<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15 (D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
-------------------------
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number 0-30050
-----------------------------
PEOPLES FINANCIAL CORPORATION
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Mississippi 64-0709834
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Lameuse and Howard Avenues, Biloxi, Mississippi 39533
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(228) 435-5511
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the last practicable date. Peoples Financial Corporation has
only one class of common stock authorized. At May 1, 2000, there were 15,000,000
shares of $1 par value common stock authorized, and 5,905,344 shares issued and
outstanding.
Page 1 of 20
<PAGE> 2
PART I
FINANCIAL INFORMATION
PEOPLES FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
March 31, December 31, and March 31, 2000 1999 1999
------------- ------------- -------------
<S> <C> <C> <C>
ASSETS
Cash and due from banks $ 33,171,502 $ 35,540,978 $ 33,604,597
Held to maturity securities, market value of
$118,238,000 - March 31, 2000;
$113,709,000 - December 31, 1999;
$141,009,000 - March 31, 1999 120,036,460 115,272,790 140,496,326
Available for sale securities, at market value 39,815,518 33,075,555 13,552,954
Federal Home Loan Bank stock, at cost 1,647,300 1,647,300
Federal funds sold 48,950,000
Loans 349,531,990 332,516,552 290,682,700
Less: Unearned income 13,009 6,985 9,804
Allowance for loan losses 4,215,983 4,338,149 4,386,613
------------- ------------- -------------
Loans, net 345,302,998 328,171,418 286,286,283
Bank premises and equipment, net of
accumulated depreciation of $10,513,000 -
March 31, 2000; $10,090,000 - December 31,
1999; and $9,320,000 - March 31, 1999 17,452,256 16,960,986 16,681,731
Other real estate 75,068 94,502 154,810
Accrued interest receivable 4,093,561 3,785,623 2,806,901
Other assets 5,700,311 3,423,266 3,841,791
------------- ------------- -------------
TOTAL ASSETS $ 567,294,974 $ 537,972,418 $ 546,375,393
============= ============= =============
</TABLE>
Page 2 of 20
<PAGE> 3
PEOPLES FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Continued)
(Unaudited)
<TABLE>
<CAPTION>
March 31, December 31, and March 31, 2000 1999 1999
------------- ------------- -------------
<S> <C> <C> <C>
LIABILITIES & SHAREHOLDERS' EQUITY
Liabilities:
Deposits:
Demand, non-interest bearing $ 85,825,727 $ 77,980,244 $ 94,344,254
Savings and demand, interest bearing 194,414,452 160,605,623 188,009,237
Time, $100,000 or more 78,163,713 91,575,980 77,118,568
Other time deposits 61,799,706 64,519,310 70,843,567
------------- ------------- -------------
Total deposits 420,203,598 394,681,157 430,315,626
Accrued interest payable 626,116 768,943 836,750
Federal funds purchased and securities sold under
agreements to repurchase 62,620,718 60,833,677 35,974,861
Notes payable 312,432 274,129 199,805
Other liabilities 4,599,036 3,647,626 4,520,581
------------- ------------- -------------
TOTAL LIABILITIES 488,361,900 460,205,532 471,847,623
SHAREHOLDERS' EQUITY:
Common Stock, $1 par value, 15,000,000 shares
authorized, 5,905,344 shares issued and
outstanding at March 31, 2000, December
31, 1999 and March 31, 1999, after giving
retroactive effect to two for one stock split
effective April 17, 2000 5,905,344 5,905,344 5,905,344
Surplus 65,759,086 65,759,086 60,759,086
Undivided profits 8,046,383 6,837,628 7,636,807
Unearned compensation (636,580) (624,842)
Accumulated other comprehensive income (141,159) (110,330) 226,533
------------- ------------- -------------
TOTAL SHAREHOLDERS' EQUITY 78,933,074 77,766,886 74,527,770
------------- ------------- -------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 567,294,974 $ 537,972,418 $ 546,375,393
============= ============= =============
</TABLE>
See Selected Notes to Consolidated Financial Statements.
Page 3 of 20
<PAGE> 4
PEOPLES FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
For the Quarters Ended March 31, 2000 1999
------------- -------------
<S> <C> <C>
INTEREST INCOME:
Interest and fees on loans $ 7,609,111 $ 6,116,045
Interest and dividends on investments:
U. S. Treasury 885,925 1,182,984
U. S. Government agencies and corporations 1,187,004 631,544
States and political subdivisions 136,500 113,888
Other investments 44,598 84,375
Interest on federal funds sold 30,468 173,961
------------- -------------
TOTAL INTEREST INCOME 9,893,606 8,302,797
------------- -------------
INTEREST EXPENSE:
Time deposits of $100,000 or more 1,131,041 926,278
Other deposits 2,231,431 2,321,769
Mortgage indebtedness 2,421 2,716
Federal funds purchased and securities sold under
agreements to repurchase 597,746 281,937
------------- -------------
TOTAL INTEREST EXPENSE 3,962,639 3,532,700
------------- -------------
NET INTEREST INCOME 5,930,967 4,770,097
Provision for losses on loans 52,500 30,000
------------- -------------
NET INTEREST INCOME AFTER PROVISION FOR LOSSES ON LOANS $ 5,878,467 $ 4,740,097
------------- -------------
</TABLE>
Page 4 of 20
<PAGE> 5
PEOPLES FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (Continued)
(Unaudited)
<TABLE>
<CAPTION>
For the Quarters Ended March 31, 2000 1999
------------- -------------
<S> <C> <C>
OTHER OPERATING INCOME:
Trust department income and fees $ 290,785 $ 280,415
Service charges on deposit accounts 1,236,333 1,164,264
Other service charges, commissions and fees 65,259 56,178
Other income 84,414 107,926
------------- -------------
TOTAL OTHER OPERATING INCOME 1,676,791 1,608,783
------------- -------------
OTHER OPERATING EXPENSE:
Salaries and employee benefits 2,646,532 2,397,291
Net occupancy 249,473 244,953
Equipment rentals, depreciation and maintenance 609,463 575,274
Other expense 1,371,401 896,598
------------- -------------
TOTAL OTHER OPERATING EXPENSE 4,876,869 4,114,116
------------- -------------
INCOME BEFORE INCOME TAXES 2,678,389 2,234,764
Income taxes 879,100 776,100
------------- -------------
NET INCOME $ 1,799,289 $ 1,458,664
============= =============
</TABLE>
See Selected Notes to Consolidated Financial Statements.
Page 5 of 20
<PAGE> 6
PEOPLES FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(Unaudited)
<TABLE>
<CAPTION>
Accumu-
lated
Other
# of Unearned Compre-
Common Common Undivided Compensa- hensive Comprehen-
Shares Stock Surplus Profits tion Income sive Income Total
--------- ----------- ------------ ----------- ---------- --------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE,
JANUARY 1,
1999, AS
PREVIOUSLY
REPORTED 2,952,672 $ 2,952,672 $ 63,711,758 $ 6,739,151 $ (160,900) $ 302,712 $ 73,545,393
Two-for-one
stock split in
2000 2,952,672 2,952,672 (2,952,672)
--------- ----------- ------------ ----------- ---------- --------- -------------
BALANCE,
JANUARY 1,
1999, AS
RESTATED 5,905,344 5,905,344 60,759,086 6,739,151 (160,900) 302,712 73,545,393
Comprehensive
Income:
Net income 1,458,664 $ 1,458,664 1,458,664
Net unrealized
loss on
available for
sale securities,
net of tax (76,057) (76,057) (76,057)
Reclassifica-
tion adjustment
for available
for sale
securities
called or sold
in current year,
net of tax (122) (122) (122)
-----------
Total compre-
hensive income $ 1,382,485
===========
Allocation of
ESOP shares 160,900 160,900
Cash
dividends
(.095 per share) (561,008) (561,008)
--------- ----------- ------------ ----------- ---------- --------- -------------
BALANCE,
MARCH 31,
1999 5,905,344 $ 5,905,344 $ 60,759,086 $ 7,636,807 $ 0 $ 226,533 $ 74,527,770
========= =========== ============ =========== ========== ========= =============
</TABLE>
Page 6 of 20
<PAGE> 7
PEOPLES FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Continued)
(Unaudited)
<TABLE>
<CAPTION>
Accumu-
lated
Other
# of Unearned Compre-
Common Common Undivided Compensa- hensive Comprehen-
Shares Stock Surplus Profits tion Income sive Income Total
--------- ----------- ------------ ----------- ---------- --------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE,
JANUARY 1,
2000 5,905,344 $ 5,905,344 $ 65,759,086 $ 6,837,628 $ (624,842) $(110,330) $ 77,766,886
Comprehensive
Income:
Net income 1,799,289 $ 1,799,289 1,799,289
Net unrealized
loss on
available for
sale securities,
net of tax (31,164) (31,164) (31,164)
Reclassifica-
tion adjustment
for available
for sale
securities
called or sold
in current year,
net of tax 335 335 335
-----------
Total
comprehensive
income $ 1,768,460
===========
Purchase of
common shares
by ESOP (41,738) (41,738)
Allocation of
ESOP shares 30,000 30,000
Cash
dividends
($ .10 per
share) (590,534) (590,534)
--------- ----------- ------------ ----------- ---------- --------- -------------
BALANCE,
MARCH 31,
2000 5,905,344 $ 5,905,344 $ 65,759,086 $ 8,046,383 $ (636,580) $(141,159) $ 78,933,074
========= =========== ============ =========== ========== ========= =============
</TABLE>
See Selected Notes to Consolidated Financial Statements.
Page 7 of 20
<PAGE> 8
PEOPLES FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
For the Quarters Ended March 31, 2000 1999
------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,799,289 $ 1,458,664
Adjustments to reconcile net income to net cash provided
by operating activities:
Gain on sales of other real estate (449,530)
Depreciation and amortization 423,000 383,459
Provision for losses on loans 52,500
Changes in assets and liabilities:
Accrued interest receivable (307,938) 321,378
Other assets (168,241) 135,511
Accrued interest payable (142,827) (87,422)
Other liabilities 970,080 718,745
------------- -------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 2,625,863 2,480,805
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities and calls of held to maturity
securities 16,000,000 33,040,000
Investment in held to maturity securities (20,763,670) (38,812,631)
Proceeds from maturities, sales and calls of available for sale
securities 123,486 1,112,622
Investment in available for sale securities (6,912,948) (1,948,650)
Proceeds from sales of other real estate 569,000
Loans, net (increase) decrease (17,154,080) 1,005,358
Acquisition of premises and equipment (894,836) (1,141,740)
Federal funds sold (48,950,000)
Other assets (2,108,804) (183,089)
------------- -------------
NET CASH USED IN INVESTING ACTIVITIES $ (31,710,852) $ (55,309,130)
------------- -------------
</TABLE>
Page 8 of 20
<PAGE> 9
PEOPLES FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(Unaudited)
<TABLE>
<CAPTION>
For the Quarters Ended March 31, 2000 1999
------------- -------------
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Demand and savings deposits, net increase $ 41,654,312 $ 41,928,831
Time deposits, net increase (decrease) (16,131,871) 6,784,559
Principal payments on notes (3,435) (3,141)
Cash dividends (590,534) (561,008)
Federal funds purchased and securities sold under
agreements to repurchase, net increase 1,787,041 7,924,081
------------- -------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 26,715,513 56,073,322
------------- -------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (2,369,476) 3,244,997
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 35,540,978 30,359,600
------------- -------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 33,171,502 $ 33,604,597
============= =============
</TABLE>
See Selected Notes to Consolidated Financial Statements.
Page 9 of 20
<PAGE> 10
PEOPLES FINANCIAL CORPORATION AND SUBSIDIARIES
SELECTED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Quarters Ended March 31, 2000 and 1999
1. The accompanying unaudited consolidated financial statements have been
prepared with the accounting policies in effect as of December 31, 1999 as set
forth in the Notes to the Consolidated Financial Statements of Peoples Financial
Corporation and Subsidiaries (the Company). In the opinion of Management, all
adjustments necessary for a fair presentation of the condensed consolidated
financial statements have been included and are of a normal recurring nature.
The accompanying unaudited consolidated financial statements have been prepared
also in accordance with the instructions to Form 10-Q and Rule 10-01 of
Regulations S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements.
2. The results of operations for the quarter ended March 31, 2000, are not
necessarily indicative of the results to be expected for the full year.
3. Per share data is based on the weighted average shares of common stock
outstanding of 5,905,344 for the quarters ended March 31, 2000 and 1999.
4. At March 31, 2000 and 1999, the total recorded investment in impaired loans
amounted to $131,000 and $473,000, respectively. The amount of that recorded
investment in impaired loans for which there was no related allowance for loan
losses was $131,000 and $473,000 at March 31, 2000 and 1999, respectively. The
amount of interest not accrued on these loans did not have a significant effect
on earnings for the quarters ended March 31, 2000 and 1999.
5. Transactions in the allowance for loan losses were as follows:
<TABLE>
<S> <C>
Balance, January 1, 2000 $ 4,338,149
Provision for loan losses 52,500
Recoveries 44,649
Loans charged off (219,315)
-----------
Balance, March 31, 2000 $ 4,215,983
===========
</TABLE>
6. The Company has defined cash and cash equivalents to include cash and due
from banks. The Company paid $4,105,000 and $3,620,000 for the quarters ended
March 31, 2000 and 1999, respectively, for interest on deposits and borrowings.
Income tax payments totaled $125,000 during the quarter ended March 31, 1999. No
income tax payments were made during the quarter ended March 31, 2000. No loans
were transferred to other real estate during the quarters ended March 31, 2000
and 1999. After receiving regulatory approval, the Company transferred property
with a book value of $19,000 from other real estate into banking premises during
the quarter ended March 31, 2000.
7. The income tax effect on the accumulated other comprehensive income was
$(16,000) and $(39,000) at March 31, 2000 and 1999, respectively.
Page 10 of 20
<PAGE> 11
Independent Accountants' Review Report
Board of Directors
Peoples Financial Corporation
Biloxi, Mississippi
We have reviewed the accompanying consolidated balance sheets - Securities and
Exchange Commission Form 10-Q of Peoples Financial Corporation as of March 31,
2000, March 31, 1999 and December 31, 1999, and the related consolidated
statements of income, retained earnings, and cash flows - Securities and
Exchange Commission Form 10-Q, for the three months ended March 31, 2000 and
March 31, 1999, in accordance with Statements on Standards for Accounting and
Review Services issued by the American Institute of Certified Public
Accountants. All information included in these financial statements is the
representation of management of Peoples Financial Corporation.
A review consists principally of inquires of Company personnel and analytical
procedures applied to financial data. It is substantially less in scope than an
audit in accordance with generally accepted auditing standards, the objective of
which is the expression of an opinion regarding the financial statements taken
as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying financial statements in order for them to be in
conformity with Securities and Exchange Commission instructions for Form 10-Q
and Rule 10-01 of Regulations S-X.
/s/ Piltz, Williams, LaRosa & Co.
PILTZ, WILLIAMS, LAROSA & CO.
May 9, 2000
Biloxi, Mississippi
Page 11 of 20
<PAGE> 12
Item 2 - Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following presents Management's discussion and analysis of the consolidated
financial condition and results of operations of Peoples Financial Corporation
and Subsidiaries (the Company) for the quarters ended March 31, 2000 and 1999.
These comments highlight the significant events and should be considered in
combination with the Consolidated Financial Statements included in this report
on Form 10-Q.
FORWARD-LOOKING INFORMATION
Congress passed the Private Securities Litigation Act of 1995 in an effort to
encourage corporations to provide information about a company's anticipated
future financial performance. This act provides a safe harbor for such
disclosure which protects the companies from unwarranted litigation if actual
results are different from management expectations. This report contains
forward-looking statements and reflects industry conditions, company performance
and financial results. These forward-looking statements are subject to a number
of factors and uncertainties which could cause the Company's actual results and
experience to differ from the anticipated results and expectations expressed in
such forward-looking statements.
OVERVIEW
The significant development during the first quarter of 2000 was the strong
earnings from operations versus the first quarter of 1999. During the first
quarter of 1999, the Company realized a gain for book purposes of $293,000, net
of taxes, from the sale of other real estate. In 2000, the Company realized net
income of $1,799,000 from normal operations, without any unusual or
non-recurring transactions, as a result of the continuing loan and deposit
growth. The following schedule compares financial highlights for the quarters
ended March 31, 2000 and 1999:
<TABLE>
<CAPTION>
For the quarters ended March 31, 2000 1999
---------- ----------
<S> <C> <C>
Net income per share $ 0.30 $ 0.25
Book value per share $ 13.37 $ 12.62
Return on average total assets 1.29% 1.12%
Return on average shareholders' equity 9.19% 7.87%
Allowance for loan losses as a % of 1.20% 1.51%
loans, net of unearned discount
</TABLE>
Page 12 of 20
<PAGE> 13
FINANCIAL CONDITION
HELD TO MATURITY SECURITIES
Held to maturity securities decreased $20,460,000 at March 31, 2000, compared
with March 31, 1999, as a result of the management of the Company's liquidity
position. As funds were available either from the maturity of these securities
or the increase in deposits, they were invested in short term U. S. Treasury and
U. S. Government Agency securities, which have been classified as available for
sale. Gross unrealized gains for held to maturity securities were $185,000 and
$942,000 and gross unrealized losses for held to maturity securities were
$1,983,000 and $429,000 at March 31, 2000 and 1999, respectively. The following
schedule reflects the mix of the held to maturity investment portfolio at March
31, 2000 and 1999:
<TABLE>
<CAPTION>
March 31, 2000 1999
----------------------------- -----------------------------
Amount % Amount %
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
U. S. Treasury $ 56,473,450 47.00% $ 91,227,812 64.90%
U. S. Government agencies 57,300,141 47.70% 42,334,589 30.10%
States and political
subdivisions 6,262,869 5.30% 6,933,925 5.00%
------------ ------------ ------------ ------------
Totals $120,036,460 100.00% $140,496,326 100.00%
============ ============ ============ ============
</TABLE>
AVAILABLE FOR SALE SECURITIES
Available for sale securities increased $26,263,000 at March 31, 2000, compared
with March 31, 1999, in the management of the Company's liquidity position, as
discussed above. Gross unrealized gains were $943,000 and $467,000 and gross
unrealized losses were $1,163,000 and $147,000 at March 31, 2000 and 1999,
respectively. The following schedule reflects the mix of available for sale
securities at March 31, 2000 and 1999:
<TABLE>
<CAPTION>
March 31, 2000 1999
----------------------------- -----------------------------
Amount % Amount %
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
U. S. Treasury $ 6,771,560 17.00% $ 3,975,994 29.30%
U. S. Government agencies 24,813,394 62.30% 5,718,981 42.20%
States and political
subdivisions 3,611,601 9.10% 3,216,646 23.70%
Other securities 4,618,963 11.60% 641,333 4.80%
------------ ------------ ------------ ------------
Totals $ 39,815,518 100.00% $ 13,552,954 100.00%
============ ============ ============ ============
</TABLE>
Page 13 of 20
<PAGE> 14
FEDERAL FUNDS SOLD
Federal funds sold were $48,950,000 at March 31, 1999, as compared with federal
funds purchased and securities sold under agreements to repurchase of
$62,621,000 at March 31, 2000. This fluctuation from federal funds sold to
federal funds purchased is a direct result of the management of the bank
subsidiary's liquidity position.
LOANS
Loans increased $58,850,000 at March 31, 2000, as compared with March 31, 1999,
as a result of the increase in loan demand in the Company's trade area during
the last 24 months. The Company anticipates that this demand will remain strong
throughout 2000.
ACCRUED INTEREST RECEIVABLE
Accrued interest receivable increased $1,287,000 as the result of an increase in
investments in U. S. Government and Agency securities and in loans at March 31,
2000, as compared with March 31, 1999.
OTHER ASSETS
Other assets increased $1,859,000 at March 31, 2000, as compared with March 31,
1999, due to the investment in whole life insurance owned by the bank
subsidiary.
DEPOSITS
Total deposits decreased $10,112,000 at March 31, 2000, as compared with March
31, 1999. Significant increases or decreases in total deposits from quarter to
quarter are anticipated by Management as customers in the casino industry and
county and municipal areas reallocate their resources periodically. As discussed
above, the Company has managed its funds including planning the timing and
classification 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 $26,646,000 at March 31, 2000, as compared with March 31, 1999, as the
result of the management of the Company's liquidity position and the
reallocation of funds by certain customers from deposit products to non-deposit
products, as mentioned above.
SHAREHOLDERS' EQUITY AND CAPITAL ADEQUACY
On March 22, 2000, the Company's Board of Directors approved a two for one
stock split of the common shares of the Company. As a result of the split,
which was effective April 17, 2000, shareholders holding a total of 2,952,672
shares of Company Stock received an additional 2,952,672 shares of the Company.
The Consolidated Statements of Condition and Shareholders' Equity have been
restated to give retroactive effect to these splits. Additionally, all share and
per share data have also been given retroactive effect for this split.
Strength, security and stability have been the hallmark of the Company since its
founding in 1985 and of its bank subsidiary since its founding in 1896. A strong
capital foundation is fundamental to the continuing prosperity of the Company
and the security of its customers and shareholders. One measure of capital
adequacy is the primary capital ratio which was 14.92% at March 31, 2000, as
compared with 15.13% at March 31, 1999. These ratios are well above the
regulatory minimum of 6.00%. Management continues to emphasize the importance of
maintaining the appropriate capital levels of the Company.
Page 14 of 20
<PAGE> 15
RESULTS OF OPERATIONS
NET INTEREST INCOME
Net interest income, the amount by which interest income on loans, investments
and other interest earning assets exceeds interest expense on deposits and other
borrowed funds, is the single largest component of the Company's income.
Management's objective is to provide the largest possible amount of income while
balancing interest rate, credit, liquidity and capital risk. Net interest income
increased $1,161,000 for the first quarter of 2000 as compared with the first
quarter of 1999. Total interest income increased $1,591,000 for the quarter
ended March 31, 2000, as compared with the quarter ended March 31, 1999. Total
interest expense increased $430,000 for the quarter ended March 31, 2000, as
compared with the quarter ended March 31, 1999. The following schedule
summarizes net interest earnings and net yield on interest earning assets:
Net Interest Earnings and Net Yield on Interest Earning Assets
<TABLE>
<CAPTION>
Quarters Ended March 31, (In
thousands, except percentages) 2000 1999
------------- -------------
<S> <C> <C>
TOTAL INTEREST INCOME (1) $ 9,964 $ 8,362
TOTAL INTEREST EXPENSE 3,963 3,533
------------- -------------
NET INTEREST EARNINGS $ 6,001 $ 4,829
============= =============
NET YIELD ON INTEREST EARNING ASSETS 4.82% 4.26%
============= =============
</TABLE>
(1) All Interest Earned is Reported on a taxable Equivalent Basis Using a Tax
Rate of 34% in 2000 and 1999.
The schedule on page 16 provides an analysis of the change in total interest
income and total interest expense for the quarters ended March 31, 2000 and
1999. These changes are generally attributable to a change in volume and/or a
change in the applicable rates.
Page 15 of 20
<PAGE> 16
Analysis of Changes in Interest Income and Interest Expense
(In Thousands)
<TABLE>
<CAPTION>
Attributable To:
------------------------------------------
For the For the
Quarter Quarter
Ended Ended
March 31, March 31, Increase Rate/
2000 1999 (Decrease) Volume Rate Volume
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
INTEREST
INCOME: (1)
Loans (2) (3) $ 7,609 $ 6,116 $ 1,493 $ 994 $ 429 $ 70
Federal funds sold 30 174 (144) (152) 65 (57)
Held to maturity:
Taxable 1,641 1,695 (54) (167) 125 (12)
Non-taxable 135 130 5 (9) 15 (1)
Available for sale:
Taxable 432 120 312 233 27 52
Non-taxable 72 43 29 20 6 3
Other 45 84 (39) 738 (79) (698)
---------- ---------- ---------- ---------- ---------- ----------
Total $ 9,964 $ 8,362 $ 1,602 $ 1,657 $ 588 $ (643)
========== ========== ========== ========== ========== ==========
INTEREST
EXPENSE:
Savings and
demand, interest
bearing $ 1,346 $ 1,373 $ (27) $ (3) $ (24) $
Time deposits 2,017 1,875 142 38 102 2
Federal funds
purchased and
securities sold
under agreements to
repurchase 598 282 316 276 20 20
Mortgage
indebtedness 2 3 (1) (1) (1) 1
---------- ---------- ---------- ---------- ---------- ----------
Total $ 3,963 $ 3,533 $ 430 $ 310 $ 97 $ 23
========== ========== ========== ========== ========== ==========
</TABLE>
(1) All interest earned is reported on a taxable equivalent basis using a tax
rate of 34% in 2000 and 1999.
(2) Loan fees are included in these figures.
(3) Includes nonaccrual loans.
Page 16 of 20
<PAGE> 17
PROVISION FOR LOAN LOSSES
Management continuously monitors the Company's relationships with its loan
customers, especially those in concentrated industries such as seafood, gaming
and hotel/motel, and their direct and indirect impact on its operations. A
thorough analysis of current economic conditions and the quality of the loan
portfolio are conducted on a quarterly basis. 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 loan losses on a monthly
basis and expects to continue to do so throughout 2000. This action was
implemented primarily in response to the large increase in volume of the loan
portfolio and does not indicate a deterioration of its quality.
SALARIES AND EMPLOYEE BENEFITS
Salaries and employee benefits increased $249,000 for the quarter ended March
31, 2000, as compared with the quarter ended March 31, 1999. This increase is
largely due to the increase in full- time employees during 1999 as a result of
the opening of two new branch locations.
OTHER EXPENSE
Other expense increased $475,000 for the quarter ended March 31, 2000, as
compared with the quarter ended March 31, 1999, due to the gain from the sale of
other real estate of $443,000 included in other expense during the first quarter
of 1999.
LIQUIDITY
Liquidity represents the Company's ability to adequately provide funds to
satisfy demands from depositors, borrowers and other commitments by either
converting assets to cash or accessing new or existing sources of funds.
Management monitors these funds requirements in such a manner as to satisfy
these demands and provide the maximum earnings on its earning assets. Deposits,
payments of principal and interest on loans, proceeds from maturities of held to
maturity securities and earnings on held to maturity securities are the
principal sources of funds for the Company. At March 31, 2000, cash and due from
banks, investment securities and federal funds sold were 46% of total deposits,
as compared with 55% at March 31, 1999.
Page 17 of 20
<PAGE> 18
PART II
OTHER INFORMATION
Item 4 - Submission of Matters to a Vote of Security Holders
(a) The Annual Meeting of Shareholders of the Company was held on April 5,
2000.
(b) The following six directors were elected at the meeting to hold office for
a term of one year:
<TABLE>
<CAPTION>
Approve Disapprove
--------- ----------
<S> <C> <C>
Drew Allen 2,435,424
William A. Barq 2,435,424
Andy Carpenter 2,435,424
Dan Magruder 2,435,424
Lyle M. Page 2,435,424
Chevis C. Swetman 2,435,424
</TABLE>
Of the 2,952,672 shares outstanding on April 5, shares not voted amounted to
516,948 and 300 shares voted to abstain. The results of the vote have not been
adjusted for the two for one stock split effective April 17, 2000.
Item 5 - Other Information
At a meeting held on April 5, 2000, the Board of Directors of the Company
approved the following slate of officers:
<TABLE>
<CAPTION>
<S> <C>
Chevis C. Swetman President and Chief Executive Officer
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
</TABLE>
Page 18 of 20
<PAGE> 19
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
Schedule 27 - Financial Data Schedule
(b) Reports on Form 8-K
A Form 8-K was filed with the Commission on March 20, 2000. This filing related
to the release of information concerning the Company's application to be listed
on the NASDAQ Small Cap Market.
A Form 8-K was filed with the Commission on May 4, 2000. This filing related to
the release of information concerning approval of the Company's application to
be listed on the NASDAQ Small Cap Market.
Page 19 of 20
<PAGE> 20
SIGNATURES
Pursuant to the requirement of Section 13 of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
PEOPLES FINANCIAL CORPORATION
(Registrant)
Date: May 12, 2000
--------------------------------------
By: /s/ Chevis C. Swetman
--------------------------------------
Chevis C. Swetman
Chairman, President and Chief Executive Officer
Date: May 12, 2000
--------------------------------------
By: /s/ Lauri A. Wood
--------------------------------------
Lauri A. Wood
Chief Financial Officer and Controller
(principal financial and accounting officer)
Page 20 of 20
<PAGE> 21
Index to Exhibits
<TABLE>
<CAPTION>
Exhibit
Number Description
- -------- -----------
<S> <C>
27 Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 33,171,502
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 39,815,518
<INVESTMENTS-CARRYING> 120,036,460
<INVESTMENTS-MARKET> 118,238,000
<LOANS> 349,531,990
<ALLOWANCE> 4,215,983
<TOTAL-ASSETS> 567,294,974
<DEPOSITS> 420,203,598
<SHORT-TERM> 0
<LIABILITIES-OTHER> 4,599,036
<LONG-TERM> 312,432
0
0
<COMMON> 5,905,344
<OTHER-SE> 73,027,730
<TOTAL-LIABILITIES-AND-EQUITY> 567,294,974
<INTEREST-LOAN> 7,609,111
<INTEREST-INVEST> 2,254,027
<INTEREST-OTHER> 30,468
<INTEREST-TOTAL> 9,893,606
<INTEREST-DEPOSIT> 3,362,472
<INTEREST-EXPENSE> 3,962,639
<INTEREST-INCOME-NET> 5,930,967
<LOAN-LOSSES> 52,500
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 1,371,401
<INCOME-PRETAX> 2,678,389
<INCOME-PRE-EXTRAORDINARY> 2,678,389
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,799,289
<EPS-BASIC> 0.30
<EPS-DILUTED> 0.30
<YIELD-ACTUAL> 4.82
<LOANS-NON> 131,000
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 4,338,149
<CHARGE-OFFS> 219,315
<RECOVERIES> 44,649
<ALLOWANCE-CLOSE> 4,215,983
<ALLOWANCE-DOMESTIC> 4,215,983
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 200,000
</TABLE>
