<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 June 30, 2000
-------------
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number 0-30050
-------
PEOPLES FINANCIAL CORPORATION
-------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Mississippi 64-0709834
------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
Lameuse and Howard Avenues, Biloxi, Mississippi 39533
-------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(228) 435-5511
-------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the last practicable date.
Peoples Financial Corporation has only one class of common stock authorized. At
July 25, 2000, there were 15,000,000 shares of $1 par value common stock
authorized, and 5,862,674 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>
June 30, December 31, and June 30, 2000 1999 1999
---------------------------------- ------------ ------------ ------------
<S> <C> <C> <C>
ASSETS
Cash and due from banks $ 33,690,622 $ 35,540,978 $ 31,898,009
Available for sale securities 41,263,586 33,075,555 22,992,765
Held to maturity securities, market value of
$103,564,000 - June 30, 2000;
$113,709,000 - December 31, 1999;
$153,877,000 - June 30, 1999 105,292,874 115,272,790 154,482,682
Federal Home Loan Bank Stock, at cost 1,647,300 1,647,300
Federal funds sold 2,750,000
Loans 370,175,118 332,516,552 302,777,457
Less: Unearned income 15,296 6,985 10,374
Allowance for loan losses 4,153,855 4,338,149 4,126,799
------------ ------------ ------------
Loans, net 366,005,967 328,171,418 298,640,284
Bank premises and equipment, net of
accumulated depreciation of $10,711,000 -
June 30, 2000; $10,090,000 - December 31,
1999; and $9,328,000 - June 30, 1999 18,655,870 16,960,986 17,005,393
Other real estate 117,207 94,502 154,809
Accrued interest receivable 2,995,829 3,785,623 3,297,799
Other assets 5,695,152 3,423,266 3,760,160
------------ ------------ ------------
TOTAL ASSETS $575,364,407 $537,972,418 $534,981,901
============ ============ ============
</TABLE>
Page 2 of 20
<PAGE> 3
PEOPLES FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Continued)
(Unaudited)
<TABLE>
<CAPTION>
June 30, December 31, and June 30, 2000 1999 1999
---------------------------------- -------------- -------------- --------------
<S> <C> <C> <C>
LIABILITIES & SHAREHOLDERS' EQUITY
LIABILITIES:
Deposits:
Demand, non-interest bearing $ 74,820,606 $ 77,980,244 $ 98,379,030
Savings and demand, interest bearing 161,260,097 160,605,623 168,078,858
Time, $100,000 or more 87,317,766 91,575,980 69,779,618
Other time deposits 63,930,598 64,519,310 68,211,983
-------------- -------------- --------------
Total deposits 387,329,067 394,681,157 404,449,489
Accrued interest payable 724,090 768,943 780,871
Federal funds purchased and securities sold
under agreements to repurchase 69,555,335 60,833,677 50,694,047
Borrowings from the Federal Home Loan Bank 34,000,000
Notes payable 350,405 274,129 196,623
Other liabilities 4,560,120 3,647,626 3,864,252
-------------- -------------- --------------
TOTAL LIABILITIES 496,519,017 460,205,532 459,985,282
SHAREHOLDERS' EQUITY:
Common Stock, $1 par value, 15,000,000
shares authorized, 5,862,674,
5,905,344 and 5,905,344 shares issued
and outstanding at June 30, 2000,
December 31, 1999 and June 30, 1999,
respectively, after giving retroactive
effect to two for one stock split
effective April 17, 2000 5,862,674 5,905,344 5,905,344
Surplus 65,780,254 65,759,086 60,759,086
Undivided profits 8,020,800 6,837,628 9,050,476
Unearned compensation (647,910) (624,842) (600,840)
Accumulated other comprehensive income (170,428) (110,330) (117,447)
-------------- -------------- --------------
TOTAL SHAREHOLDERS' EQUITY 78,845,390 77,766,886 74,996,619
-------------- -------------- --------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 575,364,407 $ 537,972,418 $ 534,981,901
============== ============== ==============
</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 June 30, For The Six Months Ended June 30,
------------------------------- ---------------------------------
2000 1999 2000 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INTEREST INCOME:
Interest and fees on loans $ 8,220,162 $ 6,349,870 $ 15,829,273 $ 12,465,915
Interest and dividends on investments:
U. S. Treasury 823,049 1,273,219 1,708,974 2,456,203
U. S. Government agencies and
corporations 1,256,764 830,693 2,443,768 1,462,237
States and political subdivisions 132,732 126,810 269,232 240,698
Other investments 51,433 4,093 96,031 88,468
Interest on federal funds sold 5,723 249,949 36,191 423,910
------------ ------------ ------------ ------------
TOTAL INTEREST INCOME 10,489,863 8,834,634 20,383,469 17,137,431
------------ ------------ ------------ ------------
INTEREST EXPENSE:
Time deposits of $100,000 or more 1,116,202 937,196 2,247,243 1,863,474
Other deposits 2,166,020 2,279,830 4,397,451 4,601,599
Mortgage indebtedness 2,498 2,673 4,919 5,389
Borrowings from Federal Home Loan
Bank 426,514 426,514
Federal funds purchased and securities
sold under agreements to repurchase 822,632 366,294 1,420,378 648,231
------------ ------------ ------------ ------------
TOTAL INTEREST EXPENSE 4,533,866 3,585,993 8,496,505 7,118,693
------------ ------------ ------------ ------------
NET INTEREST INCOME 5,955,997 5,248,641 11,886,964 10,018,738
Provision for losses on loans 52,500 30,000 105,000 60,000
------------ ------------ ------------ ------------
NET INTEREST INCOME AFTER PROVISION
FOR LOSSES ON LOANS 5,903,497 5,218,641 11,781,964 9,958,738
------------ ------------ ------------ ------------
OTHER OPERATING INCOME:
Trust department income and fees 191,294 195,548 482,079 475,963
Service charges on deposit accounts 1,282,453 1,221,137 2,518,786 2,385,401
Other service charges, commissions
and fees 82,363 62,799 147,622 118,977
Other income 184,543 76,628 268,957 184,554
------------ ------------ ------------ ------------
TOTAL OTHER OPERATING INCOME $ 1,740,653 $ 1,556,112 $ 3,417,444 $ 3,164,895
------------ ------------ ------------ ------------
</TABLE>
Page 4 of 20
<PAGE> 5
PEOPLES FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (continued)
(Unaudited)
<TABLE>
<CAPTION>
For The Quarters Ended June 30, For The Six Months Ended June 30,
------------------------------- ---------------------------------
2000 1999 2000 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
OTHER OPERATING EXPENSE:
Salaries and employee benefits $ 2,638,124 $ 2,450,551 $ 5,284,656 $ 4,847,842
Net occupancy 254,124 170,859 503,597 415,812
Equipment rentals, depreciation and
maintenance 690,513 604,273 1,299,976 1,179,547
Other expense 1,276,751 1,402,015 2,648,152 2,298,613
------------ ------------ ------------ ------------
TOTAL OTHER OPERATING EXPENSE 4,859,512 4,627,698 9,736,381 8,741,814
------------ ------------ ------------ ------------
INCOME BEFORE INCOME TAXES 2,784,638 2,147,055 5,463,027 4,381,819
INCOME TAXES 888,400 733,386 1,767,500 1,509,486
------------ ------------ ------------ ------------
NET INCOME $ 1,896,238 $ 1,413,669 $ 3,695,527 $ 2,872,333
============ ============ ============ ============
</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>
Accumulated
# of Unearned Other Compre-
Common Common Undivided Compen- Comprehen- hensive
Shares Stock Surplus Profits sation sive Income 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
Compre-
hensive
Income:
Net income 2,872,333 $ 2,872,333 2,872,333
Net unreal-
ized loss
on
available
for sale
securities,
net of tax (420,159) (420,159) (420,159)
-----------
Total
compre-
hensive
income $ 2,452,174
===========
Purchase of
shares by
ESOP (600,840) (600,840)
Allocation
of ESOP
shares 160,900 160,900
Cash
dividends
($ .095 per
share) (561,008) (561,008)
--------- ----------- ------------ ----------- ---------- ------------ -----------
Balance,
June 30,
1999 5,905,344 $ 5,905,344 $ 60,759,086 $ 9,050,476 $ (600,840) $ (117,447) $74,996,619
========= =========== ============ =========== ========== ============ ===========
</TABLE>
Page 6 of 20
<PAGE> 7
PEOPLES FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Continued)
(Unaudited)
<TABLE>
<CAPTION>
Accumulated
# of Unearned Other Compre-
Common Common Undivided Compen- Comprehen- hensive
Shares Stock Surplus Profits sation sive Income Income Total
--------- ---------- ------------ ----------- ----------- ------------ ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance,
January 1,
2000 2,952,672 $ 2,952,672 $ 68,711,758 $ 6,837,628 $ (624,842) $ (110,330) $77,766,886
Two-for-
one stock
split in
2000 2,952,672 2,952,672 (2,952,672)
--------- ----------- ------------ ----------- ---------- ------------ ----------- -----------
Balance,
January 1,
2000, as
restated 5,905,344 5,905,344 65,759,086 6,837,628 (624,842) (110,330) 77,766,886
Compre-
hensive
Income
Net income 3,695,527 $ 3,695,527 3,695,527
Net
unrealized
loss on
available
for sale
securities,
net of tax (60,098) (60,098) (60,098)
-----------
Total
compre-
hensive
income $ 3,635,429
===========
Purchase of
common
shares by
ESOP (83,068) (83,068)
Allocation
of ESOP
shares 60,000 60,000
Retirement
of common
stock (42,670) (42,670) 21,168 (1,276,927) (1,298,429)
Dividend
declared
($.11 per
share) (644,894) (644,894)
Cash
dividends
($ .10 per
share) (590,534) (590,534)
--------- ----------- ------------ ----------- ---------- ------------ -----------
Balance,
June 30,
2000 5,862,674 $ 5,862,674 $ 65,780,254 $ 8,020,800 $ (647,910) $ (170,428) $78,845,390
========= =========== ============ =========== ========== ============ ===========
</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 Six Months Ended June 30, 2000 1999
--------------------------------- ------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 3,695,527 $ 2,872,333
Adjustments to reconcile net income to net cash provided
by operating activities:
Gain on sales of other real estate (449,529)
Gain on sale of bank premises (76,328)
Depreciation and amortization 876,000 773,459
Provision for losses on loans 105,000 60,000
Changes in assets and liabilities:
Accrued interest receivable 789,794 (169,520)
Other assets 80,319 (28,556)
Accrued interest payable (44,853) (143,301)
Other liabilities 298,369 239,516
------------ ------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 5,723,828 3,154,402
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales, maturities and calls of held to
maturity securities 32,000,000 67,120,000
Investment in held to maturity securities (22,020,084) (86,878,987)
Proceeds from sales, maturities and calls of available
for sale securities 132,312 1,189,430
Investment in available for sale securities (8,411,210) (11,986,349)
Loans made (37,921,688) (12,009,483)
Proceeds from sales of other real estate 569,000
Proceeds from sale of bank premises 195,865
Acquisition of premises and equipment (2,670,987) (1,855,402)
Federal funds sold (2,750,000)
Other assets (2,352,205) 62,609
------------ ------------
NET CASH USED IN INVESTING ACTIVITIES $(41,047,997) $(46,539,182)
------------ ------------
</TABLE>
Page 8 of 20
<PAGE> 9
PEOPLES FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(Unaudited)
<TABLE>
<CAPTION>
For The Six Months Ended June 30, 2000 1999
--------------------------------- ------------- ------------
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Demand and savings deposits, net increase (decrease) $ (2,505,164) $ 23,068,583
Time deposits, net decrease (4,846,926) (221,330)
Principal payments on notes (6,792) (6,323)
Retirement of common stock (1,298,429)
Cash dividends (590,534) (561,008)
Federal funds purchased and securities sold under
agreements to repurchase 8,721,658 22,643,267
Borrowings from Federal Home Loan Bank 34,000,000
------------ ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 33,473,813 44,923,189
------------ ------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (1,850,356) 1,538,409
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 35,540,978 30,359,600
------------ ------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 33,690,622 $ 31,898,009
============ ============
</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 Six Months Ended June 30, 2000 and 1999
1. The accompanying unaudited consolidated financial statements have been
prepared with the accounting policies in effect as of December 31, 1999 as set
forth in the Notes to the Consolidated Financial Statements of Peoples Financial
Corporation and Subsidiaries (the Company). In the opinion of Management, all
adjustments necessary for a fair presentation of the condensed consolidated
financial statements have been included and are of a normal recurring nature.
The accompanying unaudited consolidated financial statements have been prepared
also in accordance with the instructions to Form 10-Q and Rule 10-01 of
Regulations S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements.
2. The results of operations for the six months ended June 30, 2000, are not
necessarily indicative of the results to be expected for the full year.
3. Per share data is based on the weighted average shares of common stock
outstanding of 5,885,686 and 5,905,344 for the six months ended June 30, 2000
and 1999, respectively.
4. At June 30, 2000 and 1999, the total recorded investment in impaired loans
amounted to $44,000 and $251,000. The amount of that recorded investment in
impaired loans for which there was no related allowance for loan losses was
$44,000 and $251,000 at June 30, 2000 and 1999, respectively. The amount of
interest not accrued on these loans did not have a significant effect on
earnings for the six months ended June 30, 2000 and 1999.
5. Transactions in the allowance for loan losses were as follows:
<TABLE>
<S> <C>
Balance, January 1, 2000 $ 4,338,149
Recoveries 65,893
Loans charged off (355,187)
Provision for loan losses 105,000
-----------
Balance, June 30, 2000 $ 4,153,855
===========
</TABLE>
6. The Company has defined cash and cash equivalents to include cash and due
from banks. The Company paid $8,541,000 and $7,262,000 for the six months ended
June 30, 2000 and 1999, respectively, for interest on deposits and borrowings.
Income tax payments totaled $1,715,000 and $1,506,000 for the six months ended
June 30, 2000 and 1999, respectively. Loans transferred to
Page 10 of 20
<PAGE> 11
other real estate amounted to $42,000 for the six months ended June 30, 2000. No
loans were transferred to ORE for the six months ended June 30, 1999. After
receiving regulatory approval, the Company transferred property with a book
value of $19,000 from ORE to banking premises during the six months ended June
30, 2000.
7. The income tax effect on the accumulated other comprehensive income was
($31,000) and ($216,000) at June 30, 2000 and 1999, respectively.
Page 11 of 20
<PAGE> 12
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 June 30,
2000, June 30, 1999 and December 31, 1999, and the related consolidated
statements of income, retained earnings, and cash flows - Securities and
Exchange Commission Form 10-Q, for the six months ended June 30, 2000 and June
30, 1999, in accordance with Statements on Standards for Accounting and Review
Services issued by the American Institute of Certified Public Accountants. All
information included in these financial statements is the representation of
management of Peoples Financial Corporation.
A review consists principally of inquires of Company personnel and analytical
procedures applied to financial data. It is substantially less in scope than an
audit in accordance with generally accepted auditing standards, the objective of
which is the expression of an opinion regarding the financial statements taken
as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying financial statements in order for them to be in
conformity with Securities and Exchange Commission instructions for Form 10-Q
and Rule 10-01 of Regulations S-X.
/s/ Piltz, Williams, LaRosa & Co.
PILTZ, WILLIAMS, LAROSA & CO.
July 28, 2000
Biloxi, Mississippi
Page 12 of 20
<PAGE> 13
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 six months ended June 30, 2000 and 1999.
These comments highlight the significant events and should be considered in
combination with the Consolidated Financial Statements included in this report
on Form 10-Q.
FORWARD-LOOKING INFORMATION
Congress passed the Private Securities Litigation Act of 1995 in an effort to
encourage corporations to provide information about a company's anticipated
future financial performance. This act provides a safe harbor for such
disclosure which protects the companies from unwarranted litigation if actual
results are different from management expectations. This report contains
forward-looking statements and reflects industry conditions, company performance
and financial results. These forward-looking statements are subject to a number
of factors and uncertainties which could cause the Company's actual results and
experience to differ from the anticipated results and expectations expressed in
such forward-looking statements.
OVERVIEW
The significant development during the first six months of 2000 was the strong
earnings from operations versus the first six months of 1999. During the first
half 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 $3,696,000 from normal operations, as a result of continuing loan and
deposit growth.
The following schedule compares financial highlights for the six months ended
June 30, 2000 and 1999:
<TABLE>
<CAPTION>
For the six months ended June 30, 2000 1999
--------------------------------- ---------- ---------
<S> <C> <C>
Net income per share $ 0.63 $ 0.48
Book value per share $ 13.45 $ 12.79
Return on average total assets 1.32% 1.11%
Return on average shareholders' equity 9.44% 7.73%
Allowance for loan losses as a % of
loans, net of unearned discount 1.12% 1.36%
</TABLE>
Page 13 of 20
<PAGE> 14
FINANCIAL CONDITION
HELD TO MATURITY SECURITIES
Held to maturity securities decreased $49,190,000 at June 30, 2000, as compared
with June 30, 1999, as a result of the management of the Company's liquidity
position. As funds were available from the maturity of these securities, they
were generally invested in available for sale securities and used to fund loan
growth. Gross unrealized gains were $170,000 and $537,000 and gross unrealized
losses were $1,899,000 and $1,143,000 at June 30, 2000 and 1999, respectively.
There were no significant realized gains or losses on these investments during
the six months ended June 30, 2000 and 1999, respectively. The following
schedule reflects the mix of the held to maturity securities portfolio at June
30, 2000 and 1999:
<TABLE>
<CAPTION>
June 30, 2000 1999
-------- ------------------------------------- ---------------------------------------
Amount % Amount %
------------------- ---------------- -------------------- -----------------
<S> <C> <C> <C> <C>
U. S. Treasury securities $ 41,737,042 39.60% $ 95,217,017 61.60%
U. S. Government agencies 57,297,841 54.40% 52,334,301 33.90%
States and political
subdivisions 6,257,991 6.00% 6,931,364 4.50%
------------------- ---------------- -------------------- -----------------
Totals $ 105,292,874 100.00% $ 154,482,682 100.00%
=================== ================ ==================== =================
</TABLE>
AVAILABLE FOR SALE SECURITIES
Available for sale securities increased $18,271,000 at June 30, 2000, as
compared with June 30, 1999, as the result of the management of the Company's
liquidity position, as discussed above. Gross unrealized gains were $954,000 and
$454,000 and gross unrealized losses were $1,214,000 and $633,000 at June 30,
2000 and 1999, respectively. There were no significant realized gains or losses
on these investments during the six months ended June 30, 2000 and 1999. The
following schedule reflects the mix of available for sale securities at June 30,
2000 and 1999:
<TABLE>
<CAPTION>
June 30, 2000 1999
-------- ------------------------------------- ---------------------------------------
Amount % Amount %
------------------- ---------------- -------------------- -----------------
<S> <C> <C> <C> <C>
U. S. Treasury securities $ 6,793,140 16.50% $ 4,864,690 21.20%
U. S. Government agencies 25,756,348 62.40% 15,295,430 66.50%
States and political 4,147,635 10.00% 2,191,312 9.50%
subdivisions
Other securities 4,566,463 11.10% 641,333 2.80%
------------------- ----------------- ------------------- ------------------
Totals $ 41,263,586 100.00% $ 22,992,765 100.00%
=================== ================= =================== ==================
</TABLE>
Page 14 of 20
<PAGE> 15
FEDERAL FUNDS SOLD
Federal funds sold decreased $2,750,000 at June 30, 2000, compared with June 30,
1999. The liquidity needs of the bank subsidiary directly impact the federal
funds position of the Company.
LOANS
Loans increased $67,398,000 at June 30, 2000, as compared with June 30, 1999, as
a result of increased loan demand in the Company's trade area. The Company
anticipates that this increased demand will continue throughout the remainder of
2000. The allowance for loan losses as a % of loans, net of unearned discount,
has decreased from 1.36% at June 30, 1999, to 1.12% at June 30, 2000, as a
result of the increase in the loan portfolio. Management continues to monitor
the volume and quality of its loan portfolio and has determined that the
allowance is adequate.
OTHER ASSETS
Other assets increased $1,935,000 at June 30, 2000, as compared with June 30,
1999, primarily as the result of the investment in whole life insurance owned by
the bank subsidiary.
DEPOSITS
Total deposits have decreased $17,120,000 at June 30, 2000, as compared with
June 30, 1999. Significant increases or decreases in total deposits are
anticipated by Management as customers in the casino industry and county and
municipal areas reallocate their resources periodically. As discussed above, the
Company has managed its funds including planning the timing of investment
maturities so as to achieve appropriate liquidity.
FEDERAL FUNDS PURCHASED AND SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE
Federal funds purchased and securities sold under agreements to repurchase
increased $18,861,000 at June 30, 2000, as compared with June 30, 1999. This
fluctuation is primarily due to the liquidity needs of the bank subsidiary, as
discussed above.
BORROWINGS FROM FEDERAL HOME LOAN BANK
Borrowings from the Federal Home Loan Bank were $34,000,000 at June 30, 2000.
The Company acquired these funds in the management of its liquidity position.
SHAREHOLDERS' EQUITY AND CAPITAL ADEQUACY
On March 22, 2000, the Company's Board of Directors approved a two for one stock
split of the common shares of the Company. As a result of this split, which was
effective April 17, 2000, shareholders holding a total of 2,952,672 shares of
the Company stock received an additional 2,952,672 shares of the Company. The
Consolidated Statements of Condition and Shareholders' Equity have been restated
to give retroactive effect to these splits. Additionally, all share and per
share data have also been given retroactive effect for this split.
On May 24, 2000, the Company's Board of Directors approved the repurchase of up
to 2.5% of the outstanding shares of the Company's common stock. As of June 30,
2000, 42,670 shares had been repurchased and retired.
Page 15 of 20
<PAGE> 16
On June 28, 2000, the Company's Board of Directors approved a semi-annual
dividend of $ .11 per share. The dividend had a record date of July 10, 2000 and
a distribution date of July 14, 2000.
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 14.79% at June 30, 2000, as
compared with 15.34% at June 30, 1999. The decrease at June 30, 2000, reflects
the significant increase in total assets rather than the softening of the
Company's capital. These ratios are well above the regulatory minimum of 6.00%.
Management continues to emphasize the importance of maintaining the appropriate
capital levels of the Company.
RESULTS OF OPERATIONS
NET INTEREST INCOME
Net interest income, the amount by which interest income on loans, investments
and other interest earning assets exceeds interest expense on deposits and other
borrowed funds, is the single largest component of the Company's income.
Management's objective is to provide the largest possible amount of income while
balancing interest rate, credit, liquidity and capital risk.
Net interest income increased $708,000 for the second quarter of 2000 as
compared with the second quarter of 1999. Net interest income increased
$1,868,000 for the six months ended June 30, 2000, as compared with the six
months ended June 30, 1999. Total interest income increased $1,655,000 for the
quarter ended June 30, 2000, as compared with the quarter ended June 30, 1999.
Total interest income increased $3,246,000 for the six months ended June 30,
2000, as compared with the six months ended June 30, 1999. Total interest
expense increased $947,000 for the quarter ended June 30, 2000, as compared with
quarter ended June 30, 1999. Total interest expense increased $1,378,000 for the
six months ended June 30, 2000, as compared with the six months ended June 30,
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>
Six Months Ended June 30, (In
thousands, except percentages) 2000 1999
------------------------------ --------- --------
<S> <C> <C> <C>
Total interest income (1) $ 20,520 $ 17,261
Total interest expense 8,497 7,119
--------- --------
Net interest earnings $ 12,023 $ 10,142
========= ========
Net yield on interest earning
assets 5.14% 4.34%
========= ========
</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 17 provides an analysis of the change in total interest
income and total interest expense for the six months ended June 30, 2000 and
1999.
Page 16 of 20
<PAGE> 17
ANALYSIS OF CHANGES IN INTEREST INCOME AND INTEREST EXPENSE
(In Thousands)
<TABLE>
<CAPTION>
For the Six For the Six Attributable To:
Months Months ------------------------------------
Ended June Ended June Increase Rate/
30, 2000 30, 1999 (Decrease) Volume Rate Volume
---------- ----------- ---------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
INTEREST
INCOME: (1)
Loans (2) $ 15,829 $ 12,466 $ 3,363 $ 2,305 $ 893 $ 165
Federal funds sold 36 424 (388) (394) 86 (80)
Held to maturity:
Taxable securities 3,204 3,576 (372) (605) 280 (47)
Non-taxable
securities 277 269 8 (36) 51 (7)
Available for sale:
Taxable securities 948 342 606 457 64 85
Non-taxable
securities 130 96 34 53 (12) (7)
Other securities 96 88 8 767 (78) (681)
-------- -------- -------- -------- -------- --------
Total $ 20,520 $ 17,261 $ 3,259 $ 2,547 $ 1,284 $ (572)
======== ======== ======== ======== ======== ========
INTEREST
EXPENSE:
Savings and nego-
tiable interest
bearing deposits $ 2,630 $ 2,732 $ (102) $ (74) $ (29) $ 1
Time deposits 4,015 3,734 281 (54) 340 (5)
Borrowings from
FHLB 427 427 427
Federal funds sold
federal funds pur-
chased and secur-
ities sold under
agreements to
repurchase 1,420 648 772 585 98 89
Mortgage
indebtedness 5 5 (1) 1
-------- -------- -------- -------- -------- --------
Total $ 8,497 $ 7,119 $ 1,378 $ 883 $ 410 $ 85
======== ======== ======== ======== ======== ========
</TABLE>
(1) All interest earned is reported on a taxable equivalent basis using a tax
rate of 34% in 2000 and 1999.
(2) Loan fees are included in these figures. Includes nonaccrual loans.
Page 17 of 20
<PAGE> 18
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 for 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 $437,000 for the six months ended June
30, 2000, as compared with the six months ended June 30, 1999. This increase was
largely due to the increase in employees during 1999 as a result of the opening
of two new branch locations.
OTHER EXPENSE
Other expense increased $350,000 for the six months ended June 30, 2000, as
compared with the same period during 1999, due to the gain from the sale of
other real estate of $443,000 included in other expense during 1999.
LIQUIDITY
Liquidity represents the Company's ability to adequately provide funds to
satisfy demands from depositors, borrowers and other commitments by either
converting assets to cash or accessing new or existing sources of funds.
Management monitors these funds requirements in such a manner as to satisfy
these demands and provide the maximum earnings on its earning assets. Deposits,
payments of principal and interest on loans, proceeds from maturities of
investment securities and earnings on investment securities are the principal
sources of funds for the Company. At June 30, 2000, cash and due from banks,
investment securities and federal funds sold were 47% of total deposits, as
compared with 52% at June 30, 1999.
Page 18 of 20
<PAGE> 19
PART II
OTHER INFORMATION
Item 5 - Other Information
None.
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 23 Consent of Certified Public Accountants
Exhibit 27 Financial Data Schedule
(b) Reports on Form 8-K
A Form 8-K was filed with the Commission on May 26, 2000. This filing related to
the announcement of a stock repurchase plan.
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: July 31, 2000
--------------------------------------
By: /s/ Chevis C. Swetman
--------------------------------------
Chevis C. Swetman
Chairman, President and Chief Executive Officer
Date: July 31, 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
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
Exhibit 23 - Consent of Certified Public Accountants
Exhibit 27 - Financial Data Schedule
</TABLE>
