U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
-------------------
[ ] TRANSITION REPORT PURSUANT SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to ________
Commission file number 33-88802
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PEOPLES FINANCIAL CORP., INC.
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(Exact name of small business issuer as specified in its charter)
Pennsylvania 25-1469914
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
Ford Street and Fourth Avenue, Ford City, PA 16226
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(Address of principal executive offices)
(412) 763-1221
----------------------------
(Issuer's telephone number)
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(Former name, former address and former fiscal year, if
changed since last report)
Check whether the issuer (1) filed all reports required to
be filed by Section 13 or 15(d) of the Exchange Act during the
past 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 [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the
issuer's classes of common equity, as of the latest practicable
dates: November 10, 1997
------------------
As of November 10, 1997, there were 882,168 shares of the
Registrant's common stock, $0.30 par value, outstanding.
Transitional Small business Disclosure Format (check one):
Yes [ ] No [X]
<PAGE>
PEOPLES FINANCIAL CORP., INC. AND SUBSIDIARY
INDEX PAGE
- ----- ----
PART I. FINANCIAL INFORMATION
ITEM 1. Consolidated Balance Sheets -
September 30, 1997 (unaudited) and
December 31, 1996 1
Consolidated Statements of Income -
Nine months ended September 30, 1997 and
1996 (unaudited) 2
Consolidated Statements of Cash Flow -
Nine months ended September 30, 1997 and
1996 (unaudited) 3
Notes to Consolidated Financial Statements 4
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operation 5
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings 6
ITEM 2. Changes in Securities 7
ITEM 3. Defaults Upon Senior Securities 7
ITEM 4. Submission of Matters to a Vote of
Securities Holders 7
ITEM 5. Other Information 7
ITEM 6. Exhibits and Reports on Form 8-K 8
SIGNATURES 9
<PAGE>
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
PEOPLES FINANCIAL CORP., INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<CAPTION>
September 30,
1997 December 31,
(Unaudited) 1996
------------ -----------
<S> <C> <C>
ASSET
Cash and due from banks $ 7,593,520 $ 8,944,707
Federal funds sold 8,600,000 7,325,000
Securities available for sale 33,827,618 25,315,225
Investment securities, at cost 31,875,601 25,674,119
Federal Home Loan Bank stock 740,200 569,500
Loans, net 147,137,643 136,050,197
Premises and equipment, net 3,592,604 3,748,922
Other assets 2,642,258 3,184,521
----------- ------------
TOTAL ASSETS $236,009,444 $210,812,191
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits
Non-interest bearing $ 22,582,385 $ 20,860,522
Interest bearing 168,338,180 155,404,110
------------ ------------
Total deposits 190,920,565 176,264,632
Accrued interest and
other liabilities 10,983,526 7,679,408
------------ ------------
TOTAL LIABILITIES 201,904,091 183,944,040
STOCKHOLDERS' EQUITY
Common stock, par value 264,650 264,247
Additional paid-in capital 3,932,656 3,849,750
Retained earnings 14,783,709 13,377,522
Unrealized holding gains on
securities available for sale 15,124,338 9,376,632
------------ -------------
Total stockholders' equity 34,105,353 26,868,151
------------ -------------
TOTAL LIABILITIES AND
STOCKHOLDERS EQUITY $236,009,444 $210,812,191
============ =============
The accompanying notes are an integral part of these
consolidated financial statements.
</TABLE>
Page 1
<PAGE>
<TABLE>
PEOPLES FINANCIAL CORP., INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
<CAPTION>
Nine Months Ended September 30
1997 1996
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<S> <C> <C>
Interest Income
Loans $ 9,076,717 $ 8,005,286
Investment securities 2,066,355 2,080,753
Interest bearing deposits 1,218 3,307
Federal funds sold 339,791 231,732
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TOTAL INTEREST INCOME 11,484,081 10,321,078
Interest Expense
Deposits 5,504,783 4,775,835
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Net Interest Income 5,979,298 5,545,243
Provision for Loan Losses 50,000 25,000
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Net Interest Income after
Provision for Loan Losses 5,929,298 5,520,243
Other Income
Service fees 475,611 482,213
Net investment gains 486,060 454,653
Other 229,170 136,445
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1,190,841 1,073,311
Other Expenses
Salaries 1,498,568 1,622,212
Pension and other employee
benefits 536,453 525,719
Occupancy expense 769,353 816,825
Legal & professional 168,120 176,548
Regulatory 40,837 23,828
Data Processing 128,245 163,249
Other 1,252,609 1,303,240
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4,394,185 4,631,621
Income Before Income Taxes 2,725,954 1,961,933
Provision for Income Taxes 677,390 389,456
------------ ----------
Net Income $ 2,048,564 $ 1,572,477
============ ===========
Net Income per Share of
Common Stock $ 2.33 $ 1.79
============ ===========
Shares Used in Computing Net
Income per Share of Common
Stock 880,022 879,807
============ ===========
The accompanying notes are an integral part of these
consolidated financial statements.
</TABLE>
Page 2
<PAGE>
<TABLE>
PEOPLES FINANCIAL CORP., INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<CAPTION>
Nine Months Ended September 30
-------------------------------
1997 1996
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<S> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES
Net Income $ 2,048,564 $ 1,573,000
Adjustments to reconcile net
cash from operating activities:
Depreciation and amortization 441,103 440,000
Net accretion/amortization of
premiums and discounts (12,840) 16,000
Gain on sale of investments (411,306) (455,000)
Provision for loan losses 50,000 25,000
Loss on sale/disposal assets 27,484 62,000
Reinvestment stock dividends (55,973) (64,000)
Increase (decrease) in cash due to
changes in assets and liabilities:
Other assets 533,777 (892,000)
Accrued interest and other
liabilities 343,178 549,000
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Net Cash from Operating Activities 2,963,987 1,254,000
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sales of securities
available for sale 629,760 981,000
Proceeds from maturities of
investment securities 7,300,911 6,300,000
Purchase of investment
securities (13,455,781) (1,990,000)
Purchase of securities available
for sale 0 (230,000)
Net sales (purchases) of FHLB
Stock (170,700) 0
Net loans made to customers (11,158,580) (16,232,000)
Premises and equipment
expenditures (293,242) (404,000)
------------ ------------
Net Cash Used by Investing
Activities (17,147,632) (11,575,000)
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in
deposits 14,666,542 8,488,000
Proceeds from issuance of
common stock 83,309 0
Dividends paid (642,393) (607,000)
Repayment of FHLB advances 0 0
------------ ----------
Net Cash from Financing
Activities 14,107,458 7,881,000
------------ -----------
Net Change in Cash and
Cash Equivalents (76,187) (2,440,000)
Cash and Cash Equivalents at
Beginning of Period 16,269,707 11,226,000
----------- -----------
Cash and Cash Equivalents at
End of Period $16,193,520 $ 8,786,000
=========== ===========
The accompanying notes are an integral part of these
consolidated financial statements.
</TABLE>
Page 3
<PAGE>
PEOPLES FINANCIAL CORP., INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements
include Peoples Financial Corp., Inc., (the Corporation) and its
wholly owned subsidiary, PFC Bank, and have been prepared in
accordance with generally accepted accounting principles for
interim financial information and the instructions to Form 10-QSB
and Article 10 of Regulation S-B. Accordingly, they do not
include all of the information and footnotes required by
generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments
(consisting primarily of normal recurring accruals) considered
necessary for a fair and not misleading presentation have been
included.
NOTE B - EARNINGS PER SHARE
Shares used in the earnings per share computation are the
weighted average number of shares outstanding during the periods
in question.
NOTE C - RECLASSIFICATIONS
Certain previously reported items have been reclassified to
conform with the current period's classifications. These
reclassifications have no effect on total assets, total
liabilities and stockholders' equity, and net income.
Page 4
<PAGE>
PEOPLES FINANCIAL CORP., INC. AND SUBSIDIARY
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
FINANCIAL CONDITION
For the nine months ended September 30, 1997, the Corporation's
total assets increased over December 31, 1996 by nearly $25.2
million resulting primarily from an increase of nearly $11.1
million in net loans and increases in available-for-sale and
held-to-maturity securities of $8.5 million and $6.2 million,
respectively.
The increase in total liabilities of approximately $18.0 million
from December 31, 1996 to September 30, 1997 is primarily
attributable to increases in deposits of over $14.6 million in
the nine-month period ended September 30, 1997.
As of September 30, 1997, PFC Bank, the Corporation's wholly
owned subsidiary, had a ratio of non-performing loans to total
assets of 0.44% as compared to a ratio of 0.54% as of the end of
December 31, 1996. Included in the third quarter, non-performing
loan totals were loans totaling $1,028,000 that were delinquent
more than 90 days and held on non-accrual status. At September
30, 1997, the allowance for possible loan losses was $1,239,000,
which represented 0.84% of net loans as compared to 0.91% at the
end of the previous calendar year. Non-performing non-accrual
loans totaled 8.23% of the allowance for possible loan losses, as
compared to 26.48% at December 31, 1996.
In management's opinion, the allowance for possible loan losses
at September 30, 1997 is adequate to absorb any future loan
losses based on information presently known. Management cannot
assure, however, that additions to the allowance will not be
required in the future to cover losses that are presently
unforeseen.
RESULTS OF OPERATIONS
Net Income
For the nine-month period ended September 30, 1997, the
Corporation recognized net income of $2,049,000, an increase of
$476,000 over the same period of the prior year.
The operating results of the Corporation are solely dependent
upon the net income generated by its subsidiary, PFC Bank. PFC
Bank also has the benefit of a substantially appreciated
available-for-sale investment portfolio, the strategic
liquidation of portions of which enable the Corporation to absorb
the negative effects of interest rate fluctuation and still
maintain profitable operations.
Interest Income and Expense
Interest income for the nine-month period ended September 30,
1997 was $11.5 million, an increase of $1,163,000 from the
nine-month period ended September 30, 1996. This increase is attributed to a
$1,071,000 increase in interest on the loan portfolio. Interest expense for
the nine-month period ended September 30, 1997 was approximately $5.5
million, a $729,000 increase over the same nine-month period ended September
30, 1996. Management attributes this increase primarily to a $12.9
million increase in interest bearing deposits since December 31,
1996.
Page 5
<PAGE>
Provision for Loan Losses
The provision for loan losses is based upon management's ongoing
assessment of the inherent risk of loss in the outstanding loan
portfolio. Management's risk assessment is based on the
evaluation of individual loans, past loss experience, current
economic conditions, and other relevant factors. While
management uses the best information available to make such
evaluations, future adjustments to the provision resulting in
adjustment to the allowance for possible loan losses may be
necessary. PFC Bank continues to monitor its loan portfolio on a
regular basis and will make additions to its allowance based on
its determination of the necessary level of the allowance. For
the nine-month period ended September 30, 1997, the PFC Bank
provided $50,000 to the provision for loan losses as compared to
$25,000 for the same period in the previous year. Net charge-offs
for the nine-month period ended September 30, 1997 amounted to
$65,000.
Other Income
Other income for the nine-month period ended September 30, 1997
was approximately $1.2 million, an increase of approximately
$118,000 over the nine-month period ended September 30, 1996.
This increase is directly attributable to insurance proceeds of
$206,000 received due to a flood in July 1996.
Net investment gains were $486,000 for the nine-month period
ended September 30, 1997 as compared to $455,000 for the same
nine-month period the previous year. These net gains were
primarily the result of the liquidation of a portion of the PFC
Bank's available-for-sale investment portfolio.
Other Expenses
Total other expenses decreased by $237,000 for the nine-month
period ended September 30, 1997 when compared to the same period
in the prior year. This decrease was primarily the result of
decreases in payroll expense of $124,000 and occupancy expense of
$47,000. The major components of other expenses represent normal
recurring costs of operations including compensation and employee
benefits, occupancy expense, and data processing.
Maintaining a focus on operating cost control has become
increasingly important and the Corporation has succeeded in
maintaining a relatively stable overhead burden.
Provision for Income Taxes
The Corporation recorded a provision for income taxes of $677,000
for the nine-month period ended September 30, 1997, as compared
to $389,000 for the same period ended September 30, 1996. State
tax liabilities are incurred both by PFC Bank, in the form of
Pennsylvania Bank Shares tax, and by the Corporation, as a
separate entity.
Page 6
<PAGE>
Regulatory Activity
Recently, Pennsylvania enacted a law to permit state
chartered banking institutions to sell insurance. This follows a
U.S. Supreme Court decision in favor of nationwide insurance
sales by banks and that also bars states from blocking insurance
sales by national banks in towns with populations of no more than
5,000. PFC Bank is currently evaluating its options regarding
the sale of insurance.
Congress is currently considering legislative reforms to
modernize the financial services industry, including repealing
the Glass Steagall Act, which prohibits commercial banks from
engaging in the securities industry. Consequently, equity
underwriting activities of banks may increase in the near future.
However, the Corporation does not currently anticipate entering
into these activities.
Changes in PFC Bank's FDIC assessment rate, caused by the
enactment of the Deposit Insurance Funds Act of 1996, will
adversely impact, to some extent, the results of operations, net
of income taxes, in a currently estimated amount of $16,700 in
1997. The Act also provides regulatory relief to the financial
services industry relative to environmental risks, frequency of
examinations, and the simplification of forms and disclosures.
From time to time, various types of federal and state
legislation have been proposed that could result in additional
regulation of, and restrictions on, the business of the
Corporation and of PFC Bank. Management cannot predict whether
such legislation will be adopted or, if adopted, how such
legislation would affect the business of the Corporation and PFC
Bank. As a consequence of the extensive regulation of commercial
banking activities in the United States, the Corporation's and
PFC Bank's business is particularly susceptible to being affected
by federal legislation and regulations that may increase the
costs of doing business. Except as specifically described above,
Management believes that the affect of the provisions of the
aforementioned legislation on the liquidity, capital resources,
and results of operations of the Corporation will be immaterial.
Management is not aware of any other current specific
recommendations by regulatory authorities or proposed
legislation, which, if they were implemented, would have a
material adverse effect upon liquidity, capital resources, or
results of operations, although the general cost of compliance
with the numerous and multiple federal and state laws and
regulations does have, and in the future may have, a negative
impact on the Corporation's results of operations.
Further, the business of the Corporation is also affected by
the state of the financial services industry in general. As a
result of legal and industry changes, Management predicts that
the industry will continue to experience an increase in
consolidations and mergers as the financial services industry
strives for greater cost efficiencies and market share.
Management also expects increased diversification of financial
products and services offered by the Bank and its competitors.
Management believes that such consolidations and mergers, and
diversification of products and services may enhance PFC Bank's
competitive position as a community bank.
Page 7
<PAGE>
Year 2000 Compliance
The Company is in the process of assessing the cost and
extent of vulnerability of the Company's computer systems to the
"Year 2000 problem." Modifications or replacements of computer
systems to attain Year 2000 compliance have begun, and the
Company expects to attain Year 2000 compliance and institute
appropriate testing of its modifications and replacements before
the Year 2000 date change. The Company believes that, with
modifications to existing software and conversions to new
software, the Year 2000 problem will not pose a significant
operational problem for the Company. However, because most
computer systems are, by their very nature, interdependent, it is
possible that non-compliant third party computers could
"reinfect" the Company's computer systems. The Company could be
adversely affected by the Year 2000 problem if it or unrelated
parties fail to successfully address this problem. The Company
has taken steps to communicate with the unrelated parties with
whom it deals to coordinate Year 2000 compliance.
The financial impact to the Company of Year 2000 compliance
has not been and is not anticipated to be material to the
Company's financial position or results of operations in any
given year.
Page 8
<PAGE>
PEOPLES FINANCIAL CORP., INC. AND SUBSIDIARY
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings
Not applicable.
ITEM 2. Changes in Securities
Not applicable.
ITEM 3. Defaults Upon Senior Securities
Not applicable.
ITEM 4. Submission of Matters to a Vote of Security Holders
There have been no matters brought to a vote of security
holders during this quarter.
ITEM 5. Other Information
Not applicable.
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
3(i) Registrant's Articles of Incorporation
(incorporated by reference to Exhibit 4.1 to
Registrant's Registration Statement No. 33-88802
on Form S-4, filed January 27, 1995).
3(ii)Registrant's By-Laws (incorporated by
reference to Exhibit 4.2 to Registrant's
Registration Statement No. 33-88802 on Form S-4,
filed January 27, 1995).
10(i)Settlement Agreement and Release, dated
December 30, 1996, among C. Edward Dunmire, the
Registrant, and Peoples Bank of PA (incorporated
by Reference to Exhibit 10(I) to Registrant's
Annual Report on Form 10-KSB, filed March 28,
1997).
Page 9
<PAGE>
PEOPLES FINANCIAL CORP., INC. AND SUBSIDIARY
PART II. OTHER INFORMATION (cont.)
ITEM 6. Exhibits and Reports on Form 8-K (cont.)
10(ii) General Release of David Fennell (incorporated
by reference to Exhibit 10(ii) to the
Registrant's Annual Report on Form 10-KSB, filed
March 28, 1997).
10(iii)Executive Employment Agreement and Stock Option
Agreement of R.B. Robertson dated September 1,
1997.
11 Statement re: Computation of Earnings Per
Share. (included herein at Part I, Item 1 of
this Form 10-QSB).
27 Financial Data Schedule.
(b) Reports on Form 8-K
The registrant filed the following current reports on
Form 8-K during the quarter ended September 30, 1997:
No 8-K reports filed in the quarter ended September 30,
1997.
Page 10
<PAGE>
SIGNATURES
Pursuant to the requirements 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.
Dated: November 11, 1997
PEOPLES FINANCIAL CORP., INC.
(Registrant)
/s/ R. B. Robertson
------------------------------
R.B. Robertson
President & Chief Executive
Officer
/s/ James L. Kifer
------------------------------
James L. Kifer
Executive Vice President & Asst.
Secretary
<PAGE>
EXHIBIT INDEX
PAGE NO.
IN MANUALLY
SIGNED
EXHIBIT NO.
ORIGINAL
------------
3(i) Registrant's Articles of Incorporation
(incorporated by reference to Exhibit
4.1 to Registrant's Registration
Statement No. 33-88802 on Form S-4,
filed January 27, 1995).
3(ii) Registrant's By-Laws (incorporated by
reference to Exhibit 4.2 to Registrant's
Registration Statement No. 33-88802 on
Form S-4, filed January 27, 1995).
10(i) Settlement Agreement and Release, dated
December 30, 1996, among C. Edward Dunmire,
the Registrant, and Peoples Bank of PA
(incorporated by Reference to Exhibit
10(I) to Registrant's Annual Report on
Form 10-KSB, filed March 28, 1997).
10(ii) General Release of David Fennell
(incorporated by reference to Exhibit
10(ii) to the Registrant's Annual Report
on Form 10-KSB, filed March 28, 1997).
10(iii) Executive Employment Agreement and
Stock Option Agreement of R.B. Robertson
dated September 1, 1997. 15
11 Statement re: Computation of Earnings Per
Share. (included herein at Part I, Item 1
of this Form 10-QSB).
27 Financial Data Schedule. 41
EXHIBIT 10 (iii)
Executive Employment Agreement and Stock
Option Agreement of R. B. Robertson dated
September 1, 1997
<PAGE>
EXECUTIVE EMPLOYMENT AGREEMENT
THIS AGREEMENT is made on the 1st day of September, 1997,
between PFC BANK, a Pennsylvania business corporation located at
Fourth Street and Ford Avenue, P. O. Box 311, Ford City,
Pennsylvania 16226, (the "Bank") and PEOPLES FINANCIAL CORP.,
INC., a Pennsylvania business corporation located at Fourth
Street and Ford Avenue, P. O. Box 311, Ford City, Pennsylvania
16226, (the "Corporation") and R. B. ROBERTSON, an adult
individual residing in Pennsylvania (the "Executive").
WHEREAS, the Bank and Corporation desire to employ the
Executive as President and CEO of the Bank and Corporation under
the terms and conditions set forth herein; and
WHEREAS, the Executive desires to serve the Bank and
Corporation in an executive capacity under the terms and
conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth herein and intending to be legally bound
hereby, the parties agree as follows:
1. TERMS OF EMPLOYMENT. The Bank and Corporation hereby
employ the Executive and the Executive hereby accepts employment
with the Bank and Corporation for a period of three (3) years
<PAGE>
beginning on September 1, 1997 and ending on August 31, 2000,
subject, however, to prior termination of this Agreement as set
forth below.
2. POSITION AND DUTIES. The Executive shall serve as the
President and CEO of the Bank and Corporation and a member of the
Board of Directors of the Bank and Corporation and shall have
supervision and control over, and responsibility for, the general
management and operation of the Bank and Corporation, and shall
have such other powers and duties as may from time to time be
prescribed by the Board of Directors of the Bank and Corporation,
provided that such duties are consistent with the Executive's
position as the President in charge of the general management of
the Bank and Corporation.
3. ENGAGEMENT IN OTHER EMPLOYMENT. The Executive shall
devote all his working time, ability and attention to the
business of the Bank and Corporation during the term of this
Agreement. The Executive shall notify the Board of Directors of
the Bank and Corporation in writing and receive their written
consent before the Executive engages in any other business or
commercial activities, duties or pursuits, including, but not
limited to, directorships of other companies. Under no
circumstances may the Executive engage in any business or
commercial activities, duties or pursuits which
- 2 -
<PAGE>
compete with the business or commercial activities of the Bank
and/or Corporation, nor may the Executive serve as a director or
officer or in any other capacity in a company which competes with
the Bank and/or Corporation.
4. COMPENSATION.
(a) Annual Direct Salary: As compensation for services
rendered the Corporation under this Agreement, the Executive
shall be entitled to receive from the Corporation an annual
direct salary of One Hundred Thirty Thousand Eight Hundred
Ninety-Two($130,892.00) Dollars per year(the "Annual Direct
Salary"), payable in substantially equal monthly installments (or
such other more frequent intervals as may be determined by the
Board of Directors of the Corporation as payroll policy for
senior executive officers) prorated for any partial employment
period.
(b) Bonus. The Board of Directors may, in its sole
discretion, provide for payment of a yearly bonus to the
Executive in such an amount as it may deem appropriate to provide
incentive to the Executive and to reward the Executive for his
performance.
(c) Stock Option Agreement. During the term of this
Agreement, and provided the Agreement is not earlier
- 3 -
<PAGE>
terminated as set forth in Paragraph 9(c), Executive shall be
entitled to purchase up to 6,536 shares of stock of the
Corporation, pursuant to the terms of the Stock Option Agreement,
attached hereto as Exhibit A and incorporated herein by
reference. Executive shall be responsible for any and all
federal state and local taxes resulting from his participation in
the Stock Option Agreement and purchase of stock thereunder.
(d) Contingent Compensation. During the term of his
employment under this Agreement, and provided the Agreement is
not earlier terminated as set forth in Paragraph 9(c), Executive
shall receive contingent compensation in the amount of a
$83,333.33 lump sum payment, minus applicable withholdings, on
September 26, 1997 September 2, 1998 and September 2, 1999. If
the Executive shall, after September 2, 1998, become disabled as
defined in Paragraph 9, and shall survive but remain disabled on
a continuous basis until January 1, 1999, the remaining payment
shall be accelerated from September 2, 1999 to January 1, 1999.
Executive shall be responsible for any and all federal state and
local taxes resulting from this contingent compensation
arrangement and shall indemnify and hold the Bank and/or
Corporation harmless
- 4 -
<PAGE>
for any and all tax liability resulting from the establishment of
this contingent compensation arrangement.
(e) Disability Benefits. If Executive becomes disabled
as the result of a non-work related illness, injury or
impairment, Executive may participate in the Bank's short and
long term disability plans pursuant to the terms and conditions
set forth in each plan. Executive understands and agrees that
these plans and policies may be amended or terminated at the
discretion of the Bank and/or Corporation.
(f) Vacation/Time Off. Executive's vacation/time off
benefits shall accrue in accordance with the Bank's vacation/time
off policy.
5. OFFICES. The Executive agrees to serve without
additional compensation as a director on the Board of Directors
of the Bank and Corporation and, if elected or appointed thereto,
without additional compensation in one or more offices of the
Bank and Corporation, and/or in one or more offices or as a
director of any of the Bank and/or Corporation's non-banking
subsidiaries; provided, however, the Executive shall not be
required to serve in such additional offices or as a director of
the Bank and/or Corporation or any subsidiary if such service
would expose him to adverse financial consequences.
- 5 -
<PAGE>
6. DIRECTORS AND OFFICERS LIABILITY INSURANCE. The Bank
and/or Corporation shall use its best efforts to obtain such
insurance coverage for the Executive under an insurance policy
covering officers and directors of the Bank and Corporation
against lawsuits, arbitrations or other legal or regulatory
proceedings; however, nothing herein shall be construed to
require the Bank and/or Corporation to obtain such insurance, if
the Board of Directors of the Bank and/or Corporation determine
that such coverage cannot be obtained at a commercially
reasonable price.
7. UNAUTHORIZED DISCLOSURE. During the employment of
Executive, or at any later time, the Executive shall not, without
the written consent of the Board of Directors of the Bank and
Corporation or a person authorized thereby, knowingly disclose to
any person, other than an employee of the Bank and Corporation or
a person to whom disclosure is reasonably necessary or
appropriate in connection with the performance by the Executive
of his duties as an executive of the Bank and Corporation, any
material confidential information obtained by him while in the
employ of the Bank and Corporation with respect to any of the
Bank and/or Corporation's services, products, improvements,
formulas, designs or styles, processes, customers, methods of
distribution or any business practices the disclosure of which
could be or will be
- 6 -
<PAGE>
materially damaging to the Bank and/or Corporation provided,
however, that confidential information shall not include any
information known generally to the public (other than as a
result of unauthorized disclosure by the Executive) or any
information of a type not otherwise considered confidential by
persons engaged in the same business or a business similar to
that conducted by the Bank and Corporation.
8. RESTRICTIVE COVENANT. The Executive covenants and
agrees as follows: the Executive shall not directly or
indirectly, within the marketing area of the Bank and/or
Corporation (defined as an area within one hundred (100) miles
radius surrounding of Ford City, Pennsylvania), enter into or
engage generally in direct or indirect competition with the Bank
and/or Corporation or any subsidiary of the Bank and/or
Corporation, either as an individual on his own or as a partner
or joint venturer, or as a director, officer, shareholder,
employee, agent, independent contractor, lessor or creditor of or
for any other person, for a period of one (1) year after the date
of termination of his employment. The existence of any claim or
cause of action of the Executive against the Bank and/or
Corporation, whether predicated on this Agreement or otherwise,
shall not constitute a defense to the enforcement by the Bank
and/or Corporation of this covenant. The Executive agrees
- 7 -
<PAGE>
that any breach of the restrictions set forth in this Paragraph
will result in irreparable injury to the Bank and/or Corporation
for which it shall have no adequate remedy at law and the Bank
and/or Corporation shall be entitled to injunctive relief in
order to enforce the provisions hereof. In the event that this
Paragraph shall be determined by any court of competent
jurisdiction to be unenforceable in part by reason of it being
too great a period of time or covering too great a geographic
area, it shall be in full force and effect as to that period of
time or geographic area determined to be reasonable by the court.
9. TERMINATION.
(a) Death. The Executive's employment hereunder shall
terminate upon his death.
(b) Disability.
(1) Suspension of Compensation. If, as a result of
physical or mental injury or impairment, Executive
is unable to perform all of the essential job
functions of his position on a full time basis with
or without a reasonable accommodation and without
posing a direct threat to himself and others, for a
period of thirty (30) days, all obligations of Bank
and Corporation to pay Executive an Annual Direct
Salary as set forth in
- 8 -
<PAGE>
Paragraph 4(a) of this Agreement are suspended.
Executive shall be entitled, pursuant to the
established disability plan or program of the Bank
to apply for disability benefits under those
programs.
(2) Disability Termination. Executive agrees that
should he remain unable to perform all the essential
functions of his position on a full time basis, with
or without a reasonable accommodation and without
posing a direct threat to himself or others, after
sixty five (65) days, the Bank and Corporation will
suffer an undue hardship by continuing Executive in
his position. Upon this event, all compensation and
employment obligations of the Bank and Corporation
under this Agreement shall cease (with the exception
of Executive's rights under the Bank's then existing
short term and long term disability plans, the stock
option benefits described in Paragraph 4(c), the
contingent compensation benefits described in
Paragraph 4(d)), and this Agreement shall terminate.
(c) Cause. The Corporation may terminate the
Executive's employment hereunder for "Cause." As used in this
Agreement, "Cause" for Termination means conduct, activities or
performance by Executive which, in the judgment of the Bank
- 9 -
<PAGE>
and/or Corporation, based upon the information then in its
possession, is detrimental to the Bank's and/or Corporation's
interests, business, goodwill or reputation. Both Executive and
the Bank and/or Corporation recognize that it is not possible to
describe every circumstance in which "Cause" for termination
would exist. By way of illustration only, the Executive and Bank
and/or Corporation agree that "Cause" for Termination of
Executive Employment includes, but is not limited to: violation
of any law (other than minor traffic offenses); excessive
absenteeism; Executive's failure or refusal to perform his duties
or obligations under this Agreement; failure to correct, to the
Bank's and/or Corporation's satisfaction, within fifteen (15)
days after written notice to Executive of such deficiency or
deficiencies, any deficiency in Executive's performance under
this Agreement; violation of Executive's confidentiality,
noncompetition and outside activities obligations under this
Agreement; insubordination; theft or abuse of company property or
of the property of its customers, employees, contractors or
business associates; dishonesty; working while intoxicated;
violation of the Bank's and/or Corporation's rules, policies,
procedures or practices; abuse of benefits or privileges of
- 10 -
<PAGE>
employment; unprofessional conduct toward or unlawful
discrimination against the Bank's and/or Corporation's employees,
customers, business associates, contractors or visitors; the
breach of Executive's fiduciary duty to the Bank and/or
Corporation involving personal profit; the willful violation of
any law, rule or regulation governing banks or bank officers or
the issuance of any final cease and desist order issued by a bank
regulatory authority, any of which directly and materially harms
the business of the Bank; and unauthorized conduct which creates
a risk of loss or liability to the Bank and/or Corporation or of
damaging Bank's and Corporation's reputation or interests.
(d) Termination by Executive. The Executive may
terminate his employment hereunder, for Good Reason. The term
"Good Reason" shall only mean: (i) any assignment to the
Executive, without his consent, of any duties other than those
contemplated by, or any limitation of the powers of the Executive
not contemplated by Paragraph 2 hereof, or (ii) any removal of
the Executive from or any failure to re-elect the Executive to
any of the positions indicated in Paragraph 2 hereof, except in
connection with termination of the Executive's employment as a
result of Executive's disability
- 11 -
<PAGE>
or for Cause, or (iii) a reduction of the Executive's Annual
Direct Salary as provided in Paragraph 4(a) hereof, or (iv) any
other material breach by the Corporation of this Agreement,
provided that the Executive shall have given the Board of
Directors thirty (30) days written notice of such breach and such
breach shall not have been cured within such thirty (30) day
period after receipt of notice, or (v) any Change of Control (as
defined herein).
10. DEFINITION OF CHANGE OF CONTROL. For purposes of this
Agreement, the term "Change of Control" shall mean: A change in
control (other than one occurring by reason of an acquisition of
the Corporation by Executive) of a nature that would be required
to be reported in response to Item 6(e) of Schedule 14A of
Regulation 14A and any successor rule or regulation promulgated
under the Securities Exchange Act of 1934 (the "Exchange Act") if
Corporation were subject to the Exchange Act reporting
requirements; provided that, without limiting the foregoing, such
a change in control shall be deemed to have occurred if;
(a) any "person" (as such term is used in Sections
13(d) and 14(d) of the Exchange Act), other than the Corporation
or any "person" who on the date hereof is a director or officer
of the Corporation is or becomes the "beneficial owner" (as
- 12 -
<PAGE>
defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Corporation representing
twenty-five percent
(25%) or more of the combined voting power of the Corporation's
then
outstanding securities, or
(b) during any period of two consecutive years during
the term of Executive's employment under this Agreement,
individuals who at the beginning of such period constitute the
Board of Directors of the Corporation cease for any reason to
constitute at least a majority thereof, unless the election of
each director who was not a director at the beginning of such
period has been approved in advance by directors representing at
least two-thirds of the directors then in office who were
directors at the beginning of the period.
11. DEFINITION OF DATE OF CHANGE OF CONTROL. For purposes
of this Agreement, the date of Change of Control shall mean:
(a) the first date on which a single person and/or
entity, or group of affiliated persons and/or entities, acquire
the beneficial ownership of twenty-five percent (25%) or more of
the Corporation's voting securities, or
(b) the date of the transfer of all or substantially
all of the Corporation's assets, or
- 13 -
<PAGE>
(c) the date on which a merger, consolidation or
combination is consummated, as applicable, or
(d) the date on which individuals who formerly
constituted a majority of the Board of Directors of the
Corporation ceased to be a majority.
12. PAYMENTS UPON TERMINATION.
(a) If the Executive's employment shall be terminated
for Cause, or by termination of the Agreement through nonrenewal,
the Bank and/or Corporation shall pay the Executive or his estate
his full Annual Direct Salary through the date of termination at
the rate in effect at the time of termination and any other
amounts owing to the Executive at the date of termination, and
the Bank and/or Corporation shall have no further obligations to
the Executive under this Agreement.
(b) If the Executive's employment is terminated by the
Bank and/or Corporation (other than pursuant to Paragraphs 9(a),
9(b) or 9(c) hereof or as a result of nonrenewal of this
Agreement), or if the Executive shall terminate his employment
for Good Reason, then the Bank and/or Corporation shall pay the
Executive his full Annual Direct Salary from the date of
- 14 -
<PAGE>
termination through the last day of the term of this Agreement
and shall have no other obligation to Executive.
(c) If the Executive's employment shall be terminated
by the Bank and/or Corporation because of Executive's disability,
the Executive shall have no further right to payment other than
those rights set forth in the Bank's then existing short term and
long term disability plans, and the stock option and contingent
compensation benefits as set forth in Paragraph 4(c) and 4(d)
respectively.
(d) If the Executive's employment shall be terminated
because of his death, the Bank and/or corporation shall pay the
Executive or his estate his full Annual Direct Salary through the
date of termination at the rate in effect at the time of
termination and any other amounts owing to the Executive and,
with the exception of those stock option and contingent
compensation benefits set forth in Paragraphs 4(c) and 4(d), the
Bank and corporation shall have no further obligations to
Executive under this Agreement.
(e) Golden Parachute Limitation. Should the payments
described in this Paragraph be considered by state or federal
bank regulators to be "golden parachute payments" as defined in
12 C.F.R. Section 359, et seq. and 12 U.S.C.S. Section 1828(k),
the Bank
- 15 -
<PAGE>
and Corporation are relieved from any and all liability for those
payments considered to be golden parachute payments.
(f) Nonrenewal of Agreement and Severance Allowance:
In the event the Executive serves the full term of this
Agreement, and the Bank and/or Corporation do not offer to renew
this Agreement, the Executive shall not be entitled to any
severance allowance whatsoever and the Bank and/or Corporation
shall have no further obligations to the Executive under this
Agreement.
13. CONSULTING ARRANGEMENT.
Upon expiration of this Agreement on September 1, 2000,
provided that this Agreement has not been previously terminated
pursuant to Paragraphs 9(a), 9(b), 9(c), and 9(d) and provided
there has been no change in control as set forth in Paragraphs 10
and 11, the Executive and Bank and Corporation agree that the
Bank and Corporation intend to purchase the services of Executive
as a consultant.
In his capacity as consultant, the Executive shall be
considered an independent contractor, and shall not receive a
salary; Executive shall not be considered an employee of the Bank
or Corporation, and Executive shall not be entitled to any of the
benefits normally made available full time to Bank and/or
- 16 -
<PAGE>
Corporation employees. In addition, the Executive shall no
longer participate in any of the salary continuation, contingent
compensation, stock purchase or other benefit plans or
arrangements described in this Agreement.
In his capacity as consultant, the Executive shall assist
the Bank and/or Corporation in their marketing endeavors, shall
advise the respective Boards of the Bank and/or Corporation on
various matters, and shall provide other services as the Bank
and/or Corporation require. For so long as Executive performs
these services as consultant, the Bank or Corporation shall pay
Executive $1,666.67 per month. The term of Executive's services
as consultant shall be consecutive one month terms, and can
terminate at any time with thirty (30) days written notice by
either party. If not previously terminated, the consulting
arrangement set forth in this Paragraph shall terminate
automatically after thirty six (36) months. Executive agrees
that, during the term of the consulting arrangement and for a
period of twelve (12) months thereafter, he shall continue to
honor the Nondisclosure (Paragraph 7) and the Restrictive
Covenant (Paragraph 8) provisions of this Agreement.
14. DAMAGES FOR BREACH OF CONTRACT/WAIVER OF JURY TRIAL. In
the event of a breach of this Agreement by either the Corporation
- 17 -
<PAGE>
or the Executive, each hereby waive to the fullest extent
permitted by law the right to a trial by jury and to assert any
claim against the others for punitive or exemplary damages.
Furthermore, Executive hereby waives any and all rights to assert
claims or recover damages in an amount in excess of that set
forth in Paragraph 12(b).
15. NOTICE. For the purposes of this Agreement, notices
and all other communications provided for in the Agreement shall
be in writing and shall be deemed to have been duly given when
delivered or mailed by United States certified mail, return
receipt requested, postage prepaid, addressed as follows:
If to the Executive: R.B. Robertson
, PA
If to the Bank: PFC Bank
Fourth and Ford Streets
Ford City, PA 16226
If to the Corporation: PEOPLES FINANCIAL CORP., INC.
Fourth and Ford Streets
Box 311
Ford City, PA 16226
or to such other address as any party may have furnished to the
other in writing in accordance herewith, except that notices of
change of address shall be effective only upon receipt.
16. SUCCESSORS. This Agreement shall inure to the benefit
of and be binding upon the Executive, his personal
representatives,
- 18 -
<PAGE>
heirs or assigns and to the Bank and/or Corporation and any of
successors or assigns of the Bank and/or Corporation.
17. SEVERABILITY. If any provision of this Agreement is
declared unenforceable by a judicial or administrative body for
any reason, the remaining provisions of this Agreement shall be
unaffected thereby and shall remain in full force and effect.
18. AMENDMENT. This Agreement may be amended or cancelled
only by mutual agreement of the parties in writing.
19. ATTORNEY'S FEES AND COSTS. If any action at law is
necessary to enforce or interpret the terms of this Agreement,
the prevailing party shall not be entitled to reasonable
attorney's fees, costs, or disbursements.
20. PAYMENT OF MONEY DUE DECEASED EXECUTIVE. If the
Executive dies prior to the expiration of the term of employment,
any monies that may be due him from the Corporation and/or Bank
under this Agreement as of the date of death shall be paid to the
executor, administrator, or other personal representative of the
Executive's estate or the beneficiaries or legatees entitled to
such monies under the decedent Executive's last will or
applicable testate laws.
21. LAW GOVERNING. This Agreement shall be governed by and
construed in accordance with the laws of the Commonwealth of
Pennsylvania.
- 19 -
<PAGE>
22. ENTIRE AGREEMENT. This Agreement supersedes any and
all agreements, either oral or in writing, between the parties
with respect to the employment of the Executive by the Bank
and/or Corporation, and this Agreement contains all the covenants
and agreements between the parties with respect to the employment
of Executive by the Bank and/or Corporation.
IN WITNESS WHEREOF, the parties hereto, intending to be
legally bound hereby, have caused this Agreement to be duly
executed in their respective names and, in the case of the
Corporation, by its authorized representatives the day and year
above mentioned.
ATTEST: PFC BANK
/s/ Brian Henry By /s/ Frank T. Baker
- --------------------------- --------------------------
Brian Henry, Secretary Frank T. Baker
ATTEST: PEOPLES FINANCIAL CORP., INC.
/s/ Brian Henry By /s/ Frank T. Baker
- --------------------------- ---------------------------
Brian Henry, Secretary Frank T. Baker
WITNESS:
/s/ James L. Kifer /s/ R. B. Robertson
- -------------------------- ---------------------------
James L. Kifer R. B. Robertson
- 20 -
<PAGE>
Exhibit A-1
NON-QUALIFIED STOCK OPTION AGREEMENT
This Agreement, dated as of September 1, 1997, is delivered
to R. B. Robertson, an adult individual (the "Executive")
pursuant to the resolution of the Board of Directors of Peoples
Financial Corp., Inc. ( the "Corporation") dated August 20, 1997
( the "Plan"), and as modified by the Consent to Corporate Action
effective as of September 1, 1997.
Subject to the terms of the Executive Employment Agreement,
the Corporation hereby grants and gives to the Executive the
option and right, but not the obligation, to purchase from the
Corporation up to six thousand five hundred thirty six (6,536)
shares of common stock of the Corporation, having a par value of
$.30 per share, at the purchase price of Thirty Eight Dollars and
Twenty Five Cents ($38.25) for each such share (being the fair
market value as of the date hereof), and under and subject to
the terms and provisions set forth in this Agreement, the
Executive Employment Agreement and the Plan. The parties intend
that the options granted by this Agreement are and shall be
Non-Qualified Options and not incentive stock options, as defined
in Section 422 of the Internal Revenue Code of 1986, as amended.
The options shall vest under and subject to the terms of the
Executive Employment Agreement according to the following
schedule:
* 2,178 shares on the date hereof;
* 2,179 shares on September 2, 1998; and
* 2,179 shares on September 2, 1999; provided,
however, that should Recipient become disabled
prior to December 31, 1998, and survive until
January 1, 1999, but remain disabled on a
continuous basis, the vesting scheduled shall
accelerate so that this option will vest on
January 1, 1999 instead of on September 2, 1999.
Subject to the other provisions of the Executive Employment
Agreement, this Agreement and the Plan, the options hereby
granted and which become vested as set forth above, shall remain
exercisable for one (1) year from the date the option vests:
Notwithstanding any other provisions of this Agreement or the
Plan, the options and all rights under this Agreement, to the
extent not exercised, shall terminate and be null and void at
12:00 o'clock midnight (Eastern prevailing time) on August 31,
2002.
<PAGE>
Exhibit A - 1
The options granted by this Agreement shall be exercisable
during the lifetime of the Executive and only by the Executive
and shall not be salable, transferable, or assignable by the
Executive except by his Will or pursuant to applicable laws of
descent and distribution.
If Executive is terminated for Cause by the Bank and/or
Corporation, as set forth in the Executive Employment Agreement,
Executive shall forfeit all options under this Non-Qualified
Stock Option Agreement, including both non-vested options and
those options which are vested and have not been exercised, and
the Corporation shall have no further obligation to Executive
under this Agreement.
If the Executive ceases to be employed by the Corporation or
any subsidiary thereof (as defined in Section 424 of the Internal
Revenue Code of 1986, as amended), subject to the limitations set
forth herein, and the limitations set forth in Executive
Employment Agreement, the Executive may exercise his options
hereunder during its remaining term for a period of three (3)
months after the date of such cessation of employment to the
extent that the option hereunder was then and remains
exercisable, unless such employment cessation was due to a Change
of Control, as that term is defined in the Executive Employment
Agreement or the Executive's disability (as defined in the
Executive Employment Agreement, in which case the three (3) month
period shall be twelve (12) months. If the Executive dies while
employed by the Corporation or a subsidiary thereof (as defined
in Section 424 of the Internal Revenue Code of 1986, as amended),
the qualified personal representatives of the Executive, or any
persons who acquire the options hereunder pursuant to the Will of
the Executive or laws of descent and distribution, may exercise
the options after the options vest hereunder during their
remaining term for a period of not more than twelve (12) months
after the date of the Executive's death to the extent that the
option hereunder was then and remains exercisable.
If the Executive desires to exercise his vested options
under this Agreement, the Executive shall do so by properly
completing, signing, and returning to the Secretary of the
Corporation, or to the person designated by said Corporate
Secretary, the Notice of Exercise in the form attached to and
made a part of this Agreement, together with full, good and
proper payment by the Executive for the common shares being
purchased hereunder in legal tender of the United States of
America. The Corporation may withhold issuance and delivery to
the Executive of any or all stock certificate or certificates for
such shares being purchased hereunder until full collection by
the Corporation or its depository of full payment for such shares
and until there is full compliance with and satisfaction of all
applicable terms and provisions of and under the Plan and this
Agreement. The Corporation may require that the Executive
remit, in cash, an amount sufficient to satisfy fully any
federal, state and other jurisdictions' income and other tax
withholding requirements. The Executive shall have no rights or
powers with respect to any shares of the common stock purchased
hereunder unless and until one or more stock certificates for
shares are issued and delivered to the Executive.
<PAGE>
Exhibit A-1
Nothing in this Agreement or in the Plan confers upon the
Executive any right to continue in the employment of, or maintain
any particular relationship with the Corporation or its
subsidiaries or affiliates, or limit or affect any rights, powers
or privileges that the Corporation or its affiliates may have to
supervise, discipline and terminate the Executive, his employment
and other relationships.
The options granted by this Agreement are and shall be under
and subject to all of the terms and provisions of the Executive
Employment Agreement, this Agreement, and the Plan, and may be
exercised only as, when, during the time or times, and in the
manner provided in the Executive Employment Agreement, this
Agreement and the Plan. The terms and provisions of the Plan are
hereby incorporated by reference in and as a part of this
Agreement, and this Agreement in all respects shall be
interpreted and construed in accordance with the Executive
Employment Agreement. The Executive acknowledges that he has
received a copy of the Executive Employment Agreement and Plan
and has read and is familiar with their provisions. The
provisions of this Agreement shall be interpreted and construed
under and enforced in accordance with the laws of the
Commonwealth of Pennsylvania, except to the extent preempted by
the laws of the United States of America, which to that extent
shall govern.
The Corporation has duly executed this Agreement as of the
date first above written.
Attest: PEOPLES FINANCIAL CORP., INC.
- ------------------------ By /s/ Frank T. Baker
-----------------------------
Frank T. Baker
<PAGE>
Exhibit A-2
Acceptance by Executive
-----------------------
The undersigned Executive, R. B. Robertson, intending to be
legally bound, hereby accepts and agrees to the terms and
provisions of the preceding Agreement and the Resolutions of the
Board of Directors of the Corporation, dated August 20, 1997, and
the Consent to Corporate Action effective as of September 1, 1997
relating thereto.
Date: 9/1/97 /s/ R. B. Robertson
------- -----------------------------
R. B. Robertson
Executive's Social Security Number:
###-##-####
------------------------------
<PAGE>
Exhibit A-3
NOTICE OF EXERCISE
OF NON-QUALIFIED OPTION
TO: Secretary
PEOPLES FINANCIAL CORPORATION, INC.
Fourth Street and Ford Avenue
P.O. Box 311
Ford City, PA 16226
I, the undersigned, the Recipient and the holder of that
certain Non-Qualified Stock Option Agreement (the "Agreement"),
dated September 1, 1997, to purchase from Peoples Financial
Corporation, Inc. (the "Corporation") up to a total of 6,536
shares of the Corporation's common stock for the exercise price
of $38.25, which exercise price is the fair market value on the
date of grant, September 1, 1997, for each share, under and
subject to the provisions of the Executive Employment Agreement
and resolutions of the Board of Directors dated August 20, 1997
(the "Plan"), hereby do notify you of my intention and election
to exercise hereby my Option under said Agreement to purchase
2,178 shares of such common stock of Peoples Financial
Corporation, Inc. as provided in said Agreement and Plan. I am
enclosing a personal check for the sum of $83,308.50,
representing full payment for such shares being purchased
hereunder at the above stated purchase price for each share under
this Agreement. I understand agree that: (i) Peoples Financial
Corporation, Inc. may withhold issuance and delivery to me of any
or all stock certificate or certificates for such shares of
common stock being purchased hereunder until full collection by
Peoples Financial Corporation, Inc. or its depository of full
payment for such shares and until there is full compliance with
and satisfaction of all applicable terms and provisions of and
under the Plan and said Agreement; (ii) Peoples Financial
Corporation, Inc. may require me to remit to Peoples Financial
Corporation, Inc. an amount sufficient to satisfy fully any
federal, state, and other jurisdictions' income and other tax
withholding requirements prior to its issuance and delivery to me
of any stock certificate or certificates for such shares being
purchased hereunder; and (iii) I will have no rights or powers
with respect to any shares of such common stock being purchased
hereunder unless and until one or more stock certificates for the
shares are issued and delivered to me.
I intend to be legally bound by this Notice and my exercise
of my stock option hereunder, which are and shall be irrevocable.
Social Security Number: ###-##-#### /s/ R. B. Robertson
----------- ------------------------
R. B. Robertson
(Signature)
Date: 9/1/97 R. B. Robertson
-------- ------------------------
(Type or Print Name)
<PAGE>
PEOPLE'S FINANCIAL CORP., INC.
PFC BANK
DIRECTORS CONSENT TO CORPORATE ACTION
The undersigned, being all of the directors of the
above-named Bank and Corporation, entitled to vote at a meeting
thereof, do hereby consent to the adoption of the following
resolutions and to taking the corporate action hereinafter
specified as though same had been approved and adopted at a
meeting of Directors duly called and convened, this consent being
given pursuant to Section 1405(d) of the Banking Code of 1965, as
amended and Section 1727(b) of the Business Corporation Law of
1988.
RESOLVED, that R. B. Robertson be and hereby is offered the
position of President and Chief Executive Officer of the Bank and
Corporation, upon the terms and conditions in the Executive
Employment Agreement, attached hereto and incorporated herein by
reference;
BE IT FURTHER RESOLVED, that the Chairman of the Board of
Directors of the Bank and Corporation be and is hereby directed
and empowered to execute an Executive Employment Agreement with
R. B. Robertson with terms and conditions substantially identical
to the terms and conditions of the Executive Employment Agreement
attached hereto.
Dated: September 1, 1997
/s/ Frank T. Baker /s/ Frank L. Doverspike
- -------------------------- -----------------------------
Frank T. Baker Frank L. Doverspike
/s/ Marlin F. Foreman /s/ Brian Henry
- -------------------------- -----------------------------
Marlin F. Foreman Brian Henry
/s/ Darl Hetrick /s/ Francis E. Kane
- -------------------------- -----------------------------
Darl Hetrick Francis E. Kane
/s/ Raleigh B. Robertson /s/ Raleigh B. Robertson, Jr.
- -------------------------- ------------------------------
Raleigh B. Robertson Raleigh B. Robertson, Jr.
/s/ J. Jack Sherman /s/ Howard H. Shreckengost
- -------------------------- ------------------------------
J. Jack Sherman Howard H. Shreckengost
/s/ William H. Toy
- --------------------------
William H. Toy
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 7,570
<INT-BEARING-DEPOSITS> 23
<FED-FUNDS-SOLD> 8,600
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 34,567
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 31,876
<LOANS> 148,377
<ALLOWANCE> 1,239
<TOTAL-ASSETS> 236,009
<DEPOSITS> 190,921
<SHORT-TERM> 0
<LIABILITIES-OTHER> 10,984
<LONG-TERM> 0
0
0
<COMMON> 265
<OTHER-SE> 33,840
<TOTAL-LIABILITIES-AND-EQUITY> 236,009
<INTEREST-LOAN> 9,077
<INTEREST-INVEST> 2,066
<INTEREST-OTHER> 341
<INTEREST-TOTAL> 11,484
<INTEREST-DEPOSIT> 5,505
<INTEREST-EXPENSE> 5,505
<INTEREST-INCOME-NET> 5,979
<LOAN-LOSSES> 50
<SECURITIES-GAINS> 486
<EXPENSE-OTHER> 4,394
<INCOME-PRETAX> 2,726
<INCOME-PRE-EXTRAORDINARY> 2,726
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,049
<EPS-PRIMARY> 2.33
<EPS-DILUTED> 2.33
<YIELD-ACTUAL> 6.89
<LOANS-NON> 102
<LOANS-PAST> 926
<LOANS-TROUBLED> 147
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1,254
<CHARGE-OFFS> 80
<RECOVERIES> 15
<ALLOWANCE-CLOSE> 1,239
<ALLOWANCE-DOMESTIC> 1,239
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
