Exhibit 13
Annual Report to Shareholders
[COVER]
[PHOTO]
CONTENTS
1 PRESIDENT'S LETTER
2 YEAR IN REVIEW
12 FINANCIALS
35 CORPORATE INFORMATION
LETTER FROM THE
PRESIDENT
[PICTURE OF PRESIDENT]
CHARTING THE COURSE FOR THE FUTURE
DEAR SHAREHOLDERS:
In some important ways, 2003 was a year of seeming contradiction: Peoples
Financial Corporation stayed the course of our strategic plan, yet at the same
time we charted new directions for the future.
In practice, these actions were not incompatible. And they were quite
successful: the company enjoyed its most profitable year since 1999, with net
income increasing 57% over 2002 to $5,018,000. Moreover, we were able to raise
the dividend not once but twice during 2003, a total increase of 25%, from $.12
a share at the beginning of 2003 to $.15 a share at the start of 2004.
So how did we stay the course and chart new directions at the same time? First,
we stayed the course of our strategic plan to continue pursuing expansion in the
face of difficult economic conditions. We started the year with the opening of
our new branch in Gautier in January, 2003, then dedicated a new, larger
facility in Long Beach near the end of the year. In December, we began work on
the renovation of our Bay St. Louis branch to accommodate the growth of our
business in Hancock County.
On the financial side of our business, we aggressively tackled the challenge of
shrinking interest margins by repricing deposits, while simultaneously
addressing loan portfolio issues. As we start 2004, I'm comfortable that all our
problem loans have been dealt with, and we can look forward to pursuing business
on the loan side once again.
At the same time, during 2003 we began charting new directions to position The
Peoples Bank for more growth in the future. Specifically, we engaged the
services of a respected management consulting firm to analyze our entire
organizational structure and suggest changes to take us seamlessly to another
level of asset size.
During the second half of 2003, we began to implement the report's
recommendations. Most notably, we have clearly defined the responsibilities of
the members of our senior management team, and they in turn have begun to build
their respective employee groups to implement their own strategic plans. The
result, we are confident, will be a more efficient operation that provides more
responsive service to our customers.
Throughout this year of change, we have been blessed with a group of employees
whose dedication has been unwavering. Their contribution to the success of The
Peoples Bank is incalculable. Whether they are on the front line directly
serving customers or in the back office keeping our systems running smoothly,
our team members represent the engine that drives The Peoples Bank. I want to
acknowledge and salute their splendid performance through turbulent times.
I also want to pay special tribute to our board of directors, who have
demonstrated their leadership in charting this new direction for Peoples
Financial Corporation while supporting our management team to stay the course of
our strategic plan. Our directors' combination of vision and determination
represents a great source of strength on which I am personally grateful to
depend.
Finally, I offer my gratitude to our stockholders who have entrusted our team
with the management and operation of this institution. We never forget that our
stockholders are our owners; we strive to earn your trust and generate a fair
return on your investment every day.
Sincerely,
/s/ Chevis C. Swetman
Chevis C. Swetman
Chairman of the Board, Chief Executive Officer
PRESIDENT'S LETTER 1
THE YEAR IN
REVIEW
[CHART OF NET INCOME 2001-2003]
IN THOUSANDS
PROFITS RISE, DIVIDEND RAISED TWICE
Financial performance in 2003 reversed the course of the last three years of
economic difficulty, with net income rising 57% over the year before, totaling
$5,018,000, compared to $3,191,000 for 2002. The 2002 performance was impacted
by a $1,500,000 addition to loan loss reserves caused by a single credit.
However, exclusive of the loss provision, 2003 results exceeded 2002 by nearly
9%, largely on the strength of an 8% increase in net interest income to more
than $19,000,000. The increase in net interest income was the result of
stabilizing interest rates and our ability to reprice loans and deposits to
bring interest rates margins back to acceptable levels.
As a result of the steady rise in earnings, the Board of Directors voted to
increase the dividend paid on the common stock of Peoples Financial Corporation
twice during 2003. In June, the Board voted to increase the dividend by 16.7%,
from $.12 to $.14 a share. At the end of the year, the Board voted to raise the
dividend another 7.1% to $.15 a common share.
[CHART OF NET INTEREST INCOME 2001-2003]
IN THOUSANDS
Combined, the two dividend raises increased the dividend 25% above the level it
stood at the end of 2002. The current dividend represents a distribution of
about 32% of earnings, very near the target of 35% set by the board a year
earlier. The latest dividend increase was the fifth in the last six years,
making the current $.30 annualized dividend 76% higher than the 1998 payout of
$.17 per share.
[CHART OF DIVIDENDS 2001-2003]
PER SHARE
Meanwhile, The Peoples Bank capital ratios continued to improve during the year.
Primary capital to average assets finished 2003 at 15.84%, compared to 15.39% at
the end of 2002. Our strong capital base gives us the ability to continue our
expansion program, even during difficult economic conditions.
[CHART OF CAPITAL RATIO 2001-2003]
2 THE YEAR IN REVIEW
TWO NEW BRANCHES OPEN, RENOVATION OF ANOTHER BRANCH ANNOUNCED
In a continuation of our program of physical and geographic expansion, 2003 saw
the grand opening of two new branches of the Peoples Bank. We opened our new
branch in Gautier in January to serve our growing customer base in Jackson
County. Later in the fall, we dedicated a new facility in Long Beach that
replaced an older branch two blocks away. The new, full-service Long Beach
branch provides a total of 2,000 square feet of banking space to customers,
including a night drop, safe deposit boxes, two drive-up lanes and an ATM.
At the end of the year, The Peoples Bank also announced plans to renovate the
Bay St. Louis branch to offer enhanced service to customers in the Bay-Waveland
area.
[PHOTO OF BRANCH]
[PHOTO OF BRANCH]
Bay St. Louis branch manager Jeannie Deen and prominent business executive
William Lady were featured in a television commercial that was part of a new
advertising campaign launched in 2003. The campaign features employees from all
departments and branches in a series of print ads that accompany the television
and radio commercials.
THE YEAR IN REVIEW 3
THE PEOPLES BANK AND ITS PEOPLE GIVE BACK TO THE COMMUNITY
[PICTURE OF PEOPLES BANK]
During 2003, The Peoples Bank continued its long-standing tradition of giving
back to the community, with corporate and individual donations to non-profit
groups serving the Mississippi Gulf Coast.
Two local charitable organizations -- St. Vincent DePaul Pharmacy and the Junior
Auxiliary of Biloxi -- each received checks for $8,266.50, raised through the
efforts of Peoples Bank employees through charity golf and bowling tournaments
during the year. The donation to the Junior Auxiliary is believed to be the
largest single donation ever received by the organization, according to
officials of the group.
In addition, bank employees selected Life of South Mississippi and Morning Star
to receive corporate donations of $5,000 each. Bank president Chevis Swetman
presented the checks to representatives of the two organizations.
Once again, The Peoples Bank took an active role in the week-long Cruisin' the
Coast event that has grown to nearly 6,000 registered participants. The annual
Biloxi block party of the event was once again staged in front of the Main
Branch of the bank. All staffers at the Main Branch, including president and CEO
Chevis Swetman, supported the event by dressing in 50s outfits of blue jeans and
poodle skirts.
[PICTURE OF PEOPLES BANK]
4 THE YEAR IN REVIEW
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
PEOPLES FINANCIAL CORPORATION AND SUBSIDIARIES
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 years ended
December 31, 2003, 2002 and 2001. These comments highlight the significant
events for these years and should be considered in combination with the
Consolidated Financial Statements and Notes to Consolidated Financial
Statements included in this annual report.
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.
CRITICAL ACCOUNTING POLICIES
Certain critical accounting policies affect the more significant estimates
and assumptions used in the preparation of the consolidated financial
statements. The Company's single most critical accounting policy relates to
its allowance for loan losses, which reflects the estimated losses
resulting from the inability of its borrowers to make loan payments. If
there was a deterioration of any of the factors considered by Management in
evaluating the allowance for loan losses, as discussed in Note A, the
estimates of loss would be updated, and additional provisions for loan
losses may be required.
OVERVIEW
Net income was $5,018,000 for the year ended December 31, 2003, as compared
with $3,191,000 for the year ended December 31, 2002. Net interest income
improved from $17,808,000 for 2002 to $19,227,000 for 2003 as the Company
continues its interest rate management policies begun in 2002. These
policies particularly include the aggressive pricing of loans and the
favorable repricing of deposits, specifically large and brokered
certificates of deposit. Also, the provision for loan losses was $2,428,000
for 2002, as compared with a provision of $447,000 for 2003, as the Company
had previously identified and provided for potential significant loan
losses in the prior year.
FINANCIAL CONDITION
AVAILABLE FOR SALE SECURITIES
Available for sale securities increased $56,002,000 at December 31, 2003 as
compared with December 31, 2002 primarily as a result of the management of
the bank subsidiary's liquidity position and its interest margin. The
Company reinvested funds from maturities in held to maturity securities in
available for sale securities.
Gross unrealized gains were $2,113,000, $3,032,000 and $2,787,000 and gross
unrealized losses were $1,094,000, $12,000 and $84,000 for available for
sale securities at December 31, 2003, 2002 and 2001, respectively. Gains of
$57,000, $210,000 and $243,000 were realized on the liquidation or sale of
available for sale securities in 2003, 2002 and 2001, respectively.
HELD TO MATURITY SECURITIES
Held to maturity securities decreased $13,235,000 at December 31, 2003,
compared with December 31, 2002. The decrease in these securities is
directly attributable to the management by the Company of its liquidity
position, as discussed above. Funds available from the maturity of these
securities were generally invested in available for sale securities.
Gross unrealized gains were $176,000, $438,000 and $725,000, at December
31, 2003, 2002 and 2001, respectively, while gross unrealized losses were
$2,000 and $18,000, at December 31, 2003 and 2001, respectively. There were
no significant realized gains or losses from calls of these investments for
the years ended December 31, 2003, 2002 and 2001.
FINANCIALS 5
FEDERAL HOME LOAN BANK STOCK
The Company acquired common stock issued by the Federal Home Loan Bank as a
prerequisite for participating in their loan programs.
LOANS
The Company's loan portfolio decreased $14,373,000 at December 31, 2003, as
compared with December 31, 2002. This decrease was a result of decreased
loan demand in the Company's trade area caused by the softening of the
local economy. Another contributing factor was the refinancing of loans in
our trade area's highly competitive interest rate environment. During the
fourth quarter of 2003, the loan portfolio increased as the local economy
became stabilized. The Company anticipates that this positive loan growth
will continue in 2004. Funds that are available to fund loan demand in the
future are presently invested primarily in available for sale securities.
Fluctuations in the various categories of loans are illustrated in Note C.
OTHER REAL ESTATE
The Other Real Estate (ORE) portfolio increased $188,000 at December 31,
2003 as compared with December 31, 2002 due to the foreclosure of several
large parcels of real estate. The Company is actively marketing these
properties and anticipates a significant reduction in ORE for 2004. Gains
(losses) realized on sales of ORE were $248,170, ($43,666) and $118,716 for
the years ended December 31, 2003, 2002 and 2001, respectively.
OTHER ASSETS
Other assets increased $1,031,000 at December 31, 2003, as compared with
December 31, 2002, due to deferred taxes on unrealized losses on available
for sale securities.
DEPOSITS
Total deposits decreased $15,617,000 at December 31, 2003, as compared with
December 31, 2002. Significant increases or decreases in total deposits
and/or significant fluctuations among the different types of deposits are
anticipated by Management as customers in the casino industry and county
and municipal areas reallocate their resources periodically. The Company
has managed its funds including planning the timing of investment
maturities and the classification of investments and using other funding
sources and their maturity so as to achieve appropriate liquidity.
Specifically, the Company obtained $30,000,000 in brokered deposits during
2000, the last of which matured in 2003. The Company does not currently
plan to obtain further brokered deposits.
FEDERAL FUNDS PURCHASED AND SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE
Federal funds purchased and securities sold under agreements to repurchase
increased $27,794,000 at December 31, 2003, as compared with December 31,
2002. This fluctuation is directly related to customers' periodic
reallocation of their funds in a non-deposit product and the management of
the Company's liquidity position.
BORROWINGS FROM FEDERAL HOME LOAN BANK
The Company acquires funds from the Federal Home Loan Bank in the
management of the liquidity position. As discussed in Note E, the Company
acquired $10,000,000 in advances which matures on January 9, 2004.
OTHER LIABILITIES
Other liabilities increased $814,000 at December 31, 2003, as compared with
December 31, 2002, as a result of an increase in liabilities related to
deferred compensation benefits for a retired officer and current officers
and directors of the bank subsidiary.
SHAREHOLDERS' EQUITY
During 2003, 2002 and 2001, there were significant events that impacted the
components of shareholders' equity. These events are detailed in Note H to
the Consolidated Financial Statements included in this report.
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. There are numerous indicators of capital adequacy including
primary capital ratios and capital formation rates. The Five-Year
Comparative Summary of Selected Financial Information presents these ratios
for those periods. This summary is included in the annual report to
shareholders. The Company's total risk-based capital ratio at December 31,
2003, 2002 and 2001 was 24.81 %, 24.16% and 21.90% as compared with the
required standard of 8.00%. The Five-Year Comparative Summary of Selected
Financial Information presents these figures.
Bank regulations limit the amount of dividends that may be paid by the bank
subsidiary without prior approval of the Commissioner of Banking and
Consumer Finance of the State of Mississippi. At December 31, 2003,
approximately $7,142,000 of undistributed earnings of the bank subsidiary
included in consolidated surplus and retained earnings was available for
future distribution to the Company as dividends, subject to approval by the
Board of Directors. The Company cannot predict what dividends, if any, will
be paid in the future, however the Board of Directors has established a
goal of achieving a 35% dividend payout ratio.
6 FINANCIALS
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.
Total interest income decreased $2,359,000 for the year ended December 31,
2003, as compared with the year ended December 31, 2002, and had decreased
$9,861,000 for the year ended December 31, 2002, as compared with the year
ended December 31, 2001. The Company experienced a decline in interest
income, particularly from loans, as a result of the decrease in the volume
of loans and the decrease in interest rates earned on loans.
Total interest expense decreased $3,777,000 for the year ended December 31,
2003, as compared with the year ended December 31, 2002, and had decreased
$8,738,000 for the year ended December 31, 2002, as compared with the year
ended December 31, 2001. As previously discussed, the Company used brokered
time deposits and borrowings from the Federal Home Loan Bank to address its
liquidity position. The cost of these funding sources was higher than other
more traditional deposit funds, and has had a slightly negative impact on
the Company's net margin. As these funds have been repriced more favorably,
the Company has realized a positive improvement in its interest margin.
PROVISION FOR LOAN LOSSES
The Company continuously monitors its 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 is conducted on a quarterly basis using the
latest available information. These analyses are utilized in the
computation of the adequacy of the allowance for loan losses. A provision
is charged to income on a periodic basis to absorb potential losses based
on these analyses. Further information related to the computation of the
provision is presented in Note A.
During 2001 and 2002, the Company identified negative events with respect
to an overall softening of the economy and negative events with respect to
specific credits which required a large increase to the Company's provision
for loan losses during those years. The Company believes that this action
provided sufficient funds to absorb significant potential losses.
Provisions for loan losses amounted to $2,428,000 and $2,503,000 for the
years ended December 31, 2002 and 2001, respectively. A provision for loan
losses of $447,000 was charged to expense for the year ended December 31,
2003. Management continues to closely evaluate the entire loan portfolio,
in accordance with its policies and procedures and will provide for any
future potential losses as deemed necessary. As a part of this evaluation,
the Company also closely monitors any improvements to specific credits
previously identified in prior years as having a potential loss. Any such
improvements and their potential impact on the provision for loan losses
are considered on a periodic basis. Although some uncertainty exists, the
Company is monitoring positive events with respect to specific credits that
may be resolved during 2004.
OTHER INCOME
Other income decreased $408,000 for the year ended December 31, 2003, as
compared with the year ended December 31, 2002, primarily as a result of
the income realized in 2002 from proceeds from whole life insurance owned
by the bank subsidiary.
RELATED PARTIES
The Company extends loans to certain officers and directors and their
personal business interests, at terms and rates comparable to other loans
of similar credit risks. Further disclosure of these transactions are
presented in Note C. The Company has not currently engaged, nor does it
have any plans to engage, in any other transactions with any related
persons or entities.
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. Note
J discloses information relating to financial instruments with
off-balance-sheet risk, including letters of credit and outstanding unused
loan commitments. The Company closely monitors the potential effects of
funding these commitments on its liquidity position.
Deposits, payment of principal and interest on loans, proceeds from
maturities of investment securities, earnings on investment securities, and
purchases of federal funds and securities sold under agreements to
repurchase are the principal sources of funds for the Company. During 2000,
the Company began using other, non-traditional sources of funds, including
borrowings from the Federal Home Loan Bank. The Company generally
anticipates relying on traditional sources of funds, especially deposits
and purchases of federal funds, for its liquidity needs in 2004.
FINANCIALS 7
THE SARBANES - OXLEY ACT OF 2002
The Sarbanes - Oxley Act of 2002 (the "Act") was signed into law on July
30, 2002. The Act requires the implementation of provisions designed to
enhance public company governance, responsibility and disclosure. The
issues addressed by the Act include the composition and responsibilities of
a public company's board of directors and its committees, especially the
Audit and Nominating Committees, the certification of financial statements
by the chief executive officer and chief financial officer, timely
reporting of trading by insiders and independence of external auditors. The
Company has implemented all effective provisions of the Act and is closely
monitoring those provisions which have not yet become effective. The
Company will take the necessary actions to ensure compliance with the Act,
as well as the listing requirements of NASDAQ, on which the Company is
registered.
NEW ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board (FASB) has issued several
statements during the current year. Statement 148, "Accounting for
Stock-Based Compensation - Transition and Disclosure", Statement 149,
"Amendment of Statement 133 on Derivative Instruments and Hedging
Activities" and Statement 150, "Accounting for Certain Financial
Instruments with Characteristics of Both Liabilities and Equity" are
effective for the current year. The Company evaluated the implementation of
adopting these new pronouncements and determined that their adoption did
not have a material effect on its financial statements.
OFF-BALANCE SHEET ARRANGEMENTS
The Company is a party to off-balance-sheet arrangements in the normal
course of business to meet the financing needs of its customers. These
arrangements include unused commitments to extend credit, which amounted to
$95,165,000 at December 31, 2003, and irrevocable letters of credit, which
amounted to $3,388,997 at December 31, 2003. The Company uses the same
credit policies in making commitments and conditional obligations as it
does for on-balance-sheet arrangements. Since some of the commitments and
irrevocable letters of credit may expire without being drawn upon, the
total amounts do not necessarily represent future cash requirements. As
discussed previously, the Company carefully monitors its liquidity needs
and considers the cash requirements, especially for loan commitments, in
making decisions on investments and obtaining funds from its other sources.
Further information relating to off-balance sheet instruments can be found
in Note J.
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Market risk is the risk of loss arising from adverse changes in market
prices and rates. Interest rate risk is the most significant market risk
affecting the Company. 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. Also, the Company does not
currently, and has no plans to, engage in trading activities or use
derivative or off-balance sheet instruments to manage interest rate risk.
The Company has risk management policies in place to monitor and limit
exposure to market risk. The Asset/Liability Committee (ALCO), whose
members include the chief executive officer and senior and middle
management from the financial, lending, investing, and deposit areas, is
responsible for the day-to-day operating guidelines, approval of strategies
affecting net interest income and coordination of activities within policy
limits established by the Board of Directors based on the Company's
tolerance for risk. Specifically, the key objectives of the Company's
asset/liability management program are to manage the exposure of planned
net interest margins to unexpected changes due to interest rate
fluctuations. These efforts will also affect loan pricing policies, deposit
interest rate policies, asset mix and volume guidelines and liquidity. The
ALCO committee reports to the Board of Directors on a quarterly basis.
During 2004, the ALCO committee will enhance its risk management analysis
through the implementation of software to assist in balance sheet
management, interest rate risk analysis and portfolio modeling.
The Company has implemented a conservative approach to its asset/liability
management. The net interest margin is managed on a daily basis largely as
a result of the management of the liquidity needs of the bank subsidiary.
The Company generally follows a policy of investing in short term U. S.
Agency securities with maturities of two years or less. Due to the low
interest rate environment, the duration of investments has been extended to
seven years or less with call provisions. The loan portfolio consists of a
40% - 60% blend of fixed and floating rate loans. It is the general loan
policy to offer loans with maturities of five years or less; however the
market is now dictating floating rate terms to be extended to fifteen
years. On the liability side, more than 66% of the deposits are demand and
savings transaction accounts. Additionally, more than 75% of the
certificates of deposit mature within eighteen months. Since the Company's
deposits are generally not rate-sensitive, they are considered to be core
deposits. The short term nature of the financial assets and liabilities
allows the Company to meet the dual requirements of liquidity and interest
rate risk management.
8 FINANCIALS
The interest rate sensitivity tables below provide additional information
about the Company's financial instruments that are sensitive to changes in
interest rates. The negative gap in 2004 is mitigated by the nature of the
Company's deposits, whose characteristics have been previously described.
The tabular disclosure reflects contractual interest rate repricing dates
and contractual maturity dates. Loan maturities have been adjusted for
reserve for loan losses. There have been no adjustments for such factors as
prepayment risk, early calls of investments, the effect of the maturity of
balloon notes or the early withdrawal of deposits. The Company does not
believe that the aforementioned factors have a significant impact on
expected maturity.
Interest rate sensitivity at December 31, 2003 was as follows (in
thousands):
12/31/03
FAIR
2004 2005 2006 2007 2008 BEYOND TOTAL VALUE
-------- -------- -------- -------- -------- -------- --------- --------
Loans, net $195,878 $ 27,523 $ 6,233 $ 10,399 $ 33,757 $ 17,734 $ 291,524 $294,685
Average rate 5.58% 7.60% 7.51% 6.22% 5.92% 6.05% 5.82%
Securities 31,568 14,560 9,320 31,852 50,176 76,337 213,813 213,987
Average rate 3.45 5.11 3.34 3.55 3.63 4.31 3.87
Total Financial Assets 227,446 42,083 15,553 42,251 83,933 94,071 505,337 508,672
Average rate 5.75 7.12 5.86 4.52 4.83 4.74 5.31
Deposits 273,265 15,088 4,387 2,035 1,356 2 296,133 297,008
Average rate 1.38 3.69 3.11 3.39 3.39 3.67 1.96
Long-term funds 10,273 184 236 168 160 6,159 17,180 18,076
Average rate 1.30 4.91 4.91 4.91 4.91 6.26 4.96
Total Financial Liabilities 283,538 15,272 4,623 2,203 1,516 6,161 313,313 315,084
Average rate 1.37 3.71 3.24 3.55 3.59 6.26 2.34
Interest rate sensitivity at December 31, 2002 was as follows (in
thousands):
12/31/02
FAIR
2003 2004 2005 2006 2007 BEYOND TOTAL VALUE
-------- -------- -------- -------- -------- -------- --------- --------
Loans, net $235,880 $ 21,654 $ 28,094 $ 7,485 $ 7,965 $ 4,521 $ 305,599 $307,501
Average rate 5.98% 8.05% 7.91% 8.04% 6.56% 6.66% 6.47%
Securities 54,478 35,122 7,799 20,605 25,939 27,056 170,999 171,437
Average rate 4.22 3.48 4.31 4.00 4.13 4.65 3.93
Total Financial Assets 290,358 56,776 35,893 28,090 33,904 31,577 476,598 478,938
Average rate 5.73 6.17 7.44 5.70 4.93 5.04 5.59
Deposits 290,104 9,199 10,536 1,579 1,053 4 312,475 314,495
Average rate 2.59 3.43 4.12 4.02 4.02 3.89 3.47
Long-term funds 153 382 193 105 97 5,717 6,647 7,398
Average rate 5.29 5.32 5.25 5.25 5.25 6.37 6.24
Total Financial Liabilities 290,257 9,581 10,729 1,684 1,150 5,721 319,122 321,893
Average rate 2.59 3.51 4.14 4.09 4.12 6.37 3.53
FINANCIALS 9
CONSOLIDATED STATEMENTS OF CONDITION
PEOPLES FINANCIAL CORPORATION AND SUBSIDIARIES
DECEMBER 31, 2003 2002 2001
ASSETS
Cash and due from banks $ 33,861,029 $ 39,654,247 $ 32,034,976
Available for sale securities 207,486,172 151,483,997 142,902,274
Held to maturity securities, fair value of
$4,527,000-2003; $18,026,000-2002; $38,986,000-2001 4,352,854 17,587,690 38,278,962
Federal Home Loan Bank Stock, at cost 1,974,200 1,927,000 1,870,500
Loans 297,922,945 312,296,263 347,168,766
Less: Allowance for loan losses 6,398,694 6,696,911 5,658,210
-------------- -------------- --------------
Loans, net 291,524,251 305,599,352 341,510,556
Bank premises and equipment, net 17,952,504 17,059,400 18,117,908
Other real estate 1,383,451 1,195,720 1,799,527
Accrued interest receivable 3,096,002 2,858,190 3,728,850
Other assets 13,804,039 12,773,580 6,768,669
-------------- -------------- --------------
TOTAL ASSETS $ 575,434,502 $ 550,139,176 $ 587,012,222
============== ============== ==============
LIABILITIES & SHAREHOLDERS' EQUITY
LIABILITIES:
Deposits:
Demand, non-interest bearing $ 76,423,904 $ 75,698,316 $ 76,215,302
Savings and demand, interest bearing 173,913,054 164,954,932 145,248,560
Time, $100,000 or more 58,182,870 74,064,356 105,446,070
Other time deposits 64,036,836 73,456,208 85,632,730
-------------- -------------- --------------
Total deposits 372,556,664 388,173,812 412,542,662
Federal funds purchased and securities sold
under agreements to repurchase 95,039,261 67,245,703 82,488,859
Borrowings from Federal Home Loan Bank 17,069,848 6,313,077 5,548,988
Notes payable 110,235 334,371 336,251
Other liabilities 7,154,545 6,340,607 6,026,436
-------------- -------------- --------------
TOTAL LIABILITIES 491,930,553 468,407,570 506,943,196
SHAREHOLDERS' EQUITY:
Common Stock, $1 par value, 15,000,000 shares authorized, 5,557,379,
5,583,472, and 5,620,239 shares issued and outstanding at
December 31, 2003, 2002 and 2001, respectively 5,557,379 5,583,472 5,620,239
Surplus 65,780,254 65,780,254 65,780,254
Undivided profits 11,574,074 8,510,341 7,052,559
Unearned compensation (94,899) (143,043) (174,043)
Accumulated other comprehensive income, net of tax 687,141 2,000,582 1,790,017
-------------- -------------- --------------
TOTAL SHAREHOLDERS' EQUITY 83,503,949 81,731,606 80,069,026
-------------- -------------- --------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 575,434,502 $ 550,139,176 $ 587,012,222
============== ============== ==============
See Notes to Consolidated Financial Statements.
10 FINANCIALS
CONSOLIDATED STATEMENTS OF INCOME
PEOPLES FINANCIAL CORPORATION AND SUBSIDIARIES
YEARS ENDED DECEMBER 31, 2003 2002 2001
INTEREST INCOME:
Interest and fees on loans $ 17,181,975 $ 20,061,342 $ 28,174,153
Interest and dividends on securities:
U. S. Treasury 1,320,545 1,397,148 2,064,729
U. S. Government agencies and corporations 5,882,469 5,161,358 5,881,969
States and political subdivisions 368,934 350,498 514,351
Other investments 249,185 257,339 445,784
Interest on federal funds sold 62,109 196,207 203,566
------------ ------------ ------------
TOTAL INTEREST INCOME 25,065,217 27,423,892 37,284,552
------------ ------------ ------------
INTEREST EXPENSE:
Deposits 4,383,806 8,052,732 15,696,840
Long-term borrowings 456,694 382,912 437,144
Federal funds purchased and securities sold under
agreements to repurchase 998,139 1,179,993 2,219,601
------------ ------------ ------------
TOTAL INTEREST EXPENSE 5,838,639 9,615,637 18,353,585
------------ ------------ ------------
NET INTEREST INCOME 19,226,578 17,808,255 18,930,967
PROVISION FOR ALLOWANCE FOR LOSSES ON LOANS 447,000 2,428,000 2,503,000
------------ ------------ ------------
NET INTEREST INCOME AFTER PROVISION FOR
ALLOWANCE FOR LOSSES ON LOANS 18,779,578 15,380,255 16,427,967
------------ ------------ ------------
OTHER OPERATING INCOME:
Trust department income and fees 1,458,037 1,419,463 1,418,847
Service charges on deposit accounts 6,709,852 6,822,638 6,388,406
Gain on liquidation, sale and calls of securities 57,356 209,659 243,126
Other income 1,512,169 1,920,452 1,205,750
------------ ------------ ------------
TOTAL OTHER OPERATING INCOME 9,737,414 10,372,212 9,256,129
------------ ------------ ------------
OTHER OPERATING EXPENSE:
Salaries and employee benefits 10,989,269 10,923,858 11,447,070
Net occupancy 1,466,797 1,506,113 1,178,261
Equipment rentals, depreciation and maintenance 2,760,125 2,802,343 2,776,745
Other expense 6,247,956 6,641,849 5,795,068
------------ ------------ ------------
TOTAL OTHER OPERATING EXPENSE 21,464,147 21,874,163 21,197,144
------------ ------------ ------------
INCOME BEFORE INCOME TAXES AND EXTRAORDINARY GAIN 7,052,845 3,878,304 4,486,952
Income taxes 2,035,000 687,582 1,082,000
------------ ------------ ------------
Income before extraordinary gain 5,017,845 3,190,722 3,404,952
Extraordinary gain, net of income tax 594,000
------------ ------------ ------------
NET INCOME $ 5,017,845 $ 3,190,722 $ 3,998,952
============ ============ ============
BASIC AND DILUTED EARNINGS PER SHARE $ .90 $ .57 $ .71
============ ============ ============
BASIC AND DILUTED EARNINGS PER SHARE BEFORE EXTRAORDINARY GAIN $ .90 $ .57 $ .60
============ ============ ============
See Notes to Consolidated Financial Statements.
FINANCIALS 11
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
PEOPLES FINANCIAL CORPORATION AND SUBSIDIARIES
NUMBER OF
COMMON COMMON
SHARES STOCK SURPLUS
----------- ----------- -----------
BALANCE, JANUARY 1, 2001 5,795,207 $ 5,795,207 $65,780,254
Comprehensive Income:
Net income
Net unrealized gain on available for sale securities, net of tax
Reclassification adjustment for available for sale securities
called or sold in current year, net of tax
Total comprehensive income
Purchase of common shares by ESOP
Allocation of ESOP shares
Cash dividends ($ .12 per share)
Dividend declared ($ .12 per share)
Issuance of stock for stock incentive plan 6,886 6,886
Effect of stock retirement on accrued dividends
Retirement of stock (181,854) (181,854)
----------- ----------- -----------
BALANCE, DECEMBER 31, 2001 5,620,239 5,620,239 65,780,254
Comprehensive Income:
Net income
Net unrealized gain on available for sale securities, net of tax
Reclassification adjustment for available for sale securities
called or sold in current year, tax net of
Total comprehensive income
Allocation of ESOP shares
Cash dividends ($ .12 per share)
Dividend declared ($ .12 per share)
Issuance of stock for stock incentive plan 7,142 7,142
Retirement of stock (43,909) (43,909)
----------- ----------- -----------
BALANCE, DECEMBER 31, 2002 5,583,472 5,583,472 65,780,254
Comprehensive Income:
Net income
Net unrealized loss on available for sale securities, net of tax
Reclassification adjustment for available for sale securities
called or sold in current year, net of tax
Total comprehensive income
Allocation of ESOP shares
Cash dividends ($ .14 per share)
Dividend declared ($ .15 per share)
Retirement of stock (26,093) (26,093)
----------- ----------- -----------
BALANCE, DECEMBER 31, 2003 5,557,379 $ 5,557,379 $65,780,254
=========== =========== ===========
See Notes to Consolidated Financial Statements.
12 FINANCIALS
ACCUMULATED
OTHER
UNDIVIDED UNEARNED COMPREHENSIVE COMPREHENSIVE
PROFITS COMPENSATION INCOME INCOME TOTAL
------------ ------------ ------------- ------------- ------------
BALANCE, JANUARY 1, 2001 $ 7,093,830 $ (535,840) $ 583,406 $ 78,716,857
Comprehensive Income:
Net income 3,998,952 $ 3,998,952 3,998,952
Net unrealized gain on available for sale
securities, net of tax 1,359,541 1,359,541 1,359,541
Reclassification adjustment for available
for sale securities called or sold in
current year, net of tax (152,930) (152,930) (152,930)
-------------
Total comprehensive income $ 5,205,563
=============
Purchase of common shares by ESOP (80,043) (80,043)
Allocation of ESOP shares 441,840 441,840
Cash dividends ($ .12 per share) (675,388) (675,388)
Dividend declared ($ .12 per share) (674,428) (674,428)
Issuance of stock for stock incentive plan 93,097 99,983
Effect of stock retirement on accrued dividends 15,545 15,545
Retirement of stock (2,799,049) (2,980,903)
------------ ------------ ------------- ------------
BALANCE, DECEMBER 31, 2001 7,052,559 (174,043) 1,790,017 80,069,026
Comprehensive Income:
Net income 3,190,722 $ 3,190,722 3,190,722
Net unrealized gain on available for sale
securities, net of tax 471,295 471,295 471,295
Reclassification adjustment for available
for sale securities called or sold in
current year, tax net of (260,730) (260,730) (260,730)
-------------
Total comprehensive income $ 3,401,287
=============
Allocation of ESOP shares 31,000 31,000
Cash dividends ($ .12 per share) (672,080) (672,080)
Dividend declared ($ .12 per share) (670,017) (670,017)
Issuance of stock for stock incentive plan 92,846 99,988
Retirement of stock (483,689) (527,598)
------------ ------------ ------------- ------------
BALANCE, DECEMBER 31, 2002 8,510,341 (143,043) 2,000,582 81,731,606
Comprehensive Income:
Net income 5,017,845 $ 5,017,845 5,017,845
Net unrealized loss on available for sale
securities, net of tax (1,195,267) (1,195,267) (1,195,267)
Reclassification adjustment for available
for sale securities called or sold in
current year, net of tax (118,174) (118,174) (118,174)
-------------
Total comprehensive income $ 3,704,404
=============
Allocation of ESOP shares 48,144 48,144
Cash dividends ($ .14 per share) (778,570) (778,570)
Dividend declared ($ .15 per share) (833,607) (833,607)
Retirement of stock (341,935) (368,028)
------------ ------------ ------------- ------------
BALANCE, DECEMBER 31, 2003 $ 11,574,074 $ (94,899) $ 687,141 $ 83,503,949
============ ============ ============= ============
FINANCIALS 13
CONSOLIDATED STATEMENTS OF CASH FLOWS
PEOPLES FINANCIAL CORPORATION AND SUBSIDIARIES
YEARS ENDED DECEMBER 31, 2003 2002 2001
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 5,017,845 $ 3,190,722 $ 3,998,952
Adjustments to reconcile net income to net cash
provided by operating activities:
(Gain) loss on sales of other real estate (248,170) 43,666 (118,716)
Gain on sales, calls and liquidation of securities (57,356) (209,659) (243,126)
Gain on sale of bank premises (130,503) (182,861)
Stock incentive plan 99,988 99,983
Depreciation 1,676,000 1,842,000 1,864,827
Provision for allowance for loan losses 447,000 2,428,000 2,503,000
Provision for losses on other real estate 210,358 533,848 409,264
Changes in assets and liabilities:
Accrued interest receivable (237,812) 870,660 768,863
Other assets (323,618) 448,969 140,233
Other liabilities 304,832 40,412 (638,777)
------------- ------------- -------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 6,658,576 9,105,745 8,784,503
------------- ------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities, sales and calls of available
for sale securities 130,443,200 145,297,421 46,359,462
Investment in available for sale securities (188,388,210) (153,352,620) (139,028,899)
Proceeds from maturities and calls of held to maturity securities 13,234,836 20,745,000 143,715,000
Investment in held to maturity securities (53,728) (83,942,007)
Investment in Federal Home Loan Bank stock (47,200) (56,500) (223,200)
Proceeds from sales of other real estate 827,665 1,010,723 1,044,119
Loans, net decrease 12,650,517 32,498,774 27,242,762
Proceeds from sale of bank premises 445,068 355,620
Acquisition of premises and equipment (2,883,669) (956,251) (1,649,463)
Other assets 325,425 (6,282,010) 521,482
------------- ------------- -------------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (33,392,368) 39,206,429 (5,960,744)
------------- ------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Demand and savings deposits, net increase 9,683,710 19,189,386 15,851,110
Time deposits made, net decrease (25,300,858) (43,558,236) (17,032,525)
Notes payable 72,799
Principal payments on notes (175,992) (43,679) (14,273)
Cash dividends (1,448,587) (1,346,508) (1,297,316)
Retirement of common stock (368,028) (527,598) (2,980,903)
Borrowings from Federal Home Loan Bank 10,756,771 764,089
Repayments to Federal Home Loan Bank (17,610,519)
Federal funds purchased and securities sold
under agreements to repurchase, net increase (decrease) 27,793,558 (15,243,156) 17,149,775
------------- ------------- -------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 20,940,574 (40,692,903) (5,934,651)
------------- ------------- -------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (5,793,218) 7,619,271 (3,110,892)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 39,654,247 32,034,976 35,145,868
------------- ------------- -------------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 33,861,029 $ 39,654,247 $ 32,034,976
============= ============= =============
See Notes to Consolidated Financial Statements.
14 FINANCIALS
NOTES TO CONSOLIDATED STATEMENTS
PEOPLES FINANCIAL CORPORATION AND SUBSIDIARIES
NOTE A - BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
BUSINESS OF THE COMPANY
Peoples Financial Corporation is a one-bank holding company headquartered
in Biloxi, Mississippi. Its two operating subsidiaries are The Peoples
Bank, Biloxi, Mississippi, and PFC Service Corp. Its principal subsidiary
is The Peoples Bank, Biloxi, Mississippi, which provides a full range of
banking, financial and trust services to individuals and small and
commercial businesses operating in Harrison, Hancock, Stone and Jackson
counties.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Peoples
Financial Corporation and its wholly-owned subsidiaries, The Peoples Bank,
Biloxi, Mississippi, and PFC Service Corp. All significant intercompany
transactions and balances have been eliminated in consolidation.
BASIS OF ACCOUNTING
Peoples Financial Corporation and Subsidiaries recognize assets and
liabilities, and income and expense, on the accrual basis of accounting.
The preparation of financial statements in conformity with generally
accepted accounting principles requires Management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from these
estimates.
CASH AND DUE FROM BANKS
The Company is required to maintain average reserve balances in its vault
or on deposit with the Federal Reserve Bank. The average amount of these
reserve requirements was approximately $10,220,000, $9,013,000 and
$8,420,000 for the years ending December 31, 2003, 2002 and 2001,
respectively.
The Company's bank subsidiary maintained account balances in excess of
amounts insured by the Federal Deposit Insurance Corporation. At December
31, 2003, the bank subsidiary had excess deposits of $8,001,000. These
amounts were uninsured and uncollateralized.
SECURITIES
The classification of securities is determined by Management at the time of
purchase. Securities are classified as held to maturity when the Company
has the positive intent and ability to hold the security until maturity.
Securities held to maturity are stated at amortized cost.
Securities not classified as held to maturity are classified as available
for sale and are stated at fair value. Unrealized gains and losses, net of
tax, on these securities are recorded in shareholders' equity as
accumulated other comprehensive income.
The amortized cost of available for sale securities and held to maturity
securities is adjusted for amortization of premiums and accretion of
discounts to maturity, determined using the interest method. Such
amortization and accretion is included in interest income on securities.
The specific identification method is used to determine realized gains and
losses on sales of securities, which are reported as gain on sale and calls
of securities in other operating income.
LOANS
The loan portfolio consists of commercial and industrial and real estate
loans within the Company's trade area in South Mississippi. The loan policy
establishes guidelines relating to pricing, repayment terms, collateral
standards including loan to value (LTV) limits, appraisal and environmental
standards, lending authority, lending limits and documentation
requirements.
Loans are stated at the amount of unpaid principal, reduced by unearned
income and the allowance for loan losses. Interest on loans is recognized
over the terms of each loan based on the unpaid principal balance.
Loan origination fees are recognized as income when received. Revenue from
these fees is not material to the financial statements.
The Company places loans on a nonaccrual status when, in the opinion of
Management, they possess sufficient uncertainty as to timely collection of
interest or principal so as to preclude the
FINANCIALS 15
recognition in reported earnings of some or all of the contractual
interest. Accrued interest on loans classified as nonaccrual is reversed at
the time the loans are placed on nonaccrual. Interest received on
nonaccrual loans is applied against principal. Loans are restored to
accrual status when the obligation is brought current or has performed in
accordance with the contractual terms for a reasonable period of time and
the ultimate collectibility of the total contractual principal and interest
is no longer in doubt. Loans classified as nonaccrual are generally
identified as impaired loans. The policy for recognizing income on impaired
loans is consistent with the nonaccrual policy.
ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses is established through provisions for loan
losses charged against earnings. Loans deemed to be uncollectible are
charged against the allowance for loan losses, and subsequent recoveries,
if any, are credited to the allowance.
The allowance for loan losses is based on Management's evaluation of the
loan portfolio under current economic conditions and is an amount that
Management believes will be adequate to absorb probable losses on loans
existing at the reporting date. The evaluation includes Management's
assessment of several factors: review and evaluations of specific loans,
changes in the nature and volume of the loan portfolio, current and
anticipated economic conditions and the related impact on specific
borrowers and industry groups, a study of loss experience, a review of
classified, nonperforming and delinquent loans, the estimated value of any
underlying collateral, an estimate of the possibility of loss based on the
risk characteristics of the portfolio, adverse situations that may affect
the borrower's ability to repay and the results of regulatory examinations.
This evaluation is inherently subjective as it requires material estimates
that may be susceptible to significant change.
BANK PREMISES AND EQUIPMENT
Bank premises and equipment are stated at cost, less accumulated
depreciation. Depreciation is computed primarily by the straight-line
method based on the estimated useful lives of the related assets.
OTHER REAL ESTATE
Other real estate acquired through foreclosure is carried at the lower of
cost (primarily outstanding loan balance) or estimated market value, less
estimated costs to sell. If, at foreclosure, the carrying value of the loan
is greater than the estimated market value of the property acquired, the
excess is charged against the allowance for loan losses and any subsequent
adjustments are charged to expense. Costs of operating and maintaining the
properties, net of related income and gains (losses) on their disposition,
are charged to expense as incurred.
TRUST DEPARTMENT INCOME AND FEES
Corporate trust fees are accounted for on an accrual basis and personal
trust fees are recorded when received for 2003. All trust fees were
recorded for 2002 and 2001 when received.
INCOME TAXES
The Company files a consolidated tax return with its wholly-owned
subsidiaries. The tax liability of each entity is allocated based on the
entity's contribution to consolidated taxable income. The provision for
applicable income taxes is based upon reported income and expenses as
adjusted for differences between reported income and taxable income. The
primary differences are exempt income on state, county and municipal
securities; differences in provisions for losses on loans as compared to
the amount allowable for income tax purposes; directors' and officers'
insurance; depreciation for income tax purposes over (under) that reported
for financial statements; gains reported under the installment sales method
for tax purposes and gains on the sale of bank premises which were
structured under the provisions of Section 1031 of the Internal Revenue
Code.
ADVERTISING
Advertising costs are expensed as incurred.
LEASES
All leases are accounted for as operating leases in accordance with the
terms of the leases.
EARNINGS PER SHARE
Basic and diluted earnings per share are computed on the basis of the
weighted average number of common shares outstanding, 5,563,015, 5,603,834
and 5,629,872 in 2003, 2002 and 2001, respectively.
STATEMENTS OF CASH FLOWS
The Company has defined cash and cash equivalents to include cash and due
from banks. The Company paid $5,937,967, $9,929,357 and $18,768,387 in
2003, 2002 and 2001, respectively, for interest on deposits and borrowings.
Income tax payments totaled $2,537,223, $1,639,612 and $1,847,250 in 2003,
2002 and 2001, respectively. Loans transferred to other real estate
amounted to $977,584, $984,430 and $2,073,113 in 2003, 2002 and 2001,
respectively. The income tax effect on the accumulated other comprehensive
income was ($676,621), $108,473 and $621,587, at December 31, 2003, 2002
and 2001, respectively.
RECLASSIFICATIONS
Certain reclassifications have been made to the prior year statements to
conform to current year presentation. The reclassifications had no effect
on prior year net income.
16 FINANCIALS
NOTE B - SECURITIES:
The amortized cost and estimated fair value of securities at December 31,
2003, 2002, and 2001, respectively, are as follows (in thousands):
Gross Gross Estimated
December 31, 2003 Amortized cost unrealized gains unrealized losses fair value
- --------------------------------------------- -------------- ---------------- ----------------- ----------
Available for sale securities:
Debt securities:
U. S. Treasury $ 49,977 $ 465 $ (38) $ 50,404
U. S. Government agencies and corp. 145,507 778 (801) 145,484
States and political subdivisions 7,154 161 (48) 7,267
-------- -------- -------- --------
Total debt securities 202,638 1,404 (887) 203,155
Equity securities 3,829 709 (207) 4,331
-------- -------- -------- --------
Total available for sale securities $206,467 $ 2,113 $ (1,094) $207,486
======== ======== ======== ========
Held to maturity securities:
U. S. Treasury $ 1,000 $ 17 $ $ 1,017
States and political subdivisions 3,353 159 (2) 3,510
-------- -------- -------- --------
Total held to maturity securities $ 4,353 $ 176 $ (2) $ 4,527
======== ======== ======== ========
Gross Gross Estimated
December 31, 2002 Amortized cost unrealized gains unrealized losses fair value
- --------------------------------------------- -------------- ---------------- ----------------- ----------
Available for sale securities:
Debt securities:
U. S. Treasury $ 46,948 $ 709 $ (1) $ 47,656
U. S. Government agencies and corp. 93,627 1,468 95,095
States and political subdivisions 4,061 89 (11) 4,139
-------- -------- -------- --------
Total debt securities 144,636 2,266 (12) 146,890
Equity securities 3,828 766 4,594
-------- -------- -------- --------
Total available for sale securities $148,464 $ 3,032 $ (12) $151,484
======== ======== ======== ========
Held to maturity securities:
U. S. Treasury $ 5,998 $ 120 $ $ 6,118
U. S. Government agencies and corp. 7,000 143 7,143
States and political subdivisions 4,590 175 4,765
-------- -------- -------- --------
Total held to maturity securities $ 17,588 $ 438 $ $ 18,026
======== ======== ======== ========
FINANCIALS 17
Gross Gross Estimated
December 31, 2001 Amortized cost unrealized gains unrealized losses fair value
- --------------------------------------------- -------------- ---------------- ----------------- ----------
Available for sale securities:
Debt securities:
U. S. Treasury $ 20,975 $ 207 $ (10) $ 21,172
U. S. Government agencies and corp. 113,494 1,557 (74) 114,977
States and political subdivisions 1,759 4 1,763
-------- -------- -------- --------
Total debt securities 136,228 1,768 (84) 137,912
Equity securities 3,971 1,019 4,990
-------- -------- -------- --------
Total available for sale securities $140,199 $ 2,787 $ (84) $142,902
======== ======== ======== ========
Held to maturity securities:
U. S. Treasury $ 18,948 $ 283 $ $ 19,231
U. S. Government agencies and corp. 13,687 306 13,993
States and political subdivisions 5,644 136 (18) 5,762
-------- -------- -------- --------
Total held to maturity securities $ 38,279 $ 725 $ (18) $ 38,986
======== ======== ======== ========
The amortized cost and estimated fair value of debt securities at December
31, 2003, (in thousands) by contractual maturity, are shown below. Expected
maturities will differ from contractual maturities because borrowers may
have the right to call or prepay obligations with or without call or
prepayment penalties.
Estimated
Amortized cost fair value
-------------- ----------
Available for sale securities:
Due in one year or less $ 30,168 $ 30,438
Due after one year through five years 104,057 104,696
Due after five years through ten years 63,596 63,256
Due after ten years 4,817 4,765
--------- ----------
Totals $ 202,638 $ 203,155
========= ==========
Held to maturity securities:
Due in one year or less $ 1,130 $ 1,149
Due after one year through five years 1,213 1,241
Due after five years through ten years 283 299
Due after ten years 1,727 1,838
--------- ----------
Totals $ 4,353 $ 4,527
========= ==========
Proceeds from maturities and calls of held to maturity debt securities
during 2003, 2002 and 2001 were $13,234,836, $20,745,000 and $143,715,000,
respectively. There were no sales of held to maturity debt securities
during 2003, 2002 and 2001. Proceeds from maturities and calls of available
for sale debt securities were $130,443,200, $145,297,421 and $46,359,462
during 2003, 2002 and 2001, respectively. Available for sale debt
securities were sold in 2001 for a gain of $243,126. There were no sales of
available for sale debt securities during 2003 and 2002. The Company
realized gains of $57,356 and $209,659 from the liquidation of equity
securities in 2003 and 2002, respectively.
Securities with an amortized cost of approximately $154,105,000,
$139,625,000 and $149,013,000 at December 31, 2003, 2002 and 2001,
respectively, were pledged to secure public deposits, federal funds
purchased and other balances required by law.
Federal Home Loan Bank (FHLB) common stock was purchased during 1999 in
order for the Company to participate in certain FHLB programs. The amount
to be invested in FHLB stock was calculated according to FHLB guidelines as
a percentage of certain mortgage loans. The investment is carried at cost.
Dividends received are reinvested in FHLB stock.
18 FINANCIALS
NOTE C - LOANS:
The composition of the loan portfolio was as follows (in thousands):
December 31, 2003 2002 2001
- --------------------------------------------------- -------- -------- --------
Real estate, construction $ 14,896 $ 21,534 $ 25,636
Real estate, mortgage 223,246 197,478 224,524
Loans to finance agricultural production
and other loans to farmers 3,980 7,375 7,241
Commercial and industrial loans 41,832 65,946 71,271
Loans to individuals for household, family
and other consumer expenditures 11,020 15,990 15,068
Obligations of states and political subdivisions
(primarily industrial revenue bonds and local
government tax anticipation notes) 2,560 3,637 3,233
All other loans 389 336 196
-------- -------- --------
Totals $297,923 $312,296 $347,169
======== ======== ========
Transactions in the allowance for loan losses are as follows (in
thousands):
2003 2002 2001
-------- -------- --------
Balance, January 1 $ 6,697 $ 5,658 $ 4,568
Recoveries 600 676 561
Loans charged off (1,345) (2,065) (1,974)
Provision for allowance for loan losses 447 2,428 2,503
-------- -------- --------
Balance, December 31 $ 6,399 $ 6,697 $ 5,658
======== ======== ========
In the ordinary course of business, the Company extends loans to certain
officers and directors and their personal business interests at, in the
opinion of Management, terms and rates comparable to other loans of similar
credit risks. These loans do not involve more than normal risk of
collectability and do not include other unfavorable features.
An analysis of the activity with respect to such loans to related parties
is as follows (in thousands):
2003 2002 2001
-------- -------- --------
Balance, January 1 $ 10,080 $ 12,340 $ 14,118
New loans and advances 14,453 19,529 20,511
Repayments (15,587) (21,789) (22,289)
-------- -------- --------
Balance, December 31 $ 8,946 $ 10,080 $ 12,340
======== ======== ========
Industrial revenue bonds with a carrying value of $502,187, $700,356 and
$898,687 at December 31, 2003, 2002 and 2001, respectively, were pledged to
secure public deposits.
Nonaccrual loans amounted to $7,415,073, $6,550,169 and $650,215 at
December 31, 2003, 2002 and 2001, respectively.
The total recorded investment in impaired loans amounted to $7,415,073,
$6,550,169 and $650,215 at December 31, 2003, 2002 and 2001, respectively.
The amount of that recorded investment in impaired loans for which there is
a related allowance for loan losses was $7,415,073, $6,550,169 and $650,215
at December 31, 2003, 2002 and 2001, respectively. At December 31, 2003,
2002 and 2001, the average recorded investment in impaired loans was
$7,400,000, $6,602,000 and $661,000, respectively. The amount of interest
not accrued on these loans was approximately $261,000 and $212,000 in 2003
and 2002, respectively. The amount of interest not accrued on these loans
did not have a significant effect on earnings in 2001.
FINANCIALS 19
NOTE D - BANK PREMISES AND EQUIPMENT:
Bank premises and equipment are shown as follows (in thousands):
Estimated
December 31, useful lives 2003 2002 2001
- --------------------------------- ------------ ------- ------- -------
Land $ 4,522 $ 4,839 $ 4,988
Buildings 5-40 years 17,533 15,584 15,315
Furniture, fixtures and equipment 3-10 years 12,173 11,596 11,107
------- ------- -------
Totals, at cost 34,228 32,019 31,410
Less: Accumulated depreciation 16,275 14,960 13,292
------- ------- -------
Totals $17,953 $17,059 $18,118
======= ======= =======
NOTE E - BORROWINGS FROM FEDERAL HOME LOAN BANK:
At December 31, 2003, the Company had $5,000,000 outstanding in advances
under a $76,000,000 line of credit with the Federal Home Loan Bank of
Dallas ("FHLB"). This advance bore interest at 6.50% and matures in 2010.
The Company also had $10,000,000 outstanding under the line which bears
interest at 1.06% and matures January 9, 2004. The advances are
collateralized by a blanket floating lien on the Company's residential
first mortgage loans.
NOTE F - NOTES PAYABLE:
December 31, 2003 2002 2001
- -------------------------------------------- --------- ---------- ---------
Small Business Administration, outstanding
mortgage on property acquired. The note
bears interest at 5 3/8% & is payable at
$1,952 monthly through January 2004. $ $ 147,029 $ 162,208
Notes payable on automobiles. The notes
are non interest-bearing and payable in
monthly installments through January 2005. 15,336 44,299
RiverHills Bank, $750,000 line of credit for
Peoples Financial Corporation Employee Stock
Ownership Plan, secured by the guarantee of
the Company; Interest at New York Prime
(4.00% at December 31, 2003) due quarterly,
principal due at maturity in June 2004. 94,899 143,043 174,043
--------- ---------- ---------
Totals $ 110,235 $ 334,371 $ 336,251
========= ========== =========
The maturities of notes payable are as follows:
2004 $ 109,769
2005 466
----------
Total $ 110,235
==========
20 FINANCIALS
NOTE G - INCOME TAXES:
Federal income taxes payable (or refundable) and deferred taxes (or
deferred charges) as of December 31, 2003, 2002 and 2001, included in other
assets or other liabilities, were as follows (in thousands):
December 31, 2003 2002 2001
- -------------------------------------------------------- -------- -------- --------
Deferred tax assets:
Allowance for loan losses $ 2,114 $ 2,215 $ 1,542
Employee benefit plans' liabilities 1,328 1,145 938
Other 836 685 431
-------- -------- --------
Deferred tax assets (4,278) (4,045) (2,911)
-------- -------- --------
Deferred tax liabilities:
Accumulated depreciation 732 820 947
Deferred gain on sale of bank premises 1,784 1,750 1,687
Installment sales 13 13 13
Unrealized gains on available for sale securities,
charged to equity 347 1,026 813
-------- -------- --------
Deferred tax liabilities 2,876 3,609 3,460
-------- -------- --------
Net deferred taxes (1,402) (436) 549
Current payable (refundable) (20) 200 75
-------- -------- --------
Totals $ (1,422) $ (236) $ 624
======== ======== ========
Income taxes consist of the following components (in thousands):
Years Ended December 31, 2003 2002 2001
- -------------------------------------------------------- -------- -------- --------
Current $ 2,322 $ 1,886 $ 2,202
Deferred (287) (1,198) (1,120)
-------- -------- --------
Totals $ 2,035 $ 688 $ 1,082
======== ======== ========
Deferred income taxes (benefits) resulted from the following (in thousands):
Years Ended December 31, 2003 2002 2001
- -------------------------------------------------------- -------- -------- --------
Depreciation $ (88) $ (127) $ (124)
Provision for loan losses 101 (628) (580)
Officers' and directors' life insurance (183) (281) (220)
Deferred gain on sale of bank premises 34 63
Unrealized gain on available for sale securities,
charged to equity (679) 213 620
Other (151) (225) (196)
-------- -------- --------
Totals $ (966) $ (985) $ (500)
======== ======== ========
FINANCIALS 21
Income taxes amounted to less than the amounts computed by applying the
U.S. Federal income tax rate of 34.0% for 2003, 2002 and 2001, to earnings
before income taxes. The reason for these differences is shown below (in
thousands):
Years Ended December 31, 2003 Amount % 2002 Amount % 2001 Amount %
- --------------------------------------------- ----------- ---- ----------- ---- ----------- ----
Taxes computed at statutory rate $ 2,398 34.0 $ 1,319 34.0 $ 1,526 34.0
Increase (decrease) resulting from:
Tax-exempt interest income (184) (2.6) (187) (4.8) (259) (5.8)
Non-deductible interest 8 0.1 15 0.4 30 0.7
Credit for certified historic structure (113) (2.5)
Non-taxable life insurance proceeds (201) (5.2) (62) (1.4)
Dividend exclusion (54) (0.8) (63) (1.6) (96) (2.1)
Other, net (133) (1.8) (195) (5.1) 56 1.2
------- ---- ------- ---- ------- ----
Total income taxes $ 2,035 28.9 $ 688 17.7 $ 1,082 24.1
======= ==== ======= ==== ======= ====
NOTE H - SHAREHOLDERS' EQUITY:
Banking regulations limit the amount of dividends that may be paid by the
bank subsidiary without prior approval of the Commissioner of Banking and
Consumer Finance of the State of Mississippi. At December 31, 2003,
approximately $7,142,000 of undistributed earnings of the bank subsidiary
included in consolidated surplus and retained earnings was available for
future distribution to the Company as dividends, subject to the approval by
Board of Directors.
On May 24, 2000, the Company's Board of Directors approved the repurchase
of up to 2.50% of the outstanding shares of the Company's common stock. As
of December 31, 2003, the 147,633 shares available under this plan had been
repurchased and retired. On December 8, 2000, the Company's Board of
Directors approved the repurchase of 146,304 shares of the outstanding
common stock from one unrelated shareholder at a purchase price of
$2,432,000. This repurchase was executed on January 2, 2001, and these
shares were subsequently retired. On November 26, 2002, the Company's Board
of Directors approved the repurchase of up to 2.50% of the outstanding
shares of the Company's common stock. As of December 31, 2003, 21,613
shares had been repurchased and retired under the plan approved November
26, 2002.
On May 23, 2001, the Company's Board of Directors approved a stock
incentive program for two executive officers. Under this plan, whole shares
valued as of the distribution date at $50,000 were distributed to each of
these officers who continue to meet the eligibility requirements on June
15, 2001, and on January 15 of the four succeeding years. On June 15, 2001
and January 15, 2002, a total of 6,886 and 7,142 shares, respectively, of
Peoples Financial Corporation common stock was issued. This incentive
program was established subsequent to the surrender of collateral
assignment split dollar policies that had been obtained on behalf of these
executives. On December 6, 2002, the Company's Board of Directors approved
the termination of the stock incentive program, which was replaced by the
acquisition of endorsement split dollar policies for the two executive
officers.
On November 25, 2003, the Company's Board of Directors approved a
semi-annual dividend of $ .15 per share. This dividend has a record date of
January 9, 2004 and a distribution date of January 16, 2004.
The bank subsidiary is subject to various regulatory capital requirements
administered by the federal banking agencies. Failure to meet minimum
capital requirements can initiate certain mandatory, and possibly
additional discretionary, actions by the regulators that, if undertaken,
could have a direct material effect on the bank subsidiary's financial
statements. Under capital adequacy guidelines and the regulatory framework
for prompt corrective action, the bank subsidiary must meet specific
capital guidelines that involve quantitative measures of the bank
subsidiary's assets, liabilities and certain off-balance sheet items as
calculated under regulatory accounting practices. The bank subsidiary's
capital amounts and classification are also subject to qualitative
judgments by the regulators about components, risk weightings and other
factors.
Quantitative measures established by regulation to ensure capital adequacy
require the bank subsidiary to maintain minimum amounts and ratios of Total
and Tier 1 capital to risk-weighted assets, and Tier 1 capital to average
assets.
22 FINANCIALS
As of December 31, 2003, the most recent notification from the Federal
Deposit Insurance Corporation categorized the bank subsidiary as well
capitalized under the regulatory framework for prompt corrective action. To
be categorized as well capitalized, the bank subsidiary must have a Total
risk-based capital ratio of 10.00% or greater, a Tier 1 risk-based capital
ratio of 6.00% or greater and a Leverage capital ratio of 5.00% or greater.
There are no conditions or events since that notification that Management
believes have changed the bank subsidiary's category.
The bank subsidiary's actual capital amounts and ratios and required
minimum capital amounts and ratios for 2003, 2002 and 2001, are as follows
(in thousands):
For Capital Adequacy
Actual Purposes
-------------------------------------------
Amount Ratio Amount Ratio
------- ----- ------- -----
December 31, 2003:
Total Capital (to Risk Weighted Assets) $85,583 24.81% $27,600 8.00%
Tier 1 Capital (to Risk Weighted Assets) 81,270 23.56% 13,800 4.00%
Tier 1 Capital (to Average Assets) 81,270 14.44% 22,511 4.00%
December 31, 2002:
Total Capital (to Risk Weighted Assets) $83,768 24.16% $27,720 8.00%
Tier 1 Capital (to Risk Weighted Assets) 79,437 22.91% 13,860 4.00%
Tier 1 Capital (to Average Assets) 79,437 13.98% 22,798 4.00%
December 31, 2001:
Total Capital (to Risk Weighted Assets) $83,201 21.90% $30,930 8.00%
Tier 1 Capital (to Risk Weighted Assets) 78,453 20.65% 15,195 4.00%
Tier 1 Capital (to Average Assets) 78,453 13.25% 23,677 4.00%
NOTE 1 - OTHER INCOME AND EXPENSES:
Other income consisted of the following:
Years Ended December 31, 2003 2002 2001
- ------------------------------------------- ---------- ---------- ----------
Other service charges, commissions and fees $ 226,946 $ 189,835 $ 208,332
Gain on sale of bank premises 130,503 182,861
Rentals 473,292 494,055 511,751
Income from proceeds of insurance policies 592,436
Other income 681,428 461,265 485,667
---------- ---------- ----------
Totals $1,512,169 $1,920,452 $1,205,750
========== ========== ==========
FINANCIALS 23
Other expenses consisted of the following:
Years Ended December 31, 2003 2002 2001
- ---------------------------------- ---------- ---------- ----------
Advertising $ 515,538 $ 433,037 $ 463,103
Data processing 282,420 268,044 233,390
FDIC and state banking assessments 117,271 127,234 132,629
Legal and accounting 382,161 395,016 272,337
Postage and freight 167,517 227,871 211,792
Stationery, printing and supplies 250,976 169,583 191,803
Other real estate 59,887 636,789 328,133
ATM expense 2,223,479 2,477,104 2,282,118
Federal Reserve service charges 154,701 153,783 152,815
Conferences and classes 120,293 99,325 112,469
Taxes and licenses 267,319 276,910 252,491
Consulting fees 363,282 45,880 11,250
Trust expense 381,233 373,483 350,525
Other 961,879 957,790 800,213
---------- ---------- ----------
Totals $6,247,956 $6,641,849 $5,795,068
========== ========== ==========
NOTE J - FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK:
The Company is a party to financial instruments with off-balance-sheet risk
in the normal course of business to meet the financing needs of its
customers. These financial instruments include commitments to extend credit
and irrevocable letters of credit. These instruments involve, to varying
degrees, elements of credit and interest rate risk in excess of the amount
recognized in the balance sheet. The contract amounts of those instruments
reflect the extent of involvement the bank subsidiary has in particular
classes of financial instruments. The Company's exposure to credit loss in
the event of nonperformance by the other party to the financial instrument
for commitments to extend credit and irrevocable letters of credit is
represented by the contractual amount of those instruments. The Company
uses the same credit policies in making commitments and conditional
obligations as it does for on-balance-sheet instruments.
Commitments to extend credit are agreements to lend to a customer as long
as there is no violation of any conditions established in the agreement.
Irrevocable letters of credit written are conditional commitments issued by
the Company to guarantee the performance of a customer to a third party.
Commitments and irrevocable letters of credit generally have fixed
expiration dates or other termination clauses and may require payment of a
fee. Since some of the commitments and irrevocable letters of credit may
expire without being drawn upon, the total amounts do not necessarily
represent future cash requirements. The Company evaluated each customer's
creditworthiness on a case-by-case basis. The amount of collateral obtained
upon extension of credit is based on Management's credit evaluation of the
customer. Collateral obtained varies but may include equipment, real
property and inventory.
The Company generally grants loans to customers in its primary trade area
of Harrison, Hancock, Jackson and Stone counties.
At December 31, 2003, 2002 and 2002, the Company had outstanding
irrevocable letters of credit aggregating $3,388,997, $2,849,400 and
$3,344,016, respectively. At December 31, 2003, 2002 and 2001, the Company
had outstanding unused loan commitments aggregating $95,165,000,
$87,382,000 and $74,254,000, respectively. Approximately $46,688,000,
$43,543,000 and $27,810,000 of outstanding commitments were at fixed rates
and the remainder were at variable rates at December 31, 2003, 2002 and
2001, respectively.
24 FINANCIALS
NOTE K - CONTINGENCIES:
During 2003, a lawsuit was filed again the Company's bank subsidiary. This
litigation, which specifies damages of $1,500,000 and punitive damages of
$12,500,000, has been filed by an insurance company trying to reverse a
settlement it voluntarily agreed to in 2000. The bank subsidiary intends to
vigorously contest the allegations of the complaint. The bank is involved
in various other legal matters and claims which are being defended and
handled in the ordinary course of business. None of these matters is
expected, in the opinion of Management, to have a material adverse effect
upon the financial position or results of operations of the Company.
NOTE L - CONDENSED PARENT COMPANY ONLY FINANCIAL INFORMATION:
Peoples Financial Corporation began its operations September 30, 1985, when
it acquired all the outstanding stock of The Peoples Bank, Biloxi,
Mississippi. A condensed summary of its financial information is shown
below.
CONDENSED BALANCE SHEETS (IN THOUSANDS)
December 31, 2003 2002 2001
- -------------------------------------------------- ------- ------- -------
ASSETS
Investments in subsidiaries, at underlying equity:
Bank subsidiary $82,957 $81,558 $79,483
Nonbank subsidiary 1 1 1
Cash in bank subsidiary 546 84 263
Other assets 1,462 1,462 1,821
------- ------- -------
TOTAL ASSETS $84,966 $83,105 $81,568
======= ======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Notes payable $ 95 $ 143 $ 174
Other liabilities 1,367 1,230 1,325
------- ------- -------
Total liabilities 1,462 1,373 1,499
Shareholders' equity 83,504 81,732 80,069
------- ------- -------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $84,966 $83,105 $81,568
======= ======= =======
CONDENSED STATEMENTS OF INCOME (IN THOUSANDS)
Years Ended December 31, 2003 2002 2001
- ------------------------------------------- ------- ------ -------
INCOME
Earnings of unconsolidated
bank subsidiary:
Distributed earnings $ 2,280 $1,400 $ 700
Undistributed earnings 2,739 1,752 3,375
Interest income 5 7 14
Other income 79 230 41
------- ------ -------
TOTAL INCOME 5,103 3,389 4,130
------- ------ -------
EXPENSES
Other expense 86 185 183
------- ------ -------
TOTAL EXPENSES 86 185 183
------- ------ -------
INCOME BEFORE INCOME TAXES 5,017 3,204 3,947
Income tax (benefit) (1) 13 (52)
------- ------ -------
NET INCOME $ 5,018 $3,191 $ 3,999
======= ====== =======
FINANCIALS 25
CONDENSED STATEMENTS OF CASH FLOWS (IN THOUSANDS)
Years Ended December 31, 2003 2002 2001
- ------------------------------------------------------ ------- ------- -------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 5,018 $ 3,191 $ 3,999
Adjustments to reconcile net income to
net cash provided by operating activities:
Gain on liquidation of investment (57) (210)
Net income of unconsolidated subsidiaries (5,019) (3,152) (4,075)
Stock incentive plan 100 100
Changes in assets and liabilities:
Other assets 15 71
------- ------- -------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (58) (56) 95
------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from liquidation of investment 57 352
Dividends from unconsolidated subsidiary 2,280 1,400 700
------- ------- -------
NET CASH PROVIDED BY INVESTING ACTIVITIES 2,337 1,752 700
------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Retirement of stock (368) (528) (2,981)
Dividends paid (1,449) (1,347) (1,297)
------- ------- -------
NET CASH USED IN FINANCING ACTIVITIES (1,817) (1,875) (4,278)
------- ------- -------
NET INCREASE (DECREASE) IN CASH 462 (179) (3,483)
CASH, BEGINNING OF YEAR 84 263 3,746
------- ------- -------
CASH, END OF YEAR $ 546 $ 84 $ 263
======= ======= =======
Peoples Financial Corporation paid income taxes of $2,537,223, $1,639,612
and $1,847,250 in 2003, 2002 and 2001, respectively. No interest was paid
during the three years ended December 31, 2003.
NOTE M - EMPLOYEE BENEFIT PLAN:
The Company sponsors the Peoples Financial Corporation Employee Stock
Ownership Plan (ESOP). Employees who work more than 1,000 hours are
eligible to participate in the ESOP. The Plan included 401(k) provisions
and the former Gulf National Bank Profit Sharing Plan. Effective January 1,
2001, the ESOP was amended to separate the 401(k) funds into the Peoples
Financial Corporation 401(k) Plan. The separation had no impact on the
eligibility or benefits provided to participants of either plan. The 401(k)
provides for a matching contribution of 75% of the amounts contributed by
the employee (up to 6% of compensation). Contributions are determined by
the Board of Directors and may be paid either in cash or Peoples Financial
Corporation capital stock. Total contributions to the plan charged to
operating expense were $360,000, $360,000 and $734,000 in 2003, 2002 and
2001, respectively.
ESOP debt for acquisition of Company shares has been guaranteed by the
Company and is reported as a debt of the Company. Shares pledged as
collateral are reported as unearned compensation in equity. ESOP debt for
acquisition from The Peoples Bank, Biloxi, Mississippi, is eliminated in
consolidation. As shares are committed to be released, the Company reports
compensation expense equal to the current market price of the shares, and
the shares become outstanding for net income per share computations.
Dividends on allocated ESOP shares are recorded as a reduction of retained
earnings; dividends on unallocated ESOP shares are recorded as a reduction
of debt and accrued interest.
Compensation expense of $7,021,816, $7,167,143 and $7,681,720 relating to
the ESOP was recorded during 2003, 2002 and 2001, respectively. The ESOP
held 467,499, 533,733 and 560,010 allocated shares at December 31, 2003,
2002, and 2001 respectively.
26 FINANCIALS
The Company established an Executive Supplemental Income Plan and a
Directors' Deferred Income Plan, which provide for pre-retirement and
post-retirement benefits to certain key executives and directors. The
Company has acquired insurance policies, with the bank subsidiary as owner
and beneficiary, that it may use as a source to pay potential benefits to
the plan participants. These contracts are carried at their cash surrender
value, which amounted to $10,588,084, $10,276,887 and $4,558,220 at
December 31, 2003, 2002 and 2001, respectively. The present value of
accumulated benefits under these plans, using an interest rate of 7.50% and
8.00% and the interest ramp-up method for 2003 and 2002 and using an
interest rate of 7.5% and the projected unit cost method for 2001, has been
accrued. The accrual amounted to $3,375,938, $2,882,009 and $2,418,114 at
December 31, 2003, 2002 and 2001, respectively.
The Company also has additional plans for non-vested post-retirement
benefits for certain key executives and directors. The Company has acquired
insurance policies, with the bank subsidiary as owner and beneficiary, that
it may use as a source to pay potential benefits to the plan participants.
Additionally, there are two endorsement split dollar policies, with the
bank subsidiary as owner and beneficiary, which provide a guaranteed death
benefit to the participants' beneficiaries. These contracts are carried at
their cash surrender value, which amounted to $989,004, $686,381 and
$420,221 at December 31, 2003, 2002 and 2001, respectively. The present
value of accumulated benefits under these plans using an interest rate of
7.50% in 2003, 2002 and 2001 and the projected unit cost method has been
accrued. The accrual amounted to $530,372 , $485,534 and $341,819 at
December 31, 2003, 2002 and 2001, respectively.
The Company provides post-retirement health insurance to certain of its
retired employees. Employees are eligible to participate in the retiree
health plan if they retire from active service no earlier than their Social
Security normal retirement age, which varies from 65 to 67 based on the
year of birth. In addition, the employee must have at least 25 continuous
years of service with the Company immediately preceding retirement.
However, any active employee who was at least age 65 as of January 1, 1995,
does not have to meet the 25 years of service requirement. The accumulated
post-retirement benefit obligation at January 1, 1995, was $517,599, which
the Company elected to amortize over 20 years. The Company reserves the
right to modify, reduce or eliminate these health benefits.
The following is a summary of the components of the net periodic
post-retirement benefit cost:
Years Ended December 31, 2003 2002 2001
- ----------------------------------------- -------- -------- --------
Service cost $157,515 $107,533 $ 67,981
Interest cost 104,409 94,603 70,461
Amortization of net transition obligation 20,600 20,600 20,600
-------- -------- --------
Net periodic post-retirement benefit cost $282,524 $222,736 $159,042
======== ======== ========
The discount rate used in determining the accumulated post-retirement
benefit obligation was 6.25% in 2003, 6.50% in 2002, and 7.25% in 2001. The
assumed health care cost trend rate used in measuring the accumulated
post-retirement benefit obligation was 10.00% in 2003. The rate was assumed
to decrease gradually to 5.00% for 2013 and remain at that level
thereafter. If the health care cost trend rate assumptions were increased
1.00%, the accumulated post-retirement benefit obligation as of December
31, 2003, would be increased by 24.39%, and the aggregate of the service
and interest cost components of the net periodic post-retirement benefit
cost for the year then ended would have increased by 28.72%. If the health
care cost trend rate assumptions were decreased 1.00%, the accumulated
post-retirement benefit obligation as of December 31, 2003, would be
decreased by 18.64%, and the aggregate of the service and interest cost
components of the net periodic post-retirement benefit cost for the year
then ended would have decreased by 21.37%.
FINANCIALS 27
The following is a reconciliation of the accumulated post-retirement
benefit obligation:
Accumulated post-retirement benefit obligation as of December 31, 2002 $ 1,693,122
Service cost 135,006
Interest cost 104,409
Actuarial loss 294,994
Benefits paid (74,549)
-----------
Accumulated post-retirement benefit obligation as of December 31, 2003 $ 2,152,982
===========
December 31, 2003 2002 2001
- ----------------------------------------------- ----------- ----------- -----------
Accumulated post-retirement benefit obligation:
Retirees $ 659,859 $ 422,403 $ 395,895
Eligible to retire 1,493,123 50,218 44,172
Not eligible to retire 1,220,501 881,657
----------- ----------- -----------
Total 2,152,982 1,693,122 1,321,724
Plan assets at fair value -0- -0- -0-
----------- ----------- -----------
Accumulated post-retirement benefit
obligation in excess of plan assets 2,152,982 1,693,122 1,321,724
Unrecognized transition obligation (226,597) (247,197) (267,797)
Unrecognized cumulative net gain from past
experience different from that assumed
and from changes in assumptions (887,947) (615,462) (394,611)
----------- ----------- -----------
Accrued post-retirement benefit cost $ 1,038,438 $ 830,463 $ 659,316
=========== =========== ===========
NOTE N - FAIR VALUE OF FINANCIAL INSTRUMENTS:
SFAS 107, "Disclosures About Fair Value of Financial Instruments," requires
all entities to disclose the fair value of financial instruments, both
assets and liabilities recognized and not recognized in the statement of
condition, for which it is practical to estimate its fair value. SFAS 107
excluded certain financial instruments and all nonfinancial instruments
from its disclosure requirements. Accordingly, the aggregate fair value
amounts presented do not represent the underlying value of the Company. In
preparing these disclosures, Management made highly sensitive estimates and
assumptions in developing the methodology to be utilized in the computation
of fair value. These estimates and assumptions were formulated based on
judgments regarding economic conditions and risk characteristics of the
financial instruments that were present at the time the computations were
made. Events may occur that alter these conditions and thus perhaps change
the assumptions as well. A change in the assumptions might affect the fair
value of the financial instruments disclosed in this footnote. In addition,
the tax consequences related to the realization of the unrealized gains and
losses have not been computed or disclosed herein. These fair value
estimates, methods and assumptions are set forth below.
CASH AND DUE FROM BANKS
The amount shown as cash and due from banks approximates fair value.
AVAILABLE FOR SALE SECURITIES
The fair value of available for sale securities is based on quoted market
prices.
HELD TO MATURITY SECURITIES
The fair value of held to maturity securities is based on quoted market
prices.
LOANS
The fair value of loans is estimated by discounting the future cash flows
using the current rates at which similar loans would be made to borrowers
with similar credit ratings for the remaining maturities. The cash flows
considered in computing the fair value of such loans are segmented into
categories relating to the nature of the contract and collateral based on
contractual principal maturities. Appropriate adjustments are made to
reflect probable credit losses. Cash flows have not been adjusted for such
factors as prepayment risk or the effect of the maturity of balloon notes.
28 FINANCIALS
DEPOSITS
The fair value of non-interest bearing demand and interest bearing savings
and demand deposits is the amount reported in the financial statements. The
fair value of time deposits is estimated by discounting the cash flows
using current rates of time deposits with similar remaining maturities. The
cash flows considered in computing the fair value of such deposits are
based on contractual maturities, since approximately 98% of time deposits
provide for automatic renewal at current interest rates.
FEDERAL FUNDS PURCHASED AND SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE
The amount shown as federal funds purchased and securities sold under
agreements to repurchase approximates fair value.
LONG TERM FUNDS
The fair value of long term funds is computed by discounting the cash flows
using current borrowing rates.
The following table presents carrying amounts and estimated fair values for
financial assets and financial liabilities at December 31, 2003, 2002 and
2001 (in thousands):
2003 2002 2001
-----------------------------------------------------------
Carrying Fair Carrying Fair Carrying Fair
Amount Value Amount Value Amount Value
-------- ------- -------- ------- -------- -------
Financial Assets:
Cash and due from banks $ 33,861 $ 33,861 $ 39,654 $ 39,654 $ 32,035 $ 32,035
Available for sale securities 206,467 207,486 151,484 151,484 142,902 142,902
Held to maturity securities 4,353 4,527 17,588 18,026 38,279 38,986
Loans, net 291,524 294,685 305,599 307,501 341,511 345,155
Financial Liabilities:
Deposits:
Non-interest bearing 76,424 76,424 75,698 75,698 76,215 76,215
Interest bearing 296,133 297,008 312,476 314,495 336,328 339,640
-------- -------- --------- -------- -------- --------
Total deposits 372,557 373,432 388,174 390,193 412,543 415,855
Federal funds purchased and
securities sold under
agreements to repurchase 95,039 95,039 67,246 67,246 82,489 82,489
Long term funds 17,180 18,076 6,647 7,398 5,885 6,356
NOTE O - EXTRAORDINARY GAIN:
In 2001, the Company agreed to an out of court settlement of an insurance
claim. An extraordinary gain of $594,000, net of taxes, was realized in the
prior year as a result of this settlement.
FINANCIALS 29
INDEPENDENT AUDITORS' REPORT
PEOPLES FINANCIAL CORPORATION AND SUBSIDIARIES
Board of Directors
Peoples Financial Corporation and Subsidiaries
Biloxi, Mississippi
We have audited the accompanying consolidated statements of condition of
Peoples Financial Corporation and Subsidiaries as of December 31, 2003,
2002 and 2001, and the related consolidated statements of income,
shareholders' equity and cash flows for the years then ended. These
financial statements are the responsibility of the Company's Management.
Our responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by Management, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Peoples
Financial Corporation and Subsidiaries at December 31, 2003, 2002 and 2001,
and the results of its operations and its cash flows for the years then
ended, in conformity with accounting principles generally accepted in the
United States of America.
Certified Public Accountants
/s/ PILTZ, WILLIAMS, LAROSA & CO.
PILTZ, WILLIAMS, LAROSA & CO.
Biloxi, Mississippi
January 21, 2004
30 FINANCIALS
FIVE-YEAR COMPARATIVE SUMMARY OF SELECTED FINANCIAL INFORMATION (IN THOUSANDS
EXCEPT PER SHARE DATA)
PEOPLES FINANCIAL CORPORATION AND SUBSIDIARIES
2003 2002 2001 2000 1999
----------- ------------ ------------ ----------- -----------
BALANCE SHEET SUMMARY
Total assets $ 575,435 $ 550,139 $ 587,012 $ 587,244 $ 537,972
Available for sale securities 207,486 151,484 142,902 48,168 33,076
Held to maturity securities 4,353 17,588 38,279 98,052 115,273
Loans, net of unearned discount 297,923 312,296 347,169 377,476 332,510
Deposits 372,557 388,174 412,543 413,724 394,681
Borrowings from FHLB 17,070 6,313 5,549 23,160
Long term notes payable 110 334 336 291 274
Shareholders' equity 83,504 81,732 80,069 78,717 77,767
SUMMARY OF OPERATIONS
Interest income $ 25,065 $ 27,424 $ 37,285 $ 42,250 $ 35,440
Interest expense 5,838 9,616 18,354 19,401 14,441
----------- ------------ ------------ ----------- -----------
Net interest income 19,227 17,808 18,931 22,849 20,999
Provision for loan losses 447 2,428 2,503 4,192 120
----------- ------------ ------------ ----------- -----------
Net interest income after provision
for loan losses 18,780 15,380 16,428 18,657 20,879
Non-interest income 9,737 10,372 9,256 7,678 6,767
Non-interest expense (21,464) (21,874) (21,197) (19,632) (18,438)
----------- ------------ ------------ ----------- -----------
Income before taxes
and extraordinary gain 7,053 3,878 4,487 6,703 9,208
Applicable income taxes 2,035 687 1,082 2,065 2,958
Extraordinary gain 594
----------- ------------ ------------ ----------- -----------
Net income $ 5,018 $ 3,191 $ 3,999 $ 4,638 $ 6,250
=========== ============ ============ =========== ===========
PER SHARE DATA
Basic and diluted earnings per share $ .90 $ .57 $ .71 $ .79 $ 1.06
Basic and diluted earnings per share
before extraordinary gain .90 .57 .60 .79 1.06
Dividends per share .29 .24 .24 .21 .20
Book value 15.03 14.64 14.25 13.58 13.17
Weighted average number of shares 5,563,015 5,603,834 5,629,872 5,857,232 5,905,344
SELECTED RATIOS
Return on average assets .88% .56% .68% .82% 1.21%
Return on average equity 6.07% 3.94% 5.04% 5.93% 8.26%
Capital formation rate 2.17% 2.08% 1.72% 1.22% 5.74%
Primary capital to average assets 15.79% 15.39% 14.47% 14.68% 15.86%
Risk-based capital ratios:
Tier 1 23.56% 22.91% 20.65% 19.97% 22.45%
Total 24.81% 24.16% 21.90% 21.13% 23.69%
Note: All share and per share data have been given retroactive effect for the
two for one stock split effective April 17, 2000.
FINANCIALS 31
Summary of Quarterly Results of Operations (in thousands except per share data)
PEOPLES FINANCIAL CORPORATION AND SUBSIDIARIES
Quarter Ended, 2003 March 31 June 30 September 30 December 31
- ------------------------------------ ----------------- ------------------ ------------------ ----------------
Interest income $ 6,410 $ 6,332 $ 6,174 $ 6,149
Net interest income 4,725 4,708 4,883 4,911
Provision for loan losses 179 139 65 64
Income before income taxes 1,384 1,599 2,116 1,954
Net income 1,037 1,088 1,511 1,382
Basic and diluted earnings per share .19 .19 .27 .25
Quarter Ended, 2002 March 31 June 30 September 30 December 31
- ------------------------------------ ----------------- ------------------ ------------------ ----------------
Interest income $ 7,118 $ 6,993 $ 6,787 $ 6,526
Net interest income 4,282 4,396 4,507 4,623
Provision for loan losses 445 168 136 1,679
Income before income taxes
and extraordinary items 894 787 1,551 646
Net income 667 658 1,145 721
Basic and diluted earnings per share .12 .12 .20 .13
MARKET INFORMATION
The Company's stock is traded under the symbol PFBX and is quoted in
publications under "PplFnMS". The following table sets forth the high and
low sale prices of the Company's common stock as reported on the NASDAQ
Stock Market.
Dividend
Year Quarter High Low per share
- ----- ------- ------------- -------------- -------------
2003 1st $ 15 $ 13 $ .12
2nd 16 13
3rd 17 14 .14
4th 18 15
2002 1st $ 15 $ 12 $ .12
2nd 15 13
3rd 15 12 .12
4th 15 12
There were 661 holders of record of common stock of the Company at January
30, 2004, and 5,557,379 shares issued and outstanding. The principal source
of funds to the Company for payment of dividends is the earnings of the
bank subsidiary. The Commissioner of Banking and Consumer Finance of the
State of Mississippi must approve all dividends paid to the Company by its
bank subsidiary. Although Management cannot predict what dividends, if any,
will be paid in the future, the Company has paid regular semiannual cash
dividends since its founding in 1985.
32 FINANCIALS
Board of Directors
Peoples Financial Corporation
Chevis C. Swetman, Chairman of the Board
Dan Magruder, Vice Chairman; President, Rex Distributing Co., Inc.
Drew Allen, President, Allen Beverages, Inc.
Rex E. Kelly, Director of Corporate Communications, Mississippi
Power Company
Lyle M. Page, Partner, Page, Mannino, Peresich & McDermott
Officers
Peoples Financial Corporation
Chevis C. Swetman, President and CEO
Thomas J. Sliman, First Vice-President
Jeannette E. Romero, Second Vice-President
Robert M. Tucei, Vice-President
A. Wes Fulmer, Vice-President and Secretary
M. O. Lawrence, III, Vice-President
Lauri A. Wood, Chief Financial Officer and Controller
Board of Directors
The Peoples Bank, Biloxi, Mississippi
Chevis C. Swetman, Chairman
Tyrone J. Gollott, Vice-Chairman; Secretary-Treasurer, Gollott &
Sons Transfer & Storage, Inc.
Drew Allen, President, Allen Beverages, Inc.
Liz Corso Joachim, President, Frank P. Corso, Inc.
Rex E. Kelly, Director of Corporate Communications, Mississippi
Power Company
Dan Magruder, President, Rex Distributing Co., Inc.
Jeffrey H. O'Keefe, President, Bradford-O'Keefe Funeral Homes, Inc.
Lyle M. Page, Partner, Page, Mannino, Peresich & McDermott
Officers
The Peoples Bank, Biloxi, Mississippi
SENIOR MANAGEMENT
Chevis C. Swetman, President and CEO
Thomas J. Sliman, Senior Vice-President
Jeannette E. Romero, Senior Vice-President
Robert M. Tucei, Senior Vice-President
Lauri A. Wood, Senior Vice-President and Cashier
A. Wes Fulmer, Senior Vice-President
M. O. Lawrence, III, Senior Vice-President
A. WES FULMER, SENIOR VICE-PRESIDENT AND CHIEF LENDING OFFICER
LENDING
Brian J. Kozlowski, Assistant Vice-President
Andrew M. Welter, Assistant Vice-President
Stephanie D. Broussard, Loan Officer
Melanie L. Battise, Branch Manager
Diana T. Winland, Loan Officer
Pinky T. Walker, Administrative Officer
West Region
Jeannie M. Deen, Vice-President
Eric M . Chambless, Assistant Vice-President
William A. Aborn, Branch Manager
Debora T. Batchelor, Loan Officer
Shannon D. Garrett, Loan Officer
Central Region
John W. McKellar, Vice-President
Mark A. Chatham, Vice-President
Read H. Breeland, Assistant Vice-President
James P. Estrada, Assistant Vice-President
Brent G. Johnson, Assistant Vice-President
William S. Maddox, Assistant Vice-President
J. Denise Holmes, Branch Manager
East Region
Jerome D. Dodge,II, Vice-President
David A. Thompson, Assistant Vice-President
Henry N. Knue, Branch Manager
Patrick J. Lyons, Branch Manager
John L.Welter, IV, Branch Manager
Julie B. Carpenter, Loan Officer
HUMAN RESOURCES
Jackie L. Henson, Vice-President
Patricia L. Levine, Vice-President
Janice L. Smitherman, Assistant Vice-President - Employee
Benefits
BUSINESS DEVELOPMENT
Dennis J. Burke, Vice-President
ROBERT M. TUCEI, SENIOR VICE-PRESIDENT AND CHIEF CREDIT OFFICER
CREDIT ADMINISTRATION
J. Patrick Wild, Vice-President
Donna F. Bessetti, Vice-President
Jesse J. Migues, Assistant Vice-President
Ronnie F. Harrison, Assistant Vice-President
Kathleen M. Worrell, Insurance Officer
FINANCIALS 33
THOMAS J. SLIMAN, SENIOR VICE-PRESIDENT AND CHIEF INFORMATION
OFFICER
TECHNOLOGY AND FACILITIES
Sandra L. York, Vice-President - Information Systems
George S. Tranum, Vice-President - Technical Support
James M. Gruich, Assistant Vice-President - Technology Security
Gloria A. Cothern, Assistant Vice-President - Electronic Banking
Ronald L. Baldwin, Systems Support Technician Officer
Frederick J. Breal, Property Officer
Cheryl A. Dewey, Data Processing Officer
Thomas A. Esposito, Jr., Business Solutions Officer
John M. Zorich, Internet Banking Technology Officer
LAURI A. WOOD, SENIOR VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
FINANCIAL
Connie F. Lepoma, Assistant Vice-President
Cassandra F. Reid, Assistant Cashier
INVESTMENTS
Peggy M. Byrd, Vice-President
Janet H. Wood, Assistant Vice-President
M. O. LAWRENCE, III, SENIOR VICE-PRESIDENT AND SENIOR TRUST OFFICER
ASSET MANAGEMENT & TRUST SERVICES
Ann F. Guice, Vice-President
Louise C. Wilson, Trust Officer
Thomas H. Wicks, Trust Officer
Daniel A. Bass, Trust Officer
C. J. Dunaway, Trust Officer
JEANNETTE E. ROMERO, SENIOR VICE PRESIDENT AND RETAIL BANKING OFFICER
ACCOUNT SERVICES
Kathy S. Comstock, Savings Officer
Toni A. Ganucheau, Assistant Cashier
ATM/BANKCARD
Cheryl A. Dubaz, Assistant Vice-President - ATM
Charlotte R. Balius, Bankcard Officer
OPERATIONS
Susan B. Page, Assistant Vice-President - Operations
Ardell M. Roberts, Assistant Cashier
Hugh J. Kavanagh, Assistant Cashier
Diana W. Williams - Branch Manager
Laura E. Elliott, Assistant Branch Manager
SECURITY
Robin Vignes, Vice-President
Minh-Tuyet Nguyen, Security Officer
Margaret H. Chandler, Assistant Security Officer
AUDIT, COMPLIANCE AND LOAN REVIEW
Gregory M. Batia, Vice-President and Auditor
Evelyn R. Herrington, Vice-President - Compliance
Robert E. Smith, Jr., Vice-President - Loan Review
F. Kay Rice, Loan Review Officer
Rebecca A. Williams, Assistant Auditor
Darnell Y. Schreck, Assistant Cashier - Compliance
BRANCH LOCATIONS
The Peoples Bank, Biloxi, Mississippi
BILOXI BRANCHES
MAIN OFFICE, 152 Lameuse Street, Biloxi, Mississippi 39530,
(228) 435-5511
CEDAR LAKE OFFICE, 11355 Cedar Lake Road, Biloxi, Mississippi 39532
(228) 435-8688
WEST BILOXI OFFICE, 2430 Pass Road, Biloxi, Mississippi 39531,
(228) 435-8203
GULFPORT BRANCHES
DOWNTOWN GULFPORT OFFICE, 1105 30th Avenue, Gulfport,
Mississippi 39501, (228) 897-8715
HANDSBORO OFFICE, 0412 E. Pass Road, Gulfport, Mississippi 39507,
(228) 897-8717
ORANGE GROVE OFFICE, 12020 Highway 49 North, Gulfport,
Mississippi 39503, (228) 897-8718
OTHER BRANCHES
BAY ST. LOUIS OFFICE, 408 Highway 90 East, Bay St. Louis,
Mississippi 39520, (228) 897-8710
DIAMONDHEAD OFFICE, 4408 West Aloha Drive, Diamondhead,
Mississippi 39525, (228) 897-8714
D'IBERVILLE-ST. MARTIN OFFICE, 10491 Lemoyne Boulevard,
D'iberville, Mississippi 39532, (228) 435-8202
GAUTIER OFFICE, 2601 Highway 90, Gautier, Mississippi 39553,
(228) 497-1766
LONG BEACH OFFICE, 298 Jeff Davis Avenue, Long Beach,
Mississippi 39560 (228) 897-8712
OCEAN SPRINGS OFFICE, 2015 Bienville Boulevard, Ocean Springs,
Mississippi 39564, (228) 435-8204
PASS CHRISTIAN OFFICE, 125 Henderson Avenue, Pass Christian,
Mississippi 39571, (228) 897-8719
SAUCIER OFFICE, 17689 Second Street, Saucier, Mississippi 39574,
(228) 897-8716
WIGGINS OFFICE, 1312 S. Magnolia Drive, Wiggins, Mississippi 39577
(228) 897-8722
34 FINANCIALS
CORPORATE INFORMATION
PEOPLES FINANCIAL CORPORATION AND SUBSIDIARIES
CORPORATE OFFICE
MAILING ADDRESS
P. O. Box 529
Biloxi, MS 39533-0529
(228) 435-8205
PHYSICAL ADDRESS
152 Lameuse Street
Biloxi, MS 39530
WEBSITE
www.thepeoples.com
CORPORATE STOCK
The common stock of Peoples Financial Corporation is traded on
the NASDAQ Small Cap Market under the symbol: PFBX. The cur-
rent market makers are:
Johnston Lemon & Company
Morgan Keegan & Company, Inc.
Sterne, Agee & Leach, Inc.
SHAREHOLDER INFORMATION
For complete information concerning the common stock of Peoples Financial
Corporation, including dividend reinvestment, or general information about the
Company, direct inquiries to transfer agent/investor relations:
Asset Management & Trust Services Department
The Peoples Bank, Biloxi, Mississippi
Attention: M. O. Lawrence, III, Senior Vice-President
P. O. Box 1416, Biloxi, Mississippi 39533-1416
(228) 435-8208,
e-mail: investorrelations@thepeoples.com
INDEPENDENT AUDITORS
Piltz, Williams, LaRosa & Company, Biloxi, Mississippi
S.E.C. FORM 10-K REQUESTS
A copy of the Annual Report on Form 10-K, as filed with the Securities and
Exchange Commission, may be obtained without charge by directing a written
request to:
Lauri A. Wood, Chief Financial Officer and Controller
Peoples Financial Corporation
P. O. Drawer 529, Biloxi, Mississippi 39533-0529
(228) 435-8412, e-mail: lwood@thepeoples.com
FINANCIALS 35
[PICTURE OF BOARD OF DIRECTORS]
BOARD OF DIRECTORS
PEOPLES FINANCIAL CORPORATION
THE PEOPLES BANK, BILOXI, MISSISSIPPI
BACK ROW FROM LEFT: Jeffrey H. O'Keefe, President, Bradford-O'Keefe Funeral
Homes, Inc.; Tyrone J. Gollott, Vice-Chairman of The Peoples Bank;
Secretary-Treasurer, Gollott & Sons Transfer & Storage, Inc.; Lyle M. Page*,
Partner, Page, Mannino, Peresich & McDermott.
FRONT ROW FROM LEFT: Rex E. Kelly*, Director of Corporate Communications,
Mississippi Power Company; Drew Allen*, President, Allen Beverages, Inc.; Chevis
C. Swetman*, Chairman of the Board; Dan Magruder*, Vice-Chairman of Peoples
Financial Corporation; President, Rex Distributing Co., Inc.; Liz Corso Joachim,
President, Frank P. Corso, Inc.
*Member of both boards.
36 THE YEAR IN REVIEW
[COVER]