U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-Q
(Mark one)
[X] QUARTERLY REPORT PURSUANT SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
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[ ] TRANSITION REPORT PURSUANT SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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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 Identification No.)
incorporation or organization)
Ford Street and Fourth Avenue, Ford City, PA 16226
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(Address of principal executive offices)
(724) 763-1221
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(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 XX No
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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: August 1, 2000
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As of August 1, 2000, there were 1,665,412 shares of the Registrant's
common stock, $0.30 par value, outstanding.
<PAGE>
PEOPLES FINANCIAL CORP., INC. AND SUBSIDIARY
<TABLE>
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INDEX PAGE
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<S> <C> <C>
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
Consolidated Balance Sheets -
June 30, 2000 (unaudited), December 31, 1999 and June 30, 1999 (unaudited). . . . . . . . 1
Consolidated Statements of Income -
Six months ended June 30, 2000 and 1999 (unaudited) . . . . . . . . . . . . . . . . . . . 2
Consolidated Statements of Income -
Three months ended June 30, 2000 and 1999 (unaudited) . . . . . . . . . . . . . . . . . . 3
Consolidated Statements of Cash Flows -
Six months ended June 30, 2000 and 1999 (unaudited) . . . . . . . . . . . . . . . . . . . 4
Notes to Consolidated Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . 5
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operation. . . . . . . . . . . . . . . . . . . . . . . 7
ITEM 3. Quantitative and Qualitative Disclosure about Market Risk . . . . . . . . . . . . . . . . 12
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ITEM 2. Changes in Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ITEM 3. Defaults Upon Senior Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ITEM 4. Submission of Matters to a Vote of Security Holders . . . . . . . . . . . . . . . . . . . 13
ITEM 5. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ITEM 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
</TABLE>
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PEOPLES FINANCIAL CORP., INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, June 30,
2000 December 31 1999
ASSETS (Unaudited) 1999 (Unaudited)
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<S> <C> <C> <C>
Cash and due from banks $ 12,330,115 $ 33,079,733 $ 12,675,588
Federal funds sold 3,900,000 5,600,000 9,150,000
Available-for-sale securities 23,761,720 27,766,282 33,572,947
Held-to-maturity securities 39,478,619 32,054,044 32,068,118
Federal Home Loan Bank stock, at cost 1,408,400 1,408,400 1,101,000
Loans receivable, net 206,877,349 196,539,392 187,284,819
Premises and equipment, net 2,955,790 2,988,549 3,172,800
Other assets 2,545,424 2,278,696 3,155,596
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Total Assets $ 293,257,417 $ 301,715,096 $ 282,180,868
============= ============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits
Non-interest bearing $ 32,386,091 $ 28,375,696 $ 27,041,958
Interest bearing 216,429,399 217,697,740 203,874,257
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Total deposits 248,815,490 246,073,436 230,916,215
FHLB Borrowings 0 8,000,000 0
Accrued interest and other liabilities 7,276,779 8,965,412 11,212,271
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Total Liabilities 256,092,269 263,038,848 242,128,486
STOCKHOLDERS' EQUITY
Common stock, par value 531,916 531,916 530,608
Surplus 3,832,083 3,832,083 3,750,044
Retained earnings 23,670,383 22,552,636 20,666,178
Accumulated other comprehensive income 9,130,766 11,759,613 15,105,552
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Total stockholders' equity 37,165,148 38,676,248 40,052,382
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Total Liabilities and Stockholders Equity $ 293,257,417 $ 301,715,096 $ 282,180,868
============= ============= =============
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
<PAGE>
PEOPLES FINANCIAL CORP., INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended June 30,
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Interest Income 2000 1999
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<S> <C> <C>
Loans $ 8,180,751 $ 7,282,465
Investment securities 1,660,648 1,454,295
Interest-bearing deposits 303,879 136,974
Federal funds sold 265,196 203,124
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Total interest income 10,410,474 9,076,858
Interest Expense
Deposits 5,387,254 4,582,209
FHLB Borrowings 21,836 0
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Total interest expense 5,409,090 4,582,209
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Net Interest Income 5,001,384 4,494,649
Provision for Loan Losses 30,000 90,000
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Net Interest Income after Provision for Loan Losses 4,971,384 4,404,649
Other Income
Service fees 253,569 269,373
Net investment gains 8,301 1,623,111
Other 42,201 25,897
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Total other income 304,071 1,918,381
Other Expenses
Salaries 1,008,116 919,680
Pension and other employee benefits 453,369 452,551
Occupancy expense 550,227 553,931
Legal and professional 65,965 75,452
Regulatory fees 42,889 29,121
Data processing 103,267 95,691
Other 774,532 886,925
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Total other expenses 2,998,365 3,013,351
Income Before Income Taxes 2,277,090 3,309,679
Provision for Income Taxes 627,427 992,424
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Net Income $ 1,649,663 $ 2,317,255
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Net Income per Share of Common Stock $ 0.93 $ 1.31
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Net Income per Share of Common Stock (fully diluted) $ 0.93 $ 1.31
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Weighted Average Shares Used in Computing Net Income
per Share of Common Stock 1,773,052 1,768,694
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</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
<PAGE>
PEOPLES FINANCIAL CORP., INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended June 30,
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Interest Income 2000 1999
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<S> <C> <C>
Loans $ 4,166,662 $ 3,707,883
Investment securities 886,067 697,213
Interest-bearing deposits 110,861 108,898
Federal funds sold 131,200 110,843
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Total interest income 5,294,790 4,624,837
Interest Expense
Deposits 2,703,941 2,341,347
FHLB Borrowings 0 0
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Total interest expense 2,703,941 2,341,347
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Net Interest Income 2,590,849 2,283,490
Provision for Loan Losses 15,000 30,000
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Net Interest Income after Provision for Loan Losses 2,575,849 2,253,490
Other Income
Service fees 129,140 139,491
Net investment gains 0 7,904
Other 19,457 9,709
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Total other income 148,597 157,104
Other Expenses
Salaries 543,704 458,762
Pension and other employee benefits 219,233 225,040
Occupancy expense 286,912 281,993
Legal and professional 51,493 34,347
Regulatory fees 21,414 14,583
Data processing 62,499 47,638
Other 386,758 491,702
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Total other expenses 1,572,013 1,554,065
Income Before Income Taxes 1,152,433 856,529
Provision for Income Taxes 303,690 221,782
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Net Income $ 848,743 $ 634,747
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Net Income per Share of Common Stock $ 0.48 $ 0.36
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Net Income per Share of Common Stock (fully diluted) $ 0.48 $ 0.36
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Weighted Average Shares Used in Computing Net Income
per Share of Common Stock 1,773,052 1,768,694
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</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
<PAGE>
PEOPLES FINANCIAL CORP., INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended June 30,
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CASH FLOWS FROM OPERATING ACTIVITIES 2000 1999
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<S> <C> <C>
Net Income $ 1,649,663 $ 2,317,255
Adjustments to reconcile net cash from operating activities:
Depreciation and amortization 274,993 313,441
Net investment security gains (8,301) (1,623,111)
Net accretion/amortization of
premiums and discounts (9,504) 11,500
Provision for loan losses 30,000 90,000
Loss on sale / disposal of assets 20,331 93,399
Reinvestment of stock dividends 0 (52,854)
Increase (decrease) in cash due to changes in assets and liabilities:
Other assets (31,139) (729,964)
Accrued interest and other liabilities (595,964) 161,922
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Net Cash From Operating Activities 1,330,079 581,588
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sales of securities available for sale 29,760 1,755,743
Proceeds from maturities of securities held to maturity 7,895,000 6,680,000
Purchase of securities held to maturity (15,310,071) (6,113,220)
Purchase of FHLB stock 0 (259,500)
Net loans made to customers (10,375,261) (12,683,867)
Purchases of Premises and equipment (243,996) (145,196)
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Net Cash Used By Investing Activities (18,004,568) (10,766,040)
CASH FLOWS FROM FINANCING ACTIVITIES
Repayments of FHLB Borrowings (8,000,000) 0
Net increase in deposits 2,756,787 17,559,823
Dividends paid (531,916) (459,860)
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Net Cash From Financing Activities (5,775,129) 17,099,963
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Net Change in Cash and Cash Equivalents (22,449,618) 6,915,511
Cash and Cash Equivalents at Beginning of Period 38,679,734 14,910,077
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Cash and Cash Equivalents at End of Period $ 16,230,116 $ 21,825,588
============= =============
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
<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 (the Bank), and have been prepared in accordance with generally accepted
accounting principles for interim financial information and the instructions to
Form 10-Q. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements and should be read in conjunction with the Corporation's consolidated
year-end financial statements, including notes thereto, which are included in
the Corporation's 1999 Annual Report on Form 10-K. In the opinion of the
Corporation, the unaudited consolidated interim financial statements contain all
significant adjustments necessary to present fairly the financial position as of
June 30, 2000 and 1999, the results of operation for the three and six months
ended June 30, 2000 and 1999 and cash flows for the six months ended June 30,
2000 and 1999.
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 to the
current year's classifications. The reclassifications have no effect on total
assets, total liabilities and stockholders' equity, or net income.
NOTE D - COMPREHENSIVE INCOME
Total comprehensive income for the six months ended June 30, 2000 and 1999 was
$(979,184) and $(61,898), respectively.
NOTE E - INVESTMENT SECURITIES
Available-for-sale securities consist of the following:
<TABLE>
<CAPTION>
June 30, 2000
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Amortized Unrealized Unrealized Market
Cost Gains Losses Value
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<S> <C> <C> <C> <C>
Equity securities $ 9,927,227 $ 13,882,215 $ (47,722) $ 23,761,720
December 31, 1999
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Amortized Unrealized Unrealized Market
Cost Gains Losses Value
----------- ------------ ----------- ------------
Equity securities $ 9,948,686 $ 17,873,106 $ (55,510) $ 27,766,282
June 30, 1999
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Amortized Unrealized Unrealized Market
Cost Gains Losses Value
----------- ------------ ----------- ------------
Equity securities $10,489,712 $ 23,110,540 $ (27,305) $ 33,572,947
</TABLE>
<PAGE>
NOTE E - INVESTMENT SECURITIES - Continued
Held-to-maturity securities consist of the following:
<TABLE>
<CAPTION>
June 30, 2000
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Amortized Unrealized Unrealized Market
Cost Gains Losses Value
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<S> <C> <C> <C> <C>
U.S. Treasury securities $20,952,581 $ 62,906 $ (96,573) $ 20,918,914
U.S. government agencies 18,361,215 5,485 (124,662) 18,242,038
State and political subdivisions 164,823 - (3,254) 161,569
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$39,478,619 $ 68,391 $ (224,489) $ 39,322,521
====================================================================
<CAPTION>
December 31, 1999
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Amortized Unrealized Unrealized Market
Cost Gains Losses Value
----------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
U.S. Treasury securities $23,333,589 $ 65,356 $ (92,432) $ 23,306,513
U.S. government agencies 8,460,770 - (236,083) 8,224,687
State and political subdivisions 259,685 971 (1,346) 259,310
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$32,054,044 $ 66,327 $ (329,861) $ 31,790,510
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<CAPTION>
June 30, 1999
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Amortized Unrealized Unrealized Market
Cost Gains Losses Value
----------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
U.S. Treasury securities $24,833,045 $ 252,287 $ (45,806) $ 25,039,526
U.S. government agencies 6,775,375 - (72,250) 6,703,125
State and political subdivisions 459,698 106 (3,079) 456,725
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$32,068,118 $ 252,393 $ (121,135) $ 32,199,376
====================================================================
</TABLE>
<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 six months ended June 30, 2000, the Corporation's total assets decreased
from December 31, 1999 by $8.5 million resulting primarily from a decrease of
approximately $22.4 million in liquid assets such as cash and due from banks and
federal funds sold in addition to a decrease of over $4.0 million in
available-for-sale securities. These decreases were the result of the full
payoff of $8.0 million in short-term borrowings and a reduction in market values
of the available-for-sale security portfolio. These decreases are offset
slightly by an increase in loans of over $10.3 million and held-to-maturity
securities of over $7.4 million. The Corporation's total assets increased over
June 30, 1999 by $11.1 million resulting from increases of $19.6 million in net
loans and $7.4 million in held-to-maturity securities partially offset by
decreases in available-for-sale securities of nearly $9.8 million and cash and
due from banks and federal funds of nearly $5.6 million.
The decrease in total liabilities of approximately $6.9 million from December
31, 1999 to June 30, 2000 is primarily attributable to a decrease in short term
borrowings of $8.0 million offset slightly by an increase in deposits of $2.7
million. The increase in total liabilities of $14.0 million from June 30, 1999
to June 30, 2000 is primarily attributable to an increase in deposits of $17.9
million offset by a decrease in other liabilities of $3.9 million.
As of June 30, 2000, PFC Bank, the Corporation's wholly owned subsidiary, had a
ratio of non-performing loans to total loans of 0.19% as compared to a ratio of
0.12% as of December 31, 1999 and 0.15% at June 30, 1999. Non-performing loan
totals at June 30, 2000 were $385,000 that were delinquent more than 90 days or
held on non-accrual status as compared to $233,000 and $290,000 at December 31,
1999 and June 30, 1999, respectively. At June 30, 2000, the allowance for
possible loan losses was $1,393,000, which represented 0.67% of net loans as
compared to 0.70% at December 31, 1999 and 0.71% at June 30, 1999.
Non-performing loans totaled 3.67% of the allowance for possible loan losses, as
compared to 0.51% at December 31, 1999 and 7.86% at June 30, 1999.
In management's opinion, the allowance for possible loan losses at June 30, 2000
is adequate to absorb 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.
<PAGE>
RESULTS OF OPERATIONS
Net Income
For the six-month period ended June 30, 2000, the Corporation recognized net
income of $1.6 million, a decrease of $668,000 compared with the same period in
the prior year. This decrease is attributable to a decrease of $1.6 million in
capital gains taken from the sale of available-for-sale securities offset by an
increase in net interest income of $507,000 and a decrease in income tax
provisions of $365,000. Net income for the three-month period ended June 30,
2000 totaled $0.8 million an increase of $214,000 compared with the three-months
ended June 30, 1999. This increase was primarily attributable to an increase in
net interest income of over $307,000 offset by an increase in provision for
income taxes of $82,000 and a decrease in fee income of $10,000.
The operating results of the Corporation are largely dependent upon the net
income generated by its subsidiary, PFC Bank. PFC Bank 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.
Net Interest Income
Interest income for the six-month period ended June 30, 2000 was $10.4 million,
an increase of over $1.3 million from the six-month period ended June 30, 1999.
This increase is primarily attributed to a $898,000 increase in interest on the
loan portfolio in addition to an increase of $435,000 in interest on
investments, interest-bearing deposits and federal funds sold. Interest expense
for the six-month period ended June 30, 2000 was approximately $5.4 million, a
$827,000 increase over the same six-month period ended June 30, 1999. Management
attributes this increase primarily to the $12.6 million increase in interest
bearing deposits since June 30, 1999. For the three-month period ended June 30,
2000, interest income was $5.3 million, a $670,000 increase as compared to the
three-month period ended June 30, 1999. This increase is due to increases in
interest on loans of $459,000 and investments, interest-bearing deposits and
federal funds sold of $211,000. Interest expense for the three-months ended June
30, 2000 of $2.7 million is an increase over the same period in 1999 of $363,000
due to an increase in interest bearing deposits
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 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 six-month period ended June 30, 2000, PFC Bank recorded $30,000 to the
provision for loan losses as compared to $90,000 for the same period in the
previous year. Net charge-offs for the six month period ended June 30, 2000
amounted to $15,000 as compared to $4,800 for the six-month period ended June
30, 1999. For the three-month period ended June 30, 2000, PFC Bank recorded
$15,000 to the provision for loan losses as compared to $30,000 for the same
period in
<PAGE>
the previous year. Net charge-offs for the three-month period ended June 30,
2000 amounted to $5,000 as compared to $200 for the three-month period ended
June 30, 1999.
Activity in the allowance for loan losses was as follows (in thousands):
Six-Months Ended Year Ended
June 30, 2000 December 31, 1999
---------------- -----------------
Balance, beginning of period $1,378 $1,238
Provision 30 150
Charge-offs (26) (48)
Recoveries 11 38
------ ------
Balance, end of period $1,393 $1,378
====== ======
Other Income
Other income for the six-month period ended June 30, 2000 was approximately
$304,000, a decrease of $1.6 million compared to the six-month period ended June
30, 1999. This decrease is attributable to capital gains from the sale of
available-for-sale securities of $8,000 for the six-month period ended June 30,
2000 as compared with capital gains of $1.6 million for the same period of 1999.
These net gains were primarily the result of the liquidation of a portion of PFC
Bank's stock portfolio. Other income for the three-month period ended June 30,
2000 was $149,000, a decrease of $8,000 as compared to the same period in 1999.
Other Expenses
Total other expenses decreased $15,000 for the six-month period ended June 30,
2000 when compared to the same period in the prior year. This decrease was the
result of decreases in various miscellaneous operating expenses of $116,000 and
legal and professional fees of $10,000, offsetting increases in salaries and
employee benefits of $89,000, regulatory fees of $14,000 and data processing
fees of $8,000. Other expenses for the three months ended June 30, 2000 of $1.6
million increased $18,000 over the three-month period ended June 30, 1999. This
increase was the result of increases in salaries and employee benefits of
$79,000, legal and professional expenses of $17,000 and data processing expenses
of $15,000 offset slightly by decreases in miscellaneous expenses of $93,000.
Maintaining a focus on operating cost control has become increasingly important
and the Corporation has succeeded in maintaining a relatively stable overhead
burden.
<PAGE>
Provision for Income Taxes
The Corporation incurred a provision for income taxes of $627,000 for the
six-month period ended June 30, 2000, as compared to $992,000 for the same
period ended June 30, 1999. During the three-month period ended June 30, 2000,
the Corporation incurred a provision for income taxes of $304,000 as compared to
$222,000 for the same period the previous year. 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.
Liquidity
Liquidity is the availability of funds to meet the daily requirements of the
business. For financial institutions, demand for funds comes principally from
extensions of credit and withdrawal of deposits. Liquidity is provided by asset
maturities, sales of investment securities, deposit growth or short-term
borrowings. Liquidity measures are formally reviewed by management monthly, and
they continue to show adequate liquidity in all areas of the organization.
Capital Adequacy
PFC Bank is subject to various regulatory capital requirements administered by
federal banking agencies. Quantitative measures established by regulation to
ensure capital adequacy require the Bank to maintain minimum amounts and ratios
of total capital and Tier I capital to risk-weighted assets and leverage ratio.
Equity and risk-based capital ratios for the Bank exceed these minimums ratios
and are as follows:
June 30 December 31 June 30
2000 1999 1999
------- ----------- -------
Leverage Ratio 10.02% 9.27% 9.54%
Risk-Based Capital 19.34% 20.55% 21.18%
Tier I Capital 15.18% 15.13% 14.36%
<PAGE>
Regulatory Activity
In recent years, 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. The decision also bars states from
blocking insurance sales by national banks in towns with populations of no more
than 5,000. PFC Bank does not currently have plans to enter the insurance field
but continues to review this option.
Congress recently enacted 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.
Management estimates that changes in PFC Bank's FDIC assessment rate, resulting
from the enactment of the Deposit Insurance Funds Act of 1996, will adversely
impact the results of operations net of income taxes. Prior to this enactment,
PFC Bank was not required to pay any FDIC assessment. Although the Bank is in
the minimum assessment bracket, income will be impacted in the amount of $50,000
for the year ended December 31, 2000. The act also provides regulatory relief to
the financial services industry relative to environmental risks, frequency of
examinations, and 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 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 liquidity, capital
resources, and results of operation 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 operation, 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 expects 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>
Forward-Looking Statements
From time to time, the Corporation may publish forward-looking statements
relating to such matters as anticipated financial performance, business
prospects, technological developments, new products, research and development
activities and similar matters. The Private Securities Litigation Reform Act of
1995 provides a safe harbor for forward-looking statements. In order to comply
with the terms of the safe harbor, the Corporation notes that a variety of
factors could cause the Corporation's actual results and experience to differ
materially from the anticipated results or other expectations expressed in the
Corporation's forward-looking statements. The risks and uncertainties that may
affect the operations, performance, development and results of the Corporation's
business include the following: general economic conditions, including their
impact on capital expenditures; business conditions in the banking industry; the
regulatory environment; rapidly changing technology and evolving banking
industry standards; competitive factors, including increased competition with
community, regional and national financial institutions; new service and product
offerings by competitors and price pressures; and similar items.
Gramm-Leach-Bliley Act
On November 12, 1999 President Clinton signed into law the Gramm-Leach-Bliley
Financial Modernization Act. The Act has a profound impact on the financial
services industry.
o The Act repeals prior legislation to permit commercial banks to affiliate
with securities firms and insurance companies. More importantly, the Act
significantly expands the authority of each of these financial industries
to engage in a full array of financial services. Thus, each industry may
now engage in activities previously reserved to one or the other.
o The Act authorizes bank holding companies meeting defined standards to
engage in a substantially broader range of non-banking activities than was
permissible before the legislation passed.
o A new hierarchy of existing state and federal regulators will monitor both
the bank and the corporation. The Act coordinates the efforts of these
regulators. The goal is to lessen regulatory burden and prevent duplication
of examination efforts.
Also, all financial institutions are required to take reasonable precautions to
protect the security and confidentiality of personal customer information. The
bank or corporation may only share customer information with its affiliates
under certain circumstances.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no material changes in the Company's interest rate risk position
since December 31, 1999. Other types of market risk, such as foreign currency
exchange rate risk and commodity price risk, do not arise in the normal course
of the Company's business activities.
<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 was no submission of matters brought to a vote of security holders in the
second quarter of 2000.
ITEM 5. Other Information
On July 6, 2000 the Corporation repurchased 107,640 shares of its common stock
at a price of $36.10 per share from the Paul L. Dunmire Trust Under Agreement
for C. Edward Dunmire and S. Esther Dunmire Trust Under Agreement for the
Benefit of C. Edward Dunmire. This stock will be held as treasury stock.
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
3.1 Registrant's Articles of Incorporation.
(Incorporated by reference in Registrant's January 27, 1995,
filing on Form S-4).
3.2 Registrant's By-Laws.
(Incorporated by reference in Registrant's January 27, 1995,
filing on Form S-4).
10.1 Agreement between R.B. Robertson and Bank.
(Incorporated by Reference in the Registrant's September 30,
1997 filing on Form 10-QSB).
10.2 Settlement Agreement.
(Incorporated by Reference in the Registrant's December 31,
1996 filing on Form 10-KSB).
<PAGE>
PEOPLES FINANCIAL CORP., INC. AND SUBSIDIARY
PART II. OTHER INFORMATION (cont.)
ITEM 6. Exhibits and Reports on Form 8-K (cont.)
10.3 General Release
(Incorporated by Reference in the Registrant's December 31,
1996 filing on Form 10-KSB).
10.4 Amendment to Executive Employment Agreement dated October 20,
1999, between R.B. Robertson and Bank.
(Incorporated by Reference to Registrant's September 30, 1999
filing of Form 10Q).
10.5 Amendment to Executive Employment Agreement dated
November 17, 1999 between R.B. Robertson, PFC Bank and
Peoples Financial Corp., Inc.
(Incorporated by Reference to the Registrant's December 31,
1999 filing of Form 10-K).
11 Statement re: Computation of Earnings Per Share.
(included herein at Part I, Item 1, Page 2 of this Form 10-Q).
27 Financial Data Schedule
(b) Reports on Form 8-K
The Registrant did note file any current reports on Form 8-K
during the quarter ended June 30, 2000.
<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: August 2, 2000
--------------------
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
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<CAPTION>
PAGE NO.
IN MANUALLY
SIGNED
EXHIBIT NO.
ORIGINAL
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<S> <C> <C>
(a) The following Exhibits are files herewith or incorporated by reference
as a part of this Annual Report.
3.1 Registrant's Articles of Incorporation.
(Incorporated by reference in Registrant's January 27, 1995
filing of Form S-4).
3.2 Registrant's By-Laws.
(Incorporated by reference in Registrant's January 27, 1995
filing of Form S-4).
10.1 Agreement between R.B. Robertson and Bank.
(Incorporated by Reference in the Registrant's September 30,
1997 filing of Form 10-QSB).
10.2 Settlement Agreement.
(Incorporated by Reference in the Registrant's December 31,
1996 filing of Form 10-KSB).
10.3 General Release
(Incorporated by Reference in the Registrant's December 31,
1996 filing of Form 10-KSB).
10.4 Amendment to Executive Employment Agreement dated October 20,
1999, between R.B. Robertson and Bank
(Incorporated by Reference to Registrant's September 30, 1999
filing of Form 10-Q).
10.5 Amendment to Executive Employment Agreement dated November 17,
1999 between R.B. Robertson, PFC Bank and Peoples Financial
Corp., Inc.
(Incorporated by Reference to the Registrant's December 31,
1999 filing of Form 10-K).
11 Statement re: Computation of Earnings Per Share.
(included herein at Part I, Item 1, Page 2 of this Form 10-Q).
27 Financial Data Schedule 17
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