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
Mississippi 64-0709834
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification number
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Securities registered pursuant to Section 12 (b) of the Act:
Name of Each Exchange on
Title of Each Class Which Registered
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None None
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Securities registered pursuant to Section 12 (g) of the Act:
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.
Cover Page 1 of 2 Pages
The aggregate market value of the voting stock held by non-affiliates of the
registrant as of March 1, 2002 was approximately $52,849,000. 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, 2002 the registrant had outstanding 5,625,238 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, 2001 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 10, 2002, are incorporated by reference into Part III of this report.
Cover Page 2 of 2 Pages
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. The Company is headquartered in Biloxi, Mississippi. At December 31, 2001, the Company operated in the state of Mississippi through its wholly-owned subsidiary, The Peoples Bank, Biloxi, Mississippi ("the Bank"). The Company is now engaged, through this 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. PFC is inactive at this time.
THE BANK SUBSIDIARY
The Company's wholly-owned bank subsidiary is The Peoples Bank, which was originally chartered in 1896 in Biloxi, Mississippi. The Bank is a state chartered bank whose deposits are insured under the Federal Deposit 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 currently offers a variety of loan and deposit services to individuals and small to middle market businesses within its trade area. Deposit services include interest bearing and non-interest bearing checking accounts, savings accounts, certificates of deposit, and IRA accounts. The Bank also offers a non-deposit funds management account, which is not insured by the FDIC. Loan services include business, real estate, construction, personal and installment loans, with an emphasis on commercial lending. The Bank also offers a variety of other functions including collection services, asset management and trust services, wire services, safe deposit box facilities, night drop facilities, cash management, automated teller machines and Internet, or home, banking.
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. While the Company has pursued external growth strategies on a limited basis, its primary focus has been on internal growth by the Bank through the establishment of new branch locations and an emphasis on strong customer relationships.
The Main Office, operations center and asset management and trust services of the Bank are located in downtown Biloxi, MS. At December 31, 2001, the Bank also had fifteen (15) branches located
throughout Harrison, Hancock, Jackson and Stone Counties. On January 31, 2002, the Bank closed its Veterans Avenue Branch in Biloxi. The Bank has automated teller machines ("ATM") at its Main Office, all branch locations and at numerous non-proprietary locations.
At December 31, 2001, the Bank employed 213 full-time employees and 22 part-time employees.
COMPETITION
The Bank is in direct competition with numerous local and regional commercial banks as well as other non-bank institutions. Interest rates paid and charged on deposits and loans are the primary competitive factors within the Bank's trade area. The Bank also competes for deposits and loans with insurance companies, finance companies and automobile finance companies. Recent legislation may further impact the competitors in this trade area. The Bank intends to continue its strategy of being a local, community bank offering traditional bank services and providing quality service in its local trade area.
ASSET MANAGEMENT AND 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.
Most of the Bank's business originates from within Harrison, Hancock, Stone 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 required to file certain reports with, and otherwise comply with the rules and regulations of, the Securities and Exchange Commission under federal securities laws.
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. Mississippi has enacted legislation which authorizes interstate acquisitions of banking organizations by bank holding companies outside of Mississippi, and also interstate branching transactions, 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.
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.
RECENT REGULATION AND SUPERVISION LEGISLATION
During 1999, the Gramm-Leach-Bliley Act (the "Act") was signed into law. The Act allows bank holding companies to engage in a wider range of financial activities. In order to engage in such activities, which, among others, include underwriting and selling insurance, providing financial, investment or economic advisory services, and underwriting, dealing in or making a market in, services, a bank holding company must elect to become a financial holding company. The Act also authorized the establishment of financial subsidiaries in order to engage in such financial activities, with certain limitations.
The Act also contains a number of other provisions affecting the Company's operations. One of the most important of these provisions relates to the issue of privacy. Federal banking regulators were authorized by the Act to adopt rules designed to protect the financial privacy of consumers. These rules implemented notice requirements and restrictions on a financial institution's ability to disclose nonpublic personal information about consumers to non-affiliated third parties.
As of the date of this Form 10-K, the Company has not taken any action to adopt either the financial holding company or the financial subsidiary structures that were authorized by the Act.
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 17-40 of the 2001 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.
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 12-16 of the 2001 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 11 and "Management's Discussion and Analysis" on pages 12-16 of the 2001 Annual Report are incorporated herein by reference.
DIVIDEND PAYOUT
Years Ended December 31,
---------------------------------
2001 2000 1999
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Dividend payout ratio 33.80% 26.58% 18.40%
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SCHEDULE I-A
Distribution of Average Assets, Liabilities and Shareholders' Equity for the Periods Indicated(2)
Years Ended December 31, (In thousands) 2001 2000 1999
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ASSETS:
Cash and due from financial institutions $ 33,948 $ 32,843 $ 33,866
Available for sale securities:
Taxable securities 86,590 32,535 17,500
Non-taxable securities 3,628 4,055 2,334
Other securities 6,747 6,505 2,623
Held to maturity securities:
Taxable securities 65,783 102,726 127,750
Non-taxable securities 5,829 6,206 6,685
Net loans(1) 353,316 354,794 299,952
Federal funds sold 5,595 1,860 10,411
Other assets 30,498 28,250 23,978
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TOTAL ASSETS $591,934 $569,774 $525,099
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LIABILITIES AND SHAREHOLDERS' EQUITY:
Non-interest bearing deposits $ 69,375 $ 78,383 $ 82,910
Interest bearing deposits 363,950 325,347 323,796
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Total deposits 433,325 403,730 406,706
Federal funds purchased and securities sold under
agreements to repurchase 66,606 65,094 37,432
Other liabilities 13,560 18,778 5,339
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Total liabilities 513,491 487,602 449,477
Shareholders' equity 78,443 82,172 75,622
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $591,934 $569,774 $525,099
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(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.
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) 2001 2000 1999
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INTEREST EARNING ASSETS:
Loans(1) $358,291 $359,624 $304,201
Federal funds sold 5,595 1,860 10,411
Available for sale securities:
Taxable securities 86,590 32,535 17,500
Non-taxable securities 3,628 4,055 2,334
Other securities 6,747 6,505 2,623
Held to maturity securities:
Taxable securities 65,783 102,726 127,750
Non-taxable securities 5,829 6,206 6,685
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TOTAL INTEREST EARNING ASSETS $532,463 $513,511 $471,504
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INTEREST BEARING LIABILITIES:
Savings and negotiable interest bearing deposits $144,780 $148,252 $169,461
Time deposits 219,170 177,095 154,335
Federal funds purchased and securities sold
under agreements to repurchase 66,606 65,094 37,432
Other borrowed funds 7,152 12,977 196
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TOTAL INTEREST BEARING LIABILITIES $437,708 $403,418 $361,424
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(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.
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) 2001 2000 1999
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INTEREST EARNED ON:
Loans(2) $28,174 $33,263 $26,426
Federal funds sold 204 116 504
Available for sale securities:
Taxable securities 4,407 2,047 1,049
Non-taxable securities 243 311 152
Other securities 446 204 98
Held to maturity securities:
Taxable securities 3,540 6,081 6,908
Non-taxable securities 536 507 536
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TOTAL INTEREST EARNED(1) $37,550 $42,529 $35,673
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INTEREST PAID ON:
Savings and negotiable interest bearing
deposits $ 3,990 $ 5,182 $ 5,390
Time deposits 11,707 10,354 7,519
Federal funds purchased and securities
sold under agreements to repurchase 2,220 2,986 1,521
Other borrowed funds 437 880 11
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TOTAL INTEREST PAID $18,354 $19,402 $14,441
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(1) All interest earned is reported on a taxable equivalent basis using a tax rate of 34% in 2001, 2000 and 1999.
(2) Loan fees of $386, $581 and $563 for 2001, 2000 and 1999, respectively, are included in these figures.
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) 2001 2000 1999
---- ---- ----
AVERAGE RATE EARNED ON:
Loans 7.86% 9.25% 8.69%
Federal funds sold 3.65 6.24 4.84
Available for sale securities:
Taxable securities 5.09 6.29 5.99
Non-taxable securities 6.70 7.67 6.51
Other securities 6.61 3.14 3.74
Held to maturity securities:
Taxable securities 5.38 5.92 5.41
Non-taxable securities 9.20 8.17 8.02
---- ---- ----
TOTAL (weighted average rate)(1) 7.05% 8.28% 7.57%
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AVERAGE RATE PAID ON:
Savings and negotiable interest bearing deposits 2.76% 3.50% 3.18%
Time deposits 5.34 5.85 4.87
Federal funds purchased and securities
sold under agreements to repurchase 3.33 4.59 4.06
Other borrowed funds 6.11 6.78 5.61
---- ---- ----
TOTAL (weighted average rate) 2.86% 4.81% 4.10%
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(1) All interest earned is reported on a taxable equivalent basis using a tax rate of 34% in 2001, 2000 and 1999.
SCHEDULE I-E
Net Interest Earnings and Net Yield on Interest Earning Assets
Years Ended December 31,
(In thousands except percentages) 2001 2000 1999
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Total interest income(1) $37,550 $42,529 $35,673
Total interest expense 18,354 19,402 14,441
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Net interest earnings $19,196 $23,127 $21,232
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Net yield on interest earning assets 3.61% 4.50% 4.50%
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(1) All interest earned is reported on a taxable equivalent basis using a tax rate of 34% in 2001, 2000 and 1999.
SCHEDULE I-F
Analysis of Changes In Interest Income and Interest Expense
(In thousands)
Attributable to:
-----------------------------
Increase Rate/
2001 2000 (Decrease) Volume Rate Volume
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INTEREST INCOME:(1)
Loans(2)(3) $28,174 $33,263 $(5,089) $ (123) $(4,984) $ 18
Federal funds sold 204 116 88 233 (48) (97)
Available for sale securities:
Taxable securities 4,407 2,047 2,360 3,401 (391) (650)
Non-taxable securities 243 311 (68) (33) (39) 4
Other securities 446 204 242 8 226 8
Held to maturity securities:
Taxable securities 3,540 6,081 (2,541) (2,187) (553) 199
Non-taxable securities 536 507 29 (31) 64 (4)
------- ------- ------- ------- ------- -------
Total $37,550 $42,529 $(4,979) $ 1,268 $(5,725) $ (522)
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INTEREST EXPENSE:
Savings and negotiable
interest bearing deposits $ 3,990 $ 5,182 $(1,192) $ (121) $(1,096) $ 25
Time deposits 11,707 10,354 1,353 2,460 (894) (213)
Federal funds purchased and
securities sold under 2,220 2,986 (766) 69 (816) (19)
agreements to repurchase
Other borrowed funds 437 880 (443) (395) (87) 39
------- ------- ------- ------- ------- -------
Total $18,354 $19,402 $(1,048) $ 2,013 $(2,893) $ (168)
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(1) All interest earned is reported on a taxable equivalent basis using a tax rate of 34% in 2001 and 2000.
(2) Loan fees are included in these figures.
(3) Includes interest on nonaccrual loans.
SCHEDULE I-F (continued) Analysis of Changes in Interest Income and Interest Expense
(In thousands)
Attributable to:
-----------------------------
Increase Rate/
2000 1999 (Decrease) Volume Rate Volume
------- ------- ------- ------- ------- -------
INTEREST INCOME:(1)
Loans(2)(3) $33,263 $26,426 $ 6,837 $ 4,815 $ 1,711 $ 311
Federal funds sold 116 504 (388) (414) 145 (119)
Available for sale securities:
Taxable securities 2,047 1,049 998 901 52 45
Non-taxable securities 311 152 159 112 27 20
Other securities 204 98 106 145 (16) (23)
Held to maturity securities:
Taxable securities 6,081 6,908 (827) (1,353) 654 (128)
Non-taxable securities 507 536 (29) (38) 10 (1)
------- ------- ------- ------- ------- -------
Total $42,529 $35,673 $ 6,856 $ 4,168 $ 2,583 $ 105
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INTEREST EXPENSE:
Savings and negotiable
interest bearing deposits $ 5,182 $ 5,390 $ (208) $ (675) $ 533 $ (66)
Time deposits 10,354 7,519 2,835 1,109 1,504 222
Federal funds purchased and
securities sold under 2,986 1,521 1,465 1,124 196 145
agreements to repurchase
Other borrowed funds 880 11 869 869
------- ------- ------- ------- ------- -------
Total $19,402 $14,441 $ 4,961 $ 2,427 $ 2,233 $ 301
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(1) All interest earned is reported on a taxable equivalent basis using a tax rate of 34% in 2000 and 1999.
(2) Loan fees are included in these figures.
(3) Includes interest on nonaccrual loans.
SCHEDULE II-A
Securities Portfolio
Book Value of Securities Portfolio at the Dates Indicated
December 31, (In thousands): 2001 2000 1999
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Available for sale securities:
U. S. Government, agency and corporate
obligations $136,149 $ 38,418 $ 24,743
States and political subdivisions 1,763 4,881 3,705
Other securities 4,990 4,869 4,628
-------- -------- --------
Total $142,902 $ 48,168 $ 33,076
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Held to maturity securities:
U. S. Government, agency and corporate
obligations $ 32,635 $ 91,978 $109,005
States and political subdivisions 5,644 6,074 6,268
-------- -------- --------
Total $ 38,279 $ 98,052 $115,273
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SCHEDULE II-B
Maturity of Securities Portfolio at December 31, 2001 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 $ 19,234 4.20% $115,879 4.72% $ 1,036 5.50% $ %
States and political subdivisions 10 4.25 1,544 6.41 209 5.00
Other 4,990 7.63
-------- ---- -------- ---- -------- ---- -------- ------
Totals $ 19,234 4.20% $115,889 4.72% $ 2,580 6.00% $ 5,199 7.56%
======== ==== ======== ==== ======== ==== ======== =======
Held to maturity securities:
U. S. Government, agency
and corporate obligations $ 17,137 4.82% $ 15,498 4.98% $ % $ %
States and political subdivisions 1,049 6.17 1,882 5.42 895 5.24 1,818 5.24
-------- ---- -------- ---- -------- ---- -------- ------
Totals $ 18,186 4.91% $ 17,380 5.03% $ 895 5.24% $ 1,818 5.24%
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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.
SCHEDULE III-A
Loan Portfolio
Loans by Type Outstanding(1)
December 31, (In thousands): 2001 2000 1999 1998 1997
-------- -------- -------- -------- --------
Real estate, construction $ 25,636 $ 29,269 $ 24,793 $ 24,836 $ 14,819
Real estate, mortgage 224,524 235,835 215,726 179,123 154,653
Loans to finance agricultural
production and other loans 7,241 11,019 8,441 13,493 12,501
to farmers
Commercial and industrial
loans 71,271 79,620 63,104 49,633 50,224
Loans to individuals for
household, family and other
consumer expenditures 15,068 17,186 16,476 15,717 13,125
Obligations of states and
political subdivisions 3,233 3,967 2,723 6,809 5,257
All other loans 196 590 1,254 1,904 1,219
-------- -------- -------- -------- --------
Totals $347,169 $377,486 $332,517 $291,515 $251,798
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(1) No foreign debt outstanding.
SCHEDULE III-B
Maturities and Sensitivity to Changes in
Interest Rates of the Loan Portfolio as of December 31, 2001
Maturity (In thousands)
------------------------------------------------------------
Over one year
One year or through 5
less years Over 5 years Total
----------- ------------- ------------- --------
Loans:
Real estate, construction $ 17,329 $ 6,897 $ 1,410 $ 25,636
Real estate, mortgage 43,069 173,960 7,495 224,524
Loans to finance
agricultural production and
other loans to farmers 7,061 180 7,241
Commercial and industrial loans 31,215 37,846 2,210 71,271
Loans to individuals for
household, family and
other consumer expenditures 6,016 9,017 35 15,068
Obligations of states and
political subdivisions 44 1,222 1,967 3,233
All other loans 107 89 196
-------- -------- -------- --------
Totals $104,841 $229,211 $ 13,117 $347,169
======== ======== ======== ========
Loans with pre-determined interest rates $ 28,745 $102,677 $ 2,676 $134,098
Loans with floating interest rates 76,096 126,534 10,441 213,071
-------- -------- -------- --------
Totals $104,841 $229,211 $ 13,117 $347,169
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SCHEDULE III-C
Non-Performing Loans
December 31, (In thousands): 2001 2000 1999 1998 1997
------ ------ ------ ------ ------
Loans accounted for on a $ 650 $3,424 $ 100 $ 490 $1,167
non-accrual basis(1)
Loans which are contractually
past due 90 or more days as to
interest or principal payment,
but are not included above 1,732 24 1,238 718 2,882
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(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 not accrued on these loans did not have a significant effect on earnings in the years presented.
SCHEDULE IV-A
Summary of Loan Loss Expenses
(In thousands except percentage data)
2001 2000 1999 1998 1997
-------- -------- -------- -------- --------
Average amount of loans
outstanding(1) $358,291 $359,624 $304,201 $268,393 $234,744
======== ======== ======== ======== ========
Balance of allowance for loan
losses at the beginning of period $ 4,568 $ 4,338 $ 4,382 $ 4,435 $ 4,523
Loans charged-off:
Commercial, financial and 895 2,088 334 406 379
agricultural
Consumer and other 1,079 2,573 74 60 56
-------- -------- -------- -------- --------
Total loans charged-off 1,974 4,661 408 466 435
Recoveries of loans previously
charged-off:
Commercial, financial and 230 209 190 361 294
agricultural
Consumer and other 331 490 54 52 53
-------- -------- -------- -------- --------
Total recoveries 561 699 244 413 347
-------- -------- -------- -------- --------
Net loans charged-off 1,413 3,962 164 53 88
Provision for loan losses charged
to operating expense 2,503 4,192 120
-------- -------- -------- -------- --------
Balance of allowance for
loan losses at end of period $ 5,658 $ 4,568 $ 4,338 $ 4,382 $ 4,435
======== ======== ======== ======== ========
Ratio of net charge-offs during
period to average loans
outstanding 0.39% 1.10% 0.05% 0.02% 0.04%
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(1) Net of unearned income.
SCHEDULE IV-B
Allocation of the Allowance for Loan Losses
2001 2000 1999 1998 1997
---------------- ------------------ ----------------- ------------------ -----------------
% of % of % of % of % of
Loans Loans Loans Loans Loans
Balance at December to Total to Total to Total to Total to Total
31, (In thousands) Amount Loans Amount Loans Amount Loans Amount Loans Amount Loans
------ -------- ------ -------- ------ -------- ------ -------- ------ --------
Real estate,
construction $ 256 7 $ 260 8 $ 289 7 $ 292 9 $ 296 6
Real estate,
mortgage 4,260 65 2,913 62 2,647 65 2,674 61 2,706 61
Loans to finance
agricultural
production and other
loans to farmers 72 2 237 3 245 3 247 5 250 5
Commercial and
industrial loans 875 20 918 21 859 18 868 17 878 20
Loans to individuals
for household,
family and
other consumer
expenditures 175 4 200 4 256 5 259 5 262 5
Obligations of states
and political
subdivisions -0- 1 -0- 1 -0- 1 -0- 2 -0- 2
All other loans 15 1 25 1 23 1 23 1 24 1
Unallocated 5 N/A 15 N/A 19 N/A 19 N/A 19 N/A
------ --- ------ --- ------ --- ------ --- ------ ---
Totals $5,658 100 $4,568 100 $4,338 100 $4,382 100 $4,435 100
====== === ====== === ====== === ====== === ====== ===
|
SCHEDULE V
Summary of Average Deposits and Their Yields
2001 2000 1999
-------------------------------------------------------------------------------------
Years Ended December
31, (In thousands
except for percentage
data) Amount Rate Amount Rate Amount Rate
-------- ---- -------- ---- -------- ----
Demand deposits in
domestic offices $ 69,375 N/A $ 78,383 N/A $ 82,910 N/A
Negotiable interest
bearing deposits
in domestic offices 119,900 2.76% 121,461 3.60% 140,891 3.21%
Savings deposits in
domestic offices 24,880 2.73% 26,791 3.03% 28,570 3.06%
Time deposits in
domestic offices 219,170 5.34% 177,095 5.85% 154,335 4.87%
-------- ---- -------- ---- -------- ----
Total deposits $433,325 3.62% $403,730 3.85% $406,706 3.17%
======== ==== ======== ==== ======== ====
|
Certificates of deposit outstanding in amounts $100,000 or more (in thousands) by the amount of time remaining until maturity as of December 31, 2001, are as follows:
Remaining maturity:
3 months or less $ 45,963
Over 3 through 6 months 23,381
Over 6 months through 12 months 23,756
Over 12 months 12,346
--------
Total $105,446
========
|
SCHEDULE VI
Short Term Borrowings
(In thousands except percentage data)
2001 2000 1999
---------- ---------- ---------
Amount outstanding at December 31, $ 82,489 $ 65,339 $ 60,834
Weighted average interest rate at
December 31, 1.62% 5.01% 4.34%
Maximum outstanding at any month-end
during year $ 82,489 $ 71,340 $ 60,834
Average amount outstanding during year $ 66,606 $ 65,094 $ 37,432
Weighted average interest rate 3.33% 4.59% 4.06%
|
Note: Short term borrowings include federal funds purchased from other banks and securities sold under agreements to repurchase.
SCHEDULE VII
Interest Sensitivity/Gap Analysis
December 31, 2001 (In
thousands) 0 - 3 Months 4 - 12 Months 1 - 5 Years Over 5 Years Total
------------ ------------- ----------- ------------ --------
ASSETS:
Loans(1) $222,920 $ 18,260 $102,662 $ 2,677 $346,519
Available for sale securities 6,989 12,245 115,889 7,779 142,902
Held to maturity securities 11,341 6,845 17,380 2,713 38,279
-------- -------- -------- -------- --------
Total assets $241,250 $ 37,350 $235,931 $ 13,169 $527,700
======== ======== ======== ======== ========
FUNDING SOURCES:
Interest bearing deposits $223,492 $ 85,831 $ 26,918 $ 86 $336,327
Long-term funds 18 55 553 5,259 5,885
-------- -------- -------- -------- --------
Total funding sources $223,510 $ 85,886 $ 27,471 $ 5,345 $342,212
======== ======== ======== ======== ========
REPRICING/MATURITY
GAP:
Period $ 17,740 $(48,536) $208,460 $ 7,824
Cumulative 17,740 (30,796) 177,664 185,488
Period Gap/Total Assets 3.36% (9.20)% 39.50% 1.48%
Cumulative Gap/Total Assets 3.36% (5.84)% 33.66% 35.14%
|
(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.
ITEM 2 - PROPERTIES
The principal properties of the Company are its 14 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 43 of the Annual Report to Shareholders.
ITEM 3 - LEGAL PROCEEDINGS
The information included in Note K to the Consolidated Financial Statements included in the 2001 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 10 of the 2001 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 11 of the 2001 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 12-16 of the 2001 Annual Report is incorporated herein by reference.
ITEM 7a - QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
The information under the caption "Quantitative and Qualitative Disclosures about Market Risk" on pages 15-16 of the 2001 Annual Report is incorporated herein by reference.
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 17-41 of the 2001 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 page 20-21
Consolidated Statements of Cash Flows on page 22
Notes to Consolidated Financial Statements on pages 23-40
Independent Auditors' Report on page 41
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 IX contained in the Proxy Statement in connection with the Annual Meeting of Shareholders to be held April 10, 2002, which was filed by the Company in definitive form with the Commission on March 8, 2002, 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 10, 2002, which was filed by the Company in definitive form with the Commission on March 8, 2002, is incorporated herein by reference.
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 10, 2002, which was filed by the Company in definitive form with the Commission on March 8, 2002, is incorporated herein by reference.
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information in Sections V, VI, VII and IX contained in the Proxy Statement in connection with the Annual Meeting of Shareholders to be held April 10, 2002, which was filed by the Company in definitive form with the Commission on March 8, 2002, 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
Incorporation 0-30050 10/a 6/21/99 3.1
(3.2) By-Laws 0-30050 10/a 6/21/99 3.2
|
Incorporated by
Reference to Exhibit
Registration or Form of Number in
Description File Number Report Date of Report Report
----------- ---------------- ------ -------------- ---------
(10.1) Description of
Automobile Plan 33-15595 10-K 12/31/88 10.1
(10.2) Description of
Directors' Deferred
Income Plan 33-15595 10-K 12/31/88 10.2
(10.3) Description of
Executive
Supplemental Plan 33-15595 10-K 12/31/88 10.3
(10.4) Split-Dollar
Insurance Agreement 33-15595 10-K 12/31/93 10.4
(10.5) Deferred
Compensation Plan 33-15595 10-K 12/31/93 10.5
(10.6) Description of
Stock Incentive
Plan *
(13) Annual Report to
Shareholders for
year ended
December 31,
2001 * (c)
(21) Proxy Statement
for Annual Meeting
of Shareholders to
be held April 10,
2002
(22) Subsidiaries of the
registrant 33-15595 10-K 12/31/88 22
(23) Consent of Certified
Public Accountants *
|
(b) Reports on Form 8-K:
No Form 8-K was filed during the fourth quarter of the year ended December 31, 2001.
(c) Furnished for the information of the Commission only and not deemed "filed" except for those portions which are specifically incorporated herein.
* Filed herewith.
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)
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/ Chevis C. Swetman
-----------------------------
Date: March 27, 2002
---------------------------
Chevis C. Swetman,
Chairman, President and CEO
BY: BY: /s/ Dan Magruder
-------------------------------- ------------------------------------
Date: Date: March 27, 2002
------------------------------ ----------------------------------
Drew Allen, Director Dan Magruder, Director
BY: BY: /s/ Lyle M. Page
-------------------------------- ------------------------------------
Date: Date: March 27, 2002
------------------------------ ----------------------------------
William A. Barq, Director Lyle M Page, Director
BY: /s/ Andy Carpenter BY: /s/ Lauri A. Wood
-------------------------------- ------------------------------------
Date: March 27, 2002 Date: March 27, 2002
------------------------------ ----------------------------------
Andy Carpenter, Executive Vice Lauri A. Wood, Principal Financial
President and Director and Accounting Officer
|
EXHIBIT INDEX
Incorporated by
Reference to Exhibit
Registration or Form of Number in
Description File Number Report Date of Report Report
----------- ---------------- ------ -------------- ---------
(3.1) Articles of
Incorporation 0-30050 10/a 6/21/99 3.1
(3.2) By-Laws 0-30050 10/a 6/21/99 3.2
(10.1) Description of
Automobile Plan 33-15595 10-K 12/31/88 10.1
(10.2) Description of
Directors' Deferred
Income Plan 33-15595 10-K 12/31/88 10.2
(10.3) Description of
Executive
Supplemental Plan 33-15595 10-K 12/31/88 10.3
(10.4) Split-Dollar
Insurance Agreement 33-15595 10-K 12/31/93 10.4
(10.5) Deferred
Compensation Plan 33-15595 10-K 12/31/93 10.5
(10.6) Description of
Stock Incentive
Plan*
(13) Annual Report to
Shareholders for
year ended
December 31,
2001*(c)
(21) Proxy Statement
for Annual Meeting
of Shareholders to
be held April 10,
2002
(22) Subsidiaries of the
registrant 33-15595 10-K 12/31/88 22
(23) Consent of Certified
Public Accountants*
|
(b) Reports on Form 8-K:
No Form 8-K was filed during the fourth quarter of the year ended December 31, 2001.
(c) Furnished for the information of the Commission only and not deemed "filed" except for those portions which are specifically incorporated herein.
* Filed herewith.
EXHIBIT 10.6
Peoples Financial Corporation
Stock Incentive Plan
On May 23, 2001, the Company's Board of Directors approved a stock incentive program for Chevis C. Swetman as President and Chief Executive Officer and Andy Carpenter as Executive Vice President ("Executives"). The purpose of the plan is to provide an incentive to retain and motivate these two executive officers.
Under this plan, whole shares valued as of the distribution date at $50,000 are to be distributed to each of these Executives who continue to meet the eligibility requirements on June 15, 2001, and January 15 of the four succeeding years ("the distribution dates"). The value of the shares is based on the closing price of the Company's stock as reported on the NASDAQ Stock Market on the distribution dates.
An Executive's rights to any unissued stock shall terminate on the date of termination of his employment with the Company regardless of the cause, except in the event of the Executive's death or disability, in which case the right to receive unissued stock shall continue in the manner provided. Further, the plan stipulates the rights of the Executives as a result of a Change in Control.
Exhibit 13: Annual Report to Shareholders
[PICTURE]
PEOPLES FINANCIAL CORPORATION
2001 ANNUAL REPORT
WHERE PEOPLE COME FIRST
[PICTURES]
[PICTURE OF CHEVIS C. SWETMAN]
FROM THE PRESIDENT
Dear Shareholders,
We at Peoples Financial Corporation are keeping a strong watch over all economic factors affecting the nation, and are ceaselessly looking for ways to maximize our shareholders' interests. Peoples Financial Corporation and its principal subsidiary, The Peoples Bank, anticipate that financial institutions should enjoy wider margins and faster growth in net interest income as our cost of deposits and borrowed funds, fall faster than assets can re-price. Since our bank is more dependent on traditional bank activities, we should receive a benefit from last year's interest rate reductions by the Federal Reserve.
The Mississippi Gulf Coast, like the rest of the country, has experienced a downturn in the economy since the beginning of 2000. We've seen even greater weakening of the economy and the disruption of travel nationwide, resulting from the horrific terrorist acts of September 11. Fortunately, the Mississippi Gulf Coast has not been as affected as other tourism and gaming destinations. This is likely due to the fact that we are primarily a drive in market.
As we continue to monitor the economy, we will also continue to identify the financial needs of our community. We have upgraded and improved our banking facilities over the past year, increased computer capabilities and added new financial products to complement our traditional banking services. New products now available to our customers include Internet Banking and Bounce Protection.
Yes, The Peoples Bank has positioned itself to take advantage of - and offer back to our customers - all financial opportunities that come our way. As we wait for global events to unfold and hope for peace, you have my solid commitment that The Peoples Bank will keep an active role in this community and help the residents of the Mississippi Gulf Coast resume their normal daily lives.
/s/ CHEVIS C. SWETMAN
Chevis C. Swetman - Chairman, President and Chief Executive Officer
|
"TREAT EVERY MAN AS IF HE
WERE KING -
EVERY WOMAN AS IF SHE
WERE QUEEN."
-Glenn L. Swetman
[PICTURES]
THE PEOPLES BANK
...
COMMITTED
TO COMMUNITY
"We believe that our success or failure rests upon the economic finances of the community we serve.
As in the past, we will continue to work
and strive to improve our community.
Our dedication and hope is that
the community, as well as the Bank,
will continue to grow and prosper."
-The Peoples Bank Community Reinvestment Statement
[PICTURES]
Each year, employees of The Peoples Bank give their time and energy to raise funds to benefit local charities. Raffles, po-boy sales, bake sales, and golf and bowling tournaments have raised over $126,000 in the past eight years.
o 1994 - Camp Rainbow - $13,938 o 1995 - Center for the Prevention of Child
Abuse - $12,411 o 1996 - Gaits to Success - $13,755 o 1997 - Loaves & Fishes,
Hancock County Food Shelter - $15,270 o 1998 - Habitat for Humanity - $16,219
o 1999 - Gulf Coast Society for Retarded Citizens, $17,100 o 2000 - Harrison
County Youth Court Shelter, Hope Haven of Hancock County, Long Beach Vision
20/20 Task Force, Stone County Local Park Committee, Homes of Grace Noah's Ark
Program (Jackson County) - $19,277 o 2001 - American Cancer Society (Gulf Coast
Division), Alzheimer's Association (Mississippi Gulf Coast Chapter) - $18,680
The Peoples Bank donates its holiday gift resources of $10,000, in honor of our valued customers, to charity each year.
[PICTURES]
In addition to employee fundraisers and holiday donations, The Peoples Bank makes generous charitable donations exceeding $100,000 each year.
We participate annually in community events including:
o The Salvation Army's
Holiday Bell Ringing and Angel Tree
o The American Cancer Society's Relay for Life
o The Alzheimer's Association Walk to Remember
o The March of Dimes' Walk
o Make A Difference Day
o Biloxi Chamber's Chamber Challenge
o Christmas Caroling for area Senior Citizens
Employees also make over 150 casseroles, cakes
and pies for The Salvation Army
and area shelters.
"WORK HARD AND BE PATIENT.
THESE ARE CHARACTERISTICS
THAT MAKE FOR LONG-TERM
SUCCESS IN LIFE."
-Mr. William Barq
The Peoples Bank
Board of Directors
[PICTURES]
Our commitment to education in our community remains unwavering. The Peoples Bank is the first bank in Mississippi to participate in the national "Save for America" program. The Lil' Peoples Bank at North Bay and Beauvoir Elementaries in Biloxi offer children the opportunity to open their own savings account and make weekly deposits at their school.
We participate in the national "Teach Children to Save Day." In support of this day, Peoples Bank employees visit local schools to present programs designed to help children understand the concept of saving money.
We are also proud of our many employees who mentor students at Popps Ferry Elementary, Gaston Point Elementary and Jeff Davis Elementary.
[PICTURES]
THE PEOPLES BANK
WHERE PEOPLE COME FIRST
14 LOCATIONS
o Bay St. Louis o Cedar Lake o Diamondhead o D'Iberville
o Downtown Gulfport o Handsboro o Long Beach
o Main Office, Biloxi o Ocean Springs o Orange Grove
o Pass Christian o Saucier o West Biloxi o Wiggins
58 ATM LOCATIONS
o Beau Rivage o Biloxi Regional Medical Center
o Boomtown Casino o Casino Magic Bay St. Louis o Casino Magic Biloxi
o Copa Casino o Eagle Express, Biloxi o Fayard BP o Grand Casino Biloxi
o Isle of Capri Casino o Memorial Hospital at Gulfport o Palace Casino
o Southern Style Deli o The Peoples Bank, Bay St. Louis
o The Peoples Bank, Cedar Lake o The Peoples Bank, D'Iberville
o The Peoples Bank, Diamondhead o The Peoples Bank, Downtown Biloxi
o The Peoples Bank, Downtown Gulfport o The Peoples Bank, Handsboro
o The Peoples Bank, Long Beach o The Peoples Bank, Ocean Springs
o The Peoples Bank, Orange Grove o The Peoples Bank, Pass Christian
o The Peoples Bank, Saucier o The Peoples Bank, Veterans Avenue
o The Peoples Bank, West Biloxi o The Peoples Bank, Wiggins
o The President Casino o Gulfport/Biloxi International Airport
www.THEPEOPLES.com
[PICTURES]
TABLE OF CONTENTS
Summary of Quarterly Results of Operations...................................................10 Market Information...........................................................................10 Five-Year Comparative Summary of Selected Financial Information..............................11 Management's Discussion and Analysis of Financial Condition and Results of Operations........12-16 Consolidated Financial Statements............................................................17-22 Notes to Consolidated Financial Statements...................................................23-40 Independent Auditors' Report.................................................................41 Board of Directors and Officers..............................................................42 Branch Locations and Officers................................................................43 Corporate Information........................................................................44 |
SUMMARY OF QUARTERLY RESULTS OF OPERATIONS
(in thousands except per share data)
Peoples Financial Corporation and Subsidiaries
QUARTER ENDED, 2001 MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31 ------------------- -------- ------- ------------ ----------- Interest income $10,585 $ 9,688 $ 9,039 $ 7,973 Net interest income 5,022 4,706 4,653 4,550 Provision for loan losses 75 1,332 74 1,022 Income before income taxes and extraordinary gain 2,075 (200) 1,879 733 Extraordinary gain 594 Net income 1,405 (118) 1,303 1,409 Basic and diluted earnings per share .25 (.02) .23 .25 Basic and diluted earnings per share before extraordinary gain .25 (.02) .23 .14 |
Quarter Ended, 2000 March 31 June 30 September 30 December 31 ------------------- -------- -------- ------------ ----------- Interest income $ 9,894 $ 10,490 $ 10,905 $ 10,961 Net interest income 5,931 5,956 5,505 5,457 Provision for loan losses 53 53 2,735 1,351 Income before income taxes 2,678 2,785 (311) 1,551 Net income 1,799 1,896 (229) 1,172 Basic and diluted earnings per share .30 .33 (.03) .19 |
MARKET INFORMATION
Peoples Financial Corporation and Subsidiaries
On May 10, 2000, the Company registered its common stock on NASDAQ Small Cap Market. The Company's stock is traded under the symbol PFBX and is quoted in publications under "PplFnMS". The following table sets forth the high and low sale prices of the Company's common stock as reported on the NASDAQ Stock Market.
DIVIDEND
YEAR QUARTER HIGH LOW PER SHARE
---- ------- ------ ------ ---------
2001 1ST $ 25 $ 13 $ .11
2ND 18 14
3RD 17 12 .12
4TH 15 10
2000 1st $ 31 $ 31 $ .10
2nd 31 19
3rd 21 18 .11
4th 20 16
|
There were 678 holders of record of common stock of the Company at January 31, 2002, and 5,625,238 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.
FIVE-YEAR COMPARATIVE SUMMARY OF SELECTED
FINANCIAL INFORMATION (in thousands except per share data)
Peoples Financial Corporation and Subsidiaries
2001 2000 1999 1998 1997
----------- ----------- ----------- ----------- -----------
BALANCE SHEET SUMMARY
Total assets $ 587,012 $ 587,244 $ 537,972 $ 488,171 $ 441,759
Available for sale securities 142,902 48,168 33,076 12,837 47,678
Held to maturity securities 38,279 98,052 115,273 134,724 102,836
Loans, net of unearned discount 347,169 377,476 332,510 291,513 251,796
Deposits 412,543 413,724 394,681 381,602 372,555
Borrowings from FHLB 5,549 23,160
Long term notes payable 336 291 274 203 215
Shareholders' equity 80,069 78,717 77,767 73,545 65,772
SUMMARY OF OPERATIONS
Interest income $ 37,285 $ 42,250 $ 35,440 $ 33,425 $ 32,235
Interest expense 18,354 19,401 14,441 13,990 12,956
----------- ----------- ----------- ----------- -----------
Net interest income 18,931 22,849 20,999 19,435 19,279
Provision for loan losses 2,503 4,192 120
----------- ----------- ----------- ----------- -----------
Net interest income after provision
for loan losses 16,428 18,657 20,879 19,435 19,279
Non-interest income 9,256 7,678 6,767 11,220 6,241
Non-interest expense (21,197) (19,632) (18,438) (17,274) (16,065)
----------- ----------- ----------- ----------- -----------
Income before taxes and
extraordinary gain 4,487 6,703 9,208 13,381 9,455
Applicable income taxes 1,082 2,065 2,958 4,591 3,088
Extraordinary gain 594
----------- ----------- ----------- ----------- -----------
Net income $ 3,999 $ 4,638 $ 6,250 $ 8,790 $ 6,367
=========== =========== =========== =========== ===========
PER SHARE DATA
Basic and diluted earnings per share $ .71 $ .79 $ 1.06 $ 1.49 $ 1.08
Basic and diluted earnings per share
before extraordinary gain .60 .79 1.06 1.49 1.08
Dividends per share .24 .21 .20 .17 .15
Book value 14.25 13.58 13.17 12.46 11.14
Weighted average number of shares 5,629,872 5,857,232 5,905,344 5,905,344 5,905,344
SELECTED RATIOS
Return on average assets .68% .82% 1.21% 1.87% 1.42%
Return on average equity 5.04% 5.93% 8.26% 12.62% 10.10%
Capital formation rate 1.72% 1.22% 5.74% 11.82% 8.98%
Primary capital to average assets 14.47% 14.68% 15.86% 16.60% 15.62%
Risk-based capital ratios:
Tier 1 20.65% 19.97% 22.45% 24.65% 25.58%
Total 21.90% 21.13% 23.69% 25.90% 26.83%
|
Note: All share and per share data have been given retroactive effect for the two for one stock split effective November 16, 1998 and the two for one stock split effective April 17, 2000.
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, 2001, 2000 and 1999. These comments highlight the significant events for these years and should be considered in combination with the Consolidated Financial Statements and Notes to Consolidated Financial Statements included in this annual report.
FORWARD-LOOKING INFORMATION
Congress passed the Private Securities Litigation Act of 1995 in an effort to encourage corporations to provide information about a company's anticipated future financial performance. This act provides a safe harbor for such disclosure which protects the companies from unwarranted litigation if actual results are different from management expectations. This report contains forward-looking statements and reflects industry conditions, company performance and financial results. These forward-looking statements are subject to a number of factors and uncertainties which could cause the Company's actual results and experience to differ from the anticipated results and expectations expressed in such forward-looking statements.
OVERVIEW
Net income was $3,999,000 for the year ended December 31, 2001, as compared with $4,638,000 for the year ended December 31, 2000. The decrease in earnings was primarily attributable to the reduction in interest rates. Specifically, interest earned on loans has decreased rapidly while interest paid on deposits, especially large certificates of deposit, has not changed significantly. During the fourth quarter of 2001, this negative trend began to improve and the Company expects a more favorable interest margin in 2002.
FINANCIAL CONDITION
AVAILABLE FOR SALE SECURITIES
Available for sale securities increased $94,735,000 at December 31, 2001 as compared with December 31, 2000 primarily as a result of the management of the bank subsidiary's liquidity position and its interest margin. The Company reinvested funds from maturities in held to maturity securities in available for sale securities. During the last six months of 2001, funds were also available for reinvestment in these securities as loan demand decreased.
Gross unrealized gains were $2,787,000, $1,215,000 and $918,000 and gross unrealized losses were $84,000, $334,000 and $1,090,000 for available for sale securities at December 31, 2001, 2000 and 1999, respectively. There were no significant realized gains or losses from calls or sales of available for sale securities during 1999 and 2000. A gain of $243,000 was realized on the sale of available for sale securities in 2001.
HELD TO MATURITY SECURITIES
Held to maturity securities decreased $59,773,000 at December 31, 2001, compared with December 31, 2000. The decrease in these securities is directly attributable to the management by the Company of its liquidity position, as discussed above.
Gross unrealized gains were $725,000, $296,000 and $253,000, while gross unrealized losses were $18,000, $402,000 and $1,817,000, at December 31, 2001, 2000 and 1999, respectively. There were no significant realized gains or losses from calls of these investments for the years ended December 31, 2001, 2000 and 1999.
FEDERAL HOME LOAN BANK STOCK
The Company acquired common stock issued by the Federal Home Loan Bank as a prerequisite for participating in their loan programs.
LOANS
The Company's loan portfolio decreased $30,317,000 at December 31, 2001. This decrease was a result of decreased loan demand in the Company's trade area, which in turn was due to a softening of the local economy. In addition, a number of customers paid off several large credits during the second and third quarters of 2001. Fluctuations in the various categories of loans are illustrated in Note C. The Company anticipates that this demand will be moderate into the first quarter of 2002.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
Peoples Financial Corporation and Subsidiaries
OTHER REAL ESTATE
The Other Real Estate (ORE) portfolio increased $738,000 at December 31, 2001 as compared with December 31, 2000 due to the foreclosure of several parcels of commercial real estate during 2001. Gains realized on sales of ORE were $118,716, $19,581 and $459,529 for the years ended December 31, 2001, 2000 and 1999, respectively. The Company is actively marketing these foreclosed assets and has contracts for sale for several parcels which it expects to close in the first quarter of 2002.
ACCRUED INTEREST RECEIVABLE
Accrued interest receivable decreased $769,000 at December 31, 2001, as compared with December 31, 2000, as a result of the decline in interest rates on loans and investments.
DEPOSITS
Total deposits decreased $1,181,000 at December 31, 2001, as compared with December 31, 2000, and had increased $19,043,000 at December 31, 2000, as compared with December 31, 1999. Significant increases or decreases in total deposits and/or significant fluctuations among the different types of deposits are anticipated by Management as customers in the casino industry and county and municipal areas reallocate their resources periodically. The Company has managed its funds including planning the timing of investment maturities and using other funding sources and their maturity so as to achieve appropriate liquidity. Beginning with the third quarter of 2000, the Company acquired brokered certificates of deposit in the management of the bank subsidiary's liquidity position.
FEDERAL FUNDS PURCHASED AND SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE
Federal funds purchased and securities sold under agreements to repurchase increased $17,150,000 at December 31, 2001, as compared with December 31, 2000. This fluctuation is directly related to customers' periodic reallocation of their funds in a non-deposit product and the management of the Company's liquidity position.
BORROWINGS FROM FEDERAL HOME LOAN BANK
The Company acquires funds from the Federal Home Loan Bank in the management of the liquidity position.
SHAREHOLDERS' EQUITY
During 2001 and 2000, there were significant events that impacted the components of shareholders' equity. These events are detailed in Note H to the Consolidated Financial Statements included in this report.
Strength, security and stability have been the hallmark of the Company since its founding in 1985 and of its bank subsidiary since its founding in 1896. A strong capital foundation is fundamental to the continuing prosperity of the Company and the security of its customers and shareholders. There are numerous indicators of capital adequacy including primary capital ratios and capital formation rates. The Five-Year Comparative Summary of Selected Financial Information presents these ratios for those periods. This summary is included in the annual report to shareholders. The Company's total risk-based capital ratio at December 31, 2001, 2000 and 1999 was 21.90%, 21.13% and 23.69% as compared with the required standard of 8.00%. The Five-Year Comparative Summary of Selected Financial Information presents these figures.
Bank regulations limit the amount of dividends that may be paid by the bank subsidiary without prior approval of the Commissioner of Banking and Consumer Finance of the State of Mississippi. At December 31, 2001, approximately $2,651,000 of undistributed earnings of the bank subsidiary included in consolidated surplus and retained earnings was available for future distribution to the Company as dividends, subject to approval by the Board of Directors.
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.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
Peoples Financial Corporation and Subsidiaries
RESULTS OF OPERATIONS (continued)
NET INTEREST INCOME (continued)
Total interest income decreased $4,966,000 for the year ended December 31, 2001, as compared with the year ended December 31, 2000, and had increased $6,810,000 for the year ended December 31, 2000, as compared with the year ended December 31, 1999. This fluctuation in 2000 in interest income was primarily due to the increase in volume in loans. During 2001, the Company experienced a decline in interest income, particularly from loans, as a result of the decrease in the volume of loans during the year and the decrease in interest rates earned on loans.
Total interest expense decreased $1,048,000 for the year ended December 31, 2001, as compared with the year ended December 31, 2000, and had increased $4,960,000 for the year ended December 31, 2000, as compared with the year ended December 31, 1999. The increase was the result of both increases in interest bearing deposits as well as the increase in rates paid on these deposits. As previously discussed, the Company used brokered time deposits and borrowings from the Federal Home Loan Bank to address its liquidity position. The cost of these funding sources has been higher than other more traditional deposit funds, and has had a slightly negative impact on the Company's net margin. As these funds are repriced more favorably, such repricing having begun in the third quarter of 2001, the Company has realized a positive improvement in its interest margin. This improvement is expected to continue in 2002.
PROVISION FOR LOAN LOSSES
The Company continuously monitors its relationships with its loan customers, especially those in concentrated industries such as seafood, gaming and hotel/motel, and their direct and indirect impact on its operations. A thorough analysis of current economic conditions and the quality of the loan portfolio is conducted on a quarterly basis using the latest available information. These analyses are utilized in the computation of the adequacy of the allowance for loan losses. A provision is charged to income on a periodic basis to absorb potential losses based on these analyses. Further information related to the computation of the provision is presented in Note A.
During the second quarter of 2001, the Company identified negative events with respect to an overall softening of the economy, and during the second and fourth quarters of 2001, the Company identified negative events with respect to specific credits which required a large increase to the Company's provision for loan losses during those quarters. The Company believes this action will provide funds to absorb potential losses. Management continues to closely evaluate these loans, and the entire loan portfolio, in accordance with its policies and procedures. Absent any unforeseen unusual events, the Company will provide for its loan loss provision on a monthly basis in 2002 at a level consistent with provisions made during the first and third quarters of 2001.
SERVICE CHARGES
Service charges increased $1,299,000 for the year ended December 31, 2001, as compared with the year ended December 31, 2000, as a result of the introduction of a new overdraft protection product in the second quarter of 2001.
SALARIES AND EMPLOYEE BENEFITS
Salaries and employee benefits increased $977,000 for the year ended December 31, 2001, as compared with the year ended December 31, 2000, as a result of an increase in health insurance premiums and additional contributions made to the Company's ESOP.
OTHER EXPENSE
Other expense increased $543,000 for the year ended December 31, 2001, as compared with the year ended December 31, 2000, primarily due to write downs of other real estate of $409,000 during 2001.
RELATED PARTIES
The Company extends loans to certain officers and directors and their personal business interests, at terms and rates comparable to other loans of similar credit risks. Further disclosure of these transactions are presented in Note C. The Company has not currently engaged, nor does it have any plans to engage, in any other transactions with any related person or entities.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
Peoples Financial Corporation and Subsidiaries
LIQUIDITY
Liquidity represents the Company's ability to adequately provide funds to satisfy demands from depositors, borrowers and other commitments by either converting assets to cash or accessing new or existing sources of funds. Management monitors these funds requirements in such a manner as to satisfy these demands and provide the maximum earnings on its earning assets. Note J discloses information relating to financial instruments with off-balance-sheet risk, including letters of credit and outstanding unused loan commitments. The Company closely monitors the potential effect of funding these commitments on its liquidity position.
Deposits, payment of principal and interest on loans, proceeds from maturities of investment securities, earnings on investment securities, purchases of federal funds and securities sold under agreements to repurchase are the principal sources of funds for the Company. During 2000, the Company began using other, non-traditional sources of funds, including borrowings from the Federal Home Loan Bank. Recent state legislation, which is expected to become effective in 2002, will reduce the pledging requirements by individual financial institutions for public funds. As the Company has significant public funds, it anticipates that this reduction will positively affect the Company's liquidity position.
NEW ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board has issued several statements during the current year. Statement 141, "Business Combinations," Statement 142, "Goodwill and Other Intangible Assets" and Statement 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" were effective for the current year. Statement 143, "Accounting for Asset Retirement Obligations" is effective in 2003. The Company has evaluated the implementation of adopting these new pronouncements and has determined that their adoption will not have a material effect on its financial statements.
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Market risk is the risk of loss arising from adverse changes in market prices and rates. Interest rate risk is the most significant market risk affecting the Company. Other types of market risk, such as foreign currency exchange rate risk and commodity price risk, do not arise in the normal course of the Company's business activities. Also, the Company does not currently, and has no plans to, engage in trading activities or use derivative or off-balance sheet instruments to manage interest rate risk. The Company has risk management policies in place to monitor and limit exposure to market risk. The Asset/Liability Committee (ALCO), consisting of the President and 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 40% - 60% blend of fixed and floating rate loans. It is the general loan policy to offer loans with maturities of five years or less. On the liability side, more than 50% of the deposits are demand and savings transaction accounts. Additionally, the vast majority of the certificates of deposit mature within eighteen months. Since the Company's deposits are generally not rate-sensitive, they are considered to be core deposits. The short term nature of the financial assets and liabilities allows the Company to meet the dual requirements of liquidity and interest rate risk management.
The interest rate sensitivity tables on the next page provide additional information about the Company's financial instruments that are sensitive to changes in interest rates. The negative gap in 2002 is mitigated by the nature of the Company's deposits, whose characteristics have been previously described. The tabular disclosure reflects contractual interest rate repricing dates and contractual maturity dates. Loan maturities have been adjusted for reserve for loan losses. There have been no adjustments for such factors as prepayment risk, early calls of investments, the effect of the maturity of balloon notes or the early withdrawal of deposits. The Company does not believe that the aforementioned factors have a significant impact on expected maturity.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
Peoples Financial Corporation and Subsidiaries
Interest rate sensitivity at December 31, 2001 was as follows (in thousands):
12/31/01
2002 2003 2004 2005 2006 BEYOND TOTAL FAIR VALUE
----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------
Loans, net $ 103,132 $ 53,757 $ 66,641 $ 64,612 $ 40,466 $ 12,903 $ 341,511 $345,155
Average rate 6.61% 6.99% 7.16% 7.13% 6.46% 6.05% 6.88%
Securities 37,419 63,650 48,082 11,702 9,836 12,363 183,052 183,759
Average rate 4.73 4.44 4.75 5.25 5.59 7.18 4.96
Total Financial
Assets 140,551 117,407 114,723 76,314 50,302 25,266 524,563 528,914
Average rate 6.07 5.89 6.38 6.91 6.31 6.65 6.34
Deposits 309,323 23,245 1,937 868 868 86 336,327 339,640
Average rate 4.11 6.43 4.93 5.15 5.15 5.60 4.36
Long-term funds 71 72 361 64 48 5,269 5,885 6,356
Average rate 5.71 5.71 5.17 5.79 5.79 6.22 6.14
Total Financial
Liabilities 309,394 23,317 2,298 932 916 5,355 342,212 345,996
Average rate 4.11 6.43 4.97 5.19 5.18 6.22 4.40
|
Interest rate sensitivity at December 31, 2000 was as follows (in thousands):
12/31/00
2001 2002 2003 2004 2005 BEYOND TOTAL FAIR VALUE
----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------
Loans, net $ 129,705 $ 34,470 $ 56,354 $ 62,637 $ 77,099 $ 12,644 $ 372,909 $ 370,237
Average rate 9.84% 9.42% 9.19% 8.86% 9.90% 9.34% 9.55%
Securities 48,398 24,099 26,271 18,802 10,335 19,962 147,867 147,761
Average rate 5.83 6.14 5.95 6.16 6.75 5.27 5.90
Total Financial
Assets 178,103 58,569 82,625 81,439 87,434 32,606 520,776 517,998
Average rate 9.71 8.39 8.44 8.40 9.64 6.17 8.83
Deposits 302,189 23,429 17,981 1,159 773 112 345,643 347,516
Average rate 4.92 6.60 6.84 5.43 5.43 5.59 5.06
Long-term funds 18,014 25 26 256 10 5,120 23,451 23,589
Average rate 6.43 5.38 5.38 7.95 6.80 6.50 7.58
Total Financial
Liabilities 320,203 23,454 18,007 1,415 783 5,232 369,094 371,105
Average rate 5.02 6.60 6.84 6.04 5.43 6.50 5.29
|
CONSOLIDATED STATEMENTS OF CONDITION
Peoples Financial Corporation and Subsidiaries
December 31, 2001 2000 1999
------------ ------------ ------------ ------------
ASSETS
Cash and due from banks $ 32,034,976 $ 35,145,868 $ 35,540,978
Available for sale securities 142,902,274 48,167,770 33,075,555
Held to maturity securities, fair value of
$38,986,000 - 2001;
$97,946,000 - 2000;
$113,709,000 - 1999 38,278,962 98,051,955 115,272,790
Federal Home Loan Bank Stock, at cost 1,870,500 1,647,300 1,647,300
Loans 347,168,766 377,485,768 332,516,552
Less: Unearned income 9,612 6,985
Allowance for loan losses 5,658,210 4,567,565 4,338,149
------------ ------------ ------------
Loans, net 341,510,556 372,908,591 328,171,418
Bank premises and equipment, net 18,117,908 18,333,272 16,960,986
Other real estate 1,799,527 1,061,081 94,502
Accrued interest receivable 3,728,850 4,497,713 3,785,623
Other assets 6,768,669 7,430,384 3,423,266
------------ ------------ ------------
TOTAL ASSETS $587,012,222 $587,243,934 $537,972,418
============ ============ ============
|
See Notes to Consolidated Financial Statements.
CONSOLIDATED STATEMENTS OF CONDITION (continued)
Peoples Financial Corporation and Subsidiaries
December 31, 2001 2000 1999
------------ ------------- ------------- -------------
LIABILITIES & SHAREHOLDERS' EQUITY
LIABILITIES:
Deposits:
Demand, non-interest bearing $ 76,215,302 $ 68,080,764 $ 77,980,244
Savings and demand, interest bearing 145,248,560 137,531,988 149,878,462
Time, $100,000 or more 105,446,070 126,353,164 92,535,818
Other time deposits 85,632,730 81,758,161 74,286,633
------------- ------------- -------------
Total deposits 412,542,662 413,724,077 394,681,157
Accrued interest payable 613,762 1,028,564 768,943
Federal funds purchased and securities sold
under agreements to repurchase 82,488,859 65,339,084 60,833,677
Borrowings from Federal Home Loan Bank 5,548,988 23,159,507
Notes payable 336,251 291,481 274,129
Other liabilities 5,412,674 4,984,364 3,647,626
------------- ------------- -------------
TOTAL LIABILITIES 506,943,196 508,527,077 460,205,532
SHAREHOLDERS' EQUITY:
Common Stock, $1 par value, 15,000,000 shares authorized, 5,620,239,
5,795,207, and 5,905,344 shares issued and outstanding at December 31, 2001,
2000 and 1999, respectively, after giving retroactive effect to
two for one stock split effective April 17, 2000 5,620,239 5,795,207 5,905,344
Surplus 65,780,254 65,780,254 65,759,086
Undivided profits 7,052,559 7,093,830 6,837,628
Unearned compensation (174,043) (535,840) (624,842)
Accumulated other comprehensive income,
net of tax 1,790,017 583,406 (110,330)
------------- ------------- -------------
TOTAL SHAREHOLDERS' EQUITY 80,069,026 78,716,857 77,766,886
------------- ------------- -------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 587,012,222 $ 587,243,934 $ 537,972,418
============= ============= =============
|
See Notes to Consolidated Financial Statements.
CONSOLIDATED STATEMENTS OF INCOME
Peoples Financial Corporation and Subsidiaries
Year Ended December 31, 2001 2000 1999
----------------------- ----------- ----------- -----------
INTEREST INCOME:
Interest and fees on loans $28,174,153 $33,262,945 $26,425,625
Interest and dividends on securities:
U. S. Treasury 2,064,729 2,960,250 4,446,038
U. S. Government agencies and corporations 5,881,969 5,167,514 3,511,373
States and political subdivisions 514,351 540,191 454,577
Other investments 445,784 203,953 98,806
Interest on federal funds sold 203,566 115,781 503,882
----------- ----------- -----------
TOTAL INTEREST INCOME 37,284,552 42,250,634 35,440,301
----------- ----------- -----------
INTEREST EXPENSE:
Deposits 15,696,840 15,535,893 12,909,303
Long-term borrowings 437,144 879,339 10,605
Federal funds purchased and securities sold
under agreements to repurchase 2,219,601 2,986,052 1,520,997
----------- ----------- -----------
TOTAL INTEREST EXPENSE 18,353,585 19,401,284 14,440,905
----------- ----------- -----------
NET INTEREST INCOME 18,930,967 22,849,350 20,999,396
PROVISION FOR ALLOWANCE FOR LOSSES ON LOANS 2,503,000 4,191,700 120,000
----------- ----------- -----------
NET INTEREST INCOME AFTER PROVISION FOR
ALLOWANCE FOR LOSSES ON LOANS 16,427,967 18,657,650 20,879,396
----------- ----------- -----------
OTHER OPERATING INCOME:
Trust department income and fees 1,418,847 1,353,294 1,366,288
Service charges on deposit accounts 6,388,406 5,089,421 4,720,293
Gain on sale and calls of securities 243,126
Other income 1,205,750 1,235,617 680,015
----------- ----------- -----------
TOTAL OTHER OPERATING INCOME 9,256,129 7,678,332 6,766,596
----------- ----------- -----------
OTHER OPERATING EXPENSE:
Salaries and employee benefits 11,447,070 10,469,450 9,945,753
Net occupancy 1,178,261 1,145,536 864,694
Equipment rentals, depreciation
and maintenance 2,776,745 2,766,053 2,564,186
Other expense 5,795,068 5,251,641 5,062,970
----------- ----------- -----------
TOTAL OTHER OPERATING EXPENSE 21,197,144 19,632,680 18,437,603
----------- ----------- -----------
INCOME BEFORE INCOME TAXES AND
EXTRAORDINARY GAIN 4,486,952 6,703,302 9,208,389
INCOME TAXES 1,082,000 2,065,525 2,958,370
----------- ----------- -----------
INCOME BEFORE EXTRAORDINARY GAIN 3,404,952 4,637,777 6,250,019
EXTRAORDINARY GAIN, NET OF INCOME TAX 594,000
----------- ----------- -----------
NET INCOME $ 3,998,952 $ 4,637,777 $ 6,250,019
=========== =========== ===========
BASIC AND DILUTED EARNINGS PER SHARE $ .71 $ .79 $ 1.06
=========== =========== ===========
BASIC AND DILUTED EARNINGS PER SHARE BEFORE
EXTRAORDINARY GAIN $ .60 $ .79 $ 1.06
=========== =========== ===========
|
See Notes to Consolidated Financial Statements.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Peoples Financial Corporation and Subsidiaries
Number of
Common Common
Shares Stock Surplus
------------ ------------ ------------
BALANCE, JANUARY 1, 1999 5,905,344 $ 5,905,344 $ 60,759,086
Comprehensive Income:
Net income
Net unrealized loss on available for sale
securities, net of tax
Total comprehensive income
Purchase of common shares by ESOP
Allocation of ESOP shares
Cash dividends ($ .195 per share)
Transfer of undivided profits 5,000,000
------------ ------------ ------------
BALANCE, DECEMBER 31, 1999 5,905,344 5,905,344 65,759,086
Comprehensive Income:
Net income
Net unrealized gain on available for sale
securities, net of tax
Total comprehensive income
Purchase of common shares by ESOP
Allocation of ESOP shares
Cash dividends ($ .21 per share)
Dividend declared, ($ .11 per share)
Retirement of stock (110,137) (110,137) 21,168
------------ ------------ ------------
BALANCE, DECEMBER 31, 2000 5,795,207 5,795,207 65,780,254
Comprehensive Income:
Net income
Net unrealized gain on available for sale
securities, net of tax
Reclassification adjustment for available for
sale securities called or sold in current year,
net of tax
Total comprehensive income
Purchase of common shares by ESOP
Allocation of ESOP shares
Cash dividends ($ .12 per share)
Dividend declared ($ .12 per share)
Issuance of stock for stock incentive plan 6,886 6,886
Effect of stock retirement on accrued dividends
Retirement of stock (181,854) (181,854)
------------ ------------ ------------
BALANCE, DECEMBER 31, 2001 5,620,239 $ 5,620,239 $ 65,780,254
============ ============ ============
|
See Notes to Consolidated Financial Statements.
Accumulated
Other
Undivided Unearned Comprehensive Comprehensive
Profits Compensation Income Income Total
------------ ------------ ------------- ------------- ------------
BALANCE, JANUARY 1, 1999 $ 6,739,151 $ (160,900) $ 302,712 $ 73,545,393
Comprehensive Income:
Net income 6,250,019 $ 6,250,019 6,250,019
Net unrealized loss on available for sale
securities, net of tax (413,042) (413,042) (413,042)
------------
Total comprehensive income $ 5,836,977
============
Purchase of common shares by ESOP (684,842) (684,842)
Allocation of ESOP shares 220,900 220,900
Cash dividends ($ .195 per share) (1,151,542) (1,151,542)
Transfer of undivided profits (5,000,000)
------------ ------------ ------------ ------------
BALANCE, DECEMBER 31, 1999 6,837,628 (624,842) (110,330) 77,766,886
Comprehensive Income:
Net income 4,637,777 $ 4,637,777 4,637,777
Net unrealized gain on available for sale
securities, net of tax 693,736 693,736 693,736
------------
Total comprehensive income $ 5,331,513
============
Purchase of common shares by ESOP (83,068) (83,068)
Allocation of ESOP shares 172,070 172,070
Cash dividends ($ .21 per share) (1,235,428) (1,235,428)
Dividend declared, ($ .11 per share)
(637,473) (637,473)
Retirement of stock (2,508,674) (2,597,643)
------------ ------------ ------------ ------------
BALANCE, DECEMBER 31, 2000 7,093,830 (535,840) 583,406 78,716,857
Comprehensive Income:
Net income 3,998,952 $ 3,998,952 3,998,952
Net unrealized gain on available for sale
securities, net of tax 1,359,541 1,359,541 1,359,541
Reclassification adjustment for available for
sale securities called or sold in current year,
net of tax (152,930) (152,930) (152,930)
------------
Total comprehensive income $ 5,205,563
============
Purchase of common shares by ESOP (80,043) (80,043)
Allocation of ESOP shares 441,840 441,840
Cash dividends ($ .12 per share) (675,388) (675,388)
Dividend declared ($ .12 per share) (674,428) (674,428)
Issuance of stock for stock incentive plan 93,097 99,983
Effect of stock retirement on accrued dividends 15,545 15,545
Retirement of stock (2,799,049) (2,980,903)
------------ ------------ ------------ ------------
BALANCE, DECEMBER 31, 2001 $ 7,052,559 $ (174,043) $ 1,790,017 $ 80,069,026
============ ============ ============ ============
|
See Notes to Consolidated Financial Statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Peoples Financial Corporation and Subsidiaries
Year Ended December 31, 2001 2000 1999
----------------------- ------------- ------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 3,998,952 $ 4,637,777 $ 6,250,019
Adjustments to reconcile net income to net
cash provided by operating activities:
Gain on sales of other real estate (118,716) (19,581) (459,529)
Gain on sale and calls of securities (243,126)
Gain on sale of bank premises (317,690)
Stock incentive plan 99,983
Depreciation 1,864,827 1,827,000 1,661,201
Provision for allowance for loan losses 2,503,000 4,191,700 120,000
Provision for losses on other real estate 409,264 25,487 60,307
Changes in assets and liabilities:
Accrued interest receivable 768,863 (712,090) (657,344)
Other assets 140,233 (1,411,203) 11,523
Accrued interest payable (414,802) 259,621 (155,229)
Other liabilities (223,975) 342,154 22,590
------------- ------------- -------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 8,784,503 8,823,175 6,853,538
------------- ------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities, sales and calls of
available for sale securities 46,359,462 2,224,119 1,253,008
Investment in available for sale securities (139,028,899) (16,265,487) (22,125,300)
Proceeds from maturities and calls of held to
maturity securities 143,715,000 56,675,000 127,775,000
Investment in held to maturity securities (83,942,007) (39,454,165) (108,324,095)
Investment in Federal Home Loan Bank stock (223,200) (1,647,300)
Proceeds from sales of other real estate 1,044,119 96,000 579,000
Loans, net (increase) decrease 27,242,762 (49,896,792) (41,540,617)
Proceeds from sale of bank premises 469,065
Acquisition of premises and equipment (1,649,463) (3,331,227) (2,698,737)
Other assets 521,482 (2,595,915) 359,424
------------- ------------- -------------
NET CASH USED IN INVESTING ACTIVITIES (5,960,744) (52,079,402) (46,369,617)
------------- ------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Demand and savings deposits, net increase
(decrease) 15,851,110 (22,245,954) (4,622,758)
Time deposits made, net increase (decrease) (17,032,525) 41,288,874 17,701,679
Principal payments on notes (14,273) (13,646) (12,819)
Cash dividends (1,297,316) (1,235,428) (1,151,542)
Retirement of common stock (2,980,903) (2,597,643)
Borrowings from Federal Home Loan Bank 23,159,507
Repayments to Federal Home Loan Bank (17,610,519)
Federal funds purchased and securities sold
under agreements to repurchase, net increase 17,149,775 4,505,407 32,782,897
------------- ------------- -------------
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES (5,934,651) 42,861,117 44,697,457
------------- ------------- -------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (3,110,892) (395,110) 5,181,378
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 35,145,868 35,540,978 30,359,600
------------- ------------- -------------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 32,034,976 $ 35,145,868 $ 35,540,978
============= ============= =============
|
See Notes to Consolidated Financial Statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Peoples Financial Corporation and Subsidiaries
NOTE A - BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
BUSINESS OF THE COMPANY
Peoples Financial Corporation is a one-bank holding company headquartered in Biloxi, Mississippi. Its two operating subsidiaries are The Peoples Bank, Biloxi, Mississippi, and PFC Service Corp. Its principal subsidiary is The Peoples Bank, Biloxi, Mississippi, which provides a full range of banking, financial and trust services to individuals and small and commercial businesses operating in 15 locations in Harrison, Hancock, Stone 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 in consolidation.
BASIS OF ACCOUNTING
Peoples Financial Corporation and Subsidiaries recognize assets and liabilities, and income and expense, on the accrual basis of accounting. The preparation of financial statements in conformity with generally accepted accounting principles requires Management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.
CASH AND DUE FROM BANKS
The Company is required to maintain average reserve balances in its vault or on deposit with the Federal Reserve Bank. The average amount of these reserve requirements was approximately $8,420,000, $10,531,000 and $11,090,000 for the years ending December 31, 2001, 2000 and 1999, respectively.
The Company's bank subsidiary maintained account balances in excess of amounts insured by the Federal Deposit Insurance Corporation. At December 31, 2001, the bank subsidiary had excess deposits of $1,777,111. These amounts were uninsured and uncollateralized.
SECURITIES
The classification of securities is determined by Management at the time of purchase. Securities are classified as held to maturity when the Company has the positive intent and ability to hold the security until maturity. Securities held to maturity are stated at amortized cost.
Securities not classified as held to maturity are classified as available for sale and are stated at fair value. Unrealized gains and losses, net of tax, on these securities are recorded in shareholders' equity as accumulated other comprehensive income.
The amortized cost of available for sale securities and held to maturity securities is adjusted for amortization of premiums and accretion of discounts to maturity, determined using the interest method. Such amortization and accretion is included in interest income on securities. The specific identification method is used to determine realized gains and losses on sales of securities, which are reported as gain on sale and calls of securities in other operating income.
LOANS
The loan portfolio consists of commercial and industrial and real estate loans within the Company's trade area in South Mississippi. The loan policy establishes guidelines relating to pricing, repayment terms, collateral standards including loan to value (LTV) limits, appraisal and environmental standards, lending authority, lending limits and documentation requirements.
Loans are stated at the amount of unpaid principal, reduced by unearned income and the allowance for loan losses. Interest on loans is recognized over the terms of each loan based on the unpaid principal balance.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Peoples Financial Corporation and Subsidiaries
NOTE A - BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (continued)
LOANS (continued)
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. Interest received on nonaccrual loans is applied against principal. Loans are restored to accrual status when the obligation is brought current or has performed in accordance with the contractual terms for a reasonable period of time and the ultimate collectibility of the total contractual principal and interest is no longer in doubt. Loans classified as nonaccrual are generally identified as impaired loans. The policy for recognizing income on impaired loans is consistent with the nonaccrual policy.
ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses is established through provisions for loan losses charged against earnings. Loans deemed to be uncollectible are charged against the allowance for loan losses, and subsequent recoveries, if any, are credited to the allowance.
The allowance for loan losses is based on Management's evaluation of the loan portfolio under current economic conditions and is an amount that Management believes will be adequate to absorb probable losses on loans existing at the reporting date. The evaluation includes Management's assessment of several factors: reviews and evaluations of specific loans, changes in the nature and volume of the loan portfolio, current and anticipated economic conditions and the related impact on specific borrowers and industry groups, a study of loss experience, a review of classified, nonperforming and delinquent loans, the estimated value of any underlying collateral, an estimate of the possibility of loss based on the risk characteristics of the portfolio, adverse situations that may affect the borrower's ability to repay, and the results of regulatory examinations. This evaluation is inherently subjective as it requires material estimates that may be susceptible to significant change.
BANK PREMISES AND EQUIPMENT
Bank premises and equipment are stated at cost, less accumulated depreciation. Depreciation is computed primarily by the straight-line method based on the estimated useful lives of the related assets.
OTHER REAL ESTATE
Other real estate acquired through foreclosure is carried at the lower of cost (primarily outstanding loan balance) or estimated market value, less estimated costs to sell. If, at foreclosure, the carrying value of the loan is greater than the estimated market value of the property acquired, the excess is charged against the allowance for loan losses and any subsequent adjustments are charged to expense. Costs of operating and maintaining the properties, net of related income and gains (losses) on their disposition, are charged to expense as incurred.
TRUST DEPARTMENT INCOME AND FEES
Trust fees are recorded when received and amounted to $1,418,847, $1,353,294 and $1,366,288 in 2001, 2000 and 1999, respectively.
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 gains on the sale of bank premises which were structured under the provisions of Section 1031 of the Internal Revenue Code.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Peoples Financial Corporation and Subsidiaries
NOTE A - BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (continued)
ADVERTISING
Advertising costs are expensed as incurred.
LEASES
All leases are accounted for as operating leases in accordance with the terms of the leases.
EARNINGS PER SHARE
Basic and diluted earnings per share are computed on the basis of the weighted average number of common shares outstanding, 5,629,872, 5,857,232 and 5,905,344 in 2001, 2000 and 1999, respectively.
STATEMENTS OF CASH FLOWS
The Company has defined cash and cash equivalents to include cash and due from banks. The Company paid $18,768,387, $19,141,663 and $14,596,134 in 2001, 2000 and 1999, respectively, for interest on deposits and borrowings. Income tax payments totaled $1,847,250, $3,630,000 and $3,361,436 in 2001, 2000 and 1999, respectively. Loans transferred to other real estate amounted to $2,073,113 and $1,011,500 in 2001 and 2000, respectively. No loans were transferred to other real estate in 1999. After receiving regulatory approval, the Company transferred property with a book value of $19,434 from other real estate to banking premises during 2000. The income tax effect on the accumulated other comprehensive income was $621,587, $357,379 and ($212,779), at December 31, 2001, 2000 and 1999, respectively.
RECLASSIFICATIONS
Certain reclassifications have been made to the prior year statements to conform to current year presentation. The reclassifications had no effect on prior year net income.
NOTE B - SECURITIES:
The amortized cost and estimated fair value of securities at December 31, 2001, 2000 and 1999, respectively, are as follows (in thousands):
Gross Gross
Amortized unrealized unrealized Estimated fair
December 31, 2001 cost gains losses value
----------------- --------- ---------- ---------- --------------
Available for sale securities:
Debt securities:
U. S. Treasury $ 20,975 $ 207 $ (10) $ 21,172
U. S. Government agencies and corp 113,494 1,557 (74) 114,977
States and political subdivisions 1,759 4 1,763
-------- -------- -------- --------
Total debt securities 136,228 1,768 (84) 137,912
Equity securities 3,971 1,019 4,990
-------- -------- -------- --------
Total available for sale securities $140,199 $ 2,787 $ (84) $142,902
======== ======== ======== ========
Held to maturity securities:
U. S. Treasury $ 18,948 $ 283 $ $ 19,231
U. S. Government agencies and corp 13,687 306 13,993
States and political subdivisions 5,644 136 (18) 5,762
-------- -------- -------- --------
Total held to maturity securities $ 38,279 $ 725 $ (18) $ 38,986
======== ======== ======== ========
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Peoples Financial Corporation and Subsidiaries
NOTE B - SECURITIES: (continued)
Gross Gross
Amortized unrealized unrealized Estimated fair
December 31, 2000 cost gains losses value
----------------- --------- ---------- ---------- --------------
Available for sale securities:
Debt securities:
U. S. Treasury $ 5,966 $ 75 $ (42) $ 5,999
U. S. Government agencies and corp 32,492 121 (194) 32,419
States and political subdivisions 4,803 101 (23) 4,881
------- ------- ------- -------
Total debt securities 43,261 297 (259) 43,299
Equity securities 4,026 918 (75) 4,869
------- ------- ------- -------
Total available for sale securities $47,287 $ 1,215 $ (334) $48,168
======= ======= ======= =======
Held to maturity securities:
U. S. Treasury $31,797 $ 118 $ (35) $31,880
U. S. Government agencies and corp 60,181 33 (335) 59,879
States and political subdivisions 6,074 145 (32) 6,187
------- ------- ------- -------
Total held to maturity securities $98,052 $ 296 $ (402) $97,946
======= ======= ======= =======
|
Gross Gross
Amortized unrealized unrealized Estimated fair
December 31, 1999 cost gains losses value
----------------- --------- ---------- ---------- --------------
Available for sale securities:
Debt securities:
U. S. Treasury $ 5,994 $ $ (201) $ 5,793
U. S. Government agencies and corp 19,670 (720) 18,950
States and political subdivisions 3,808 (103) 3,705
-------- -------- -------- --------
Total debt securities 29,472 (1,024) 28,448
Equity securities 3,776 918 (66) 4,628
-------- -------- -------- --------
Total available for sale securities $ 33,248 $ 918 $ (1,090) $ 33,076
======== ======== ======== ========
Held to maturity securities:
U. S. Treasury $ 53,693 $ 147 $ (234) $ 53,606
U. S. Government agencies and corp 55,312 (1,441) 53,871
States and political subdivisions 6,268 106 (142) 6,232
-------- -------- -------- --------
Total held to maturity securities $115,273 $ 253 $ (1,817) $113,709
======== ======== ======== ========
|
The amortized cost and estimated fair value of debt securities at December 31, 2001, (in thousands) by contractual maturity, are shown on next page. 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.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Peoples Financial Corporation and Subsidiaries
NOTE B - SECURITIES: (continued)
Amortized Estimated fair
cost value
--------- --------------
Available for sale securities:
Due in one year or less $ 19,036 $ 19,233
Due after one year through five years 114,443 115,890
Due after five years through ten years 2,540 2,581
Due after ten years 209 208
-------- --------
Totals $136,228 $137,912
======== ========
Held to maturity securities:
Due in one year or less $ 18,186 $ 18,401
Due after one year through five years 17,381 17,823
Due after five years through ten years 895 899
Due after ten years 1,817 1,863
-------- --------
Totals $ 38,279 $ 38,986
======== ========
|
Proceeds from maturities and calls of held to maturity debt securities during 2001, 2000 and 1999 were $143,715,000, $56,675,000 and $127,775,000, respectively. There were no sales of held to maturity debt securities during 1999, 2000 and 2001. Proceeds from maturities and calls of available for sale debt securities were $46,359,462, $2,224,119 and $1,253,008 during 2001, 2000 and 1999, respectively. Available for sale debt securities were sold in 2001 for a gain of $243,126. There were no sales of available for sale debt securities during 1999 and 2000.
Securities with an amortized cost of approximately $149,013,000, $133,314,000 and $139,051,000 at December 31, 2001, 2000 and 1999, respectively, were pledged to secure public deposits, federal funds purchased and other balances required by law.
Federal Home Loan Bank (FHLB) common stock was purchased during 1999 in order for the Company to participate in certain FHLB programs. The amount invested in FHLB stock was calculated according to FHLB guidelines as a percentage of certain mortgage loans. The investment is carried at cost. Dividends received are reinvested in FLHB stock.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Peoples Financial Corporation and Subsidiaries
NOTE C - LOANS
The composition of the loan portfolio was as follows (in thousands):
December 31, 2001 2000 1999
------------ -------- -------- --------
Real estate, construction $ 25,636 $ 29,269 $ 24,793
Real estate, mortgage 224,524 235,835 215,726
Loans to finance agricultural production
and other loans to farmers 7,241 11,019 8,441
Commercial and industrial loans 71,271 79,620 63,104
Loans to individuals for household, family
and other consumer expenditures 15,068 17,186 16,476
Obligations of states and political subdivisions
(primarily industrial revenue bonds and local
government tax anticipation notes) 3,233 3,967 2,723
All other loans 196 590 1,254
-------- -------- --------
Totals $347,169 $377,486 $332,517
======== ======== ========
|
Transactions in the allowance for loan losses are as follows (in thousands):
2001 2000 1999
------- ------- -------
Balance, January 1 $ 4,568 $ 4,338 $ 4,382
Recoveries 561 699 244
Loans charged off (1,974) (4,661) (408)
Provision for allowance for loan losses 2,503 4,192 120
------- ------- -------
Balance, December 31 $ 5,658 $ 4,568 $ 4,338
======= ======= =======
|
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 collectibility and do not include other unfavorable features.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Peoples Financial Corporation and Subsidiaries
NOTE C - LOANS (continued)
An analysis of the activity with respect to such loans to related parties is as follows (in thousands):
2001 2000 1999
-------- -------- --------
Balance, January 1 $ 14,431 $ 11,363 $ 12,610
New loans and advances 20,533 26,141 21,704
Repayments (22,528) (23,073) (22,951)
-------- -------- --------
Balance, December 31 $ 12,436 $ 14,431 $ 11,363
======== ======== ========
|
Industrial revenue bonds with a carrying value of $898,687, $1,094,233 and $1,258,433 at December 31, 2001, 2000 and 1999, respectively, were pledged to secure public deposits.
Nonaccrual loans amounted to approximately $650,215, $3,424,280 and $100,000 at December 31, 2001, 2000 and 1999, respectively.
The total recorded investment in impaired loans amounted to $650,215, $3,424,280 and $100,000 at December 31, 2001, 2000 and 1999, respectively. The amount of that recorded investment in impaired loans for which there is no related allowance for loan losses was $650,215, $3,424,280 and $100,000 at December 31, 2001, 2000 and 1999, respectively. At December 31, 2001, 2000 and 1999, the average recorded investment in impaired loans was $661,000, $881,000 and $101,000, respectively. The amount of interest not accrued on these loans did not have a significant effect on earnings in 2001, 2000 or 1999.
NOTE D - BANK PREMISES AND EQUIPMENT
Bank premises and equipment are shown as follows (in thousands):
Estimated
December 31, useful lives 2001 2000 1999
------------ ------------ ------- ------- -------
Land $ 4,988 $ 4,845 $ 4,682
Buildings 5-40 years 15,315 14,551 12,480
Furniture, fixtures and equipment 3-10 years 11,107 10,364 9,889
------- ------- -------
Totals, at cost 31,410 29,760 27,051
Less: Accumulated depreciation 13,292 11,427 10,090
------- ------- -------
Totals $18,118 $18,333 $16,961
======= ======= =======
|
Depreciation expense charged to operations in 2001, 2000 and 1999 was $1,864,827, $1,827,000 and $1,661,201, respectively.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Peoples Financial Corporation and Subsidiaries
NOTE E - BORROWINGS FROM FEDERAL HOME LOAN BANK:
At December 31, 2000, the Company had $23,000,000 outstanding in advances under a $76,000,000 line of credit with the Federal Home Loan Bank of Dallas ("FHLB"). These advances bore interest at 6.43% - 6.50%. An advance of $18,000,000 was repaid on January 2, 2001, and the remaining funds mature in 2010. The advances are collateralized by a blanket floating lien on the Company's residential first mortgage loans.
NOTE F - NOTES PAYABLE:
The composition of the loan portfolio was as follows (in thousands):
December 31, 2001 2000 1999
------------ -------- -------- --------
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 $162,209 $176,481 $190,127
RiverHills Bank, $750,000 line of credit
for Peoples Financial Corporation Employee Stock Ownership Plan, secured by
the guarantee of the Company; Interest at New York Prime (4.75% at December
31, 2001) due quarterly, principal due at maturity
in June 2004 174,042 115,000 84,002
-------- -------- --------
Totals $336,251 $291,481 $274,129
======== ======== ========
|
The maturities of notes payable are as follows:
2002 $ 15,058
2003 15,885
2004 305,308
---------
Total $ 336,251
=========
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Peoples Financial Corporation and Subsidiaries
NOTE G - INCOME TAXES:
Federal income taxes payable (or refundable) and deferred taxes (or deferred charges) as of December 31, 2001, 2000 and 1999, included in other assets or other liabilities, were as follows (in thousands):
Years Ended December 31, 2001 2000 1999
------------------------ ------- ------- -------
Deferred tax assets:
Allowance for loan losses $ 1,542 $ 962 $ 888
Employee benefit plans' liabilities 938 718 618
Unrealized loss on available for sale
securities, charged to equity 168
Other 431 236 169
------- ------- -------
Deferred tax assets (2,911) (1,916) (1,843)
------- ------- -------
Deferred tax liabilities:
Accumulated depreciation 947 1,071 1,064
Deferred gain on sale of bank premises 1,687 1,687 1,582
Installment sales 13 14 14
Unrealized gains on available for sale
securities, charged to equity 813 193
------- ------- -------
Deferred tax liabilities 3,460 2,965 2,660
------- ------- -------
Net deferred taxes 549 1,049 817
Current payable (refundable) 75 (1,525) (85)
------- ------- -------
Totals $ 624 $ (476) $ 732
======= ======= =======
|
Income taxes consist of the following components (in thousands):
Years Ended December 31, 2001 2000 1999
------------------------ ------- ------- -------
Current $ 2,202 $ 2,195 $ 3,157
Deferred (1,120) (129) (199)
------- ------- -------
Totals $ 1,082 $ 2,066 $ 2,958
======= ======= =======
|
Deferred income taxes (benefits) resulted from the following (in thousands):
Years Ended December 31, 2001 2000 1999
------------------------ ----- ----- -----
Depreciation $(124) $ 7 $ 48
Provision for loan losses (580) (74) (112)
Officers' and directors' life insurance (220) (100) (87)
Deferred gain on sale of bank premises 105
Unrealized gain (loss) on available for sale
securities, charged to equity 620 361 (216)
Other (196) (67) (48)
----- ----- -----
Totals $(500) $ 232 $(415)
===== ===== =====
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Peoples Financial Corporation and Subsidiaries
NOTE G - INCOME TAXES: (continued)
Income taxes amounted to less than the amounts computed by applying the U.S. Federal income tax rate of 34.0% for 2001, 2000 and 1999, to earnings before income taxes. The reason for these differences is shown below (in thousands):
Years Ended December 31, 2001 AMOUNT % 2000 Amount % 1999 Amount %
------------------------ ----------- ------- ----------- ------- ----------- -------
Taxes computed at statutory rate $ 1,526 34.0 $ 2,279 34.0 $ 3,131 34.0
Increase (decrease) resulting from:
Tax-exempt interest income (259) (5.8) (263) (3.9) (301) (3.3)
Non-deductible interest 30 .7 34 0.5 27 0.3
Credit for certified historic
structure (113) (2.5)
Non-taxable life insurance
proceeds (62) (1.4)
Dividend exclusion (96) (2.1) (38) (0.6) (20) (.2)
Other, net 56 1.2 54 0.8 121 1.3
------- ------- ------- ------- ------- -------
Total income taxes $ 1,082 24.1 $ 2,066 30.8 $ 2,958 32.1
======= ======= ======= ======= ======= =======
|
NOTE H - SHAREHOLDER'S EQUITY:
On April 5, 2000, 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 2,952,672 shares of Company stock received an additional 2,952,672 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 by the bank subsidiary without prior approval of the Commissioner of Banking and Consumer Finance of the State of Mississippi. At December 31, 2001, approximately $2,651,000 of undistributed earnings of the bank subsidiary included in consolidated surplus and retained earnings was available for future distribution to the Company as dividends, subject to the approval by Board of Directors.
On May 24, 2000, the Company's Board of Directors approved the repurchase of up to 2.50% of the outstanding shares of the Company's common stock. As of December 31, 2001, 103,016 shares had been repurchased and retired under the plan approved May 24, 2000. On December 8, 2000, the Company's Board of Directors approved the repurchase of 146,304 shares of the outstanding common stock from one unrelated shareholder at a purchase price of $2,432,000. This repurchase was executed on January 2, 2001, and these shares were subsequently retired.
On May 23, 2001, the Company's Board of Directors approved a stock incentive program for two executive officers. Under this plan, whole shares valued as of the distribution date at $50,000 are to be distributed to each of these officers who continue to meet the eligibility requirements on June 15, 2001, and on January 15 of the four succeeding years. On June 15, 2001, a total of 6,886 shares of Peoples Financial Corporation common stock was issued. This incentive program was established subsequent to the surrender of split dollar policies that had been obtained on behalf of these executives.
On December 12, 2001, the Company's Board of Directors approved a semi-annual dividend of $ .12 per share. This dividend has a record date of January 9, 2002 and a distribution date of January 14, 2002.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Peoples Financial Corporation and Subsidiaries
NOTE H - SHAREHOLDER'S EQUITY: (continued)
The bank subsidiary is subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory, and possibly additional discretionary, actions by the regulators that, if undertaken, could have a direct material effect on the bank subsidiary's financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the bank subsidiary must meet specific capital guidelines that involve quantitative measures of the bank subsidiary's assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices. The bank subsidiary's capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors.
Quantitative measures established by regulation to ensure capital adequacy require the bank subsidiary to maintain minimum amounts and ratios of Total and Tier 1 capital to risk-weighted assets, and Tier 1 capital to average assets.
As of December 31, 2001, the most recent notification from the Federal Deposit Insurance Corporation categorized the bank subsidiary as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, the bank subsidiary must have a Total risk-based capital ratio of 10.00% or greater, a Tier 1 risk-based capital ratio of 6.00% or greater and a Leverage capital ratio of 5.00% or greater. There are no conditions or events since that notification that Management believes have changed the bank subsidiary's category.
The bank subsidiary's actual capital amounts and ratios and required minimum capital amounts and ratios for 2001, 2000 and 1999, are as follows:
Actual For Capital Adequacy Purposes
--------------------- -----------------------------
Amount Ratio Amount Ratio
----------- ----- ----------- -----
DECEMBER 31, 2001:
TOTAL CAPITAL (TO RISK WEIGHTED ASSETS) $83,201,465 21.90% $30,389,840 8.00%
TIER 1 CAPITAL (TO RISK WEIGHTED ASSETS) 78,453,052 20.65% 15,194,920 4.00%
TIER 1 CAPITAL (TO AVERAGE ASSETS) 78,453,052 13.25% 23,677,357 4.00%
December 31, 2000:
Total Capital (to Risk Weighted Assets) 83,236,856 21.13% 31,517,120 8.00%
Tier 1 Capital (to Risk Weighted Assets) 78,669,291 19.97% 15,758,560 4.00%
Tier 1 Capital (to Average Assets) 78,669,291 13.87% 22,682,441 4.00%
December 31, 1999:
Total Capital (to Risk Weighted Assets) 82,840,207 23.69% 27,969,862 8.00%
Tier 1 Capital (to Risk Weighted Assets) 78,502,058 22.45% 13,984,931 4.00%
Tier 1 Capital (to Average Assets) 78,502,058 15.16% 20,711,320 4.00%
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Peoples Financial Corporation and Subsidiaries
NOTE I - OTHER INCOME AND EXPENSES:
Other income consisted of the following:
December 31, 2001 2000 1999
------------ ---------- ---------- ----------
Other service charges, commissions and fees $ 280,517 $ 294,373 $ 268,370
Gain on sale of bank premises 317,690
Rentals 511,751 404,458 273,215
Other income 413,482 219,096 138,430
---------- ---------- ----------
Totals $1,205,750 $1,235,617 $ 680,015
========== ========== ==========
|
Other expenses consisted of the following:
December 31, 2001 2000 1999
------------ ----------- ----------- -----------
Advertising $ 463,103 $ 474,047 $ 485,419
Data processing 233,390 332,202 588,733
FDIC and state banking assessments 132,629 139,225 103,799
Legal and accounting 272,337 205,113 253,644
Postage and freight 211,792 189,740 194,842
Stationery, printing and supplies 191,803 261,747 339,236
Other real estate 328,133 (18,022) (425,729)
ATM expense 2,282,118 1,968,209 1,777,665
Federal Reserve service charges 152,815 131,485 118,032
Conferences and classes 112,469 137,852 115,103
Taxes and licenses 252,491 255,153 245,851
Consulting fees 11,250 35,718 22,983
Trust expense 350,525 354,744 317,673
Other 800,213 784,428 925,719
----------- ----------- -----------
Totals $ 5,795,068 $ 5,251,641 $ 5,062,970
=========== =========== ===========
|
NOTE J - FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK:
The Company is a party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit and irrevocable letters of credit. These instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the balance sheet. The contract amounts of those instruments reflect the extent of involvement the bank subsidiary has in particular classes of financial instruments. The Company's exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and irrevocable letters of credit is represented by the contractual amount of those instruments. The Company uses the same credit policies in making commitments and conditional obligations as it does for on-balance-sheet instruments.
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any conditions established in the agreement. Irrevocable letters of credit written are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. Commitments and irrevocable letters of credit generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since some of the commitments and irrevocable letters of credit may expire without being drawn upon, the total amounts do not necessarily represent future cash requirements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Peoples Financial Corporation and Subsidiaries
NOTE J - FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK: (continued)
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, west Jackson and Stone counties. The Company also grants loans on a limited basis in Claiborne County.
At December 31, 2001, 2000 and 1999, the Company had outstanding irrevocable letters of credit aggregating $3,344,016, $2,815,262 and $5,392,000, respectively. At December 31, 2001, 2000 and 1999, the Company had outstanding unused loan commitments aggregating $74,254,000, $73,201,000 and $110,690,000, respectively.
NOTE K - CONTINGENCIES:
The bank is involved in various other legal matters and claims which are being defended and handled in the ordinary course of business. None of these matters is expected, in the opinion of Management, to have a material adverse effect upon the financial position or results of operations of the Company.
NOTE L - CONDENSED PARENT COMPANY ONLY FINANCIAL INFORMATION:
Peoples Financial Corporation began its operations September 30, 1985, when it acquired all the outstanding stock of The Peoples Bank, Biloxi, Mississippi. A condensed summary of its financial information is shown below.
CONDENSED BALANCE SHEETS (in thousands)
December 31, 2001 2000 1999
------------ ------- ------- -------
Assets
Investments in subsidiaries, at underlying equity:
Bank subsidiary $79,483 $74,927 $77,395
Nonbank subsidiary 1 1 57
Cash in bank subsidiary 263 3,746 2
Other assets 1,821 1,893 1,641
------- ------- -------
Total assets $81,568 $80,567 $79,095
======= ======= =======
Liabilities and Shareholders' Equity
Notes payable $ 174 $ 536 $ 625
Other liabilities 1,325 1,314 703
------- ------- -------
Total liabilities 1,499 1,850 1,328
Shareholders' equity 80,069 78,717 77,767
------- ------- -------
Total liabilities and shareholders' equity $81,568 $80,567 $79,095
======= ======= =======
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Peoples Financial Corporation and Subsidiaries
NOTE L - CONDENSED PARENT COMPANY ONLY FINANCIAL INFORMATION: (continued)
CONDENSED STATEMENTS OF INCOME (in thousands)
Year Ended December 31, 2001 2000 1999
----------------------- ------- ------- -------
INCOME
Earnings of unconsolidated bank subsidiary:
Distributed earnings $ 700 $ 4,655 $ 1,629
Undistributed earnings 3,375 4,619
Earnings of unconsolidated nonbank subsidiary 1 1
Interest income 14 12 2
Other income 41 40 95
------- ------- -------
TOTAL INCOME 4,130 4,708 6,346
------- ------- -------
EXPENSES
Other expense 183 78 98
------- ------- -------
TOTAL EXPENSES 183 78 98
------- ------- -------
INCOME BEFORE INCOME TAXES 3,947 4,630 6,248
Income tax benefit (52) (8) (2)
------- ------- -------
NET INCOME $ 3,999 $ 4,638 $ 6,250
======= ======= =======
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CONDENSED STATEMENTS OF CASH FLOWS (in thousands)
Year Ended December 31, 2001 2000 1999
----------------------- ------- ------- -------
Cash flows from operating activities:
Net income $ 3,999 $ 4,638 $ 6,250
Adjustments to reconcile net income to net
cash provided by operating activities:
Net income of unconsolidated subsidiaries (4,075) (4,656) (6,249)
Stock incentive plan 100
Changes in assets and liabilities:
Other assets 71 (3)
------- ------- -------
Net cash provided by (used in)
operating activities 95 (21) 1
------- ------- -------
Cash flows from investing activities:
Investment in common stock (250) (504)
Dividends from unconsolidated subsidiary 700 7,791 1,629
------- ------- -------
Net cash provided by investing activities 700 7,541 1,125
------- ------- -------
Cash flows from financing activities:
Return of capital 56
Retirement of stock (2,981) (2,597)
Dividends paid (1,297) (1,235) (1,152)
------- ------- -------
Net cash used in financing activities (4,278) (3,776) (1,152)
------- ------- -------
Net increase (decrease) in cash (3,483) 3,744 (26)
Cash, beginning of year 3,746 2 28
------- ------- -------
Cash, end of year $ 263 $ 3,746 $ 2
======= ======= =======
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Peoples Financial Corporation paid income taxes of $1,847,250, $3,630,000 and $3,361,436 in 2001, 2000 and 1999, respectively. No interest was paid during the three years ended December 31, 2001.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Peoples Financial Corporation and Subsidiaries
NOTE M - EMPLOYEE BENEFIT PLANS:
The Company sponsors the Peoples Financial Corporation Employee Stock Ownership
Plan (ESOP). Employees who work more than 1,000 hours are eligible to
participate in the ESOP. The Plan included 401(k) provisions and the former Gulf
National Bank Profit Sharing Plan. Effective January 1, 2001, the ESOP was
amended to separate the 401(k) funds into the Peoples Financial Corporation
401(k) Plan. The separation had no impact on the eligibility or benefits
provided to the participants of either plan. The 401(k) provides for a matching
contribution of 75% of the amounts contributed by the employee (up to 6% of
compensation). Contributions are determined by the Board of Directors and may be
paid either in cash or Peoples Financial Corporation capital stock. Total
contributions to the plans charged to operating expense were $734,000, $360,000
and $360,000 in 2001, 2000, and 1999, respectively.
ESOP debt for acquisition of Company shares has been guaranteed by the Company and is reported as a debt of the Company. Shares pledged as collateral are reported as unearned compensation in equity. ESOP debt for acquisition from The Peoples Bank, Biloxi, Mississippi, is eliminated in consolidation. As shares are committed to be released, the Company reports compensation expense equal to the current market price of the shares, and the shares become outstanding for net income per share computations. Dividends on allocated ESOP shares are recorded as a reduction of retained earnings; dividends on unallocated ESOP shares are recorded as a reduction of debt and accrued interest.
Compensation expense of $7,681,720, $7,230,082 and $6,939,345 relating to the ESOP was recorded during 2001, 2000, and 1999, respectively. The ESOP held 560,010, 696,718, and 754,552 allocated shares and 14,355, and 19,254 suspense shares at December 31, 2000 and 1999, 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. 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 $4,558,220, $4,743,262 and $2,450,560 at December 31, 2001, 2000 and 1999, respectively. The present value of accumulated benefits under these plans, using an interest rate of 7.50% for 2001 and 9.00% for 2000 and 1999, and the projected unit cost method, has been accrued. The accrual amounted to $2,418,114, $1,798,078 and $1,523,024 at December 31, 2001, 2000 and 1999, respectively.
The Company also has additional plans for non-vested post-retirement benefits for certain key executives and directors. The Company has acquired insurance policies, with the bank subsidiary as owner and beneficiary, that it may use as a source to pay potential benefits to the plan participants. These contracts are carried at their cash surrender value, which amounted to $420,221, $478,248 and $425,235 at December 31, 2001, 2000 and 1999, respectively. The present value of accumulated benefits under these plans using an interest rate of 7.50% in 2001 and 8.50% in 2000 and 1999 and the projected unit cost method has been accrued. The accrual amounted to $341,819, $314,638 and $294,493 at December 31, 2001, 2000 and 1999, respectively.
The Company provides post-retirement health insurance to certain of its retired employees. Employees are eligible to participate in the retiree health plan if they retire from active service no earlier than their Social Security normal retirement age, which varies from 65 to 67 based on the year of birth. In addition, the employee must have at least 25 continuous years of service with the Company immediately preceding retirement. However, any active employee who was at least age 65 as of January 1, 1995, does not have to meet the 25 years of service requirement. The accumulated post-retirement benefit obligation at January 1, 1995, was $517,599, which the Company elected to amortize over 20 years. The Company reserves the right to modify, reduce or eliminate these health benefits.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Peoples Financial Corporation and Subsidiaries
NOTE M - EMPLOYEE BENEFIT PLANS: (continued)
The following is a summary of the components of the net periodic postretirement benefit cost:
Year Ended December 31, 2001 2000 1999
----------------------- -------- -------- --------
Service cost $ 67,981 $ 52,520 $ 62,975
Interest cost 70,461 58,321 55,862
Amortization of net transition obligation 20,600 20,600 20,600
-------- -------- --------
Net periodic postretirement benefit cost $159,042 $131,441 $139,437
======== ======== ========
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The discount rate used in determining the accumulated postretirement benefit obligation was 7.25% in 2001, 7.50% in 2000, and 7.75% in 1999. The assumed health care cost trend rate used in measuring the accumulated postretirement benefit obligation was 9.00% in 2001. 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, 2001, would be increased by 21.98 %, 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 25.43%. If the health care cost trend rate assumptions were decreased 1.00%, the accumulated postretirement benefit obligation as of December 31, 2001, would be decreased by 17.00%, 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 19.25%.
The following is a reconciliation of the accumulated postretirement benefit obligation:
Accumulated postretirement benefit obligation as of December 31, 2000 $ 884,645
Service cost 65,873
Interest cost 70,461
Actuarial loss 336,822
Benefits paid (36,077)
----------
Accumulated postretirement benefit obligation as of December 31, 2001 $1,321,724
==========
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Year Ended December 31, 2001 2000 1999
----------------------- ----------- ----------- -----------
Accumulated postretirement benefit obligation:
Retirees $ 395,895 $ 293,192 $ 295,164
Eligible to retire 44,172 35,626 32,463
Not eligible to retire 881,657 555,827 439,909
----------- ----------- -----------
Total 1,321,724 884,645 767,536
Plan assets at fair value -0- -0- -0-
----------- ----------- -----------
Accumulated postretirement benefit obligation
in excess of plan assets 1,321,724 884,645 767,536
Unrecognized transition obligation (267,797) (288,397) (308,997)
Unrecognized cumulative net (gain) loss
from past experience different from that
assumed and from changes in assumptions (394,611) (59,897) (23,614)
----------- ----------- -----------
Accrued postretirement benefit cost $ 659,316 $ 536,351 $ 434,925
=========== =========== ===========
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Peoples Financial Corporation and Subsidiaries
NOTE N - FAIR VALUE OF FINANCIAL INSTRUMENTS:
SFAS 107, "Disclosures About Fair Value of Financial Instruments," requires all entities to disclose the fair value of financial instruments, both assets and liabilities recognized and not recognized in the statement of condition, for which it is practical to estimate its fair value. SFAS 107 excluded certain financial instruments and all nonfinancial instruments from its disclosure requirements. Accordingly, the aggregate fair value amounts presented do not represent the underlying value of the Company. In preparing these disclosures, Management made highly sensitive estimates and assumptions in developing the methodology to be utilized in the computation of fair value. These estimates and assumptions were formulated based on judgments regarding economic conditions and risk characteristics of the financial instruments that were present at the time the computations were made. Events may occur that alter these conditions and thus perhaps change the assumptions as well. A change in the assumptions might affect the fair value of the financial instruments disclosed in this footnote. In addition, the tax consequences related to the realization of the unrealized gains and losses have not been computed or disclosed herein. These fair value estimates, methods and assumptions are set forth below.
CASH AND DUE FROM BANKS
The amount shown as cash and due from banks approximates fair value.
AVAILABLE FOR SALE SECURITIES
The fair value of available for sale securities is based on quoted market prices.
HELD TO MATURITY SECURITIES
The fair value of held to maturity securities is based on quoted market prices.
LOANS
The fair value of loans is estimated by discounting the future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings for the remaining maturities. The cash flows considered in computing the fair value of such loans are segmented into categories relating to the nature of the contract and collateral based on contractual principal maturities. Appropriate adjustments are made to reflect probable credit losses. Cash flows have not been adjusted for such factors as prepayment risk or the effect of the maturity of balloon notes.
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.
LONG TERM FUNDS
The fair value of long term funds is computed by discounting the cash flows using current borrowing rates.
ACCRUED INTEREST PAYABLE
The amount shown as accrued interest payable approximates fair value.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Peoples Financial Corporation and Subsidiaries
NOTE N - Fair Value of Financial Instruments: (continued)
The following table presents carrying amounts and estimated fair values for financial assets and financial liabilities at December 31, 2001, 2000 and 1999 (in thousands):
2001 2000 1999
--------------------- --------------------- ---------------------
CARRYING FAIR Carrying Fair Carrying Fair
AMOUNT VALUE Amount Value Amount Value
-------- -------- -------- -------- -------- --------
Financial Assets:
Cash and due from banks $ 32,035 $ 32,035 $ 35,146 $ 35,146 $ 35,541 $ 35,541
Available for sale securities 142,902 142,902 48,168 48,168 33,076 33,076
Held to maturity securities 38,279 38,986 98,052 97,946 115,273 113,709
Loans, net 341,511 345,155 372,909 370,237 328,171 327,962
Accrued interest receivable 3,729 3,729 4,498 4,498 3,786 3,786
Financial Liabilities:
Deposits:
Non-interest bearing 76,215 76,215 68,081 68,081 77,980 77,980
Interest bearing 336,327 339,640 345,643 347,516 316,701 316,636
-------- -------- -------- -------- -------- --------
Total deposits 412,542 415,855 413,724 415,597 394,681 394,616
Federal funds purchased and
securities sold under
agreements to repurchase 82,489 82,489 65,339 65,339 60,834 60,834
Long term funds 5,885 6,356 23,451 23,589 274 256
Accrued interest payable 614 614 1,029 1,029 769 769
|
NOTE O - EXTRAORDINARY GAIN:
In 2001, the Company agreed to an out of court settlement of an insurance claim. An extraordinary gain of $594,000, net of taxes was realized in the current year as a result of this settlement.
INDEPENDENT AUDITOR'S 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, 2001, 2000 and 1999, and the related consolidated statements of income, shareholders' equity and cash flows for the years then ended. These financial statements are the responsibility of the Company's Management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by Management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Peoples Financial Corporation and Subsidiaries at December 31, 2001, 2000 and 1999, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.
Certified Public Accountants
/s/ PILTZ, WILLIAMS, LAROSA & CO. PILTZ, WILLIAMS, LAROSA & CO. Biloxi, Mississippi January 18, 2002 |
BOARD OF DIRECTORS & OFFICERS
Peoples Financial Corporation and Subsidiaries
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.
Dan Magruder, President, Rex Distributing
Co., Inc.
Lyle M. Page, Partner, Page, Mannino,
Peresich & McDermott
OFFICERS
Peoples Financial Corporation
Chevis C. Swetman, President and CEO
Andy Carpenter, Executive Vice-President
Thomas J. Sliman, First Vice-President
Jeannette E. Romero, 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
& McDermott
OFFICERS
The Peoples Bank, Biloxi, Mississippi
SENIOR MANAGEMENT
Chevis C. Swetman, President and CEO
Andy Carpenter, Executive Vice-President
Thomas J. Sliman, Senior Vice-President
Jeannette E. Romero, 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
CONSUMER LENDING
Brian J. Kozlowski, Assistant Vice-President
Stephanie D. Broussard, Loan Officer Shannon D. Garrett, Loan Officer
COMPLIANCE
Evelyn R. Herrington, Assistant Vice-President
AUDIT AND ACCOUNTING
Gregory M. Batia, Auditor
Caroline B. Randolph, Trust Auditor
James M. Gruich, Assistant Vice-President -
Technology Security
Connie F. Lepoma, Assistant Vice-President -
Accounting
Rebecca A. Williams, Assistant Auditor
INVESTMENTS
Peggy M. Byrd, Vice-President
Janet H. Wood, Assistant Vice-President
LOAN PROCESSING
Donna F. Bessetti, Vice-President
Jesse J. Migues, Assistant Vice-President
Lisa S. Adams, Assistant Cashier
LOAN REVIEW
Robert E. Smith, Jr., Vice-President
F. Kay Woodbury, Loan Review Officer
PERSONNEL
Jackie L. Henson, Vice-President
Patricia L. Levine, Vice-President Janice L. Smitherman, Assistant Vice-President - Employee Benefits
MARKETING
Jennifer S. Crane, Assistant Vice-President
ASSET MANAGEMENT & Trust Services
M. O. Lawrence, III, Senior Vice-President
Ann F. Guice, Vice-President
Louise C. Wilson, Trust Officer
Thomas H. Wicks, 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
Ronnie F. Harrison, Assistant Vice-President
SECURITY
Robin J. Vignes, Vice-President
Minh-Tuyet Nguyen, Security Officer Margaret H. Chandler, 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, 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 Vice-President -
Operations
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
Toni A. Ganucheau, Assistant Cashier
John M. Zorich, Internet Banking Technology
Officer
BRANCH LOCATIONS & OFFICERS
The Peoples Bank Biloxi, Mississippi
BILOXI BRANCHES
o Main Office, 152 Lameuse Street, Biloxi, Mississippi 39530, (228) 435-5511 Ralph A. Seymour, Vice-President
o Cedar Lake Office, 11355 Cedar Lake Road, Biloxi, Mississippi 39532,
(228) 435-8688
Julie B. Carpenter, Branch Manager
o West Biloxi Office, 2430 Pass Road, Biloxi, Mississippi 39531, (228) 435-8203 Read H. Breeland, Assistant Vice-President Diana T. Winland, Loan Officer
GULFPORT BRANCHES
o 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
o Handsboro Office, 0412 E. Pass Road, Gulfport, Mississippi 39507,
(228) 897-8717
John L. Welter, IV, Branch Manager
o Orange Grove Office, 12020 Highway 49 North, Gulfport, Mississippi 39503,
(228) 897-8718
Mark A. Chatham, Vice-President
Other Branches
o 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
J. Denise Holmes, Loan Officer
o Diamondhead Office, 4408 West Aloha Drive, Diamondhead, Mississippi 39525,
(228) 897-8714
William R. Aborn, Branch Manager
o D'Iberville-St. Martin Office, 10491 Lemoyne Boulevard, D'Iberville,
Mississippi 39532, (228) 435-8202
Jerome D. Dodge, II, Vice-President
Henry N. Knue, Loan Officer
o Long Beach Office, 403 Jeff Davis Avenue, Long Beach, Mississippi 39560,
(228) 897-8712
Eric M. Chambless, Assistant Vice-President
o Ocean Springs Office, 2015 Bienville Boulevard, Ocean Springs, Mississippi
39564, (228) 435-8204
Andrew M. Welter, Assistant Vice-President
David A. Thompson, Assistant Vice-President
o Pass Christian Office, 125 Henderson Avenue, Pass Christian, Mississippi
39571, (228) 897-8719
J. Patrick Wild, Vice-President
o Saucier Office, 17689 Second Street, Saucier, Mississippi 39574,
(228) 897-8716
James P. Estrada, Assistant Vice-President
o Wiggins Office, 1312 S. Magnolia Drive, Wiggins, Mississippi 39577,
(228) 897-8722
William S. Maddox, Branch Manager
CORPORATE INFORMATION
Peoples Financial Corporation and Subsidiaries
CORPORATE OFFICE
MAILING ADDRESS PHYSICAL ADDRESS WEBSITE
P. O. Box 529 152 Lameuse Street www.thepeoples.com
Biloxi, MS 39533-0529 Biloxi, MS 39530
(228) 435-8205
|
CORPORATE STOCK
The common stock of Peoples Financial Corporation is traded on the NASDAQ Small Cap Market under the symbol: PFBX. The current market makers are:
Johnston Lemon & Company
Morgan Keegan & Company, Inc.
Sterne, Agee & Leach, Inc.
SHAREHOLDER INFORMATION
For complete information concerning the common stock of Peoples Financial Corporation, including dividend reinvestment, or general information about the Company, direct inquiries to transfer agent/investor relations:
Asset Management & Trust Services Department
The Peoples Bank, Biloxi, Mississippi
Attention: M. O. Lawrence, III, Senior Vice-President
P. O. Box 1416, Biloxi, Mississippi 39533-1416
(228) 435-8208, e-mail: investorrelations@thepeoples.com
INDEPENDENT AUDITORS
Piltz, Williams, LaRosa & Company, Biloxi, Mississippi
S.E.C. FORM 10-K REQUESTS
A copy of the Annual Report on Form 10-K, as filed with the Securities and Exchange Commission, may be obtained without charge by directing a written request to:
Lauri A. Wood, Chief Financial Officer and Controller
Peoples Financial Corporation
P. O. Drawer 529, Biloxi, Mississippi 39533-0529
(228) 435-8412, e-mail: lwood@thepeoples.com
[BACK COVER]
EXHIBIT 23
Consent of Certified Public Accountants
We consent to the use of our reports, dated January 18, 2002, in Form 10-K filing of the Peoples Financial Corporation.
/s/ Piltz, Williams, LaRosa & Co. PILTZ, WILLIAMS, LAROSA & CO. Biloxi, Mississippi March 15, 2002 |