FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 2000
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OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT
For the transition period from ____________ to _______________
Commission File No. 0-28838
PEOPLES FINANCIAL CORPORATION
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(Exact name of small business issuer as specified in its charter)
Ohio 34-1822228
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
211 Lincoln Way East, Massillon, Ohio 44646
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(Address of principal executive offices)
(330) 832-7441
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(Issuer's telephone number)
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(Former name, former address and former fiscal year, if changed since
last report)
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the issuer filed all documents and reports required to be filed by
Section 12, 13 or 15(d) of the Exchange Act after the distribution of securities
under a plan confirmed by a court.
Yes No
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APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: February 9, 2001 - 1,234,085 common
shares
Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X]
Page 1 of 17 pages
INDEX
PEOPLES FINANCIAL CORPORATION
Page
PART I - FINANCIAL INFORMATION
Consolidated Statements of Financial Condition 3
Consolidated Statements of Earnings 4
Consolidated Statements of Comprehensive Income 5
Consolidated Statements of Cash Flows 6
Notes to Consolidated Financial Statements 8
Management's Discussion and Analysis of
Financial Condition and Results of Operations 10
PART II - OTHER INFORMATION 16
SIGNATURES 17
Page 2 of 17 pages
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
PEOPLES FINANCIAL CORPORATION
(In thousands, except share data)
December 31, September 30,
ASSETS 2000 2000
Cash and due from banks $ 408 $ 437
Interest-bearing deposits in other financial institutions 1,736 1,191
------- -------
Cash and cash equivalents 2,144 1,628
Investment securities designated as available for sale -
at market 565 518
Investment securities held to maturity - at cost, approximate
market value of $972 and $984 as of December 31, 2000
and September 30, 2000 934 946
Mortgage-backed and related securities designated
as available for sale - at market 6,664 6,847
Mortgage-backed and related securities held to maturity - at
amortized cost, approximate market value of $2,420 and
$2,559 as of December 31, 2000 and September 30, 2000 2,379 2,521
Loans receivable - net 88,114 84,834
Office premises and equipment - at depreciated cost 1,561 1,588
Stock in Federal Home Loan Bank - at cost 1,054 993
Accrued interest receivable 340 350
Prepaid expenses and other assets 45 213
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Total assets $103,800 $100,438
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LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits $ 72,358 $ 70,758
Advances from the Federal Home Loan Bank 20,200 18,650
Other liabilities 405 290
Accrued federal income taxes 52 116
Deferred federal income taxes 349 309
------- -------
Total liabilities 93,364 90,123
Shareholders' equity
Preferred stock - authorized 1,000,000 shares without par
value; no shares issued - -
Common stock - authorized 6,000,000 shares without par
or stated value; 1,491,012 shares issued - -
Additional paid-in capital 7,360 7,360
Retained earnings - restricted 6,063 6,020
Accumulated comprehensive income, unrealized gains
on securities designated as available
for sale, net of related tax effects 391 313
Less 256,927 treasury shares, at cost (3,378) (3,378)
------- -------
Total shareholders' equity 10,436 10,315
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Total liabilities and shareholders' equity $103,800 $100,438
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Page 3 of 17 pages
CONSOLIDATED STATEMENTS OF EARNINGS
PEOPLES FINANCIAL CORPORATION
For the three months ended December 31,
(In thousands, except share data)
2000 1999
Interest income
Loans $1,661 $1,395
Mortgage-backed and related securities 168 166
Investment securities 35 42
Interest-bearing deposits and other 16 50
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Total interest income 1,880 1,653
Interest expense
Deposits 946 791
Borrowings 324 186
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Total interest expense 1,270 977
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Net interest income 610 676
Provision for losses on loans 3 3
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Net interest income after provision for
losses on loans 607 673
Other income
Gain on sale of investment securities
designated as available for sale 96 68
Other operating 34 14
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Total other income 130 82
General, administrative and other expense
Employee compensation and benefits 304 263
Occupancy and equipment 86 69
Franchise taxes 42 48
Federal deposit insurance premiums 4 10
Data processing 35 28
Advertising 19 7
Other operating 75 83
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Total general, administrative and other expense 565 508
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Earnings before income taxes 172 247
Federal income taxes
Current 55 80
Deferred - -
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Total federal income taxes 55 80
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NET EARNINGS $ 117 $ 167
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EARNINGS PER SHARE
Basic $.09 $.13
=== ===
Diluted $.09 $.13
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Page 4 of 17 pages
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
PEOPLES FINANCIAL CORPORATION
For the three months ended December 31,
(In thousands)
2000 1999
Net earnings $117 $167
Other comprehensive income, net of taxes:
Unrealized holding gains (losses) on securities during
the period, net of taxes (benefits) of $73 and $(47) in
2000 and 1999, respectively 141 (92)
Reclassification adjustment for realized gains included in net
earnings, net of tax of $33 and $23 in 2000 and
1999, respectively (63) (45)
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Comprehensive income $195 $ 30
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Accumulated comprehensive income $391 $592
=== ===
Page 5 of 17 pages
CONSOLIDATED STATEMENTS OF CASH FLOWS
PEOPLES FINANCIAL CORPORATION
For the three months ended December 31,
(In thousands)
2000 1999
Cash flows provided by (used in) operating activities:
Net earnings for the period $ 117 $ 167
Adjustments to reconcile net earnings to net cash
provided by (used in) operating activities:
Depreciation of premises and equipment 40 27
Amortization of premiums and discounts on investment securities
and mortgage-backed securities, net (1) 4
Gain on sale of investment securities designated
as available for sale (96) (68)
Amortization of deferred loan origination fees (13) (12)
Provision for losses on loans 3 3
Federal Home Loan Bank stock dividends (19) (16)
Increase (decrease) in cash due to changes in:
Accrued interest receivable 10 58
Prepaid expenses and other assets 168 107
Other liabilities 113 126
Accrued interest payable 2 17
Prepaid federal income taxes (64) 79
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Net cash provided by operating activities 260 492
Cash flows provided by (used in) investing activities:
Principal repayments on mortgage-backed and related securities 395 619
Proceeds from sale of investment securities 97 69
Principal repayments and maturities of investment securities 12 1,012
Purchase of Federal Home Loan Bank stock (42) -
Loan principal repayments 3,804 3,851
Loan disbursements (7,073) (6,232)
Purchase of office premises and equipment (13) -
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Net cash used in investing activities (2,820) (681)
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Net cash used in operating and investing
activities (balance carried forward) (2,560) (189)
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Page 6 of 17 pages
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
PEOPLES FINANCIAL CORPORATION
For the three months ended December 31,
(In thousands)
2000 1999
Net cash used in operating and
investing activities (balance brought forward) $(2,560) $ (189)
Cash flows provided by (used in) financing activities:
Net increase in deposit accounts 1,600 2,263
Proceeds from Federal Home Loan Bank advances 21,300 18,000
Repayment of Federal Home Loan Bank advances (19,750) (16,000)
Cash dividends paid (74) (3,998)
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Net cash provided by financing activities 3,076 265
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Net increase (decrease) in cash and cash equivalents 516 76
Cash and cash equivalents at beginning of period 1,628 2,620
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Cash and cash equivalents at end of period $ 2,144 $ 2,696
====== ======
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Federal income taxes $ 119 $ -
====== ======
Interest on deposits and borrowings $ 1,268 $ 960
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Supplemental disclosure of noncash investing activities:
Unrealized gains (losses) on securities designated as available
for sale, net of related tax effects $ 78 $ (137)
====== ======
Page 7 of 17 pages
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PEOPLES FINANCIAL CORPORATION
For the three month periods ended December 31, 2000 and 1999
1. Basis of Presentation
The accompanying unaudited consolidated financial statements were prepared in
accordance with instructions for Form 10-QSB and, therefore, do not include
information or footnotes necessary for a complete presentation of financial
position, results of operations and cash flows in conformity with generally
accepted accounting principles. Accordingly, these financial statements should
be read in conjunction with the consolidated financial statements and notes
thereto of Peoples Financial Corporation included in the Annual Report on Form
10-KSB for the year ended September 30, 2000. However, in the opinion of
management, all adjustments (consisting of only normal recurring accruals) which
are necessary for a fair presentation of the consolidated financial statements
have been included. The results of operations for the three month period ended
December 31, 2000, are not necessarily indicative of the results which may be
expected for an entire fiscal year.
2. Principles of Consolidation
The accompanying consolidated financial statements include the accounts of
Peoples Financial Corporation ("PFC" or the "Corporation") and Peoples Federal
Savings and Loan Association of Massillon ("Peoples Federal" or the
"Association"). All significant intercompany items have been eliminated.
3. Effects of Recent Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board (the "FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for
Derivative Instruments and Hedging Activities," which requires entities to
recognize all derivatives in their financial statements as either assets or
liabilities measured at fair value. SFAS No. 133 also specifies new methods of
accounting for hedging transactions, prescribes the items and transactions that
may be hedged, and specifies detailed criteria to be met to qualify for hedge
accounting.
The definition of a derivative financial instrument is complex, but in general,
it is an instrument with one or more underlyings, such as an interest rate or
foreign exchange rate, that is applied to a notional amount, such as an amount
of currency, to determine the settlement amount(s). It generally requires no
significant initial investment and can be settled net or by delivery of an asset
that is readily convertible to cash. SFAS No. 133 applies to derivatives
embedded in other contracts, unless the underlying of the embedded derivative is
clearly and closely related to the host contract.
SFAS No. 133, as amended by SFAS No. 137, is effective for fiscal years
beginning after June 15, 2000. On adoption, entities are permitted to transfer
held-to-maturity debt securities to the available-for-sale or trading category
without calling into question their intent to hold other debt securities to
maturity in the future. Management adopted SFAS No. 133 effective October 1,
2000, as required, without material impact on the Corporation's financial
position or results of operations.
Page 8 of 17 pages
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
PEOPLES FINANCIAL CORPORATION
For the three month periods ended December 31, 2000 and 1999
4. Earnings Per Share
Basic earnings per share is computed based upon the weighted-average shares
outstanding during the period. Weighted-average common shares outstanding
totaled 1,234,085 and 1,265,108 for the three-month periods ended December 31,
2000 and 1999 respectively.
Diluted earnings per share is computed taking into consideration common shares
outstanding and dilutive potential common shares to be issued under PFC's stock
option plan. Weighted-average common shares deemed outstanding for purposes of
computing diluted earnings per share totaled 1,234,085 for the three-month
period ended December 31, 2000 and 1,265,108 for the three-month period ended
December 31, 1999.
Options to purchase 116,617 shares of common stock at a weighted-average
exercise price of $12.39 per share were outstanding at December 31, 2000 and
1999, but were excluded from the computation of common share equivalents because
their exercise prices were greater than the average market price of the common
shares.
5. Reclassifications
Certain prior year amounts have been reclassified to conform to the 2000
consolidated financial statement presentation.
Page 9 of 17 pages
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
PEOPLES FINANCIAL CORPORATION
Note Regarding Forward-Looking Statements
In addition to historical information contained herein, the following discussion
contains forward-looking statements that involve risks and uncertainties.
Economic circumstances, PFC's operations and PFC's actual results could differ
significantly from those discussed in the forward-looking statements. Some of
the factors that could cause or contribute to such differences are discussed
herein but also include changes in the economy and interest rates in the nation
and PFC's market area generally. See Exhibit 99 hereto, which is incorporated
herein by reference.
Some of the forward-looking statements included herein are the statements
regarding management's determination of the amount and adequacy of allowance for
loan losses and the effect of certain recent accounting pronouncements.
Discussion of Financial Condition Changes from September 30, 2000 to December
31, 2000
PFC's assets totaled $103.8 million as of December 31, 2000, an increase of $3.4
million, or 3.3%, over the September 30, 2000 total. The increase in assets was
funded primarily by an increase in deposits of $1.6 million and an increase in
advances from the Federal Home Loan Bank ("FHLB") of $1.6 million. The increase
in assets was comprised primarily of increases in loans receivable of $3.3
million, offset by net decreases in investment securities and mortgage-backed
securities of $290,000.
Cash and cash equivalents totaled $2.1 million at December 31, 2000, an increase
of $516,000, or 31.7%, over the total at September 30, 2000.
Investment securities totaled $1.5 million at December 31, 2000, an increase of
$35,000, or 2.4%, over the total at September 30, 2000. This increase resulted
primarily from a net increase of $48,000 in unrealized gains and maturities of
$12,000.
Mortgage-backed securities totaled $9.0 million at December 31, 2000, a decrease
of $325,000, or 3.5%, from the total at September 30, 2000. This decrease
resulted primarily from principal repayments of $395,000, partially offset by an
increase in net unrealized gains of $70,000. Proceeds from principal repayments
were primarily used to fund loan originations.
Net loans receivable totaled $88.1 million at December 31, 2000, an increase of
$3.3 million, or 3.9%, over the September 30, 2000 total. The increase is
attributable to Peoples Federal's continued focus on its marketing program to
originate new fixed and adjustable-rate mortgage loans and home equity loans at
the main office and the branch lending office, offset by an increase in
construction loans. The allowance for loan losses totaled $238,000 at December
31, 2000, an increase of $3,000, over the balance at September 30, 2000. The
allowance represented .25% and .26% of total loans at December 31, 2000 and
September 30, 2000, respectively. Nonperforming loans totaled $223,000 at both
December 31, 2000 and September 30, 2000.
Page 10 of 17 pages
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
PEOPLES FINANCIAL CORPORATION
Discussion of Financial Condition Changes from September 30, 2000 to December
31, 2000 (continued)
Deposits totaled $72.4 million at December 31, 2000, an increase of $1.6
million, or 2.3%, over the September 30, 2000 amount. During the three months
ended December 31, 2000, certificates of deposit increased by $1.6 million, as
Peoples Federal offered rates designed to maintain certificates and control
interest costs. NOW accounts decreased by $54,000 during the period. Passbook
deposits and statement savings accounts decreased by $533,000 during the period.
Premium savings accounts increased by $545,000 during the period.
Advances from the FHLB totaled $20.2 million at December 31, 2000, an increase
of $1.6 million, or 8.3%, over the September 30, 2000 amount, as PFC used
advances primarily to fund loan originations. At December 31, 2000, borrowings
included $4.8 million of variable rate advances maturing in fiscal 2001 and
fixed rate advances of $3.4 million maturing in fiscal 2001 and $2.0 million
maturing in fiscal 2002. The remainder of advances from the FHLB were comprised
of convertible fixed rate advances of $10.0 million with final maturities
currently scheduled for 2010.
The Association is subject to the regulatory capital requirements of the Office
of Thrift Supervision (the "OTS"). Failure to meet minimum capital requirements
can initiate certain mandatory - and possibly additional discretionary - actions
by regulators that, if undertaken, could have a direct material effect on the
Association's financial statements. Under capital adequacy guidelines and the
regulatory framework for prompt corrective action, the Association must meet
specific capital guidelines that involve quantitative measures of the
Association's assets, liabilities, and certain off-balance-sheet items as
calculated under regulatory accounting practices. The Association's capital
amounts and classification are also subject to qualitative judgments by the
regulators about components, risk-weightings, and other factors.
Such minimum capital standards generally require the maintenance of regulatory
capital sufficient to meet each of three tests, hereinafter described as the
tangible capital requirement, the core capital requirement and the risk-based
capital requirement. The tangible capital requirement provides for minimum
tangible capital (defined as stockholders' equity less all intangible assets)
equal to 1.5% of adjusted total assets. The core capital requirement provides
for minimum core capital (tangible capital plus certain forms of supervisory
goodwill and other qualifying intangible assets) generally equal to 4.0% of
adjusted total assets except for those associations with the highest examination
rating and acceptable levels of risk.
The risk-based capital requirement provides for the maintenance of adjusted core
capital plus general loss allowances equal to 8.0% of risk-weighted assets. In
computing risk-weighted assets, the Association multiplies the value of each
asset on its statement of financial condition by a defined risk-weighting
factor, e.g., one-to-four family residential loans carry a risk-weighted factor
of 50%.
Page 11 of 17 pages
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
PEOPLES FINANCIAL CORPORATION
Discussion of Financial Condition Changes from September 30, 2000 to December
31, 2000 (continued)
As of December 31, 2000 and September 30, 2000, management believes that the
Association met all capital adequacy requirements to which it was subject.
As of December 31, 2000
To be "well-
capitalized" under
For capital prompt corrective
Actual adequacy purposes action provisions
Amount Ratio Amount Ratio Amount Ratio
(Dollars in thousands)
Tangible capital $9,129 8.8% =>$1,549 =>1.5% =>$5,164 => 5.0%
Core capital $9,129 8.8% =>$4,132 =>4.0% =>$6,197 => 6.0%
Risk-based capital $9,617 16.2% =>$4,740 =>8.0% =>$5,925 =>10.0%
As of September 30, 2000
To be "well-
capitalized" under
For capital prompt corrective
Actual adequacy purposes action provisions
Amount Ratio Amount Ratio Amount Ratio
(Dollars in thousands)
Tangible capital $9,000 9.0% =>$1,503 =>1.5% =>$5,011 => 5.0%
Core capital $9,000 9.0% =>$4,009 =>4.0% =>$6,013 => 6.0%
Risk-based capital $9,464 16.7% =>$4,529 =>8.0% =>$5,661 =>10.0%
Comparison of Operating Results for the Three-Month Periods Ended December 31,
2000 and 1999
General
Net earnings for the three months ended December 31, 2000, totaled $117,000,
compared to $167,000 for the same period in 1999, a decrease of $50,000, or
29.9%. The decline in earnings resulted primarily from a decrease in net
interest income of $66,000, or 9.8%, and an increase in general, administrative
and other expense of $57,000, or 11.2%, which were partially offset by an
increase in gain on sale of investment securities of $28,000, or 41.2%, an
increase in other operating income of $20,000 or 142.9%, and a decrease in
federal income taxes of $25,000, or 31.3%.
Page 12 of 17 pages
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
PEOPLES FINANCIAL CORPORATION
Comparison of Operating Results for the Three-Month Periods Ended December 31,
2000 and 1999 (continued)
Net Interest Income
Interest income on loans for the three months ended December 31, 2000, increased
by $266,000, or 19.1%, over the 1999 period. This increase resulted primarily
from a $12.9 million, or 17.2%, increase in the average net loan portfolio
balance outstanding and an increase in weighted-average yield from 7.46% in the
three months ended December 31, 1999 to 7.58% in the 2000 period. Interest
income on mortgage-backed and related securities, investment securities and
interest-bearing deposits decreased by $39,000, or 15.1%, from the 1999 period.
This decrease resulted from a $3.6 million, or 22.3%, decrease in average
portfolio balances outstanding, partly offset by an increase in weighted average
yield from 6.33% in the 1999 quarter to 6.92% in the 2000 quarter.
Interest expense on deposits increased by $155,000, or 19.6%, for the three
months ended December 31, 2000, as compared to the same period in 1999. This
increase resulted from an increase of $3.5 million, or 5.1%, in average deposit
balances outstanding, coupled with an increase in the weighted-average cost of
funds, from 4.63% in 1999 to 5.27% in 2000. Interest expense on FHLB advances
increased by $138,000, or 74.2%, for the three months ended December 31, 2000,
as compared to the same period in 1999. The average advances outstanding from
the FHLB increased to $19.4 million in the quarter ended December 31, 2000, from
$13.0 million in the same quarter of 1999, and the weighted-average interest
rate increased to 6.67% in 2000 from 5.73% in 1999.
As a result of the foregoing changes in interest income and interest expense,
net interest income decreased by $66,000, or 9.8%, for the three months ended
December 31, 2000, compared to the same period in 1999. The interest rate spread
decreased to 1.93% for the three months ended December 31, 2000, as compared to
2.45% for the corresponding 1999 three-month period. The net interest margin
decreased to 2.44% for the three months ended December 31, 2000, as compared to
2.97% for the comparable 1999 period.
Provision for Losses on Loans
It is the Association's policy to provide valuation allowances for estimated
losses on loans based on past loan loss experience, changes in the composition
of the loan portfolio, trends in the level of delinquent and problem loans,
adverse situations that may affect the borrower's ability to repay, the
estimated value of any underlying collateral and current and anticipated
economic conditions in the primary lending area. The allowance for loan losses
is increased by charges to earnings and decreased by charge-offs (net of
recoveries). After considering the above guidelines, management decided to
increase the allowance for loan losses by $3,000 during both the three month
periods ended December 31, 2000 and 1999. There can be no assurance that the
allowance for loan losses of Peoples Federal will be adequate to cover losses on
nonperforming loans in the future.
Page 13 of 17 pages
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
PEOPLES FINANCIAL CORPORATION
Comparison of Operating Results for the Three-Month Periods Ended December 31,
2000 and 1999 (continued)
Other Income
Other income totaled $130,000 for the three months ended December 31, 2000, an
increase of $48,000, or 58.5%, over the 1999 amount. The increase was primarily
the result of a larger gain on sale of FHLMC common stock during the three
months ended December 31, 2000 than for the comparable 1999 period. FHLMC common
stock with a book value of $1,000 was sold in December 2000 for $97,000,
resulting in a realized gain of $96,000, while FHLMC common stock with a book
value of $1,000 was sold in December 1999 for $69,000, resulting in a realized
gain of $68,000. Other operating income amounted to $34,000 for three-month
period ended December 31, 2000, an increase of $20,000, or 142.9%, over the
comparable 1999 period. The ATM installed at the Wal-Mart branch and increased
ATM transactions at all locations along with increased NOW fee income have been
the principal sources of increased other operating income. Other operating
income also includes home equity line of credit and other fee income, safe
deposit box rentals and late charges on loans.
General, Administrative and Other Expense
General, administrative and other expense increased by $57,000, or 11.2%, for
the three months ended December 31, 2000, compared to the same period in 1999.
Employee compensation and benefits increased by $41,000, or 15.6%. Hiring of new
employees, principally for the Wal-Mart branch, and the effect of normal merit
increases added $65,000 to employee compensation for fiscal 2000 over fiscal
1999. Increased cost of health insurance, principally due to increased insurance
premiums and premiums for new employees, added $6,000 to the cost of employee
compensation and benefits. Termination of the Recognition and Retention Plan
decreased benefit costs by $37,000 for the three months ended December 31, 2000,
compared to the same period in 1999, while resumption of employer contributions
to the 401(k) plan increased benefit costs by $7,000 year to year.
Occupancy and equipment for the three months ended December 31, 2000, increased
$17,000, or 24.6%. Increases in occupancy and equipment expense for fiscal 2000
compared to 1999 were $13,000 for depreciation and $8,000 for rent, both
principally due to operation of the Wal-Mart branch, which were partially offset
by a $4,000 decline in repairs and maintenance.
Advertising increased by $12,000, or 171.4%, primarily due to increased local
media advertising of loan and deposit rates and new product and branch
promotions. Data processing increased by $7,000, or 25.0%, principally due to
the new branch and new products. Other operating expense decreased by $8,000, or
9.6%, primarily due to a decrease in employee education and related travel
costs, offset by increased professional and supervisory costs.
Page 14 of 17 pages
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
PEOPLES FINANCIAL CORPORATION
Comparison of Operating Results for the Three-Month Periods Ended December 31,
2000 and 1999 (continued)
General, Administrative and Other Expense (continued)
Ohio franchise taxes for the three months ended December 31, 2000, decreased by
$6,000, or 12.5%, compared to the 1999 period, due primarily to a decrease in
shareholders' equity. Federal deposit insurance premiums decreased by $6,000, or
60.0%, due to lower assessment rates beginning January 1, 2000.
Federal Income Taxes
Federal income taxes are based on earnings before taxes for the three months
ended December 31, 2000 and 1999. The decrease of $25,000, or 31.3%, in the
provision for income taxes resulted primarily from the $75,000, or 30.4%,
decrease in earnings before income taxes. The effective tax rates amounted to
32.0% and 32.4% for the three months ended December 31, 2000 and 1999,
respectively.
Page 15 of 17 pages
PART II
PEOPLES FINANCIAL CORPORATION
ITEM 1. Legal Proceedings
Not applicable
ITEM 2. Changes in Securities and Use of Proceeds
Not applicable
ITEM 3. Defaults Upon Senior Securities
Not applicable
ITEM 4. Submission of Matters to a Vote of Security Holders
On January 24, 2001, the Annual Meeting of PFC's Shareholders was
held. The three directors nominated were elected to terms expiring
in 2003 by the following votes:
Victor C. Baker For: 929,494 Withheld: 40,257
Vincent G. Matecheck For: 932,944 Withheld: 36,807
Paul von Gunten For: 934,494 Withheld: 35,257
ITEM 5. Other Information
Not applicable
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
99 Safe Harbor under the Private Securities
Litigation Reform Act of 1995.
(b) Reports on Form 8-K: None.
Page 16 of 17 pages
SIGNATURES
PEOPLES FINANCIAL CORPORATION
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: February 9, 2001 By: /s/Paul von Gunten
------------------------- -----------------------
Paul von Gunten
President and Chief
Executive Officer
Date: February 9, 2001 By: /s/James R. Rinehart
------------------------- -----------------------
James R. Rinehart
Treasurer
Page 17 of 17 pages