)
--------- ---------- ----------- ---------- ---------- ----------- -----------
Balance,
December 31,
1999 2,952,672 $2,952,672 $68,711,758 $6,837,628 $ (624,842) $ (110,330) $77,766,886
========= ========== =========== ========== ========== =========== ===========
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE> 16
CONSOLIDATED STATEMENTS OF CASH FLOWS
Peoples Financial Corporation and Subsidiaries
<TABLE>
<CAPTION>
Years Ended December 31, 1999 1998 1997
------------- ------------- -------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 6,250,019 $ 8,789,506 $ 6,366,997
Adjustments to reconcile net income to
net cash provided by operating
activities:
Gain on sales of other real estate (459,529) (335,768) (1,999)
Gain on sale and calls of securities (115,494) (667,728)
Gain on sale of bank premises (5,228,741)
Depreciation and amortization 1,661,201 1,574,548 1,382,474
Provision for allowance for loan
losses 120,000
Provision for losses on other real
estate 60,307 88,687 75,638
Changes in assets and liabilities:
Accrued interest receivable (657,344) 491,638 271,548
Other assets 11,523 164,439 (79,567)
Accrued interest payable (155,229) 197,409 (278,745)
Other liabilities 22,590 1,296,918 598,785
------------- ------------- -------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 6,853,538 6,923,142 7,667,403
------------- ------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities, sales and calls
of available for sale securities 1,253,008 43,783,631 7,017,728
Investment in available for sale
securities (22,125,300) (8,666,154) (961,500)
Proceeds from maturities and calls of
held to maturity securities 127,775,000 112,885,000 72,858,400
Investment in held to maturity securities (108,324,095) (144,756,413) (47,823,681)
Investment in Federal Home Loan Bank stock (1,647,300)
Proceeds from sales of other real estate
and other property 579,000 889,077 182,200
Loans, net increases (41,540,617) (40,334,065) (23,895,833)
Proceeds from sale of bank premises 6,141,628
Acquisition of premises and equipment (2,698,737) (8,797,408) (1,873,890)
Federal funds sold 6,150,000 (6,150,000)
Other assets 359,424 (581,990) (323,238)
------------- ------------- -------------
NET CASH USED IN INVESTING ACTIVITIES (46,369,617) (33,286,694) (969,814)
------------- ------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Demand and savings deposits, net
increase (decrease) (4,803,438) 15,299,432 948,743
Time deposits made, net increase
(decrease) 17,882,359 (6,252,025) 3,474,077
Principal payments on notes (12,819) (12,148) (11,514)
Cash dividends (1,151,542) (974,382) (871,038)
Federal funds purchased and securities
sold under agreements to repurchase,
net increase (decrease) 32,782,897 28,050,780 (16,500,000)
------------- ------------- -------------
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES 44,697,457 36,111,657 (12,959,732)
------------- ------------- -------------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 5,181,378 9,748,105 (6,262,143)
CASH AND CASH EQUIVALENTS, BEGINNING
OF YEAR 30,359,600 20,611,495 26,873,638
------------- ------------- -------------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 35,540,978 $ 30,359,600 $ 20,611,495
============= ============= =============
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE> 17
Notes To Consolidated Financial Statements
Peoples Financial Corporation and Subsidiaries
NOTE A - BUSINESS AND SUMMARY OF SIGNIFICANT 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 14 locations in Harrison, Hancock, Stone 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 in consolidation.
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 $11,090,000, $9,347,000 and $8,442,000 for the
years ending December 31, 1999, 1998 and 1997, respectively.
The Company's bank subsidiary maintained account balances in excess of amounts
insured by the Federal Deposit Insurance Corporation. At December 31, 1999, the
bank subsidiary had excess deposits of $229,033. These amounts were uninsured
and uncollateralized.
Securities
The classification of securities is determined by Management at the time of
purchase. Securities are classified as held to maturity when the Company has the
positive intent and ability to hold the security until maturity. Securities held
to maturity are stated at amortized cost.
Securities not classified as held to maturity are classified as available for
sale and are stated at fair value. Unrealized gains and losses, net of tax, on
these securities are recorded in shareholders' equity as accumulated other
comprehensive income.
<PAGE> 18
The amortized cost of available for sale securities and held to maturity
securities is adjusted for amortization of premiums and accretion of discounts
to maturity, determined using the interest method. Such amortization and
accretion is included in interest income on securities. The specific
identification method is used to determine realized gains and losses on sales of
securities, which are reported as gain on sale and calls of securities in other
operating income.
Loans
The loan portfolio consists of commercial and industrial and real estate loans
within the Company's trade area in South Mississippi. The loan policy
establishes guidelines relating to pricing, repayment terms, collateral
standards including loan to value (LTV) limits, appraisal and environmental
standards, lending authority, lending limits and documentation requirements.
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 each loan based on the unpaid principal balance.
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. Loans
classified as nonaccrual are generally identified as impaired loans.
Allowance for Loan Losses
The allowance for loan losses is established through provisions for loan losses
charged against earnings. Loans deemed to be uncollectible are charged against
the allowance for loan losses, and subsequent recoveries, if any, are credited
to the allowance.
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, an estimate of the possibility of loss based
on the risk characteristics of the portfolio, adverse situations that may affect
the borrower's ability to repay and other relevant factors.
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
<PAGE> 19
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 was amortized over 10 years.
The core deposits acquired in the main branch of the Southern Federal Bank for
Savings acquisition on August 16, 1991, were amortized over the estimated lives
ranging from six to seven years.
Trust Department Income and Fees
Trust fees are recorded when received. These fees amounted to $1,366,288,
$1,262,348 and $1,105,776 in 1999, 1998 and 1997, 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; gains reported under the installment sales method for
tax purposes and the gain on the sale of bank premises which was structured
under the provisions of Section 1031 of the Internal Revenue Code.
Leases
All leases are accounted for as operating leases in accordance with the terms of
the leases.
Earnings Per Share
Basic and diluted earnings per share are computed on the basis of the weighted
average number of common shares outstanding, 2,952,672 in 1999, 1998 and 1997.
Statements of Cash Flows
The Company has defined cash and cash equivalents to include cash and due from
banks. The Company paid $14,596,134, $13,792,229 and $13,235,107 in 1999, 1998
and 1997, respectively, for interest on deposits and borrowings. Income tax
payments totaled $3,361,436, $2,810,100 and $3,199,740 in 1999, 1998 and 1997,
respectively. Loans transferred to other real estate amounted to $403,906 and
$503,248 in 1998 and 1997, respectively. No loans were transferred to other real
estate in 1999. The income tax effect on the accumulated other comprehensive
income was $(212,779), $61,512 and $(40,388), at December 31, 1999, 1998 and
1997, respectively.
<PAGE> 20
NOTE B - SECURITIES:
The amortized cost and estimated fair value of securities at December 31, 1999,
1998 and 1997, respectively, are as follows (in thousands):
<TABLE>
<CAPTION>
Gross Gross
Amortized unrealized unrealized Estimated
December 31, 1999 cost gains losses fair value
- ----------------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Available for sale securities:
Debt securities:
U. S. Treasury $ 5,994 $ $ (201) $ 5,793
U. S. Government agencies
and corp. 19,670 (720) 18,950
States and political subdivisions 3,808 (103) 3,705
----------- ------ -------- ---------
Total debt securities 29,472 (1,024) 28,448
Equity securities 3,776 918 (66) 4,628
----------- ------ -------- ---------
Total available for sale securities $ 33,248 $ 918 $ (1,090) $ 33,076
=========== ====== ======== =========
Held to maturity securities:
U. S. Treasury $ 53,693 $ 147 $ (234) $ 53,606
U. S. Government agencies and corp. 55,312 (1,441) 53,871
States and political subdivisions 6,268 106 (142) 6,232
----------- ------ -------- ---------
Total held to maturity securities $ 115,273 $ 253 $ (1,817) $ 113,709
=========== ====== ======== =========
</TABLE>
<PAGE> 21
<TABLE>
<CAPTION>
Gross Gross
Amortized unrealized unrealized Estimated
December 31, 1998 cost gains losses fair value
- ----------------- ---------- ---------- ---------- ----------
Available for sale securities:
<S> <C> <C> <C> <C>
Debt securities:
U. S. Treasury $ 2,995 $ 37 $ (5) $ 3,027
U. S. Government agencies and corp 5,999 1 (51) 5,949
States and political subdivisions 2,246 36 (7) 2,275
Other securities 940 5 945
---------- ---------- ---------- ----------
Total debt securities 12,180 79 (63) 12,196
Equity securities 198 443 641
---------- ---------- ---------- ----------
Total available for sale securities $ 12,378 $ 522 $ (63) $ 12,837
========== ========== ========== ==========
Held to maturity securities:
U. S. Treasury $ 90,244 $ 936 $ (70) $ 91,110
U. S. Government agencies and corp 37,931 112 (122) 37,921
States and political subdivisions 6,549 344 6,893
---------- ---------- ---------- ----------
Total held to maturity securities $ 134,724 $ 1,392 $ (192) $ 135,924
========== ========== ========== ==========
</TABLE>
<PAGE> 22
<TABLE>
<CAPTION>
Gross Gross
Amortized unrealized unrealized Estimated
December 31, 1997 cost gains losses fair value
- ----------------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Debt securities:
U. S. Treasury $ 3,984 $ 4 $ (5) $ 3,983
U. S. Government agencies and corp 42,627 42 (210) 42,459
States and political subdivisions 592 3 595
--------- --------- --------- ---------
Total debt securities 47,203 49 (215) 47,037
Equity securities 198 443 641
Total available for sale securities $ 47,401 $ 492 $ (215) $ 47,678
========= ========= ========= =========
Held to maturity securities:
U. S. Treasury $ 76,670 $ 690 $ (83) $ 77,277
U. S. Government agencies and corp 20,491 35 (26) 20,500
States and political subdivisions 5,674 342 6,016
--------- --------- --------- ---------
Total held to maturity securities $ 102,835 $ 1,067 $ (109) $ 103,793
========= ========= ========= =========
</TABLE>
The amortized cost and estimated fair value of debt securities at December 31,
1999, (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.
<PAGE> 23
<TABLE>
<CAPTION>
AMORTIZED COST ESTIMATED FAIR VALUE
--------------- --------------------
<S> <C> <C>
Available for sale securities:
Due in one year or less $ 2,000 $ 1,990
Due after one year through five years 16,848 16,316
Due after five years through ten years 8,930 8,595
Due after ten years 1,694 1,547
--------------- ---------------
Totals $ 29,472 $ 28,448
=============== ===============
Held to maturity securities:
Due in one year or less $ 39,395 $ 39,314
Due after one year through five years 68,823 67,550
Due after five years through ten years 5,060 4,930
Due after ten years 1,995 1,915
--------------- ---------------
Totals $ 115,273 $ 113,709
=============== ===============
</TABLE>
Available for sale securities included 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 held the Hibernia common as an 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. These shares were sold during 1997 at a realized gain of
$640,706.
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 was due to mature in
2001. Appropriate review of the market value and risk associated with these
investments was 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. This
instrument was called at par value during 1997.
<PAGE> 24
Proceeds from maturities and calls of held to maturity debt securities during
1999, 1998 and 1997 were $127,775,000, $112,885,000 and $72,858,400,
respectively. There were no sales of held to maturity debt securities during
1997, 1998 and 1999. Proceeds from maturities and calls of available for sale
debt securities were $1,253,008, $43,783,631 and $6,377,022 during 1999, 1998
and 1997, respectively. There were no sales of available for sale debt
securities during 1997, 1998 and 1999.
Securities with an amortized cost of approximately $139,051,000, $125,107,000
and $147,780,000 at December 31, 1999, 1998 and 1997, respectively, were pledged
to secure public deposits, federal funds purchased and other balances required
by law.
Federal Home Loan Bank (FHLB) common stock was purchased during 1999 in order
for the Company to participate in FHLB loan programs. The amount to be invested
in FHLB stock was calculated according to FHLB guidelines as a percentage of
certain mortgage loans. The investment is carried at cost. At December 31, 1999,
the Company was not a participant in any FHLB programs. At such time as the
Company does participate in such programs, other obligations may be required.
NOTE C - LOANS:
The composition of the loan portfolio was as follows (in thousands):
<TABLE>
<CAPTION>
December 31, 1999 1998 1997
- ------------ --------- --------- ---------
<S> <C> <C> <C>
Real estate, construction $ 24,793 $ 24,836 $ 14,819
Real estate, mortgage 215,726 179,123 154,653
Loans to finance agricultural
production and other loans to
farmers 8,441 13,493 12,501
Commercial and industrial loans 63,104 49,633 50,224
Loans to individuals for
household, family and other
consumer expenditures 16,476 15,717 13,125
Obligations of states and political
subdivisions (primarily industrial
revenue bonds and local
government tax anticipation
notes) 2,723 6,809 5,257
All other loans 1,254 1,904 1,219
--------- --------- ---------
Totals $ 332,517 $ 291,515 $ 251,798
========= ========= =========
</TABLE>
<PAGE> 25
Transactions in the allowance for loan losses are as follows (in thousands):
<TABLE>
<CAPTION>
1999 1998 1997
--------- --------- ---------
<S> <C> <C> <C>
Balance, January 1 $ 4,382 $ 4,435 $ 4,523
Recoveries 244 413 347
Loans charged off (408) (466) (435)
Provision for allowance for loan
losses 120
--------- --------- ---------
Balance, December 31 $ 4,338 $ 4,382 $ 4,435
========= ========= =========
</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>
1999 1998 1997
--------- --------- ---------
<S> <C> <C> <C>
Balance, January 1 $ 12,610 $ 9,172 $ 7,891
January 1 balance, loans of
officers and directors appointed
during the year 75
New loans and advances 21,704 22,098 22,358
Repayments (22,951) (18,735) (21,077)
--------- --------- ---------
Balance, December 31 $ 11,363 $ 12,610 $ 9,172
========= ========= =========
</TABLE>
Industrial revenue bonds with a carrying value of $1,258,433, $1,408,856 and
$1,547,120 at December 31, 1999, 1998 and 1997, respectively, were pledged to
secure public deposits.
<PAGE> 26
Nonaccrual loans amounted to approximately $100,000, $490,000 and $1,167,000 at
December 31, 1999, 1998 and 1997, respectively.
The total recorded investment in impaired loans amounted to $100,000, $490,000
and $1,208,000 at December 31, 1999, 1998 and 1997, respectively. The amount of
that recorded investment in impaired loans for which there is no related
allowance for loan losses was $100,000, $490,000 and $1,208,000 at December 31,
1999, 1998 and 1997, respectively. At December 31, 1999, 1998 and 1997, the
average recorded investment in impaired loans was $101,000, $493,000 and
$1,265,000, respectively. The amount of interest not accrued on these loans did
not have a significant effect on earnings in 1999, 1998 or 1997.
NOTE D - BANK PREMISES AND EQUIPMENT:
Bank premises and equipment are shown as follows (in thousands):
<TABLE>
<CAPTION>
Estimated
December 31, useful lives 1999 1998 1997
- ------------ ------------ -------- --------- --------
<S> <C> <C> <C> <C>
Land $ 4,682 $ 4,463 $ 1,339
Buildings 5-40 years 12,480 11,370 8,904
Furniture, fixtures and equipment 3-10 years 9,889 9,020 6,943
-------- --------- --------
Totals, at cost 27,051 24,853 17,186
Less: Accumulated depreciation 10,090 8,930 7,762
-------- --------- --------
Totals $ 16,961 $ 15,923 $ 9,424
======== ========= ========
</TABLE>
Depreciation expense charged to operations in 1999, 1998 and 1997 was
$1,661,201, $1,385,151 and $1,075,877, respectively.
NOTE E - NOTES PAYABLE:
<TABLE>
<CAPTION>
December 31, 1999 1998 1997
- ------------ ----------- ----------- -----------
<S> <C> <C> <C>
Small Business Administration,
outstanding mortgage on property acquired
The note bears interest at 5 3/8% & is
payable at $1,952 monthly through January
2004 $ 190,127 $ 202,946 $ 215,094
RiverHills Bank, $750,000 line of credit
for Peoples Financial Corporation Employee
Stock Ownership Plan, secured by the
guarantee of the Company; Interest at New
York Prime (8.50% at December 31, 1999) due
quarterly, principal due at maturity in
June 2004 84,002
----------- ----------- -----------
Totals $ 274,129 $ 202,946 $ 215,094
=========== =========== ===========
</TABLE>
<PAGE> 27
The maturities of notes payable for each of the next five years are as follows:
<TABLE>
<S> <C>
2000 $ 13,525
2001 14,271
2002 15,058
2003 15,885
2004 215,390
---------
Total $ 274,129
=========
</TABLE>
NOTE F - INCOME TAXES:
Federal income taxes payable (or refundable) and deferred taxes (or deferred
charges) as of December 31, 1999, 1998 and 1997, included in other assets or
other liabilities, were as follows (in thousands):
<TABLE>
<CAPTION>
December 31, 1999 1998 1997
- ------------ ---------- ---------- ----------
<S> <C> <C> <C>
Deferred tax assets:
Allowance for loan losses $ 888 $ 776 $ 776
Employee benefit plans'
liabilities 618 531 479
Other 337 229 192
---------- ---------- ----------
Deferred tax assets (1,843) (1,536) (1,447)
---------- ---------- ----------
Deferred tax liabilities:
Accumulated depreciation 1,064 1,016 950
Deferred gain on sale of bank
premises 1,582 1,582
Installment sales 14 14 14
Unrealized gains on available
for sale securities, charged to
equity 156 94
---------- ---------- ----------
Deferred tax liabilities 2,660 2,768 1,058
---------- ---------- ----------
Net deferred taxes (charges) 817 1,232 (389)
Current payable (refundable) (85) 125 (103)
---------- ---------- ----------
Totals $ 732 $ 1,357 $ (492)
========== ========== ==========
</TABLE>
<PAGE> 28
Income taxes consist of the following components (in thousands):
<TABLE>
<CAPTION>
Years Ended December 31, 1999 1998 1997
- ------------------------ ---------- ---------- ----------
<S> <C> <C> <C>
Current $ 3,373 $ 2,970 $ 3,142
Deferred (415) 1,621 (54)
---------- ---------- ----------
Totals $ 2,958 $ 4,591 $ 3,088
========== ========== ==========
</TABLE>
Deferred income taxes (benefits) resulted from the following (in thousands):
<TABLE>
<CAPTION>
Years Ended December 31, 1999 1998 1997
- ------------------------ ---------- ---------- ----------
<S> <C> <C> <C>
Depreciation $ 48 $ 66 $ 85
Installment sales (1)
Provision for loan losses (112)
Officers' and directors' life
insurance (87) (52) (35)
Deferred gain on sale of bank
premises 1,582
Unrealized gain (loss) on available
for sale securities (216) 62 (40)
Other (48) (37) (63)
---------- ---------- ----------
Totals $ (415) $ 1,621 $ (54)
========== ========== ==========
</TABLE>
<PAGE> 29
Income taxes amounted to less than the amounts computed by applying the U.S.
Federal income tax rate of 34.0% for 1999, 1998 and 1997, to earnings before
income taxes. The reason for these differences is shown below (in thousands):
<TABLE>
<CAPTION>
1999 1998 1997
Years Ended December 31, AMOUNT % Amount % Amount %
- ------------------------ -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Taxes computed at
statutory rate $ 3,131 34.0 $ 4,550 34.0 $ 3,215 34.0
Increase (decrease) resulting from:
Tax-exempt interest
income (301) (3.3) (187) (1.3) (250) (2.6)
Non-deductible interest 27 0.3 32 0.2 33 0.3
Non-deductible
amortization 64 0.5 98 1.1
Other, net 101 1.1 132 0.9 (8) (0.1)
-------- -------- -------- -------- -------- --------
Total income taxes $ 2,958 32.1 $ 4,591 34.3 $ 3,088 32.7
======== ======== ======== ======== ======== ========
</TABLE>
NOTE G - SHAREHOLDERS' EQUITY:
On August 27, 1997, 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 738,168 shares of Company stock received an
additional 738,168 common shares. On October 28, 1998, 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 1,476,336
shares of Company stock received an additional 1,476,336 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 by the bank
subsidiary without prior approval of the Commissioner of Banking and Consumer
Finance of the State of Mississippi.
<PAGE> 30
At December 31, 1999, approximately $2,411,570 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.
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 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 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 judgments 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, 1999, 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
10.00% or greater, a Tier 1 risk-based capital ratio of 6.00% or greater and a
Leverage capital ratio of 5.00% or greater. There are no conditions or events
since that notification that Management believes have changed the bank
subsidiary's category.
<PAGE> 31
The bank subsidiary's actual capital amounts and ratios and required minimum
capital amounts and ratios for 1999, 1998 and 1997, are as follows:
<TABLE>
<CAPTION>
For Capital Adequacy
Actual Purposes
------------------------------------ ------------------------------------
Amount Ratio Amount Ratio
--------------- ----- --------------- -----
<S> <C> <C> <C> <C>
DECEMBER 31, 1999:
TOTAL CAPITAL (TO RISK WEIGHTED ASSETS) $ 82,840,207 23.69% $ 27,969,862 8.00%
TIER 1 CAPITAL (TO RISK WEIGHTED ASSETS) 78,502,058 22.45% 13,984,931 4.00%
TIER 1 CAPITAL (TO AVERAGE ASSETS) 78,502,058 15.16% 20,711,320 4.00%
December 31, 1998:
Total Capital (to Risk Weighted Assets) 77,125,631 25.90% 23,768,820 8.00%
Tier 1 Capital (to Risk Weighted Assets) 73,403,581 24.65% 11,884,410 4.00%
Tier 1 Capital (to Average Assets) 73,403,581 15.78% 18,601,800 4.00%
December 31, 1997:
Total Capital (to Risk Weighted Assets) 68,186,611 26.83% 20,333,200 8.00%
Tier 1 Capital (to Risk Weighted Assets) 65,010,555 25.58% 10,166,600 4.00%
Tier 1 Capital (to Average Assets) 65,010,555 14.61% 17,800,360 4.00%
</TABLE>
NOTE H - OTHER EXPENSES:
Other expenses consisted of the following:
<TABLE>
<CAPTION>
Years Ended December 31, 1999 1998 1997
- ------------------------ ------------ ------------ ------------
<S> <C> <C> <C>
Amortization $ $ 189,416 $ 306,596
Advertising 485,419 539,792 546,308
Data processing 588,733 501,388 965,944
FDIC and state banking assessments 103,799 98,817 91,368
Legal and accounting 253,644 311,100 354,343
Postage and freight 194,842 181,120 131,160
Stationary, printing and supplies 339,236 243,940 198,984
Other real estate (425,729) (231,430) 53,299
ATM expense 1,777,665 1,487,583 1,341,118
Federal Reserve service charges 118,032 104,017 89,964
Conferences and classes 115,103 151,663 149,316
Taxes and licenses 245,851 244,860 212,036
Consulting fees 22,983 24,108 30,942
Trust expense 317,673 383,364 192,420
Other 925,719 857,529 814,458
------------ ------------ ------------
Totals $ 5,062,970 $ 5,087,267 $ 5,478,256
============ ============ ============
</TABLE>
<PAGE> 32
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.
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 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, west Jackson and Stone counties. The Company also grants
loans on a limited basis in Claiborne County.
At December 31, 1999, 1998 and 1997, the Company had outstanding irrevocable
letters of credit aggregating $5,392,000, $5,479,053 and $3,156,909,
respectively. At December 31, 1999, 1998 and 1997, the Company had outstanding
unused loan commitments aggregating $110,690,000, $99,105,000 and $77,257,000,
respectively.
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 attempt to certify a class action was unsuccessful. In
October of 1997, the case was settled with the bank subsidiary making an
immaterial cash payment to the plaintiff.
<PAGE> 33
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.
<TABLE>
<CAPTION>
CONDENSED BALANCE SHEETS (in thousands)
December 31, 1999 1998 1997
- ------------ ---------- ---------- ----------
<S> <C> <C> <C>
ASSETS
Investments in subsidiaries, at
underlying equity:
Bank subsidiary $ 77,395 $ 73,530 $ 65,162
Nonbank subsidiary 57 56 55
Cash in bank subsidiary 2 28 306
Intangible assets 189
Other assets 1,641 661 655
---------- ---------- ----------
TOTAL ASSETS $ 79,095 $ 74,275 $ 66,367
========== ========== ==========
LIABILITIES AND SHAREHOLDERS'
EQUITY
Notes payable $ 625 $ 161 $
Deferred federal income taxes 703 569 595
---------- ---------- ----------
Total liabilities 1,328 730 595
Shareholders' equity 77,767 73,545 65,772
---------- ---------- ----------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 79,095 $ 74,275 $ 66,367
========== ========== ==========
</TABLE>
<PAGE> 34
<TABLE>
<CAPTION>
CONDENSED STATEMENTS OF INCOME (in thousands)
Years Ended December 31, 1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
INCOME
Earnings of unconsolidated bank
subsidiary:
Distributed earnings $ 1,629 $ 750 $ 875
Undistributed earnings 4,619 8,085 5,240
Earnings of unconsolidated
nonbank subsidiary 1 1 1
Interest income 2 2 4
Other income 95 14 288
---------- ---------- ----------
TOTAL INCOME 6,346 8,852 6,408
---------- ---------- ----------
EXPENSES
Other expense 98 58 53
---------- ---------- ----------
TOTAL EXPENSES 98 58 53
---------- ---------- ----------
INCOME BEFORE INCOME TAXES 6,248 8,794 6,355
Income taxes 2 (4) 12
---------- ---------- ----------
NET INCOME $ 6,250 $ 8,790 $ 6,367
========== ========== =========
</TABLE>
<PAGE> 35
<TABLE>
<CAPTION>
CONDENSED STATEMENTS OF CASH FLOWS (in thousands)
Years Ended December 31, 1999 1998 1997
- ------------------------ ---------- ---------- ----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income $ 6,250 $ 8,790 $ 6,367
Adjustments to reconcile net
income to net cash provided
by operating activities:
Net income of unconsolidated
subsidiaries (6,249) (8,836) (6,116)
Changes in assets and liabilities:
Accrued expenses (8) 3
---------- ---------- ----------
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES 1 (54) 254
---------- ---------- ----------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Investment in common stock (504)
Dividends from unconsolidated
subsidiary 1,629 750 875
---------- ---------- ----------
NET CASH PROVIDED BY INVESTING
ACTIVITIES 1,125 750 875
---------- ---------- ----------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Dividends paid (1,152) (974) (871)
---------- ---------- ----------
NET CASH USED IN FINANCING
ACTIVITIES (1,152) (974) (871)
---------- ---------- ----------
NET INCREASE (DECREASE) IN CASH (26) (278) 258
CASH, BEGINNING OF YEAR 28 306 48
---------- ---------- ----------
CASH, END OF YEAR $ 2 $ 28 $ 306
========== ========== ==========
</TABLE>
<PAGE> 36
Peoples Financial Corporation paid income taxes of $3,361,436, $2,810,100 and
$3,199,740 in 1999, 1998 and 1997, respectively. No interest was paid during the
three years ended December 31, 1999.
NOTE L - EMPLOYEE BENEFIT PLANS:
The Company sponsors the Peoples Financial Corporation Employee Stock Ownership
Plan (ESOP). The ESOP 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 December 31, 1991, the plan was amended
effective January 1, 1991, except where specifically indicated to the contrary,
to adjust, among other things, the Employer Discretionary Matching Contribution
and the 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 $360,000, $260,000
and $210,000 in 1999, 1998 and 1997, respectively.
The Company accounts for all shares acquired after the December 15, 1993,
effective date of Statement of Position 93-6, "Employers' Accounting for
Employee Stock Ownership Plans" in accordance with the statement of position.
Accordingly, the debt of the Company and the shares pledged as collateral are
reported as unearned compensation in equity. The Peoples Bank, Biloxi,
Mississippi's loan asset and the Company's debt liability eliminate in
consolidation. As shares are committed to be released, the Company reports
compensation expense equal to the current market price of the shares, and the
shares become outstanding for net income per share computations. Dividends on
allocated ESOP shares are recorded as a reduction of retained earnings;
dividends on
<PAGE> 37
unallocated ESOP shares are recorded as a reduction of debt and accrued
interest.
Compensation expense of $6,939,345, $6,068,311 and $5,520,368 relating to the
ESOP was recorded during 1999, 1998 and 1997, respectively. The ESOP held
377,276, 384,268 and 373,554 allocated shares and 9,627 and 3,358 suspense
shares at December 31, 1999 and 1998, respectively. The fair value of the
suspense shares at December 31, 1999 was $587,247. Since the Company stock is
not readily tradable on an established market, the plan requires the Company to
issue a "put option" to any Participant who receives a distribution of Company
Stock. The fair value of all shares subject to this put option was $23,013,836
at December 31, 1999.
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 $2,450,560, $2,418,146 and $2,293,656 at December 31, 1999, 1998 and
1997, respectively. The present value of accumulated benefits under these plans,
using an interest rate of 9.00% for 1999 and 10.00% for 1998 and 1997, and the
projected unit cost method, has been accrued. The accrual amounted to
$1,523,024, $1,288,261 and $1,146,192 at December 31, 1999, 1998 and 1997,
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 $425,235, $340,824 and $283,150 at
December 31, 1999, 1998 and 1997, 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. The accrual amounted to $294,493, $273,877
and $263,809 at December 31, 1999, 1998 and 1997, respectively.
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. The accumulated post-retirement benefit obligation at
January 1, 1995, was $517,599, which the Company elected to amortize over 20
years. 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:
<PAGE> 38
<TABLE>
<CAPTION>
Years Ended December 31, 1999 1998 1997
- ------------------------ -------- -------- --------
<S> <C> <C> <C>
Service cost $ 62,975 $ 38,373 $ 39,595
Interest cost 55,862 40,136 41,260
Amortization of net transition
obligation 20,600 20,600 20,600
-------- -------- --------
Net periodic postretirement $139,437 $ 99,109 $101,455
benefit cost ======== ======== ========
</TABLE>
The discount rate used in determining the accumulated postretirement benefit
obligation was 7.75% in 1999, 6.50% in 1998 and 7.00% in 1997. The assumed
health care cost trend rate used in measuring the accumulated postretirement
benefit obligation was 7.00% in 1999. The rate was assumed to decrease gradually
to 5.00% for 2003 and remain at that level thereafter. If the health care cost
trend rate assumptions were increased 1.00%, the accumulated postretirement
benefit obligation as of December 31, 1999, would be increased by 20.59%, 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
28.55%. If the health care cost trend rate assumptions were decreased 1.00%, the
accumulated postretirement benefit obligation as of December 31, 1999, would be
decreased by 16.05%, and the aggregate of the service and interest cost
components of the net periodic postretirement benefit cost for the year then
ended would have decreased by 21.29%.
The following is a reconciliation of the accumulated postretirement benefit
obligation:
<TABLE>
<S> <C>
Accumulated postretirement
benefit obligation as of December
31, 1998 $ 695,175
Service cost 62,975
Interest cost 55,862
Actuarial loss (436)
Benefits paid (46,040)
---------
Accumulated postretirement
benefit obligation as of December
31, 1999 $ 767,536
=========
</TABLE>
<PAGE> 39
<TABLE>
<CAPTION>
December 31, 1999 1998 1997
- -------------------------- --------- --------- ---------
<S> <C> <C> <C>
Accumulated postretirement
benefit obligation:
Retirees $ 295,164 $ 238,265 $ 236,748
Eligible to retire 32,463 79,446 70,923
Not eligible to retire 439,909 377,464 278,203
--------- --------- ---------
Total 767,536 695,175 585,874
Plan assets at fair value -0- -0- -0-
--------- --------- ---------
Accumulated postretirement
benefit obligation in excess of
plan assets 767,536 695,175 585,874
Unrecognized transition
obligation (308,997) (329,597) (350,197)
Unrecognized cumulative net
(gain) loss from past experience
different from that assumed and
from changes in assumptions (23,614) (24,050) 31,734
--------- --------- ---------
Accrued postretirement benefit
cost $ 434,925 $ 341,528 $ 267,411
========= ========= =========
</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
<PAGE> 40
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 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.
Accrued Interest Receivable
The amount shown as accrued interest receivable approximates fair value.
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 and Securities Sold under Agreements to Repurchase
The amount shown as federal funds purchased and securities sold under agreements
to repurchase approximates fair value.
Notes Payable
The fair value of notes payable is computed by discounting the cash flows using
current borrowing rates.
<PAGE> 41
Accrued Interest Payable
The amount shown as accrued interest payable approximates fair value.
The following table presents carrying amounts and estimated fair values for
financial assets and financial liabilities at December 31, 1999, 1998 and 1997
(in thousands):
<TABLE>
<CAPTION>
1999 1998 1997
------------------- ------------------- -------------------
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 $ 35,541 $ 35,541 $ 30,360 $ 30,360 $ 20,611 $ 20,611
Available for sale
securities 33,076 33,076 12,837 12,837 47,678 47,678
Held to maturity
securities 115,273 113,709 134,724 135,924 102,836 103,793
Loans, net 328,171 327,962 287,131 288,425 247,361 247,210
Accrued interest
receivable 3,786 3,786 3,128 3,128 3,620 3,620
Financial
Liabilities:
Deposits:
Non-interest
bearing 77,980 77,980 76,269 76,269 67,581 67,581
Interest bearing 316,701 316,636 305,333 306,006 304,974 305,159
-------- -------- -------- -------- -------- --------
Total deposits 394,681 394,616 381,602 382,275 372,555 372,740
Federal funds
purchased and
securities sold
under agreements
to repurchase 60,834 60,834 28,051 28,051
Notes payable 274 256 203 185 215 189
Accrued interest
payable 769 769 924 924 727 727
</TABLE>
<PAGE> 42
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, 1999, 1998 and 1997,
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, 1999, 1998 and 1997, 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
/s/ Piltz, Williams, LaRosa & Co.
PILTZ, WILLIAMS, LAROSA & CO.
Biloxi, Mississippi
January 19, 2000
<PAGE> 43
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
David M. Hughes, Vice-President
A. Wes Fulmer, Vice-President and Secretary
M. O. Lawrence, III, Vice-President
Lauri A. Wood, Chief Financial Officer and Controller
Board of Directors
The Peoples Bank, Biloxi, Mississippi
Chevis C. Swetman, Chairman
William A. Barq, Vice-Chairman, Former Owner and President (retired), Barq's
Bottling Co., Inc.
Drew Allen, President, Allen Beverages, Inc.
Andy Carpenter, Executive Vice-President, The Peoples Bank, Biloxi, Mississippi
Tyrone J. Gollott, Secretary-Treasurer, Gollott & Sons Transfer & Storage, Inc.
Liz Corso Joachim, President, Frank P. Corso, Inc.
Rex E. Kelly, Director of Corporate Communications, Mississippi Power Company
Dan Magruder, President, Rex Distributing Co., Inc.
Jeffrey H. O'Keefe, President, Bradford-O'Keefe Funeral Homes, Inc.
Lyle M. Page, Partner, Page, Mannino, Peresich & McDermott
F. Walker Tucei, Executive Vice-President (retired), The Peoples Bank, Biloxi,
Mississippi
<PAGE> 44
Officers
The Peoples Bank, Biloxi, Mississippi
SENIOR MANAGEMENT
Chevis C. Swetman, President and CEO
Andy Carpenter, Executive Vice-President
Jeannette E. Romero, Senior Vice-President
Thomas J. Sliman, Senior Vice-President
Robert M. Tucei, Senior Vice-President
David M. Hughes, Senior Vice-President
Lauri A. Wood, Senior Vice-President
A. Wes Fulmer, Senior Vice-President
M. O. Lawrence, III, Senior Vice-President
COMMERCIAL LENDING
Darnell M. Hebert, Assistant Vice-President
CONSUMER LENDING
Brian J. Kozlowski, Assistant Vice-President
Stephanie D. Broussard, Loan Officer
COMPLIANCE
Evelyn R. Madison, Assistant Vice-President
AUDIT AND ACCOUNTING
Gregory M. Batia, Auditor
Caroline B. Randolph, Trust Auditor
Connie F. Lepoma, Accounting Officer
INVESTMENTS
Peggy M. Byrd, Vice-President
Janet H. Wood, Assistant Vice-President
LOAN PROCESSING
Donna F. Bessetti, Vice-President
Jesse J. Migues, Assistant Vice-President
Lisa S. Adams, 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
<PAGE> 45
Patricia L. Levine, Vice-President
Janice L. Smitherman, Employee Benefits Officer
Jennifer S. Crane, Marketing/Training Officer
ASSET MANAGEMENT & TRUST SERVICES
M. O. Lawrence, III, Senior Vice-President
Ann F. Guice, Vice-President
Emily W. Suares, Vice-President
Louise C. Johns, Trust Officer
Thomas H. Wicks, Trust Officer
Daniel A. Bass, Assistant Trust Officer
C. J. Dunaway, Assistant Trust Officer
Carla Hsie, Assistant Trust Officer
PROPERTY
Shirley A. Braun, Vice-President
Ray I. Cross, Assistant Vice-President - Appraisals
SECURITY
Robin J. Vignes, Vice-President
Minh-Tuyet Nguyen, Assistant Security Officer
Margaret H. Chandler, Assistant Security Officer
CASH MANAGEMENT
Larry A. Evans, Cash Management Officer
Gloria A. Cothern, Assistant Vice-President
DATA PROCESSING
Sandra L. York, Vice-President - Information Systems
Dennis J. Burke, Vice-President - Business Solutions
George S. Tranum, Assistant Vice-President - Technical Support
Ronald L. Baldwin, Systems Support Technician
Scott P. Landrum, Data Processing Officer
OPERATIONS/OTHER SERVICES
Cheryl A. Dubaz, Assistant Vice-President - ATM
Susan B. Polovich, Assistant Vice-President - Operations
Charlotte R. Balius, Bankcard Officer
Cassandra F. Reid, Assistant Cashier
Ardell M. Roberts, Assistant Cashier
Hugh J. Kavanagh, Assistant Cashier
Kathy S. Comstock, Savings Officer
Kathleen M. Worrell, Insurance Officer
Toni A. Montiforte, Assistant Cashier
<PAGE> 46
BRANCH LOCATIONS AND OFFICERS
The Peoples Bank, Biloxi, Mississippi
BILOXI BRANCHES
MAIN OFFICE, 152 Lameuse Street, Biloxi, Mississippi 39530, (228) 435-5511
Ralph A. Seymour, Vice-President
VETERANS AVENUE OFFICE, 186 Veterans Avenue, Biloxi, Mississippi 39531,
(228) 897-8711
R. Patrick Byrd, Branch Manager
Diana T. Winland, Loan Officer
WEST BILOXI OFFICE, 2430 Pass Road, Biloxi, Mississippi 39531, (228) 435-8203
Read H. Breeland, Assistant Vice-President
GULFPORT BRANCHES
DOWNTOWN GULFPORT OFFICE, 1105 30th Avenue, Gulfport, Mississippi 39501,
(228) 897-8715
David M. Hughes, Senior Vice-President
John W. McKellar, Vice-President
Brent G. Johnson, Assistant Vice-President
Diana W. Williams, Branch Manager
Shannon D. Garrett, Loan Officer
HANDSBORO OFFICE, 0412 E. Pass Road, Gulfport, Mississippi 39507, (228) 897-8717
Andrew M. Welter, Assistant Vice-President
ORANGE GROVE OFFICE, 12020 Highway 49 North, Gulfport, Mississippi 39503,
(228) 897-8718
Mark A. Chatham, Assistant Vice-President
OTHER BRANCHES
BAY ST. LOUIS OFFICE, 408 Highway 90 East, Bay St. Louis, Mississippi 39520,
(228) 897-8710
Jeannie M. Deen, Vice-President
Laura A. Elliott, Assistant Branch Manager
William R. Aborn, Loan Officer
DIAMONDHEAD OFFICE, 4408 West Aloha Drive, Diamondhead, Mississippi 39525,
(228) 897-8714
J. Patrick Wild, Assistant Vice-President
D'IBERVILLE-ST. MARTIN OFFICE, 10491 Lemoyne Boulevard, D'Iberville, Mississippi
39532, (228) 435-8202
Jerome D. Dodge, II, Vice-President
John L. Welter, IV, Loan Officer
LONG BEACH OFFICE, 403 Jeff Davis Avenue, Long Beach, Mississippi 39560
(228) 897-8712
Eric M. Chambless, Assistant Vice-President
OCEAN SPRINGS OFFICE, 2015 Bienville Boulevard, Ocean Springs, Mississippi
39564, (228) 435-8204
Ronnie F. Harrison, Assistant Vice-President
<PAGE> 47
PASS CHRISTIAN OFFICE, 125 Henderson Avenue, Pass Christian, Mississippi 39571,
(228) 897-8719
Gerald C. Gex, Jr., Assistant Vice-President
SAUCIER OFFICE, 17689 Second Street, Saucier, Mississippi 39574, (228) 897-8716
James P. Estrada, Assistant Vice-President
WIGGINS OFFICE, 1312 S. Magnolia Drive, Wiggins, Mississippi 39577
(228) 897-8722
Patrick R. Somers, Vice-President
William S. Maddox, Loan Officer
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, Senior Vice-President
The Peoples Bank, Biloxi, Mississippi
Asset Management & Trust Services Department
P. O. Box 1416, Biloxi, Mississippi 39533-1416
(228) 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 and Controller
Peoples Financial Corporation
P. O. Drawer 529, Biloxi, Mississippi 39533-0529
(228) 435-8412
(Company logo)
<PAGE> 1
EXHIBIT 23
Consent of Certified Public Accountants
We consent to the use of our reports, dated January 19, 2000, in Form 10-K
filing of the Peoples Financial Corporation.
/s/ Piltz, Williams, LaRosa & Co.
PILTZ, WILLIAMS, LAROSA & CO.
Biloxi, Mississippi
February 24, 2000
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 35,540,978
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 33,075,555
<INVESTMENTS-CARRYING> 115,272,790
<INVESTMENTS-MARKET> 113,709,000
<LOANS> 332,516,552
<ALLOWANCE> 4,338,149
<TOTAL-ASSETS> 537,972,418
<DEPOSITS> 394,681,157
<SHORT-TERM> 0
<LIABILITIES-OTHER> 3,647,626
<LONG-TERM> 274,129
0
0
<COMMON> 2,952,672
<OTHER-SE> 74,814,214
<TOTAL-LIABILITIES-AND-EQUITY> 537,972,418
<INTEREST-LOAN> 26,425,625
<INTEREST-INVEST> 8,510,794
<INTEREST-OTHER> 503,882
<INTEREST-TOTAL> 35,440,301
<INTEREST-DEPOSIT> 12,909,303
<INTEREST-EXPENSE> 14,440,905
<INTEREST-INCOME-NET> 20,999,396
<LOAN-LOSSES> 120,000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 5,062,970
<INCOME-PRETAX> 9,208,389
<INCOME-PRE-EXTRAORDINARY> 9,208,389
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,250,019
<EPS-BASIC> 2.12
<EPS-DILUTED> 2.12
<YIELD-ACTUAL> 4.50
<LOANS-NON> 100,000
<LOANS-PAST> 1,238,000
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 4,382,000
<CHARGE-OFFS> 408,000
<RECOVERIES> 244,000
<ALLOWANCE-CLOSE> 4,338,000
<ALLOWANCE-DOMESTIC> 4,338,000
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 125,000
</TABLE>
