-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, SHD0bXWCrc2vHUgEolK4RlUvrz/OQkwNlxd7MTJLJX70FeSrG4uURV4tTHHJ0hLb nKgwoYe1QMp+h2eYdkhyhg== 0000950134-99-001909.txt : 19990325 0000950134-99-001909.hdr.sgml : 19990325 ACCESSION NUMBER: 0000950134-99-001909 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990324 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PEOPLES FINANCIAL CORP /MS/ CENTRAL INDEX KEY: 0000770460 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 640709834 STATE OF INCORPORATION: MS FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 002-98268 FILM NUMBER: 99571249 BUSINESS ADDRESS: STREET 1: 152 LAMEUSE STREET STREET 2: P O BOX 529 CITY: BILOXI STATE: MS ZIP: 39530 BUSINESS PHONE: 6014355511 MAIL ADDRESS: STREET 1: P O BOX 529 STREET 2: PO BOX 559 CITY: BILOXI STATE: MS ZIP: 39533-0529 10-K405 1 FORM 10-K FOR FISCAL YEAR END DECEMBER 31, 1998 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1998 ------------------------------------------- Commission File Number 2-98268 ------------------------------------------- PEOPLES FINANCIAL CORPORATION ------------------------------------------------------ (Exact name of registrant as specified in its charter) Mississippi 64-0709834 --------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification number Lameuse and Howard Avenues, Biloxi, Mississippi 39533 ------------------------------------------------------------- (Address of principal executive offices) (Zip code) 228-435-5511 ---------------------------------------------------- (Registrant's telephone number, including area code) Securities registered pursuant to Section 12 (b) of the Act: Name of Each Exchange on Title of Each Class Which Registered ------------------- ------------------------ None None Securities registered pursuant to Section 12 (g) of the Act: NONE ------------------------------------------------------------ (Title of each class) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO ---- ---- Indicate by check mark if disclosure of delinquent filers pursuant to item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the Registrant's knowledge in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to the Form 10-K. X ---- Cover Page 1 of 2 Pages 2 The aggregate market value of the voting stock held by non-affiliates of the registrant as of March 1, 1999 was approximately $131,004,000. For purposes of this calculation only, shares held by non-affiliates are deemed to consist of (a) shares held by all shareholders other than directors and executive officers plus (b) shares held by directors and executive officers as to which beneficial ownership has been disclaimed. On March 1, 1999 the registrant had outstanding 2,952,672 shares of common stock, par value of $1.00 per share. DOCUMENTS INCORPORATED BY REFERENCE Portions of the Registrant's Annual Report to Stockholders for the year ended December 31, 1998 are incorporated by reference into Parts I, II and III of this report. Portions of the Registrant's Definitive Proxy Statement issued in connection with the Annual Meeting of Shareholders to be held April 14, 1999, are incorporated by reference into Part III of this report. Cover Page 2 of 2 Pages 3 PART I ITEM 1 - DESCRIPTION OF BUSINESS THE REGISTRANT Peoples Financial Corporation (the "Company") was established as a one bank holding company on December 18, 1984. Under a "Reorganization and Merger Agreement" dated March 21, 1985, and approved on July 8, 1985, Peoples Financial Corporation acquired all the outstanding stock of consenting shareholders of The Peoples Bank of Biloxi (the "Bank") on September 30, 1985, in exchange for 25,086 shares of its common stock. A settlement was reached with dissenting shareholders to acquire their stock at $1,000.00 per share, and this amount was paid during 1986, with interest at 9% per annum. The transaction was accounted for as a pooling-of-interest. The Company is now engaged, through its subsidiary, in the banking business. The Bank is the Company's principal asset and primary source of revenue. NONBANK SUBSIDIARY On August 22, 1985, PFC Service Corp. ("PFC") was chartered and began operations as the second wholly-owned subsidiary of Peoples Financial Corporation on October 3, 1985. The purpose of PFC was principally the leasing of automobiles and equipment under direct financing and sales-type leases that expired in various periods through 1993. The Bank acquired all remaining leases from PFC during 1990. PFC is inactive at this time. ACQUISITIONS On August 19, 1988, the Company acquired Gulf National Bank ("GNB") and merged GNB into the Bank with shareholders of GNB receiving shares of 4% convertible preferred stock. The preferred stock was mandatorily convertible into Company common stock five years and one month after August 19, 1988, at the rate of one share of common stock for each 24 shares of preferred stock. This conversion was executed on September 19, 1993. On August 16, 1991, the Company purchased certain assets and assumed the insured deposits of the Main Office of the former Southern Federal Bank for Savings from the Resolution Trust Corporation and merged those assets and deposits into the Bank. THE BANK The Bank, which was originally chartered in 1896 in Biloxi, Mississippi, currently offers many customary banking services to its customers including interest bearing and non-interest bearing checking accounts; savings accounts; certificates of deposit; IRA accounts; business, real estate, construction, personal and installment loans; collection services; trust services; safe deposit box facilities; night drop facilities and automated teller machines. The Bank is a state chartered bank 1 4 whose deposits are insured under the Federal Insurance Act. The Bank is not a member of the Federal Reserve System. The legal name of the Bank was changed to The Peoples Bank, Biloxi, Mississippi, during 1991. The Bank has a large number of customers acquired over a period of many years and is not dependent upon a single customer or upon a few customers. The Bank also provides services to customers representing a wide variety of industries including seafood, retail, hospitality, gaming and construction. The Main Office, operations center and trust services of the Bank are located in downtown Biloxi, MS. The Bank also has eleven (11) branches from Bay St. Louis, MS, to Ocean Springs, MS. The Bank has automated teller machines ("ATM") at its Main Office, all branch locations and at numerous non-proprietary locations. At December 31, 1998, the Bank employed 212 full-time employees and 33 part-time employees. COMPETITION The Bank is in direct competition with approximately eight (8) commercial banks and three (3) non-bank institutions. These banks range in size from approximately $27 million to approximately $4.4 billion. The Bank also competes for deposits and loans with insurance companies, finance companies and automobile finance companies. TRUST SERVICES The Bank's Asset Management and Trust Services Department offers personal trust, agencies and estate services including living and testamentary trusts, executorships, guardianships, and conservatorships. Benefit accounts maintained by the Department primarily include self-directed individual retirement accounts. Escrow management, stock transfer and bond paying agency accounts are available to corporate customers. MISCELLANEOUS The Bank holds no patents, licenses (other than licenses required to be obtained from appropriate bank regulatory agencies), franchises or concessions. During 1994, the Bank obtained the rights to the registered trademark, "The Mint". There has been no significant change in the kind of services offered by the Bank during the last three fiscal years. The Bank has not engaged in any research activities relating to the development of new services or the improvement of existing services except in the normal course of its business activities. The Bank presently has no plans for any new line of business requiring the investment of a material amount of total assets. 2 5 Most of the Bank's business originates from within Harrison, Hancock and west Jackson Counties in Mississippi; however, some business is obtained from Claiborne County and the other counties in southern Mississippi. There has been no material effect upon the Bank's capital expenditures, earnings or competitive position as a result of federal, state or local environmental regulations. REGULATION AND SUPERVISION The Company is a registered one bank holding company under the Bank Holding Company Act. As such, the Company is required to file periodic reports and such additional information as the Federal Reserve may require. The Federal Reserve Board may also make examinations of the Company and its subsidiaries. The Bank Holding Company Act requires every bank holding company to obtain the prior approval of the Federal Reserve Board before it may acquire substantially all the assets of any bank or ownership or control of any voting shares of any bank if, after the acquisition, it would own or control, directly or indirectly, more than 5 percent of the voting shares of the bank. A bank holding company is generally prohibited from engaging in, or acquiring direct or indirect control of, voting shares of any company engaged in non-banking activities. One of the principal exceptions to this prohibition is for activities found by the Federal Reserve to be so closely related to banking or the managing or controlling of banks as to be a proper incident thereto. Some of the activities the Federal Reserve Board has determined by regulation to be closely related to banking are the making and servicing of loans, performing certain bookkeeping or data processing services, acting as fiduciary or investment or financial advisor, making equity or debt investments in corporations or projects designed primarily to promote community welfare, leasing transactions if the functional equivalent of an extension of credit and mortgage banking or brokerage. A bank holding company and its subsidiaries are also prohibited from acquiring any voting shares of or interest in, any banks located outside the state in which the operations of the bank holding company's subsidiaries are located, unless the acquisition is specially authorized by the statute of the state in which the target is located. Certain southern states, including Mississippi, have enacted legislation which authorizes interstate acquisitions of a banking organization by bank holding companies within the south, subject to certain conditions and restrictions. The Bank is subject to the regulation of and examination by the Mississippi Department of Banking and Consumer Finance ("Department of Banking") and the Federal Deposit Insurance Corporation ("FDIC"). Areas subject to regulation include reserves, investments, loans, mergers, branching, issuance of securities, payment of dividends, capital adequacy, management practices and all other aspects of banking operations. In addition to regular examinations, the Bank must furnish periodic reports to its regulatory authorities containing a full and accurate statement of affairs. The Bank is subject to deposit insurance assessments by the FDIC and the Department of Banking. 3 6 The earnings of commercial banks and bank holding companies are affected not only by general economic conditions but also by the policies of various governmental regulatory authorities, including the Federal Reserve Board. In particular, the Federal Reserve Board regulates money and credit conditions, and interest rates, primarily through open market operations in U. S. Government securities, varying the discount rate of member and nonmember bank borrowing, setting reserve requirements against bank deposits and regulating interest rates payable by banks on certain deposits. These policies influence to a varying extent the overall growth and distribution of bank loans, investments and deposits and the interest rates charged on loans. The monetary policies of the Federal Reserve Board have had a significant effect on the operating results of commercial banks in the past and are expected to continue to do so in the future. SUPPLEMENTAL STATISTICAL INFORMATION Schedules I-A through VII present certain statistical information regarding the Company. This information is not audited and should be read in conjunction with the Company's Consolidated Financial Statements and Notes to Consolidated Financial Statements found at pages 17 - 41 of the 1998 Annual Report to Shareholders. DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS' EQUITY AND INTEREST RATES AND DIFFERENTIALS Net Interest Income, the difference between Interest Income and Interest Expense, is the most significant component of the Company's earnings. For interest analytical purposes, Management adjusts Net Interest Income to a "taxable equivalent" basis using a 34% Federal Income Tax rate on tax-exempt items (primarily interest on municipal securities). Another significant statistic in the analysis of Net Interest Income is the effective interest differential, also called the net yield on earning assets. The net yield is the difference between the rate of interest earned on earning assets and the effective rate paid for all funds, non-interest bearing as well as interest bearing. Since a portion of the Bank's deposits do not bear interest, such as demand deposits, the rate paid for all funds is lower than the rate on interest bearing liabilities alone. Recognizing the importance of interest differential to total earnings, Management places great emphasis on managing interest rate spreads. Although interest differential is affected by national, regional and area economic conditions, including the level of credit demand and interest rates, there are significant opportunities to influence interest differential through appropriate loan and investment policies which are designed to maximize the interest differential while maintaining sufficient liquidity and availability of "incremental funds" for purposes of meeting existing commitments and investment in lending and investment opportunities that may arise. 4 7 The information included in Schedule I-F presents the change in interest income and interest expense along with the reason(s) for these changes. The change attributable to volume is computed as the change in volume times the old rate. The change attributable to rate is computed as the change in rate times the old volume. The change in rate/volume is computed as the change in rate times the change in volume. SUMMARY OF LOAN LOSS EXPERIENCE In the normal course of business, the Bank assumes risks in extending credit. The Bank manages these risks through its lending policies, loan review procedures and the diversification of its loan portfolio. Although it is not possible to predict loan losses with complete accuracy, Management constantly reviews the characteristics of the loan portfolio to determine its overall risk profile and quality. Constant attention to the quality of the loan portfolio is achieved by the loan review process. Throughout this ongoing process, Management is advised of the condition of individual loans and of the quality profile of the entire loan portfolio. Any loan or portion thereof which is classified "loss" by regulatory examiners or which is determined by Management to be uncollectible because of such factors as the borrower's failure to pay interest or principal, the borrower's financial condition, economic conditions in the borrower's industry or the inadequacy of underlying collateral, is charged-off. Provisions are charged to operating expense based upon historical loss experience, and additional amounts are provided when, in the opinion of Management, such provisions are not adequate based upon the current factors affecting loan collectibility. The allocation of the allowance for loan losses by loan category is based on the factors mentioned in the preceding paragraphs. Accordingly, since all of these factors are subject to change, the allocation is not necessarily indicative of the breakdown of future losses. The comments concerning the provision for loan losses and the allowance for loan losses presented in "Management's Discussion and Analysis" at pages 10 - 16 of the 1998 Annual Report to Shareholders are incorporated herein by reference. RETURN ON EQUITY AND ASSETS The information under the captions "Five-Year Comparative Summary of Selected Financial Information" on page 9 and "Management's Discussion and Analysis" on pages 10 - 16 of the 1998 Annual Report are incorporated herein by reference. 5 8 DIVIDEND PAYOUT
Years Ended December 31, ----------------------------- 1998 1997 1996 ------- ------- ------- Dividend payout ratio 11.09% 13.69% 12.98% ======= ======= =======
6 9 SCHEDULE I-A Distribution of Average Assets, Liabilities and Shareholders' Equity for the Periods Indicated (2)
Years Ended December 31, (In thousands) 1998 1997 1996 -------- -------- -------- ASSETS: Cash and due from financial institutions $ 30,547 $ 24,324 $ 24,431 Available for sale securities: Taxable securities 27,202 50,522 52,263 Non-taxable securities 790 Other securities 641 730 925 Held to maturity securities: Taxable securities 111,257 98,110 143,270 Non-taxable securities 6,301 5,838 4,717 Net loans (1) 264,047 230,306 219,652 Federal funds sold 8,601 9,216 11,032 Other assets 21,370 16,802 11,991 -------- -------- -------- TOTAL ASSETS $470,756 $435,848 $468,281 ======== ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY: Non-interest bearing deposits $ 79,028 $ 67,835 $ 66,215 Interest bearing deposits 304,617 299,625 339,438 -------- -------- -------- Total deposits 383,645 367,460 405,653 Federal funds purchased and securities sold under agreements to repurchase 11,343 1,624 1,941 Other liabilities 5,035 3,931 3,585 -------- -------- -------- Total liabilities 400,023 373,015 411,179 Shareholders' equity 70,733 62,833 57,102 -------- -------- -------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $470,756 $435,848 $468,281 ======== ======== ========
(1) Gross loans and discounts, net of unearned income and allowance for loan losses. (2) All averages are computed on a daily basis with the exception of deposits, which were computed on a monthly basis. Daily averages were not available for deposits. 7 10 SCHEDULE I-B Average (2) Amount Outstanding for Major Categories of Interest Earning Assets and Interest Bearing Liabilities for the Periods Indicated
Years Ended December 31, (In thousands) 1998 1997 1996 -------- -------- -------- INTEREST EARNING ASSETS: Loans (1) $268,393 $234,744 $224,231 Federal funds sold 8,601 9,216 11,032 Available for sale securities: Taxable securities 27,202 50,522 52,263 Non-taxable securities 790 Other securities 641 730 945 Held to maturity securities: Taxable securities 111,257 98,110 143,270 Non-taxable securities 6,301 5,838 4,717 -------- -------- -------- TOTAL INTEREST EARNING ASSETS $423,185 $399,160 $436,458 ======== ======== ======== INTEREST BEARING LIABILITIES: Savings and negotiable interest bearing deposits $153,839 $161,635 $185,537 Time deposits 150,778 137,990 153,901 Federal funds purchased and securities sold under agreements to repurchase 11,343 1,624 1,941 Other borrowed funds 209 220 232 -------- -------- -------- TOTAL INTEREST BEARING LIABILITIES $316,169 $301,469 $341,611 ======== ======== ========
(1) Net of unearned income. Includes nonaccrual loans. (2) All averages are computed on a daily basis with the exception of deposits, which were computed on a monthly basis. Daily averages were not available for deposits. 8 11 SCHEDULE I-C Interest Earned or Paid on the Major Categories of Interest Earning Assets and Interest Bearing Liabilities for the Periods Indicated
Years Ended December 31, (In thousands) 1998 1997 1996 -------- -------- -------- INTEREST EARNED ON: Loans (2) $ 24,412 $ 21,777 $ 20,414 Federal funds sold 493 500 582 Available for sale securities: Taxable securities 1,673 3,270 3,343 Non-taxable securities 68 Other securities 27 297 45 Held to maturity securities: Taxable securities 6,426 5,976 8,460 Non-taxable securities 528 628 612 -------- -------- -------- TOTAL INTEREST EARNED (1) $ 33,627 $ 32,448 $ 33,456 ======== ======== ======== INTEREST PAID ON: Savings and negotiable interest bearing deposits $ 5,457 $ 5,091 $ 5,951 Time deposits 7,968 7,757 8,332 Federal funds purchased and securities sold under agreements to repurchase 553 97 110 Other borrowed funds 12 12 13 -------- -------- -------- TOTAL INTEREST PAID $ 13,990 $ 12,957 $ 14,406 ======== ======== ========
(1) All interest earned is reported on a taxable equivalent basis using a tax rate of 34% in 1998, 1997 and 1996. (2) Loan fees of $501, $395 and $334 for 1998, 1997 and 1996, respectively, are included in these figures. 9 12 SCHEDULE I-D Average Interest Rate Earned or Paid for Major Categories of Interest Earning Assets and Interest Bearing Liabilities for the Periods Indicated
Years Ended December 31, (In thousands) 1998 1997 1996 ---------- ---------- ---------- AVERAGE RATE EARNED ON: Loans 9.10% 9.28% 9.10% Federal funds sold 5.73 5.43 5.28 Available for sale securities: Taxable securities 6.15 6.47 6.39 Non-taxable securities 8.61 Other securities (2) 4.21 40.70 4.76 Held to maturity securities: Taxable securities 5.78 6.07 5.90 Non-taxable securities 8.38 10.76 12.97 ---------- ---------- ---------- TOTAL (weighted average rate) (1) 7.95% 8.13% 7.67% ========== ========== ========== AVERAGE RATE PAID ON: Savings and negotiable interest bearing deposits 3.55% 3.15% 3.21% Time deposits 5.28 5.62 5.41 Federal funds purchased and securities sold under agreements to repurchase 4.88 5.97 5.67 Other borrowed funds 5.74 5.43 5.60 ---------- ---------- ---------- TOTAL (weighted average rate) 4.42% 4.30% 4.22% ========== ========== ==========
(1) All interest earned is reported on a taxable equivalent basis using a tax rate of 34% in 1998, 1997 and 1996. (2) In 1997, a dividend of $270 was received on stock held as available for sale at a market value of $640. 10 13 SCHEDULE I-E Net Interest Earnings and Net Yield on Interest Earning Assets
Years Ended December 31, (In thousands except percentages) 1998 1997 1996 ------- ------- ------- Total interest income (1) $33,627 $32,448 $33,456 Total interest expense 13,990 12,957 14,406 ------- ------- ------- Net interest earnings $19,637 $19,491 $19,050 ======= ======= ======= Net yield on interest earning assets 4.64% 4.88% 4.36% ======= ======= =======
(1) All interest earned is reported on a taxable equivalent basis using a tax rate of 34% in 1998, 1997 and 1996. 11 14 SCHEDULE I-F Analysis of Changes In Interest Income and Interest Expense (In thousands)
Attributable to: ----------------------------------- Increase Rate / 1998 1997 (Decrease) Volume Rate Volume --------- --------- --------- --------- --------- --------- INTEREST INCOME:(1) Loans (2) (3) $ 24,412 $ 21,777 $ 2,635 $ 3,122 $ (426) $ (61) Federal funds sold 493 500 (7) (33) 28 (2) Available for sale securities: Taxable securities 1,673 3,270 (1,597) (1,509) (163) 75 Non-taxable securities 68 68 68 Other securities 27 297 (270) (36) (266) 32 Held to maturity securities: Taxable securities 6,426 5,976 450 801 (309) (42) Non-taxable securities 528 628 (100) 50 (139) (11) --------- --------- --------- --------- --------- --------- Total $ 33,627 $ 32,448 $ 1,179 $ 2,463 $ (1,275) $ (9) ========= ========= ========= ========= ========= ========= INTEREST EXPENSE: Savings and negotiable interest bearing deposits $ 5,457 $ 5,091 $ 366 $ (243) $ 639 $ (30) Time deposits 7,968 7,757 211 719 (465) (43) Federal funds purchased and securities sold under agreements to repurchase 553 97 456 580 (18) (106) Other borrowed funds 12 12 --------- --------- --------- --------- --------- --------- Total $ 13,990 $ 12,957 $ 1,033 $ 1,056 $ 156 $ (179) ========= ========= ========= ========= ========= =========
(1) All interest earned is reported on a taxable equivalent basis using a tax rate of 34% in 1998 and 1997. (2) Loan fees are included in these figures. (3) Includes interest on nonaccrual loans. 12 15 SCHEDULE I-F (continued) Analysis of Changes in Interest Income and Interest Expense (In thousands)
Attributable to: ----------------------------------- Increase Rate / 1997 1996 (Decrease) Volume Rate Volume --------- --------- --------- --------- --------- --------- INTEREST INCOME:(1) Loans (2) (3) $ 21,777 $ 20,414 $ 1,363 $ 957 $ 388 $ 18 Federal funds sold 500 582 (82) (96) 16 (2) Available for sale securities: Taxable securities 3,270 3,343 (73) (111) 40 (2) Other securities 297 45 252 (10) 339 (77) Held to maturity securities: Taxable securities 5,976 8,460 (2,484) (2,667) 267 (84) Non-taxable securities 628 612 16 145 (105) (24) --------- --------- --------- --------- --------- --------- Total $ 32,448 $ 33,456 $ (1,008) $ (1,782) $ 945 $ (171) ========= ========= ========= ========= ========= ========= INTEREST EXPENSE: Savings and negotiable interest bearing deposits $ 5,091 $ 5,951 $ (860) $ (770) $ (104) $ 14 Time deposits 7,757 8,332 (575) (861) 319 (33) Federal funds purchased and securities sold under agreements to repurchase 97 110 (13) (18) 6 (1) Other borrowed funds 12 13 (1) (1) (1) 1 --------- --------- --------- --------- --------- --------- Total $ 12,957 $ 14,406 $ (1,449) $ (1,650) $ 220 $ (19) ========= ========= ========= ========= ========= =========
(1) All interest earned is reported on a taxable equivalent basis using a tax rate of 34% in 1997 and 1996. (2) Loan fees are included in these figures. (3) Includes interest on nonaccrual loans. 13 16 SCHEDULE II-A Securities Portfolio Book Value of Securities Portfolio at the Dates Indicated
December 31, (In thousands): 1998 1997 1996 -------- -------- -------- Available for sale securities: U. S. Government, agency and corporate $ 9,921 $ 46,442 $ 51,921 obligations States and political subdivisions 2,275 595 Other securities 641 641 1,238 -------- -------- -------- Total $ 12,837 $ 47,678 $ 53,159 ======== ======== ======== Held to maturity securities: U. S. Government, agency and corporate $128,175 $ 97,161 $122,090 obligations States and political subdivisions 6,549 5,674 5,780 -------- -------- -------- Total $134,724 $102,835 $127,870 ======== ======== ========
14 17 SCHEDULE II-B Maturity of Securities Portfolio at December 31, 1998 And Weighted Average Yields of Such Securities
Maturity (In thousands except percentage data) -------------------------------------------------------------------------------------------------- After one but After five but Within one year within five years within ten years After ten years ---------------------- ---------------------- --------------------- --------------------- Amount Yield Amount Yield Amount Yield Amount Yield --------- --------- --------- --------- --------- --------- --------- --------- Available for sale securities: U. S Government, agency and corporate obligations $ 2,036 5.59% $ 3,982 5.34% $ 2,920 5.33% $ 983 6.40% States and political subdivisions 1,562 4.28% 713 5.05% Other 641 4.21% --------- --------- --------- --------- --------- --------- --------- --------- Totals $ 2,036 5.59% $ 3,982 5.34% $ 4,482 5.02% $ 2,337 5.55% ========= ========= ========= ========= ========= ========= ========= ========= Held to maturity securities: U. S Government, agency and corporate obligations $ 66,286 5.03% $ 41,853 6.06% $ 20,036 5.64% $ States and political subdivisions 781 4.99% 1,635 6.30% 2,371 5.58% 1,762 5.35% --------- --------- --------- --------- --------- --------- --------- --------- Totals $ 67,067 5.03% $ 43,488 6.07% $ 22,407 5.63% $ 1,762 5.35% ========= ========= ========= ========= ========= ========= ========= =========
Note: The weighted average yields are calculated on the basis of cost. Average yields on investments in states and political subdivisions are based on their contractual yield. 15 18 SCHEDULE III-A Loan Portfolio Loans by Type Outstanding (1)
December 31, (In thousands): 1998 1997 1996 1995 1994 -------- -------- -------- -------- -------- Real estate, construction $ 24,836 $ 14,819 $ 14,704 $ 16,473 $ 14,056 Real estate, mortgage 179,123 154,653 137,766 138,254 131,584 Loans to finance agricultural production and other loans to farmers 13,493 12,501 10,483 9,962 11,259 Commercial and industrial loans 49,633 50,224 48,057 39,228 42,505 Loans to individuals for household, family and other consumer expenditures 15,717 13,125 11,179 11,903 13,114 Obligations of states and political subdivisions 6,809 5,257 4,496 5,469 6,752 All other loans 1,904 1,219 1,824 2,780 3,572 -------- -------- -------- -------- -------- Totals $291,515 $251,798 $228,509 $224,069 $222,842 ======== ======== ======== ======== ========
(1) No foreign debt outstanding. 16 19 SCHEDULE III-B Maturities and Sensitivity to Changes in Interest Rates of the Loan Portfolio as of December 31, 1998
Maturity (In thousands) -------------------------------------------------------------- Over one year One year or through 5 less years Over 5 years Total -------- -------- -------- -------- Loans: Real estate, construction $ 18,627 $ 4,288 $ 1,921 $ 24,836 Real estate, mortgage 39,979 125,672 13,472 179,123 Loans to finance agricultural production and other loans to farmers 12,937 556 13,493 Commercial and industrial loans 28,493 20,335 805 49,633 Loans to individuals for household, family and other consumer expenditures 7,014 8,659 44 15,717 Obligations of states and political subdivisions 4,280 986 1,543 6,809 All other loans 878 1,026 1,904 -------- -------- -------- -------- Totals $112,208 $161,522 $ 17,785 $291,515 ======== ======== ======== ======== Loans with pre-determined interest rates $ 49,496 $ 84,834 $ 7,217 $141,547 Loans with floating interest rates 62,712 76,688 10,568 149,968 -------- -------- -------- -------- Totals $112,208 $161,522 $ 17,785 $291,515 ======== ======== ======== ========
17 20 SCHEDULE III-C Non-Performing Loans
December 31, (In thousands): 1998 1997 1996 1995 1994 -------- -------- -------- -------- -------- Loans accounted for on a non-accrual basis (1) $ 490 $ 1,167 $ 546 $ 610 $ 138 Loans which are contractually past due 90 or more days as to interest or principal payment, but are not included above 718 2,882 3,026 146 474
(1) The Bank 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 recognition in reported earnings of some or all of the contractual interest. The amount of interest that would have been earned on these loans had they been on accrual during 1998 was approximately $19. The Bank did receive $22 in interest payments during 1998 so that the net effect of recording income on nonaccrual loans on the cash basis was to reduce interest income by approximately $3 in 1998. 18 21 SCHEDULE IV-A Summary of Loan Loss Expenses (In thousands except percentage data)
1998 1997 1996 1995 1994 --------- --------- --------- --------- --------- Average amount of loans outstanding (1) $ 268,393 $ 234,744 $ 224,231 $ 224,819 $ 198,044 ========= ========= ========= ========= ========= Balance of allowance for loan losses at the beginning of period $ 4,435 $ 4,523 $ 4,353 $ 4,901 $ 5,100 Loans charged-off: Commercial, financial and agricultural 406 379 77 601 79 Consumer and other 60 56 62 101 58 --------- --------- --------- --------- --------- Total loans charged-off 466 435 139 702 137 Recoveries of loans previously charged-off: Commercial, financial and agricultural 361 294 403 63 142 Consumer and other 52 53 56 91 96 --------- --------- --------- --------- --------- Total recoveries 413 347 459 154 238 --------- --------- --------- --------- --------- Net loans (recovered) charged- 53 88 (320) 548 (101) off Provision for (reduction of) loan losses charged to operating expense (150) (300) --------- --------- --------- --------- --------- Balance of allowance for loan losses at end of period $ 4,382 $ 4,435 $ 4,523 $ 4,353 $ 4,901 ========= ========= ========= ========= ========= Ratio of net charge-offs during period to average loans outstanding 0.02% 0.04% (0.14)% 0.24% (0.05)% ========= ========= ========= ========= =========
(1) Net of unearned income. 19 22 SCHEDULE IV-B Allocation of the Allowance for Loan Losses
1998 1997 1996 1995 1994 ------------------- ------------------- ------------------- ------------------- ------------------- % of % of % of Loans % of % of Loans Loans to Loans Loans Balance at December to Total to Total Total to Total to Total 31, ( In thousands) Amount Loans Amount Loans Amount Loans Amount Loans Amount Loans -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- Real estate, construction $ 292 9 $ 296 6 $ 294 6 $ 329 7 $ 281 6 Real estate, mortgage 2,674 61 2,706 61 2,755 60 2,765 62 2,561 59 Loans to finance agricultural production and other loans to farmers 247 5 250 5 210 5 199 4 225 5 Commercial and industrial loans 868 17 878 20 961 21 785 18 1,250 19 Loans to individuals for household, family and other consumer expenditures 259 5 262 5 223 5 238 5 262 6 Obligations of states and political subdivisions -0- 2 -0- 2 -0- 2 -0- 3 -0- 3 All other loans 23 1 24 1 36 1 18 1 71 2 Unallocated 19 N/A 19 N/A 44 N/A 19 N/A 251 N/A -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- Totals $ 4,382 100 $ 4,435 100 $ 4,523 100 $ 4,353 100 $ 4,901 100 ======== ======== ======== ======== ======== ======== ======== ======== ======== ========
20 23 SCHEDULE V Summary of Average Deposits and Their Yields
1998 1997 1996 ------------------- ------------------- ------------------- Years Ended December 31, (In thousands except for percentage data) Amount Rate Amount Rate Amount Rate -------- -------- -------- -------- -------- -------- Demand deposits in domestic offices $ 79,028 N/A $ 67,835 N/A $ 66,215 N/A Negotiable interest bearing deposits in domestic offices 127,191 3.64% 126,108 3.43% 149,314 3.44% Savings deposits in domestic offices 26,648 3.09% 35,527 2.18% 36,223 2.25% Time deposits in domestic offices 150,778 5.28% 137,990 5.62% 153,901 5.41% -------- -------- -------- -------- -------- -------- Total deposits $383,645 3.50% $367,460 3.50% $405,653 3.52% ======== ======== ======== ======== ======== ========
Certificates of deposit outstanding in amounts $100,000 or more (in thousands) by the amount of time remaining until maturity as of December 31, 1998, are as follows: Remaining maturity: 3 months or less $ 38,320 Over 3 through 6 months 18,807 Over 6 months through 12 months 9,295 Over 12 months 1,658 --------------------- Total $ 68,080 =====================
21 24 SCHEDULE VI Short Term Borrowings (In thousands except percentage data)
1998 1997 1996 ---------- ---------- ---------- Amount outstanding at December 31, $ 28,151 $ 16,500 Weighted average interest rate at December 31, 4.11% N/A 6.00% Maximum outstanding at any month-end during year $ 28,151 $ 9,325 $ 16,500 Average amount outstanding during year $ 11,343 $ 1,624 $ 1,941 Weighted average interest rate 4.88% 5.97% 5.67%
Note: Short term borrowings include federal funds purchased from other banks and securities sold under agreements to repurchase. 22 25 SCHEDULE VII Interest Sensitivity/Gap Analysis
December 31, 1998 (In 0 - 3 4 - 12 1 - 5 Over 5 thousands) Months Months Years Years Total --------- --------- --------- --------- --------- ASSETS: Loans (1) $ 44,898 $ 67,268 $ 161,074 $ 17,785 $ 291,025 Available for sale securities 2,036 3,982 6,819 12,837 Held to maturity securities 30,933 34,097 62,853 6,841 134,724 --------- --------- --------- --------- --------- Total assets $ 75,831 $ 103,401 $ 227,909 $ 31,445 $ 438,586 ========= ========= ========= ========= ========= FUNDING SOURCES: Interest bearing deposits $ 236,698 $ 58,026 $ 10,609 $ $ 305,333 Long-term funds 3 10 59 131 203 --------- --------- --------- --------- --------- Total funding sources $ 236,701 $ 58,036 $ 10,668 $ 131 $ 305,536 ========= ========= ========= ========= ========= REPRICING/MATURITY GAP: Period $(160,870) $ 45,365 $ 217,241 $ 31,314 Cumulative (160,870) (115,505) 101,736 133,050 Period Gap/Total Assets (36.68)% 10.34% 49.53% 7.14% Cumulative Gap/Total (36.68)% (26.34)% 23.19% 30.33% Assets
(1) Amounts stated include fixed and variable rate investments of the balance sheet that are still accruing interest. Variable rate instruments are included in the next period in which they are subject to a change in rate. The principal portions of scheduled payments on fixed rate instruments are included in periods in which they become due or mature. 23 26 ITEM 2 - PROPERTIES The principal properties of the Company are its 13 business locations, including the Main Office, which is located at 152 Lameuse Street in Biloxi, MS. All such properties are owned by the Company. The operations center is subject to a mortgage from the Small Business Administration. The address of the Main Office and branch locations are listed on page 44 of the Annual Report to Shareholders. ITEM 3 - LEGAL PROCEEDINGS The information included in Note J to the Consolidated Financial Statements included in the 1998 Annual Report to Shareholders is incorporated herein by reference. ITEM 4 - SUBMISSION OF MATTERS TO VOTE OF SECURITIES HOLDERS None. PART II ITEM 5 - MARKET INFORMATION The information provided on page 2 of the 1998 Annual Report is incorporated herein by reference. ITEM 6 - SELECTED FINANCIAL DATA The information under the caption "Five Year Comparative Summary of Selected Financial Information" on page 9 of the 1998 Annual Report is incorporated herein by reference. ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The information under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations" on pages 10 - 16 of the 1998 Annual Report is incorporated herein by reference. 24 27 ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA The following consolidated financial statements of the Company and consolidated subsidiaries and the independent auditors' report appearing on pages 17 - 42 of the 1998 Annual Report are incorporated herein by reference: Consolidated Statements of Condition on pages 17 and 18 Consolidated Statements of Income on page 19 Consolidated Statements of Shareholders' Equity on pages 20 - 21 Consolidated Statements of Cash Flows on page 22 Notes to Consolidated Financial Statements on pages 23 - 41 Independent Auditors' Report on page 42 ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The information in Sections II and VIII contained in the Proxy Statement in connection with the Annual Meeting of Shareholders to be held April 14, 1999, which was filed by the Company in definitive form with the Commission on March 9, 1999, is incorporated herein by reference. ITEM 11 - EXECUTIVE COMPENSATION The information in Section V contained in the Proxy Statement in connection with the Annual Meeting of Shareholders to be held April 14, 1999, which was filed by the Company in definitive form with the Commission on March 9, 1999, is incorporated herein by reference. 25 28 ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information in Sections III and IV contained in the Proxy Statement in connection with the Annual Meeting of Shareholders to be held April 14, 1999, which was filed by the Company in definitive form with the Commission on March 9, 1999, is incorporated herein by reference. ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information in Sections V, VI, VII and VIII contained in the Proxy Statement in connection with the Annual Meeting of Shareholders to be held April 14, 1999, which was filed by the Company in definitive form with the Commission on March 9, 1999, and is incorporated herein by reference. PART IV ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) 1. Index of Financial Statements: See Item 8. (a) 2. Index of Financial Schedules: All other schedules have been omitted as not applicable or not required or because the information has been included in the financial statements or applicable notes. (a) 3. Index of Exhibits:
Incorporated by Reference to Exhibit Registration or Form of Number in Description File Number Report Date of Report Report ---------------------------------------------------------------------------------------------------------- (3.1) Articles of 33-15595 10-K 12/31/93 3.1 Incorporation (3.2) By-Laws 33-15595 10-K 12/31/93 3.2
26 29
Incorporated by Reference to Exhibit Registration or Form of Number in Description File Number Report Date of Report Report ---------------------------------------------------------------------------------------------------------- (10.1) Description of Automobile 33-15595 10-K 12/31/88 10.1 Plan (10.2) Description of Directors' 33-15595 10-K 12/31/88 10.2 Deferred Income Plan (10.3) Description of Executive 33-15595 10-K 12/31/88 10.3 Supplemental Plan (10.4) Split-Dollar Insurance 33-15595 10-K 12/31/93 10.4 Agreement (10.5) Deferred Compensation Plan 33-15595 10-K 12/31/93 10.5 (13) Annual Report to Shareholders for year ended December 31, 1998 * (C) (21) Proxy Statement for Annual Meeting of Shareholders to be held April 14, 1999 (22) Subsidiaries of the 33-15595 10-K 12/31/88 22 registrant (23) Consent of Certified Public Accountants * (27) Financial Data Schedule *
(b) No report on Form 8-K was filed during the fourth quarter of the year ended December 31, 1998. (c) Furnished for the information of the Commission only and not deemed "filed" except for those portions which are specifically incorporated herein. * Filed herewith. 27 30 SIGNATURES Pursuant to the requirements of Section 13 of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. PEOPLES FINANCIAL CORPORATION (Registrant) Date: March 24, 1999 ---------------------------------------- BY: /s/ Chevis C. Swetman ---------------------------------------------- Chevis C. Swetman, Chairman of the Board Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. BY: /s/ Drew Allen BY: /s/ Chevis C. Swetman ----------------------------------- ----------------------------------- Date: March 24, 1999 Date: March 24, 1999 ----------------------------------- ----------------------------------- Drew Allen Chevis C. Swetman Director President, Chief Executive Officer and Director BY: /s/ William A. Barq BY: /s/ F. Walker Tucei ----------------------------------- ----------------------------------- Date: March 24, 1999 Date: March 24, 1999 ----------------------------------- ----------------------------------- William A. Barq F. Walker Tucei Director Director BY: /s/ Andy Carpenter BY: /s/ Lauri A. Wood ----------------------------------- ----------------------------------- Date: March 24, 1999 Date: March 24, 1999 ----------------------------------- ----------------------------------- Andy Carpenter Lauri A. Wood Executive Vice President and Director Principal Financial and Accounting Officer
28 31 INDEX TO EXHIBIT
Incorporated by Reference to Exhibit Registration or Form of Number in Description File Number Report Date of Report Report ---------------------------------------------------------------------------------------------------------- (3.1) Articles of 33-15595 10-K 12/31/93 3.1 Incorporation (3.2) By-Laws 33-15595 10-K 12/31/93 3.2 (10.1) Description of Automobile 33-15595 10-K 12/31/88 10.1 Plan (10.2) Description of Directors' 33-15595 10-K 12/31/88 10.2 Deferred Income Plan (10.3) Description of Executive 33-15595 10-K 12/31/88 10.3 Supplemental Plan (10.4) Split-Dollar Insurance 33-15595 10-K 12/31/93 10.4 Agreement (10.5) Deferred Compensation Plan 33-15595 10-K 12/31/93 10.5 (13) Annual Report to Shareholders for year ended December 31, 1998 * (C) (21) Proxy Statement for Annual Meeting of Shareholders to be held April 14, 1999 (22) Subsidiaries of the 33-15595 10-K 12/31/88 22 registrant (23) Consent of Certified Public Accountants * (27) Financial Data Schedule *
(c) Furnished for the information of the Commission only and not deemed "filed" except for those portions which are specifically incorporated herein. * Filed herewith. EX-13 2 ANNUAL REPORT TO SHAREHOLDERS 1 EXHIBIT 13 ANNUAL REPORT TO SHAREHOLDERS Five-Year Comparative Summary of Selected Financial Information (in thousands except per share data) Peoples Financial Corporation and Subsidiaries
1998 1997 1996 1995 1994 ----------- ----------- ----------- ----------- ----------- BALANCE SHEET SUMMARY Total assets $ 488,171 $ 441,759 $ 448,110 $ 446,305 $ 414,989 Available for sale securities 12,837 47,678 53,159 20,830 198 Held to maturity securities 134,724 102,836 127,870 165,142 159,498 Loans, net of unearned discount 291,513 251,796 228,492 224,046 222,830 Deposits 381,602 372,555 368,132 376,172 348,190 Long term notes payable 203 215 227 438 623 Shareholders' equity 73,545 65,772 60,354 54,582 48,441 SUMMARY OF OPERATIONS Interest income $ 33,425 $ 32,235 $ 33,248 $ 31,485 $ 27,185 Interest expense 13,990 12,956 14,406 12,372 9,522 ----------- ----------- ----------- ----------- ----------- Net interest income 19,435 19,279 18,842 19,113 17,663 Provision for loan losses (150) (300) ----------- ----------- ----------- ----------- ----------- Net interest income after provision for loan losses 19,435 19,279 18,992 19,113 17,963 Non-interest income 11,220 6,241 5,564 5,240 3,962 Non-interest expense (17,274) (16,065) (15,417) (14,535) (13,467) ----------- ----------- ----------- ----------- ----------- Income before taxes 13,381 9,455 9,139 9,818 8,458 Applicable income taxes 4,591 3,088 2,993 3,147 2,842 ----------- ----------- ----------- ----------- ----------- Net income $ 8,790 $ 6,367 $ 6,146 $ 6,671 $ 5,616 =========== =========== =========== =========== =========== PER SHARE DATA Basic earnings per share $ 2.98 $ 2.16 $ 2.08 $ 2.26 $ 1.90 Dividends per share 0.33 0.30 0.28 0.26 0.23 Book Value 24.91 22.28 20.44 18.49 16.41 Weighted average number of shares 2,952,672 2,952,672 2,952,672 2,952,672 2,952,672 SELECTED RATIOS Return on average assets 1.87% 1.42% 1.36% 1.53% 1.41% Return on average equity 12.62 10.10 10.69 12.94 12.24 Capital formation rate 11.82 8.98 10.57 12.68 11.82 Primary capital to average assets 16.60 15.62 14.36 13.54 13.42 Risk-based capital ratios: Tier 1 24.65 25.58 24.95 23.64 21.48 Total 25.90 26.83 26.20 24.89 22.73
NOTE: ALL SHARE AND PER SHARE DATA HAVE BEEN GIVEN RETROACTIVE EFFECT FOR THE TWO FOR ONE STOCK SPLIT EFFECTIVE NOVEMBER 22, 1995, THE TWO FOR ONE STOCK SPLIT EFFECTIVE OCTOBER 16, 1996, THE TWO FOR ONE STOCK SPLIT EFFECTIVE SEPTEMBER 15, 1997 AND THE TWO FOR ONE STOCK SPLIT EFFECTIVE NOVEMBER 16, 1998. 2 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, 1998, 1997 and 1996. 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. OVERVIEW Net income was $8,790,000 for the year ended December 31, 1998, as compared to $6,367,000 for the year ended December 31, 1997. The increase in earnings was primarily attributable to the gain realized for book purposes of $3,300,000, net of taxes, from the sale of a branch location. The transaction was structured for tax purposes to qualify the transaction as a like-kind exchange, and thus minimize the current tax payment associated with the sale. The proceeds of the transaction were invested in replacement properties, which the Company plans to use for future branch locations. The exchange was completed on August 4, 1998. FINANCIAL CONDITION Federal Funds Sold Federal funds sold decreased $6,150,000 at December 31, 1998, as compared with December 31, 1997, as a result of the management of the Company's liquidity position. Available for Sale Securities Available for sale securities decreased $34,841,000 at December 31, 1998 as compared with December 31, 1997 primarily as a result of maturities and calls of these securities during the year. The Company chose to reinvest the proceeds from these maturities and calls in shorter term U. S. Treasury securities, which have been classified as held to maturity. Gross unrealized gains were $522,000, $492,000 and $1,083,000 and gross unrealized losses were $63,000, $215,000 and $685,000 for available for sale securities at December 31, 1998, 1997 and 1996, respectively. A realized gain of $668,000 was the result of the sale of shares of Hibernia Corporation and call of other debt securities during 1997. There were no significant realized gains or losses from calls or sales of available for sale securities during 1998 and 1996. Held to Maturity Securities Held to maturity securities increased $31,888,000 at December 31, 1998, compared with December 31, 1997. The increase in these securities is directly attributable to the management by the Company of its liquidity position, as discussed above. Gross unrealized gains were $1,392,000, $1,067,000 and $1,237,000, while gross unrealized losses were $192,000, $109,000 and $228,000, at December 31, 1998, 1997 and 1996, respectively. There were no significant realized gains or losses from calls or sales of these investments for the years ended December 31, 1998, 1997 and 1996. The Company's held to maturity portfolio consists primarily of U. S. Treasury securities, which is indicative of Management's conservative investment policy of maximizing return on investments while maintaining proper liquidity and risk factors. Loans The Company's loan portfolio increased $39,717,000 at December 31, 1998, as compared with December 31, 1997, and $23,289,000 at December 31, 1997, as compared with December 31, 1996. The portfolio 3 includes commercial and consumer loans primarily in its trade area of Harrison, Hancock and west Jackson counties. The continued growth in the portfolio is primarily a product of the increased real estate and commercial and industrial loan demand as a result of improved economic conditions in the trade area. The increases in these categories are illustrated on the schedule summarizing loans included in Note C to the Consolidated Financial Statements. The Company anticipates that this demand will remain steady into 1999. Bank Premises and Equipment Bank premises and equipment increased $6,500,000 at December 31, 1998, as compared with December 31, 1997, primarily as a result of the acquisition of real estate to be used for future branch locations in Harrison and Stone Counties. During 1998, the Company also completed the acquisition of computer hardware and software related to its data processing conversion. Other Real Estate The Other Real Estate (ORE) portfolio decreased $238,000 at December 31, 1998 as compared with December 31, 1997 due to the sale of several properties during 1998. Gains realized on sales of ORE were $335,768, $1,999 and $145,850 for the years ended December 31, 1998, 1997 and 1996, respectively. During 1996, after receiving regulatory approval, the Company transferred property with a book value of $130,650 from other real estate into bank premises. Deposits Total deposits increased $9,047,000 at December 31, 1998, as compared with December 31, 1997, and $4,423,000 at December 31, 1997, as compared with December 31, 1996. 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 so as to achieve appropriate liquidity. Federal Funds Purchased and Securities Sold Under Agreements to Repurchase Federal funds purchased and securities sold under agreements to repurchase increased $28,051,000 at December 31, 1998, as compared with December 31, 1997. This fluctuation is directly related to the introduction of a non-deposit product during the current year. Other Liabilities Other liabilities increased $1,356,000 at December 31, 1998, as compared with December 31, 1997, as the result of deferred taxes on the gain relating to the sale of bank premises which was structured as a like-kind exchange for tax purposes. Shareholders' Equity During 1998, 1997 and 1996, there were significant events that impacted the components of shareholders' equity. These events are detailed in Note G 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, 1998, 1997 and 1996 was 25.90%, 26.83% and 26.20% as compared with the required standard of 8%. The Five-Year Comparative Summary of Selected Financial Information presents these figures. 4 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 increased $1,189,000 for the year ended December 31, 1998, as compared with the year ended December 31, 1997, and had decreased $1,012,000 for the year ended December 31, 1997, as compared with the year ended December 31, 1996. These fluctuations in interest income are primarily due to the increases and decreases in volume in investments and loans. Total interest expense increased $1,033,000 for the year ended December 31, 1998, as compared with the year ended December 31, 1997, and had decreased $1,449,000 for the year ended December 31, 1997, as compared with the year ended December 31, 1996. The decrease in total interest expense in 1997 is attributable to the decrease in volume in deposits during 1997, particularly during the second quarter. The increase in 1998 was the result of both increases in interest bearing deposits during this year as well as the increase in rates earned on these deposits. Provision for Loan Losses During 1998 and 1997, the Company made no adjustments to its provision for loan losses. During 1996, the Company reduced its allowance for loan losses by $150,000. The Company has not provided for its allowance for loan losses since the first quarter of 1993. The reserve is currently 1.50% of loans, net of unearned income. Management continuously monitors the Company's relationships with its loan customers, especially those in concentrated industries such as seafood, gaming and hotel/motel, and their direct and indirect impact on its operations. Any possible losses have been considered in the computation of the allowance for loan losses. Based on current conditions and giving full consideration to the increase in loans, Management has determined that the allowance is adequate. Gain on Sale of Securities During 1997, the Company sold the shares of common stock of Hibernia Corporation it had carried in its available for sale portfolio at a realized gain of $640,000. Gain on Sale of Bank Premises Gain on sale of bank premises reflects the gain realized for book purposes of $5,083,000 as a result of the sale of one of the branch locations during the current year. Salaries and Employee Benefits Salaries and employee benefits increased $1,073,000 for the year ended December 31, 1998, as compared with the year ended December 31, 1997, as the result of an increase in health insurance and an increase in employee salaries during the current year. Equipment, Rentals, Depreciation and Maintenance Equipment, rentals, depreciation and maintenance increased $496,000 for the year ended December 31, 1998, as compared with the year ended December 31, 1997, primarily due to increased depreciation of $309,000 on the computer hardware and software acquired during the prior eighteen months. 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 5 funds. Management monitors these funds requirements in such a manner as to satisfy these demands and provide the maximum earnings on its earning assets. Deposits, payment of principal and interest on loans, proceeds from maturities of investment securities and earnings on investment securities are the principal sources of funds for the Company. At December 31, 1998, cash and due from banks, investment securities and federal funds sold were 47% of total deposits, as compared with 48% and 57% at December 31, 1997 and 1996, respectively. NEW ACCOUNTING REQUIREMENTS In June 1997, the Financial Accounting Standards Board issued SFAS 130, "Reporting Comprehensive Income" and SFAS 131, "Disclosure about Segments of an Enterprise and Related Information." In February 1998, the Financial Accounting Standards Board issued SFAS 132, "Employers' Discloures about Pensions and Other Postretirement Benefits." These Statements are effective for periods beginning after December 15, 1997. SFAS 130 requires the disclosure of comprehensive income within the financial statements. SFAS 130 was implemented by the Company during 1998. SFAS 131 requires the disclosure of certain information relating to operating segments. The Company has evaluated the disclosure prescribed by Statement 131 and has determined that this Statement is not applicable to the Company at this time. SFAS 132 revises current disclosures for employers' pension and other postretirement benefit plans. SFAS 132 was implemented by the Company during 1998. In February 1998, the Financial Accounting Standards Board issued SFAS 133, "Accounting for Derivative Instruments and Hedging Activities," and in October 1998, issues SFAS 134, "Accounting for Mortgaged Back Securities Retained after the Securitization of Mortgage Loans Held for Sale by a Mortgage Banking Enterprise." These statements are effective for fiscal years beginning after December 31, 1998. The Company has evaluated the provisions of these Statements and has determined that their implementation will not have a material impact on its financial statements. YEAR 2000 The banking industry will be critically impacted by the advent of the Year 2000. In response to this issue, the Company has established a committee, headed by a senior officer of the Company, to review all computer-based systems which includes all operations departments and applications as well as other operational activities. The committee has developed and is in the process of implementing a plan of action, which has been approved by the Board of Directors, to ensure that its computer and information systems will function properly in the Year 2000. This plan incorporates the awareness, assessment, renovation, validation and implementation phases as directed by the Federal Deposit Insurance Corporation (FDIC). Renovation of systems for Year 2000 compliance was completed by December 31, 1998, with final testing to be completed by June 30, 1999. The Company has budgeted for projected Year 2000 expenses, and the Company does not expect the costs of achieving Year 2000 compliance to have a material effect on the Company's financial statements. In the event of unforeseen Year 2000 problems, the Company has established a Year 2000 contingency plan, which includes all information technology and non-information technology systems. The Plan, which has been approved by the Board of Directors, also addresses potential Year 2000 issues relating to core application software, trust services software, ATM services, liquidity and other operational activities. While the Company has taken steps to ensure that its material vendors and customers are Year 2000 compliant, there is no guarantee that the systems of these other companies will be Year 2000 compliant on time. As a result, the Company could be adversely affected by the failure of other companies to become Year 2000 compliant. The potential impact of such a failure cannot be quantified at this time. 6 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 nor does it plan in the immediate future to engage in trading activities or use derivative or off-balance sheet instruments to control interest rate risk. The Company has risk management policies in place to monitor and limit exposure to market risk. The Asset/Liability ("ALCO") Committee, consisting of the President and the Investment Officers, 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. 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. Government securities with maturities of two years or less. The loan portfolio consists of a 50% - 50% blend of fixed and floating rate loans. It is the general loan policy to offer loans with maturities of five years or less. On the liability side, more than 60% of the deposits are demand and savings transaction accounts. Additionally, the vast majority of the certificates of deposit mature within eighteen months. The short term nature of the financial assets and liabilities allow the Company to meet the dual requirements of liquidity and interest rate risk management. The interest rate sensitivity tables below provide additional information about the Company's financial instruments that are sensitive to changes in interest rates. 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. 7 Interest rate sensitivity at December 31, 1998 was as follows (in thousands):
12/31/98 Fair 1999 2000 2001 2002 2003 Beyond Total Value ----------- ----------- ----------- ----------- ----------- ----------- --------- --------- Loans, net $ 110,407 $ 19,252 $ 48,974 $ 40,458 $ 50,524 $ 17,516 $ 287,131 $ 288,425 Average rate 8.18% 8.49% 8.24% 8.12% 8.45% 8.56% 8.15% Investment securities 67,066 19,212 20,259 9,043 18,321 13,660 147,561 148,761 Average rate 5.20% 5.66% 6.12% 6.04% 6.04% 4.84% 5.39% Total Financial Assets 177,473 38,464 69,233 49,501 68,845 31,176 434,692 437,186 Average rate 7.35% 7.36% 7.73% 7.82% 7.95% 7.42% 7.44% Deposits 294,724 4,417 1,882 2,586 1,724 305,333 306,006 Average rate 4.29% 5.39% 5.25% 5.54% 5.49% 4.44% Long-term funds 13 14 14 15 16 131 203 185 Average rate 5.38% 5.38% 5.38% 5.38% 5.38% 5.38% 5.38% Total Financial Liabilities 294,737 4,431 1,896 2,601 1,740 131 305,536 306,191 Average rate 4.29% 5.39% 5.25% 5.54% 5.49% 5.38% 4.44%
8 Interest rate sensitivity at December 31, 1997 was as follows (in thousands):
12/31/97 Fair 1998 1999 2000 2001 2002 Beyond Total Value ----------- ----------- ----------- ----------- ----------- ----------- --------- --------- Loans, net $ 88,751 $ 28,021 $ 29,748 $ 52,201 $ 30,462 $ 18,178 $ 247,361 $ 247,210 Average rate 8.91% 9.67% 9.68% 9.70% 9.71% 9.30% 9.36% Investment securities 56,521 26,699 15,162 19,291 980 31,861 150,514 151,471 Average rate 5.68% 6.16% 6.26% 6.34% 6.46% 6.53% 6.10% Total Financial Assets 145,272 54,720 44,910 71,492 31,442 50,039 397,875 398,681 Average rate 7.98% 8.34% 8.83% 9.05% 9.64% 7.77% 8.43% Deposits 296,056 3,889 2,458 711 1,860 304,974 305,159 Average rate 4.48% 5.29% 5.62% 4.86% 5.71% 4.67% Long-term funds 12 13 13 14 16 147 215 189 Average rate 5.38% 5.38% 5.38% 5.38% 5.38% 5.38% 5.38% Total Financial Liabilities 296,068 3,902 2,471 725 1,876 147 305,189 305,348 Average rate 4.48% 5.29% 5.62% 4.88% 5.71% 5.38% 4.67%
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 form 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. 9 Market Information Peoples Financial Corporation and Subsidiaries The common stock of Peoples Financial Corporation is not listed or traded on an exchange or over-the-counter. Trading in the stock is very limited. Most transactions in Company stock occur between existing shareholders or members of the family of existing shareholders. The prices listed in the table below are based on sale prices as stated to the transfer agent, and after restatement to give retroactive effect for the 2 for 1 stock split effective September 15, 1997, and the 2 for 1 stock split effective November 16, 1998. These do not represent all sales.
Dividend per Year Quarter High Low share - ---------------------------------------------------------------------------------------- 1998 1st $ 48 $ 47 .16 2nd 48 47 3rd 47 47 .17 4th 61 47 1997 1st 20 20 .15 2nd 25 24 3rd 30 26 .15 4th 46 30
There were 520 holders of record of common stock of the Company at January 31, 1999, and 2,952,672 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. Summary of Quarterly Results of Operations (in thousands except per share data) Peoples Financial Corporation and Subsidiaries
QUARTER ENDED, 1998 MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31 ------------------------------------------------------------------------------------------------ Interest income $ 8,184 $ 8,343 $ 8,530 $ 8,368 Net interest income 4,868 4,862 4,936 4,769 Net income 4,360 1,284 1,579 1,567 Earnings per share 1.48 0.44 0.53 0.53
Quarter Ended, 1997 March 31 June 30 September 30 December 31 ------------------------------------------------------------------------------------------------ Interest income $ 7,967 $ 7,906 $ 8,246 $ 8,116 Net interest income 4,679 4,693 5,057 4,850 Net income 1,807 1,401 1,533 1,626 Earnings per share 0.61 0.48 0.52 0.55
10 CONSOLIDATED STATEMENTS OF CONDITION Peoples Financial Corporation and Subsidiaries
December 31, 1998 1997 1996 ------------ ------------ ------------ ASSETS Cash and due from banks $ 30,359,600 $ 20,611,495 $ 26,873,638 Federal funds sold 6,150,000 Available for sale securities 12,836,885 47,677,562 53,159,353 Held to maturity securities, fair value of $135,924,000 - 1998; $103,793,000 - 1997; $128,879,000 - 1996 134,723,695 102,835,564 127,870,283 Loans 291,514,748 251,797,566 228,508,895 Less: Unearned income 1,850 1,314 17,295 Allowance for loan losses 4,382,157 4,434,770 4,522,704 ------------ ------------ ------------ Loans, net 287,130,741 247,361,482 223,968,896 Bank premises and equipment, net 15,923,450 9,424,080 8,626,068 Other real estate 274,280 512,370 264,962 Accrued interest receivable 3,128,279 3,619,917 3,891,465 Other assets 3,794,213 3,376,662 2,958,967 Intangible assets 189,397 495,993 ------------ ------------ ------------ TOTAL ASSETS $488,171,143 $441,758,529 $448,109,625 ============ ============ ============
See Notes to Consolidated Financial Statements. 11 CONSOLIDATED STATEMENTS OF CONDITION (continued) Peoples Financial Corporation and Subsidiaries
December 31, 1998 1997 1996 ------------- ------------- ------------- LIABILITIES & SHAREHOLDERS' EQUITY LIABILITIES: Deposits: Demand, non-interest bearing $ 76,268,636 $ 67,580,617 $ 73,535,221 Savings and demand, interest bearing 167,120,669 160,499,479 153,596,132 Time, $100,000 or more 68,080,406 83,700,139 84,973,369 Other time deposits 70,132,525 60,774,594 56,027,287 ------------- ------------- ------------- Total deposits 381,602,236 372,554,829 368,132,009 Accrued interest payable 924,172 726,763 1,005,508 Federal funds purchased and securities sold under agreements to repurchase 28,050,780 16,500,000 Notes payable 202,946 215,094 226,608 Other liabilities 3,845,616 2,490,081 1,891,296 ------------- ------------- ------------- TOTAL LIABILITIES 414,625,750 375,986,767 387,755,421 SHAREHOLDERS' EQUITY: Common Stock, $1 par value, 15,000,000 shares authorized, 2,952,672 shares issued and outstanding at December 31, 1998, 1997 and 1996, after giving retroactive effect to two for one stock split effective September 15, 1997 and two for one stock split effective November 16, 1998 2,952,672 2,952,672 2,952,672 Surplus 63,711,758 56,711,758 51,711,758 Undivided profits 6,739,151 5,924,027 5,428,068 Unearned compensation (160,900) Accumulated other comprehensive income 302,712 183,305 261,706 ------------- ------------- ------------- TOTAL SHAREHOLDERS' EQUITY 73,545,393 65,771,762 60,354,204 ------------- ------------- ------------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 488,171,143 $ 441,758,529 $ 448,109,625 ============= ============= =============
See Notes to Consolidated Financial Statements. 12 CONSOLIDATED STATEMENTS OF INCOME Peoples Financial Corporation and Subsidiaries
Years Ended December 31, 1998 1997 1996 ------------ ------------ ------------ INTEREST INCOME: Interest and fees on loans $ 24,411,619 $ 21,776,773 $ 20,414,470 Interest and dividends on securities: U. S. Treasury 5,086,243 5,342,196 7,992,855 U. S. Government agencies and corporations 3,013,102 3,904,276 3,809,117 States and political subdivisions 393,269 415,011 403,698 Other investments 27,130 297,494 45,322 Interest on federal funds sold 493,488 499,722 582,321 ------------ ------------ ------------ TOTAL INTEREST INCOME 33,424,851 32,235,472 33,247,783 ------------ ------------ ------------ INTEREST EXPENSE: Time deposits of $100,000 or more 4,097,194 4,290,114 5,092,411 Other deposits 9,328,234 8,557,223 9,190,266 Mortgage indebtedness 11,275 11,910 12,512 Federal funds purchased and securities sold under agreements to repurchase 552,935 97,115 110,324 ------------ ------------ ------------ TOTAL INTEREST EXPENSE 13,989,638 12,956,362 14,405,513 ------------ ------------ ------------ NET INTEREST INCOME 19,435,213 19,279,110 18,842,270 REDUCTION OF ALLOWANCE FOR LOSSES ON LOANS 150,000 ------------ ------------ ------------ NET INTEREST INCOME AFTER REDUCTION OF ALLOWANCE FOR LOSSES ON LOANS 19,435,213 19,279,110 18,992,270 ------------ ------------ ------------ OTHER OPERATING INCOME: Trust department income and fees 1,262,348 1,105,776 932,502 Service charges on deposit accounts 3,973,627 3,828,586 3,763,566 Other service charges, commissions and fees 258,955 266,973 246,579 Gain on sale and calls of securities 115,494 667,728 Gain on sale of bank premises 5,228,741 Other income 380,344 372,232 621,730 ------------ ------------ ------------ TOTAL OTHER OPERATING INCOME 11,219,509 6,241,295 5,564,377 ------------ ------------ ------------ OTHER OPERATING EXPENSE: Salaries and employee benefits 8,947,361 7,874,492 7,932,306 Net occupancy 994,740 964,890 780,928 Equipment rentals, depreciation and maintenance 2,244,288 1,748,030 1,633,110 Other expense 5,087,267 5,478,256 5,071,101 ------------ ------------ ------------ TOTAL OTHER OPERATING EXPENSE 17,273,656 16,065,668 15,417,445 ------------ ------------ ------------ 13,381,066 9,454,737 9,139,202 INCOME BEFORE INCOME TAXES Income taxes 4,591,560 3,087,740 2,993,145 ------------ ------------ ------------ NET INCOME $ 8,789,506 $ 6,366,997 $ 6,146,057 ============ ============ ============ BASIC EARNINGS PER SHARE $ 2.98 $ 2.16 $ 2.08 ============ ============ ============
See Notes to Consolidated Financial Statements. 13 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY Peoples Financial Corporation and Subsidiaries
Accumulated Other Number of Unearned Comprehen- common Common Undivided Compensa- sive Comprehen- shares stock Surplus profits tion Income sive Income Total ---------- ------------ ------------ ------------ ----------- ----------- ------------- ------------- BALANCE, JANUARY 1, 1996 $ 1,476,336 $ 1,476,336 $ 48,188,094 $ 5,075,542 $ (200,000) $ 42,433 $ 54,582,405 Two-for-one stock split 1,476,336 1,476,336 (1,476,336) ----------- ------------ ------------ ------------ ----------- ----------- ------------ BALANCE, JANUARY 1, 1996 AS RESTATED 2,952,672 2,952,672 46,711,758 5,075,542 (200,000) 42,433 54,582,405 Comprehensive Income: Net income 6,146,057 $ 6,146,057 6,146,057 Net unrealized gain on available for sale securities, net of tax (75,239) (75,239) (75,239) Additional minimum liability in excess of prior service cost, net of tax 294,512 294,512 294,512 ----------- Total comprehensive income $ 6,365,330 =========== Allocation of ESOP shares 200,000 200,000 Cash dividends, ($ .26875 per share) (793,531) (793,531) Transfer of undivided profits 5,000,000 (5,000,000) ----------- ------------ ------------ ------------ ----------- ----------- ------------
14
Accumulated Other Number of Unearned Comprehen- common Common Undivided Compensa- sive Comprehen- shares stock Surplus profits tion Income sive Income Total ---------- ------------ ------------ ------------ ----------- ----------- ------------- ------------- BALANCE, DECEMBER 31, 1996 2,952,672 2,952,672 51,711,758 5,428,068 -0- 261,706 60,354,204 Compre- hensive Income: Net Income 6,366,997 $ 6,366,997 6,366,997 Net unrealized gain on available for sale securities, net of tax 334,640 334,640 334,640 Reclassifi- cation adjustment for available for sale securities called or sold in current year, net of tax (413,041) (413,041) (413,041) ----------- Total compre- hensive income $ 6,288,596 =========== Cash dividends, ($ .295 per share) (871,038) (871,038) Transfer of undivided profits 5,000,000 (5,000,000) ---------- ------------ ------------ ------------ ----------- ----------- ------------- ------------- BALANCE, DECEMBER 31, 1997 2,952,672 2,952,672 56,711,758 5,924,027 -0- 183,305 65,771,762 Comprehensive Income: Net income 8,789,506 $ 8,789,506 8,789,506 Net unrealized gain on available for sale securities, net of tax 183,683 183,683 183,683
15
Accumulated Other Number of Unearned Comprehen- common Common Undivided Compensa- sive Comprehen- shares stock Surplus profits tion Income sive Income Total ---------- ------------ ------------ ------------ ----------- ----------- ------------- ------------- Reclassifi- cation adjustment available for sale securities called or sold in current year, net of tax (64,276) (64,276) (64,276) ----------- Total comprehensive income $ 8,908,913 =========== Purchase of common shares by ESOP (220,900) (220,900) Allocation of ESOP shares 60,000 60,000 Cash dividends, ($ .33 per share) (974,382) (974,382) Transfer of undivided profits 7,000,000 (7,000,000) ---------- ----------- ------------ ------------ ----------- ------------ ------------- Balance, December 31, 1998 2,952,672 $ 2,952,672 $ 63,711,758 $ 6,739,151 $ (160,900) $ 302,712 $ 73,545,393 ========== =========== ============ ============ =========== ============ =============
See Notes to Consolidated Financial Statements. 16 CONSOLIDATED STATEMENTS OF CASH FLOWS Peoples Financial Corporation and Subsidiaries
Years Ended December 31, 1998 1997 1996 ------------- ------------- ------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 8,789,506 $ 6,366,997 $ 6,146,057 Adjustments to reconcile net income to net cash provided by operating activities: Gain on sales of other real estate (335,768) (1,999) (145,850) Gain on sale and calls of securities (115,494) (667,728) Gain on sale of bank premises (5,228,741) Depreciation and amortization 1,574,548 1,382,474 1,322,449 Pension plan termination cost 446,230 Reduction of allowance for loan losses (150,000) Provision for losses on other real estate 88,687 75,638 154,376 Changes in assets and liabilities: Accrued interest receivable 491,638 271,548 (721,799) Other assets 164,439 (79,567) 112,665 Accrued interest payable 197,409 (278,745) (134,260) Other liabilities 1,296,918 598,785 67,553 ------------- ------------- ------------- NET CASH PROVIDED BY OPERATING ACTIVITIES 6,923,142 7,667,403 7,097,421 ------------- ------------- ------------- CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from maturities, sales and calls of available for sale securities 43,783,631 7,017,728 19,935,000 Investment in available for sale securities (8,666,154) (961,500) (52,377,557) Proceeds from maturities and calls of held to maturity securities 112,885,000 72,858,400 160,217,482 Investment in held to maturity securities (144,756,413) (47,823,681) (122,945,682) Proceeds from sales of other real estate and other property 889,077 182,200 322,700 Loans, net increases (40,334,065) (23,895,833) (4,125,383) Proceeds from sale of bank premises 6,141,628 Acquisition of premises and equipment (8,797,408) (1,873,890) (710,393) Federal funds sold 6,150,000 (6,150,000) Other assets (581,990) (323,238) (266,129) ------------- ------------- ------------- NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (33,286,694) (969,814) 50,038 ------------- ------------- ------------- CASH FLOWS FROM FINANCING ACTIVITIES: Demand and savings deposits, net increase (decrease) 15,299,432 948,743 (10,846,266) Time deposits made, net increase (decrease) (6,252,025) 3,474,077 2,806,540 Principal payments on notes (12,148) (11,514) (10,912) Cash dividends (974,382) (871,038) (793,531) Federal funds purchased and securities purchased under agreements to repurchase, net increase (decrease) 28,050,780 (16,500,000) 4,350,000 ------------- ------------- ------------- NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 36,111,657 (12,959,732) (4,494,169) ------------- ------------- ------------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 9,748,105 (6,262,143) 2,653,290 CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 20,611,495 26,873,638 24,220,348 ------------- ------------- ------------- CASH AND CASH EQUIVALENTS, END OF YEAR $ 30,359,600 $ 20,611,495 $ 26,873,638 ============= ============= =============
See Notes to Consolidated Financial Statements. 17 Notes To Consolidated Financial Statements Peoples Financial Corporation and Subsidiaries NOTE A - 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 12 locations in Harrison, Hancock and west 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. 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 $9,347,000, $8,442,000 and $8,388,000 for the years ending December 31, 1998, 1997 and 1996, respectively. The Company's bank subsidiary maintained account balances in excess of amounts insured by the Federal Deposit Insurance Corporation. At December 31, 1998, the bank subsidiary had excess deposits of $254,254. These amounts were uninsured and uncollateralized. Securities Available for sale securities are stated at fair value. The unrealized difference, if any, between amortized cost and fair value of these securities is excluded from earnings and is reported, net of deferred taxes, as a component of shareholders' equity. Held to maturity securities are stated at cost, adjusted for amortization of premiums and accretion of discounts. Most of the Company's portfolio is classified as held to maturity since it has the positive intent and ability to hold its investments until maturity. Gains or losses, if any, are recognized as income when realized and are computed based on the amortized cost of the specific securities sold. 18 Loans 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 balances. 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 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. Allowance for Loan Losses 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 the nature and volume of the loan portfolio, a study of loss experience, a review of delinquencies, the estimated value of any underlying collateral and an estimate of the possibility of loss based on the risk characteristics of the portfolio. 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. Intangible Assets The excess of the purchase price over the value of the net tangible assets acquired in the Gulf National Bank acquisition on August 19, 1988, was assigned primarily to the value of core deposits and was being amortized over 10 years. The core deposits acquired in the main branch of the Southern Federal Bank for Savings acquisition on August 16, 1991, were being amortized over the estimated lives of the demand deposits (72 months), savings deposits (84 months) and certificates (84 months) acquired. Trust Department Income and Fees Trust fees are recorded when received. These fees amounted to $1,262,348, $1,105,776 and $932,502 in 1998, 1997 and 1996, respectively. 19 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 that reported for financial statements, gains reported under the installment sales method for tax purposes and the gain on the sale of bank premises which was structured under the provisions of Section 1031 of the Internal Revenue Code. Leases All leases are accounted for as operating leases in accordance with the terms of the leases. Earnings Per Share Basic earnings per share is computed on the basis of the weighted average number of common shares outstanding, 2,952,672 in 1998, 1997 and 1996. Statements of Cash Flows The Company has defined cash and cash equivalents to include cash and due from banks. The Company paid $13,792,229, $13,235,107 and $14,539,773 in 1998, 1997 and 1996, respectively, for interest on deposits and borrowings. Income tax payments totaled $2,810,100, $3,199,740 and $2,869,605 in 1998, 1997 and 1996, respectively. Loans transferred to other real estate amounted to $403,906 and $503,248 in 1998 and 1997, respectively. No loans were transferred to other real estate in 1996. After receiving regulatory approval, the Company transferred property with a book value of $130,650 from other real estate into banking premises during 1996. The income tax effect on the accumulated other comprehensive income was $61,512, $(40,388) and $112,958, at December 31, 1998, 1997 and 1996, respectively. NOTE B - SECURITIES: The amortized cost and estimated fair value of securities at December 31, 1998, 1997 and 1996, respectively, are as follows (in thousands): 20
GROSS GROSS AMORTIZED UNREALIZED UNREALIZED ESTIMATED DECEMBER 31, 1998 COST GAINS LOSSES FAIR VALUE - ----------------- --------- ---------- ---------- ---------- Available for sale securities: Debt securities: U. S. Treasury $ 2,995 $ 37 $ (5) $ 3,027 U. S. Government agencies and corp 5,999 1 (51) 5,949 States and political subdivisions 2,246 36 (7) 2,275 Other securities 940 5 945 --------- -------- -------- --------- Total debt securities 12,180 79 (63) 12,196 Equity securities 198 443 641 --------- -------- -------- --------- Total available for sale securities $ 12,378 $ 522 $ (63) $ 12,837 ========= ======== ======== ========= Held to maturity securities: U. S. Treasury $ 90,244 $ 936 $ (70) $ 91,110 U. S. Government agencies and corp 37,931 112 (122) 37,921 States and political subdivisions 6,549 344 6,893 --------- -------- -------- --------- Total held to maturity securities $ 134,724 $ 1,392 $ (192) $ 135,924 ========= ======== ======== =========
21
Gross Gross Amortized unrealized unrealized Estimated December 31, 1997 cost gains losses fair value - ----------------- --------- ---------- ---------- ---------- Available for sale securities: Debt securities: U. S. Treasury $ 3,984 $ 4 $ (5) $ 3,983 U. S. Government agencies and corp 42,627 42 (210) 42,459 States and political subdivisions 592 3 595 --------- -------- -------- --------- Total debt securities 47,203 49 (215) 47,037 Equity securities 198 443 641 --------- -------- -------- --------- Total available for sale securities $ 47,401 $ 492 $ (215) $ 47,678 ========= ======== ======== ========= Held to maturity securities: U. S. Treasury $ 76,670 $ 690 $ (83) $ 77,277 U. S. Government agencies and corp 20,491 35 (26) 20,500 States and political subdivisions 5,674 342 6,016 --------- -------- -------- --------- Total held to maturity securities $ 102,835 $ 1,067 $ (109) $ 103,793 ========= ======== ======== =========
22
Gross Gross Amortized unrealized unrealized Estimated December 31, 1996 cost gains losses fair value - ----------------- --------- ---------- ---------- ---------- Available for sale securities: Debt securities: U. S. Treasury $ 5,969 $ 2 $ (37) $ 5,934 U. S. Government agencies and corp 46,594 41 (648) 45,987 --------- -------- -------- --------- Total debt securities 52,563 43 (685) 51,921 Equity securities 198 1,040 1,238 --------- -------- -------- --------- Total available for sale securities $ 52,761 $ 1,083 $ (685) $ 53,159 ========= ======== ======== ========= Held to maturity securities: U. S. Treasury $ 108,568 $ 830 $ (188) $ 109,210 U. S. Government agencies and corp 13,522 34 (39) 13,517 States and political subdivisions 5,780 373 (1) 6,152 --------- -------- -------- --------- Total held to maturity securities $ 127,870 $ 1,237 $ (228) $ 128,879 ========= ======== ======== =========
The amortized cost and estimated fair value of debt securities at December 31, 1998, (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. 23
ESTIMATED FAIR AMORTIZED COST VALUE --------------- -------------- Available for sale securities: Due in one year or less $ 1,999 $ 2,036 Due after one year through five years 3,996 3,982 Due after five years through ten years 4,493 4,482 Due after ten years 1,692 1,696 --------- --------- Totals $ 12,180 $ 12,196 ========= ========= Held to maturity securities: Due in one year or less $ 67,066 $ 67,150 Due after one year through five years 43,488 44,413 Due after five years through ten years 22,408 22,497 Due after ten years 1,762 1,864 --------- --------- Totals $ 134,724 $ 135,924 ========= =========
Available for sale securities included equity securities of Hibernia Corporation. The Company had acquired common and preferred shares of Progressive Bancorporation in 1993 from a debt previously contracted and had recorded the shares at their estimated value of $1.00. During 1995, Progressive was acquired by Hibernia Corporation. As a result of the merger, the Company received cash for its Progressive preferred shares and common stock of Hibernia in exchange for the Progressive common. The Company held the Hibernia common as an available for sale security and recorded the stock at its fair value, with an unrealized gain of $596,205 recorded, net of deferred tax, as an adjustment to shareholders' equity. These shares were sold during 1997 at a realized gain of $640,706. During 1994, the Company purchased three multi-step up instruments issued by the Federal Home Loan Bank with a total par value of $4,000,000. These instruments had original maturity dates in 1996 and 2009 and provided for a call option by the issuer at each interest payment date until maturity. There was a fixed increase in the interest rate on an annual basis. The Company purchased these instruments in the management of its interest rate exposure since these notes carried a higher rate of interest than other agency notes available at the time of purchase. Appropriate review of the 24 market value and risk associated with these investments was performed by Management. These investments were classified as held to maturity and carried at amortized cost in compliance with Management's positive intent and ability to hold these investments until maturity. During 1995 and 1996, these investments were called at par value. During 1996, the Company purchased a multi-step up instrument issued by the Federal Home Loan Bank with a par value of $2,000,000 which was due to mature in 2001. This instrument was called at par value during 1997. Proceeds from maturities and calls of held to maturity debt securities during 1998, 1997 and 1996 were $112,885,000, $72,858,400 and $160,217,482, respectively. There were no sales of held to maturity debt securities during 1996, 1997 and 1998. Proceeds from maturities and calls of available for sale debt securities were $43,783,631, $6,377,022 and $19,935,000 during 1998, 1997 and 1996, respectively. There were no sales of available for sale debt securities during 1996, 1997 and 1998. Securities with a carrying value of approximately $126,670,000, $147,612,000 and $165,515,000 at December 31, 1998, 1997 and 1996, respectively, were pledged to secure public deposits, federal funds purchased and other balances required by law. NOTE C - LOANS: The composition of the loan portfolio was as follows (in thousands):
December 31, 1998 1997 1996 - ------------ ---- ---- ---- Real estate, construction $ 24,836 $ 14,819 $ 14,704 Real estate, mortgage 179,123 154,653 137,766 Loans to finance agricultural production and other loans to farmers 13,493 12,501 10,483 Commercial and industrial loans 49,633 50,224 48,057 Loans to individuals for household, family and other consumer expenditures 15,717 13,125 11,179 Obligations of states and political subdivisions (primarily industrial revenue bonds and local government tax anticipation notes) 6,809 5,257 4,496 All other loans 1,904 1,219 1,824 --------- --------- --------- Totals $ 291,515 $ 251,798 $ 228,509 ========= ========= =========
25 Transactions in the allowance for loan losses are as follows (in thousands):
1998 1997 1996 ------- ------- ------- Balance, January 1 $ 4,435 $ 4,523 $ 4,353 Recoveries 413 347 459 Loans charged off (466) (435) (139) Reduction of allowance for loan losses (150) ------- ------- ------- Balance, December 31 $ 4,382 $ 4,435 $ 4,523 ======= ======= =======
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):
1998 1997 1996 -------- -------- -------- Balance, January 1 $ 9,172 $ 7,891 $ 6,857 January 1 balance, loans of officers and directors appointed during the year 75 224 New loans and advances 22,098 22,358 28,599 Repayments (18,735) (21,077) (27,789) -------- -------- -------- Balance, December 31 $ 12,610 $ 9,172 $ 7,891 ======== ======== ========
Industrial revenue bonds with a carrying value of $1,408,856, $1,547,120 and $3,318,251 at December 31, 1998, 1997 and 1996, respectively, were pledged to secure public deposits. Nonaccrual loans amounted to approximately $490,000, $1,167,000 and $546,000 at December 31, 1998, 1997 and 1996, respectively. The total recorded investment in impaired loans amounted to $490,000, $1,208,000 and $1,017,000 at December 31, 1998, 1997 and 1996, respectively. The amount of that recorded investment in impaired loans for which there is no related allowance for loan losses was $490,000, $1,208,000 and $1,017000 at December 31, 1998, 1997 and 1996, respectively. At December 31, 1998, the average recorded investment in impaired loans was $493,000. During 1998, the Company recognized $19,000 in interest income on impaired loans and received $22,000 in interest payments on impaired loans. 26 NOTE D - BANK PREMISES AND EQUIPMENT: Bank premises and equipment are shown as follows (in thousands):
Estimated December 31, useful lives 1998 1997 1996 ---------- ---------- ---------- ---------- Land $ 4,463 $ 1,339 $ 1,314 Buildings 5-40 years 11,370 8,904 8,659 Furniture, fixtures and equipment 3-10 years 9,020 6,943 5,533 ---------- ---------- ---------- Totals, at cost 24,853 17,186 15,506 Less: Accumulated depreciation 8,930 7,762 6,880 ---------- ---------- ---------- Totals $ 15,923 $ 9,424 $ 8,626 ========== ========== ==========
Depreciation expense charged to operations in 1998, 1997 and 1996 was $1,385,151, $1,075,877 and $1,044,617, respectively. NOTE E - NOTES PAYABLE:
December 31, 1998 1997 1996 ---------- ---------- ---------- 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 $ 202,946 $ 215,094 $ 226,608 ========== ========== ==========
The maturities of notes payable for each of the next five years are as follows: 1999 $ 12,819 2000 13,525 2001 14,271 2002 15,058 2003 15,885 THEREAFTER 131,388 ----------- TOTAL $ 202,946 ===========
27 NOTE F - INCOME TAXES: Federal income taxes payable (or refundable) and deferred taxes (or deferred charges) as of December 31, 1998, 1997 and 1996, included in other assets or other liabilities, were as follows (in thousands):
December 31, 1998 1997 1996 ---------- ---------- ---------- Deferred tax assets: Allowance for loan losses $ 776 $ 776 $ 776 Employee benefit plans' liabilities 531 479 444 Other 229 192 129 ---------- ---------- ---------- Deferred tax assets (1,536) (1,447) (1,349) ---------- ---------- ---------- Deferred tax liabilities: Accumulated depreciation 1,016 950 865 Deferred gain on sale of bank premises 1,582 Installment sales 14 14 15 Unrealized gains on available for sale securities, charged to equity 156 94 134 ---------- ---------- ---------- Deferred tax liabilities 2,768 1,058 1,014 ---------- ---------- ---------- Net deferred taxes (charges) 1,232 (389) (335) Current payable (refundable) 125 (103) ---------- ---------- ---------- Totals $ 1,357 $ (492) $ (335) ========== ========== ==========
28 Income taxes consist of the following components (in thousands): Years Ended December 31, 1998 1997 1996 ---------- ---------- ---------- Current $ 2,971 $ 3,142 $ 2,936 Deferred 1,621 (54) 57 ---------- ---------- ---------- Totals $ 4,592 $ 3,088 $ 2,993 ========== ========== ==========
Deferred income taxes (benefits) resulted from the following (in thousands):
Years Ended December 31, 1998 1997 1996 ---------- ---------- ---------- Depreciation $ 66 $ 85 $ 70 Installment sales (1) (1) Provision for loan losses 51 Officers' and directors' life insurance (52) (35) (67) Deferred gain on sale of bank premises 1,582 Unrealized gain on available for sale securities 62 (40) (40) Other (37) (63) 44 ---------- ---------- ---------- Totals $ 1,621 $ (54) $ 57 ========== ========== ==========
Income taxes amounted to less than the amounts computed by applying the U.S. Federal income tax rate of 34.0% for 1998, 1997 and 1996, to earnings before income taxes. The reason for these differences is shown below (in thousands): 29
Years Ended December 1998 1997 1996 31, AMOUNT % Amount % Amount % ------- ------- ------- ------- ------- ------- Taxes computed at statutory rate $ 4,550 34.0 $ 3,215 34.0 $ 3,107 34.0 Increase (decrease) resulting from: Tax-exempt interest income (187) (1.3) (250) (2.6) (288) (3.2) Deductible dividends to ESOP (1) (0.1) Non-deductible interest 32 0.2 33 0.3 36 0.4 Non-deductible amortization 64 0.5 98 1.1 100 1.1 Other, net 133 0.9 (8) (0.1) 39 0.5 ------- ------- ------- ------- ------- ------- Total income taxes $ 4,592 34.3 $ 3,088 32.7 $ 2,993 32.7 ======= ======= ======= ======= ======= =======
During a prior year, the Internal Revenue Service began an audit of the Company's 1994 and 1993 returns. As a result of the examination, adjustments were proposed by the Internal Revenue Service. The Company agreed with the adjustments and paid an assessment of $102,000 on July 23, 1996, which included interest of $17,000. NOTE G - SHAREHOLDERS' EQUITY: On October 4, 1996, the Company's Board of Directors approved a two for one stock split of the common shares of the Company. As a result of this split, shareholders holding a total of 369,084 shares of Company stock received an additional 369,084 common shares. On August 27, 1997, the Company's Board of Directors approved a two for one stock split of the common shares of the Company. As a result of this split, shareholders holding a total of 738,168 shares of Company stock received an additional 738,168 common shares. On October 28, 1998, the Company's Board of Directors approved a two for one stock split of the common shares of the Company. As a result of this split, shareholders holding a total of 1,476,336 shares of Company stock received an additional 1,476,336 common shares. The Consolidated Statements of Condition and Shareholders' Equity have been restated to give retroactive effect to these splits. Additionally, all share and per share data have also been given retroactive effect for these splits. Banking regulations limit the amount of dividends that may be paid without prior approval of the Commissioner of Banking and Consumer Finance of the State of Mississippi. At December 31, 1998, approximately $3,792,912 of undistributed earnings of the bank subsidiary included in 30 consolidated surplus and retained earnings was available for future distribution to the Company as dividends, subject to approval by the Board of Directors. NOTE H - OTHER EXPENSES: Other expenses consisted of the following:
Years Ended December 31, 1998 1997 1996 ----------- ----------- ----------- Amortization $ 189,416 $ 306,596 $ 317,832 Advertising 539,792 546,308 498,820 Data processing 501,388 965,944 841,174 FDIC and state banking assessments 98,817 91,368 188,060 Legal and accounting 311,100 354,343 328,788 Postage and freight 181,120 131,160 160,448 Stationary, printing and supplies 243,940 198,984 242,367 Other real estate (231,430) 53,299 (15,465) ATM expense 1,487,583 1,341,118 1,286,179 Federal Reserve service charges 104,017 89,964 96,416 Conferences and classes 151,663 149,316 110,119 Taxes and licenses 244,860 212,036 183,826 Consulting fees 24,108 30,942 27,270 Trust expense 383,364 192,420 151,223 Other 857,529 814,458 654,044 ----------- ----------- ----------- Totals $ 5,087,267 $ 5,478,256 $ 5,071,101 =========== =========== ===========
NOTE I - 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 31 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. At December 31, 1998, 1997 and 1996, the Company had outstanding irrevocable letters of credit aggregating $5,479,053 , $3,156,909 and $1,170,107, respectively. 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 and west Jackson counties. The Company also grants loans on a limited basis in Claiborne County. NOTE J - CONTINGENCIES: In January 1996, a class action suit was filed against the Company's bank subsidiary related to the placement of collateral protection insurance by the bank subsidiary. The attempt to certify a class action was unsuccessful. In October of 1997, the case was settled with the bank subsidiary making an immaterial cash payment to the plaintiff. 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 K - 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. 32 CONDENSED BALANCE SHEETS (in thousands)
December 31, 1998 1997 1996 ---------- ---------- ---------- ASSETS Investments in subsidiaries, at underlying equity: Bank subsidiary $ 73,530 $ 65,162 $ 59,720 Nonbank subsidiary 56 55 55 Cash in bank subsidiary 28 306 48 Intangible assets 189 496 Other assets 661 655 656 ---------- ---------- ---------- TOTAL ASSETS $ 74,275 $ 66,367 $ 60,975 ========== ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY Notes payable, nonaffiliates $ 161 $ $ Deferred federal income taxes 569 595 621 ---------- ---------- ---------- Total liabilities 730 595 621 Shareholders' equity 73,545 65,772 60,354 ---------- ---------- ---------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 74,275 $ 66,367 $ 60,975 ========== ========== ==========
33 CONDENSED STATEMENTS OF INCOME (in thousands)
Years Ended December 31, 1998 1997 1996 ---------- ---------- ---------- INCOME Earnings of unconsolidated bank subsidiary: Distributed earnings $ 750 $ 875 $ 800 Undistributed earnings 8,085 5,240 5,373 Earnings of unconsolidated nonbank subsidiary 1 1 2 Interest income 2 4 3 Other income 14 288 12 ---------- ---------- ---------- TOTAL INCOME 8,852 6,408 6,190 ---------- ---------- ---------- EXPENSES Other expense 58 53 59 ---------- ---------- ---------- TOTAL EXPENSES 58 53 59 ---------- ---------- ---------- INCOME BEFORE INCOME TAXES 8,794 6,355 6,131 Income taxes (4) 12 15 ---------- ---------- ---------- NET INCOME $ 8,790 $ 6,367 $ 6,146 ========== ========== ==========
34 CONDENSED STATEMENTS OF CASH FLOWS (in thousands)
Years Ended December 31, 1998 1997 1996 ---------- ---------- ---------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 8,790 $ 6,367 $ 6,146 Adjustments to reconcile net income to net cash provided by operating activities: Net income of unconsolidated (8,836) (6,116) (6,175) subsidiaries Changes in assets and liabilities: Accrued expenses (8) 3 (3) ---------- ---------- ---------- NET CASH PROVIDED BY (USED IN) (54) 254 (32) OPERATING ACTIVITIES ---------- ---------- ---------- CASH FLOWS FROM INVESTING ACTIVITIES: Dividends from unconsolidated 750 875 800 subsidiary ---------- ---------- ---------- NET CASH PROVIDED BY INVESTING 750 875 800 ACTIVITIES ---------- ---------- ---------- CASH FLOWS FROM FINANCING ACTIVITIES: Dividends paid (974) (871) (794) ---------- ---------- ---------- NET CASH USED IN FINANCING (974) (871) (794) ACTIVITIES ---------- ---------- ---------- NET INCREASE (DECREASE) IN CASH (278) 258 (26) CASH, BEGINNING OF YEAR 306 48 74 ---------- ---------- ---------- CASH, END OF YEAR $ 28 $ 306 $ 48 ========== ========== ==========
Peoples Financial Corporation paid income taxes of $2,810,100, $3,199,740 and $2,869,605 in 1998, 1997 and 1996, respectively. No interest was paid during the three years ended December 31, 1998. 35 NOTE L - EMPLOYEE BENEFIT PLANS: The Company sponsored the Peoples Financial Corporation Retirement Plan (Pension Plan), a non-contributory defined benefit pension plan covering substantially all salaried, full-time employees. Pension benefits were fully vested after 7 years and were based on average compensation during years of service, with 1985 compensation used for each year prior to 1985. A partial reduction in benefits was provided for each year less than 30 years of service. The Company's funding policy for years presented was to contribute no more than the minimum funding requirement for federal income tax purposes. The following is a summary of the components of net periodic pension cost:
Year Ended December 31, 1996 ---------- Interest cost $ 47,827 Return on assets (36,147) ---------- Net periodic pension cost $ 11,680 ==========
Effective December 31, 1991, the Pension Plan was frozen and no additional benefits accrued under the Plan. The accrued benefit of each participant, other than a highly compensated employee within the meaning of Section 414(q)(A) or (B) of the Internal Revenue Code, was equal to the employee's accrued benefit calculated as of December 31, 1991. The accrued benefit of a highly compensated employee was equal to the employee's accrued benefit as of the December 31 preceding the Plan year in which the employee became a highly compensated employee, but no earlier than December 31, 1988. Future credited service counted for vesting purposes for those participants not fully vested at December 31, 1991. All participants were notified of these events on December 14, 1991, in accordance with ERISA. No new participants entered the Plan after December 31, 1991. The Pension Plan was amended on December 16, 1994, to comply with the Internal Revenue Code. The amendment was retroactively effective to January 1, 1989, unless specifically indicated to the contrary. On June 28, 1995, the Board of Directors of the Company voted to terminate the Plan effective September 1, 1995. The participants were notified of this event by June 29, 1995, in accordance with ERISA. Approval was received from the Internal Revenue Service on March 18, 1996, to terminate the Plan. Upon the Plan's termination, each participant became 100% vested in their accrued benefit. All assets of the Plan were distributed to participants either as a lump sum or by the purchase of an annuity with an insurance carrier on July 18 and August 28, 1996. The lump sum distributions were calculated using the GATT interest rate in effect as of January 1, 1996 (6.06%) and a 50/50 blend of the 1983 Group Annuity Mortality for males and females. The loss realized as a result of the termination was $426,747. The Company was obligated to make further contributions to provide sufficient funds to settle the liabilities of the Plan. The Company made a contribution of $95,890 to the Plan during 1996 to fulfill its obligation. 36 The Company also sponsors the Peoples Financial Corporation Employee Stock Ownership Plan (ESOP). Company Management curtailed the Pension Plan in 1991 and decided to terminate the Plan in 1995 because of their intent to make the ESOP, which is more flexible than the Pension Plan, the primary benefit plan, and because of the high cost of administering two plans. The employee stock ownership plan covers substantially all salaried, full-time employees. The effective date of the ESOP is December 24, 1984. On November 22, 1989, the plan was amended and restated effective January 1, 1989, to comply with Internal Revenue Code of 1986 and other regulations, to adopt 401(k) provisions for the plan, and effective December 31, 1989, to merge the former Gulf National Bank Profit Sharing Plan into the plan. On December 31, 1991, the plan was amended effective January 1, 1991, except where specifically indicated to the contrary, to adjust, among other things, the Employer Discretionary Matching Contribution and the vesting schedule. On December 16, 1994, the plan was amended effective January 1, 1989, except where specifically indicated to the contrary, to comply with the Internal Revenue Code and to clarify the hardship distribution provisions. 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 $260,000, $210,000 and $240,000 in 1998, 1997 and 1996, respectively. The Company accounts for all shares acquired after the December 15, 1993, effective date of Statement of Position 93-6, "Employers' Accounting for Employee Stock Ownership Plans" in accordance with the statement of position. Accordingly, the debt of The Parent Company and the shares pledged as collateral are reported as unearned compensation in equity. The Peoples Bank, Biloxi, Mississippi's loan asset and the Parent Company's debt liability eliminate 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 $6,068,311, $5,520,368 and $5,228,487 relating to the ESOP was recorded during 1998, 1997 and 1996, respectively. The ESOP held 387,626, 373,554 and 377,120 allocated shares and 3,537 suspense shares at December 31, 1998. The fair value of the suspense shares at December 31, 1998 was $194,535. Since the Company stock is not readily tradable on an established market, the plan requires the Company to issue a "put option" to any Participant who receives a distribution of Company Stock. The fair value of all shares subject to this put option was $21,319,430 at December 31, 1998. The Company established an Executive Supplemental Income Plan and a Directors' Deferred Income Plan in 1985. These plans provide for non-vested 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 $2,418,146, $2,293,656 and $2,070,924 at December 31, 1998, 1997 and 1996, respectively. The present value of accumulated benefits under these plans, using an interest rate of 10%, and the projected unit cost method has been accrued. The accrual amounted to $1,288,261, $1,146,192 and $1,046,262 at December 31, 1998, 1997 and 1996, respectively. 37 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 split dollar policies of which certain executive officers are the owners and beneficiaries, and which are assigned to the bank subsidiary for the repayment of premiums paid by the Company. These contracts are carried at their cash surrender value, which amounted to $340,824 , $283,150 and $281,937 at December 31, 1998, 1997 and 1996, respectively. The present value of accumulated benefits under these plans using an interest rate of 8.50% and the projected unit cost method has been accrued. The accrual amounted to $273,877, $263,809 and $259,508 at December 31, 1998, 1997 and 1996, 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 is 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 postretirement benefit cost:
Years Ended December 31, 1998 1997 1996 ---------- ---------- ---------- Service cost $ 38,373 $ 39,595 $ 49,154 Interest cost 40,136 41,260 49,381 Amortization of net transition obligation 20,600 20,600 38,498 ---------- ---------- ---------- Net periodic postretirement benefit cost $ 99,109 $ 101,455 $ 137,033 ========== ========== ==========
The discount rate used in determining the accumulated postretirement benefit obligation was 6.50% in 1998, 7.00% in 1997 and 7.50% in 1996. The assumed health care cost trend rate used in measuring the accumulated postretirement benefit obligation was 7.50% in 1998. The rate was assumed to decrease gradually to 5.00% for 2003 and remain at that level thereafter. If the health care cost trend rate assumptions were increased 1.00%, the accumulated postretirement benefit obligation as of December 31, 1998, would be increased by 22.48%, and the aggregate of the service and interest cost components of the net periodic postretirement benefit cost for the year then ended would have increased by 27.40%. If the health care cost trend rate assumptions were decreased 1.00%, the accumulated postretirement benefit obligation as of December 31, 1998, would be decreased by 17.27%, and the aggregate of the service and interest cost components of the net periodic postretirement benefit cost for the year then ended would have decreased by 20.39%. The following is a reconciliation of the accumulated postretirement benefit obligation: Accumulated postretirement benefit obligation as of December 31, 1997 $ 585,874 Service cost 38,373 Interest cost 40,136 Actuarial loss 55,784 Benefits paid (24,992) ---------- Accumulated postretirement benefit obligation as of December 31, 1998 $ 695,175 ==========
38
December 31, 1998 1997 1996 ---------- ---------- ---------- Accumulated postretirement benefit obligation: Retirees $ 238,265 $ 236,748 $ 185,595 Eligible to retire 79,446 70,923 101,298 Not eligible to retire 377,464 278,203 352,473 ---------- ---------- ---------- Total 695,175 585,874 639,366 Plan assets at fair value -0- -0- -0- ---------- ---------- ---------- Accumulated postretirement benefit obligation in excess of plan assets 695,175 585,874 639,366 Unrecognized transition obligation (329,597) (350,197) (465,839) Prior service cost not yet recognized in net periodic post- retirement benefit cost 95,042 Unrecognized net (gain) loss from past experience different from that assumed and from changes in assumptions (24,050) 31,734 (77,273) ---------- ---------- ---------- Accrued postretirement benefit cost $ 341,528 $ 267,411 $ 191,296 ========== ========== ==========
NOTE M - FAIR VALUE OF FINANCIAL INSTRUMENTS: In December 1991, the Financial Accounting Standards Board issued SFAS 107, "Disclosures About Fair Value of Financial Instruments." SFAS 107 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 39 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. Fair value estimates, methods and assumptions are set forth below for the Company's financial instruments. 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. Accrued Interest Receivable The amount shown as accrued interest receivable approximates fair value. 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. Notes Payable The fair value of notes payable is computed by discounting the cash flows using current borrowing rates. 40 Accrued Interest Payable The amount shown as accrued interest payable approximates fair value. Irrevocable Letters of Credit The fair value of irrevocable letters of credit is estimated using the fees currently charged to enter into similar agreements. The following table presents carrying amounts and estimated fair values for financial assets and financial liabilities at December 31, 1998, 1997 and 1996 (in thousands):
1998 1997 1996 ----------------------- ----------------------- ----------------------- CARRYING FAIR Carrying Fair Carrying Fair AMOUNT VALUE Amount Value Amount Value ---------- ---------- ---------- ---------- ---------- ---------- Financial Assets: Cash and due from banks $ 30,360 $ 30,360 $ 20,611 $ 20,611 $ 26,874 $ 26,874 Available for sale securities 12,837 12,837 47,678 47,678 53,159 53,159 Held to maturity securities 134,724 135,924 102,836 103,793 127,870 128,879 Loans, net 287,131 288,425 247,361 247,210 223,969 225,492 Accrued interest receivable 3,128 3,128 3,620 3,620 3,891 3,891 Financial Liabilities: Deposits: Non-interest bearing 76,269 76,269 67,581 67,581 73,535 73,535 Interest bearing 305,333 306,006 304,974 305,159 294,597 294,728 ---------- ---------- ---------- ---------- ---------- ---------- Total deposits 381,602 382,275 372,555 372,740 368,132 368,263 Federal funds purchased and securities sold under agreements to repurchase 28,051 28,051 16,500 16,500 Notes payable 203 185 215 189 227 198 Accrued interest payable 924 924 727 727 1,005 1,005 Irrevocable letters of credit -- 55 -- 32 -- 12
41 NOTE N - REGULATORY MATTERS: 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's 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. As of December 31, 1998, 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% or greater, a Tier 1 risk-based capital ratio of 6% or greater and a leverage capital ratio of 5% 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 1998, 1997 and 1996, are as follows:
For Capital Adequacy Actual Purposes ------------------------- ------------------------- Amount Ratio Amount Ratio ----------- ----------- ----------- ----------- December 31, 1998: Total Capital (to Risk Weighted Assets) $77,125,631 25.90% $23,768,820 8.00% Tier 1 Capital (to Risk Weighted Assets) 73,403,581 24.65 11,884,160 4.00 Tier 1 Capital (to Average Assets) 73,403,581 15.78 18,601,800 4.00 December 31, 1997: Total Capital (to Risk Weighted Assets) 68,186,611 26.83 20,333,200 8.00 Tier 1 Capital (to Risk Weighted Assets) 65,010,555 25.58 10,166,600 4.00 Tier 1 Capital (to Average Assets) 65,010,555 14.61 17,800,360 4.00 December 31, 1996: Total Capital (to Risk Weighted Assets 62,072,284 26.20 18,952,160 8.00 Tier 1 Capital (to Risk Weighted Assets) 59,111,009 24.95 9,476,080 4.00 Tier 1 Capital (to Average Assets) 59,111,009 12.63 18,713,857 4.00
42 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, 1998, 1997 and 1996, 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 generally accepted auditing standards. 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, 1998, 1997 and 1996, and the results of its operations and its cash flows for the years then ended, in conformity with generally accepted accounting principles. Certified Public Accountants /s/ Piltz, Williams, LaRosa & Co. PILTZ, WILLIAMS, LAROSA & CO. Biloxi, Mississippi January 19, 1999 43 Board of Directors Peoples Financial Corporation Chevis C. Swetman, Chairman of the Board Andy Carpenter, Vice Chairman Drew Allen, President, Allen Beverages, Inc. William A. Barq, Former Owner and President (retired), Barq's Bottling Co., Inc. F. Walker Tucei, Executive Vice-President (retired), The Peoples Bank, Biloxi, Mississippi Officers Peoples Financial Corporation Chevis C. Swetman, President and CEO Andy Carpenter, Executive Vice-President Jeannette E. Romero, First Vice-President Thomas J. Sliman, Second Vice-President Robert M. Tucei, Vice-President David M. Hughes, 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 William A. Barq, Vice-Chairman, Former Owner and President (retired), Barq's Bottling Co., Inc. Drew Allen, President, Allen Beverages, Inc. Andy Carpenter, Executive Vice-President, The Peoples Bank, Biloxi, Mississippi Tyrone J. Gollott, Secretary-Treasurer, Gollott & Sons Transfer & Storage, 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, Dickinson & McDermott F. Walker Tucei, Executive Vice-President (retired), The Peoples Bank, Biloxi, Mississippi 44 Officers The Peoples Bank, Biloxi, Mississippi SENIOR MANAGEMENT Chevis C. Swetman, President and CEO Andy Carpenter, Executive Vice-President Jeannette E. Romero, Senior Vice-President Thomas J. Sliman, Senior Vice-President Robert M. Tucei, Senior Vice-President David M. Hughes, Senior Vice-President Lauri A. Wood, Senior Vice-President A. Wes Fulmer, Senior Vice-President M. O. Lawrence, III, Senior Vice-President COMMERCIAL LENDING Darnell M. Hebert, Assistant Vice-President CONSUMER LENDING Brian J. Kozlowski, Loan Officer COMPLIANCE Evelyn R. Madison, Compliance Officer AUDIT AND ACCOUNTING Gregory M. Batia, Assistant Auditor Caroline B. Randolph, Trust Auditor Connie F. Lepoma, Accounting Officer INVESTMENTS Peggy M. Byrd, Vice-President Janet H. Wood, Investment Officer LOAN PROCESSING Donna F. Bessetti, Vice-President Jesse J. Migues, Assistant Vice-President LOAN REVIEW Robert E. Smith, Jr., Assistant Vice-President F. Kay Woodbury, Loan Review Officer PERSONNEL Jackie L. Henson, Vice-President Janis C. Culler, Vice-President - Employee Benefits Patricia L. Levine, Vice-President Janice L. Smitherman, Employee Benefits Officer Jennifer S. Crane, Training Officer 45 ASSET MANAGEMENT & TRUST SERVICES M. O. Lawrence, III, Senior Vice-President Ann F. Guice, Vice-President Louise C. Johns, Trust Officer Thomas H. Wicks, Assistant Trust Officer Daniel A. Bass, Assistant Trust Officer C. J. Dunaway, Assistant Trust Officer PROPERTY Shirley A. Braun, Vice-President Ray I. Cross, Assistant Vice-President - Appraisals SECURITY Robin J. Vignes, Assistant Vice-President Minh-Tuyet Nguyen, Assistant Security Officer CASH MANAGEMENT Larry A. Evans, Cash Management Officer Gloria A. Cothern, Assistant Vice-President DATA PROCESSING Sandra L. York, Vice-President - Information Systems Dennis J. Burke, Vice-President - Business Solutions George S. Tranum, Assistant Vice-President - Technical Support Ronald L. Baldwin, Systems Support Technician Scott P. Landrum, Data Processing Officer OPERATIONS/OTHER SERVICES Cheryl A. Dubaz, Assistant Vice-President - ATM Susan B. Polovich, Assistant Operations Officer Charlotte R. Balius, Bankcard Officer Cassandra F. Reid, Assistant Cashier Ardell M. Roberts, Assistant Cashier Hugh J. Kavanagh, Assistant Cashier Kathy S. Comstock, Savings Officer Kathleen M. Worrell, Insurance Officer Yvonne P. Owen, Assistant Cashier 46 BRANCH LOCATIONS AND OFFICERS The Peoples Bank, Biloxi, Mississippi BILOXI BRANCHES MAIN OFFICE, 152 Lameuse Street, Biloxi, Mississippi 39530, (228) 435-5511 Ralph A. Seymour, Vice-President VETERANS AVENUE OFFICE, 186 Veterans Avenue, Biloxi, Mississippi 39531, (228) 897-8711 R. Patrick Byrd, Branch Manager Diana T. Winland, Loan Officer WEST BILOXI OFFICE, 2430 Pass Road, Biloxi, Mississippi 39531, (228) 435-8203 Read H. Breeland, Assistant Vice-President GULFPORT BRANCHES DOWNTOWN GULFPORT OFFICE, 1105 30th Avenue, Gulfport, Mississippi 39501, (228) 897-8715 David M. Hughes, Senior Vice-President John W. McKellar, Vice-President Brent G. Johnson, Assistant Vice-President Diana W. Williams, Branch Manager HANDSBORO OFFICE, 0412 E. Pass Road, Gulfport, Mississippi 39507, (228) 897-8717 Andrew M. Welter, Assistant Vice-President ORANGE GROVE OFFICE, 12020 Highway 49 North, Gulfport, Mississippi 39503, (228) 897-8718 Mark A. Chatham, Assistant Vice-President William R. Aborn, Loan Officer OTHER BRANCHES BAY ST. LOUIS OFFICE, 408 Highway 90 East, Bay St. Louis, Mississippi 39520, (228) 897-8710 Jeannie M. Deen, Vice-President Laura A. Elliott, Assistant Branch Manager Shannon D. Garrett, Loan Officer DIAMONDHEAD OFFICE, 4408 West Aloha Drive, Diamondhead, Mississippi 39525, (228) 897-8714 J. Patrick Wild, Assistant Vice-President D'IBERVILLE-ST. MARTIN OFFICE, 10491 Lemoyne Boulevard, D'Iberville, Mississippi 39532, (228) 435-8202 Jerome D. Dodge, II, Vice-President John L. Welter, IV, Loan Officer LONG BEACH OFFICE, 403 Jeff Davis Avenue, Long Beach, Mississippi 39560 (228) 897-8712 Eric M. Chambless, Branch Manager OCEAN SPRINGS OFFICE, 2015 Bienville Boulevard, Ocean Springs, Mississippi 39564, (228) 435-8204 Ronnie F. Harrison, Assistant Vice-President 47 PASS CHRISTIAN OFFICE, 125 Henderson Avenue, Pass Christian, Mississippi 39571, (228) 897-8719 Gerald C. Gex, Jr., Assistant Vice-President SAUCIER OFFICE, (Opening summer 1999)17689 Second Street, Saucier, Mississippi 39574 James P. Estrada, Assistant Vice-President SHAREHOLDER INFORMATION Peoples Financial Corporation and Subsidiaries DIVIDEND SERVICES/ADDRESS CHANGE/STOCK TRANSFER: For complete information concerning the common stock of Peoples Financial Corporation, inquiries should be directed to: M. O. Lawrence, III, Senior Vice-President Asset Management & Trust Services Department P. O. Box 1416, Biloxi, Mississippi 39533-1416 (228) 435-8208 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 EX-23 3 CONSENT OF CERTIFIED PUBLIC ACCOUNTANTS 1 EXHIBIT 23 Consent of Certified Public Accountants We consent to the use of our reports, dated January 19, 1999, in Form 10-K filing of the Peoples Financial Corporation. /s/ Piltz, Williams, LaRosa & Co. PILTZ, WILLIAMS, LAROSA & CO. Biloxi, Mississippi March 15, 1999 EX-27 4 FINANCIAL DATA SCHEDULE
9 YEAR DEC-31-1998 DEC-31-1998 30,359,600 0 0 0 12,836,885 134,723,695 135,924,000 291,514,748 4,382,157 488,171,143 381,602,236 0 3,845,616 202,946 0 0 2,952,672 70,592,721 488,171,143 24,411,619 8,519,744 493,488 33,424,851 13,425,428 13,989,638 19,435,213 0 115,494 5,087,267 13,381,066 13,381,066 0 0 8,789,506 2.98 2.98 4.64 490,000 718,000 0 0 4,435,000 466,000 413,000 4,382,000 4,382,000 0 250,000
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