1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2001
-----------------------------------
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number 0-30050
-----------------------------------
PEOPLES FINANCIAL CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Mississippi 64-0709834
-------------------------------------------------------------- ------------------------------------
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
Lameuse and Howard Avenues, Biloxi, Mississippi 39533
----------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(228) 435-5511
----------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
---------------- ----------------
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the last practicable date. Peoples Financial Corporation has
only one class of common stock authorized. At May 1, 2001, there were 15,000,000
shares of $1 par value common stock authorized, and 5,638,504 shares issued and
outstanding.
Page 1 of 19
2
PART I
FINANCIAL INFORMATION
PEOPLES FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
March 31, December 31, and March 31, 2001 2000 2000
- ------------------------------------ ------------ ------------ ------------
ASSETS
Cash and due from banks $ 37,498,149 $ 35,145,868 $ 33,171,502
Held to maturity securities, market value of
$93,467,000 - March 31, 2001;
$97,946,000 - December 31, 2000;
$118,238,000 - March 31, 2000 92,845,616 98,051,955 120,036,460
Available for sale securities, at market value 73,051,036 48,167,770 39,815,518
Federal Home Loan Bank stock, at cost 1,808,600 1,647,300 1,647,300
Federal funds sold 4,800,000
Loans 368,893,004 377,485,768 349,531,990
Less: Unearned income 14,655 9,612 13,009
Allowance for loan losses 4,693,883 4,567,565 4,215,983
------------ ------------ ------------
Loans, net 364,184,466 372,908,591 345,302,998
Bank premises and equipment, net of
accumulated depreciation of $11,940,000 -
March 31, 2001; $11,427,000 - December 31,
2000; and $10,513,000 - March 31, 2000 18,669,785 18,333,272 17,452,256
Other real estate 1,679,382 1,061,081 75,068
Accrued interest receivable 4,330,134 4,497,713 4,093,561
Other assets 6,342,009 7,430,384 5,700,311
------------ ------------ ------------
TOTAL ASSETS $605,209,177 $587,243,934 $567,294,974
============ ============ ============
Page 2 of 19
3
PEOPLES FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Continued)
(Unaudited)
March 31, December 31, and March 31, 2001 2000 2000
- ------------------------------------ ------------- ------------- -------------
LIABILITIES & SHAREHOLDERS' EQUITY
LIABILITIES:
Deposits:
Demand, non-interest bearing $ 72,783,454 $ 68,080,764 $ 85,825,727
Savings and demand, interest bearing 163,857,318 137,531,988 183,962,248
Time, $100,000 or more 138,984,591 126,353,164 79,130,455
Other time deposits 81,818,092 81,758,161 71,285,168
------------- ------------- -------------
Total deposits 457,443,455 413,724,077 420,203,598
Accrued interest payable 1,095,221 1,028,564 626,116
Federal funds purchased and securities sold
under agreements to repurchase 58,433,099 65,339,084 62,620,718
Borrowings from Federal Home Loan Bank 5,158,681 23,159,507
Notes payable 266,984 291,481 312,432
Other liabilities 4,681,842 4,984,364 4,599,036
------------- ------------- -------------
TOTAL LIABILITIES 527,079,282 508,527,077 488,361,900
SHAREHOLDERS' EQUITY:
Common Stock, $1 par value, 15,000,000 shares
authorized, 5,638,504, 5,795,207 and 5,905,344
shares issued and outstanding at March 31,
2001, December 31, 2000 and March 31, 2000,
respectively, after giving retroactive effect to
two for one stock split effective April 17, 2000 5,638,504 5,795,207 5,905,344
Surplus 65,780,254 65,780,254 65,759,086
Undivided profits 6,067,923 7,093,830 8,046,383
Unearned compensation (484,840) (535,840) (636,580)
Accumulated other comprehensive income 1,128,054 583,406 (141,159)
------------- ------------- -------------
TOTAL SHAREHOLDERS' EQUITY 78,129,895 78,716,857 78,933,074
------------- ------------- -------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 605,209,177 $ 587,243,934 $ 567,294,974
============= ============= =============
See Selected Notes to Consolidated Financial Statements.
Page 3 of 19
4
PEOPLES FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
For the Quarters Ended March 31, 2001 2000
- -------------------------------- ----------- -----------
INTEREST INCOME:
Interest and fees on loans $ 8,135,633 $ 7,609,111
Interest and dividends on investments:
U. S. Treasury 687,736 885,925
U. S. Government agencies and corporations 1,369,200 1,187,004
States and political subdivisions 138,746 136,500
Other investments 223,747 44,598
Interest on federal funds sold 29,588 30,468
----------- -----------
TOTAL INTEREST INCOME 10,584,650 9,893,606
----------- -----------
INTEREST EXPENSE:
Time deposits of $100,000 or more 2,134,841 1,131,041
Other deposits 2,569,178 2,231,431
Borrowing from Federal Home Loan Bank 132,440
Mortgage indebtedness 2,360 2,421
Federal funds purchased and securities sold under
agreements to repurchase 723,955 597,746
----------- -----------
TOTAL INTEREST EXPENSE 5,562,774 3,962,639
----------- -----------
NET INTEREST INCOME 5,021,876 5,930,967
Provision for losses on loans 75,000 52,500
----------- -----------
NET INTEREST INCOME AFTER PROVISION FOR LOSSES ON LOANS $ 4,946,876 $ 5,878,467
----------- -----------
Page 4 of 19
5
PEOPLES FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (Continued)
(Unaudited)
For the Quarters Ended March 31, 2001 2000
- -------------------------------- ---------- ----------
OTHER OPERATING INCOME:
Trust department income and fees $ 231,790 $ 290,785
Service charges on deposit accounts 1,430,155 1,236,333
Other service charges, commissions and fees 71,590 65,259
Other income 322,493 84,414
---------- ----------
TOTAL OTHER OPERATING INCOME 2,056,028 1,676,791
---------- ----------
OTHER OPERATING EXPENSE:
Salaries and employee benefits 2,687,770 2,646,532
Net occupancy 281,692 249,473
Equipment rentals, depreciation and maintenance 700,713 609,463
Other expense 1,258,135 1,371,401
---------- ----------
TOTAL OTHER OPERATING EXPENSE 4,928,310 4,876,869
---------- ----------
INCOME BEFORE INCOME TAXES 2,074,594 2,678,389
Income taxes 669,995 879,100
---------- ----------
NET INCOME $1,404,599 $1,799,289
========== ==========
See Selected Notes to Consolidated Financial Statements.
Page 5 of 19
6
PEOPLES FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(Unaudited)
Accumulated
# of Other
Common Common Undivided Unearned Comprehensive Comprehensive
Shares Stock Surplus Profits Compensation Income Income
------------ ------------ ------------ ------------ ------------ ------------- -------------
BALANCE,
JANUARY 1,
2000, AS
PREVIOUSLY
REPORTED 2,952,672 $ 2,952,672 $ 68,711,758 $ 6,837,628 $ (624,842) $ (110,330)
Two-for-one
stock split in
2000 2,952,672 2,952,672 (2,952,672)
------------ ------------ ------------ ------------ ------------ ------------
BALANCE,
JANUARY 1,
2000, AS
RESTATED 5,905,344 5,905,344 65,759,086 6,837,628 (624,842) (110,330)
Comprehensive
Income:
Net income 1,799,289 $ 1,799,289
Net
unrealized
loss on
available for
sale securities,
net of tax (30,829) (30,829)
------------
Total
comprehensive
income $ 1,768,460
============
Purchase of
ESOP shares (41,738)
Allocation of
ESOP shares 30,000
Cash
dividends
(.10 per share) (590,534)
------------ ------------ ------------ ------------ ------------ ------------
BALANCE,
MARCH 31,
2000 5,905,344 $ 5,905,344 $ 65,759,086 $ 8,046,383 $ (636,580) $ (141,159)
============ ============ ============ ============ ============ ============
Total
------------
BALANCE,
JANUARY 1,
2000, AS
PREVIOUSLY
REPORTED $ 77,766,886
Two-for-one
stock split in
2000
------------
BALANCE,
JANUARY 1,
2000, AS
RESTATED 77,766,886
Comprehensive
Income:
Net income 1,799,289
Net
unrealized
loss on
available for
sale securities,
net of tax (30,829)
Total
comprehensive
income
Purchase of
ESOP shares (41,738)
Allocation of
ESOP shares 30,000
Cash
dividends
(.10 per share) (590,534)
------------
BALANCE,
MARCH 31,
2000 $ 78,933,074
============
Page 6 of 19
7
PEOPLES FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Continued)
(Unaudited)
Accumulated
# of Other
Common Common Undivided Unearned Comprehensive Comprehensive
Shares Stock Surplus Profits Compensation Income Income
------------ ------------ ------------ ------------ ------------ ------------- --------------
BALANCE,
JANUARY 1,
2001 5,795,207 $ 5,795,207 $ 65,780,254 $ 7,093,830 $ (535,840) $ 583,406
Comprehensive
Income:
Net income 1,404,599 $ 1,404,599
Net unrealized
gain on
available for
sale securities,
net of tax 544,648 544,648
------------
Total
comprehensive
income $ 1,949,247
============
Allocation of
ESOP shares 51,000
Effect of stock
retirement on
accrued
dividends 15,545
Retirement of
common stock (156,703) (156,703) (2,446,051)
------------ ------------ ------------ ------------ ------------ ------------
BALANCE,
MARCH 31,
2001 5,638,504 $ 5,638,504 $ 65,780,254 $ 6,067,923 $ (484,840) $ 1,128,054
============ ============ ============ ============ ============ ============
Total
--------------
BALANCE,
JANUARY 1,
2001 $ 78,716,857
Comprehensive
Income:
Net income 1,404,599
Net unrealized
gain on
available for
sale securities,
net of tax 544,648
Total
comprehensive
income
Allocation of
ESOP shares 51,000
Effect of stock
retirement on
accrued
dividends 15,545
Retirement of
common stock (2,602,754)
-------------
BALANCE,
MARCH 31,
2001 $ 78,129,895
=============
See Selected Notes to Consolidated Financial Statements.
Page 7 of 19
8
PEOPLES FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the Quarters Ended March 31, 2001 2000
- -------------------------------- ------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,404,599 $ 1,799,289
Adjustments to reconcile net income to net cash
provided by operating activities:
Gain on sales of other real estate 5,000
Depreciation and amortization 513,000 423,000
Provision for losses on loans 75,000 52,500
Changes in assets and liabilities:
Accrued interest receivable 167,579 (307,938)
Other assets 719,545 (168,241)
Accrued interest payable 66,657 (142,827)
Other liabilities 56,951 970,080
------------ ------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 3,008,331 2,625,863
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities and calls of held to 43,995,000 16,000,000
maturity securities
Investment in held to maturity securities (38,788,661) (20,763,670)
Proceeds from maturities, sales and calls of 10,036,625 123,486
available for sale securities
Investment in available for sale securities (34,097,243) (6,912,948)
Investment in Federal Home Loan Bank (161,300)
Proceeds from sales of other real estate 47,000
Loans, net (increase) decrease 8,008,824 (17,154,080)
Acquisition of premises and equipment (849,513) (894,836)
Federal funds sold (4,800,000)
Other assets 368,830 (2,108,804)
------------ ------------
NET CASH USED IN INVESTING ACTIVITIES $(16,240,438) $(31,710,852)
------------ ------------
Page 8 of 19
9
PEOPLES FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(Unaudited)
For the Quarters Ended March 31, 2001 2000
- -------------------------------- ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Demand and savings deposits, net increase $ 31,028,020 $ 41,929,269
Time deposits, net increase (decrease) 12,691,358 (16,406,828)
Principal payments on notes (3,497) (3,435)
Borrowings from Federal Home Loan Bank (18,000,826)
Retirement of common stock (2,602,754)
Cash dividends (621,928) (590,534)
Federal funds purchased and securities sold
under agreements to repurchase, net increase
(decrease) (6,905,985) 1,787,041
------------ ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 15,584,388 26,715,513
------------ ------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 2,352,281 (2,369,476)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 35,145,868 35,540,978
------------ ------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 37,498,149 $ 33,171,502
============ ============
See Selected Notes to Consolidated Financial Statements.
Page 9 of 19
10
PEOPLES FINANCIAL CORPORATION AND SUBSIDIARIES
SELECTED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Quarters Ended March 31, 2001 and 2000
1. The accompanying unaudited consolidated financial statements have been
prepared with the accounting policies in effect as of December 31, 2000 as set
forth in the Notes to the Consolidated Financial Statements of Peoples Financial
Corporation and Subsidiaries (the Company). In the opinion of Management, all
adjustments necessary for a fair presentation of the condensed consolidated
financial statements have been included and are of a normal recurring nature.
The accompanying unaudited consolidated financial statements have been prepared
also in accordance with the instructions to Form 10-Q and Rule 10-01 of
Regulations S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements.
2. The results of operations for the quarter ended March 31, 2001, are not
necessarily indicative of the results to be expected for the full year. Per
share data is based on the weighted average shares of common stock outstanding
of 5,642,423 and 5,905,344 for the quarters ended March 31, 2001 and 2000,
respectively.
3. At March 31, 2001 and 2000, the total recorded investment in impaired loans,
for which there was no related allowance for loan losses, amounted to $2,487,000
and $131,000, respectively. The amount of interest not accrued on these loans
did not have a significant effect on earnings for the quarters ended March 31,
2001 and 2000.
4. Transactions in the allowance for loan losses were as follows:
Balance, January 1, 2001 $4,567,565
Provision for loan losses 75,000
Recoveries 137,672
Loans charged off (86,354)
-----------
Balance, March 31, 2001 $4,693,883
==========
5. The Company has defined cash and cash equivalents to include cash and due
from banks. The Company paid $5,496,000 and $4,105,000 for the quarters ended
March 31, 2001 and 2000, respectively, for interest on deposits and borrowings.
No income tax payments were made during the quarters ended March 31, 2001 and
2000. Loans transferred to other real estate amounted to $670,000 for the
quarter ended March 31, 2001. No loans were transferred to other real estate
during the quarter ended March 31, 2000. After receiving regulatory approval,
the Company transferred property with a book value of $19,000 from ORE into
banking premises during the quarter ended March 31, 2000. The income tax effect
on the accumulated other comprehensive income was $281,000 and $(16,000) at
March 31, 2001 and 2000, respectively.
6. Certain reclassifications, which had no effect on prior year net income, have
been made to the prior period statements to conform to current year
presentation.
Page 10 of 19
11
Independent Accountants' Review Report
Board of Directors
Peoples Financial Corporation
Biloxi, Mississippi
We have reviewed the accompanying consolidated balance sheets - Securities and
Exchange Commission Form 10-Q of Peoples Financial Corporation as of March 31,
2001, March 31, 2000 and December 31, 2000, and the related consolidated
statements of income, retained earnings, and cash flows - Securities and
Exchange Commission Form 10-Q, for the three months ended March 31, 2001 and
March 31, 2000, in accordance with Statements on Standards for Accounting and
Review Services issued by the American Institute of Certified Public
Accountants. All information included in these financial statements is the
representation of management of Peoples Financial Corporation.
A review consists principally of inquires of Company personnel and analytical
procedures applied to financial data. It is substantially less in scope than an
audit in accordance with generally accepted auditing standards, the objective of
which is the expression of an opinion regarding the financial statements taken
as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying financial statements in order for them to be in
conformity with Securities and Exchange Commission instructions for Form 10-Q
and Rule 10-01 of Regulations S-X.
/s/ Piltz, Williams, LaRosa & Co.
PILTZ, WILLIAMS, LAROSA & Co.
April 19, 2001
Biloxi, Mississippi
Page 11 of 19
12
Item 2 - Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following presents Management's discussion and analysis of the consolidated
financial condition and results of operations of Peoples Financial Corporation
and Subsidiaries (the Company) for the quarters ended March 31, 2001 and 2000.
These comments highlight the significant events and should be considered in
combination with the Consolidated Financial Statements included in this report
on Form 10-Q.
FORWARD-LOOKING INFORMATION
Congress passed the Private Securities Litigation Act of 1995 in an effort to
encourage corporations to provide information about a company's anticipated
future financial performance. This act provides a safe harbor for such
disclosure which protects the companies from unwarranted litigation if actual
results are different from management expectations. This report contains
forward-looking statements and reflects industry conditions, company performance
and financial results. These forward-looking statements are subject to a number
of factors and uncertainties which could cause the Company's actual results and
experience to differ from the anticipated results and expectations expressed in
such forward-looking statements.
OVERVIEW
During the first quarter of 2001, the Company continued to enjoy steady loan
demand and asset growth. The most significant development during this time
period is the increase in cost of funds, particularly certificates of deposit.
The Company began utilizing brokered certificates to manage its liquidity
position, however these funds bear interest at a higher rate of interest than
more traditional sources of funds. At the same time, the rate of interest earned
on loans has slightly decreased. The result of these two factors is a decrease
in the net interest margin for the first quarter of 2001. The Company hopes to
reverse this negative trend during the second quarter of 2001 by more favorable
repricing of funds.
The following schedule compares financial highlights for the quarters ended
March 31, 2001 and 2000:
For the quarters ended March 31, 2001 2000
- -------------------------------- ---- ----
Net income per share $ 0.25 $ 0.30
Book value per share $ 13.86 $ 13.37
Return on average total assets .94% 1.29%
Return on average shareholders' equity 7.17% 9.19%
Allowance for loan losses as a % of
loans, net of unearned discount 1.27% 1.20%
Page 12 of 19
13
FINANCIAL CONDITION
HELD TO MATURITY SECURITIES
Held to maturity securities decreased $27,191,000 at March 31, 2001, compared
with March 31, 2000, as a result of the management of the Company's liquidity
position. As funds were available from the maturity of these securities, they
were generally invested in short term U. S. Government Agency securities, which
have been classified as available for sale. Gross unrealized gains for held to
maturity securities were $647,000 and $185,000 and gross unrealized losses for
held to maturity securities were $26,000 and $1,983,000 at March 31, 2001 and
2000, respectively. The following schedule reflects the mix of the held to
maturity investment portfolio at March 31, 2001 and 2000:
March 31, 2001 2000
- --------- --------------------------- ---------------------------
Amount % Amount %
------------ ------------ ------------ ------------
U. S. Treasury $ 48,594,761 52.30% $ 56,473,450 47.00%
U. S. Government agencies 38,375,992 41.30% 57,300,141 47.70%
States and political
subdivisions 5,874,863 6.40% 6,262,869 5.30%
------------ ------------ ------------ ------------
Totals $ 92,845,616 100.00% $120,036,460 100.00%
============ ============ ============ ============
AVAILABLE FOR SALE SECURITIES
Available for sale securities increased $33,236,000 at March 31, 2001, compared
with March 31, 2000, in the management of the Company's liquidity position, as
discussed above. Gross unrealized gains were $1,724,000 and $943,000 and gross
unrealized losses were $21,000 and $1,163,000 at March 31, 2001 and 2000,
respectively. The following schedule reflects the mix of available for sale
securities at March 31, 2001 and 2000:
March 31, 2001 2000
- --------- ------------------------- -------------------------
Amount % Amount %
----------- ----------- ----------- -----------
U. S. Treasury $ 6,125,010 8.40% $ 6,771,560 17.00%
U. S. Government agencies 56,930,351 77.90% 24,813,394 62.30%
States and political subdivisions 5,006,812 6.90% 3,611,601 9.10%
Other securities 4,988,863 6.80% 4,618,963 11.60%
----------- ----------- ----------- -----------
Totals $73,051,036 100.00% $39,815,518 100.00%
=========== =========== =========== ===========
Page 13 of 19
14
FEDERAL FUNDS SOLD
Federal funds sold were $4,800,000 at March 31, 2001, as a direct result of the
management of the bank subsidiary's liquidity position.
LOANS
Loans increased $19,361,000 at March 31, 2001, as compared with March 31, 2000,
as a result of the increase in loan demand in the Company's trade area during
the last 30 months. The Company anticipates that this demand will remain steady
throughout 2001.
OTHER REAL ESTATE
Other real estate increased $1,604,000 at March 31, 2001, as compared with March
31, 2000, due to the foreclosure of several parcels of commercial real estate
during the fourth quarter of 2000 and the first quarter of 2001.
OTHER ASSETS
Other assets increased $642,000 at March 31, 2001, as compared with March 31,
2000, due to an income tax benefit due to the Company.
DEPOSITS
Total deposits increased $37,240,000 at March 31, 2001, as compared with March
31, 2000. Significant increases or decreases in total deposits and/or
significant fluctuations among the different types of deposits from quarter to
quarter are anticipated by Management as customers in the casino industry and
county and municipal areas reallocate their resources periodically. As discussed
above, the Company has managed its funds including planning the timing and
classification of investment maturities and using other funding sources and
their maturity so as to achieve appropriate liquidity.
Specifically, the Company obtained brokered deposits of $30,000,000 during the
third quarter of 2000.
FEDERAL FUNDS PURCHASED AND SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE
Federal funds purchased and securities sold under agreements to repurchase
decreased $4,188,000 at March 31, 2001, as compared with March 31, 2000, as the
result of the management of the Company's liquidity position and the
reallocation of funds by certain customers between deposit products and
non-deposit products.
BORROWINGS FROM FEDERAL HOME LOAN BANK
The Company acquired funds from the Federal Home Loan Bank in the management of
its liquidity position.
SHAREHOLDERS' EQUITY AND CAPITAL ADEQUACY
Strength, security and stability have been the hallmark of the Company since its
founding in 1985 and of its bank subsidiary since its founding in 1896. A strong
capital foundation is fundamental to the continuing prosperity of the Company
and the security of its customers and shareholders. One measure of capital
adequacy is the primary capital ratio which was 13.78% at March 31, 2001, as
compared with 14.92% at March 31, 2000. These ratios are well above the
regulatory minimum of 6.00%. Management continues to emphasize the importance of
maintaining the appropriate capital levels of the Company.
Page 14 of 19
15
RESULTS OF OPERATIONS
NET INTEREST INCOME
Net interest income, the amount by which interest income on loans, investments
and other interest earning assets exceeds interest expense on deposits and other
borrowed funds, is the single largest component of the Company's income.
Management's objective is to provide the largest possible amount of income while
balancing interest rate, credit, liquidity and capital risk. Net interest income
decreased $909,000 for the first quarter of 2001 as compared with the first
quarter of 2000. Total interest income increased $691,000 for the quarter ended
March 31, 2001, as compared with the quarter ended March 31, 2000. Total
interest expense increased $1,600,000 for the quarter ended March 31, 2001, as
compared with the quarter ended March 31, 2000. The following schedule
summarizes net interest earnings and net yield on interest earning assets:
Net Interest Earnings and Net Yield on Interest Earning Assets
Quarters Ended March 31, (In
thousands, except percentages) 2001 2000
- ------------------------------ ------- -------
Total interest income (1) $10,656 $ 9,964
Total interest expense 5,563 3,963
------- -------
Net interest earnings $ 5,093 $ 6,001
======= =======
Net yield on interest earning assets 3.82% 4.82%
======= =======
(1) All interest earned is reported on a taxable equivalent basis using a tax
rate of 34% in 2001 and 2000.
The schedule on page 16 provides an analysis of the change in total interest
income and total interest expense for the quarters ended March 31, 2001 and
2000. Changes in interest income are generally attributable to changes in volume
related to interest-earning assets. Changes in interest expense, while impacted
by changes in volume related to interest-bearing liabilities, were heavily
impacted by the increase in the cost of funds during these time periods.
Page 15 of 19
16
Analysis of Changes in Interest Income and Interest Expense
(In Thousands)
Attributable To:
-------------------------------
For the For the
Quarter Quarter
Ended Ended Increase Rate/
March 31, 2001 March 31, 2000 (Decrease) Volume Rate Volume
-------------- -------------- ---------- -------- -------- --------
INTEREST INCOME: (1)
Loans(2)(3) $ 8,136 $ 7,609 $ 527 $ 772 $ (223) $ (22)
Federal funds sold 30 30 2 (1) (1)
Held to maturity:
Taxable 1,338 1,641 (303) (289) (17) 3
Non-taxable 127 135 (8) (6) (2)
Available for sale:
Taxable 718 432 286 300 (8) (6)
Non-taxable 84 72 12 26 (10) (4)
Other 223 45 178 3 166 9
------- ------- ------- ------- ------- -------
Total $10,656 $ 9,964 $ 692 $ 808 $ (95) $ (21)
======= ======= ======= ======= ======= =======
INTEREST EXPENSE:
Savings
and
demand,
interest
bearing $ 1,342 $ 1,346 $ (4) $ (202) 233 (35)
Time deposits 3,363 2,017 1,346 776 412 158
Federal
funds
purchased and
securities sold under
agreements to
repurchase 724 598 126 120 5 1
Borrowings from FHLB 132 132 132
Mortgage
indebtedness 2 2 1 (1)
------- ------- ------- ------- ------- -------
Total $ 5,563 $ 3,963 $ 1,600 $ 827 $ 649 $ 124
======= ======= ======= ======= ======= =======
(1) All interest earned is reported on a taxable equivalent basis using a tax
rate of 34% in 2001 and 2000.
(2) Loan fees are included in these figures.
(3) Includes nonaccrual loans.
Page 16 of 19
17
PROVISION FOR LOAN LOSSES
Management continuously monitors the Company's relationships with its loan
customers, especially those in concentrated industries such as seafood, gaming
and hotel/motel, and their direct and indirect impact on its operations. A
thorough analysis of current economic conditions and the quality of the loan
portfolio are conducted on a quarterly basis. These analyses are utilized in the
computation of the adequacy of the allowance for loan losses. Based on these
analyses, the Company is providing for loan losses on a monthly basis and
expects to continue to do so throughout 2001.
SERVICE CHARGES ON DEPOSITS ACCOUNTS
Service charges on deposit accounts increased $194,000 for the quarter ended
March 31, 2001, as compared with the quarter ended March 31, 2000, as a result
of an increase in fees charged for non-sufficient funds and other services.
OTHER INCOME
Other income increased $238,000 for the quarter ended March 31, 2001 as compared
with the quarter ended March 31, 2000, primarily as a result of the gain
realized on proceeds from whole life insurance owned by the bank subsidiary.
LIQUIDITY
Liquidity represents the Company's ability to adequately provide funds to
satisfy demands from depositors, borrowers and other commitments by either
converting assets to cash or accessing new or existing sources of funds.
Management monitors these funds requirements in such a manner as to satisfy
these demands and provide the maximum earnings on its earning assets. Deposits,
payments of principal and interest on loans, proceeds from maturities of
investment securities and earnings on investment securities are the principal
sources of funds for the Company. As discussed previously, the Company has
utilized non-traditional sources of funds including brokered certificates and
borrowings from the Federal Home Loan Bank. These additional sources have
allowed the Company to satisfy its liquidity needs. The Company will continue to
utilize these sources of funds throughout 2001, as necessary.
Page 17 of 19
18
PART II
OTHER INFORMATION
Item 4 - Submission of Matters to a Vote of Security Holders
(a) The Annual Meeting of Shareholders of the Company was held on April 11,
2001.
(b) The following six directors were elected at the meeting to hold office for a
term of one year:
Approve Disapprove
------- ----------
Drew Allen 4,351,551.6545 1,553.5584
William A. Barq 4,351,311.6545 1,553.5584
Andy Carpenter 4,349,661.6545 1,553.5584
Dan Magruder 4,351,551.6545 1,553.5584
Lyle M. Page 4,351,531.2521 1,553.5584
Chevis C. Swetman 4,349,661.5645 1,553.5584
Of the 5,643,504 shares eligible to vote, shares not voted amounted to
1,290,955.1925 and 116.9950 shares voted to abstain.
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 23: Consent of Certified Public Accountants
(b) Reports on Form 8-K
None.
Page 18 of 19
19
SIGNATURES
Pursuant to the requirement of Section 13 of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
PEOPLES FINANCIAL CORPORATION
(Registrant)
Date: May 11, 2001
-------------------------------------
By: /s/ Chevis C. Swetman
-------------------------------------
Chevis C. Swetman
Chairman, President and Chief Executive Officer
Date: May 11, 2001
-------------------------------------
By: /s/ Lauri A. Wood
-------------------------------------
Lauri A. Wood
Chief Financial Officer and Controller
(principal financial and accounting officer)
Page 19 of 19
20
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
23 Consent of Certified Public Accountants