EMPLOYEE AND DIRECTOR BENEFIT PLANS

12 Months Ended

Dec. 31, 2024

EMPLOYEE AND DIRECTOR BENEFIT PLANS

EMPLOYEE AND DIRECTOR BENEFIT PLANS

NOTE O - EMPLOYEE AND DIRECTOR BENEFIT PLANS:

The Company sponsors the Peoples Financial Corporation Employee Stock Ownership Plan (“ESOP”). Employees who are in a position requiring at least 1,000 hours of service during a plan year and who are 21 years of age are eligible to participate in the ESOP. The Plan included 401(k) provisions and the former Gulf National Bank Profit Sharing Plan. Effective January 1, 2001, the ESOP was amended to separate the 401(k) funds into the Peoples Financial Corporation 401(k) Profit Sharing Plan. The separation had no impact on the eligibility or benefits provided to participants of either plan. The 401(k) provides for a matching contribution of 75% of the amounts contributed by the employee (up to 6% of compensation). Contributions are determined by the Board of Directors and may be paid either in cash or Peoples Financial Corporation common stock. Total contributions to the plans charged to operating expense were $265,000 for 2024,  $274,000 for 2023, and $260,000 for 2022.

The ESOP was frozen effective January 1, 2019. The ESOP held 210,947, 216,010 and 214,961 allocated shares at December 31, 2024, 2023 and 2022, respectively.

The Company established an Executive Supplemental Income Plan and a Directors’ Deferred Income Plan, which provide for pre-retirement and post-retirement benefits to certain key executives and directors. Benefits under the Executive Supplemental Income Plan are based upon the position and salary of the officer at retirement or death. Normal retirement benefits under the plan are equal to 67% of salary for the president and chief executive officer, 58% of salary for the executive vice president and 50% of salary for all other executive officers and are payable monthly over a period of fifteen years. Under the Directors’ Deferred Income Plan, the directors are given an opportunity to defer receipt of their annual directors’ fees until retirement from the board. For those who choose to participate, benefits are payable monthly for ten years beginning the first day of the month following the director’s normal retirement date. The normal retirement date is the later of the normal retirement age (65) or separation of service.  Through December 31, 2021, interest on deferred fees accrued at an annual rate of 10%, compounded annually. Also through December 31, 2021, after payments

commenced, interest accrued at an annual rate of 7.50%, compounded monthly. The Board amended the plan on November 23, 2021, providing that, effective January 1, 2022, on a prospective basis, interest on deferred fees shall accrue at an annual rate equal to the Chase Manhattan Bank Prime Rate as of December 31st of each year, compounded annually, before payments commence under the plan, and that after payments have commenced, interest will accrue on the account balance at an annual fixed rate equal to Chase Manhattan Bank Prime Rate as of the Director’s separation from service, compounded monthly. The Company has acquired insurance policies, with the bank subsidiary as owner and beneficiary, which 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 $18,862,950 and $18,404,490 at December 31, 2024 and 2023, respectively. The present value of accumulated benefits under these plans, using an interest rate of 5.00% and 3.50% at December 31, 2024 and 2023, respectively, and the interest ramp-up method has been accrued. The accrual amounted to $14,329,854 and $14,422,984 at December 31, 2024 and 2023, respectively, and is included in Employee and director benefit plans liabilities.

The Company also has additional plans for post-retirement benefits for certain key executives. The Company has acquired insurance policies, with the bank subsidiary as owner and beneficiary, which 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 $3,304,283 and $3,115,923 at December 31, 2024 and 2023, respectively. The present value of accumulated benefits under these plans using an interest rate of 5.00% and 3.50% at December 31, 2024 and 2023, respectively, and the projected unit cost method has been accrued. The accrual amounted to $1,484,904 and $1,593,985 at December 31, 2024 and 2023, respectively, and is included in Employee and director benefit plans liabilities.

Additionally, there are two endorsement split dollar policies, with the bank subsidiary as owner and beneficiary, which provide a guaranteed death benefit to the participants’ beneficiaries. These contracts are carried at their cash surrender value, which amounted to $338,527 and $334,346 at December 31, 2024 and 2023, respectively. The present value of accumulated benefits under these plans using an interest rate of 5.00% and 3.50% at December 31, 2024 and 2023, respectively, and the projected unit cost method has been accrued. The accrual amounted to $114,871 and $114,269 at December 31, 2024 and 2023, respectively, and is included in Employee and director benefit plans liabilities.

The Company has additional plans for post-retirement benefits for directors. The Company has acquired insurance policies, with the bank subsidiary as owner and beneficiary, which 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 $197,771 and $188,851 at December 31, 2024 and 2023, respectively. The present value of accumulated benefits under these plans using an interest rate of 5.00% and 3.50% at December 31, 2024 and 2023, respectively, and the projected unit cost method has been accrued. The accrual amounted to $217,422 and $218,853 at December 31, 2024 and 2023, respectively, and is included in Employee and director benefit plans liabilities.

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 age 60. In addition, the employee must have at least 25 continuous years of service with the Company immediately preceding retirement. However, any active employee who was at least age 65 as of January 1, 1995, does not have to meet the 25 years of service requirement. The Company reserves the right to modify, reduce or eliminate these health benefits. The Company has chosen to not offer this post-retirement benefit to individuals entering the employment of the Company after December 31, 2006. Employees who are eligible and enroll in the bank subsidiary’s group medical and dental health care plans upon their retirement must enroll in Medicare Parts A, B and D when first eligible upon their retirement from the bank subsidiary. This results in the bank subsidiary’s programs being secondary insurance coverage for retired employees and any dependent(s), if applicable, while Medicare Parts A and B will be their primary coverage, and Medicare Part D will be the sole and exclusive prescription drug benefit plan for retired employees.

The net postretirement benefit cost was as follows (in thousands):

For the Year Ended December 31,	2024		2023
Net Postretirement Benefit Cost	$	(159)	$	(191)

The accumulated postretirement benefit obligation and the balance in accumulated other comprehensive income was as follows (in thousands):

December 31,	2024		2023
Accumulated Postretirement Benefit Obligation	$	3,054	$	3,231
Fair Value of Plan Assets		—		—
Unfunded Status	$	3,054	$	3,231
Balance in Accumulated Other Comprehensive Income	$	1,843	$	1,881

Amounts recognized in Accumulated Other Comprehensive Income were as follows (in thousands):

For the Year Ended December 31,	2024		2023
Net Gain	$	1,684	$	1,518
Prior Service Credit		159		363
Total	$	1,843	$	1,881

The prior service credit and net gain that will be recognized in accumulated other comprehensive income during 2025 is $386,519.

The following is a summary of the actuarial assumptions used to determine the accumulated postretirement benefit obligation:

December 31,	2024		2023
Equivalent APBO Single Discount Rate	5.60	%	5.00	%
Rate of Increase in Future Compensation Levels	N/A		N/A
Current Pre 65 Health Care Trend Rate	8.65	%	8.35	%
Current Post 64 Health Care Trend Rate-Non Grandfathered	5.68	%	5.38	%
Current Post 64 Health Care Trend Rate-Granfathered	7.98	%	7.23	%
Ultimate Health Care Trend Rate	4.59	%	4.59	%
Year Ultimate Trend Rate Reached	2042		2042

The following is a summary of the assumptions used to determine the net postretirement benefit cost:

January 1,	2024		2023
Equivalent APBO Single Discount Rate	5.00	%	5.20	%
Rate of Increase in Future Compensation Levels	N/A		N/A
Current Pre 65 Health Care Trend Rate	8.35	%	8.64	%
Current Post 64 Health Care Trend Rate-Non Grandfathered	5.38	%	5.32	%
Current Post 64 Health Care Trend Rate-Grandfathered	7.23	%	7.35	%
Ultimate Health Care Trend Rate	4.59	%	4.59	%
Year Ultimate Trend Rate Reached	2042		2042

The following is a reconciliation of the accumulated postretirement benefit obligation, which is included in employee and director benefit plans liabilities (in thousands):

	Accumulated
	Postretirement
	Benefit		Fair Value of		Funded
Reconciliation of Funded Status	Obligation		Plan Assets		Status
December 31, 2023:	$	(3,231)	$	—	$	(3,231)
Service cost		(72)		—		(72)
Interest cost		(157)		—		(157)
Gains/(Losses)		348		—		348
Benefits paid		136		(136)		—
Participant contributions		(78)		78		—
Employer Contributions		—		58		58
December 31, 2024	$	(3,054)	$	—	$	(3,054)

The following is a reconciliation of the accumulated other comprehensive income (in thousands):

					Accumulated Other
	Net		Prior Service		Comprehensive
	Gain/Loss		Cost/(Credit)		Income
December 31, 2023:	$	(1,518)	$	(363)	$	(1,881)
Amortization payment		182		204		386
Liability (Gain)/Loss		(348)		—		(348)
December 31, 2024	$	(1,684)	$	(159)	$	(1,843)

The source of the liability gain/(loss) is based upon demographic experience during 2024, claims and retiree contributions, medical trend assumptions, and the change in the discount rate from 5.00% to 5.60%.

The following table displays the benefits expected to be paid from the plan during each of the next five fiscal years, and in aggregate for the five fiscal years thereafter (in thousands):

Fiscal 2025	$	223
Fiscal 2026		220
Fiscal 2027		260
Fiscal 2028		254
Fiscal 2029		263
Fiscal 2030-2034	$	1,126