PEOPLES FINANCIAL CORP /MS/ (Form: 10-K, Received: 03/26/2004 11:51:55)

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934 OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2003

Commission File Number 0-30050

PEOPLES FINANCIAL CORPORATION

(Exact name of registrant as specified in its charter)


Mississippi		64-0709834

(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification number


Lameuse and Howard Avenues, Biloxi, Mississippi		39533

(Address of principal executive offices)		(Zip code)

228-435-5511

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12 (b) of the Act:


		Name of Each Exchange on
Title of Each Class		Which Registered

None		None

Securities registered pursuant to Section 12 (g) of the Act:

Common, $1.00 Par Value

(Title of each class)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES [X] NO [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the Registrant’s knowledge in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to the Form 10-K. [X]

Indicate by check mark whether the registrant is an accelerated filer (as defined by Rule 12b-2 of the Act.) YES [ ] NO [X]

At June 30, 2003, the aggregate market value of the registrant’s voting stock held by non-affiliates was approximately $61,707,000.

On March 1, 2004, the registrant had outstanding 5,557,379 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, 2003 are incorporated by reference into Parts I, II and III of this report. Portions of the Registrant’s Definitive Proxy Statement issued in connection with the Annual Meeting of Shareholders to be held April 14, 2004, are incorporated by reference into Part III of this report.

CONTENTS


PART I
Item 1.	Business	4
Item 2.	Properties	27
Item 3.	Legal Proceedings	27
Item 4.	Submission of Matters to a Vote of Security Holders	27
PART II
Item 5.	Market for the Registrant’s Common Stock And Related Stockholder Matters	27
Item 6.	Selected Financial Data	27
Item 7.	Management’s Discussion and Analysis of Financial Condition And Results of Operations	27
Item 7a.	Quantitative and Qualitative Disclosures About Market Risk	27
Item 8.	Financial Statements and Supplementary Data	28
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	28
Item 9a.	Controls and Procedures	28
PART III
Item 10.	Directors and Executive Officers of the Registrant	28
Item 11.	Executive Compensation	29
Item 12.	Security Ownership of Certain Beneficial Owners and Management	29
Item 13.	Certain Relationships and Related Transactions	29
Item 14.	Principal Accountant Fees and Services	29
PART IV
Item 15.	Exhibits, Financial Statement Schedules and Reports On Form 8-K	30
Description of Automobile Plan
Directors' Deferred Income Plan Agreements
Executive Supplemental Income Plan Agreements
Split Dollar Plan Agreements
Annual Report to Shareholders - Year End 12/31/03
Consent of Certified Public Accountants
Certification of Chief Executive Officer
Certification of Chief Financial Officer
Certification of Chief Executive Officer
Certification of Chief Financial Officer

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, 2003, 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, 2003, the Bank also had fifteen (15) branches located

throughout Harrison, Hancock, Jackson and Stone Counties. The Bank has automated teller machines (“ATM”) at its Main Office, all branch locations and at numerous non-proprietary locations.

At December 31, 2003, the Bank employed 207 full-time employees and 17 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 Jackson Counties in Mississippi; however, some business is obtained from Claiborne County, Pearl River 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 10 - 29 of the 2003 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 5 - 9 of the 2003 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 31 and “Management’s Discussion and Analysis” on pages 5 - 9 of the 2003 Annual Report are incorporated herein by reference.

DIVIDEND PAYOUT


	Years Ended December 31,
	2003			2002			2001
Dividend payout ratio		32.22	%		42.11	%		33.80	%

SCHEDULE I-A

Distribution of Average Assets, Liabilities and Shareholders’ Equity for the Periods Indicated (2)


Years Ended December 31, (In thousands)	2003		2002		2001
ASSETS:
Cash and due from financial institutions	$	34,423	$	34,560	$	33,948
Available for sale securities:
Taxable securities		189,053		141,296		86,590
Non-taxable securities		5,359		2,054		3,628
Other securities		6,454		6,511		6,747
Held to maturity securities:
Taxable securities		6,629		19,079		65,783
Non-taxable securities		3,619		5,058		5,829
Net loans (1)		287,504		319,023		353,316
Federal funds sold		5,685		11,677		5,595
Other assets		35,522		30,696		30,498

TOTAL ASSETS	$	574,248	$	569,954	$	591,934

LIABILITIES AND SHAREHOLDERS’ EQUITY:
Non-interest bearing deposits	$	119,038	$	77,254	$	69,375
Interest bearing deposits		267,017		325,135		363,950

Total deposits		386,055		402,389		433,325
Federal funds purchased and securities sold under agreements to repurchase		87,912		74,580		66,606
Other liabilities		17,793		12,631		13,560

Total liabilities		491,760		489,600		513,491
Shareholders’ equity		82,488		80,354		78,443

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	574,248	$	569,954	$	591,934

(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)	2003		2002		2001
INTEREST EARNING ASSETS:
Loans (1)	$	293,708	$	324,757	$	358,291
Federal funds sold		5,685		11,677		5,595
Available for sale securities:
Taxable securities		189,053		141,296		86,590
Non-taxable securities		5,359		2,054		3,628
Other securities		6,454		6,511		6,747
Held to maturity securities:
Taxable securities		6,629		19,079		65,783
Non-taxable securities		3,619		5,058		5,829

TOTAL INTEREST EARNING ASSETS	$	510,507	$	510,432	$	532,463

INTEREST BEARING LIABILITIES:
Savings and negotiable interest bearing deposits	$	129,799	$	153,867	$	144,780
Time deposits		137,218		171,268		219,170
Federal funds purchased and securities sold under agreements to repurchase		87,912		74,580		66,606
Other borrowed funds		10,749		6,004		7,152

TOTAL INTEREST BEARING LIABILITIES	$	365,678	$	405,719	$	437,708

(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)	2003		2002		2001
INTEREST EARNED ON:
Loans (2)	$	17,182	$	20,061	$	28,174
Federal funds sold		62		196		204
Available for sale securities:
Taxable securities		6,893		5,658		4,407
Non-taxable securities		268		113		243
Other securities		249		257		446
Held to maturity securities:
Taxable securities		311		900		3,540
Non-taxable securities		290		420		536

TOTAL INTEREST EARNED (1)	$	25,255	$	27,605	$	37,550

INTEREST PAID ON:
Savings and negotiable interest bearing deposits	$	1,489	$	2,398	$	3,990
Time deposits		2,896		5,654		11,707
Federal funds purchased and securities sold under agreements to repurchase		998		1,180		2,220
Other borrowed funds		456		384		437

TOTAL INTEREST PAID	$	5,839	$	9,616	$	18,354

(1) All interest earned is reported on a taxable equivalent basis using a tax rate of 34% in 2003, 2002 and 2001.

(2) Loan fees of $547, $521 and $386 for 2003, 2002 and 2001, 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)	2003			2002			2001
AVERAGE RATE EARNED ON:
Loans		5.85	%		6.18	%		7.86	%
Federal funds sold		1.09			1.68			3.65
Available for sale securities:
Taxable securities		3.65			4.00			5.09
Non-taxable securities		5.00			5.50			6.70
Other securities		3.86			3.95			6.61
Held to maturity securities:
Taxable securities		4.69			4.72			5.38
Non-taxable securities		8.01			8.30			9.20

TOTAL (weighted average rate) (1)		4.95	%		5.41	%		7.05	%

AVERAGE RATE PAID ON:
Savings and negotiable interest bearing deposits		1.15	%		1.56	%		2.76	%
Time deposits		2.11			3.30			5.34
Federal funds purchased and securities sold under agreements to repurchase		1.14			1.58			3.33
Other borrowed funds		4.24			6.40			6.11

TOTAL (weighted average rate)		1.60	%		2.37	%		4.19	%

(1) All interest earned is reported on a taxable equivalent basis using a tax rate of 34% in 2003, 2002 and 2001.

SCHEDULE I-E
Net Interest Earnings and Net Yield on Interest Earning Assets


Years Ended December 31,
(In thousands except percentages)	2003			2002			2001
Total interest income (1)	$	25,255		$	27,605		$	37,550
Total interest expense		5,839			9,616			18,354

Net interest earnings	$	19,416		$	17,989		$	19,196

Net yield on interest earning assets		3.83	%		3.52	%		3.61	%

(1) All interest earned is reported on a taxable equivalent basis using a tax rate of 34% in 2003, 2002 and 2001.

SCHEDULE I-F
Analysis of Changes In Interest Income and Interest Expense
(In thousands)


					Attributable to:
					Increase									Rate /
	2003		2002		(Decrease)			Volume			Rate			Volume
INTEREST INCOME:(1)
Loans (2) (3)	$	17,182	$	20,061	$	(2,879	)	$	(1,918	)	$	(1,063	)	$	102
Federal funds sold		62		196		(134	)		(170	)		268			(232	)
Available for sale securities:
Taxable securities		6,893		5,658		1,235			1,912			(506	)		(171	)
Non-taxable securities		268		113		155			181			(10	)		(16	)
Other securities		249		257		(8	)		(2	)		(6	)
Held to maturity securities:
Taxable securities		311		900		(589	)		(587	)		(5	)		3
Non-taxable securities		290		420		(130	)		(119	)		(15	)		4

Total	$	25,255	$	27,605	$	(2,350	)	$	(703	)	$	(1,337	)	$	(310	)

INTEREST EXPENSE:
Savings and negotiable interest bearing deposits	$	1,489	$	2,398	$	(909	)	$	(375	)	$	(632	)	$	98
Time deposits		2,896		5,654		(2,758	)		(1,124	)		(2,039	)		405
Federal funds purchased and securities sold under agreements to repurchase		998		1,180		(182	)		211			(333	)		(60	)
Other borrowed funds		456		384		72			303			(129	)		(102	)

Total	$	5,839	$	9,616	$	(3,777	)	$	(985	)	$	(3,133	)	$	341

(1) All interest earned is reported on a taxable equivalent basis using a tax rate of 34% in 2003 and 2002.

(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 /
	2002		2001		(Decrease)			Volume			Rate			Volume
INTEREST INCOME:(1)
Loans (2) (3)	$	20,061	$	28,174	$	(8,113	)	$	(2,637	)	$	(6,042	)	$	566
Federal funds sold		196		204		(8	)		222			(110	)		(120	)
Available for sale securities:
Taxable securities		5,658		4,407		1,251			2,784			(940	)		(593	)
Non-taxable securities		113		243		(130	)		(105	)		(43	)		18
Other securities		257		446		(189	)		(16	)		(180	)		7
Held to maturity securities:
Taxable securities		900		3,540		(2,640	)		(2,513	)		(437	)		310
Non-taxable securities		420		536		(116	)		(71	)		(52	)		7

Total	$	27,605	$	37,550	$	(9,945	)	$	(2,336	)	$	(7,804	)	$	195

INTEREST EXPENSE:
Savings and negotiable interest bearing deposits	$	2,398	$	3,990	$	(1,592	)	$	250		$	(1,734	)	$	(108	)
Time deposits		5,654		11,707		(6,053	)		(2,559	)		(4,472	)		978
Federal funds purchased and securities sold under agreements to repurchase		1,180		2,220		(1,040	)		266			(1,166	)		(140	)
Other borrowed funds		384		437		(53	)		(70	)		20			(3	)

Total	$	9,616	$	18,354	$	(8,738	)	$	(2,113	)	$	(7,352	)	$	727

(1) All interest earned is reported on a taxable equivalent basis using a tax rate of 34% in 2002 and 2001.

(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):	2003		2002		2001
Available for sale securities:
U. S. Government, agency and corporate obligations	$	195,888	$	142,751	$	136,149
States and political subdivisions		7,267		4,139		1,763
Other securities		4,331		4,594		4,990

Total	$	207,486	$	151,484	$	142,902

Held to maturity securities:
U. S. Government, agency and corporate obligations	$	1,000	$	12,998	$	32,635
States and political subdivisions		3,353		4,590		5,644

Total	$	4,353	$	17,588	$	38,279

SCHEDULE II-B
Maturity of Securities Portfolio at December 31, 2003
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	$	30,271		3.37	%	$	101,274		3.53	%	$	61,785		4.36	%	$	2,558		5.43	%
States and political subdivisions		167		2.93	%		3,422		3.65	%		1,471		3.43	%		2,207		3.69	%
Other																	4,331		3.86	%

Totals	$	30,438		3.36	%	$	104,696		3.54	%	$	63,256		4.28	%	$	9,096		4.39	%

Held to maturity securities:
U. S. Government, agency and corporate obligations	$	1,000		5.29	%	$					$					$
States and political subdivisions		131		4.45	%		1,212		5.25	%		283		5.27	%		1,727		5.23	%

Totals	$	1,131		5.20	%	$	1,212		5.25	%	$	283		5.27	%	$	1,727		5.23	%

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):	2003		2002		2001		2000		1999
Real estate, construction	$	14,896	$	21,534	$	25,636	$	29,269	$	24,793
Real estate, mortgage		223,246		197,478		224,524		235,835		215,726
Loans to finance agricultural production and other loans to farmers		3,980		7,375		7,241		11,019		8,441
Commercial and industrial loans		41,832		65,946		71,271		79,620		63,104
Loans to individuals for household, family and other consumer expenditures		11,020		15,990		15,068		17,186		16,476
Obligations of states and political subdivisions		2,560		3,637		3,233		3,967		2,723
All other loans		389		336		196		580		1,254

Totals	$	297,923	$	312,296	$	347,169	$	377,476	$	332,517

(1) No foreign debt outstanding.

SCHEDULE III-B

Maturities and Sensitivity to Changes in
Interest Rates of the Loan Portfolio as of December 31, 2003


	Maturity (In thousands)
			Over one year
	One year or		through 5
	less		years		Over 5 years		Total
Loans:
Real estate, construction	$	11,110	$	2,012	$	1,774	$	14,896
Real estate, mortgage		47,011		131,642		44,593		223,246
Loans to finance agricultural production and other loans to farmers		3,860		120				3,980
Commercial and industrial loans		18,529		18,288		5,015		41,832
Loans to individuals for household, family and other consumer expenditures		4,264		6,573		183		11,020
Obligations of states and political subdivisions		241		812		1,507		2,560
All other loans		327		62				389

Totals	$	85,342	$	159,509	$	53,072	$	297,923

Loans with pre-determined interest rates	$	22,067	$	79,269	$	14,584	$	115,920
Loans with floating interest rates		63,275		80,240		38,488		182,003

Totals	$	85,342	$	159,509	$	53,072	$	297,923

SCHEDULE III-C
Non-Performing Loans


December 31, (In thousands):	2003		2002		2001		2000		1999
Loans accounted for on a non-accrual basis (1)	$	7,415	$	6,550	$	650	$	3,424	$	100

Loans which are contractually past due 90 or more days as to interest or principal payment, but are not included above		4,867		2,828		1,732		24		1,238

(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. See Note C to the 2003 Annual Report to Shareholders for discussion of impaired loans.

SCHEDULE IV-A
Summary of Loan Loss Expenses
(In thousands except percentage data)


	2003			2002			2001			2000			1999
Average amount of loans outstanding (1)	$	293,708		$	324,757		$	358,291		$	359,624		$	304,201

Balance of allowance for loan losses at the beginning of period	$	6,697		$	5,658		$	4,568		$	4,338		$	4,382
Loans charged-off:
Commercial, financial and agricultural		109			139			895			2,088			334
Consumer and other		1,236			1,926			1,079			2,573			74

Total loans charged-off		1,345			2,065			1,974			4,661			408
Recoveries of loans previously charged-off:
Commercial, financial and agricultural		42			64			230			209			190
Consumer and other		558			612			331			490			54

Total recoveries		600			676			561			699			244

Net loans charged-off		745			1,389			1,413			3,962			164
Provision for loan losses charged to operating expense		447			2,428			2,503			4,192			120

Balance of allowance for loan losses at end of period	$	6,399		$	6,697		$	5,658		$	4,568		$	4,338

Ratio of net charge-offs during period to average loans outstanding		0.25	%		0.43	%		0.39	%		1.10	%		0.05	%

(1) Net of unearned income.

SCHEDULE IV-B
Allocation of the Allowance for Loan Losses


	2003				2002				2001				2000				1999
			% of				% of				% of				% of				% of
			Loans				Loans to				Loans				Loans				Loans
Balance at December			to Total				Total				to Total				to Total				to Total
31, (In thousands)	Amount		Loans		Amount		Loans		Amount		Loans		Amount		Loans		Amount		Loans
Real estate, construction	$	658		5	$	245		7	$	256		7	$	260		8	$	289		7
Real estate, mortgage		3,229		74		3,770		63		4,260		65		2,913		62		2,647		65
Loans to finance agricultural production and other loans to farmers		20		1		70		2		72		2		237		3		245		3
Commercial and industrial loans		1,963		14		2,425		21		875		20		918		21		859		18
Loans to individuals for household, family and other consumer expenditures		525		4		173		5		175		4		200		4		256		5
Obligations of states and political subdivisions		-0-		1		-0-		1		-0-		1		-0-		1		-0-		1
All other loans		4		1		14		1		15		1		25		1		23		1
Unallocated		-0-		N/A		-0-		N/A		5		N/A		15		N/A		19		N/A

Totals	$	6,399		100	$	6,697		100	$	5,658		100	$	4,568		100	$	4,338		100

SCHEDULE V
Summary of Average Deposits and Their Yields


	2003					2002					2001
Years Ended December
31, (In thousands
except for percentage
data)	Amount		Rate			Amount		Rate			Amount		Rate
Demand deposits in domestic offices	$	119,038		N/A		$	77,254		N/A		$	69,375		N/A
Negotiable interest bearing deposits in domestic offices		86,447		1.27	%		119,034		1.45	%		119,900		2.76	%
Savings deposits in domestic offices		43,352		.92	%		34,833		1.93	%		24,880		2.73	%
Time deposits in domestic offices		137,218		2.11	%		171,268		3.30	%		219,170		5.34	%

Total deposits	$	386,055		1.14	%	$	402,389		2.00	%	$	433,325		3.62	%

Certificates of deposit outstanding in amounts $100,000 or more (in thousands) by the amount of time remaining until maturity as of December 31, 2003, are as follows:


Remaining maturity:
3 months or less	$	30,103
Over 3 through 6 months		19,348
Over 6 months through 12 months		7,526
Over 12 months		1,206

Total	$	58,183

SCHEDULE VI
Short Term Borrowings
(In thousands except percentage data)


	2003			2002			2001
Amount outstanding at December 31,	$	95,039		$	67,246		$	82,489
Weighted average interest rate at December 31,		1.03	%		1.08	%		1.62	%
Maximum outstanding at any month-end during year	$	97,757		$	95,261		$	82,489
Average amount outstanding during year	$	87,912		$	74,580		$	66,606
Weighted average interest rate		1.14	%		1.58	%		3.33	%

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, 2003 (In	0 - 3			4 - 12			1 - 5			Over 5
thousands)	Months			Months			Years			Years			Total
ASSETS:
Loans (1)	$	177,843		$	15,202		$	79,340		$	18,123		$	290,508
Available for sale securities		14,063			16,375			104,696			72,352			207,486
Held to maturity securities		101			1,029			1,213			2,010			4,353

Total assets	$	192,007		$	32,606		$	185,249		$	92,485		$	502,347

FUNDING SOURCES:
Interest bearing deposits	$	219,280		$	53,985		$	22,866		$	2		$	296,133
Long-term funds		10,068			205			748			6,159			17,180

Total funding sources	$	229,348		$	54,190		$	23,614		$	6,161		$	313,313

REPRICING/MATURITY GAP:
Period	$	(37,341	)	$	(21,584	)	$	161,635		$	86,324		$	189,034
Cumulative		(37,341	)		(58,925	)		102,710			189,034
Period Gap/Total Assets		(7.43	%)		(4.29	)%		32.18	%		17.18	%
Cumulative Gap/Total Assets		(7.43	%)		(11.72	)%		20.46	%		37.64	%

(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 15 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 34 of the 2003 Annual Report to Shareholders.

ITEM 3 — LEGAL PROCEEDINGS

The information included in Note K to the Consolidated Financial Statements included in the 2003 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 FOR THE REGISTRANT’S COMMON STOCK AND RELATED STOCKHOLDER MATTERS

The information provided on page 32 of the 2003 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 31 of the 2003 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 5 — 9 of the 2003 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 8 — 9 of the 2003 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 10 — 30 of the 2003 Annual Report are incorporated herein by reference:

Consolidated Statements of Condition on page 10

Consolidated Statements of Income on page 11

Consolidated Statements of Shareholders’ Equity on page 12 - 13

Consolidated Statements of Cash Flows on page 14

Notes to Consolidated Financial Statements on pages 15 - 29

Independent Auditors’ Report on page 30

ITEM 9 — CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9a — CONTROLS AND PROCEDURES

Based on their evaluation, as of December 31, 2003, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(c) and 15d-15(c)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) are effective. During the period ending December 31, 2003, there were no changes in internal controls over financial reporting that materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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 14, 2004, which was filed by the Company in definitive form with the Commission on March 12, 2004, is incorporated herein by reference.

The Company’s Board of Directors has adopted a Code of Conduct that applies to not only the chief executive officer and the chief financial officer, but also all of the officers, directors and employees of the Company and its subsidiaries. A copy of this Code of Conduct can be found at the Company’s internet website at www.thepeoples.com. The Company intends to disclose any amendments to its

Code of Conduct, and any waiver from a provision of the Code of Conduct granted to the Company’s chief executive officer or chief financial officer on the Company’s internet website within five business days following such amendment or waiver. The information contained on or connected to the Company’s internet website is not incorporated by reference into this Form 10-K and should not be considered part of this or any other report that the Company may file with or furnish to the SEC.

ITEM 11 — EXECUTIVE COMPENSATION

The information in Section V contained in the Proxy Statement in connection with the Annual Meeting of Shareholders to be held April 14, 2004, which was filed by the Company in definitive form with the Commission on March 12, 2004, 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 14, 2004, which was filed by the Company in definitive form with the Commission on March 12, 2004, 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 14, 2004, which was filed by the Company in definitive form with the Commission on March 12, 2004, is incorporated herein by reference.

ITEM 14 — PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information in Section XII contained in the Proxy Statement in connection with the Annual Meeting of Shareholders to be held April 14, 2004, which was filed by the Company in definitive form with the Commission on March 12, 2004, is incorporated herein by reference.

PART IV

ITEM 15 — 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

Form

Exhibit

Registration or File

Date of

Number in

Description

Number

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*

(10.2)

Directors’ Deferred Income Plan Agreements*

(10.3)

Executive Supplemental
Income Plan Agreements*

(10.4)

Split Dollar Plan Agreements*

(10.5)

Deferred Compensation Plan

33-15595

10-K

12/31/93

10.5

(10.6)

Description of Stock Incentive Plan

33-15595

10-K

12/31/01

10.6

(13)

Annual Report to Shareholders for year ended December 31, 2003 * ( C)

(21)

Proxy Statement for Annual Meeting of Shareholders to be held April 14, 2004

(22)

Subsidiaries of the registrant

33-15595

10-K

12/31/88

Incorporated by

Reference to

Form

Exhibit

Registration or File

Date of

Number in

Description

Number

Report

(23)

Consent of Certified Public Accountants *

(31.1)

Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes -Oxley Act of 2002*

(31.2)

Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes — Oxley Act of 2002*

(32.1)

Certification of Chief Executive Officer Pursuant to 18 U.S.C. ss. 1350*

(32.2)

Certification of Chief Financial Officer Pursuant to 18 U.S.C. ss. 1350*

(b) Reports on Form 8-K:

A Form 8-K was filed on October 17, 2003 and January 12, 2004.

(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)


		Date: March 24, 2004
	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 24, 2004
Chevis C. Swetman, Chairman, President and CEO


BY:	/s/ Drew Allen	BY:	/s/ Dan Magruder
Date:	March 24, 2004	Date:	March 24, 2004
	Drew Allen, Director		Dan Magruder, Director

BY:		BY:	/s/ Lyle M. Page

Date:		Date:	March 24, 2004
	Rex E. Kelly, Director		Lyle M. Page, Director

		BY:	/s/ Lauri A. Wood

		Date:	March 24, 2004
			Lauri A. Wood, Principal Financial
			and Accounting Officer

Exhibit 10.1

Description of Automobile Plan

The Company maintains an Automobile Plan for its executive officers. Under the terms of the Plan, an executive officer may be given the use of a Company automobile for their use during business hours. The executive officer is permitted to take the automobile home at night and on weekends. The amount of compensation to the executive officer as a result of the personal use of the automobile is taxable income to the officer. Alternatively, an executive officer may choose to receive an automobile allowance, which is taxable income to the officer.

EXHIBIT 10.2

DIRECTORS DEFERRED INCOME AGREEMENT

This Agreement is entered into on this the ______________ day of __________________, 19 ___________, by and between PEOPLES BANK OF BILOXI, BILOXI, MISSISSIPPI, hereinafter called the "Bank", and LYLE M. PAGE, hereinafter called the "Director".

WITNESSETH:

WHEREAS, the Bank recognizes that the competent and faithful efforts of the Director on behalf of the Bank have contributed significantly to the success and growth of the Bank; and

WHEREAS, the Bank values the efforts, abilities and accomplishments of the Director and recognizes the Director's services will substantially contribute to the continued growth and profits in the future; and

WHEREAS, the Bank desires to compensate the Director and retain the services of the Director for five years if re-elected to serve on the Board of Directors; and

WHEREAS, the Director, in consideration of the foregoing, agrees to continue to serve as a Director, if re-elected; and

WHEREAS, the Director has agreed to defer receipt of fees to be earned in the future.

NOW, THEREFORE, it is mutually agreed as follows:

1. DEFINITIONS

For the purposes of this Agreement, whenever the context so indicates, the singular or plural number and the masculine, feminine, or neuter gender shall be deemed to include the other, the terms, "he," "his," and "him," shall refer to the Officer, and the capitalized terms shall have the following meanings:

Beneficiary:               The person or persons the Director has designated in
                           writing to the Bank; if none, then the Director's
                           Spouse, if living; if none, then the Children of the
                           Director; if none, then the Estate of the Director.

Children:                  The Director's children, both natural and adopted,
                           then living at the time payments are due the Children
                           under this Agreement.

Deferred
Compensation
Benefit:                   The benefit provided to the Director at his
                           Retirement Age, provided he has satisfied the
                           conditions and terms of this Agreement, as calculated
                           in paragraph 5.

Estate:                    Means the Estate of the Director. The benefits
                           remaining, if any, after death of the Director, the
                           Director's designated Beneficiaries, Spouse, and
                           Children shall be paid to the Estate of the Director.

Spouse:                    The individual to whom the Director is legally
                           married at the time of the Director's death.

2. DEFERRAL OF FEES

The Director has elected to defer receipt of Five Thousand Five Hundred and 00/100 Dollars ($5,500.00) annually of Director's fees to be earned during the five year period which commenced with the execution of the Election to Participate Form (a copy of which is attached hereto), said form to be filed with the Secretary of the Board. Any increase in Director's fees payable to the Directors of the Bank due to an increase in the fee structure shall be covered by the above mentioned election unless the Director directs the Secretary in writing within 10 days after notification of the increase and prior to the right to receive the additional fees that such additional fees are not to be deferred. If Director fees are increased or decreased during the deferral period, the compensation payable under paragraph (3) and (4) shall be determined by reference to the Adjustment Schedule held by the Secretary and adopted by the Board of Directors and evidenced by an addendum to this Agreement.

3. COMPENSATION

The Bank agrees to pay to the Director, if living, and if not, then to the designated Beneficiary(ies) as recorded with the Secretary of the Bank, the total sum of One Hundred Seventeen Thousand Nine Hundred Twenty and 40/100 Dollars ($117,920.40) payable in monthly installments of Nine Hundred Eighty-two and 67/100 Dollars ($982.67) for one hundred twenty consecutive months, commencing on the first day of the month following the completion of the five year deferral or the Director's attainment of age 65 whichever occurs last, or upon Director's death if such shall occur first. However, said amounts shall be adjusted as provided by the provisions of paragraph 5 as required therein.

4. DEATH OF DIRECTOR AFTER BEGINNING OF PAYMENTS

If the Director dies after the beginning of monthly payments, but prior to receiving the full one hundred twenty monthly installments, the remaining monthly installments will be paid to the Director's designated Beneficiary(ies). The Beneficiary(ies) shall receive all remaining monthly installments which the Director would have received until the total sum set forth in paragraph 3 is paid.

5. BENEFIT REDUCTION CLAUSE

If the Director shall terminate service on the Board during the five year deferral period, the benefits provided under this Agreement will be reduced prorata by the amount of time remaining in the five year period.

6. STATUS OF AGREEMENT

This Agreement does not constitute a contract of employment between the parties, nor shall any provision of this Agreement restrict the right of the Bank's Shareholders to replace the Director or the right of the Director to terminate service on the Board.

7. BINDING EFFECT

This Agreement shall be binding upon the parties hereto and upon the successors and assigns of the Bank, and upon the heirs and legal representatives of the Director.

8. BENEFICIARY DESIGNATION

For purposes of this Agreement, the Director shall designate primary and contingent Beneficiary(ies) on forms furnished by the Bank (a copy is attached hereto). Such Director may then from time to time change the designated Beneficiary(ies) by written notice to the Bank and upon such change, the rights of all previously designated Beneficiary(ies) to receive any benefits under this Agreement shall cease. If, at the date of death of the Director, no duly designated

Beneficiary(ies) exists, or if the Beneficiary(ies) designated shall have died prior to the death of the Director, or if the Director has revoked a prior designation by a writing filed with the Bank without having filed a new designation, then any death benefits which would have been payable to the Beneficiary(ies) shall be payable to the Director's Spouse, if any; if none, to the Director's surviving Children, share and share alike; or if non survive, then to the Director's Estate.

9. INCOMPETENCY

If the Bank shall find that any person to whom any payment is payable under this Agreement is unable to care for their affairs because of illness or accident, or is a minor, any payment due (unless a prior claim therefore shall have been made by a duly appointed guardian, committee or other legal representative) may be paid to the spouse, a child, a parent, a brother or sister, or a custodian determined pursuant to the Uniform Gift to Minors Act, or to any person deemed by the Bank to have incurred expense for such person otherwise entitled to payment, in such manner and proportions as the Bank may determine. Any such payment shall be a complete discharge of the liabilities of the Bank under this Agreement.

10. ASSIGNMENT OF RIGHTS

None of the rights to compensation under this Agreement are assignable by the Director or any Beneficiary(ies) or designee of the Director, and any attempt to anticipate, sell, transfer, assign, pledge, encumber, or change the Director's right to receive Compensation shall be void.

11. FUNDING

The Bank's obligations under this Agreement shall be an unfunded and unsecured promise to pay. The Bank shall not be obligated under any circumstances to fund or otherwise secure its obligations under this Agreement. Under no circumstances will the Bank, without the consent of the Director, cause this Agreement to be directly funded in whole or part through escrow, trust, or otherwise such as to create a pre-retirement or post-retirement taxable event to the Director or an annual post-death taxable event to his beneficiary through direct annual or monthly payments to the Director of his beneficiary as provided in paragraph 3.

12. DIRECTOR RIGHTS

The rights of the Director, any designated Beneficiary(ies) of the Director, or any other person claiming through the Director under this Agreement, shall be solely those of an unsecured general creditor of the Bank. The Director, a designated Beneficiary(ies) of the Director, or any other person claiming through the Director shall only have the right to receive from the Bank those payments as specified under this Agreement.

13. ASSETS

It is agreed that the Director, the Director's designated Beneficiary(ies), or any other person claiming through the Director shall have no rights or interests whatsoever in any asset of the Bank in connection with the liabilities the Bank has assumed under this Agreement, or otherwise. Any asset used or acquired by the Bank in connection with the liabilities it has assumed under this Agreement shall not be deemed to be held under any trust for the benefit of the Director or the Director's designated Beneficiary(ies), nor

shall it be considered security for the performance of the obligations of the Bank, and it shall be, and remain, a general, unpledged, and unrestricted asset of the Bank.

14. AMENDMENT

During the lifetime of the Director and prior to retirement, this Agreement may be amended or revoked at any time, in whole or in part, by the mutual written agreement of the Bank and the Director.

15. LAW GOVERNING

This Agreement shall be governed by the laws of the State of Mississippi.

16. SEVERABILITY

In the event that any of the provisions of this Agreement or portion thereof, are held to be inoperative or invalid by any court of competent jurisdiction, then: (1) insofar as is reasonable, effect will be given to the intent manifested in the provision held invalid or inoperative, and (2) the validity and enforceability of the remaining provisions will not be affected thereby.

17. SUICIDE

Notwithstanding anything to the contrary in this Agreement, the benefits otherwise provided herein shall not be payable if the Director's death results from suicide, whether sane or insane, within two years after the execution of this Agreement. If the Director dies during this two year period due to suicide, the fees deferred will be paid to the Director's designated Beneficiary(ies) in a single payment. Payment is to be made within thirty days after the Director's death is declared a suicide by competent legal authority.

Credit shall be given to the Bank for payments made prior to determination of suicide.

18. PERIOD OF ECONOMIC HARDSHIP

19. EXECUTION OF AGREEMENT

This Agreement shall be executed in triplicate, each copy of which, when so executed and delivered, shall be an original, but all three copies shall together constitute one and the same instrument.

In witness hereof, the parties have signed this Agreement the day and year written here below.

________________________                        ________________________________
         Date                                              LYLE M. PAGE

                                                     PEOPLES BANK OF BILOXI
                                                      BILOXI, MISSISSIPPI

________________________                        ________________________________
         Date                                                              Title

THE PEOPLES BANK, BILOXI, MISSISSIPPI
BILOXI, MISSISSIPPI

DIRECTORS DEFERRED INCOME AGREEMENT

This Agreement is effective on the 1st day of January, 1991, by and between THE PEOPLES BANK, BILOXI, MISSISSIPPI Biloxi, Mississippi (the "Bank") and LYLE M. PAGE (the "Director").

WITNESSETH:

WHEREAS, the Bank recognizes that the competent and faithful efforts of the Director on behalf of the Bank have contributed significantly to the success and growth of the Bank;

WHEREAS, the Bank desires to compensate the Director and retain the services of the Director if re-elected to serve on the Board of Directors;

WHEREAS, the Director, in consideration of the foregoing, agrees to continue to serve as a Director, if re-elected; and

WHEREAS, the Director has agreed to defer receipt of fees to be earned in the future.

NOW, THEREFORE, it is mutually agreed as follows:

ARTICLE 1. DEFINITIONS

For the purposes of this Agreement, whenever the context so indicates, the capitalized terms shall have the following meanings:

Beneficiary:               The person or persons designated by the Director who
                           may become entitled to receive the Compensation
                           payable under Article 3 and Article 4 of this
                           Agreement (See Article 8).

Deferral Period:           The sixty (60) month period which commenced on the
                           date shown on the Addendum to this AGREEMENT. An
                           Election to Participate Form signed by the Director
                           is included and made a part of this Agreement.

ARTICLE 2. DEFERRAL OF FEES

The Director has elected to defer receipt of Director's fees to be earned during the Deferral Period. Once the Director has executed the Election to Participate Form, a subsequent increase in the Director's fees payable due to an increase in the fee structure shall also be deferred under the provisions of this Agreement, unless the Director directs the Secretary in writing within 10 days after notification of the increase and prior to the right to receive the additional fees that such additional fees are not to be deferred. If Director fees are increased or decreased during the Deferral Period, the Compensation payable under Article 3 and Article 4 shall be actuarially determined and evidenced by the Addendum to this Agreement.

ARTICLE 3. COMPENSATION

The Bank agrees to pay Director, if living, and if not, then to the designated Beneficiary, the Annual Compensation as

shown in the Addendum to this Agreement. Annual Compensation is to be paid in monthly payments, for a total of one hundred twenty (120) consecutive payments, commencing on the first business day of the month following the date upon which the Director attains the age of 65, or upon Director's death if such shall occur before the payments have commenced. The payments may be accelerated or paid in a lump sum at the request of the Director and subject to the Board's discretion. Accelerated payments are to be actuarially determined to be of substantially the same value as payments made under the terms of this Article using the current Pension Benefit Guaranty Corporation interest rate for valuing immediate annuities. However, in any event, Compensation payable under this Article 3 and the Addendum to this Agreement shall be adjusted as provided by the provisions of Article 5.

ARTICLE 4. DEATH OF DIRECTOR AFTER BEGINNING OF PAYMENTS

If the Director dies after the beginning of payments, but prior to receiving the full one hundred twenty (120) payments, the Bank shall continue to pay such payments to the Director's Beneficiary until the total number of payments made to the Director and the Beneficiary equal one hundred twenty (120).

ARTICLE 5. BENEFIT REDUCTION CLAUSE

If the Director shall terminate service on the Board during the Deferral Period, the Compensation provided under this Agreement will be reduced pro rata by the amount of time remaining in the Deferral Period.

ARTICLE 6. STATUS OF AGREEMENT

This Agreement does not constitute a contract of employment between the parties, nor shall any provision of

this Agreement restrict the right of the Bank's shareholders to replace the Director or the right of the Director to terminate service on the Board.

ARTICLE 7. BINDING EFFECT

This Agreement shall be binding upon and inure to the benefit of the parties hereto and upon the successors and assigns of the Bank, and upon the heirs and legal representatives of the Director.

ARTICLE 8. BENEFICIARY DESIGNATION

While covered under this Agreement, the Director may from time to time designate, in writing, any person or entity, contingently or successively to whom the Bank shall pay the Director's compensation in the event of the Director's death. If the Director fails to designate a Beneficiary or if the Beneficiary predeceases the Director, then benefits are payable to the Director's estate. If the Beneficiary dies before complete distribution of the Director's benefits, then the Bank shall pay the Director's Compensation to the Beneficiary's estate.

ARTICLE 9. INCOMPETENCY

If the Bank shall find that any person to whom any payment is payable under this Agreement is unable to care for his or her affairs because of illness or accident, or is a minor, any payment due (unless a prior claim therefore shall have been made by a duly appointed guardian, committee or other legal representative) may be paid to the spouse, a child, a parent, a brother or sister, or a custodian determined pursuant to the Uniform Gift to Minors Act, or to any person deemed by the Bank to have incurred expense for

such person otherwise entitled to payment, in such manner and proportions as the Bank may determine. Any such payment shall be a complete discharge of the liabilities of the Bank under this Agreement.

ARTICLE 10. ASSIGNMENT OF RIGHTS

None of the rights to Compensation under this Agreement are assignable by the Director or any Beneficiary or designee of the Director, and any attempt to anticipate, sell, transfer, assign, pledge, encumber, or change the Director's right to receive Compensation shall be void.

ARTICLE 11. NAMED FIDUCIARY

(a) The Bank is hereby designated as the Named Fiduciary under this Agreement. The Named Fiduciary shall have authority to control and manage the operation and administration of this Agreement, and it shall be responsible for establishing and carrying out a funding policy and method consistent with the objectives of this Agreement.

(b) The Bank shall make all determinations as to rights to benefits under this Agreement. Any decision by the Bank denying a claim made by the Director or by a Beneficiary for benefits under this Agreement shall be stated in writing and delivered or mailed to the Director or such Beneficiary. Such statement shall set forth the specific reasons for the denial, written to the best of the Bank's ability in a manner that may be understood without legal or actuarial counsel. In addition, the Bank shall afford a reasonable opportunity to the Director or the Beneficiary for a full and fair review of the decision denying such claim.

(c) Subject to the foregoing, the Board of Directors of the Bank shall have full power and authority to interpret, construe and administer this Agreement. No member of the Board of Directors of the Bank shall, in any event, be liable to any person for any action taken or omitted in connection with the interpretation, construction or administration of this Agreement, so long as such action or omission to act be made in good faith. In no event, however, shall the provisions of Article 12 or any other provisions in this Agreement prevent the Director from seeking legal recourse for any claim under this Agreement.

ARTICLE 12. FUNDING

The Bank's obligations under this Agreement shall be an unfunded and unsecured promise to pay. The Bank shall not be obligated under any circumstances to fund or otherwise secure its obligations under this Agreement. Under no circumstances will the Bank, without the consent of the Director, cause this Agreement to be directly funded in whole or part through escrow, trust, or otherwise such as to create a taxable event to the Director or the Director's Beneficiary.

ARTICLE 13. DIRECTOR RIGHTS

The rights of the Director, any designated Beneficiary of the Director, or any other person claiming through the Director under this agreement, shall be solely those of an unsecured general creditor of the Bank. The Director, a designated Beneficiary of the Director, or any other person claiming through the Director shall only have the right to receive from the Bank those payments as specified under this Agreement.

ARTICLE 14. ASSETS

The Director, the Director's designated Beneficiary, or any other person claiming through the Director shall have no rights or interests whatsoever in any asset of the Bank in connection with the liabilities the Bank has assumed under this Agreement, or otherwise. Any asset used or acquired by the Bank in connection with the liabilities it has assumed under this Agreement shall not be deemed to be held in trust for the benefit of the Director or the Director's designated Beneficiary, nor shall it be considered security for the performance of the obligations of the Bank, and it shall be, and remain, a general, unpledged, and unrestricted asset of the Bank.

ARTICLE 15. AMENDMENT

During the lifetime of the Director and prior to retirement, this Agreement may be amended or revoked at any time, in whole or part, by the mutual written agreement of the Bank and the Director.

ARTICLE 16. LAW GOVERNING

This Agreement shall be governed by the laws of the State of Mississippi.

ARTICLE 17. SEVERABILITY

In the event that any of the provisions of this Agreement or portion thereof, are held to be inoperative or invalid by any court of competent jurisdiction, then (1) insofar as is reasonable, effect will be given to the intent manifested in the provision held invalid or inoperative, and (2) the validity and enforceability of the remaining provisions will not be affected thereby.

ARTICLE 18. SUICIDE

Notwithstanding anything to the contrary in this Agreement, the benefits otherwise provided herein shall not be payable if the Director's death results from suicide, whether sane or insane, within two years after the execution of this Agreement. If the Director dies during this two year period due to suicide, the fees deferred will be paid to the Director's designated Beneficiary in a single payment. Payment is to be made within thirty days after the Director's death is declared a suicide by competent legal authority. Credit shall be given to the Bank for payments made prior to determination of suicide.

ARTICLE 19. PERIOD OF ECONOMIC HARDSHIP

If, in any year, payments made under this Agreement would, in the sole judgment of the Board of Directors, create economic hardship for the Bank's depositors, the Board of Directors has full authority to postpone such payments. However, upon such postponement, the Bank will increase the total sum payable to the Director or the Director's Beneficiaries under this Agreement by an actuarially determined amount.

ARTICLE 20. PRIOR AGREEMENTS

This Agreement sets forth the entire understanding of the parties hereto with respect to the transactions contemplated hereby, and any previous agreements or understandings between the parties hereto regarding the subject matter hereof are merged into and superseded by this Agreement.

IN WITNESS WHEREOF, the parties have executed this Agreement each acknowledging a receipt of the fully signed original.

___________________________           __________________________________________
           Date                                       LYLE M. PAGE

                                    THE PEOPLES BANK, BILOXI, MISSISSIPPI
                                            BILOXI, MISSISSIPPI

___________________________         By__________________________________________
          Date                                                             Title

THE PEOPLES BANK
BILOXI, MISSISSIPPI

DIRECTORS DEFERRED INCOME AGREEMENT

THIS AGREEMENT is effective on the 1st day of January, 1996, by and between The Peoples Bank, Biloxi, Mississippi (the "Bank") and Tyrone Gollott (the "Director") and supersedes the existing Director Deferred Income Agreement between the parties.

WITNESSETH:

WHEREAS, the Bank recognizes that the competent and faithful efforts of the Director on behalf of the Bank have contributed significantly to the success and growth of the Bank;

WHEREAS, the Bank desires to compensate the Director and retain the services of the Director if re-elected to serve on the Board of Directors;

WHEREAS, the Director, in consideration of the foregoing, agrees to continue to serve as a Director, if re-elected; and

WHEREAS, the Director has agreed to defer receipt of fees to be earned in the future.

NOW, THEREFORE, it is mutually agreed as follows:

ARTICLE 1

DEFINITIONS

For the purposes of this Agreement, whenever the context so requires, the capitalized terms shall have the following meanings:

1.1 "Beneficiary" shall mean the person or persons designated by the Director who may become entitled to receive the Compensation payable under Article 3, 4, and 5 of this Agreement (See Article 8).

1.2 "Deferral Period" shall mean the period shown on the Addendum to this Agreement. An Election to Participate Form signed by the Director is included and made a part of this Agreement.

ARTICLE 2

DEFERRAL OF FEES

The Director has elected to defer receipt of Director's fees to be earned during the Deferral Period. Once the Director has executed the Election to Participate Form, a subsequent increase in the director's fees payable due to an increase in the fee structure shall also be deferred under the provisions of this Agreement, unless the Director directs the Secretary in writing within 10 days after notification of the increase and prior to the right to receive the additional fees that such additional fees are not to be deferred. If Director fees are increased or decreased during the Deferral Period for any reason other than death of the Director, the compensation payable under Article 3 and Article 5 shall be actuarially determined and evidenced by the Addendum to this Agreement.

ARTICLE 3

COMPENSATION

The Bank agrees to pay to the Director, if living, and if not, then to the designated Beneficiary, the Annual Compensation as shown in the Addendum to this Agreement. Annual Compensation is to be paid in monthly payments, for a total of one hundred twenty (120) consecutive payments, commencing on the first business day of the month following the Director's attainment of age 65, or upon Director's death if such event shall occur before the payments have commenced. However, in any event, Compensation payable under this Article 3 and the Addendum to this Agreement shall be recalculated to reflect any increase or decrease in the future deferral of fees for any reason other than death of the Director during the Deferral Period.

ARTICLE 4

DEATH OF DIRECTOR DURING DEFERRAL PERIOD

If the Director dies during the Deferral Period, the Bank shall pay to the designated Beneficiary the Annual Compensation as shown in the Addendum to this Agreement in effect at the time of death.

ARTICLE 5

DEATH OF DIRECTOR AFTER BEGINNING OF PAYMENTS

If the Director dies after the beginning of payments, but prior to receiving the full one hundred twenty (120) consecutive payments, the Bank shall continue to pay such payments to the Director's Beneficiary until the total number of payments made to the Director and the Beneficiary equal one hundred twenty (120).

ARTICLE 6

STATUS OF AGREEMENT

This Agreement does not constitute a contract of employment between the parties, nor shall any provision of this Agreement restrict the right of the Bank's shareholders to replace the Director or the right of the Director to terminate service on the Board.

ARTICLE 7

BINDING EFFECT

This Agreement shall be binding upon and inure to the benefit of the parties hereto and upon the successors and assigns of the Bank, and upon the heirs and legal representatives of the Director.

ARTICLE 8

BENEFICIARY DESIGNATION

While covered under this Agreement, the Director may from time to time designate, in writing, any person or persons, contingently or successively to whom the Bank shall pay the Director's compensation in the event of the Director's death. If the Director fails to designate a Beneficiary or if the Beneficiary designated by the Director predeceases the Director, then benefits are payable to the Director's estate. If the Beneficiary dies before complete distribution of the Director's Compensation, then the Bank shall pay the Director's Compensation to the Director's estate.

ARTICLE 9

INCOMPETENCY

If the Bank shall find that any person to whom any payment is payable under this Agreement is unable to care for his or her affairs because of illness or accident, or is a minor, any payment due (unless a prior claim therefore shall have been made by a duly appointed guardian, committee or other legal representative) may be paid to the spouse, a child, a parent, a brother or sister, or a custodian determined pursuant to the Uniform Transfers to Minors Act, or to any person deemed by the Bank to have incurred expense for such person otherwise entitled to payment, in such manner and proportions as the Bank may determine. Any such payment shall be a complete discharge of the liabilities of the Bank under this Agreement.

ARTICLE 10

ASSIGNMENT OF RIGHTS

ARTICLE 11

NAMED FIDUCIARY

ARTICLE 12

FUNDING

whole or part through escrow, trust, or otherwise to create a taxable event to the Director or the Director's beneficiary.

ARTICLE 13

DIRECTOR RIGHTS

ARTICLE 14

ASSETS

The Director, a Director's designated Beneficiary, or any other person claiming through the Director shall have no rights or interests whatsoever in any asset of the Bank in connection with the liabilities the Bank has assumed under this Agreement, or otherwise. Any asset used or acquired by the Bank in connection with the liabilities it has assumed under this Agreement shall not be deemed to be held in trust for the benefit of the Director or the Director's designated Beneficiary, nor shall it be considered security for the performance of the obligations of the Bank, and it shall be, and remain, a general, unpledged, and unrestricted asset of the Bank.

ARTICLE 15

AMENDMENT

During the lifetime of the Director and prior to retirement, this Agreement may be amended or revoked at any time, in whole or in part, by the mutual written agreement of the Bank and the Director.

ARTICLE 16

LAW GOVERNING

This Agreement shall be governed by the laws of the state of Mississippi.

ARTICLE 17

SEVERABILITY

ARTICLE 18

SUICIDE

Notwithstanding anything to the contrary in this Agreement, the benefits otherwise provided herein shall not be payable if the Director's death results from suicide, whether sane or insane, within two years after the effective date of this Agreement. If the Director dies during this two year period due to suicide, the fees deferred plus interest will be paid to the Director's designated Beneficiary in a single payment. Payment is to be made within thirty days after the Director's death is declared a suicide by competent legal authority. Credit shall be given to the Bank for payments made prior to determination of suicide.

ARTICLE 19

PERIOD OF ECONOMIC HARDSHIP

ARTICLE 20

PRIOR AGREEMENTS

IN WITNESS WHEREOF, the parties have executed this Agreement each acknowledging a receipt of the fully signed original.

TYRONE GOLLOTT

THE PEOPLES BANK
BILOXI, MISSISSIPPI

BY:___________________________

THE PEOPLES BANK
BILOXI, MISSISSIPPI

DIRECTORS DEFERRED INCOME AGREEMENT

THIS AGREEMENT is effective on the 1st day of January, 1999, by and between The Peoples Bank, Biloxi, Mississippi (the "Bank") and Elizabeth Joachim (the "Director").

WITNESSETH:

WHEREAS, the Bank recognizes that the competent and faithful efforts of the Director on behalf of the bank have contributed significantly to the success and growth of the Bank;

WHEREAS, the Bank desires to compensate the Director and retain the services of the Director if re-elected to serve on the Board of Directors;

WHEREAS, the Director, in consideration of the foregoing, agrees to continue to serve as a Director, if re-elected; and

WHEREAS, the Director has agreed to defer receipt of fees to be earned in the future.

NOW, THEREFORE, it is mutually agreed as follows:

ARTICLE 1

DEFINITIONS

For the purposes of this Agreement, whenever the context so requires, the capitalized terms shall have the following meanings:

1.1 "Beneficiary" shall mean the person or persons designated by the Director who may become entitled to receive the Compensation payable under Article 3, 4, and 5 of this Agreement (See Article 8).

1.2 "Deferral Period" shall mean the period shown on the Addendum to this Agreement. An Election to Participate Form signed by the Director Is included and made a part of this Agreement.

ARTICLE 2

DEFERRAL OF FEES

The Director has elected to defer receipt of Director's fees to be earned during the Deferral Period. Once the Director has executed the Election to Participate Form, a subsequent increase in the director's fees payable due to an increase in the fee structure shall also be deferred under the provisions of this Agreement, unless the Director directs the Secretary in writing within 10 days after notification of the increase and prior to the right to receive the additional fees that such additional fees are not to be deferred. If Director fees are increased or decreased during the Deferral Period for any reason other than death of the Director, the compensation payable under Article 3 and Article 5 shall be actuarially determined and evidenced by the Addendum to this Agreement.

ARTICLE 3

COMPENSATION

The Bank agrees to pay to the Director, if living, and if not, then to the designated Beneficiary, the Annual Compensation as shown in the Addendum to this Agreement. Annual Compensation is to be paid in monthly payments, for a total of one hundred twenty (120) consecutive payments, commencing on the first business day of the month following the Director's attainment of age 65, or upon Director's death if such even shall occur before the payments have commenced. However, in any event, Compensation payable under this Article 3 and the Addendum to this Agreement shall be recalculated to reflect any increase or decrease in the future deferral of fees for any reason other than death of the Director during the Deferral Period.

ARTICLE 4

DEATH OF DIRECTOR DURING DEFERRAL PERIOD

If the Director dies during the Deferral Period, the Bank shall pay to the designated Beneficiary the Annual Compensation as shown in the Addendum to this Agreement in effect at the time of death.

ARTICLE 5

DEATH OF DIRECTOR AFTER BEGINNING OF PAYMENTS

ARTICLE 6

STATUS OF AGREEMENT

ARTICLE 7

BINDING EFFECT

This Agreement shall be binding upon and inure to the benefit of the parties hereto and upon the successors and assigns of the Bank, and upon the heirs and legal representatives of the Director.

ARTICLE 8

BENEFICIARY DESIGNATION

ARTICLE 9

INCOMPETENCY

If the Bank shall find that any person to whom any payment is payable under this Agreement is unable to care for his or her affairs because of illness or accident, or is a minor, any payment due (unless a prior claim therefore shall have been made by a duly appointed guardian, committee or other legal representative) may be paid to the spouse, a child, a parent, a brother or sister, or a custodian determined pursuant to the Uniform Transfers to Minors Act, or to any person deemed by the Bank to have incurred expense for such person otherwise entitled to payment, in such manner and proportions as the Bank may determine. Any such payment shall be a complete discharge of the liabilities of the Bank under this Agreement.

ARTICLE 10

ASSIGNMENT OF RIGHTS

ARTICLE 11

NAMED FIDUCIARY

ARTICLE 12

FUNDING

whole or part through escrow, trust, or otherwise to create a taxable event to the Director or the Director's beneficiary.

ARTICLE 13

DIRECTOR RIGHTS

ARTICLE 14

ASSETS

ARTICLE 15

AMENDMENT

During the lifetime of the Director and prior to retirement, this Agreement may be amended or revoked at any time, in whole or in part, by the mutual written agreement of the Bank and the Director.

ARTICLE 16

LAW GOVERNING

This Agreement shall be governed by the laws of the state of Mississippi.

ARTICLE 17

SEVERABILITY

ARTICLE 18

SUICIDE

Notwithstanding anything to the contrary in this Agreement, the benefits otherwise provided herein shall not be payable if the Director's death results from suicide, whether sane or insane, within two years after the effective date of this Agreement. If the Director dies during this two year period due to suicide, the fees deferred plus interest will be paid to the Director's designated Beneficiary in a single payment. Payment is to be made within thirty days after the Director's death is declared a suicide by competent legal authority. Credit shall be given to the Bank for payments made prior to determination of suicide.

ARTICLE 19

PERIOD OF ECONOMIC HARDSHIP

ARTICLE 20

PRIOR AGREEMENTS

IN WITNESS WHEREOF, the parties have executed this Agreement each acknowledging a receipt of the fully signed original.

ELIZABETH JOACHIM

THE PEOPLES BANK
BILOXI, MISSISSIPPI

BY:_________________________________

THE PEOPLES BANK
BILOXI, MISSISSIPPI

DIRECTORS DEFERRED INCOME AGREEMENT

THIS AGREEMENT is effective on the 1st day of January, 1999, by and between The Peoples Bank, Biloxi, Mississippi (the "Bank") and Rex Kelly (the "Director").

WITNESSETH:

WHEREAS, the Bank recognizes that the competent and faithful efforts of the Director on behalf of the Bank have contributed significantly to the success and growth of the Bank;

WHEREAS, the Bank desires to compensate the Director and retain the services of the Director if re-elected to serve on the Board of Directors;

WHEREAS, the Director, in consideration of the foregoing, agrees to continue to serve as a Director, if re-elected; and

WHEREAS, the Director has agreed to defer receipt of fees to be earned in the future.

NOW, THEREFORE, it is mutually agreed as follows:

ARTICLE 1

DEFINITIONS

For the purposes of this Agreement, whenever the context so requires, the capitalized terms shall have the following meanings:

1.1 "Beneficiary" shall mean the person or persons designated by the Director who may become entitled to receive the Compensation payable under Article 3, 4, and 5 of this Agreement (See Article 8).

1.2 "Deferral Period" shall mean the period shown on the Addendum to this Agreement. An Election to Participate Form signed by the Director is included and made a part of this Agreement.

ARTICLE 2

DEFERRAL OF FEES

The Director has elected to defer receipt of Director's fees to be earned during the Deferral Period. Once the Director has executed the Election to Participate Form, a subsequent increase in the director's fees payable due to an increase in the fee structure shall also be deferred under the provisions of this Agreement, unless the Director directs the Secretary in writing within 10 days after notification of the increase and prior to the right to receive the additional fees that such additional fees are not to be deferred. If Director fees are increased or decreased during the Deferral Period for any reason other than death of the Director, the compensation payable under Article 3 and Article 5 shall be actuarially determined and evidenced by the Addendum to this Agreement.

ARTICLE 3

COMPENSATION

The Bank agrees to pay to the Director, if living, and if not, then to the designated Beneficiary, the Annual Compensation as shown in the Addendum to this Agreement. Annual Compensation is to be paid in monthly payments, for a total of one hundred twenty (120) consecutive payments, commencing on the first business day of the month following the Director's attainment of age 65, or upon Director's death if such even shall occur before the payments have commenced. However, in any event, Compensation payable under this Article 3 and the Addendum to this Agreement shall be recalculated to reflect any increase or decrease in the future deferral of fees for any reason other than death of the Director during the Deferral Period.

ARTICLE 4

DEATH OF DIRECTOR DURING DEFERRAL PERIOD

If the Director dies during the Deferral Period, the Bank shall pay to the designated Beneficiary the Annual Compensation as shown in the Addendum to this Agreement in effect at the time of death.

ARTICLE 5

DEATH OF DIRECTOR AFTER BEGINNING OF PAYMENTS

ARTICLE 6

STATUS OF AGREEMENT

ARTICLE 7

BINDING EFFECT

This Agreement shall be binding upon and inure to the benefit of the parties hereto and upon the successors and assigns of the Bank, and upon the heirs and legal representatives of the Director.

ARTICLE 8

BENEFICIARY DESIGNATION

ARTICLE 9

INCOMPETENCY

If the Bank shall find that any person to whom any payment is payable under this Agreement is unable to care for his or her affairs because of illness or accident, or is a minor, any payment due (unless a prior claim therefore shall have been made by a duly appointed guardian, committee or other legal representative) may be paid to the spouse, a child, a parent, a brother or sister, or a custodian determined pursuant to the Uniform Transfers to Minors Act, or to any person deemed by the Bank to have incurred expense for such person otherwise entitled to payment, in such manner and proportions as the Bank may determine. Any such payment shall be a complete discharge of the liabilities of the Bank under this Agreement.

ARTICLE 10

ASSIGNMENT OF RIGHTS

ARTICLE 11

NAMED FIDUCIARY

ARTICLE 12

FUNDING

whole or part through escrow, trust, or otherwise to create a taxable event to the Director or the Director's beneficiary.

ARTICLE 13

DIRECTOR RIGHTS

ARTICLE 14

ASSETS

ARTICLE 15

AMENDMENT

During the lifetime of the Director and prior to retirement, this Agreement may be amended or revoked at any time, in whole or in part, by the mutual written agreement of the Bank and the Director.

ARTICLE 16

LAW GOVERNING

This Agreement shall be governed by the laws of the state of Mississippi.

ARTICLE 17

SEVERABILITY

ARTICLE 18

SUICIDE

Notwithstanding anything to the contrary in this Agreement, the benefits otherwise provided herein shall not be payable if the Director's death results from suicide, whether sane or insane, within two years after the effective date of this Agreement. If the Director dies during this two year period due to suicide, the fees deferred plus interest will be paid to the Director's designated Beneficiary in a single payment. Payment is to be made within thirty days after the Director's death is declared a suicide by competent legal authority. Credit shall be given to the Bank for payments made prior to determination of suicide.

ARTICLE 19

PERIOD OF ECONOMIC HARDSHIP

ARTICLE 20

PRIOR AGREEMENTS

IN WITNESS WHEREOF, the parties have executed this Agreement each acknowledging a receipt of the fully signed original.

REX KELLY

THE PEOPLES BANK
BILOXI, MISSISSIPPI

BY:

THE PEOPLES BANK
BILOXI, MISSISSIPPI

DIRECTORS DEFERRED INCOME AGREEMENT

THIS AGREEMENT is effective on the 1st day of January, 1996, by and between The Peoples Bank, Biloxi, Mississippi (the "Bank") and Lyle M. Page (the "Director").

WITNESSETH:

WHEREAS, the Bank recognizes that the competent and faithful efforts of the Director on behalf of the Bank have contributed significantly to the success and growth of the Bank;

WHEREAS, the Bank desires to compensate the Director and retain the services of the Director if re-elected to serve on the Board of Directors;

WHEREAS, the Director, in consideration of the foregoing, agrees to continue to serve as a Director, if re-elected; and

WHEREAS, the Director has agreed to defer receipt of fees to be earned in the future.

NOW, THEREFORE, it is mutually agreed as follows:

ARTICLE 1

DEFINITIONS

For the purposes of this Agreement, whenever the context so requires, the capitalized terms shall have the following meanings:

1.1 "Beneficiary" shall mean the person or persons designated by the Director who may become entitled to receive the Compensation payable under Articles 3, 4, and 5 of this Agreement (See Article 8).

1.2 "Deferral Period" shall mean the date shown on the Addendum to this Agreement. An Election to Participate Form signed by the Director is included and made a part of this Agreement.

ARTICLE 2

DEFERRAL OF FEES

The Director has elected to defer receipt of Director's fees to be earned during the Deferral Period. Once the Director has executed the Election to Participate Form, a subsequent increase in the director's fees payable due to an increase in the fee structure shall also be deferred under the provisions of this Agreement, unless the Director directs the Secretary in writing within 10 days after notification of the increase and prior to the right to receive the additional fees that such additional fees are not to be deferred. If Director fees are increased or decreased during the Deferral Period for any reason other than death of the Director, the compensation payable under Article 3 and Article 5 shall be actuarially determined and evidenced by the Addendum to this Agreement.

ARTICLE 3

COMPENSATION

The Bank agrees to pay to the Director, if living, and if not, then to the designated Beneficiary, the Annual Compensation as shown in the Addendum to this Agreement. Annual Compensation is to be paid in monthly payments, for a total of one hundred twenty (120) consecutive payments, commencing on the first business day of the month following the Director's attainment of age 65, or upon Director's death if such event shall occur before the payments have commenced. However, in any event, Compensation payable under this Article 3 and the Addendum to this Agreement shall be recalculated to reflect any increase or decrease in future deferral of fees for any reason other than death of the Director during the Deferral Period.

ARTICLE 4

DEATH OF DIRECTOR DURING DEFERRAL

If the Director dies during the Deferral Period, the Bank shall pay to the designated Beneficiary the Annual Compensation as shown in the Addendum to this Agreement in effect at the time of death.

ARTICLE 5

DEATH OF DIRECTOR AFTER BEGINNING OF PAYMENTS

ARTICLE 6

STATUS OF AGREEMENT

ARTICLE 7

BINDING EFFECT

This Agreement shall be binding upon and inure to the benefit of the parties hereto and upon the successors and assigns of the Bank, and upon the heirs and legal representatives of the Director.

ARTICLE 8

BENEFICIARY DESIGNATION

While covered under this Agreement, the Director may from time to time designate, in writing, any person or entity, contingently or successively to whom the Bank shall pay the

Director's compensation in the event of the Director's death. If the Director fails to designate a Beneficiary or if the Beneficiary predeceases the Director, then benefits are payable to the Director's estate. If the Beneficiary dies before complete distribution of the Director's benefits, then the Bank shall pay the Director's Compensation to the Director's estate.

ARTICLE 9

INCOMPETENCY

If the Bank shall find that any person to whom any payment is payable under this Agreement is unable to care for his or her affairs because of illness or accident, or is a minor, any payment due (unless a prior claim therefore shall have been made by a duly appointed guardian, committee or other legal representative) may be paid to the spouse, a child, a parent, a brother or sister, or a custodian determined pursuant to the Uniform Transfers to Minors Act, or to any person deemed by the Bank to have incurred expense for such person otherwise entitled to payment, in such manner and proportions as the Bank may determine. Any such payment shall be a complete discharge of the liabilities of the Bank under this Agreement.

ARTICLE 10

ASSIGNMENT OF RIGHTS

ARTICLE 11

NAMED FIDUCIARY

(a) The Bank is hereby designated as the Named Fiduciary under this Agreement. The Named Fiduciary shall have authority to control and manage the operation and

administration of this Agreement, and it shall be responsible for establishing and carrying out a funding policy and method consistent with the objectives of this Agreement.

ARTICLE 12

FUNDING

The Bank's obligations under this Agreement shall be an unfunded and unsecured promise to pay. The Bank shall not be obligated under any circumstances to fund or otherwise secure its obligations under this Agreement. Under no circumstances will the Bank, without the consent of the Director, cause this Agreement to be directly funded in whole or part through escrow, trust, or otherwise to create a taxable event to the Director or the Director's beneficiary.

ARTICLE 13

DIRECTOR RIGHTS

ARTICLE 14

ASSETS

ARTICLE 15

AMENDMENT

During the lifetime of the Director and prior to retirement, this Agreement may be amended or revoked at any time, in whole or in part, by the mutual written agreement of the Bank and the Director.

ARTICLE 16

LAW GOVERNING

This Agreement shall be governed by the laws of the state of Mississippi.

ARTICLE 17

SEVERABILITY

ARTICLE 18

SUICIDE

Notwithstanding anything to the contrary in this Agreement, the benefits otherwise provided herein shall not be payable if the Director's death results from suicide, whether sane or insane, within two years after the effective date of this Agreement. If the Director dies during this two year period due to suicide, the fees deferred plus interest will be paid to the Director's designated Beneficiary in a single payment. Payment is to be made within thirty days after the Director's death is declared a suicide by competent legal authority. Credit shall be given to the Bank for payments made prior to determination of suicide.

ARTICLE 19

PERIOD OF ECONOMIC HARDSHIP

ARTICLE 20

PRIOR AGREEMENTS

IN WITNESS WHEREOF, the parties have executed this Agreement each acknowledging a receipt of the fully signed original.

LYLE M. PAGE

THE PEOPLES BANK
BILOXI, MISSISSIPPI

BY:

THE PEOPLES BANK
BILOXI, MISSISSIPPI

DIRECTORS DEFERRED INCOME AGREEMENT

THIS AGREEMENT is effective on the 1st day of January, 1996, by and between The Peoples Bank, Biloxi, Mississippi (the "Bank") and Thomas D. Magruder (the "Director") and supersedes the existing Director Deferred Income Agreement between the parties.

WITNESSETH:

WHEREAS, the Bank recognizes that the competent and faithful efforts of the Director on behalf of the Bank have contributed significantly to the success and growth of the Bank;

WHEREAS, the Bank desires to compensate the Director and retain the services of the Director if re-elected to serve on the Board of Directors;

WHEREAS, the Director, in consideration of the foregoing, agrees to continue to serve as a Director, if re-elected; and

WHEREAS, the Director has agreed to defer receipt of fees to be earned in the future.

NOW, THEREFORE, it is mutually agreed as follows:

ARTICLE 1

DEFINITIONS

For the purposes of this Agreement, whenever the context so requires, the capitalized terms shall have the following meanings:

1.1 "Beneficiary" shall mean the person or persons designated by the Director who may become entitled to receive the Compensation payable under Article 3, 4, and 5 of this Agreement (See Article 8).

1.2 "Deferral Period" shall mean the period shown on the Addendum to this Agreement. An Election to Participate Form signed by the Director is included and made a part of this Agreement.

ARTICLE 2

DEFERRAL OF FEES

The Director has elected to defer receipt of Director's fees to be earned during the Deferral Period. Once the Director has executed the Election to Participate Form, a subsequent increase in the director's fees payable due to an increase in the fee structure shall also be deferred under the provisions of this Agreement, unless the Director directs the Secretary in writing within 10 days after notification of the increase and prior to the right to receive the additional fees that such additional fees are not to be deferred. If Director fees are increased or decreased during the Deferral Period for any reason other than death of the Director, the compensation payable under Article 3 and Article 5 shall be actuarially determined and evidenced by the Addendum to this Agreement.

ARTICLE 3

COMPENSATION

ARTICLE 4

DEATH OF DIRECTOR DURING DEFERRAL PERIOD

If the Director dies during the Deferral Period, the Bank shall pay to the designated Beneficiary the Annual Compensation as shown in the Addendum to this Agreement in effect at the time of death.

ARTICLE 5

DEATH OF DIRECTOR AFTER BEGINNING OF PAYMENTS

ARTICLE 6

STATUS OF AGREEMENT

ARTICLE 7

BINDING EFFECT

This Agreement shall be binding upon and inure to the benefit of the parties hereto and upon the successors and assigns of the Bank, and upon the heirs and legal representatives of the Director.

ARTICLE 8

BENEFICIARY DESIGNATION

ARTICLE 9

INCOMPETENCY

If the Bank shall find that any person to whom any payment is payable under this Agreement is unable to care for his or her affairs because of illness or accident, or is a minor, any payment due (unless a prior claim therefore shall have been made by a duly appointed guardian, committee or other legal representative) may be paid to the spouse, a child, a parent, a brother or sister, or a custodian determined pursuant to the Uniform Transfers to Minors Act, or to any person deemed by the Bank to have incurred expense for such person otherwise entitled to payment, in such manner and proportions as the Bank may determine. Any such payment shall be a complete discharge of the liabilities of the Bank under this Agreement.

ARTICLE 10

ASSIGNMENT OF RIGHTS

ARTICLE 11

NAMED FIDUCIARY

ARTICLE 12

FUNDING

whole or part through escrow, trust, or otherwise to create a taxable event to the Director or the Director's beneficiary.

ARTICLE 13

DIRECTOR RIGHTS

ARTICLE 14

ASSETS

ARTICLE 15

AMENDMENT

During the lifetime of the Director and prior to retirement, this Agreement may be amended or revoked at any time, in whole or in part, by the mutual written agreement of the Bank and the Director.

ARTICLE 16

LAW GOVERNING

This Agreement shall be governed by the laws of the state of Mississippi.

ARTICLE 17

SEVERABILITY

ARTICLE 18

SUICIDE

Notwithstanding anything to the contrary in this Agreement, the benefits otherwise provided herein shall not be payable if the Director's death results from suicide, whether sane or insane, within two years after the effective date of this Agreement. If the Director dies during this two year period due to suicide, the fees deferred plus interest will be paid to the Director's designated Beneficiary in a single payment. Payment is to be made within thirty days after the Director's death is declared a suicide by competent legal authority. Credit shall be given to the Bank for payments made prior to determination of suicide.

ARTICLE 19

PERIOD OF ECONOMIC HARDSHIP

ARTICLE 20

PRIOR AGREEMENTS

IN WITNESS WHEREOF, the parties have executed this Agreement each acknowledging a receipt of the fully signed original.

THOMAS D. MAGRUDER

THE PEOPLES BANK
BILOXI, MISSISSIPPI

BY: ________________________________

THE PEOPLES BANK
DIRECTOR DEFERRED FEE AGREEMENT

THIS AGREEMENT, effective as of January 1, 2003 (the "Effective Date"), is made by and between The Peoples Bank, with its principal office located in Biloxi, Mississippi (the "Company"), and Dan Magruder (the "Director").

INTRODUCTION

To encourage the Director to remain a member of the Company's Board of Directors, the Company is willing to provide to the Director a deferred fee opportunity. The Company will pay the Director's benefits from the Company's general assets.

AGREEMENT

The Director and the Company agree as follows:

ARTICLE 1
DEFINITIONS

1.1 Definitions. Whenever used in this Agreement, the following words and phrases shall have the meanings specified:

         1.1.1    "Anniversary Date" means December 31st of each year.

         1.1.2    "Code" means the Internal Revenue Code of 1986, as
amended.

         1.1.3    "Deferral Account" means the Company's accounting of

the Director's accumulated Deferrals plus accrued interest.

1.1.4 "Deferrals" means the amount of the Director's Fees which the Director elects to defer according to this Agreement.

1.1.5 "Election Form" means the Form attached as Exhibit A.

1.1.6 "Fees" means the total fees payable to the Director during a Plan Year.

1.1.7 "Normal Retirement Age" means age sixty-five (65).

1.1.8 "Normal Retirement Date" means the later of the Normal Retirement Age or Termination of Service.

1.1.9 "Plan Year" means each twelve (12) consecutive month period beginning on January 1st of each year and ending on December 31st of each year.

1.1.10 "Termination of Service" means that the Director ceases to be a member of the Company's Board of Directors for any reason whatsoever other than by reason of a leave of absence that is approved by the Company.

ARTICLE 2
DEFERRAL ELECTION

2.1 Initial Election. The Director shall make an initial deferral election under this Agreement by filing with the Company a signed Election Form within 30 days after the Effective Date of this Agreement. The Election Form shall set forth the amount of Fees to be deferred and shall be effective to defer only Fees earned after the date the Election Form is received by the Company.

2.2 Election Changes

2.2.1 Generally. Upon Company approval, the Director may modify the amount of Fees to be deferred annually by filing a new Election Form with the Company prior to the beginning of the Plan Year in which the Fees are to be deferred. The modified deferral election shall not be effective until the calendar year following the year in which the subsequent Election Form is received and approved by the Company.

2.2.2 Hardship. If an unforeseeable financial emergency arising from the death of a family member, divorce, sickness, injury, catastrophe or similar event outside the control of the Director occurs, the Director, by written instructions to the Company, may reduce future deferrals under this Agreement.

ARTICLE 3
DEFERRAL ACCOUNT

3.1 Establishing and Crediting. The Company shall establish a Deferral Account on its books for the Director and shall credit to the Deferral Account the following amounts:

3.1.1 Deferrals. The Fees deferred by the Director as of the time the Fees would have otherwise been paid to the Director.

3.1.2 Interest. On each Anniversary Date and immediately prior to the payment of any benefits interest shall accrue on the account balance at an annual rate of ten percent (10.00%), compounded annually. After payments have commenced, interest shall accrue on the account balance at an annual rate of seven and one-half percent (7.5%), compounded monthly.

3.2 Statement of Accounts. The Company shall provide to the Director, within 120 days after each Anniversary Date, a statement setting forth the Deferral Account balance.

3.3 Accounting Device Only. The Deferral Account is solely a device for measuring amounts to be paid under this Agreement. The Deferral Account is not a trust fund of any kind. The Director is a general unsecured creditor of the Company for the payment of benefits. The

benefits represent the mere Company promise to pay such benefits. The Director's rights are not subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment, or garnishment by the Director's creditors.

ARTICLE 4
LIFETIME BENEFITS

4.1 Normal Retirement Benefit. Upon the Normal Retirement Date the Company shall pay to the Director the benefit described in this Section 4.1 in lieu of any other benefit under this Agreement.

4.1.1 Amount of Benefit. The benefit under this Section 4.1 is the Deferral Account balance at the Director's Normal Retirement Date.

4.1.2 Payment of Benefit. The Company shall pay the benefit to the Director in one hundred twenty (120) equal monthly installments commencing on the first day of the month following the Director's Normal Retirement Date. In determining the amount of the equal monthly installments the Company shall credit interest pursuant to Section 3.1.2 on the remaining account balance during any applicable installment period.

4.2 Termination of Service. Upon Termination of Service prior to the Normal Retirement Age, the Company shall pay to the Director the benefit described in this Section 4.2 in lieu of any other benefit under this Agreement.

4.2.1 Amount of Benefit. The benefit under this Section 4.2 is the Deferral Account balance at the Director's Termination of Service.

4.2.2 Payment of Benefit. The Company shall pay the benefit to the Director in a single lump sum within sixty (60) days of Termination of Service.

4.3 Hardship Distribution. Upon the Board of Director's determination (following petition by the Director) that the Director has suffered an unforeseeable financial emergency as described in Section 2.2.2, the Company shall distribute to the Director all or a portion of the Deferral Account balance as determined by the Company, but in no event shall the distribution be greater than is necessary to relieve the financial hardship.

ARTICLE 5
DEATH BENEFITS

5.1 Death During Active Service. If the Director dies while in the active service of the Company, the Company shall pay to the Director's beneficiary the benefit described in this Section 5.1 in lieu of any other benefit under this Agreement.

5.1.1 Amount of Benefit. The benefit under Section 5.1 is the greater of: (i) the Deferral Account balance on the Director's death; or, (ii) One Hundred Twenty Four Thousand Six Hundred and No/100 Dollars ($124,600.00).

5.1.2 Payment of Benefit. The Company shall pay the amount stated in Section 5.1.1 to the beneficiary in one hundred twenty (120) equal monthly installments commencing on the first day of the month following the Director's death. In determining the amount of the equal monthly installments the Company shall credit interest pursuant to
Section 3.1.2 on the remaining account balance during any applicable installment period.

5.2 Death During Benefit Period. If the Director dies after benefit payments have commenced under this Agreement but before receiving all such payments, the Company shall pay the remaining benefits to the Director's beneficiary at the same time and in the same amounts they would have been paid to the Director had the Director survived.

5.3 Death After Termination of Service But Before Benefit Payments Commence. If the Director is entitled to benefit payments under this Agreement, but dies prior to the commencement of said benefit payments, the Company shall pay the benefit payments to the Director's beneficiary that the Director was entitled to prior to death except that the benefit payments shall commence on the first day of the month following the date of the Director's death.

ARTICLE 6
BENEFICIARIES

6.1 Beneficiary Designations. The Director shall designate a beneficiary by filing a written designation with the Company. The Director may revoke or modify the designation at any time by filing a new designation. However, designations will only be effective if signed by the Director and accepted by the Company during the Director's lifetime. The Director's beneficiary designation shall be deemed automatically revoked if the beneficiary predeceases the Director or if the Director names a spouse as beneficiary and the marriage is subsequently dissolved. If the Director dies without a valid beneficiary designation, all payments shall be made to the Director's estate.

6.2 Facility of Payment. If a benefit is payable to a minor, to a person declared incompetent, or to a person incapable of handling the disposition of his or her property, the Company may pay such benefit to the guardian, legal representative or person having the care or custody of such minor, incompetent person or incapable person. The Company may require proof of incompetence, minority or guardianship as it may deem appropriate prior to distribution of the benefit. Such distribution shall completely discharge the Company from all liability with respect to such benefit.

ARTICLE 7
GENERAL LIMITATIONS

7.1 Suicide or Misstatement. The Company shall not pay any death benefit under this Agreement exceeding the Deferral Account if the Director commits suicide within two years after the date of this Agreement, or if the Director has made any material misstatement of fact on any application for life insurance purchased by the Company.

7.2 Excess Parachute Payment. Notwithstanding any provision of this Agreement to the contrary, the Company shall not pay any benefit under this Agreement to the extent the benefit would create an excise tax under the excess parachute rules of Section 280G of the Code.

ARTICLE 8
CLAIMS AND REVIEW PROCEDURES

8.1 Claims Procedure. The Company shall notify any person or entity that makes a claim against the Agreement (the "Claimant") in writing, within 90 days of Claimant's written application for benefits, of his or her eligibility or non-eligibility for benefits under the Agreement. If the Company determines that the Claimant is not eligible for benefits or full benefits, the notice shall set forth (1) the specific reasons for such denial, (2) a specific reference to the provisions of the Agreement on which the denial is based, (3) a description of any additional information or material necessary for the Claimant to perfect his or her claim, and a description of why it is needed, and (4) an explanation of the Agreement's claims review procedure and other appropriate information as to the steps to be taken if the Claimant wishes to have the claim reviewed. If the Company determines that there are special circumstances requiring additional time to make a decision, the Company shall notify the Claimant of the special circumstances and the date by which a decision is expected to be made, and may extend the time for up to an additional 90 days.

8.2 Review Procedure. If the Claimant is determined by the Company not to be eligible for benefits, or if the Claimant believes that he or she is entitled to greater or different benefits, the Claimant shall have the opportunity to have such claim reviewed by the Company by filing a petition for review with the Company within 60 days after receipt of the notice issued by the Company. Said petition shall state the specific reasons which the Claimant believes entitle him or her to benefits or to greater or different benefits. Within 60 days after receipt by the Company of the petition, the Company shall afford the Claimant (and counsel, if any) an opportunity to present his or her position to the Company verbally or in writing, and the Claimant (or counsel) shall have the right to review the pertinent documents. The Company shall notify the Claimant of its decision in writing within the 60-day period, stating specifically the basis of its decision, written in a manner calculated to be understood by the Claimant and the specific provisions of the Agreement on which the decision is based. If, because of the need for a hearing, the 60-day period is not sufficient, the decision may be deferred for up to another 60 days at the election of the Company, but notice of this deferral shall be given to the Claimant.

ARTICLE 9
AMENDMENTS AND TERMINATION

9.1 Agreed Amendment or Termination. Subject to Section 9.2, this Agreement may be amended or terminated only by a written agreement signed by the Company and the Director.

9.2 Amendment or Termination by Operation of Law. The Company may amend or terminate this Agreement at any time if, pursuant to legislative, judicial or regulatory action, continuation of the Agreement would (i) cause benefits to be taxable to the Director prior to actual receipt, or (ii) result in significant financial penalties or other significantly detrimental ramifications to the Company (other than the financial impact of paying the benefits). In no event shall this Agreement be terminated under this Section 9.2 without payment to the Director of the Deferral Account balance within in a single lump sum sixty (60) days of a termination of this Agreement.

ARTICLE 10
MISCELLANEOUS

10.1 Binding Effect. This Agreement shall bind the Director and the Company, and their beneficiaries, survivors, executors, administrators and transferees.

10.2 No Guarantee of Service. This Agreement is not a contract for services. It does not give the Director the right to remain in the service of the Company, nor does it interfere with the shareholders' rights to replace the Director. It also does not require the Director to remain in the service of the Company nor interfere with the Director's right to terminate services at any time.

10.3 Non-Transferability. Benefits under this Agreement cannot be sold, transferred, assigned, pledged, attached or encumbered in any manner.

10.4 Tax Withholding. The Company shall withhold any taxes that are required to be withheld from the benefits provided under this Agreement.

10.5 Applicable Law. The Agreement and all rights hereunder shall be governed by Mississippi state law, except to the extent preempted by the laws of the United States of America.

10.6 Unfunded Arrangement. The Director and the Director's beneficiary are general unsecured creditors of the Company for the payment of benefits under this Agreement. The benefits represent the mere promise by the Company to pay such benefits. The rights to benefits are not subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment, or garnishment by creditors. Any insurance on the Director's life is a general asset of the Company to which the Director and the Director's beneficiary have no preferred or secured claim.

10.7 Reorganization. The Company shall not merge or consolidate into or with another company, or reorganize, or sell substantially all of its assets to another company, firm, or

person unless such succeeding or continuing company, firm, or person agrees to assume and discharge the obligations of the Company under this Agreement.

10.8 Entire Agreement. This Agreement constitutes the entire agreement between the Company and the Director as to the subject matter hereof. No rights are granted to the Director by virtue of this Agreement other than those specifically set forth herein.

10.9 Administration. The Company shall have powers which are necessary to administer this Agreement, including but not limited to:

(a) Interpreting the provisions of the Agreement;

(b) Establishing and revising the method of accounting for the Agreement;

(d) Establishing rules and prescribing any forms necessary or desirable to administer the Agreement.

10.10 Named Fiduciary. The Company shall be the named fiduciary and plan administrator under the Agreement. The named fiduciary may delegate to others certain aspects of the management and operation responsibilities of the plan including the employment of advisors and the delegation of ministerial duties to qualified individuals.

10.11 Full Obligation. Notwithstanding any provision to the contrary, when the Company has paid either the lifetime benefits or death benefits as appropriate under any section of the Agreement, the Company has completed its obligation to the Director.

IN WITNESS WHEREOF, the Director and a duly authorized Company officer have signed this Agreement.

DIRECTOR:

________________________________________    Date:_________________________
DAN MAGRUDER

THE PEOPLES BANK

By: ____________________________________    Date:__________________________

Its: ___________________________________

EXHIBIT A
TO
THE PEOPLES BANK
DIRECTOR DEFERRED FEE AGREEMENT

DEFERRAL ELECTION

I elect to defer my Fees received under this Agreement with the Company, as follows:

      AMOUNT OF DEFERRAL                        DURATION
---------------------------------   ----------------------------------
[INITIAL AND COMPLETE ONE]          [INITIAL ONE]

_____ I elect to defer _________%   ______ One Year only
      of my Fees.

_____ I elect to defer $_________   ______ For ______ [INSERT
      of my annual Fees.                   NUMBER] Years

_____ I elect not to defer any of   ______ Until Normal
      my Fees.                             Retirement Age

I understand that I may change the amount and duration of my deferrals by filing a new election form with the Company; provided, however, that any subsequent election will not be effective until the calendar year following the year in which the new election is received by the Company.

Signature ____________________________________
DAN MAGRUDER

Date ____________________________

Accepted by the Company this ________ day of ___________________, 20___.

By __________________________________________

Title ______________________________

BENEFICIARY DESIGNATION

THE PEOPLES BANK
DIRECTOR DEFERRED FEE AGREEMENT

I designate the following as beneficiary of benefits under this Agreement payable following my death:

Primary: _______________________________________________________________________

Contingent: ____________________________________________________________________

NOTE: TO NAME A TRUST AS BENEFICIARY, PLEASE PROVIDE THE NAME OF THE TRUSTEE(s) AND THE EXACT NAME AND DATE OF THE TRUST AGREEMENT.

I understand that I may change these beneficiary designations by filing a new written designation with the Company. I further understand that the designations will be automatically revoked if the beneficiary predeceases me, or, if I have named my spouse as beneficiary and our marriage is subsequently dissolved.

Signature _______________________
DAN MAGRUDER

Date ____________________________

Accepted by the Company this ________ day of ___________________, 20____.

By __________________________________________

Title ________________________________

THE PEOPLES BANK
DIRECTOR DEFERRED FEE AGREEMENT

INTRODUCTION

AGREEMENT

The Director and the Company agree as follows:

ARTICLE 1
DEFINITIONS

1.1 Definitions. Whenever used in this Agreement, the following words and phrases shall have the meanings specified:

         1.1.1    "Anniversary Date" means December 31st of each year.

         1.1.2    "Code" means the Internal Revenue Code of 1986, as
amended.

         1.1.3    "Deferral Account" means the Company's accounting of

the Director's accumulated Deferrals plus accrued interest.

1.1.4 "Deferrals" means the amount of the Director's Fees which the Director elects to defer according to this Agreement.

1.1.5 "Election Form" means the Form attached as Exhibit A.

1.1.6 "Fees" means the total fees payable to the Director during a Plan Year.

1.1.7 "Normal Retirement Age" means age sixty-five (65).

1.1.8 "Normal Retirement Date" means the later of the Normal Retirement Age or Termination of Service.

1.1.9 "Plan Year" means each twelve (12) consecutive month period beginning on January 1st of each year and ending on December 31st of each year.

ARTICLE 2
DEFERRAL ELECTION

2.2 Election Changes

ARTICLE 3
DEFERRAL ACCOUNT

3.1 Establishing and Crediting. The Company shall establish a Deferral Account on its books for the Director and shall credit to the Deferral Account the following amounts:

3.1.1 Deferrals. The Fees deferred by the Director as of the time the Fees would have otherwise been paid to the Director.

3.2 Statement of Accounts. The Company shall provide to the Director, within 120 days after each Anniversary Date, a statement setting forth the Deferral Account balance.

ARTICLE 4
LIFETIME BENEFITS

4.1 Normal Retirement Benefit. Upon the Normal Retirement Date the Company shall pay to the Director the benefit described in this Section 4.1 in lieu of any other benefit under this Agreement.

4.1.1 Amount of Benefit. The benefit under this Section 4.1 is the Deferral Account balance at the Director's Normal Retirement Date.

4.2.1 Amount of Benefit. The benefit under this Section 4.2 is the Deferral Account balance at the Director's Termination of Service.

4.2.2 Payment of Benefit. The Company shall pay the benefit to the Director in a single lump sum within sixty (60) days of Termination of Service.

4.3 Hardship Distribution. Upon the Board of Director's determination (following petition by the Director) that the Director has suffered an unforeseeable financial emergency as described in
Section 2.2.2, the Company shall distribute to the Director all or a portion of the Deferral Account balance as determined by the Company, but in no event shall the distribution be greater than is necessary to relieve the financial hardship.

ARTICLE 5
DEATH BENEFITS

5.1.1 Amount of Benefit. The benefit under Section 5.1 is the greater of: (i) the Deferral Account balance on the Director's death; or, (ii) Two Hundred Thirty Four Thousand Three Hundred and No/100 Dollars ($234,300.00).

ARTICLE 6
BENEFICIARIES

ARTICLE 7
GENERAL LIMITATIONS

ARTICLE 8
CLAIMS AND REVIEW PROCEDURES

ARTICLE 9
AMENDMENTS AND TERMINATION

9.1 Agreed Amendment or Termination. Subject to Section 9.2, this Agreement may be amended or terminated only by a written agreement signed by the Company and the Director.

ARTICLE 10
MISCELLANEOUS

10.1 Binding Effect. This Agreement shall bind the Director and the Company, and their beneficiaries, survivors, executors, administrators and transferees.

10.3 Non-Transferability. Benefits under this Agreement cannot be sold, transferred, assigned, pledged, attached or encumbered in any manner.

10.4 Tax Withholding. The Company shall withhold any taxes that are required to be withheld from the benefits provided under this Agreement.

10.5 Applicable Law. The Agreement and all rights hereunder shall be governed by Mississippi state law, except to the extent preempted by the laws of the United States of America.

10.7 Reorganization. The Company shall not merge or consolidate into or with another company, or reorganize, or sell substantially all of its assets to another company, firm, or

person unless such succeeding or continuing company, firm, or person agrees to assume and discharge the obligations of the Company under this Agreement.

10.9 Administration. The Company shall have powers which are necessary to administer this Agreement, including but not limited to:

(a) Interpreting the provisions of the Agreement;

(b) Establishing and revising the method of accounting for the Agreement;

(d) Establishing rules and prescribing any forms necessary or desirable to administer the Agreement.

IN WITNESS WHEREOF, the Director and a duly authorized Company officer have signed this Agreement.

DIRECTOR:

________________________________________    Date: ________________________
DREW ALLEN

THE PEOPLES BANK

By: ____________________________________    Date: _________________________

Its: __________________________________

EXHIBIT A
TO
THE PEOPLES BANK
DIRECTOR DEFERRED FEE AGREEMENT

DEFERRAL ELECTION

I elect to defer my Fees received under this Agreement with the Company, as follows:

         AMOUNT OF DEFERRAL                      DURATION
-----------------------------------     --------------------------
[INITIAL AND COMPLETE ONE]              [INITIAL ONE]

_____  I elect to defer ___________%    ______  One Year only
       of my Fees.

_____  I elect to defer $__________     ______  For ______ [INSERT
       of my annual Fees.                      NUMBER] Years

_____  I elect not to defer any of      _____  Until Normal
       my Fees.                                Retirement Age

Signature __________________________________
DREW ALLEN

Date ____________________________

Accepted by the Company this ________ day of ___________________, 20___.

By __________________________________________

Title ______________________________

BENEFICIARY DESIGNATION

THE PEOPLES BANK
DIRECTOR DEFERRED FEE AGREEMENT

I designate the following as beneficiary of benefits under this Agreement payable following my death:

Primary: ______________________________________________________________________

Contingent: __________________________________________________________________

NOTE: TO NAME A TRUST AS BENEFICIARY, PLEASE PROVIDE THE NAME OF THE TRUSTEE(s) AND THE EXACT NAME AND DATE OF THE TRUST AGREEMENT.

Signature __________________________________
DREW ALLEN

Date _____________________________

Accepted by the Company this ________ day of ___________________, 20____.

By __________________________________________

Title ________________________________

THE PEOPLES BANK
DIRECTOR DEFERRED FEE AGREEMENT

INTRODUCTION

AGREEMENT

The Director and the Company agree as follows:

ARTICLE 1
DEFINITIONS

1.1 Definitions. Whenever used in this Agreement, the following words and phrases shall have the meanings specified:

         1.1.1    "Anniversary Date" means December 31st of each year.

         1.1.2    "Code" means the Internal Revenue Code of 1986, as
amended.

         1.1.3    "Deferral Account" means the Company's accounting of

the Director's accumulated Deferrals plus accrued interest.

1.1.4 "Deferrals" means the amount of the Director's Fees which the Director elects to defer according to this Agreement.

1.1.5 "Election Form" means the Form attached as Exhibit A.

1.1.6 "Fees" means the total fees payable to the Director during a Plan Year.

1.1.7 "Normal Retirement Age" means age sixty-five (65).

1.1.8 "Normal Retirement Date" means the later of the Normal Retirement Age or Termination of Service.

1.1.9 "Plan Year" means each twelve (12) consecutive month period beginning on January 1st of each year and ending on December 31st of each year.

ARTICLE 2
DEFERRAL ELECTION

2.2 Election Changes

ARTICLE 3
DEFERRAL ACCOUNT

3.1 Establishing and Crediting. The Company shall establish a Deferral Account on its books for the Director and shall credit to the Deferral Account the following amounts:

3.1.1 Deferrals. The Fees deferred by the Director as of the time the Fees would have otherwise been paid to the Director.

3.2 Statement of Accounts. The Company shall provide to the Director, within 120 days after each Anniversary Date, a statement setting forth the Deferral Account balance.

ARTICLE 4
LIFETIME BENEFITS

4.1 Normal Retirement Benefit. Upon the Normal Retirement Date the Company shall pay to the Director the benefit described in this Section 4.1 in lieu of any other benefit under this Agreement.

4.1.1 Amount of Benefit. The benefit under this Section 4.1 is the Deferral Account balance at the Director's Normal Retirement Date.

4.2.1 Amount of Benefit. The benefit under this Section 4.2 is the Deferral Account balance at the Director's Termination of Service.

4.2.2 Payment of Benefit. The Company shall pay the benefit to the Director in a single lump sum within sixty (60) days of Termination of Service.

ARTICLE 5
DEATH BENEFITS

5.1.1 Amount of Benefit. The benefit under Section 5.1 is the greater of: (i) the Deferral Account balance on the Director's death; or, (ii) One Hundred Twelve Thousand One Hundred and No/100 Dollars ($112,100.00).

ARTICLE 6
BENEFICIARIES

ARTICLE 7
GENERAL LIMITATIONS

7.3 Excess Parachute Payment. Notwithstanding any provision of this Agreement to the contrary, the Company shall not pay any benefit under this Agreement to the extent the benefit would create an excise tax under the excess parachute rules of Section 280G of the Code.

ARTICLE 8
CLAIMS AND REVIEW PROCEDURES

ARTICLE 9
AMENDMENTS AND TERMINATION

9.1 Agreed Amendment or Termination. Subject to Section 9.2, this Agreement may be amended or terminated only by a written agreement signed by the Company and the Director.

ARTICLE 10
MISCELLANEOUS

10.1 Binding Effect. This Agreement shall bind the Director and the Company, and their beneficiaries, survivors, executors, administrators and transferees.

10.3 Non-Transferability. Benefits under this Agreement cannot be sold, transferred, assigned, pledged, attached or encumbered in any manner.

10.4 Tax Withholding. The Company shall withhold any taxes that are required to be withheld from the benefits provided under this Agreement.

10.5 Applicable Law. The Agreement and all rights hereunder shall be governed by Mississippi state law, except to the extent preempted by the laws of the United States of America.

10.7 Reorganization. The Company shall not merge or consolidate into or with another company, or reorganize, or sell substantially all of its assets to another company, firm, or

person unless such succeeding or continuing company, firm, or person agrees to assume and discharge the obligations of the Company under this Agreement.

10.9 Administration. The Company shall have powers which are necessary to administer this Agreement, including but not limited to:

(a) Interpreting the provisions of the Agreement;

(b) Establishing and revising the method of accounting for the Agreement;

(d) Establishing rules and prescribing any forms necessary or desirable to administer the Agreement.

IN WITNESS WHEREOF, the Director and a duly authorized Company officer have signed this Agreement.

DIRECTOR:

________________________________________    Date: ________________________
REX E. KELLY

THE PEOPLES BANK

By: __________________________________      Date: _____________________________

Its: __________________________________

EXHIBIT A
TO
THE PEOPLES BANK
DIRECTOR DEFERRED FEE AGREEMENT

DEFERRAL ELECTION

I elect to defer my Fees received under this Agreement with the Company, as follows:

         AMOUNT OF DEFERRAL                      DURATION
-----------------------------------     --------------------------
[INITIAL AND COMPLETE ONE]              [INITIAL ONE]

_____  I elect to defer ___________%    ______  One Year only
       of my Fees.

_____  I elect to defer $__________     ______  For ______ [INSERT
       of my annual Fees.                      NUMBER] Years

_____  I elect not to defer any of      _____  Until Normal
       my Fees.                                Retirement Age

Signature ____________________________________
REX E. KELLY

Date ____________________________

Accepted by the Company this ________ day of ___________________, 20___.

By __________________________________________

Title ______________________________

BENEFICIARY DESIGNATION

THE PEOPLES BANK
DIRECTOR DEFERRED FEE AGREEMENT

I designate the following as beneficiary of benefits under this Agreement payable following my death:

Primary: ______________________________________________________________________

Contingent: __________________________________________________________________

NOTE: TO NAME A TRUST AS BENEFICIARY, PLEASE PROVIDE THE NAME OF THE TRUSTEE(s) AND THE EXACT NAME AND DATE OF THE TRUST AGREEMENT.

Signature __________________________________
REX E. KELLY

Date __________________________

Accepted by the Company this ________ day of ___________________, 20____.

By __________________________________________

Title ________________________________

EXHIBIT 10.3

AMENDMENT AND RESTATEMENT OF
EXECUTIVE SUPPLEMENTAL INCOME AGREEMENT

This Agreement, effective as of October 1, 2002 (The "Effective Date"), is made by and between The Peoples Bank, a state-chartered commercial bank with its principal office located in Biloxi, Mississippi (hereinafter referred to as the "Company"), and Chevis C. Swetman (hereinafter referred to as the "Executive"). This Agreement hereby amends and restates, in its entirety, a prior agreement, with an initial effective date of January 1, 1988 (hereinafter the "Prior Agreement"), made by and between the Company and the Executive.

INTRODUCTION

The Company and the Executive entered into the Prior Agreement in order to provide certain benefits to the Executive as an officer of the Company upon the Executive's retirement.

The Company and the Executive, by this current Agreement, desire to amend and desire to restate the Prior Agreement, in its entirety, to include and reflect the terms set forth herein and to incorporate the benefit accumulated to date by the Executive under Prior Agreement.

Therefore, in order to encourage the Executive to remain an employee of the Company, the Company is willing to provide salary continuation benefits to the Executive. The Company will pay the benefits from its general assets.

AGREEMENT

The Executive and the Company agree as follows:

ARTICLE 1
DEFINITIONS

1.1 Definitions. Whenever used in this Agreement, the following words and phrases shall have the meanings specified:

1.1.1 "Change of Control" means:

(a) a change in the ownership of the capital stock of the Company or Peoples Financial Corporation (the "Holding Company"), whereby a corporation, person or group acting in concert (a "Person") as described in Section 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), holds or acquires, directly or indirectly, beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of a number of shares of capital stock of the Company or Holding Company which constitutes fifty percent (50%) or more of the combined voting power of the Company's or Holding Company's outstanding capital stock then entitled to vote generally in the election of directors; or

(b) the persons who were members of the Board of Directors of the Company or Holding Company immediately prior to a tender offer, exchange offer, contested election or any combination of the foregoing, cease to constitute a majority of such Board of Directors; or

(c) the adoption by the Board of Directors of the Company or of the Holding Company of a merger, consolidation or reorganization plan involving the Company or Holding Company in which the Company or the Holding Company is not the surviving entity, or a sale of all or substantially all of the assets of the Company or Holding Company. For purposes of this Agreement, a sale of all or substantially all of the assets of the Company or Holding Company shall be deemed to occur if any Person acquires (or during the 12-month period ending on the date of the most recent acquisition by such Person, has acquired) gross assets of the Company or Holding Company that have an aggregate fair market value equal to fifty percent (50%) of the fair market value of all of the respective gross assets of the Company or Holding Company immediately prior to such acquisition or acquisitions; or

(d) a tender offer or exchange offer is made by any Person which, if successfully completed, would result in such Person beneficially owning (within the meaning of Rule 13d-3 promulgated under the Exchange Act) either fifty percent (50%) or more of the Company's or Holding Company's outstanding shares of Common Stock or shares of capital stock having fifty percent (50%) or more the combined voting power of the Company's or Holding Company's then outstanding capital stock (other than an offer made by the Company or the Holding Company), and sufficient shares are acquired under the offer to cause such person to own fifty percent (50%) or more of the voting power; or

(e) any other transactions or series of related transactions occurring which have substantially the same effect as the transactions specified in any of the preceding clauses of this Subsection (1.1.1).

1.1.1.1 "Permitted Transfers" means that a Shareholder, as hereinafter defined in Subsection 1.1.10 may make the following transfers and such transfers shall be deemed not to be a Change of Control under Subsection 1.1.1:

(a) To any trust, company, or partnership created solely for the benefit of any Shareholder or any spouse of or any lineal descendant of any Shareholder;

(b) To any individual or entity by bona fide gift;

(d) To any officer or employee of the Company pursuant to any incentive stock option plan established by the Shareholder;

(e) To any family member of any Shareholder;

(f) After receipt of any necessary regulatory approvals, to any company or partnership, including, but not limited to, a family limited partnership, a majority of the stock or interests of which company or partnership are owned by any of the Shareholder; or

(g) To any existing Shareholder as of the Effective Date.

1.1.2 "Code" means the Internal Revenue Code of 1986, as amended. References to a Code section shall be deemed to be to that section as it now exists and to any successor provision.

1.1.3 "Disability" means the Executive's suffering a sickness, accident or injury which has been determined by the carrier of any individual or group long-term disability insurance policy carried by the Company covering the Executive, or, if no such long-term disability policy exists, then as determined by the Social Security Administration, to be a disability rendering the Executive totally and permanently disabled. The Executive must submit proof to the Company of the carrier's or Social Security Administration's determination upon the request of the Company.

1.1.4 "Discount Rate" means eight percent (8%).

1.1.5 "Early Retirement Date" means the date the Executive: (i) attains at least age fifty-five (55); (ii) attains at least his fifteen (15) year anniversary of employment at the Company; and, (iii) has participated in the Prior Agreement, including this amendment and restatement of the Prior Agreement, for five (5) years.

1.1.6 "Executive Benefit Accrual" means the amount accrued as a liability to the Executive by the Company by virtue of the terms of the Prior Agreement through the Effective Date and by virtue of the terms of this Agreement under Generally Accepted Accounting Principles (GAAP).

1.1.7 "Normal Retirement Date" means the date the Executive attains age sixty-five (65).

1.1.8 "Plan Year" means each twelve (12) consecutive month period commencing on the Effective Date. For example, the twelve month period commencing on the date the Company and the Executive execute this Agreement shall constitute then first Plan Year. The twelve month period following the first Plan Year shall constitute the second Plan Year and so on.

1.1.9 "Salary" means the base annual amount, without bonus or other benefits, paid to the Executive by the Company as of the earlier to occur of: (i) Termination of Employment; or, (ii) the Company' termination of the Agreement under Section 7.3.

1.1.10 "Shareholder" means the existing owners of all issued and outstanding stock of the Company or Holding Company as of the date this Agreement is signed.

1.1.11 "Termination of Employment" or "Terminates Employment" means the Executive's ceasing to be employed by the Company for any reason whatsoever, voluntary or involuntary, other than by reason of an approved leave of absence.

ARTICLE 2
LIFETIME BENEFITS

2.1 Normal Retirement Benefit. If Termination of Employment occurs on or after the Normal Retirement Date, the Company shall pay to the Executive the benefit described in this Section 2.1.

2.1.1 Amount of Benefit. The benefit under this Section 2.1 is sixty-seven percent (67%) of the Executive's Salary.

2.1.2 Payment of Benefit. The Company shall pay the annual benefit determined under subsection 2.1.1 for a period of fifteen (15) years, payable monthly (one-twelfth [1/12th] of the annual benefit) beginning on the last day of the month commencing with the month following Termination of Employment. The monthly payments under this subsection 2.1.2 shall total one hundred eighty (180) substantially equal payments over a period of one hundred eighty (180) months.

2.2 Early Retirement Benefit. If Termination of Employment occurs on or after the Early Retirement Date and prior to the Normal Retirement Date, the Company shall pay to the Executive the benefit described in this Section 2.2 in lieu of any other benefit under this Agreement.

2.2.1 Amount of Benefit. The benefit under this Section 2.2 is the annual benefit set forth in subsection 2.1.1 reduced by one-half of a percent (0.5%) for each month or partial month between Termination of Employment and the Normal Retirement Date. By way of example, assume the Executive elects to retire at age 59 1/2, which is 66 months prior to the Normal Retirement Date. Assume further the annual benefit under subsection 2.1.1 equals thirty percent (30%) of Salary. Based on these assumptions the percentage of Salary payable under this subsection 2.2.1 would equal 30% times 67% (100% minus the product of 66 times 0.5%). The resulting annual benefit under this subsection 2.2.1, based on the assumptions in this example, would equal 20.10% (30% multiplied by 67%) of Salary.

2.2.2 Payment of Benefit. The Company shall pay the annual benefit determined under subsection 2.2.1 for a period of fifteen (15) years, payable monthly (one-twelfth [1/12th] of the annual benefit) beginning on the last day of the month commencing with the month following Termination of Employment. The monthly payments under this subsection 2.2.2 shall total one hundred eighty (180) substantially equal payments over a period of one hundred eighty (180) months.

2.3 Termination of Employment Prior to the Early Retirement Date or Prior to the Normal Retirement Date. Subject to the provisions of Section 2.5, if Termination of Employment occurs, for reasons other than death or Disability, before either the Early Retirement Date or prior to the Normal Retirement Date, the Company shall

pay to the Executive the benefit described in this Section 2.3.

2.3.1 Amount of Benefit. The benefit under this Section 2.3 is the Executive Benefit Accrual as of Termination of Employment.

2.3.2 Payment of Benefit. The Company shall pay to the Executive the benefit set forth in subsection 2.3.1, in lieu of any other benefit under this Agreement, in a single lump-sum within sixty
(60) days of Termination of Employment.

2.4 Disability Benefit. If Termination of Employment due to a Disability occurs prior to the Normal Retirement Date, the Company shall pay to the Executive the benefit described in this Section 2.4.

2.4.1 Amount of Benefit. Subject to the provisions of
Section 2.6 and Section 5.3, the annual benefit under this Section 2.4 is the annual benefit set forth in subsection 2.1.1.

2.4.2 Payment of Benefit. The Company shall pay the annual benefit determined under subsection 2.4.1, in lieu of any other benefit under this Agreement, for a period of fifteen (15) years, payable monthly (one-twelfth [1/12th] of the annual benefit) beginning on the last day of the month commencing with the month following the Executive's Normal Retirement Date. The monthly payments under this subsection 2.4.2 shall total one hundred eighty (180) substantially equal payments over a period of one hundred eighty (180) months.

2.4.3 Death During Disability. In the event the Executive dies subsequent to Termination of Employment due to Disability and prior to receiving any payment under this Agreement, the Company shall pay the Executive's designated beneficiary the annual benefit set forth in subsection 3.1.1 and in the manner set forth in Section 3.1.2 in lieu of any other benefit under this Agreement.

2.5 Change of Control Benefit. Upon a Change of Control prior to Termination of Employment, the Company, subject to the provisions of Section 2.6 and Section 5.3, shall pay to the Executive the benefit described in this
Section 2.5 in lieu of any other benefit under this Agreement.

2.5.1 Amount of Benefit. The benefit under this Section 2.5 is the present value of the payments under Section 2.1, assuming, for purposes of determining present value under this subsection 2.5.1 only, that the Executive was entitled to benefit payments under Section 2.1 at Termination of Employment. In determining this present value the Company shall utilize the Discount Rate.

2.5.2 Payment of Benefit. The Company shall pay to the Executive the benefit set forth in subsection 2.5.1, in lieu of any other benefit under this Agreement, in a single lump-sum within sixty
(60) days of Termination of Employment.

2.6 Excess Parachute Payment. Notwithstanding any provision of this Agreement to the contrary, the Company shall not pay any benefit under this Agreement to the extent the benefit would be a non-deductible parachute payment under Section 280G of the Code.

ARTICLE 3
DEATH BENEFITS

3.1. Death During Active Service. The Company shall pay to the Executive's beneficiary the benefit described in this Section 3.1 if the Executive dies: (i) while employed by the Company; or, (ii) after Termination of Employment due to Disability prior to the Normal Retirement Date.

3.1.1. Amount of Benefit. The annual benefit under this
Section 3.1 is the annual benefit set forth in Section 2.1.1.

3.1.2. Payment of Benefit. The Company shall pay the annual benefit determined under

subsection 3.1.1, in lieu of any other benefit under this Agreement, for a period of fifteen (15) years, payable monthly (one-twelfth
[1/12th] of the annual benefit) beginning on the last day of the month commencing with the month following the Executive's death. The monthly payments under this subsection 3.1.2 shall total one hundred eighty
(180) substantially equal payments over a period of one hundred eighty
(180) months.

3.2. Death During Benefit Period. If the Executive dies after benefit payments have commenced under section of this Agreement, but before receiving all such payments, the Company shall pay the remaining benefits to the Executive's beneficiary at the same time and in the same amounts that would have been paid to the Executive had the Executive survived. If the Executive's designated beneficiary dies after benefit payments have commenced under this Agreement but before receiving all such payments, the Company shall pay the present value of the remaining benefits due under this Agreement, utilizing the a discount rate of seven and one-half percent (7.5%) to determine the present value of the remaining payments, to the estate of the Executive's designated beneficiary in a single lump sum within sixty (60) days of the death of the Executive's designated beneficiary.

ARTICLE 4
BENEFICIARIES

4.1 Beneficiary Designations. The Executive shall designate a beneficiary by filing with the Company a written designation of beneficiary on a form substantially similar to the form attached as Exhibit A. The Executive may revoke or modify the designation at any time by filing a new designation. However, designations will only be effective if signed by the Executive and accepted by the Company during the Executive's lifetime. The Executive's beneficiary designation shall be deemed automatically revoked if the beneficiary predeceases the Executive, or if the Executive names a spouse as beneficiary and the marriage is subsequently dissolved. If the Executive dies without a valid beneficiary designation, all payments shall be made to the Executive's surviving spouse, if any, and if none, to the Executive's surviving children and the descendants of any deceased child by right of representation, and if no children or descendants survive, to the Executive's estate.

4.2 Facility of Payment. If a benefit is payable to a minor, to a person declared incompetent, or to a person incapable of handling the disposition of his or her property, the Company may pay such benefit to the guardian, legal representative or person having the care or custody of such minor, incompetent person or incapable person, or to a custodian selected by the Company under the Mississippi Uniform Transfers to Minors Act for the benefit of such minor. The Company may require proof of incompetency, minority or guardianship as it may deem appropriate prior to distribution of the benefit. Such distribution shall completely discharge the Company from all liability with respect to such benefit.

ARTICLE 5
GENERAL LIMITATIONS

Notwithstanding any provision of this Agreement to the contrary, the Company shall not pay any benefit under this Agreement if any of the following occur:

5.1 Termination for Cause. If the Company terminates the Executive's employment for any of the following reasons:

         5.1.1    Conviction in a court of competent jurisdiction of a
felony; or

         5.1.2    Fraud, dishonesty, or embezzlement. Also, any willful

violation of any law or willful violation of a significant Company policy committed in connection with the Executive's employment, with either resulting in an adverse effect on the Company.

5.2 Suicide. No benefits shall be payable if the Executive commits suicide within two (2) years after the date of this Agreement, or if the Executive has made any material misstatement of fact on any application for life insurance purchased by the Company.

5.3 Golden Parachute Payment. Notwithstanding any provision of this Agreement to the contrary, the Company shall not be required to pay any benefit under this Agreement if, upon the advice of counsel, the Company determines that the payment of such benefit would be prohibited by 12 C.F.R. Part 359 or any successor regulations regarding employee compensation promulgated by any regulatory agency having jurisdiction over the Company or its affiliates or to the extent the benefit would be a non-deductible excess parachute payment under Section 280G of the Code. To the extent possible, such benefit payment shall be proportionately reduced to allow payment within the fullest extent permissible under applicable law.

ARTICLE 6
CLAIMS AND REVIEW PROCEDURES

6.1 Claims Procedure. Any individual ("Claimant") who has not received benefits under the Plan that he or she believes should be paid shall make a claim for such benefits as follows:

6.1.1 Initiation - Written Claim. The Claimant initiates a claim by submitting to the Company a written claim for the benefits.

6.1.2 Timing of Company Response. The Company shall respond to such Claimant within 90 days after receiving the claim. If the Company determines that special circumstances require additional time for processing the claim, the Company can extend the response period by an additional 90 days by notifying the Claimant in writing, prior to the end of the initial 90-day period, that an additional period is required. The notice of extension must set forth the special circumstances and the date by which the Company expects to render its decision.

6.1.3 Notice of Decision. If the Company denies part or all of the claim, the Company shall notify the Claimant in writing of such denial. The Company shall write the notification in a manner calculated to be understood by the Claimant. The notification shall set forth:

(a) The specific reasons for the denial,

(b) A reference to the specific provisions of the Plan on which the denial is based,

(c) A description of any additional information or material necessary for the Claimant to perfect the claim and an explanation of why it is needed,

(d) An explanation of the Plan's review procedures and the time limits applicable to such procedures, and

(e) A statement of the Claimant's right to bring a civil action under ERISA Section 502(a) following an adverse benefit determination on review.

6.2 Review Procedure. If the Company denies part or all of the claim, the Claimant shall have the opportunity for a full and fair review by the Company of the denial, as follows:

6.2.1 Initiation - Written Request. To initiate the review, the Claimant, within 60 days after receiving the Company's notice of denial, must file with the Company a written request for review.

6.2.2 Additional Submissions - Information Access. The Claimant shall then have the opportunity to submit written comments, documents, records and other information relating to the claim. The Company shall also provide the Claimant, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant (as defined in applicable ERISA regulations) to the Claimant's claim for benefits.

6.2.3 Considerations on Review. In considering the review, the Company shall take into account all materials and information the Claimant submits relating to the claim, without regard to whether such information was submitted or considered in the initial benefit determination.

6.2.4 Timing of Company Response. The Company shall respond in writing to such Claimant within 60 days after receiving the request for review. If the Company determines that special circumstances require additional time for processing the claim, the Company can extend the response period by an additional 60 days by notifying the Claimant in writing, prior to the end of the initial 60-day period, that an additional period is required. The notice of extension must set forth the special circumstances and the date by which the Company expects to render its decision.

6.2.5 Notice of Decision. The Company shall notify the Claimant in writing of its decision on review. The Company shall write the notification in a manner calculated to be understood by the Claimant. The notification shall set forth:

(a) The specific reasons for the denial,

(b) A reference to the specific provisions of the Plan on which the denial is based,

(c) A statement that the Claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant (as defined in applicable ERISA regulations) to the Claimant's claim for benefits, and

(d) A statement of the Claimant's right to bring a civil action under ERISA Section 502(a).

ARTICLE 7
AMENDMENTS AND TERMINATION

7.1 Amendment or Termination of Agreement. This Agreement may be amended or terminated only by at a written agreement signed by the Company and the Executive.

7.2 Termination by Operation of Law. Notwithstanding the previous paragraph in this Article 7, the Company may amend or terminate this Agreement at any time if, pursuant to legislative, judicial or regulatory action, continuation of the Agreement would (i) cause benefits to be taxable to the Executive prior to actual receipt, or (ii) result in significant financial penalties or other significantly detrimental ramifications to the Company (other than the financial impact of paying the benefits). In the event of a termination of the Agreement under this Section 7.2, the Company shall pay to the Executive a single lump-sum payment equaling one hundred percent (100%) of the Executive Benefit Accrual one hundred eighty (180) days from termination of the Agreement.

7.3 Termination by Company. The Company may terminate this Agreement at any time. In the event the Company terminates this Agreement, for reasons other than those set forth in Section 7.1 or Section 7.2, the Company, subject to Section 2.6 and Section 5.3, shall pay the Executive the benefit provided in subsection Section 2.5, assuming, for purposes of this Section 7.3 only, that upon Termination of the Agreement by the Company under this Section
7.3 Termination of Employment occurred, even if the Executive continues employment with the Company after Termination of the Agreement under this
Section 7.3.

ARTICLE 8
MISCELLANEOUS

8.1 Binding Effect. This Agreement shall bind the Executive and the Company, and their beneficiaries, survivors, executors, administrators and permitted transferees.

8.2 No Guaranty of Employment. This Agreement is not an employment policy or contract. It does not give the Executive the right to remain an employee of the Company, nor does it interfere with the Company's

right to discharge the Executive. It also does not require the Executive to remain an employee nor interfere with the Executive's right to terminate employment at any time.

8.3 Non-Transferability. Benefits under this Agreement cannot be sold, transferred, assigned, pledged, attached or encumbered in any manner, except in accordance with Article 4 with respect to designation of beneficiaries.

8.4 Tax Withholding. The Company shall withhold any taxes that are required to be withheld from the benefits provided under this Agreement.

8.5 Applicable Law. The Agreement and all rights hereunder shall be governed by the laws of the State of Mississippi, except to the extent preempted by the laws of the United States of America.

8.6 Unfunded Arrangement. The Executive and beneficiary are general unsecured creditors of the Company for the payment of benefits under this Agreement. The benefits represent the mere promise by the Company to pay such benefits. The rights to benefits are not subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment, or garnishment by creditors. Any insurance on the Executive's life is a general asset of the Company to which the Executive and beneficiary have no preferred or secured claim.

8.7 Severability. Without limitation of any other section contained herein, in case any one or more provisions contained in this Agreement shall for any reason be held to be invalid, illegal or unenforceable in any other respect, such invalidity, illegality or unenforceability shall not affect the other provisions of this Agreement. In the event any one or more of the provisions found in the Agreement shall be held to be invalid, illegal or unenforceable by any governmental regulatory agency or court of competent jurisdiction, this Agreement shall be construed as if such invalid, illegal or unenforceable provision had never been a part of this Agreement and such provision shall be deemed substituted by such other provisions as will most nearly accomplish the intent of the parties to the extent permitted by applicable law.

8.8 Administration. The Company shall have powers which are necessary to administer this Agreement, including but not limited to:

(a) Interpreting the provisions of the Agreement;

(b) Establishing and revising the method of accounting for the Agreement;

(d) Establishing rules and prescribing any forms necessary or desirable to administer the Agreement.

8.9 Named Fiduciary. The Company shall be the named fiduciary and plan administrator under this Agreement. It may delegate to others certain aspects of the management and operational responsibilities including the employment of advisors and the delegation of ministerial duties to qualified individuals.

8.10 Full Obligation. Notwithstanding any provision to the contrary, when the Company has paid either a Lifetime Benefit or a Death Benefit as appropriate under any section of the Agreement, the Company has completed its obligation to the Executive.

IN WITNESS WHEREOF, the Executive and a duly authorized Company officer have signed this Agreement as of the date indicated below.

COMPANY:                                             EXECUTIVE:
THE PEOPLES BANK

By: _________________________________       __________________________________

8

                                                     CHEVIS C. SWETMAN

Its: _________________________________

Date: _________________                              Date:    _________________

9

EXHIBIT A
BENEFICIARY DESIGNATION

I, _____________________________, designate the following as beneficiary of any death benefits payable under the Amendment and Restatement of Executive Supplemental Income Agreement between myself and The Peoples Bank:

Primary Beneficiary

Name                                       Relationship

Address

Contingent Beneficiary

Name                                       Relationship

Address

NOTE: TO NAME A TRUST AS BENEFICIARY, PLEASE PROVIDE THE NAME OF THE TRUSTEE AND THE EXACT DATE OF THE TRUST AGREEMENT.

Date

Accepted by the Company this _____ day of _____________, 20___

By:

Title:

AMENDMENT AND RESTATEMENT OF
EXECUTIVE SUPPLEMENTAL INCOME AGREEMENT

This Agreement, effective as of October 1, 2002 (The "Effective Date"), is made by and between The Peoples Bank, a state-chartered commercial bank with its principal office located in Biloxi, Mississippi (hereinafter referred to as the "Company"), and Ira W. Carpenter, Jr. (hereinafter referred to as the "Executive"). This Agreement hereby amends and restates, in its entirety, a prior agreement, with an initial effective date of January 1, 1988 (hereinafter the "Prior Agreement"), made by and between the Company and the Executive.

INTRODUCTION

The Company and the Executive entered into the Prior Agreement in order to provide certain benefits to the Executive as an officer of the Company upon the Executive's retirement.

AGREEMENT

The Executive and the Company agree as follows:

ARTICLE 1
DEFINITIONS

1.1 Definitions. Whenever used in this Agreement, the following words and phrases shall have the meanings specified:

1.1.1 "Change of Control" means:

(a) To any trust, company, or partnership created solely for the benefit of any Shareholder or any spouse of or any lineal descendant of any Shareholder;

(b) To any individual or entity by bona fide gift;

(d) To any officer or employee of the Company pursuant to any incentive stock option plan established by the Shareholder;

(e) To any family member of any Shareholder;

(g) To any existing Shareholder as of the Effective Date.

1.1.2 "Code" means the Internal Revenue Code of 1986, as amended. References to a Code section shall be deemed to be to that section as it now exists and to any successor provision.

1.1.4 "Discount Rate" means eight percent (8%).

1.1.7 "Normal Retirement Date" means the date the Executive attains age sixty-five (65).

1.1.9 "Salary" means the base annual amount, without bonus or other benefits, paid to the Executive by the Company as of the earlier to occur of:
(i) Termination of Employment; or, (ii) the Company' termination of the Agreement under Section 7.3.

1.1.10 "Shareholder" means the existing owners of all issued and outstanding stock of the Company or Holding Company as of the date this Agreement is signed.

ARTICLE 2
LIFETIME BENEFITS

2.1 Normal Retirement Benefit. If Termination of Employment occurs on or after the Normal Retirement Date, the Company shall pay to the Executive the benefit described in this Section 2.1.

2.1.1 Amount of Benefit. The benefit under this Section 2.1 is fifty-eight percent (58%) of the Executive's Salary.

2.2.1 Amount of Benefit. The benefit under this Section 2.2 is the annual benefit set forth in subsection 2.1.1 reduced by one-half of a percent (0.5%) for each month or partial month between Termination of Employment and the Normal Retirement Date. By way of example, assume the Executive elects to retire at age 59 -1/2, which is 66 months prior to the Normal Retirement Date. Assume further the annual benefit under subsection 2.1.1 equals thirty percent (30%) of Salary. Based on these assumptions the percentage of Salary payable under this subsection 2.2.1 would equal 30% times 67% (100% minus the product of 66 times 0.5%). The resulting annual benefit under this subsection 2.2.1, based on the assumptions in this example, would equal 20.10% (30% multiplied by 67%) of Salary.

pay to the Executive the benefit described in this Section 2.3.

2.3.1 Amount of Benefit. The benefit under this Section 2.3 is the Executive Benefit Accrual as of Termination of Employment.

2.4 Disability Benefit. If Termination of Employment due to a Disability occurs prior to the Normal Retirement Date, the Company shall pay to the Executive the benefit described in this Section 2.4.

2.4.1 Amount of Benefit. Subject to the provisions of
Section 2.6 and Section 5.3, the annual benefit under this Section 2.4 is the annual benefit set forth in subsection 2.1.1.

ARTICLE 3
DEATH BENEFITS

3.1.1. Amount of Benefit. The annual benefit under this
Section 3.1 is the annual benefit set forth in Section 2.1.1.

3.1.2. Payment of Benefit. The Company shall pay the annual benefit determined under

ARTICLE 4
BENEFICIARIES

ARTICLE 5
GENERAL LIMITATIONS

Notwithstanding any provision of this Agreement to the contrary, the Company shall not pay any benefit under this Agreement if any of the following occur:

5.1 Termination for Cause. If the Company terminates the Executive's employment for any of the following reasons:

         5.1.1    Conviction in a court of competent jurisdiction of a
felony; or

         5.1.2    Fraud, dishonesty, or embezzlement. Also, any willful

violation of any law or willful violation of a significant Company policy committed in connection with the Executive's employment, with either resulting in an adverse effect on the Company.

ARTICLE 6
CLAIMS AND REVIEW PROCEDURES

6.1 Claims Procedure. Any individual ("Claimant") who has not received benefits under the Plan that he or she believes should be paid shall make a claim for such benefits as follows:

6.1.1 Initiation - Written Claim. The Claimant initiates a claim by submitting to the Company a written claim for the benefits.

(a) The specific reasons for the denial,

(b) A reference to the specific provisions of the Plan on which the denial is based,

(c) A description of any additional information or material necessary for the Claimant to perfect the claim and an explanation of why it is needed,

(d) An explanation of the Plan's review procedures and the time limits applicable to such procedures, and

(e) A statement of the Claimant's right to bring a civil action under ERISA Section 502(a) following an adverse benefit determination on review.

6.2 Review Procedure. If the Company denies part or all of the claim, the Claimant shall have the opportunity for a full and fair review by the Company of the denial, as follows:

6.2.1 Initiation - Written Request. To initiate the review, the Claimant, within 60 days after receiving the Company's notice of denial, must file with the Company a written request for review.

(a) The specific reasons for the denial,

(b) A reference to the specific provisions of the Plan on which the denial is based,

(d) A statement of the Claimant's right to bring a civil action under ERISA Section 502(a).

ARTICLE 7
AMENDMENTS AND TERMINATION

7.1 Amendment or Termination of Agreement. This Agreement may be amended or terminated only by at a written agreement signed by the Company and the Executive.

ARTICLE 8
MISCELLANEOUS

8.1 Binding Effect. This Agreement shall bind the Executive and the Company, and their beneficiaries, survivors, executors, administrators and permitted transferees.

right to discharge the Executive. It also does not require the Executive to remain an employee nor interfere with the Executive's right to terminate employment at any time.

8.4 Tax Withholding. The Company shall withhold any taxes that are required to be withheld from the benefits provided under this Agreement.

8.5 Applicable Law. The Agreement and all rights hereunder shall be governed by the laws of the State of Mississippi, except to the extent preempted by the laws of the United States of America.

8.8 Administration. The Company shall have powers which are necessary to administer this Agreement, including but not limited to:

(a) Interpreting the provisions of the Agreement;

(b) Establishing and revising the method of accounting for the Agreement;

(d) Establishing rules and prescribing any forms necessary or desirable to administer the Agreement.

IN WITNESS WHEREOF, the Executive and a duly authorized Company officer have signed this Agreement as of the date indicated below.

COMPANY:                                          EXECUTIVE:
THE PEOPLES BANK

By: _________________________________        ___________________________________

8

                                                        IRA W. CARPENTER, JR.

Its: _________________________________

Date: _________________                                 Date: __________________

9

EXHIBIT A
BENEFICIARY DESIGNATION

Primary Beneficiary

  Name                                                Relationship

  Address

Contingent Beneficiary

  Name                                                Relationship

Address

NOTE: TO NAME A TRUST AS BENEFICIARY, PLEASE PROVIDE THE NAME OF THE TRUSTEE AND THE EXACT DATE OF THE TRUST AGREEMENT.

Date

Accepted by the Company this _____ day of _____________, 20___

By:

Title:

AMENDMENT AND RESTATEMENT OF
EXECUTIVE SUPPLEMENTAL INCOME AGREEMENT

This Agreement, effective as of October 1, 2002 (The "Effective Date"), is made by and between The Peoples Bank, a state-chartered commercial bank with its principal office located in Biloxi, Mississippi (hereinafter referred to as the "Company"), and Jeannette E. Romero (hereinafter referred to as the "Executive"). This Agreement hereby amends and restates, in its entirety, a prior agreement, with an initial effective date of January 1, 1988 (hereinafter the "Prior Agreement"), made by and between the Company and the Executive.

INTRODUCTION

The Company and the Executive entered into the Prior Agreement in order to provide certain benefits to the Executive as an officer of the Company upon the Executive's retirement.

AGREEMENT

The Executive and the Company agree as follows:

ARTICLE 1
DEFINITIONS

1.1 Definitions. Whenever used in this Agreement, the following words and phrases shall have the meanings specified:

1.1.1 "Change of Control" means:

(a) To any trust, company, or partnership created solely for the benefit of any Shareholder or any spouse of or any lineal descendant of any Shareholder;

(b) To any individual or entity by bona fide gift;

(d) To any officer or employee of the Company pursuant to any incentive stock option plan established by the Shareholder;

(e) To any family member of any Shareholder;

(g) To any existing Shareholder as of the Effective Date.

1.1.2 "Code" means the Internal Revenue Code of 1986, as amended. References to a Code section shall be deemed to be to that section as it now exists and to any successor provision.

1.1.4 "Discount Rate" means eight percent (8%).

1.1.5 "Early Retirement Date" means the date the Executive: (i) attains at least age fifty-five (55); (ii) attains at least her fifteen (15) year anniversary of employment at the Company; and, (iii) has participated in the Prior Agreement, including this amendment and restatement of the Prior Agreement, for five (5) years.

1.1.7 "Normal Retirement Date" means the date the Executive attains age sixty-five (65).

1.1.9 "Salary" means the base annual amount, without bonus or other benefits, paid to the Executive by the Company as of the earlier to occur of:
(i) Termination of Employment; or, (ii) the Company' termination of the Agreement under Section 7.3.

1.1.10 "Shareholder" means the existing owners of all issued and outstanding stock of the Company or Holding Company as of the date this Agreement is signed.

ARTICLE 2
LIFETIME BENEFITS

2.1 Normal Retirement Benefit. If Termination of Employment occurs on or after the Normal Retirement Date, the Company shall pay to the Executive the benefit described in this Section 2.1.

2.1.1 Amount of Benefit. The benefit under this Section 2.1 is fifty percent (50%) of the Executive's Salary.

2.2.1 Amount of Benefit. The benefit under this Section 2.2 is the annual benefit set forth in subsection 2.1.1 reduced by one-half of a percent (0.5%) for each month or partial month between Termination of Employment and the Normal Retirement Date. By way of example, assume the Executive elects to retire at age 59 -1/2, which is 66 months prior to the Normal Retirement Date. Assume further the annual benefit under subsection 2.1.1 equals thirty percent (30%) of Salary. Based on these assumptions the percentage of Salary payable under this subsection 2.2.1 would equal 30% times 67% (100% minus the product of 66 times 0.5%). The resulting annual benefit under this subsection 2.2.1, based on the assumptions in this example, would equal 20.10% (30% multiplied by 67%) of Salary.

pay to the Executive the benefit described in this Section 2.3.

2.3.1 Amount of Benefit. The benefit under this Section 2.3 is the Executive Benefit Accrual as of Termination of Employment.

2.4 Disability Benefit. If Termination of Employment due to a Disability occurs prior to the Normal Retirement Date, the Company shall pay to the Executive the benefit described in this Section 2.4.

2.4.1 Amount of Benefit. Subject to the provisions of
Section 2.6 and Section 5.3, the annual benefit under this Section 2.4 is the annual benefit set forth in subsection 2.1.1.

ARTICLE 3
DEATH BENEFITS

3.1.1. Amount of Benefit. The annual benefit under this
Section 3.1 is the annual benefit set forth in Section 2.1.1.

3.1.2. Payment of Benefit. The Company shall pay the annual benefit determined under

ARTICLE 4
BENEFICIARIES

ARTICLE 5
GENERAL LIMITATIONS

Notwithstanding any provision of this Agreement to the contrary, the Company shall not pay any benefit under this Agreement if any of the following occur:

5.1 Termination for Cause. If the Company terminates the Executive's employment for any of the following reasons:

         5.1.1    Conviction in a court of competent jurisdiction of a
felony; or

         5.1.2    Fraud, dishonesty, or embezzlement. Also, any willful

violation of any law or willful violation of a significant Company policy committed in connection with the Executive's employment, with either resulting in an adverse effect on the Company.

ARTICLE 6
CLAIMS AND REVIEW PROCEDURES

6.1 Claims Procedure. Any individual ("Claimant") who has not received benefits under the Plan that he or she believes should be paid shall make a claim for such benefits as follows:

6.1.1 Initiation - Written Claim. The Claimant initiates a claim by submitting to the Company a written claim for the benefits.

(a) The specific reasons for the denial,

(b) A reference to the specific provisions of the Plan on which the denial is based,

(c) A description of any additional information or material necessary for the Claimant to perfect the claim and an explanation of why it is needed,

(d) An explanation of the Plan's review procedures and the time limits applicable to such procedures, and

(e) A statement of the Claimant's right to bring a civil action under ERISA Section 502(a) following an adverse benefit determination on review.

6.2 Review Procedure. If the Company denies part or all of the claim, the Claimant shall have the opportunity for a full and fair review by the Company of the denial, as follows:

6.2.1 Initiation - Written Request. To initiate the review, the Claimant, within 60 days after receiving the Company's notice of denial, must file with the Company a written request for review.

(a) The specific reasons for the denial,

(b) A reference to the specific provisions of the Plan on which the denial is based,

(d) A statement of the Claimant's right to bring a civil action under ERISA Section 502(a).

ARTICLE 7
AMENDMENTS AND TERMINATION

7.1 Amendment or Termination of Agreement. This Agreement may be amended or terminated only by at a written agreement signed by the Company and the Executive.

ARTICLE 8
MISCELLANEOUS

8.1 Binding Effect. This Agreement shall bind the Executive and the Company, and their beneficiaries, survivors, executors, administrators and permitted transferees.

right to discharge the Executive. It also does not require the Executive to remain an employee nor interfere with the Executive's right to terminate employment at any time.

8.4 Tax Withholding. The Company shall withhold any taxes that are required to be withheld from the benefits provided under this Agreement.

8.5 Applicable Law. The Agreement and all rights hereunder shall be governed by the laws of the State of Mississippi, except to the extent preempted by the laws of the United States of America.

8.8 Administration. The Company shall have powers which are necessary to administer this Agreement, including but not limited to:

(a) Interpreting the provisions of the Agreement;

(b) Establishing and revising the method of accounting for the Agreement;

(d) Establishing rules and prescribing any forms necessary or desirable to administer the Agreement.

IN WITNESS WHEREOF, the Executive and a duly authorized Company officer have signed this Agreement as of the date indicated below.

COMPANY:                                             EXECUTIVE:
THE PEOPLES BANK

By: _________________________________       ____________________________________

8

                                            JEANNETTE E. ROMERO

Its: _________________________________

Date: _________________                     Date: ______________________

9

EXHIBIT A
BENEFICIARY DESIGNATION

Primary Beneficiary

Name                                          Relationship

Address

Contingent Beneficiary

Name                                          Relationship

Address

NOTE: TO NAME A TRUST AS BENEFICIARY, PLEASE PROVIDE THE NAME OF THE TRUSTEE AND THE EXACT DATE OF THE TRUST AGREEMENT.

Date

Accepted by the Company this _____ day of _____________, 20___

By:

Title:

AMENDMENT AND RESTATEMENT OF
EXECUTIVE SUPPLEMENTAL INCOME AGREEMENT

This Agreement, effective as of October 1, 2002 (The "Effective Date"), is made by and between The Peoples Bank, a state-chartered commercial bank with its principal office located in Biloxi, Mississippi (hereinafter referred to as the "Company"), and Lauri A. Wood (hereinafter referred to as the "Executive"). This Agreement hereby amends and restates, in its entirety, a prior agreement, with an initial effective date of January 1, 1992 (hereinafter the "Prior Agreement"), made by and between the Company and the Executive.

INTRODUCTION

The Company and the Executive entered into the Prior Agreement in order to provide certain benefits to the Executive as an officer of the Company upon the Executive's retirement.

AGREEMENT

The Executive and the Company agree as follows:

ARTICLE 1
DEFINITIONS

1.1 Definitions. Whenever used in this Agreement, the following words and phrases shall have the meanings specified:

1.1.1 "Change of Control" means:

(a) To any trust, company, or partnership created solely for the benefit of any Shareholder or any spouse of or any lineal descendant of any Shareholder;

(b) To any individual or entity by bona fide gift;

(d) To any officer or employee of the Company pursuant to any incentive stock option plan established by the Shareholder;

(e) To any family member of any Shareholder;

(g) To any existing Shareholder as of the Effective Date.

1.1.2 "Code" means the Internal Revenue Code of 1986, as amended. References to a Code section shall be deemed to be to that section as it now exists and to any successor provision.

1.1.4 "Discount Rate" means eight percent (8%).

1.1.7 "Normal Retirement Date" means the date the Executive attains age sixty-five (65).

1.1.9 "Salary" means the base annual amount, without bonus or other benefits, paid to the Executive by the Company as of the earlier to occur of:
(i) Termination of Employment; or, (ii) the Company' termination of the Agreement under Section 7.3.

1.1.10 "Shareholder" means the existing owners of all issued and outstanding stock of the Company or Holding Company as of the date this Agreement is signed.

ARTICLE 2
LIFETIME BENEFITS

2.1 Normal Retirement Benefit. If Termination of Employment occurs on or after the Normal Retirement Date, the Company shall pay to the Executive the benefit described in this Section 2.1.

2.1.1 Amount of Benefit. The benefit under this Section 2.1 is fifty percent (50%) of the Executive's Salary.

2.2.1 Amount of Benefit. The benefit under this Section 2.2 is the annual benefit set forth in subsection 2.1.1 reduced by one-half of a percent (0.5%) for each month or partial month between Termination of Employment and the Normal Retirement Date. By way of example, assume the Executive elects to retire at age 59 -1/2, which is 66 months prior to the Normal Retirement Date. Assume further the annual benefit under subsection 2.1.1 equals thirty percent (30%) of Salary. Based on these assumptions the percentage of Salary payable under this subsection 2.2.1 would equal 30% times 67% (100% minus the product of 66 times 0.5%). The resulting annual benefit under this subsection 2.2.1, based on the assumptions in this example, would equal 20.10% (30% multiplied by 67%) of Salary.

pay to the Executive the benefit described in this Section 2.3.

2.3.1 Amount of Benefit. The benefit under this Section 2.3 is the Executive Benefit Accrual as of Termination of Employment.

2.4 Disability Benefit. If Termination of Employment due to a Disability occurs prior to the Normal Retirement Date, the Company shall pay to the Executive the benefit described in this Section 2.4.

2.4.1 Amount of Benefit. Subject to the provisions of
Section 2.6 and Section 5.3, the annual benefit under this Section 2.4 is the annual benefit set forth in subsection 2.1.1.

ARTICLE 3
DEATH BENEFITS

3.1.1. Amount of Benefit. The annual benefit under this
Section 3.1 is the annual benefit set forth in Section 2.1.1.

3.1.2. Payment of Benefit. The Company shall pay the annual benefit determined under

ARTICLE 4
BENEFICIARIES

ARTICLE 5
GENERAL LIMITATIONS

Notwithstanding any provision of this Agreement to the contrary, the Company shall not pay any benefit under this Agreement if any of the following occur:

5.1 Termination for Cause. If the Company terminates the Executive's employment for any of the following reasons:

         5.1.1    Conviction in a court of competent jurisdiction of a
felony; or

         5.1.2    Fraud, dishonesty, or embezzlement. Also, any willful

violation of any law or willful violation of a significant Company policy committed in connection with the Executive's employment, with either resulting in an adverse effect on the Company.

ARTICLE 6
CLAIMS AND REVIEW PROCEDURES

6.1 Claims Procedure. Any individual ("Claimant") who has not received benefits under the Plan that he or she believes should be paid shall make a claim for such benefits as follows:

6.1.1 Initiation - Written Claim. The Claimant initiates a claim by submitting to the Company a written claim for the benefits.

(a) The specific reasons for the denial,

(b) A reference to the specific provisions of the Plan on which the denial is based,

(c) A description of any additional information or material necessary for the Claimant to perfect the claim and an explanation of why it is needed,

(d) An explanation of the Plan's review procedures and the time limits applicable to such procedures, and

(e) A statement of the Claimant's right to bring a civil action under ERISA Section 502(a) following an adverse benefit determination on review.

6.2 Review Procedure. If the Company denies part or all of the claim, the Claimant shall have the opportunity for a full and fair review by the Company of the denial, as follows:

6.2.1 Initiation - Written Request. To initiate the review, the Claimant, within 60 days after receiving the Company's notice of denial, must file with the Company a written request for review.

(a) The specific reasons for the denial,

(b) A reference to the specific provisions of the Plan on which the denial is based,

(d) A statement of the Claimant's right to bring a civil action under ERISA Section 502(a).

ARTICLE 7
AMENDMENTS AND TERMINATION

7.1 Amendment or Termination of Agreement. This Agreement may be amended or terminated only by at a written agreement signed by the Company and the Executive.

ARTICLE 8
MISCELLANEOUS

8.1 Binding Effect. This Agreement shall bind the Executive and the Company, and their beneficiaries, survivors, executors, administrators and permitted transferees.

right to discharge the Executive. It also does not require the Executive to remain an employee nor interfere with the Executive's right to terminate employment at any time.

8.4 Tax Withholding. The Company shall withhold any taxes that are required to be withheld from the benefits provided under this Agreement.

8.5 Applicable Law. The Agreement and all rights hereunder shall be governed by the laws of the State of Mississippi, except to the extent preempted by the laws of the United States of America.

8.8 Administration. The Company shall have powers which are necessary to administer this Agreement, including but not limited to:

(a) Interpreting the provisions of the Agreement;

(b) Establishing and revising the method of accounting for the Agreement;

(d) Establishing rules and prescribing any forms necessary or desirable to administer the Agreement.

IN WITNESS WHEREOF, the Executive and a duly authorized Company officer have signed this Agreement as of the date indicated below.

COMPANY:                                             EXECUTIVE:
THE PEOPLES BANK

By: _________________________________        __________________________________

8

                                                  LAURI A. WOOD

Its: _________________________________

Date: _________________                           Date: _________________

9

EXHIBIT A
BENEFICIARY DESIGNATION

Primary Beneficiary

Name                                                           Relationship

Address

Contingent Beneficiary

Name                                                           Relationship

Address

NOTE: TO NAME A TRUST AS BENEFICIARY, PLEASE PROVIDE THE NAME OF THE TRUSTEE AND THE EXACT DATE OF THE TRUST AGREEMENT.

Date

Accepted by the Company this _____ day of _____________, 20___

By:

Title:

AMENDMENT AND RESTATEMENT OF
EXECUTIVE SUPPLEMENTAL INCOME AGREEMENT

This Agreement, effective as of October 1, 2002 (The "Effective Date"), is made by and between The Peoples Bank, a state-chartered commercial bank with its principal office located in Biloxi, Mississippi (hereinafter referred to as the "Company"), and M.O. Lawrence, III (hereinafter referred to as the "Executive"). This Agreement hereby amends and restates, in its entirety, a prior agreement, with an initial effective date of January 1, 1988 (hereinafter the "Prior Agreement"), made by and between the Company and the Executive.

INTRODUCTION

The Company and the Executive entered into the Prior Agreement in order to provide certain benefits to the Executive as an officer of the Company upon the Executive's retirement.

AGREEMENT

The Executive and the Company agree as follows:

ARTICLE 1
DEFINITIONS

1.1 Definitions. Whenever used in this Agreement, the following words and phrases shall have the meanings specified:

1.1.1 "Change of Control" means:

(a) To any trust, company, or partnership created solely for the benefit of any Shareholder or any spouse of or any lineal descendant of any Shareholder;

(b) To any individual or entity by bona fide gift;

(d) To any officer or employee of the Company pursuant to any incentive stock option plan established by the Shareholder;

(e) To any family member of any Shareholder;

(g) To any existing Shareholder as of the Effective Date.

1.1.2 "Code" means the Internal Revenue Code of 1986, as amended. References to a Code section shall be deemed to be to that section as it now exists and to any successor provision.

1.1.4 "Discount Rate" means eight percent (8%).

1.1.7 "Normal Retirement Date" means the date the Executive attains age sixty-five (65).

1.1.9 "Salary" means the base annual amount, without bonus or other benefits, paid to the Executive by the Company as of the earlier to occur of:
(i) Termination of Employment; or, (ii) the Company' termination of the Agreement under Section 7.3.

1.1.10 "Shareholder" means the existing owners of all issued and outstanding stock of the Company or Holding Company as of the date this Agreement is signed.

ARTICLE 2
LIFETIME BENEFITS

2.1 Normal Retirement Benefit. If Termination of Employment occurs on or after the Normal Retirement Date, the Company shall pay to the Executive the benefit described in this Section 2.1.

2.1.1 Amount of Benefit. The benefit under this Section 2.1 is fifty percent (50%) of the Executive's Salary.

2.2.1 Amount of Benefit. The benefit under this Section 2.2 is the annual benefit set forth in subsection 2.1.1 reduced by one-half of a percent (0.5%) for each month or partial month between Termination of Employment and the Normal Retirement Date. By way of example, assume the Executive elects to retire at age 59 -1/2, which is 66 months prior to the Normal Retirement Date. Assume further the annual benefit under subsection 2.1.1 equals thirty percent (30%) of Salary. Based on these assumptions the percentage of Salary payable under this subsection 2.2.1 would equal 30% times 67% (100% minus the product of 66 times 0.5%). The resulting annual benefit under this subsection 2.2.1, based on the assumptions in this example, would equal 20.10% (30% multiplied by 67%) of Salary.

pay to the Executive the benefit described in this Section 2.3.

2.3.1 Amount of Benefit. The benefit under this Section 2.3 is the Executive Benefit Accrual as of Termination of Employment.

2.4 Disability Benefit. If Termination of Employment due to a Disability occurs prior to the Normal Retirement Date, the Company shall pay to the Executive the benefit described in this Section 2.4.

2.4.1 Amount of Benefit. Subject to the provisions of
Section 2.6 and Section 5.3, the annual benefit under this Section 2.4 is the annual benefit set forth in subsection 2.1.1.

ARTICLE 3
DEATH BENEFITS

3.1.1. Amount of Benefit. The annual benefit under this
Section 3.1 is the annual benefit set forth in Section 2.1.1.

3.1.2. Payment of Benefit. The Company shall pay the annual benefit determined under

3.1. Death During Benefit Period. If the Executive dies after benefit payments have commenced under section of this Agreement, but before receiving all such payments, the Company shall pay the remaining benefits to the Executive's beneficiary at the same time and in the same amounts that would have been paid to the Executive had the Executive survived. If the Executive's designated beneficiary dies after benefit payments have commenced under this Agreement but before receiving all such payments, the Company shall pay the present value of the remaining benefits due under this Agreement, utilizing the a discount rate of seven and one-half percent (7.5%) to determine the present value of the remaining payments, to the estate of the Executive's designated beneficiary in a single lump sum within sixty (60) days of the death of the Executive's designated beneficiary.

ARTICLE 4
BENEFICIARIES

ARTICLE 5
GENERAL LIMITATIONS

Notwithstanding any provision of this Agreement to the contrary, the Company shall not pay any benefit under this Agreement if any of the following occur:

5.1 Termination for Cause. If the Company terminates the Executive's employment for any of the following reasons:

         5.1.1    Conviction in a court of competent jurisdiction of a
felony; or

         5.1.2    Fraud, dishonesty, or embezzlement. Also, any willful

violation of any law or willful violation of a significant Company policy committed in connection with the Executive's employment, with either resulting in an adverse effect on the Company.

ARTICLE 6
CLAIMS AND REVIEW PROCEDURES

6.1 Claims Procedure. Any individual ("Claimant") who has not received benefits under the Plan that he or she believes should be paid shall make a claim for such benefits as follows:

6.1.1 Initiation - Written Claim. The Claimant initiates a claim by submitting to the Company a written claim for the benefits.

(a) The specific reasons for the denial,

(b) A reference to the specific provisions of the Plan on which the denial is based,

(c) A description of any additional information or material necessary for the Claimant to perfect the claim and an explanation of why it is needed,

(d) An explanation of the Plan's review procedures and the time limits applicable to such procedures, and

(e) A statement of the Claimant's right to bring a civil action under ERISA Section 502(a) following an adverse benefit determination on review.

6.2 Review Procedure. If the Company denies part or all of the claim, the Claimant shall have the opportunity for a full and fair review by the Company of the denial, as follows:

6.2.1 Initiation - Written Request. To initiate the review, the Claimant, within 60 days after receiving the Company's notice of denial, must file with the Company a written request for review.

(a) The specific reasons for the denial,

(b) A reference to the specific provisions of the Plan on which the denial is based,

(d) A statement of the Claimant's right to bring a civil action under ERISA Section 502(a).

ARTICLE 7
AMENDMENTS AND TERMINATION

7.1 Amendment or Termination of Agreement. This Agreement may be amended or terminated only by at a written agreement signed by the Company and the Executive.

ARTICLE 8
MISCELLANEOUS

8.1 Binding Effect. This Agreement shall bind the Executive and the Company, and their beneficiaries, survivors, executors, administrators and permitted transferees.

right to discharge the Executive. It also does not require the Executive to remain an employee nor interfere with the Executive's right to terminate employment at any time.

8.4 Tax Withholding. The Company shall withhold any taxes that are required to be withheld from the benefits provided under this Agreement.

8.5 Applicable Law. The Agreement and all rights hereunder shall be governed by the laws of the State of Mississippi, except to the extent preempted by the laws of the United States of America.

8.8 Administration. The Company shall have powers which are necessary to administer this Agreement, including but not limited to:

(a) Interpreting the provisions of the Agreement;

(b) Establishing and revising the method of accounting for the Agreement;

(d) Establishing rules and prescribing any forms necessary or desirable to administer the Agreement.

IN WITNESS WHEREOF, the Executive and a duly authorized Company officer have signed this Agreement as of the date indicated below.

COMPANY:                                             EXECUTIVE:
THE PEOPLES BANK

By: _________________________________       __________________________________

8

                                                     M.O. LAWRENCE, III

Its: _________________________________

Date: _________________                              Date:    _________________

9

EXHIBIT A
BENEFICIARY DESIGNATION

Primary Beneficiary

Name                                        Relationship

Address

Contingent Beneficiary

Name                                        Relationship

Address

NOTE: TO NAME A TRUST AS BENEFICIARY, PLEASE PROVIDE THE NAME OF THE TRUSTEE AND THE EXACT DATE OF THE TRUST AGREEMENT.

Date

Accepted by the Company this _____ day of _____________, 20___

By:

Title:

AMENDMENT AND RESTATEMENT OF
EXECUTIVE SUPPLEMENTAL INCOME AGREEMENT

This Agreement, effective as of October 1, 2002 (The "Effective Date"), is made by and between The Peoples Bank, a state-chartered commercial bank with its principal office located in Biloxi, Mississippi (hereinafter referred to as the "Company"), and Robert M. Tucei (hereinafter referred to as the "Executive"). This Agreement hereby amends and restates, in its entirety, a prior agreement, with an initial effective date of January 1, 1988 (hereinafter the "Prior Agreement"), made by and between the Company and the Executive.

INTRODUCTION

The Company and the Executive entered into the Prior Agreement in order to provide certain benefits to the Executive as an officer of the Company upon the Executive's retirement.

AGREEMENT

The Executive and the Company agree as follows:

ARTICLE 1
DEFINITIONS

1.1 Definitions. Whenever used in this Agreement, the following words and phrases shall have the meanings specified:

1.1.1 "Change of Control" means:

(a) To any trust, company, or partnership created solely for the benefit of any Shareholder or any spouse of or any lineal descendant of any Shareholder;

(b) To any individual or entity by bona fide gift;

(d) To any officer or employee of the Company pursuant to any incentive stock option plan established by the Shareholder;

(e) To any family member of any Shareholder;

(g) To any existing Shareholder as of the Effective Date.

1.1.2 "Code" means the Internal Revenue Code of 1986, as amended. References to a Code section shall be deemed to be to that section as it now exists and to any successor provision.

1.1.4 "Discount Rate" means eight percent (8%).

1.1.7 "Normal Retirement Date" means the date the Executive attains age sixty-five (65).

1.1.9 "Salary" means the base annual amount, without bonus or other benefits, paid to the Executive by the Company as of the earlier to occur of:
(i) Termination of Employment; or, (ii) the Company' termination of the Agreement under Section 7.3.

1.1.10 "Shareholder" means the existing owners of all issued and outstanding stock of the Company or Holding Company as of the date this Agreement is signed.

ARTICLE 2
LIFETIME BENEFITS

2.1 Normal Retirement Benefit. If Termination of Employment occurs on or after the Normal Retirement Date, the Company shall pay to the Executive the benefit described in this Section 2.1.

2.1.1 Amount of Benefit. The benefit under this Section 2.1 is fifty percent (50%) of the Executive's Salary.

2.2.1 Amount of Benefit. The benefit under this
Section 2.2 is the annual benefit set forth in subsection 2.1.1 reduced by one-half of a percent (0.5%) for each month or partial month between Termination of Employment and the Normal Retirement Date. By way of example, assume the Executive elects to retire at age 59 -1/2, which is 66 months prior to the Normal Retirement Date. Assume further the annual benefit under subsection 2.1.1 equals thirty percent (30%) of Salary. Based on these assumptions the percentage of Salary payable under this subsection 2.2.1 would equal 30% times 67% (100% minus the product of 66 times 0.5%). The resulting annual benefit under this subsection 2.2.1, based on the assumptions in this example, would equal 20.10% (30% multiplied by 67%) of Salary.

2.2.2 Payment of Benefit. The Company shall pay the annual benefit determined under subsection 2.2.1 for a period of fifteen (15) years, payable monthly (one-twelfth
[1/12th] of the annual benefit) beginning on the last day of the month commencing with the month following Termination of Employment. The monthly payments under this subsection 2.2.2 shall total one hundred eighty (180) substantially equal payments over a period of one hundred eighty (180) months.

pay to the Executive the benefit described in this Section 2.3.

2.3.1 Amount of Benefit. The benefit under this
Section 2.3 is the Executive Benefit Accrual as of Termination of Employment.

2.4 Disability Benefit. If Termination of Employment due to a Disability occurs prior to the Normal Retirement Date, the Company shall pay to the Executive the benefit described in this Section 2.4.

2.4.1 Amount of Benefit. Subject to the provisions of Section 2.6 and Section 5.3, the annual benefit under this
Section 2.4 is the annual benefit set forth in subsection 2.1.1.

2.5 Change of Control Benefit. Upon a Change of Control prior to Termination of Employment, the Company, subject to the provisions of Section 2.6 and Section 5.3, shall pay to the Executive the benefit described in this Section 2.5 in lieu of any other benefit under this Agreement.

2.5.1 Amount of Benefit. The benefit under this
Section 2.5 is the present value of the payments under Section 2.1, assuming, for purposes of determining present value under this subsection 2.5.1 only, that the Executive was entitled to benefit payments under Section 2.1 at Termination of Employment. In determining this present value the Company shall utilize the Discount Rate.

ARTICLE 3
DEATH BENEFITS

3.1.1. Amount of Benefit. The annual benefit under this Section 3.1 is the annual benefit set forth in Section 2.1.1.

3.1.2. Payment of Benefit. The Company shall pay the annual benefit determined under

subsection 3.1.1, in lieu of any other benefit under this Agreement, for a period of fifteen (15) years, payable monthly (one-twelfth [1/12th] of the annual benefit) beginning on the last day of the month commencing with the month following the Executive's death. The monthly payments under this subsection 3.1.2 shall total one hundred eighty (180) substantially equal payments over a period of one hundred eighty (180) months.

3.1. Death During Benefit Period. If the Executive dies after benefit payments have commenced under section of this Agreement, but before receiving all such payments, the Company shall pay the remaining benefits to the Executive's beneficiary at the same time and in the same amounts that would have been paid to the Executive had the Executive survived. If the Executive's designated beneficiary dies after benefit payments have commenced under this Agreement but before receiving all such payments, the Company shall pay the present value of the remaining benefits due under this Agreement, utilizing the a discount rate of seven and one-half percent (7.5%) to determine the present value of the remaining payments, to the estate of the Executive's designated beneficiary in a single lump sum within sixty
(60) days of the death of the Executive's designated beneficiary.

ARTICLE 4
BENEFICIARIES

ARTICLE 5
GENERAL LIMITATIONS

Notwithstanding any provision of this Agreement to the contrary, the Company shall not pay any benefit under this Agreement if any of the following occur:

5.1 Termination for Cause. If the Company terminates the Executive's employment for any of the following reasons:

5.1.1 Conviction in a court of competent jurisdiction of a felony; or

5.1.2 Fraud, dishonesty, or embezzlement. Also, any willful violation of any law or willful violation of a significant Company policy committed in connection with the Executive's employment, with either resulting in an adverse effect on the Company.

5.3 Golden Parachute Payment. Notwithstanding any provision of this Agreement to the contrary, the Company shall not be required to pay any benefit under this Agreement if, upon the advice of counsel, the Company determines that the payment of such benefit would be prohibited by 12 C.F.R. Part 359 or any successor regulations regarding employee compensation promulgated by any regulatory agency having jurisdiction over the Company or its affiliates or to the extent the benefit would be a non-deductible excess parachute payment under
Section 280G of the Code. To the extent possible, such benefit payment shall be proportionately reduced to allow payment within the fullest extent permissible under applicable law.

ARTICLE 6
CLAIMS AND REVIEW PROCEDURES

6.1 Claims Procedure. Any individual ("Claimant") who has not received benefits under the Plan that he or she believes should be paid shall make a claim for such benefits as follows:

6.1.1 Initiation - Written Claim. The Claimant initiates a claim by submitting to the Company a written claim for the benefits.

(a) The specific reasons for the denial,

(b) A reference to the specific provisions of the Plan on which the denial is based,

(c) A description of any additional information or material necessary for the Claimant to perfect the claim and an explanation of why it is needed,

(d) An explanation of the Plan's review procedures and the time limits applicable to such procedures, and

(e) A statement of the Claimant's right to bring a civil action under ERISA Section 502(a) following an adverse benefit determination on review.

6.2 Review Procedure. If the Company denies part or all of the claim, the Claimant shall have the opportunity for a full and fair review by the Company of the denial, as follows:

6.2.1 Initiation - Written Request. To initiate the review, the Claimant, within 60 days after receiving the Company's notice of denial, must file with the Company a written request for review.

(a) The specific reasons for the denial,

(b) A reference to the specific provisions of the Plan on which the denial is based,

(d) A statement of the Claimant's right to bring a civil action under ERISA Section 502(a).

ARTICLE 7
AMENDMENTS AND TERMINATION

7.1 Amendment or Termination of Agreement. This Agreement may be amended or terminated only by at a written agreement signed by the Company and the Executive.

7.3 Termination by Company. The Company may terminate this Agreement at any time. In the event the Company terminates this Agreement, for reasons other than those set forth in Section 7.1 or
Section 7.2, the Company, subject to Section 2.6 and Section 5.3, shall pay the Executive the benefit provided in subsection Section 2.5, assuming, for purposes of this Section 7.3 only, that upon Termination of the Agreement by the Company under this Section 7.3 Termination of Employment occurred, even if the Executive continues employment with the Company after Termination of the Agreement under this Section 7.3.

ARTICLE 8
MISCELLANEOUS

8.1 Binding Effect. This Agreement shall bind the Executive and the Company, and their beneficiaries, survivors, executors, administrators and permitted transferees.

right to discharge the Executive. It also does not require the Executive to remain an employee nor interfere with the Executive's right to terminate employment at any time.

8.4 Tax Withholding. The Company shall withhold any taxes that are required to be withheld from the benefits provided under this Agreement.

8.5 Applicable Law. The Agreement and all rights hereunder shall be governed by the laws of the State of Mississippi, except to the extent preempted by the laws of the United States of America.

8.8 Administration. The Company shall have powers which are necessary to administer this Agreement, including but not limited to:

(a) Interpreting the provisions of the Agreement;

(b) Establishing and revising the method of accounting for the Agreement;

(d) Establishing rules and prescribing any forms necessary or desirable to administer the Agreement.

IN WITNESS WHEREOF, the Executive and a duly authorized Company officer have signed this Agreement as of the date indicated below.

COMPANY:                                             EXECUTIVE:
THE PEOPLES BANK

By: _________________________________       __________________________________

8

                                                     ROBERT M. TUCEI

Its: _________________________________

Date: _________________                              Date:    _________________

9

EXHIBIT A
BENEFICIARY DESIGNATION

 Primary Beneficiary

 Name                                                           Relationship

 Address

Contingent Beneficiary

 Name                                                           Relationship

Address

NOTE: TO NAME A TRUST AS BENEFICIARY, PLEASE PROVIDE THE NAME OF THE TRUSTEE AND THE EXACT DATE OF THE TRUST AGREEMENT.

Date

Accepted by the Company this _____ day of _____________, 20___

By:

Title:

AMENDMENT AND RESTATEMENT OF
EXECUTIVE SUPPLEMENTAL INCOME AGREEMENT

This Agreement, effective as of October 1, 2002 (The "Effective Date"), is made by and between The Peoples Bank, a state-chartered commercial bank with its principal office located in Biloxi, Mississippi (hereinafter referred to as the "Company"), and Thomas J. Sliman (hereinafter referred to as the "Executive"). This Agreement hereby amends and restates, in its entirety, a prior agreement, with an initial effective date of January 1, 1988 (hereinafter the "Prior Agreement"), made by and between the Company and the Executive.

INTRODUCTION

The Company and the Executive entered into the Prior Agreement in order to provide certain benefits to the Executive as an officer of the Company upon the Executive's retirement.

AGREEMENT

The Executive and the Company agree as follows:

ARTICLE 1
DEFINITIONS

1.1 Definitions. Whenever used in this Agreement, the following words and phrases shall have the meanings specified:

1.1.1 "Change of Control" means:

(a) To any trust, company, or partnership created solely for the benefit of any Shareholder or any spouse of or any lineal descendant of any Shareholder;

(b) To any individual or entity by bona fide gift;

(d) To any officer or employee of the Company pursuant to any incentive stock option plan established by the Shareholder;

(e) To any family member of any Shareholder;

(g) To any existing Shareholder as of the Effective Date.

1.1.2 "Code" means the Internal Revenue Code of 1986, as amended. References to a Code section shall be deemed to be to that section as it now exists and to any successor provision.

1.1.4 "Discount Rate" means eight percent (8%).

1.1.7 "Normal Retirement Date" means the date the Executive attains age sixty-five (65).

1.1.9 "Salary" means the base annual amount, without bonus or other benefits, paid to the Executive by the Company as of the earlier to occur of:
(i) Termination of Employment; or, (ii) the Company' termination of the Agreement under Section 7.3.

1.1.10 "Shareholder" means the existing owners of all issued and outstanding stock of the Company or Holding Company as of the date this Agreement is signed.

ARTICLE 2
LIFETIME BENEFITS

2.1 Normal Retirement Benefit. If Termination of Employment occurs on or after the Normal Retirement Date, the Company shall pay to the Executive the benefit described in this Section 2.1.

2.1.1 Amount of Benefit. The benefit under this Section 2.1 is fifty percent (50%) of the Executive's Salary.

pay to the Executive the benefit described in this Section 2.3.

2.3.1 Amount of Benefit. The benefit under this Section 2.3 is the Executive Benefit Accrual as of Termination of Employment.

2.4 Disability Benefit. If Termination of Employment due to a Disability occurs prior to the Normal Retirement Date, the Company shall pay to the Executive the benefit described in this Section 2.4.

2.4.1 Amount of Benefit. Subject to the provisions of
Section 2.6 and Section 5.3, the annual benefit under this Section 2.4 is the annual benefit set forth in subsection 2.1.1.

ARTICLE 3
DEATH BENEFITS

3.1.1. Amount of Benefit. The annual benefit under this
Section 3.1 is the annual benefit set forth in Section 2.1.1.

3.1.2. Payment of Benefit. The Company shall pay the annual benefit determined under

ARTICLE 4
BENEFICIARIES

ARTICLE 5
GENERAL LIMITATIONS

Notwithstanding any provision of this Agreement to the contrary, the Company shall not pay any benefit under this Agreement if any of the following occur:

5.1 Termination for Cause. If the Company terminates the Executive's employment for any of the following reasons:

         5.1.1    Conviction in a court of competent jurisdiction of a
felony; or

         5.1.2    Fraud, dishonesty, or embezzlement. Also, any willful

violation of any law or willful violation of a significant Company policy committed in connection with the Executive's employment, with either resulting in an adverse effect on the Company.

ARTICLE 6
CLAIMS AND REVIEW PROCEDURES

6.1 Claims Procedure. Any individual ("Claimant") who has not received benefits under the Plan that he or she believes should be paid shall make a claim for such benefits as follows:

6.1.1 Initiation - Written Claim. The Claimant initiates a claim by submitting to the Company a written claim for the benefits.

(a) The specific reasons for the denial,

(b) A reference to the specific provisions of the Plan on which the denial is based,

(c) A description of any additional information or material necessary for the Claimant to perfect the claim and an explanation of why it is needed,

(d) An explanation of the Plan's review procedures and the time limits applicable to such procedures, and

(e) A statement of the Claimant's right to bring a civil action under ERISA Section 502(a) following an adverse benefit determination on review.

6.2 Review Procedure. If the Company denies part or all of the claim, the Claimant shall have the opportunity for a full and fair review by the Company of the denial, as follows:

6.2.1 Initiation - Written Request. To initiate the review, the Claimant, within 60 days after receiving the Company's notice of denial, must file with the Company a written request for review.

(a) The specific reasons for the denial,

(b) A reference to the specific provisions of the Plan on which the denial is based,

(d) A statement of the Claimant's right to bring a civil action under ERISA Section 502(a).

ARTICLE 7
AMENDMENTS AND TERMINATION

7.1 Amendment or Termination of Agreement. This Agreement may be amended or terminated only by at a written agreement signed by the Company and the Executive.

ARTICLE 8
MISCELLANEOUS

8.1 Binding Effect. This Agreement shall bind the Executive and the Company, and their beneficiaries, survivors, executors, administrators and permitted transferees.

right to discharge the Executive. It also does not require the Executive to remain an employee nor interfere with the Executive's right to terminate employment at any time.

8.4 Tax Withholding. The Company shall withhold any taxes that are required to be withheld from the benefits provided under this Agreement.

8.5 Applicable Law. The Agreement and all rights hereunder shall be governed by the laws of the State of Mississippi, except to the extent preempted by the laws of the United States of America.

8.8 Administration. The Company shall have powers which are necessary to administer this Agreement, including but not limited to:

(a) Interpreting the provisions of the Agreement;

(b) Establishing and revising the method of accounting for the Agreement;

(d) Establishing rules and prescribing any forms necessary or desirable to administer the Agreement.

IN WITNESS WHEREOF, the Executive and a duly authorized Company officer have signed this Agreement as of the date indicated below.

COMPANY:                                   EXECUTIVE:
THE PEOPLES BANK

By: _________________________________      __________________________________

8

                                           THOMAS J. SLIMAN

Its: _________________________________

Date: _________________                    Date:_________________

9

EXHIBIT A
BENEFICIARY DESIGNATION

Primary Beneficiary

Name                                    Relationship

Address

Contingent Beneficiary

Name                                    Relationship

Address

NOTE: TO NAME A TRUST AS BENEFICIARY, PLEASE PROVIDE THE NAME OF THE TRUSTEE AND THE EXACT DATE OF THE TRUST AGREEMENT.

Date

Accepted by the Company this _____ day of _____________, 20___

By:

Title:

AMENDMENT AND RESTATEMENT OF
EXECUTIVE SUPPLEMENTAL INCOME AGREEMENT

This Agreement, effective as of October 1, 2002 (The "Effective Date"), is made by and between The Peoples Bank, a state-chartered commercial bank with its principal office located in Biloxi, Mississippi (hereinafter referred to as the "Company"), and A. Wes Fulmer (hereinafter referred to as the "Executive"). This Agreement hereby amends and restates, in its entirety, a prior agreement, with an initial effective date of January 1, 1995 (hereinafter the "Prior Agreement"), made by and between the Company and the Executive.

INTRODUCTION

The Company and the Executive entered into the Prior Agreement in order to provide certain benefits to the Executive as an officer of the Company upon the Executive's retirement.

AGREEMENT

The Executive and the Company agree as follows:

ARTICLE 1
DEFINITIONS

1.1 Definitions. Whenever used in this Agreement, the following words and phrases shall have the meanings specified:

1.1.1 "Change of Control" means:

(a) To any trust, company, or partnership created solely for the benefit of any Shareholder or any spouse of or any lineal descendant of any Shareholder;

(b) To any individual or entity by bona fide gift;

(d) To any officer or employee of the Company pursuant to any incentive stock option plan established by the Shareholder;

(e) To any family member of any Shareholder;

(g) To any existing Shareholder as of the Effective Date.

1.1.2 "Code" means the Internal Revenue Code of 1986, as amended. References to a Code section shall be deemed to be to that section as it now exists and to any successor provision.

1.1.4 "Discount Rate" means eight percent (8%).

1.1.7 "Normal Retirement Date" means the date the Executive attains age sixty-five (65).

1.1.9 "Salary" means the base annual amount, without bonus or other benefits, paid to the Executive by the Company as of the earlier to occur of:
(i) Termination of Employment; or, (ii) the Company' termination of the Agreement under Section 7.3.

1.1.10 "Shareholder" means the existing owners of all issued and outstanding stock of the Company or Holding Company as of the date this Agreement is signed.

ARTICLE 2
LIFETIME BENEFITS

2.1 Normal Retirement Benefit. If Termination of Employment occurs on or after the Normal Retirement Date, the Company shall pay to the Executive the benefit described in this Section 2.1.

2.1.1 Amount of Benefit. The benefit under this Section 2.1 is fifty percent (50%) of the Executive's Salary.

pay to the Executive the benefit described in this Section 2.3.

2.3.1 Amount of Benefit. The benefit under this Section 2.3 is the Executive Benefit Accrual as of Termination of Employment.

2.4 Disability Benefit. If Termination of Employment due to a Disability occurs prior to the Normal Retirement Date, the Company shall pay to the Executive the benefit described in this Section 2.4.

2.4.1 Amount of Benefit. Subject to the provisions of
Section 2.6 and Section 5.3, the annual benefit under this Section 2.4 is the annual benefit set forth in subsection 2.1.1.

ARTICLE 3
DEATH BENEFITS

3.1.1. Amount of Benefit. The annual benefit under this
Section 3.1 is the annual benefit set forth in Section 2.1.1.

3.1.2. Payment of Benefit. The Company shall pay the annual benefit determined under

ARTICLE 4
BENEFICIARIES

ARTICLE 5
GENERAL LIMITATIONS

Notwithstanding any provision of this Agreement to the contrary, the Company shall not pay any benefit under this Agreement if any of the following occur:

5.1 Termination for Cause. If the Company terminates the Executive's employment for any of the following reasons:

         5.1.1    Conviction in a court of competent jurisdiction of a
felony; or

         5.1.2    Fraud, dishonesty, or embezzlement. Also, any willful

violation of any law or willful violation of a significant Company policy committed in connection with the Executive's employment, with either resulting in an adverse effect on the Company.

ARTICLE 6
CLAIMS AND REVIEW PROCEDURES

6.1 Claims Procedure. Any individual ("Claimant") who has not received benefits under the Plan that he or she believes should be paid shall make a claim for such benefits as follows:

6.1.1 Initiation - Written Claim. The Claimant initiates a claim by submitting to the Company a written claim for the benefits.

(a) The specific reasons for the denial,

(b) A reference to the specific provisions of the Plan on which the denial is based,

(c) A description of any additional information or material necessary for the Claimant to perfect the claim and an explanation of why it is needed,

(d) An explanation of the Plan's review procedures and the time limits applicable to such procedures, and

(e) A statement of the Claimant's right to bring a civil action under ERISA Section 502(a) following an adverse benefit determination on review.

6.2 Review Procedure. If the Company denies part or all of the claim, the Claimant shall have the opportunity for a full and fair review by the Company of the denial, as follows:

6.2.1 Initiation - Written Request. To initiate the review, the Claimant, within 60 days after receiving the Company's notice of denial, must file with the Company a written request for review.

(a) The specific reasons for the denial,

(b) A reference to the specific provisions of the Plan on which the denial is based,

(d) A statement of the Claimant's right to bring a civil action under ERISA Section 502(a).

ARTICLE 7
AMENDMENTS AND TERMINATION

7.1 Amendment or Termination of Agreement. This Agreement may be amended or terminated only by at a written agreement signed by the Company and the Executive.

ARTICLE 8
MISCELLANEOUS

8.1 Binding Effect. This Agreement shall bind the Executive and the Company, and their beneficiaries, survivors, executors, administrators and permitted transferees.

right to discharge the Executive. It also does not require the Executive to remain an employee nor interfere with the Executive's right to terminate employment at any time.

8.4 Tax Withholding. The Company shall withhold any taxes that are required to be withheld from the benefits provided under this Agreement.

8.5 Applicable Law. The Agreement and all rights hereunder shall be governed by the laws of the State of Mississippi, except to the extent preempted by the laws of the United States of America.

8.8 Administration. The Company shall have powers which are necessary to administer this Agreement, including but not limited to:

(a) Interpreting the provisions of the Agreement;

(b) Establishing and revising the method of accounting for the Agreement;

(d) Establishing rules and prescribing any forms necessary or desirable to administer the Agreement.

IN WITNESS WHEREOF, the Executive and a duly authorized Company officer have signed this Agreement as of the date indicated below.

COMPANY:                                             EXECUTIVE:
THE PEOPLES BANK

By: ___________________________             _________________________________

8

                                                  A. WES FULMER

Its: _________________________________

Date: _________________________                   Date: ____________________

9

EXHIBIT A
BENEFICIARY DESIGNATION

Primary Beneficiary

Name                                   Relationship

Address

Contingent Beneficiary

Name                                   Relationship

Address

NOTE: TO NAME A TRUST AS BENEFICIARY, PLEASE PROVIDE THE NAME OF THE TRUSTEE AND THE EXACT DATE OF THE TRUST AGREEMENT.

Date

Accepted by the Company this _____ day of _____________, 20___

By:

Title:

EXHIBIT 10.4

THE PEOPLES BANK
SPLIT DOLLAR AGREEMENT

THIS AGREEMENT, effective January 1, 2003 (the "Effective Date"), is made by and between The Peoples Bank, a state-chartered commercial bank with its principal office located in Biloxi, Mississippi (the "Company"), and Chevis C. Swetman (the "Executive"), a key officer employed by the Company and a director of the Company.

INTRODUCTION

WHEREAS, the Executive has contributed substantially to the success and profitability of the Company and it is expected that the Executive will continue to contribute substantially to the success and profitability of the Company;

WHEREAS, as a result of these contributions and to ensure that the Executive maintains his relationship with the Company, the Company is willing to divide the death proceeds of a life insurance policy on the Executive's life. The Company will pay for its portion of the life insurance premiums from its general assets; and,

WHEREAS, in order to encourage the Executive to continue his relationship with the Company, to remain employed by the Company until his retirement or death, the Company agrees to provide the aforementioned benefit to the Executive as a current benefit that will continue beyond the date the Executive's service to the Company ends;

AGREEMENT

The Executive and the Company agree as follows:

ARTICLE 1
GENERAL DEFINITIONS

The following terms shall have the meanings specified:

1.1 "Change of Control" means:

or Holding Company's outstanding capital stock then entitled to vote generally in the election of directors; or

1.1.1.1 "Permitted Transfers" means that a Shareholder, as hereinafter defined in Subsection 1.1.8 may make the following transfers and such transfers shall be deemed not to be a Change of Control under Subsection 1.1.1:

(a) To any trust, company, or partnership created solely for the benefit of any Shareholder or any spouse of or any lineal descendant of any Shareholder;

(b) To any individual or entity by bona fide gift;

(d) To any officer or employee of the Company pursuant to any incentive stock option plan established by the Shareholder;

(e) To any family member of any Shareholder;

(g) To any existing Shareholder as of the Effective Date.

1.2 "Disability" means the Executive's suffering a sickness, accident or injury which has been determined by the carrier of any individual or group long-term disability insurance policy carried by the Company covering the Executive, or, if no such long-term disability policy exists, then as determined by the Social Security Administration, to be a disability rendering the Executive totally and permanently disabled. The Executive must submit proof to the Company of the carrier's or Social Security Administration's determination upon the request of the Company.

1.3 "Insurer" means Massachusetts Mutual Life Insurance Company.

1.4 "Policy" means insurance policy number XXXXX issued by Massachusetts Mutual Life Insurance Company.

1.5 "Insured" means the Executive.

1.6 "Net Death Proceeds" means the total death proceeds of the Policy minus the cash surrender value of the Policy. The Net Death Proceeds in this case equals One Hundred Fifty Thousand and No/100 Dollars ($150,000.00).

1.7 "Shareholder" means the existing owners of all issued and outstanding stock of the Company or Holding Company as of the date this Agreement is signed.

1.8 "Termination of Employment" means the Executive ceasing to be employed by the Company for any reason whatsoever, other than by reason of an approved leave of absence.

ARTICLE 2
POLICY OWNERSHIP/INTERESTS

2.1 Company Ownership. The Company is the sole owner of the Policy and shall have the right to exercise all incidents of ownership. The Company shall be the beneficiary of the cash surrender value of the Policy. The Company shall receive this amount upon either the surrender of the Policy or upon the death of the Executive.

2.2 Executive's Interest. The Executive shall have the right to designate the beneficiary of the Net Death Proceeds. The Executive shall also have the right to elect and change settlement options that may be permitted. The Company and the Executive agree that the Executive shall have all rights or interests in the Policy with respect to the Net Death Proceeds designated in this Section 2.2 upon the Executive's Termination of Employment, and that the Executive shall maintain all of the powers and interests described in this
Section 2.2 until the death of the Executive.

2.3 Option to Purchase. The Company shall not sell, surrender or transfer ownership of the Policy while this Agreement is in effect without first giving the Executive or the Executive's transferee the option to purchase the Policy for a period of ninety (90) days from written notice of such intention. The purchase price shall be an amount equal to the cash surrender value of the Policy. This provision shall not impair the right of the Company to terminate this Agreement.

2.4 Comparable Coverage. Upon execution of this Agreement, the Company shall maintain the Policy in full force and effect and in no event shall the Company amend, terminate or otherwise abrogate the Executive's interest in the Policy, unless the Company replaces the Policy with a comparable insurance policy to cover the benefit provided under this Agreement. The Policy or any comparable policy shall be subject to the claims of the Company's creditors.

2.5 Change of Control. Upon Change of Control, the Company shall maintain the Policy in full force and effect and in no event shall the Company amend, terminate or otherwise abrogate the Executive's interest in the Policy, unless the Company replaces the Policy with a comparable insurance policy to cover the benefit provided under this Agreement, unless a written agreement between the Executive and the Company provides otherwise.

ARTICLE 3
PREMIUMS

3.1 Premium Payment. The Company shall pay any premiums due on the Policy.

3.2 Economic Benefit. The Company shall determine the economic benefit attributable to the Executive based on the amount of the current term rate for the Executive's age multiplied by the aggregate death benefit payable to the Executive's designated beneficiary, as determined in accordance with applicable Internal Revenue Service rules and regulations. The

Company shall notify the Executive of the Economic Benefit determined under this
Section 3.2 each Plan Year.

3.3 Imputed Income. On an annual basis the Company shall impute to the Executive in an amount equal to the Economic Benefit.

ARTICLE 4
ASSIGNMENT

The Executive may assign without consideration all interests in the Policy and in this Agreement to any person, entity or trust. In the event the Executive transfers all of the Executive's interest in the Policy, then all of the Executive's interest in the Policy and in the Agreement shall be vested in the Executive's transferee, who shall be substituted as a party hereunder and the Executive shall have no further interest in the Policy or in this Agreement.

ARTICLE 5
INSURER

The Insurer shall be bound only by the terms of the Policy. Any payments the Insurer makes or actions it takes in accordance with the Policy shall fully discharge it from all claims, suits and demands of all entities or persons. The Insurer shall not be bound by or be deemed to have notice of the provisions of this Agreement.

ARTICLE 6
CLAIMS PROCEDURE

6.1 Claims Procedure. Any individual ("Claimant") who has not received benefits under the Plan that he or she believes should be paid shall make a claim for such benefits as follows:

6.1.1 Initiation - Written Claim. The Claimant initiates a claim by submitting to the Company a written claim for the benefits.

(a) The specific reasons for the denial,

(b) A reference to the specific provisions of the Plan on which the denial is based,

(c) A description of any additional information or material necessary for the Claimant to perfect the claim and an explanation of why it is needed,

(d) An explanation of the Plan's review procedures and the time limits applicable to such procedures, and

(e) A statement of the Claimant's right to bring a civil action under ERISA Section 502(a) following an adverse benefit determination on review.

6.2 Review Procedure. If the Company denies part or all of the claim, the Claimant shall have the opportunity for a full and fair review by the Company of the denial, as follows:

6.2.1 Initiation - Written Request. To initiate the review, the Claimant, within 60 days after receiving the Company's notice of denial, must file with the Company a written request for review.

(a) The specific reasons for the denial,

(b) A reference to the specific provisions of the Plan on which the denial is based,

(d) A statement of the Claimant's right to bring a civil action under ERISA Section 502(a).

ARTICLE 7
AMENDMENTS AND TERMINATION

This Agreement may be amended or terminated only by a written agreement signed by the Company and the Executive.

ARTICLE 8
MISCELLANEOUS

8.1 Binding Effect. This Agreement shall bind the Executive and the Company and their beneficiaries, survivors, executors, administrators and transferees, and any Policy beneficiary.

8.2 No Guarantee of Service or of Employment. This Agreement is not a contract for services or employment. It does not give the Executive the right to remain in the service of the Company, to remain in employment with the Company, nor does it interfere with the shareholders' rights to replace the Executive. It also does not require the Executive to remain in the service or employment of the Company nor interfere with the Executive's right to terminate services or employment at any time.

8.3 Applicable Law. The Agreement and all rights hereunder shall be governed by and construed according to the laws of Mississippi, except to the extent preempted by the laws of the United States of America.

8.4 Reorganization. The Company shall not merge or consolidate into or with another company, or reorganize, or sell substantially all of its assets to another company, firm or person unless such succeeding or continuing company, firm or person agrees to assume and discharge the obligations of the Company.

8.5 Notice. Any notice, consent or demand required or permitted to be given under the provisions of this Split Dollar Agreement by one party to another shall be in writing, shall be signed by the party giving or making the same, and may be given either by delivering the same to such other party personally, or by mailing the same, by United States certified mail, postage prepaid, to such party, addressed to his or her last known address as shown on the records of the Company. The date of such mailing shall be deemed the date of such mailed notice, consent or demand.

8.6 Entire Agreement. This Agreement constitutes the entire agreement between the Company and the Executive as to the subject matter hereof. No rights are granted to the Executive by virtue of this Agreement other than those specifically set forth herein.

8.7 Administration. The Company shall have powers which are necessary to administer this Agreement, including but not limited to:

(a) Interpreting the provisions of the Agreement;

(b) Establishing and revising the method of accounting for the Agreement;

(d) Establishing rules and prescribing any forms necessary or desirable to administer the Agreement.

8.8 Named Fiduciary. The Company shall be the named fiduciary and plan administrator under the Agreement. The named fiduciary may delegate to others certain aspects of the management and operation responsibilities of the plan including the employment of advisors and the delegation of ministerial duties to qualified individuals

IN WITNESS WHEREOF, the parties have executed this Agreement the day and year first above written.

EXECUTIVE:                                 THE PEOPLES BANK

____________________________               BY: _____________________________
CHEVIS C. SWETMAN

                                           TITLE: ____________________________

SPLIT DOLLAR POLICY ENDORSEMENT TO
THE PEOPLES BANK SPLIT DOLLAR AGREEMENT
ATTACHED TO POLICY NUMBER XXXXX
ON THE LIFE OF CHEVIS C. SWETMAN

The undersigned Owner requests that the above-referenced policy issued by Massachusetts Mutual Life Insurance Company ("Insurer") shall provide for the following beneficiary designation and limited contract ownership rights to the Insured:

1. Upon the death of the insured, proceeds shall be paid in one sum to the Owner, its successors or assigns, to the extent of its interest in the policy. It is hereby provided that the Insurer may rely solely upon a statement from the Owner as to the amount of proceeds it is entitled to receive under this paragraph.

2. Any proceeds at the death of the Insured in excess of the amount paid under the provisions of the preceding paragraph shall be paid in one sum to

PRIMARY BENEFICIARY, RELATIONSHIP/SOCIAL SECURITY NUMBER

_______________________________________________________________________________.
CONTINGENT BENEFICIARY, RELATIONSHIP/SOCIAL SECURITY NUMBER

The exclusive right to change the beneficiary for the proceeds payable under this paragraph, to elect any optional method of settlement for the proceeds paid under this paragraph which are available under the terms of the policy and to assign all rights and interests granted under this paragraph is hereby granted to the Insured. The sole signature of the Insured shall be sufficient to exercise said rights. The Owner retains all contract rights not granted to the Insured under this paragraph.

3. It is agreed by the undersigned that this designation and limited assignment of rights shall be subject in all respects to the contractual terms of the policy.

4. Any payment directed by the Owner under this endorsement shall be a full discharge of the Insurer, and such discharge shall be binding on all parties claiming any interest under the policy.

The undersigned for the Owner is signing in a representative capacity and warrants that he or she has the authority to bind the entity on whose behalf this document is being executed.

This endorsement rescinds and supercedes any/all prior endorsements for this policy. Signed at Biloxi, Mississippi, on this _____ day of ____________, 200__.

                                    OWNER:
INSURED:                            THE PEOPLES BANK

___________________________         By________________________________
CHEVIS C. SWETMAN

                                    Title ____________________________

THE PEOPLES BANK
SPLIT DOLLAR AGREEMENT

THIS AGREEMENT, effective January 1, 2003 (the "Effective Date"), is made by and between The Peoples Bank, a state-chartered commercial bank with its principal office located in Biloxi, Mississippi (the "Company"), and Ira W. Carpenter, Jr. (the "Executive"), a key officer employed by the Company and a director of the Company.

INTRODUCTION

WHEREAS, the Executive has contributed to the success and profitability of the Company; and

WHEREAS, as a result of these contributions, the Company is willing to divide the death proceeds of a life insurance policy or policies on the Executive's life. The Company will pay for its portion of the life insurance premiums from its general assets; and,

WHEREAS, the Company agrees to provide the aforementioned benefit to the Executive that will continue beyond the date the Executive's service to the Company ends;

AGREEMENT

The Executive and the Company agree as follows:

ARTICLE 1
GENERAL DEFINITIONS

The following terms shall have the meanings specified:

1.1 "Change of Control" means:

(b) the persons who were members of the Board of Directors of the Company or Holding Company immediately prior to a tender offer, exchange offer, contested

election or any combination of the foregoing, cease to constitute a majority of such Board of Directors; or

(a) To any trust, company, or partnership created solely for the benefit of any Shareholder or any spouse of or any lineal descendant of any Shareholder;

(b) To any individual or entity by bona fide gift;

(d) To any officer or employee of the Company pursuant to any incentive stock option plan established by the Shareholder;

(e) To any family member of any Shareholder;

(g) To any existing Shareholder as of the Effective Date.

1.3 "Insurer" means New York Life Insurance and Annuity Corporation.

1.4 "Policy" or "Policies" means Policy number XXXXXXXX issued by New York Life Insurance and Annuity Corporation and Policy number XXXXXXXX issued by New York Life Insurance and Annuity Corporation.

1.5 "Insured" means the Executive.

1.6 "Net Death Proceeds" means an amount of One Hundred Thousand and No/100 Dollars ($100,000.00) from Policy number XXXXXXXX and an amount of Fifty Thousand and No/100 Dollars ($50,000.00) from Policy number XXXXXXXX.

1.7 "Shareholder" means the existing owners of all issued and outstanding stock of the Company or Holding Company as of the date this Agreement is signed.

1.8 "Termination of Employment" means the Executive ceasing to be employed by the Company for any reason whatsoever, other than by reason of an approved leave of absence.

ARTICLE 2
POLICY OWNERSHIP/INTERESTS

2.1 Company Ownership. The Company is the sole owner of the Policies and shall have the right to exercise all incidents of ownership. The Company shall be the beneficiary of the cash surrender value of the Policies. The Company shall receive this amount upon either the surrender of the Policies or upon the death of the Executive.

2.2 Executive's Interest. The Executive shall have the right to designate the beneficiary of the Net Death Proceeds. The Executive shall also have the right to elect and change settlement options that may be permitted. The Company and the Executive further agree that the Executive shall have all rights or interests in the Policies with respect to the Net Death Proceeds designated in this Section 2.2 upon the Executive's Termination of Employment, and that the Executive shall maintain all of the powers and interests described in this
Section 2.2 until the death of the Executive.

2.3 Option to Purchase. The Company shall not sell, surrender or transfer ownership of the Policies while this Agreement is in effect without first giving the Executive or the Executive's transferee the option to purchase the Policies for a period of ninety (90) days from written notice of such intention. The purchase price shall be an amount equal to the cash surrender value of the Policies. This provision shall not impair the right of the Company to terminate this Agreement.

2.4 Comparable Coverage. Upon execution of this Agreement, the Company shall maintain the Policies in full force and effect and in no event shall the Company amend, terminate or otherwise abrogate the Executive's interest in the Policies, unless the Company replaces a Policy with a comparable insurance policy to cover the benefit provided under this Agreement. The Policies or any comparable policies shall be subject to the claims of the Company's creditors.

2.5 Change of Control. Upon Change of Control, the Company shall maintain the Policies in full force and effect and in no event shall the Company amend, terminate or otherwise abrogate the Executive's interest in the Policies, unless the Company replaces a Policy with a comparable insurance policy to cover the benefit provided under this Agreement, unless a written agreement between the Executive and the Company provides otherwise.

ARTICLE 3
PREMIUMS

3.1 Premium Payment. The Company shall pay any premiums due on the Policies.

3.3 Imputed Income. On an annual basis the Company shall impute to the Executive in an amount equal to the Economic Benefit.

ARTICLE 4
ASSIGNMENT

The Executive may assign without consideration all interests in the Policies and in this Agreement to any person, entity or trust. In the event the Executive transfers all of the Executive's interest in the Policies, then all of the Executive's interest in the Policies and in the Agreement shall be vested in the Executive's transferee, who shall be substituted as a party hereunder and the Executive shall have no further interest in the Policies or in this Agreement.

ARTICLE 5
INSURER

The Insurer shall be bound only by the terms of the Policies. Any payments the Insurer makes or actions it takes in accordance with the Policies shall fully discharge it from all claims, suits and demands of all entities or persons. The Insurer shall not be bound by or be deemed to have notice of the provisions of this Agreement.

ARTICLE 6
CLAIMS PROCEDURE

6.1 Claims Procedure. Any individual ("Claimant") who has not received benefits under the Plan that he or she believes should be paid shall make a claim for such benefits as follows:

6.1.1 Initiation - Written Claim. The Claimant initiates a claim by submitting to the Company a written claim for the benefits.

(a) The specific reasons for the denial,

(b) A reference to the specific provisions of the Plan on which the denial is based,

(c) A description of any additional information or material necessary for the Claimant to perfect the claim and an explanation of why it is needed,

(d) An explanation of the Plan's review procedures and the time limits applicable to such procedures, and

(e) A statement of the Claimant's right to bring a civil action under ERISA Section 502(a) following an adverse benefit determination on review.

6.2 Review Procedure. If the Company denies part or all of the claim, the Claimant shall have the opportunity for a full and fair review by the Company of the denial, as follows:

6.2.1 Initiation - Written Request. To initiate the review, the Claimant, within 60 days after receiving the Company's notice of denial, must file with the Company a written request for review.

(a) The specific reasons for the denial,

(b) A reference to the specific provisions of the Plan on which the denial is based,

(d) A statement of the Claimant's right to bring a civil action under ERISA Section 502(a).

ARTICLE 7
AMENDMENTS AND TERMINATION

This Agreement may be amended or terminated only by a written agreement signed by the Company and the Executive.

ARTICLE 8
MISCELLANEOUS

8.1 Binding Effect. This Agreement shall bind the Executive and the Company and their beneficiaries, survivors, executors, administrators and transferees, and any Policy beneficiary.

such other party personally, or by mailing the same, by United States certified mail, postage prepaid, to such party, addressed to his or her last known address as shown on the records of the Company. The date of such mailing shall be deemed the date of such mailed notice, consent or demand.

8.7 Administration. The Company shall have powers which are necessary to administer this Agreement, including but not limited to:

(a) Interpreting the provisions of the Agreement;

(b) Establishing and revising the method of accounting for the Agreement;

(d) Establishing rules and prescribing any forms necessary or desirable to administer the Agreement.

IN WITNESS WHEREOF, the parties have executed this Agreement the day and year first above written.

EXECUTIVE:                                   THE PEOPLES BANK

____________________________                 BY:  ______________________________
IRA W. CARPENTER, JR.

                                             TITLE: ____________________________

SPLIT DOLLAR POLICY ENDORSEMENT TO
THE PEOPLES BANK SPLIT DOLLAR AGREEMENT
ATTACHED TO POLICY NUMBER XXXXXXXX
ON THE LIFE OF IRA W. CARPENTER, JR.

The undersigned Owner requests that the above-referenced policy issued by New York Life Insurance and Annuity Corporation ("Insurer") shall provide for the following beneficiary designation and limited contract ownership rights to the Insured:

2. Any proceeds at the death of the Insured in excess of the amount paid under the provisions of the preceding paragraph shall be paid in one sum to:

PRIMARY BENEFICIARY, RELATIONSHIP/SOCIAL SECURITY NUMBER

_______________________________________________________________________________.
CONTINGENT BENEFICIARY, RELATIONSHIP/SOCIAL SECURITY NUMBER

3. It is agreed by the undersigned that this designation and limited assignment of rights shall be subject in all respects to the contractual terms of the policy.

4. Any payment directed by the Owner under this endorsement shall be a full discharge of the Insurer, and such discharge shall be binding on all parties claiming any interest under the policy.

The undersigned for the Owner is signing in a representative capacity and warrants that he or she has the authority to bind the entity on whose behalf this document is being executed.

This endorsement rescinds and supercedes any/all prior endorsements for this policy. Signed at Biloxi, Mississippi, on this _____ day of ____________, 200__.

                                    OWNER:
INSURED:                            THE PEOPLES BANK

___________________________         By _________________________________
IRA W. CARPENTER, JR.

                                    Title ______________________________

Exhibit 13

Annual Report to Shareholders

[COVER]

[PHOTO]

CONTENTS

1 PRESIDENT'S LETTER

2 YEAR IN REVIEW

12 FINANCIALS

35 CORPORATE INFORMATION

LETTER FROM THE
PRESIDENT

[PICTURE OF PRESIDENT]

CHARTING THE COURSE FOR THE FUTURE

DEAR SHAREHOLDERS:

In some important ways, 2003 was a year of seeming contradiction: Peoples Financial Corporation stayed the course of our strategic plan, yet at the same time we charted new directions for the future.

In practice, these actions were not incompatible. And they were quite successful: the company enjoyed its most profitable year since 1999, with net income increasing 57% over 2002 to $5,018,000. Moreover, we were able to raise the dividend not once but twice during 2003, a total increase of 25%, from $.12 a share at the beginning of 2003 to $.15 a share at the start of 2004.

So how did we stay the course and chart new directions at the same time? First, we stayed the course of our strategic plan to continue pursuing expansion in the face of difficult economic conditions. We started the year with the opening of our new branch in Gautier in January, 2003, then dedicated a new, larger facility in Long Beach near the end of the year. In December, we began work on the renovation of our Bay St. Louis branch to accommodate the growth of our business in Hancock County.

On the financial side of our business, we aggressively tackled the challenge of shrinking interest margins by repricing deposits, while simultaneously addressing loan portfolio issues. As we start 2004, I'm comfortable that all our problem loans have been dealt with, and we can look forward to pursuing business on the loan side once again.

At the same time, during 2003 we began charting new directions to position The Peoples Bank for more growth in the future. Specifically, we engaged the services of a respected management consulting firm to analyze our entire organizational structure and suggest changes to take us seamlessly to another level of asset size.

During the second half of 2003, we began to implement the report's recommendations. Most notably, we have clearly defined the responsibilities of the members of our senior management team, and they in turn have begun to build their respective employee groups to implement their own strategic plans. The result, we are confident, will be a more efficient operation that provides more responsive service to our customers.

Throughout this year of change, we have been blessed with a group of employees whose dedication has been unwavering. Their contribution to the success of The Peoples Bank is incalculable. Whether they are on the front line directly serving customers or in the back office keeping our systems running smoothly, our team members represent the engine that drives The Peoples Bank. I want to acknowledge and salute their splendid performance through turbulent times.

I also want to pay special tribute to our board of directors, who have demonstrated their leadership in charting this new direction for Peoples Financial Corporation while supporting our management team to stay the course of our strategic plan. Our directors' combination of vision and determination represents a great source of strength on which I am personally grateful to depend.

Finally, I offer my gratitude to our stockholders who have entrusted our team with the management and operation of this institution. We never forget that our stockholders are our owners; we strive to earn your trust and generate a fair return on your investment every day.

Sincerely,

/s/ Chevis C. Swetman

Chevis C. Swetman
Chairman of the Board, Chief Executive Officer

PRESIDENT'S LETTER 1

THE YEAR IN
REVIEW

[CHART OF NET INCOME 2001-2003]

IN THOUSANDS

PROFITS RISE, DIVIDEND RAISED TWICE

Financial performance in 2003 reversed the course of the last three years of economic difficulty, with net income rising 57% over the year before, totaling $5,018,000, compared to $3,191,000 for 2002. The 2002 performance was impacted by a $1,500,000 addition to loan loss reserves caused by a single credit.

However, exclusive of the loss provision, 2003 results exceeded 2002 by nearly 9%, largely on the strength of an 8% increase in net interest income to more than $19,000,000. The increase in net interest income was the result of stabilizing interest rates and our ability to reprice loans and deposits to bring interest rates margins back to acceptable levels.

As a result of the steady rise in earnings, the Board of Directors voted to increase the dividend paid on the common stock of Peoples Financial Corporation twice during 2003. In June, the Board voted to increase the dividend by 16.7%, from $.12 to $.14 a share. At the end of the year, the Board voted to raise the dividend another 7.1% to $.15 a common share.

[CHART OF NET INTEREST INCOME 2001-2003]

IN THOUSANDS

Combined, the two dividend raises increased the dividend 25% above the level it stood at the end of 2002. The current dividend represents a distribution of about 32% of earnings, very near the target of 35% set by the board a year earlier. The latest dividend increase was the fifth in the last six years, making the current $.30 annualized dividend 76% higher than the 1998 payout of $.17 per share.

[CHART OF DIVIDENDS 2001-2003]

PER SHARE

Meanwhile, The Peoples Bank capital ratios continued to improve during the year. Primary capital to average assets finished 2003 at 15.84%, compared to 15.39% at the end of 2002. Our strong capital base gives us the ability to continue our expansion program, even during difficult economic conditions.

[CHART OF CAPITAL RATIO 2001-2003]

2 THE YEAR IN REVIEW

TWO NEW BRANCHES OPEN, RENOVATION OF ANOTHER BRANCH ANNOUNCED

In a continuation of our program of physical and geographic expansion, 2003 saw the grand opening of two new branches of the Peoples Bank. We opened our new branch in Gautier in January to serve our growing customer base in Jackson County. Later in the fall, we dedicated a new facility in Long Beach that replaced an older branch two blocks away. The new, full-service Long Beach branch provides a total of 2,000 square feet of banking space to customers, including a night drop, safe deposit boxes, two drive-up lanes and an ATM.

At the end of the year, The Peoples Bank also announced plans to renovate the Bay St. Louis branch to offer enhanced service to customers in the Bay-Waveland area.

[PHOTO OF BRANCH]

Bay St. Louis branch manager Jeannie Deen and prominent business executive William Lady were featured in a television commercial that was part of a new advertising campaign launched in 2003. The campaign features employees from all departments and branches in a series of print ads that accompany the television and radio commercials.

THE YEAR IN REVIEW 3

THE PEOPLES BANK AND ITS PEOPLE GIVE BACK TO THE COMMUNITY

[PICTURE OF PEOPLES BANK]

During 2003, The Peoples Bank continued its long-standing tradition of giving back to the community, with corporate and individual donations to non-profit groups serving the Mississippi Gulf Coast.

Two local charitable organizations -- St. Vincent DePaul Pharmacy and the Junior Auxiliary of Biloxi -- each received checks for $8,266.50, raised through the efforts of Peoples Bank employees through charity golf and bowling tournaments during the year. The donation to the Junior Auxiliary is believed to be the largest single donation ever received by the organization, according to officials of the group.

In addition, bank employees selected Life of South Mississippi and Morning Star to receive corporate donations of $5,000 each. Bank president Chevis Swetman presented the checks to representatives of the two organizations.

Once again, The Peoples Bank took an active role in the week-long Cruisin' the Coast event that has grown to nearly 6,000 registered participants. The annual Biloxi block party of the event was once again staged in front of the Main Branch of the bank. All staffers at the Main Branch, including president and CEO Chevis Swetman, supported the event by dressing in 50s outfits of blue jeans and poodle skirts.

[PICTURE OF PEOPLES BANK]

4 THE YEAR IN REVIEW

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

PEOPLES FINANCIAL CORPORATION AND SUBSIDIARIES

The following presents Management's discussion and analysis of the consolidated financial condition and results of operations of Peoples Financial Corporation and Subsidiaries (the Company) for the years ended December 31, 2003, 2002 and 2001. These comments highlight the significant events for these years and should be considered in combination with the Consolidated Financial Statements and Notes to Consolidated Financial Statements included in this annual report.

FORWARD-LOOKING INFORMATION

Congress passed the Private Securities Litigation Act of 1995 in an effort to encourage corporations to provide information about a company's anticipated future financial performance. This act provides a safe harbor for such disclosure which protects the companies from unwarranted litigation if actual results are different from management expectations. This report contains forward-looking statements and reflects industry conditions, company performance and financial results. These forward-looking statements are subject to a number of factors and uncertainties which could cause the Company's actual results and experience to differ from the anticipated results and expectations expressed in such forward-looking statements.

CRITICAL ACCOUNTING POLICIES

Certain critical accounting policies affect the more significant estimates and assumptions used in the preparation of the consolidated financial statements. The Company's single most critical accounting policy relates to its allowance for loan losses, which reflects the estimated losses resulting from the inability of its borrowers to make loan payments. If there was a deterioration of any of the factors considered by Management in evaluating the allowance for loan losses, as discussed in Note A, the estimates of loss would be updated, and additional provisions for loan losses may be required.

OVERVIEW

Net income was $5,018,000 for the year ended December 31, 2003, as compared with $3,191,000 for the year ended December 31, 2002. Net interest income improved from $17,808,000 for 2002 to $19,227,000 for 2003 as the Company continues its interest rate management policies begun in 2002. These policies particularly include the aggressive pricing of loans and the favorable repricing of deposits, specifically large and brokered certificates of deposit. Also, the provision for loan losses was $2,428,000 for 2002, as compared with a provision of $447,000 for 2003, as the Company had previously identified and provided for potential significant loan losses in the prior year.

FINANCIAL CONDITION

AVAILABLE FOR SALE SECURITIES

Available for sale securities increased $56,002,000 at December 31, 2003 as compared with December 31, 2002 primarily as a result of the management of the bank subsidiary's liquidity position and its interest margin. The Company reinvested funds from maturities in held to maturity securities in available for sale securities.

Gross unrealized gains were $2,113,000, $3,032,000 and $2,787,000 and gross unrealized losses were $1,094,000, $12,000 and $84,000 for available for sale securities at December 31, 2003, 2002 and 2001, respectively. Gains of $57,000, $210,000 and $243,000 were realized on the liquidation or sale of available for sale securities in 2003, 2002 and 2001, respectively.

HELD TO MATURITY SECURITIES

Held to maturity securities decreased $13,235,000 at December 31, 2003, compared with December 31, 2002. The decrease in these securities is directly attributable to the management by the Company of its liquidity position, as discussed above. Funds available from the maturity of these securities were generally invested in available for sale securities.

Gross unrealized gains were $176,000, $438,000 and $725,000, at December 31, 2003, 2002 and 2001, respectively, while gross unrealized losses were $2,000 and $18,000, at December 31, 2003 and 2001, respectively. There were no significant realized gains or losses from calls of these investments for the years ended December 31, 2003, 2002 and 2001.

FINANCIALS 5

FEDERAL HOME LOAN BANK STOCK

The Company acquired common stock issued by the Federal Home Loan Bank as a prerequisite for participating in their loan programs.

LOANS

The Company's loan portfolio decreased $14,373,000 at December 31, 2003, as compared with December 31, 2002. This decrease was a result of decreased loan demand in the Company's trade area caused by the softening of the local economy. Another contributing factor was the refinancing of loans in our trade area's highly competitive interest rate environment. During the fourth quarter of 2003, the loan portfolio increased as the local economy became stabilized. The Company anticipates that this positive loan growth will continue in 2004. Funds that are available to fund loan demand in the future are presently invested primarily in available for sale securities. Fluctuations in the various categories of loans are illustrated in Note C.

OTHER REAL ESTATE

The Other Real Estate (ORE) portfolio increased $188,000 at December 31, 2003 as compared with December 31, 2002 due to the foreclosure of several large parcels of real estate. The Company is actively marketing these properties and anticipates a significant reduction in ORE for 2004. Gains (losses) realized on sales of ORE were $248,170, ($43,666) and $118,716 for the years ended December 31, 2003, 2002 and 2001, respectively.

OTHER ASSETS

Other assets increased $1,031,000 at December 31, 2003, as compared with December 31, 2002, due to deferred taxes on unrealized losses on available for sale securities.

DEPOSITS

Total deposits decreased $15,617,000 at December 31, 2003, as compared with December 31, 2002. Significant increases or decreases in total deposits and/or significant fluctuations among the different types of deposits are anticipated by Management as customers in the casino industry and county and municipal areas reallocate their resources periodically. The Company has managed its funds including planning the timing of investment maturities and the classification of investments and using other funding sources and their maturity so as to achieve appropriate liquidity. Specifically, the Company obtained $30,000,000 in brokered deposits during 2000, the last of which matured in 2003. The Company does not currently plan to obtain further brokered deposits.

FEDERAL FUNDS PURCHASED AND SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE

Federal funds purchased and securities sold under agreements to repurchase increased $27,794,000 at December 31, 2003, as compared with December 31, 2002. This fluctuation is directly related to customers' periodic reallocation of their funds in a non-deposit product and the management of the Company's liquidity position.

BORROWINGS FROM FEDERAL HOME LOAN BANK

The Company acquires funds from the Federal Home Loan Bank in the management of the liquidity position. As discussed in Note E, the Company acquired $10,000,000 in advances which matures on January 9, 2004.

OTHER LIABILITIES

Other liabilities increased $814,000 at December 31, 2003, as compared with December 31, 2002, as a result of an increase in liabilities related to deferred compensation benefits for a retired officer and current officers and directors of the bank subsidiary.

SHAREHOLDERS' EQUITY

During 2003, 2002 and 2001, there were significant events that impacted the components of shareholders' equity. These events are detailed in Note H to the Consolidated Financial Statements included in this report.

Strength, security and stability have been the hallmark of the Company since its founding in 1985 and of its bank subsidiary since its founding in 1896. A strong capital foundation is fundamental to the continuing prosperity of the Company and the security of its customers and shareholders. There are numerous indicators of capital adequacy including primary capital ratios and capital formation rates. The Five-Year Comparative Summary of Selected Financial Information presents these ratios for those periods. This summary is included in the annual report to shareholders. The Company's total risk-based capital ratio at December 31, 2003, 2002 and 2001 was 24.81 %, 24.16% and 21.90% as compared with the required standard of 8.00%. The Five-Year Comparative Summary of Selected Financial Information presents these figures.

Bank regulations limit the amount of dividends that may be paid by the bank subsidiary without prior approval of the Commissioner of Banking and Consumer Finance of the State of Mississippi. At December 31, 2003, approximately $7,142,000 of undistributed earnings of the bank subsidiary included in consolidated surplus and retained earnings was available for future distribution to the Company as dividends, subject to approval by the Board of Directors. The Company cannot predict what dividends, if any, will be paid in the future, however the Board of Directors has established a goal of achieving a 35% dividend payout ratio.

6 FINANCIALS

RESULTS OF OPERATIONS

NET INTEREST INCOME

Net interest income, the amount by which interest income on loans, investments and other interest earning assets exceeds interest expense on deposits and other borrowed funds, is the single largest component of the Company's income. Management's objective is to provide the largest possible amount of income while balancing interest rate, credit, liquidity and capital risk.

Total interest income decreased $2,359,000 for the year ended December 31, 2003, as compared with the year ended December 31, 2002, and had decreased $9,861,000 for the year ended December 31, 2002, as compared with the year ended December 31, 2001. The Company experienced a decline in interest income, particularly from loans, as a result of the decrease in the volume of loans and the decrease in interest rates earned on loans.

Total interest expense decreased $3,777,000 for the year ended December 31, 2003, as compared with the year ended December 31, 2002, and had decreased $8,738,000 for the year ended December 31, 2002, as compared with the year ended December 31, 2001. As previously discussed, the Company used brokered time deposits and borrowings from the Federal Home Loan Bank to address its liquidity position. The cost of these funding sources was higher than other more traditional deposit funds, and has had a slightly negative impact on the Company's net margin. As these funds have been repriced more favorably, the Company has realized a positive improvement in its interest margin.

PROVISION FOR LOAN LOSSES

The Company continuously monitors its relationships with its loan customers, especially those in concentrated industries such as seafood, gaming and hotel/motel, and their direct and indirect impact on its operations. A thorough analysis of current economic conditions and the quality of the loan portfolio is conducted on a quarterly basis using the latest available information. These analyses are utilized in the computation of the adequacy of the allowance for loan losses. A provision is charged to income on a periodic basis to absorb potential losses based on these analyses. Further information related to the computation of the provision is presented in Note A.

During 2001 and 2002, the Company identified negative events with respect to an overall softening of the economy and negative events with respect to specific credits which required a large increase to the Company's provision for loan losses during those years. The Company believes that this action provided sufficient funds to absorb significant potential losses. Provisions for loan losses amounted to $2,428,000 and $2,503,000 for the years ended December 31, 2002 and 2001, respectively. A provision for loan losses of $447,000 was charged to expense for the year ended December 31, 2003. Management continues to closely evaluate the entire loan portfolio, in accordance with its policies and procedures and will provide for any future potential losses as deemed necessary. As a part of this evaluation, the Company also closely monitors any improvements to specific credits previously identified in prior years as having a potential loss. Any such improvements and their potential impact on the provision for loan losses are considered on a periodic basis. Although some uncertainty exists, the Company is monitoring positive events with respect to specific credits that may be resolved during 2004.

OTHER INCOME

Other income decreased $408,000 for the year ended December 31, 2003, as compared with the year ended December 31, 2002, primarily as a result of the income realized in 2002 from proceeds from whole life insurance owned by the bank subsidiary.

RELATED PARTIES

The Company extends loans to certain officers and directors and their personal business interests, at terms and rates comparable to other loans of similar credit risks. Further disclosure of these transactions are presented in Note C. The Company has not currently engaged, nor does it have any plans to engage, in any other transactions with any related persons or entities.

LIQUIDITY

Liquidity represents the Company's ability to adequately provide funds to satisfy demands from depositors, borrowers and other commitments by either converting assets to cash or accessing new or existing sources of funds. Management monitors these funds requirements in such a manner as to satisfy these demands and provide the maximum earnings on its earning assets. Note J discloses information relating to financial instruments with off-balance-sheet risk, including letters of credit and outstanding unused loan commitments. The Company closely monitors the potential effects of funding these commitments on its liquidity position.

Deposits, payment of principal and interest on loans, proceeds from maturities of investment securities, earnings on investment securities, and purchases of federal funds and securities sold under agreements to repurchase are the principal sources of funds for the Company. During 2000, the Company began using other, non-traditional sources of funds, including borrowings from the Federal Home Loan Bank. The Company generally anticipates relying on traditional sources of funds, especially deposits and purchases of federal funds, for its liquidity needs in 2004.

FINANCIALS 7

THE SARBANES - OXLEY ACT OF 2002

The Sarbanes - Oxley Act of 2002 (the "Act") was signed into law on July 30, 2002. The Act requires the implementation of provisions designed to enhance public company governance, responsibility and disclosure. The issues addressed by the Act include the composition and responsibilities of a public company's board of directors and its committees, especially the Audit and Nominating Committees, the certification of financial statements by the chief executive officer and chief financial officer, timely reporting of trading by insiders and independence of external auditors. The Company has implemented all effective provisions of the Act and is closely monitoring those provisions which have not yet become effective. The Company will take the necessary actions to ensure compliance with the Act, as well as the listing requirements of NASDAQ, on which the Company is registered.

NEW ACCOUNTING PRONOUNCEMENTS

The Financial Accounting Standards Board (FASB) has issued several statements during the current year. Statement 148, "Accounting for Stock-Based Compensation - Transition and Disclosure", Statement 149, "Amendment of Statement 133 on Derivative Instruments and Hedging Activities" and Statement 150, "Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity" are effective for the current year. The Company evaluated the implementation of adopting these new pronouncements and determined that their adoption did not have a material effect on its financial statements.

OFF-BALANCE SHEET ARRANGEMENTS

The Company is a party to off-balance-sheet arrangements in the normal course of business to meet the financing needs of its customers. These arrangements include unused commitments to extend credit, which amounted to $95,165,000 at December 31, 2003, and irrevocable letters of credit, which amounted to $3,388,997 at December 31, 2003. The Company uses the same credit policies in making commitments and conditional obligations as it does for on-balance-sheet arrangements. Since some of the commitments and irrevocable letters of credit may expire without being drawn upon, the total amounts do not necessarily represent future cash requirements. As discussed previously, the Company carefully monitors its liquidity needs and considers the cash requirements, especially for loan commitments, in making decisions on investments and obtaining funds from its other sources. Further information relating to off-balance sheet instruments can be found in Note J.

QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

Market risk is the risk of loss arising from adverse changes in market prices and rates. Interest rate risk is the most significant market risk affecting the Company. Other types of market risk, such as foreign currency exchange rate risk and commodity price risk, do not arise in the normal course of the Company's business activities. Also, the Company does not currently, and has no plans to, engage in trading activities or use derivative or off-balance sheet instruments to manage interest rate risk.

The Company has risk management policies in place to monitor and limit exposure to market risk. The Asset/Liability Committee (ALCO), whose members include the chief executive officer and senior and middle management from the financial, lending, investing, and deposit areas, is responsible for the day-to-day operating guidelines, approval of strategies affecting net interest income and coordination of activities within policy limits established by the Board of Directors based on the Company's tolerance for risk. Specifically, the key objectives of the Company's asset/liability management program are to manage the exposure of planned net interest margins to unexpected changes due to interest rate fluctuations. These efforts will also affect loan pricing policies, deposit interest rate policies, asset mix and volume guidelines and liquidity. The ALCO committee reports to the Board of Directors on a quarterly basis. During 2004, the ALCO committee will enhance its risk management analysis through the implementation of software to assist in balance sheet management, interest rate risk analysis and portfolio modeling.

The Company has implemented a conservative approach to its asset/liability management. The net interest margin is managed on a daily basis largely as a result of the management of the liquidity needs of the bank subsidiary. The Company generally follows a policy of investing in short term U. S. Agency securities with maturities of two years or less. Due to the low interest rate environment, the duration of investments has been extended to seven years or less with call provisions. The loan portfolio consists of a 40% - 60% blend of fixed and floating rate loans. It is the general loan policy to offer loans with maturities of five years or less; however the market is now dictating floating rate terms to be extended to fifteen years. On the liability side, more than 66% of the deposits are demand and savings transaction accounts. Additionally, more than 75% of the certificates of deposit mature within eighteen months. Since the Company's deposits are generally not rate-sensitive, they are considered to be core deposits. The short term nature of the financial assets and liabilities allows the Company to meet the dual requirements of liquidity and interest rate risk management.

8 FINANCIALS

The interest rate sensitivity tables below provide additional information about the Company's financial instruments that are sensitive to changes in interest rates. The negative gap in 2004 is mitigated by the nature of the Company's deposits, whose characteristics have been previously described. The tabular disclosure reflects contractual interest rate repricing dates and contractual maturity dates. Loan maturities have been adjusted for reserve for loan losses. There have been no adjustments for such factors as prepayment risk, early calls of investments, the effect of the maturity of balloon notes or the early withdrawal of deposits. The Company does not believe that the aforementioned factors have a significant impact on expected maturity.

Interest rate sensitivity at December 31, 2003 was as follows (in thousands):

                                                                                                           12/31/03
                                                                                                             FAIR
                               2004       2005       2006       2007       2008      BEYOND      TOTAL       VALUE
                             --------   --------   --------   --------   --------   --------   ---------   --------
Loans, net                   $195,878   $ 27,523   $  6,233   $ 10,399   $ 33,757   $ 17,734   $ 291,524   $294,685
Average rate                     5.58%      7.60%      7.51%      6.22%      5.92%      6.05%       5.82%
Securities                     31,568     14,560      9,320     31,852     50,176     76,337     213,813    213,987
Average rate                     3.45       5.11       3.34       3.55       3.63       4.31        3.87
Total Financial Assets        227,446     42,083     15,553     42,251     83,933     94,071     505,337    508,672
Average rate                     5.75       7.12       5.86       4.52       4.83       4.74        5.31
Deposits                      273,265     15,088      4,387      2,035      1,356          2     296,133    297,008
Average rate                     1.38       3.69       3.11       3.39       3.39       3.67        1.96
Long-term funds                10,273        184        236        168        160      6,159      17,180     18,076
Average rate                     1.30       4.91       4.91       4.91       4.91       6.26        4.96
Total Financial Liabilities   283,538     15,272      4,623      2,203      1,516      6,161     313,313    315,084
Average rate                     1.37       3.71       3.24       3.55       3.59       6.26        2.34

Interest rate sensitivity at December 31, 2002 was as follows (in thousands):

                                                                                                           12/31/02
                                                                                                             FAIR
                               2003       2004       2005       2006       2007      BEYOND      TOTAL       VALUE
                             --------   --------   --------   --------   --------   --------   ---------   --------
Loans, net                   $235,880   $ 21,654   $ 28,094   $  7,485   $  7,965   $  4,521   $ 305,599   $307,501
Average rate                     5.98%      8.05%      7.91%      8.04%      6.56%      6.66%       6.47%
Securities                     54,478     35,122      7,799     20,605     25,939     27,056     170,999    171,437
Average rate                     4.22       3.48       4.31       4.00       4.13       4.65        3.93
Total Financial Assets        290,358     56,776     35,893     28,090     33,904     31,577     476,598    478,938
Average rate                     5.73       6.17       7.44       5.70       4.93       5.04        5.59
Deposits                      290,104      9,199     10,536      1,579      1,053          4     312,475    314,495
Average rate                     2.59       3.43       4.12       4.02       4.02       3.89        3.47
Long-term funds                   153        382        193        105         97      5,717       6,647      7,398
Average rate                     5.29       5.32       5.25       5.25       5.25       6.37        6.24
Total Financial Liabilities   290,257      9,581     10,729      1,684      1,150      5,721     319,122    321,893
Average rate                     2.59       3.51       4.14       4.09       4.12       6.37        3.53

FINANCIALS 9

CONSOLIDATED STATEMENTS OF CONDITION
PEOPLES FINANCIAL CORPORATION AND SUBSIDIARIES

 DECEMBER 31,                                                                 2003              2002              2001
 ASSETS

 Cash and due from banks                                                 $   33,861,029    $   39,654,247    $   32,034,976
 Available for sale securities                                              207,486,172       151,483,997       142,902,274
 Held to maturity securities, fair value of
  $4,527,000-2003; $18,026,000-2002; $38,986,000-2001                         4,352,854        17,587,690        38,278,962
 Federal Home Loan Bank Stock, at cost                                        1,974,200         1,927,000         1,870,500
 Loans                                                                      297,922,945       312,296,263       347,168,766
       Less: Allowance for loan losses                                        6,398,694         6,696,911         5,658,210
                                                                         --------------    --------------    --------------
       Loans, net                                                           291,524,251       305,599,352       341,510,556
 Bank premises and equipment, net                                            17,952,504        17,059,400        18,117,908
 Other real estate                                                            1,383,451         1,195,720         1,799,527
 Accrued interest receivable                                                  3,096,002         2,858,190         3,728,850
 Other assets                                                                13,804,039        12,773,580         6,768,669
                                                                         --------------    --------------    --------------
 TOTAL ASSETS                                                            $  575,434,502    $  550,139,176    $  587,012,222
                                                                         ==============    ==============    ==============
 LIABILITIES & SHAREHOLDERS' EQUITY

 LIABILITIES:

  Deposits:
   Demand, non-interest bearing                                          $   76,423,904    $   75,698,316    $   76,215,302
   Savings and demand, interest bearing                                     173,913,054       164,954,932       145,248,560
   Time, $100,000 or more                                                    58,182,870        74,064,356       105,446,070
   Other time deposits                                                       64,036,836        73,456,208        85,632,730
                                                                         --------------    --------------    --------------
   Total deposits                                                           372,556,664       388,173,812       412,542,662
  Federal funds purchased and securities sold
   under agreements to repurchase                                            95,039,261        67,245,703        82,488,859
  Borrowings from Federal Home Loan Bank                                     17,069,848         6,313,077         5,548,988
  Notes payable                                                                 110,235           334,371           336,251
  Other liabilities                                                           7,154,545         6,340,607         6,026,436
                                                                         --------------    --------------    --------------
  TOTAL LIABILITIES                                                         491,930,553       468,407,570       506,943,196

 SHAREHOLDERS' EQUITY:

  Common Stock, $1 par value, 15,000,000 shares authorized, 5,557,379,
   5,583,472, and 5,620,239 shares issued and outstanding at
   December 31, 2003, 2002 and 2001, respectively                             5,557,379         5,583,472         5,620,239
  Surplus                                                                    65,780,254        65,780,254        65,780,254
  Undivided profits                                                          11,574,074         8,510,341         7,052,559
  Unearned compensation                                                         (94,899)         (143,043)         (174,043)
  Accumulated other comprehensive income, net of tax                            687,141         2,000,582         1,790,017
                                                                         --------------    --------------    --------------
  TOTAL SHAREHOLDERS' EQUITY                                                 83,503,949        81,731,606        80,069,026
                                                                         --------------    --------------    --------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                               $  575,434,502    $  550,139,176    $  587,012,222
                                                                         ==============    ==============    ==============

See Notes to Consolidated Financial Statements.

10 FINANCIALS

CONSOLIDATED STATEMENTS OF INCOME
PEOPLES FINANCIAL CORPORATION AND SUBSIDIARIES

YEARS ENDED DECEMBER 31,                                             2003           2002           2001
INTEREST INCOME:
  Interest and fees on loans                                     $ 17,181,975   $ 20,061,342   $ 28,174,153
  Interest and dividends on securities:
       U. S. Treasury                                               1,320,545      1,397,148      2,064,729
       U. S. Government agencies and corporations                   5,882,469      5,161,358      5,881,969
       States and political subdivisions                              368,934        350,498        514,351
       Other investments                                              249,185        257,339        445,784
  Interest on federal funds sold                                       62,109        196,207        203,566
                                                                 ------------   ------------   ------------
  TOTAL INTEREST INCOME                                            25,065,217     27,423,892     37,284,552
                                                                 ------------   ------------   ------------
INTEREST EXPENSE:
  Deposits                                                          4,383,806      8,052,732     15,696,840
  Long-term borrowings                                                456,694        382,912        437,144
  Federal funds purchased and securities sold under
       agreements to repurchase                                       998,139      1,179,993      2,219,601
                                                                 ------------   ------------   ------------
  TOTAL INTEREST EXPENSE                                            5,838,639      9,615,637     18,353,585
                                                                 ------------   ------------   ------------
NET INTEREST INCOME                                                19,226,578     17,808,255     18,930,967
PROVISION FOR ALLOWANCE FOR LOSSES ON LOANS                           447,000      2,428,000      2,503,000
                                                                 ------------   ------------   ------------
NET INTEREST INCOME AFTER PROVISION FOR
       ALLOWANCE FOR LOSSES ON LOANS                               18,779,578     15,380,255     16,427,967
                                                                 ------------   ------------   ------------
OTHER OPERATING INCOME:
  Trust department income and fees                                  1,458,037      1,419,463      1,418,847
  Service charges on deposit accounts                               6,709,852      6,822,638      6,388,406
  Gain on liquidation, sale and calls of securities                    57,356        209,659        243,126
  Other income                                                      1,512,169      1,920,452      1,205,750
                                                                 ------------   ------------   ------------
  TOTAL OTHER OPERATING INCOME                                      9,737,414     10,372,212      9,256,129
                                                                 ------------   ------------   ------------
OTHER OPERATING EXPENSE:
  Salaries and employee benefits                                   10,989,269     10,923,858     11,447,070
  Net occupancy                                                     1,466,797      1,506,113      1,178,261
  Equipment rentals, depreciation and maintenance                   2,760,125      2,802,343      2,776,745
  Other expense                                                     6,247,956      6,641,849      5,795,068
                                                                 ------------   ------------   ------------
  TOTAL OTHER OPERATING EXPENSE                                    21,464,147     21,874,163     21,197,144
                                                                 ------------   ------------   ------------
INCOME BEFORE INCOME TAXES AND EXTRAORDINARY GAIN                   7,052,845      3,878,304      4,486,952
Income taxes                                                        2,035,000        687,582      1,082,000
                                                                 ------------   ------------   ------------
Income before extraordinary gain                                    5,017,845      3,190,722      3,404,952
Extraordinary gain, net of income tax                                                               594,000
                                                                 ------------   ------------   ------------
NET INCOME                                                       $  5,017,845   $  3,190,722   $  3,998,952
                                                                 ============   ============   ============
BASIC AND DILUTED EARNINGS PER SHARE                             $        .90   $        .57   $        .71
                                                                 ============   ============   ============
BASIC AND DILUTED EARNINGS PER SHARE BEFORE EXTRAORDINARY GAIN   $        .90   $        .57   $        .60
                                                                 ============   ============   ============

See Notes to Consolidated Financial Statements.

FINANCIALS 11

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
PEOPLES FINANCIAL CORPORATION AND SUBSIDIARIES

                                                                    NUMBER OF
                                                                     COMMON        COMMON
                                                                     SHARES         STOCK        SURPLUS
                                                                   -----------   -----------   -----------
BALANCE, JANUARY 1, 2001                                             5,795,207   $ 5,795,207   $65,780,254

Comprehensive Income:
Net income
Net unrealized gain on available for sale securities, net of tax
Reclassification adjustment for available for sale securities
   called or sold in current year, net of tax
Total comprehensive income
Purchase of common shares by ESOP
Allocation of ESOP shares
Cash dividends ($ .12 per share)
Dividend declared ($ .12 per share)
Issuance of stock for stock incentive plan                               6,886         6,886
Effect of stock retirement on accrued dividends
Retirement of stock                                                   (181,854)     (181,854)
                                                                   -----------   -----------   -----------
BALANCE, DECEMBER 31, 2001                                           5,620,239     5,620,239    65,780,254

Comprehensive Income:
Net income
Net unrealized gain on available for sale securities, net of tax
Reclassification adjustment for available for sale securities
   called or sold in current year, tax net of
Total comprehensive income
Allocation of ESOP shares
Cash dividends ($ .12 per share)
Dividend declared ($ .12 per share)
Issuance of stock for stock incentive plan                               7,142         7,142
Retirement of stock                                                    (43,909)      (43,909)
                                                                   -----------   -----------   -----------
BALANCE, DECEMBER 31, 2002                                           5,583,472     5,583,472    65,780,254

Comprehensive Income:
Net income
Net unrealized loss on available for sale securities, net of tax
Reclassification adjustment for available for sale securities
   called or sold in current year, net of tax
Total comprehensive income
Allocation of ESOP shares
Cash dividends ($ .14 per share)
Dividend declared ($ .15 per share)
Retirement of stock                                                    (26,093)      (26,093)
                                                                   -----------   -----------   -----------
BALANCE, DECEMBER 31, 2003                                           5,557,379   $ 5,557,379   $65,780,254
                                                                   ===========   ===========   ===========

See Notes to Consolidated Financial Statements.

12 FINANCIALS

                                                                                   ACCUMULATED
                                                                                      OTHER
                                                    UNDIVIDED       UNEARNED      COMPREHENSIVE    COMPREHENSIVE
                                                     PROFITS      COMPENSATION       INCOME            INCOME          TOTAL
                                                  ------------    ------------    -------------    -------------    ------------
BALANCE, JANUARY 1, 2001                          $  7,093,830    $   (535,840)   $     583,406                     $ 78,716,857
Comprehensive Income:
Net income                                           3,998,952                                     $   3,998,952       3,998,952
Net unrealized gain on available for sale
   securities, net of tax                                                             1,359,541        1,359,541       1,359,541
Reclassification adjustment for available
   for sale securities called or sold in
   current year, net of tax                                                            (152,930)        (152,930)       (152,930)
                                                                                                   -------------
Total comprehensive income                                                                         $   5,205,563
                                                                                                   =============
Purchase of common shares by ESOP                                      (80,043)                                          (80,043)
Allocation of ESOP shares                                              441,840                                           441,840
Cash dividends ($ .12 per share)                      (675,388)                                                         (675,388)
Dividend declared ($ .12 per share)                   (674,428)                                                         (674,428)
Issuance of stock for stock incentive plan              93,097                                                            99,983
Effect of stock retirement on accrued dividends         15,545                                                            15,545
Retirement of stock                                 (2,799,049)                                                       (2,980,903)
                                                  ------------    ------------    -------------                     ------------
BALANCE, DECEMBER 31, 2001                           7,052,559        (174,043)       1,790,017                       80,069,026
Comprehensive Income:
Net income                                           3,190,722                                     $   3,190,722       3,190,722
Net unrealized gain on available for sale
   securities, net of tax                                                               471,295          471,295         471,295
Reclassification adjustment for available
   for sale securities called or sold in
   current year, tax net of                                                            (260,730)        (260,730)       (260,730)
                                                                                                   -------------
Total comprehensive income                                                                         $   3,401,287
                                                                                                   =============
Allocation of ESOP shares                                               31,000                                            31,000
Cash dividends ($ .12 per share)                      (672,080)                                                         (672,080)
Dividend declared ($ .12 per share)                   (670,017)                                                         (670,017)
Issuance of stock for stock incentive plan              92,846                                                            99,988
Retirement of stock                                   (483,689)                                                         (527,598)
                                                  ------------    ------------    -------------                     ------------
BALANCE, DECEMBER 31, 2002                           8,510,341        (143,043)       2,000,582                       81,731,606
Comprehensive Income:
Net income                                           5,017,845                                     $   5,017,845       5,017,845
Net unrealized loss on available for sale
   securities, net of tax                                                            (1,195,267)      (1,195,267)     (1,195,267)
Reclassification adjustment for available
   for sale securities called or sold in
   current year, net of tax                                                            (118,174)        (118,174)       (118,174)
                                                                                                   -------------
Total comprehensive income                                                                         $   3,704,404
                                                                                                   =============
Allocation of ESOP shares                                               48,144                                            48,144
Cash dividends ($ .14 per share)                      (778,570)                                                         (778,570)
Dividend declared ($ .15 per share)                   (833,607)                                                         (833,607)
Retirement of stock                                   (341,935)                                                         (368,028)
                                                  ------------    ------------    -------------                     ------------
BALANCE, DECEMBER 31, 2003                        $ 11,574,074    $    (94,899)   $     687,141                     $ 83,503,949
                                                  ============    ============    =============                     ============

FINANCIALS 13

CONSOLIDATED STATEMENTS OF CASH FLOWS

PEOPLES FINANCIAL CORPORATION AND SUBSIDIARIES

YEARS ENDED DECEMBER 31,                                                            2003             2002            2001
      CASH FLOWS FROM OPERATING ACTIVITIES:
      Net income                                                               $   5,017,845    $   3,190,722    $   3,998,952
                Adjustments to reconcile net income to net cash
                          provided by operating activities:
                          (Gain) loss on sales of other real estate                 (248,170)          43,666         (118,716)
                          Gain on sales, calls and liquidation of securities         (57,356)        (209,659)        (243,126)
                          Gain on sale of bank premises                             (130,503)        (182,861)
                          Stock incentive plan                                                         99,988           99,983
                          Depreciation                                             1,676,000        1,842,000        1,864,827
                          Provision for allowance for loan losses                    447,000        2,428,000        2,503,000
                          Provision for losses on other real estate                  210,358          533,848          409,264
                          Changes in assets and liabilities:
                               Accrued interest receivable                          (237,812)         870,660          768,863
                               Other assets                                         (323,618)         448,969          140,233
                               Other liabilities                                     304,832           40,412         (638,777)
                                                                               -------------    -------------    -------------
           NET CASH PROVIDED BY OPERATING ACTIVITIES                               6,658,576        9,105,745        8,784,503
                                                                               -------------    -------------    -------------
      CASH FLOWS FROM INVESTING ACTIVITIES:
           Proceeds from maturities, sales and calls of available
                     for sale securities                                         130,443,200      145,297,421       46,359,462
           Investment in available for sale securities                          (188,388,210)    (153,352,620)    (139,028,899)
           Proceeds from maturities and calls of held to maturity securities      13,234,836       20,745,000      143,715,000
           Investment in held to maturity securities                                                  (53,728)     (83,942,007)
           Investment in Federal Home Loan Bank stock                                (47,200)         (56,500)        (223,200)
           Proceeds from sales of other real estate                                  827,665        1,010,723        1,044,119
           Loans, net decrease                                                    12,650,517       32,498,774       27,242,762
           Proceeds from sale of bank premises                                       445,068          355,620
           Acquisition of premises and equipment                                  (2,883,669)        (956,251)      (1,649,463)
           Other assets                                                              325,425       (6,282,010)         521,482
                                                                               -------------    -------------    -------------
           NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES                   (33,392,368)      39,206,429       (5,960,744)
                                                                               -------------    -------------    -------------
      CASH FLOWS FROM FINANCING ACTIVITIES:
           Demand and savings deposits, net increase                               9,683,710       19,189,386       15,851,110
           Time deposits made, net decrease                                      (25,300,858)     (43,558,236)     (17,032,525)
           Notes payable                                                                               72,799
           Principal payments on notes                                              (175,992)         (43,679)         (14,273)
           Cash dividends                                                         (1,448,587)      (1,346,508)      (1,297,316)
           Retirement of common stock                                               (368,028)        (527,598)      (2,980,903)
           Borrowings from Federal Home Loan Bank                                 10,756,771          764,089
           Repayments to Federal Home Loan Bank                                                                    (17,610,519)
           Federal funds purchased and securities sold
                     under agreements to repurchase, net increase (decrease)      27,793,558      (15,243,156)      17,149,775
                                                                               -------------    -------------    -------------
           NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES                    20,940,574      (40,692,903)      (5,934,651)
                                                                               -------------    -------------    -------------
      NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                        (5,793,218)       7,619,271       (3,110,892)
      CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR                                39,654,247       32,034,976       35,145,868
                                                                               -------------    -------------    -------------
      CASH AND CASH EQUIVALENTS, END OF YEAR                                   $  33,861,029    $  39,654,247    $  32,034,976
                                                                               =============    =============    =============

See Notes to Consolidated Financial Statements.

14 FINANCIALS

NOTES TO CONSOLIDATED STATEMENTS

PEOPLES FINANCIAL CORPORATION AND SUBSIDIARIES

NOTE A - BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

BUSINESS OF THE COMPANY

Peoples Financial Corporation is a one-bank holding company headquartered in Biloxi, Mississippi. Its two operating subsidiaries are The Peoples Bank, Biloxi, Mississippi, and PFC Service Corp. Its principal subsidiary is The Peoples Bank, Biloxi, Mississippi, which provides a full range of banking, financial and trust services to individuals and small and commercial businesses operating in Harrison, Hancock, Stone and Jackson counties.

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of Peoples Financial Corporation and its wholly-owned subsidiaries, The Peoples Bank, Biloxi, Mississippi, and PFC Service Corp. All significant intercompany transactions and balances have been eliminated in consolidation.

BASIS OF ACCOUNTING

Peoples Financial Corporation and Subsidiaries recognize assets and liabilities, and income and expense, on the accrual basis of accounting. The preparation of financial statements in conformity with generally accepted accounting principles requires Management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.

CASH AND DUE FROM BANKS

The Company is required to maintain average reserve balances in its vault or on deposit with the Federal Reserve Bank. The average amount of these reserve requirements was approximately $10,220,000, $9,013,000 and $8,420,000 for the years ending December 31, 2003, 2002 and 2001, respectively.

The Company's bank subsidiary maintained account balances in excess of amounts insured by the Federal Deposit Insurance Corporation. At December 31, 2003, the bank subsidiary had excess deposits of $8,001,000. These amounts were uninsured and uncollateralized.

SECURITIES

The classification of securities is determined by Management at the time of purchase. Securities are classified as held to maturity when the Company has the positive intent and ability to hold the security until maturity. Securities held to maturity are stated at amortized cost.

Securities not classified as held to maturity are classified as available for sale and are stated at fair value. Unrealized gains and losses, net of tax, on these securities are recorded in shareholders' equity as accumulated other comprehensive income.

The amortized cost of available for sale securities and held to maturity securities is adjusted for amortization of premiums and accretion of discounts to maturity, determined using the interest method. Such amortization and accretion is included in interest income on securities. The specific identification method is used to determine realized gains and losses on sales of securities, which are reported as gain on sale and calls of securities in other operating income.

LOANS

The loan portfolio consists of commercial and industrial and real estate loans within the Company's trade area in South Mississippi. The loan policy establishes guidelines relating to pricing, repayment terms, collateral standards including loan to value (LTV) limits, appraisal and environmental standards, lending authority, lending limits and documentation requirements.

Loans are stated at the amount of unpaid principal, reduced by unearned income and the allowance for loan losses. Interest on loans is recognized over the terms of each loan based on the unpaid principal balance.

Loan origination fees are recognized as income when received. Revenue from these fees is not material to the financial statements.

The Company places loans on a nonaccrual status when, in the opinion of Management, they possess sufficient uncertainty as to timely collection of interest or principal so as to preclude the

FINANCIALS 15

recognition in reported earnings of some or all of the contractual interest. Accrued interest on loans classified as nonaccrual is reversed at the time the loans are placed on nonaccrual. Interest received on nonaccrual loans is applied against principal. Loans are restored to accrual status when the obligation is brought current or has performed in accordance with the contractual terms for a reasonable period of time and the ultimate collectibility of the total contractual principal and interest is no longer in doubt. Loans classified as nonaccrual are generally identified as impaired loans. The policy for recognizing income on impaired loans is consistent with the nonaccrual policy.

ALLOWANCE FOR LOAN LOSSES

The allowance for loan losses is established through provisions for loan losses charged against earnings. Loans deemed to be uncollectible are charged against the allowance for loan losses, and subsequent recoveries, if any, are credited to the allowance.

The allowance for loan losses is based on Management's evaluation of the loan portfolio under current economic conditions and is an amount that Management believes will be adequate to absorb probable losses on loans existing at the reporting date. The evaluation includes Management's assessment of several factors: review and evaluations of specific loans, changes in the nature and volume of the loan portfolio, current and anticipated economic conditions and the related impact on specific borrowers and industry groups, a study of loss experience, a review of classified, nonperforming and delinquent loans, the estimated value of any underlying collateral, an estimate of the possibility of loss based on the risk characteristics of the portfolio, adverse situations that may affect the borrower's ability to repay and the results of regulatory examinations. This evaluation is inherently subjective as it requires material estimates that may be susceptible to significant change.

BANK PREMISES AND EQUIPMENT

Bank premises and equipment are stated at cost, less accumulated depreciation. Depreciation is computed primarily by the straight-line method based on the estimated useful lives of the related assets.

OTHER REAL ESTATE

Other real estate acquired through foreclosure is carried at the lower of cost (primarily outstanding loan balance) or estimated market value, less estimated costs to sell. If, at foreclosure, the carrying value of the loan is greater than the estimated market value of the property acquired, the excess is charged against the allowance for loan losses and any subsequent adjustments are charged to expense. Costs of operating and maintaining the properties, net of related income and gains (losses) on their disposition, are charged to expense as incurred.

TRUST DEPARTMENT INCOME AND FEES

Corporate trust fees are accounted for on an accrual basis and personal trust fees are recorded when received for 2003. All trust fees were recorded for 2002 and 2001 when received.

INCOME TAXES

The Company files a consolidated tax return with its wholly-owned subsidiaries. The tax liability of each entity is allocated based on the entity's contribution to consolidated taxable income. The provision for applicable income taxes is based upon reported income and expenses as adjusted for differences between reported income and taxable income. The primary differences are exempt income on state, county and municipal securities; differences in provisions for losses on loans as compared to the amount allowable for income tax purposes; directors' and officers' insurance; depreciation for income tax purposes over (under) that reported for financial statements; gains reported under the installment sales method for tax purposes and gains on the sale of bank premises which were structured under the provisions of Section 1031 of the Internal Revenue Code.

ADVERTISING

Advertising costs are expensed as incurred.

LEASES

All leases are accounted for as operating leases in accordance with the terms of the leases.

EARNINGS PER SHARE

Basic and diluted earnings per share are computed on the basis of the weighted average number of common shares outstanding, 5,563,015, 5,603,834 and 5,629,872 in 2003, 2002 and 2001, respectively.

STATEMENTS OF CASH FLOWS

The Company has defined cash and cash equivalents to include cash and due from banks. The Company paid $5,937,967, $9,929,357 and $18,768,387 in 2003, 2002 and 2001, respectively, for interest on deposits and borrowings. Income tax payments totaled $2,537,223, $1,639,612 and $1,847,250 in 2003, 2002 and 2001, respectively. Loans transferred to other real estate amounted to $977,584, $984,430 and $2,073,113 in 2003, 2002 and 2001, respectively. The income tax effect on the accumulated other comprehensive income was ($676,621), $108,473 and $621,587, at December 31, 2003, 2002 and 2001, respectively.

RECLASSIFICATIONS

Certain reclassifications have been made to the prior year statements to conform to current year presentation. The reclassifications had no effect on prior year net income.

16 FINANCIALS

NOTE B - SECURITIES:

The amortized cost and estimated fair value of securities at December 31, 2003, 2002, and 2001, respectively, are as follows (in thousands):

                                                                      Gross             Gross         Estimated
              December 31, 2003                  Amortized cost  unrealized gains  unrealized losses  fair value
---------------------------------------------    --------------  ----------------  -----------------  ----------
Available for sale securities:
      Debt securities:
           U. S. Treasury                           $ 49,977         $    465          $    (38)       $ 50,404
           U. S. Government agencies and corp.       145,507              778              (801)        145,484
           States and political subdivisions           7,154              161               (48)          7,267
                                                    --------         --------          --------        --------
           Total debt securities                     202,638            1,404              (887)        203,155
      Equity securities                                3,829              709              (207)          4,331
                                                    --------         --------          --------        --------
Total available for sale securities                 $206,467         $  2,113          $ (1,094)       $207,486
                                                    ========         ========          ========        ========

Held to maturity securities:
      U. S. Treasury                                $  1,000         $     17          $               $  1,017
      States and political subdivisions                3,353              159                (2)          3,510
                                                    --------         --------          --------        --------
Total held to maturity securities                   $  4,353         $    176          $     (2)       $  4,527
                                                    ========         ========          ========        ========

                                                                      Gross             Gross         Estimated
              December 31, 2002                  Amortized cost  unrealized gains  unrealized losses  fair value
---------------------------------------------    --------------  ----------------  -----------------  ----------
Available for sale securities:
      Debt securities:
           U. S. Treasury                           $ 46,948         $    709          $     (1)       $ 47,656
           U. S. Government agencies and corp.        93,627            1,468                            95,095
           States and political subdivisions           4,061               89               (11)          4,139
                                                    --------         --------          --------        --------
           Total debt securities                     144,636            2,266               (12)        146,890
      Equity securities                                3,828              766                             4,594
                                                    --------         --------          --------        --------
Total available for sale securities                 $148,464         $  3,032          $    (12)       $151,484
                                                    ========         ========          ========        ========
Held to maturity securities:
      U. S. Treasury                                $  5,998         $    120          $               $  6,118
      U. S. Government agencies and corp.              7,000              143                             7,143
      States and political subdivisions                4,590              175                             4,765
                                                    --------         --------          --------        --------
Total held to maturity securities                   $ 17,588         $    438          $               $ 18,026
                                                    ========         ========          ========        ========

FINANCIALS 17

                                                                      Gross             Gross         Estimated
              December 31, 2001                  Amortized cost  unrealized gains  unrealized losses  fair value
---------------------------------------------    --------------  ----------------  -----------------  ----------
Available for sale securities:
      Debt securities:
           U. S. Treasury                           $ 20,975         $    207          $    (10)       $ 21,172
           U. S. Government agencies and corp.       113,494            1,557               (74)        114,977
           States and political subdivisions           1,759                4                             1,763
                                                    --------         --------          --------        --------
      Total debt securities                          136,228            1,768               (84)        137,912
      Equity securities                                3,971            1,019                             4,990
                                                    --------         --------          --------        --------
Total available for sale securities                 $140,199         $  2,787          $    (84)       $142,902
                                                    ========         ========          ========        ========
Held to maturity securities:
      U. S. Treasury                                $ 18,948         $    283          $               $ 19,231
      U. S. Government agencies and corp.             13,687              306                            13,993
      States and political subdivisions                5,644              136               (18)          5,762
                                                    --------         --------          --------        --------
Total held to maturity securities                   $ 38,279         $    725          $    (18)       $ 38,986
                                                    ========         ========          ========        ========

The amortized cost and estimated fair value of debt securities at December 31, 2003, (in thousands) by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

                                                                  Estimated
                                                 Amortized cost  fair value
                                                 --------------  ----------
Available for sale securities:
      Due in one year or less                       $  30,168    $   30,438
      Due after one year through five years           104,057       104,696
      Due after five years through ten years           63,596        63,256
      Due after ten years                               4,817         4,765
                                                    ---------    ----------
      Totals                                        $ 202,638    $  203,155
                                                    =========    ==========
Held to maturity securities:
      Due in one year or less                       $   1,130    $    1,149
      Due after one year through five years             1,213         1,241
      Due after five years through ten years              283           299
      Due after ten years                               1,727         1,838
                                                    ---------    ----------
      Totals                                        $   4,353    $    4,527
                                                    =========    ==========

Proceeds from maturities and calls of held to maturity debt securities during 2003, 2002 and 2001 were $13,234,836, $20,745,000 and $143,715,000, respectively. There were no sales of held to maturity debt securities during 2003, 2002 and 2001. Proceeds from maturities and calls of available for sale debt securities were $130,443,200, $145,297,421 and $46,359,462 during 2003, 2002 and 2001, respectively. Available for sale debt securities were sold in 2001 for a gain of $243,126. There were no sales of available for sale debt securities during 2003 and 2002. The Company realized gains of $57,356 and $209,659 from the liquidation of equity securities in 2003 and 2002, respectively.

Securities with an amortized cost of approximately $154,105,000, $139,625,000 and $149,013,000 at December 31, 2003, 2002 and 2001, respectively, were pledged to secure public deposits, federal funds purchased and other balances required by law.

Federal Home Loan Bank (FHLB) common stock was purchased during 1999 in order for the Company to participate in certain FHLB programs. The amount to be invested in FHLB stock was calculated according to FHLB guidelines as a percentage of certain mortgage loans. The investment is carried at cost. Dividends received are reinvested in FHLB stock.

18 FINANCIALS

NOTE C - LOANS:

The composition of the loan portfolio was as follows (in thousands):

                   December 31,                         2003       2002       2001
---------------------------------------------------   --------   --------   --------
Real estate, construction                             $ 14,896   $ 21,534   $ 25,636
Real estate, mortgage                                  223,246    197,478    224,524
Loans to finance agricultural production
      and other loans to farmers                         3,980      7,375      7,241
Commercial and industrial loans                         41,832     65,946     71,271
Loans to individuals for household, family
      and other consumer expenditures                   11,020     15,990     15,068
Obligations of states and political subdivisions
      (primarily industrial revenue bonds and local
      government tax anticipation notes)                 2,560      3,637      3,233
All other loans                                            389        336        196
                                                      --------   --------   --------
Totals                                                $297,923   $312,296   $347,169
                                                      ========   ========   ========

Transactions in the allowance for loan losses are as follows (in thousands):

                                                        2003       2002       2001
                                                      --------   --------   --------
Balance, January 1                                    $  6,697   $  5,658   $  4,568
Recoveries                                                 600        676        561
Loans charged off                                       (1,345)    (2,065)    (1,974)
Provision for allowance for loan losses                    447      2,428      2,503
                                                      --------   --------   --------
Balance, December 31                                  $  6,399   $  6,697   $  5,658
                                                      ========   ========   ========

In the ordinary course of business, the Company extends loans to certain officers and directors and their personal business interests at, in the opinion of Management, terms and rates comparable to other loans of similar credit risks. These loans do not involve more than normal risk of collectability and do not include other unfavorable features.

An analysis of the activity with respect to such loans to related parties is as follows (in thousands):

                           2003        2002        2001
                         --------    --------    --------
Balance, January 1       $ 10,080    $ 12,340    $ 14,118
New loans and advances     14,453      19,529      20,511
Repayments                (15,587)    (21,789)    (22,289)
                         --------    --------    --------
Balance, December 31     $  8,946    $ 10,080    $ 12,340
                         ========    ========    ========

Industrial revenue bonds with a carrying value of $502,187, $700,356 and $898,687 at December 31, 2003, 2002 and 2001, respectively, were pledged to secure public deposits.

Nonaccrual loans amounted to $7,415,073, $6,550,169 and $650,215 at December 31, 2003, 2002 and 2001, respectively.

The total recorded investment in impaired loans amounted to $7,415,073, $6,550,169 and $650,215 at December 31, 2003, 2002 and 2001, respectively. The amount of that recorded investment in impaired loans for which there is a related allowance for loan losses was $7,415,073, $6,550,169 and $650,215 at December 31, 2003, 2002 and 2001, respectively. At December 31, 2003, 2002 and 2001, the average recorded investment in impaired loans was $7,400,000, $6,602,000 and $661,000, respectively. The amount of interest not accrued on these loans was approximately $261,000 and $212,000 in 2003 and 2002, respectively. The amount of interest not accrued on these loans did not have a significant effect on earnings in 2001.

FINANCIALS 19

NOTE D - BANK PREMISES AND EQUIPMENT:

Bank premises and equipment are shown as follows (in thousands):

                                    Estimated
            December 31,           useful lives    2003     2002     2001
---------------------------------  ------------  -------  -------  -------
Land                                             $ 4,522  $ 4,839  $ 4,988
Buildings                          5-40 years     17,533   15,584   15,315
Furniture, fixtures and equipment  3-10 years     12,173   11,596   11,107
                                                 -------  -------  -------
Totals, at cost                                   34,228   32,019   31,410
Less: Accumulated depreciation                    16,275   14,960   13,292
                                                 -------  -------  -------
Totals                                           $17,953  $17,059  $18,118
                                                 =======  =======  =======

NOTE E - BORROWINGS FROM FEDERAL HOME LOAN BANK:

At December 31, 2003, the Company had $5,000,000 outstanding in advances under a $76,000,000 line of credit with the Federal Home Loan Bank of Dallas ("FHLB"). This advance bore interest at 6.50% and matures in 2010. The Company also had $10,000,000 outstanding under the line which bears interest at 1.06% and matures January 9, 2004. The advances are collateralized by a blanket floating lien on the Company's residential first mortgage loans.

NOTE F - NOTES PAYABLE:

                December 31,                     2003         2002        2001
--------------------------------------------   ---------   ----------  ---------
Small Business Administration, outstanding
mortgage on property acquired. The note
bears interest at 5 3/8% & is payable at
$1,952 monthly through January 2004.           $           $  147,029  $ 162,208

Notes payable on automobiles. The notes
are non interest-bearing and payable in
monthly installments through January 2005.        15,336       44,299

RiverHills Bank, $750,000 line of credit for
Peoples Financial Corporation Employee Stock
Ownership Plan, secured by the guarantee of
the Company; Interest at New York Prime
(4.00% at December 31, 2003) due quarterly,
principal due at maturity in June 2004.           94,899      143,043    174,043
                                               ---------   ----------  ---------
Totals                                         $ 110,235   $  334,371  $ 336,251
                                               =========   ==========  =========

The maturities of notes payable are as follows:

2004   $  109,769
2005          466
       ----------
Total  $  110,235
       ==========

20 FINANCIALS

NOTE G - INCOME TAXES:

Federal income taxes payable (or refundable) and deferred taxes (or deferred charges) as of December 31, 2003, 2002 and 2001, included in other assets or other liabilities, were as follows (in thousands):

                      December 31,                           2003       2002       2001
--------------------------------------------------------   --------   --------   --------
Deferred tax assets:
      Allowance for loan losses                            $  2,114   $  2,215   $  1,542
      Employee benefit plans' liabilities                     1,328      1,145        938
      Other                                                     836        685        431
                                                           --------   --------   --------
      Deferred tax assets                                    (4,278)    (4,045)    (2,911)
                                                           --------   --------   --------
Deferred tax liabilities:
      Accumulated depreciation                                  732        820        947
      Deferred gain on sale of bank premises                  1,784      1,750      1,687
      Installment sales                                          13         13         13
      Unrealized gains on available for sale securities,
           charged to equity                                    347      1,026        813
                                                           --------   --------   --------
      Deferred tax liabilities                                2,876      3,609      3,460
                                                           --------   --------   --------
Net deferred taxes                                           (1,402)      (436)       549
Current payable (refundable)                                    (20)       200         75
                                                           --------   --------   --------
Totals                                                     $ (1,422)  $   (236)  $    624
                                                           ========   ========   ========

Income taxes consist of the following components (in thousands):

                  Years Ended December 31,                   2003       2002       2001
--------------------------------------------------------   --------   --------   --------
Current                                                    $  2,322   $  1,886   $  2,202
Deferred                                                       (287)    (1,198)    (1,120)
                                                           --------   --------   --------
Totals                                                     $  2,035   $    688   $  1,082
                                                           ========   ========   ========

Deferred income taxes (benefits) resulted from the following (in thousands):

                  Years Ended December 31,                   2003       2002       2001
--------------------------------------------------------   --------   --------   --------
Depreciation                                               $    (88)  $   (127)  $   (124)
Provision for loan losses                                       101       (628)      (580)
Officers' and directors' life insurance                        (183)      (281)      (220)
Deferred gain on sale of bank premises                           34         63
Unrealized gain on available for sale securities,
      charged to equity                                        (679)       213        620
Other                                                          (151)      (225)      (196)
                                                           --------   --------   --------
Totals                                                     $   (966)  $   (985)  $   (500)
                                                           ========   ========   ========

FINANCIALS 21

Income taxes amounted to less than the amounts computed by applying the U.S. Federal income tax rate of 34.0% for 2003, 2002 and 2001, to earnings before income taxes. The reason for these differences is shown below (in thousands):

           Years Ended December 31,            2003 Amount    %   2002 Amount    %    2001 Amount    %
---------------------------------------------  -----------  ----  -----------  ----   -----------  ----
Taxes computed at statutory rate                 $ 2,398    34.0    $ 1,319    34.0     $ 1,526    34.0
Increase (decrease) resulting from:
      Tax-exempt interest income                    (184)   (2.6)      (187)   (4.8)       (259)   (5.8)
      Non-deductible interest                          8     0.1         15     0.4          30     0.7
      Credit for certified historic structure                                              (113)   (2.5)
      Non-taxable life insurance proceeds                              (201)   (5.2)        (62)   (1.4)
      Dividend exclusion                             (54)   (0.8)       (63)   (1.6)        (96)   (2.1)
      Other, net                                    (133)   (1.8)      (195)   (5.1)         56     1.2
                                                 -------    ----    -------    ----     -------    ----
Total income taxes                               $ 2,035    28.9    $   688    17.7     $ 1,082    24.1
                                                 =======    ====    =======    ====     =======    ====

NOTE H - SHAREHOLDERS' EQUITY:

Banking regulations limit the amount of dividends that may be paid by the bank subsidiary without prior approval of the Commissioner of Banking and Consumer Finance of the State of Mississippi. At December 31, 2003, approximately $7,142,000 of undistributed earnings of the bank subsidiary included in consolidated surplus and retained earnings was available for future distribution to the Company as dividends, subject to the approval by Board of Directors.

On May 24, 2000, the Company's Board of Directors approved the repurchase of up to 2.50% of the outstanding shares of the Company's common stock. As of December 31, 2003, the 147,633 shares available under this plan had been repurchased and retired. On December 8, 2000, the Company's Board of Directors approved the repurchase of 146,304 shares of the outstanding common stock from one unrelated shareholder at a purchase price of $2,432,000. This repurchase was executed on January 2, 2001, and these shares were subsequently retired. On November 26, 2002, the Company's Board of Directors approved the repurchase of up to 2.50% of the outstanding shares of the Company's common stock. As of December 31, 2003, 21,613 shares had been repurchased and retired under the plan approved November 26, 2002.

On May 23, 2001, the Company's Board of Directors approved a stock incentive program for two executive officers. Under this plan, whole shares valued as of the distribution date at $50,000 were distributed to each of these officers who continue to meet the eligibility requirements on June 15, 2001, and on January 15 of the four succeeding years. On June 15, 2001 and January 15, 2002, a total of 6,886 and 7,142 shares, respectively, of Peoples Financial Corporation common stock was issued. This incentive program was established subsequent to the surrender of collateral assignment split dollar policies that had been obtained on behalf of these executives. On December 6, 2002, the Company's Board of Directors approved the termination of the stock incentive program, which was replaced by the acquisition of endorsement split dollar policies for the two executive officers.

On November 25, 2003, the Company's Board of Directors approved a semi-annual dividend of $ .15 per share. This dividend has a record date of January 9, 2004 and a distribution date of January 16, 2004.

The bank subsidiary is subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory, and possibly additional discretionary, actions by the regulators that, if undertaken, could have a direct material effect on the bank subsidiary's financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the bank subsidiary must meet specific capital guidelines that involve quantitative measures of the bank subsidiary's assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices. The bank subsidiary's capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors.

Quantitative measures established by regulation to ensure capital adequacy require the bank subsidiary to maintain minimum amounts and ratios of Total and Tier 1 capital to risk-weighted assets, and Tier 1 capital to average assets.

22 FINANCIALS

As of December 31, 2003, the most recent notification from the Federal Deposit Insurance Corporation categorized the bank subsidiary as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, the bank subsidiary must have a Total risk-based capital ratio of 10.00% or greater, a Tier 1 risk-based capital ratio of 6.00% or greater and a Leverage capital ratio of 5.00% or greater. There are no conditions or events since that notification that Management believes have changed the bank subsidiary's category.

The bank subsidiary's actual capital amounts and ratios and required minimum capital amounts and ratios for 2003, 2002 and 2001, are as follows (in thousands):

                                                                  For Capital Adequacy
                                                 Actual                  Purposes
                                           -------------------------------------------
                                           Amount      Ratio       Amount     Ratio
                                           -------     -----      -------     -----
December 31, 2003:
Total Capital (to Risk Weighted Assets)    $85,583     24.81%     $27,600      8.00%
Tier 1 Capital (to Risk Weighted Assets)    81,270     23.56%      13,800      4.00%
Tier 1 Capital (to Average Assets)          81,270     14.44%      22,511      4.00%
December 31, 2002:
Total Capital (to Risk Weighted Assets)    $83,768     24.16%     $27,720      8.00%
Tier 1 Capital (to Risk Weighted Assets)    79,437     22.91%      13,860      4.00%
Tier 1 Capital (to Average Assets)          79,437     13.98%      22,798      4.00%
December 31, 2001:
Total Capital (to Risk Weighted Assets)    $83,201     21.90%     $30,930      8.00%
Tier 1 Capital (to Risk Weighted Assets)    78,453     20.65%      15,195      4.00%
Tier 1 Capital (to Average Assets)          78,453     13.25%      23,677      4.00%

NOTE 1 - OTHER INCOME AND EXPENSES:

Other income consisted of the following:

         Years Ended December 31,                2003         2002         2001
-------------------------------------------   ----------   ----------   ----------
Other service charges, commissions and fees   $  226,946   $  189,835   $  208,332
Gain on sale of bank premises                    130,503      182,861
Rentals                                          473,292      494,055      511,751
Income from proceeds of insurance policies                    592,436
Other income                                     681,428      461,265      485,667
                                              ----------   ----------   ----------
Totals                                        $1,512,169   $1,920,452   $1,205,750
                                              ==========   ==========   ==========

FINANCIALS 23

Other expenses consisted of the following:

     Years Ended December 31,           2003         2002         2001
----------------------------------   ----------   ----------   ----------
Advertising                          $  515,538   $  433,037   $  463,103
Data processing                         282,420      268,044      233,390
FDIC and state banking assessments      117,271      127,234      132,629
Legal and accounting                    382,161      395,016      272,337
Postage and freight                     167,517      227,871      211,792
Stationery, printing and supplies       250,976      169,583      191,803
Other real estate                        59,887      636,789      328,133
ATM expense                           2,223,479    2,477,104    2,282,118
Federal Reserve service charges         154,701      153,783      152,815
Conferences and classes                 120,293       99,325      112,469
Taxes and licenses                      267,319      276,910      252,491
Consulting fees                         363,282       45,880       11,250
Trust expense                           381,233      373,483      350,525
Other                                   961,879      957,790      800,213
                                     ----------   ----------   ----------
Totals                               $6,247,956   $6,641,849   $5,795,068
                                     ==========   ==========   ==========

NOTE J - FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK:

The Company is a party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit and irrevocable letters of credit. These instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the balance sheet. The contract amounts of those instruments reflect the extent of involvement the bank subsidiary has in particular classes of financial instruments. The Company's exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and irrevocable letters of credit is represented by the contractual amount of those instruments. The Company uses the same credit policies in making commitments and conditional obligations as it does for on-balance-sheet instruments.

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any conditions established in the agreement. Irrevocable letters of credit written are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. Commitments and irrevocable letters of credit generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since some of the commitments and irrevocable letters of credit may expire without being drawn upon, the total amounts do not necessarily represent future cash requirements. The Company evaluated each customer's creditworthiness on a case-by-case basis. The amount of collateral obtained upon extension of credit is based on Management's credit evaluation of the customer. Collateral obtained varies but may include equipment, real property and inventory.

The Company generally grants loans to customers in its primary trade area of Harrison, Hancock, Jackson and Stone counties.

At December 31, 2003, 2002 and 2002, the Company had outstanding irrevocable letters of credit aggregating $3,388,997, $2,849,400 and $3,344,016, respectively. At December 31, 2003, 2002 and 2001, the Company had outstanding unused loan commitments aggregating $95,165,000, $87,382,000 and $74,254,000, respectively. Approximately $46,688,000, $43,543,000 and $27,810,000 of outstanding commitments were at fixed rates and the remainder were at variable rates at December 31, 2003, 2002 and 2001, respectively.

24 FINANCIALS

NOTE K - CONTINGENCIES:

During 2003, a lawsuit was filed again the Company's bank subsidiary. This litigation, which specifies damages of $1,500,000 and punitive damages of $12,500,000, has been filed by an insurance company trying to reverse a settlement it voluntarily agreed to in 2000. The bank subsidiary intends to vigorously contest the allegations of the complaint. The bank is involved in various other legal matters and claims which are being defended and handled in the ordinary course of business. None of these matters is expected, in the opinion of Management, to have a material adverse effect upon the financial position or results of operations of the Company.

NOTE L - CONDENSED PARENT COMPANY ONLY FINANCIAL INFORMATION:

Peoples Financial Corporation began its operations September 30, 1985, when it acquired all the outstanding stock of The Peoples Bank, Biloxi, Mississippi. A condensed summary of its financial information is shown below.

CONDENSED BALANCE SHEETS (IN THOUSANDS)

                   December 31,                        2003      2002      2001
--------------------------------------------------   -------   -------   -------
ASSETS

Investments in subsidiaries, at underlying equity:
      Bank subsidiary                                $82,957   $81,558   $79,483
      Nonbank subsidiary                                   1         1         1
Cash in bank subsidiary                                  546        84       263
Other assets                                           1,462     1,462     1,821
                                                     -------   -------   -------
TOTAL ASSETS                                         $84,966   $83,105   $81,568
                                                     =======   =======   =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Notes payable                                        $    95   $   143   $   174
Other liabilities                                      1,367     1,230     1,325
                                                     -------   -------   -------
Total liabilities                                      1,462     1,373     1,499
Shareholders' equity                                  83,504    81,732    80,069
                                                     -------   -------   -------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY           $84,966   $83,105   $81,568
                                                     =======   =======   =======

CONDENSED STATEMENTS OF INCOME (IN THOUSANDS)

          Years Ended December 31,             2003       2002     2001
-------------------------------------------   -------    ------   -------
INCOME
Earnings of unconsolidated
 bank subsidiary:
      Distributed earnings                    $ 2,280    $1,400   $   700
      Undistributed earnings                    2,739     1,752     3,375
Interest income                                     5         7        14
Other income                                       79       230        41
                                              -------    ------   -------
TOTAL INCOME                                    5,103     3,389     4,130
                                              -------    ------   -------
EXPENSES
Other expense                                      86       185       183
                                              -------    ------   -------
TOTAL EXPENSES                                     86       185       183
                                              -------    ------   -------
INCOME BEFORE INCOME TAXES                      5,017     3,204     3,947
Income tax (benefit)                               (1)       13       (52)
                                              -------    ------   -------
NET INCOME                                    $ 5,018    $3,191   $ 3,999
                                              =======    ======   =======

FINANCIALS 25

CONDENSED STATEMENTS OF CASH FLOWS (IN THOUSANDS)

             Years Ended December 31,                     2003       2002        2001
------------------------------------------------------   -------    -------    -------
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net income                                            $ 5,018    $ 3,191    $ 3,999
   Adjustments to reconcile net income to
        net cash provided by operating activities:
     Gain on liquidation of investment                       (57)      (210)
     Net income of unconsolidated subsidiaries            (5,019)    (3,152)    (4,075)
     Stock incentive plan                                               100        100
     Changes in assets and liabilities:
          Other assets                                                   15         71
                                                         -------    -------    -------
   NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES       (58)       (56)        95
                                                         -------    -------    -------
CASH FLOWS FROM INVESTING ACTIVITIES:
   Proceeds from liquidation of investment                    57        352
   Dividends from unconsolidated subsidiary                2,280      1,400        700
                                                         -------    -------    -------
NET CASH PROVIDED BY INVESTING ACTIVITIES                  2,337      1,752        700
                                                         -------    -------    -------
CASH FLOWS FROM FINANCING ACTIVITIES:
   Retirement of stock                                      (368)      (528)    (2,981)
   Dividends paid                                         (1,449)    (1,347)    (1,297)
                                                         -------    -------    -------
   NET CASH USED IN FINANCING ACTIVITIES                  (1,817)    (1,875)    (4,278)
                                                         -------    -------    -------
NET INCREASE (DECREASE) IN CASH                              462       (179)    (3,483)
CASH, BEGINNING OF YEAR                                       84        263      3,746
                                                         -------    -------    -------
CASH, END OF YEAR                                        $   546    $    84    $   263
                                                         =======    =======    =======

Peoples Financial Corporation paid income taxes of $2,537,223, $1,639,612 and $1,847,250 in 2003, 2002 and 2001, respectively. No interest was paid during the three years ended December 31, 2003.

NOTE M - EMPLOYEE BENEFIT PLAN:

The Company sponsors the Peoples Financial Corporation Employee Stock Ownership Plan (ESOP). Employees who work more than 1,000 hours are eligible to participate in the ESOP. The Plan included 401(k) provisions and the former Gulf National Bank Profit Sharing Plan. Effective January 1, 2001, the ESOP was amended to separate the 401(k) funds into the Peoples Financial Corporation 401(k) Plan. The separation had no impact on the eligibility or benefits provided to participants of either plan. The 401(k) provides for a matching contribution of 75% of the amounts contributed by the employee (up to 6% of compensation). Contributions are determined by the Board of Directors and may be paid either in cash or Peoples Financial Corporation capital stock. Total contributions to the plan charged to operating expense were $360,000, $360,000 and $734,000 in 2003, 2002 and 2001, respectively.

ESOP debt for acquisition of Company shares has been guaranteed by the Company and is reported as a debt of the Company. Shares pledged as collateral are reported as unearned compensation in equity. ESOP debt for acquisition from The Peoples Bank, Biloxi, Mississippi, is eliminated in consolidation. As shares are committed to be released, the Company reports compensation expense equal to the current market price of the shares, and the shares become outstanding for net income per share computations. Dividends on allocated ESOP shares are recorded as a reduction of retained earnings; dividends on unallocated ESOP shares are recorded as a reduction of debt and accrued interest.

Compensation expense of $7,021,816, $7,167,143 and $7,681,720 relating to the ESOP was recorded during 2003, 2002 and 2001, respectively. The ESOP held 467,499, 533,733 and 560,010 allocated shares at December 31, 2003, 2002, and 2001 respectively.

26 FINANCIALS

The Company established an Executive Supplemental Income Plan and a Directors' Deferred Income Plan, which provide for pre-retirement and post-retirement benefits to certain key executives and directors. The Company has acquired insurance policies, with the bank subsidiary as owner and beneficiary, that it may use as a source to pay potential benefits to the plan participants. These contracts are carried at their cash surrender value, which amounted to $10,588,084, $10,276,887 and $4,558,220 at December 31, 2003, 2002 and 2001, respectively. The present value of accumulated benefits under these plans, using an interest rate of 7.50% and 8.00% and the interest ramp-up method for 2003 and 2002 and using an interest rate of 7.5% and the projected unit cost method for 2001, has been accrued. The accrual amounted to $3,375,938, $2,882,009 and $2,418,114 at December 31, 2003, 2002 and 2001, respectively.

The Company also has additional plans for non-vested post-retirement benefits for certain key executives and directors. The Company has acquired insurance policies, with the bank subsidiary as owner and beneficiary, that it may use as a source to pay potential benefits to the plan participants. Additionally, there are two endorsement split dollar policies, with the bank subsidiary as owner and beneficiary, which provide a guaranteed death benefit to the participants' beneficiaries. These contracts are carried at their cash surrender value, which amounted to $989,004, $686,381 and $420,221 at December 31, 2003, 2002 and 2001, respectively. The present value of accumulated benefits under these plans using an interest rate of 7.50% in 2003, 2002 and 2001 and the projected unit cost method has been accrued. The accrual amounted to $530,372 , $485,534 and $341,819 at December 31, 2003, 2002 and 2001, respectively.

The Company provides post-retirement health insurance to certain of its retired employees. Employees are eligible to participate in the retiree health plan if they retire from active service no earlier than their Social Security normal retirement age, which varies from 65 to 67 based on the year of birth. In addition, the employee must have at least 25 continuous years of service with the Company immediately preceding retirement. However, any active employee who was at least age 65 as of January 1, 1995, does not have to meet the 25 years of service requirement. The accumulated post-retirement benefit obligation at January 1, 1995, was $517,599, which the Company elected to amortize over 20 years. The Company reserves the right to modify, reduce or eliminate these health benefits.

The following is a summary of the components of the net periodic post-retirement benefit cost:

           Years Ended December 31,           2003       2002       2001
-----------------------------------------   --------   --------   --------
Service cost                                $157,515   $107,533   $ 67,981
Interest cost                                104,409     94,603     70,461
Amortization of net transition obligation     20,600     20,600     20,600
                                            --------   --------   --------
Net periodic post-retirement benefit cost   $282,524   $222,736   $159,042
                                            ========   ========   ========

The discount rate used in determining the accumulated post-retirement benefit obligation was 6.25% in 2003, 6.50% in 2002, and 7.25% in 2001. The assumed health care cost trend rate used in measuring the accumulated post-retirement benefit obligation was 10.00% in 2003. The rate was assumed to decrease gradually to 5.00% for 2013 and remain at that level thereafter. If the health care cost trend rate assumptions were increased 1.00%, the accumulated post-retirement benefit obligation as of December 31, 2003, would be increased by 24.39%, and the aggregate of the service and interest cost components of the net periodic post-retirement benefit cost for the year then ended would have increased by 28.72%. If the health care cost trend rate assumptions were decreased 1.00%, the accumulated post-retirement benefit obligation as of December 31, 2003, would be decreased by 18.64%, and the aggregate of the service and interest cost components of the net periodic post-retirement benefit cost for the year then ended would have decreased by 21.37%.

FINANCIALS 27

The following is a reconciliation of the accumulated post-retirement benefit obligation:

Accumulated post-retirement benefit obligation as of December 31, 2002   $ 1,693,122
Service cost                                                                 135,006
Interest cost                                                                104,409
Actuarial loss                                                               294,994
Benefits paid                                                                (74,549)
                                                                         -----------
Accumulated post-retirement benefit obligation as of December 31, 2003   $ 2,152,982
                                                                         ===========

                   December 31,                       2003           2002           2001
-----------------------------------------------   -----------    -----------    -----------
Accumulated post-retirement benefit obligation:
   Retirees                                       $   659,859    $   422,403    $   395,895
   Eligible to retire                               1,493,123         50,218         44,172
   Not eligible to retire                                          1,220,501        881,657
                                                  -----------    -----------    -----------
Total                                               2,152,982      1,693,122      1,321,724
Plan assets at fair value                                 -0-            -0-            -0-
                                                  -----------    -----------    -----------
Accumulated post-retirement benefit
     obligation in excess of plan assets            2,152,982      1,693,122      1,321,724
Unrecognized transition obligation                   (226,597)      (247,197)      (267,797)
Unrecognized cumulative net gain from past
     experience different from that assumed
     and from changes in assumptions                 (887,947)      (615,462)      (394,611)
                                                  -----------    -----------    -----------
Accrued post-retirement benefit cost              $ 1,038,438    $   830,463    $   659,316
                                                  ===========    ===========    ===========

NOTE N - FAIR VALUE OF FINANCIAL INSTRUMENTS:

SFAS 107, "Disclosures About Fair Value of Financial Instruments," requires all entities to disclose the fair value of financial instruments, both assets and liabilities recognized and not recognized in the statement of condition, for which it is practical to estimate its fair value. SFAS 107 excluded certain financial instruments and all nonfinancial instruments from its disclosure requirements. Accordingly, the aggregate fair value amounts presented do not represent the underlying value of the Company. In preparing these disclosures, Management made highly sensitive estimates and assumptions in developing the methodology to be utilized in the computation of fair value. These estimates and assumptions were formulated based on judgments regarding economic conditions and risk characteristics of the financial instruments that were present at the time the computations were made. Events may occur that alter these conditions and thus perhaps change the assumptions as well. A change in the assumptions might affect the fair value of the financial instruments disclosed in this footnote. In addition, the tax consequences related to the realization of the unrealized gains and losses have not been computed or disclosed herein. These fair value estimates, methods and assumptions are set forth below.

CASH AND DUE FROM BANKS

The amount shown as cash and due from banks approximates fair value.

AVAILABLE FOR SALE SECURITIES

The fair value of available for sale securities is based on quoted market prices.

HELD TO MATURITY SECURITIES

The fair value of held to maturity securities is based on quoted market prices.

LOANS

The fair value of loans is estimated by discounting the future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings for the remaining maturities. The cash flows considered in computing the fair value of such loans are segmented into categories relating to the nature of the contract and collateral based on contractual principal maturities. Appropriate adjustments are made to reflect probable credit losses. Cash flows have not been adjusted for such factors as prepayment risk or the effect of the maturity of balloon notes.

28 FINANCIALS

DEPOSITS

The fair value of non-interest bearing demand and interest bearing savings and demand deposits is the amount reported in the financial statements. The fair value of time deposits is estimated by discounting the cash flows using current rates of time deposits with similar remaining maturities. The cash flows considered in computing the fair value of such deposits are based on contractual maturities, since approximately 98% of time deposits provide for automatic renewal at current interest rates.

FEDERAL FUNDS PURCHASED AND SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE

The amount shown as federal funds purchased and securities sold under agreements to repurchase approximates fair value.

LONG TERM FUNDS

The fair value of long term funds is computed by discounting the cash flows using current borrowing rates.

The following table presents carrying amounts and estimated fair values for financial assets and financial liabilities at December 31, 2003, 2002 and 2001 (in thousands):

                                       2003                 2002                 2001
                                -----------------------------------------------------------
                                Carrying    Fair     Carrying    Fair    Carrying    Fair
                                 Amount     Value     Amount     Value    Amount     Value
                                --------   -------   --------   -------  --------   -------
Financial Assets:
Cash and due from banks         $ 33,861  $ 33,861   $ 39,654  $ 39,654  $ 32,035  $ 32,035
Available for sale securities    206,467   207,486    151,484   151,484   142,902   142,902
Held to maturity securities        4,353     4,527     17,588    18,026    38,279    38,986
Loans, net                       291,524   294,685    305,599   307,501   341,511   345,155
Financial Liabilities:
Deposits:
Non-interest bearing              76,424    76,424     75,698    75,698    76,215    76,215
Interest bearing                 296,133   297,008    312,476   314,495   336,328   339,640
                                --------  --------  ---------  --------  --------  --------
Total deposits                   372,557   373,432    388,174   390,193   412,543   415,855
Federal funds purchased and
   securities sold under
   agreements to repurchase       95,039    95,039     67,246    67,246    82,489    82,489
Long term funds                   17,180    18,076      6,647     7,398     5,885     6,356

NOTE O - EXTRAORDINARY GAIN:

In 2001, the Company agreed to an out of court settlement of an insurance claim. An extraordinary gain of $594,000, net of taxes, was realized in the prior year as a result of this settlement.

FINANCIALS 29

INDEPENDENT AUDITORS' REPORT

PEOPLES FINANCIAL CORPORATION AND SUBSIDIARIES

Board of Directors
Peoples Financial Corporation and Subsidiaries Biloxi, Mississippi

We have audited the accompanying consolidated statements of condition of Peoples Financial Corporation and Subsidiaries as of December 31, 2003, 2002 and 2001, and the related consolidated statements of income, shareholders' equity and cash flows for the years then ended. These financial statements are the responsibility of the Company's Management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by Management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Peoples Financial Corporation and Subsidiaries at December 31, 2003, 2002 and 2001, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

Certified Public Accountants

/s/ PILTZ, WILLIAMS, LAROSA & CO.

PILTZ, WILLIAMS, LAROSA & CO.

Biloxi, Mississippi
January 21, 2004

30 FINANCIALS

FIVE-YEAR COMPARATIVE SUMMARY OF SELECTED FINANCIAL INFORMATION (IN THOUSANDS EXCEPT PER SHARE DATA)

PEOPLES FINANCIAL CORPORATION AND SUBSIDIARIES

                                               2003          2002           2001         2000           1999
                                           -----------   ------------   ------------  -----------    -----------
BALANCE SHEET SUMMARY

Total assets                               $   575,435   $    550,139   $    587,012  $   587,244    $   537,972
Available for sale securities                  207,486        151,484        142,902       48,168         33,076
Held to maturity securities                      4,353         17,588         38,279       98,052        115,273
Loans, net of unearned discount                297,923        312,296        347,169      377,476        332,510
Deposits                                       372,557        388,174        412,543      413,724        394,681
Borrowings from FHLB                            17,070          6,313          5,549       23,160
Long term notes payable                            110            334            336          291            274
Shareholders' equity                            83,504         81,732         80,069       78,717         77,767

SUMMARY OF OPERATIONS

Interest income                            $    25,065   $     27,424   $     37,285  $    42,250    $    35,440
Interest expense                                 5,838          9,616         18,354       19,401         14,441
                                           -----------   ------------   ------------  -----------    -----------
Net interest income                             19,227         17,808         18,931       22,849         20,999
Provision for loan losses                          447          2,428          2,503        4,192            120
                                           -----------   ------------   ------------  -----------    -----------
Net interest income after provision
   for loan losses                              18,780         15,380         16,428       18,657         20,879
Non-interest income                              9,737         10,372          9,256        7,678          6,767
Non-interest expense                           (21,464)       (21,874)       (21,197)     (19,632)       (18,438)
                                           -----------   ------------   ------------  -----------    -----------
Income before taxes
   and extraordinary gain                        7,053          3,878          4,487        6,703          9,208
Applicable income taxes                          2,035            687          1,082        2,065          2,958
Extraordinary gain                                                               594
                                           -----------   ------------   ------------  -----------    -----------
Net income                                 $     5,018   $      3,191   $      3,999  $     4,638    $     6,250
                                           ===========   ============   ============  ===========    ===========
PER SHARE DATA

Basic and diluted earnings per share       $       .90   $        .57   $        .71  $       .79    $      1.06
Basic and diluted earnings per share
   before extraordinary gain                       .90            .57            .60          .79           1.06
Dividends per share                                .29            .24            .24          .21            .20
Book value                                       15.03          14.64          14.25        13.58          13.17
Weighted average number of shares            5,563,015      5,603,834      5,629,872    5,857,232      5,905,344

SELECTED RATIOS

Return on average assets                           .88%           .56%           .68%         .82%          1.21%
Return on average equity                          6.07%          3.94%          5.04%        5.93%          8.26%
Capital formation rate                            2.17%          2.08%          1.72%        1.22%          5.74%
Primary capital to average assets                15.79%         15.39%         14.47%       14.68%         15.86%
Risk-based capital ratios:
   Tier 1                                        23.56%         22.91%         20.65%       19.97%         22.45%
   Total                                         24.81%         24.16%         21.90%       21.13%         23.69%

Note: All share and per share data have been given retroactive effect for the two for one stock split effective April 17, 2000.

FINANCIALS 31

Summary of Quarterly Results of Operations (in thousands except per share data)

PEOPLES FINANCIAL CORPORATION AND SUBSIDIARIES

        Quarter Ended, 2003                 March 31             June 30           September 30         December 31
------------------------------------    -----------------  ------------------   ------------------   ----------------
Interest income                         $           6,410  $            6,332   $            6,174   $          6,149
Net interest income                                 4,725               4,708                4,883              4,911
Provision for loan losses                             179                 139                   65                 64
Income before income taxes                          1,384               1,599                2,116              1,954
Net income                                          1,037               1,088                1,511              1,382
Basic and diluted earnings per share                  .19                 .19                  .27                .25

        Quarter Ended, 2002                 March 31             June 30           September 30         December 31
------------------------------------    -----------------  ------------------   ------------------   ----------------
Interest income                         $           7,118   $           6,993   $            6,787   $          6,526
Net interest income                                 4,282               4,396                4,507              4,623
Provision for loan losses                             445                 168                  136              1,679
Income before income taxes
   and extraordinary items                            894                 787                1,551                646
Net income                                            667                 658                1,145                721
Basic and diluted earnings per share                  .12                 .12                  .20                .13

MARKET INFORMATION

The Company's stock is traded under the symbol PFBX and is quoted in publications under "PplFnMS". The following table sets forth the high and low sale prices of the Company's common stock as reported on the NASDAQ Stock Market.

                                                                                  Dividend
Year           Quarter              High                       Low                per share
-----          -------          -------------            --------------        -------------
2003             1st            $          15            $           13        $         .12
                 2nd                       16                        13
                 3rd                       17                        14                  .14
                 4th                       18                        15

2002             1st            $          15            $           12        $         .12
                 2nd                       15                        13
                 3rd                       15                        12                  .12
                 4th                       15                        12

There were 661 holders of record of common stock of the Company at January 30, 2004, and 5,557,379 shares issued and outstanding. The principal source of funds to the Company for payment of dividends is the earnings of the bank subsidiary. The Commissioner of Banking and Consumer Finance of the State of Mississippi must approve all dividends paid to the Company by its bank subsidiary. Although Management cannot predict what dividends, if any, will be paid in the future, the Company has paid regular semiannual cash dividends since its founding in 1985.

32 FINANCIALS

Board of Directors
Peoples Financial Corporation

Chevis C. Swetman, Chairman of the Board Dan Magruder, Vice Chairman; President, Rex Distributing Co., Inc. Drew Allen, President, Allen Beverages, Inc. Rex E. Kelly, Director of Corporate Communications, Mississippi Power Company
Lyle M. Page, Partner, Page, Mannino, Peresich & McDermott

Officers
Peoples Financial Corporation

Chevis C. Swetman, President and CEO
Thomas J. Sliman, First Vice-President
Jeannette E. Romero, Second Vice-President Robert M. Tucei, Vice-President
A. Wes Fulmer, Vice-President and Secretary M. O. Lawrence, III, Vice-President
Lauri A. Wood, Chief Financial Officer and Controller

Board of Directors
The Peoples Bank, Biloxi, Mississippi

Chevis C. Swetman, Chairman
Tyrone J. Gollott, Vice-Chairman; Secretary-Treasurer, Gollott & Sons Transfer & Storage, Inc.
Drew Allen, President, Allen Beverages, Inc. Liz Corso Joachim, President, Frank P. Corso, Inc. Rex E. Kelly, Director of Corporate Communications, Mississippi Power Company
Dan Magruder, President, Rex Distributing Co., Inc. Jeffrey H. O'Keefe, President, Bradford-O'Keefe Funeral Homes, Inc. Lyle M. Page, Partner, Page, Mannino, Peresich & McDermott

Officers
The Peoples Bank, Biloxi, Mississippi

SENIOR MANAGEMENT

Chevis C. Swetman, President and CEO
Thomas J. Sliman, Senior Vice-President
Jeannette E. Romero, Senior Vice-President Robert M. Tucei, Senior Vice-President
Lauri A. Wood, Senior Vice-President and Cashier
A. Wes Fulmer, Senior Vice-President
M. O. Lawrence, III, Senior Vice-President

A. WES FULMER, SENIOR VICE-PRESIDENT AND CHIEF LENDING OFFICER

LENDING

Brian J. Kozlowski, Assistant Vice-President Andrew M. Welter, Assistant Vice-President Stephanie D. Broussard, Loan Officer
Melanie L. Battise, Branch Manager
Diana T. Winland, Loan Officer
Pinky T. Walker, Administrative Officer

West Region

Jeannie M. Deen, Vice-President
Eric M . Chambless, Assistant Vice-President William A. Aborn, Branch Manager
Debora T. Batchelor, Loan Officer
Shannon D. Garrett, Loan Officer

Central Region

John W. McKellar, Vice-President
Mark A. Chatham, Vice-President
Read H. Breeland, Assistant Vice-President James P. Estrada, Assistant Vice-President Brent G. Johnson, Assistant Vice-President William S. Maddox, Assistant Vice-President J. Denise Holmes, Branch Manager

East Region

Jerome D. Dodge,II, Vice-President
David A. Thompson, Assistant Vice-President Henry N. Knue, Branch Manager
Patrick J. Lyons, Branch Manager
John L.Welter, IV, Branch Manager
Julie B. Carpenter, Loan Officer

HUMAN RESOURCES

Jackie L. Henson, Vice-President
Patricia L. Levine, Vice-President
Janice L. Smitherman, Assistant Vice-President - Employee Benefits

BUSINESS DEVELOPMENT

Dennis J. Burke, Vice-President

ROBERT M. TUCEI, SENIOR VICE-PRESIDENT AND CHIEF CREDIT OFFICER

CREDIT ADMINISTRATION

J. Patrick Wild, Vice-President
Donna F. Bessetti, Vice-President
Jesse J. Migues, Assistant Vice-President Ronnie F. Harrison, Assistant Vice-President Kathleen M. Worrell, Insurance Officer

FINANCIALS 33

THOMAS J. SLIMAN, SENIOR VICE-PRESIDENT AND CHIEF INFORMATION OFFICER

TECHNOLOGY AND FACILITIES

Sandra L. York, Vice-President - Information Systems George S. Tranum, Vice-President - Technical Support James M. Gruich, Assistant Vice-President - Technology Security Gloria A. Cothern, Assistant Vice-President - Electronic Banking Ronald L. Baldwin, Systems Support Technician Officer Frederick J. Breal, Property Officer
Cheryl A. Dewey, Data Processing Officer Thomas A. Esposito, Jr., Business Solutions Officer John M. Zorich, Internet Banking Technology Officer

LAURI A. WOOD, SENIOR VICE PRESIDENT AND CHIEF FINANCIAL OFFICER

FINANCIAL

Connie F. Lepoma, Assistant Vice-President Cassandra F. Reid, Assistant Cashier

INVESTMENTS

Peggy M. Byrd, Vice-President
Janet H. Wood, Assistant Vice-President

M. O. LAWRENCE, III, SENIOR VICE-PRESIDENT AND SENIOR TRUST OFFICER

ASSET MANAGEMENT & TRUST SERVICES

Ann F. Guice, Vice-President
Louise C. Wilson, Trust Officer
Thomas H. Wicks, Trust Officer
Daniel A. Bass, Trust Officer
C. J. Dunaway, Trust Officer

JEANNETTE E. ROMERO, SENIOR VICE PRESIDENT AND RETAIL BANKING OFFICER

ACCOUNT SERVICES

Kathy S. Comstock, Savings Officer
Toni A. Ganucheau, Assistant Cashier

ATM/BANKCARD

Cheryl A. Dubaz, Assistant Vice-President - ATM Charlotte R. Balius, Bankcard Officer

OPERATIONS

Susan B. Page, Assistant Vice-President - Operations Ardell M. Roberts, Assistant Cashier
Hugh J. Kavanagh, Assistant Cashier
Diana W. Williams - Branch Manager
Laura E. Elliott, Assistant Branch Manager

SECURITY

Robin Vignes, Vice-President
Minh-Tuyet Nguyen, Security Officer
Margaret H. Chandler, Assistant Security Officer

AUDIT, COMPLIANCE AND LOAN REVIEW

Gregory M. Batia, Vice-President and Auditor Evelyn R. Herrington, Vice-President - Compliance Robert E. Smith, Jr., Vice-President - Loan Review F. Kay Rice, Loan Review Officer
Rebecca A. Williams, Assistant Auditor
Darnell Y. Schreck, Assistant Cashier - Compliance

BRANCH LOCATIONS

The Peoples Bank, Biloxi, Mississippi

BILOXI BRANCHES

MAIN OFFICE, 152 Lameuse Street, Biloxi, Mississippi 39530, (228) 435-5511

CEDAR LAKE OFFICE, 11355 Cedar Lake Road, Biloxi, Mississippi 39532 (228) 435-8688

WEST BILOXI OFFICE, 2430 Pass Road, Biloxi, Mississippi 39531, (228) 435-8203

GULFPORT BRANCHES

DOWNTOWN GULFPORT OFFICE, 1105 30th Avenue, Gulfport, Mississippi 39501, (228) 897-8715

HANDSBORO OFFICE, 0412 E. Pass Road, Gulfport, Mississippi 39507, (228) 897-8717

ORANGE GROVE OFFICE, 12020 Highway 49 North, Gulfport, Mississippi 39503, (228) 897-8718

OTHER BRANCHES

BAY ST. LOUIS OFFICE, 408 Highway 90 East, Bay St. Louis, Mississippi 39520, (228) 897-8710

DIAMONDHEAD OFFICE, 4408 West Aloha Drive, Diamondhead, Mississippi 39525, (228) 897-8714

D'IBERVILLE-ST. MARTIN OFFICE, 10491 Lemoyne Boulevard, D'iberville, Mississippi 39532, (228) 435-8202

GAUTIER OFFICE, 2601 Highway 90, Gautier, Mississippi 39553, (228) 497-1766

LONG BEACH OFFICE, 298 Jeff Davis Avenue, Long Beach, Mississippi 39560 (228) 897-8712

OCEAN SPRINGS OFFICE, 2015 Bienville Boulevard, Ocean Springs, Mississippi 39564, (228) 435-8204

PASS CHRISTIAN OFFICE, 125 Henderson Avenue, Pass Christian, Mississippi 39571, (228) 897-8719

SAUCIER OFFICE, 17689 Second Street, Saucier, Mississippi 39574, (228) 897-8716

WIGGINS OFFICE, 1312 S. Magnolia Drive, Wiggins, Mississippi 39577 (228) 897-8722

34 FINANCIALS

CORPORATE INFORMATION

PEOPLES FINANCIAL CORPORATION AND SUBSIDIARIES

CORPORATE OFFICE

MAILING ADDRESS

P. O. Box 529
Biloxi, MS 39533-0529
(228) 435-8205

PHYSICAL ADDRESS

152 Lameuse Street
Biloxi, MS 39530

WEBSITE

www.thepeoples.com

CORPORATE STOCK

The common stock of Peoples Financial Corporation is traded on the NASDAQ Small Cap Market under the symbol: PFBX. The cur- rent market makers are:

Johnston Lemon & Company
Morgan Keegan & Company, Inc.
Sterne, Agee & Leach, Inc.

SHAREHOLDER INFORMATION

For complete information concerning the common stock of Peoples Financial Corporation, including dividend reinvestment, or general information about the Company, direct inquiries to transfer agent/investor relations:

Asset Management & Trust Services Department The Peoples Bank, Biloxi, Mississippi
Attention: M. O. Lawrence, III, Senior Vice-President P. O. Box 1416, Biloxi, Mississippi 39533-1416
(228) 435-8208, e-mail: investorrelations@thepeoples.com

INDEPENDENT AUDITORS

Piltz, Williams, LaRosa & Company, Biloxi, Mississippi

S.E.C. FORM 10-K REQUESTS

A copy of the Annual Report on Form 10-K, as filed with the Securities and Exchange Commission, may be obtained without charge by directing a written request to:

Lauri A. Wood, Chief Financial Officer and Controller Peoples Financial Corporation
P. O. Drawer 529, Biloxi, Mississippi 39533-0529
(228) 435-8412, e-mail: lwood@thepeoples.com

FINANCIALS 35

[PICTURE OF BOARD OF DIRECTORS]

BOARD OF DIRECTORS

PEOPLES FINANCIAL CORPORATION

THE PEOPLES BANK, BILOXI, MISSISSIPPI

BACK ROW FROM LEFT: Jeffrey H. O'Keefe, President, Bradford-O'Keefe Funeral Homes, Inc.; Tyrone J. Gollott, Vice-Chairman of The Peoples Bank; Secretary-Treasurer, Gollott & Sons Transfer & Storage, Inc.; Lyle M. Page*, Partner, Page, Mannino, Peresich & McDermott.

FRONT ROW FROM LEFT: Rex E. Kelly*, Director of Corporate Communications, Mississippi Power Company; Drew Allen*, President, Allen Beverages, Inc.; Chevis C. Swetman*, Chairman of the Board; Dan Magruder*, Vice-Chairman of Peoples Financial Corporation; President, Rex Distributing Co., Inc.; Liz Corso Joachim, President, Frank P. Corso, Inc.

*Member of both boards.

36 THE YEAR IN REVIEW

[COVER]

Exhibit 23

Consent of Certified Public Accountants

We consent to the use of our reports, dated January 21, 2004, in Form 10-K filing of the Peoples Financial Corporation.

/s/ Piltz, Williams, LaRosa & Co.

PILTZ, WILLIAMS, LAROSA & CO.
Biloxi, Mississippi
March 1, 2004

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PEOPLES FINANCIAL CORPORATION
PURSUANT TO SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002

I, Chevis C. Swetman, certify that:

1. I have reviewed this annual report on Form 10-K of Peoples Financial Corporation.

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls over financial reporting.

Dated: March 24, 2004

                   /s/ Chevis C. Swetman
                   -----------------------------------------------
                       Chevis C. Swetman,
                       President and Chief Executive Officer

Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER
PEOPLES FINANCIAL CORPORATION
PURSUANT TO SECTION 302 OF THE
SARBANES - OXLEY ACT OF 2002

I, Lauri A. Wood, certify that:

1. I have reviewed this annual report on Form 10-K of Peoples Financial Corporation.

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Dated: March 24, 2004

                        /s/ Lauri A. Wood
                        ---------------------------------------
                        Lauri A. Wood,
                        Chief Financial Officer

Exhibit 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PEOPLES FINANCIAL CORPORATION
PURSUANT TO 18 U.S.C. Section 1350

I, Chevis C. Swetman, Chairman, President and Chief Executive Officer of Peoples Financial Corporation (the "Company"), hereby certify that the accompanying report on Form 10-K for the period ending December 31, 2003 and filed with the Securities and Exchange Commission on the date hereof pursuant to Section 13(a) of the Securities Exchange Act of 1934 (the "Report") by the Company fully complies with the requirements of that section.

I further certify that the information contained in the Report fairly presents, in all material aspects, the financial operations and results of operations of the Company.

BY: /s/ Chevis C. Swetman
    -----------------------------------------
    Chevis C. Swetman
    Chairman, President and Chief Executive Officer

DATE: March 24, 2004

Exhibit 32.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER
PEOPLES FINANCIAL CORPORATION
PURSUANT TO 18 U.S.C. Section 1350

I, Lauri A. Wood, Chief Financial Officer and Controller of Peoples Financial Corporation (the "Company"), hereby certify that the accompanying report on Form 10-K for the period ending December 31, 2003, and filed with the Securities and Exchange Commission on the date hereof pursuant to Section 13(a) of the Securities Exchange Act of 1934 (the "Report") by the Company fully complies with the requirements of that section.

I further certify that the information contained in the Report fairly presents, in all material aspects, the financial operations and results of operations of the Company.

BY: /s/ Lauri A. Wood
    ----------------------------------------
    Lauri A. Wood
    Chief Financial Officer

DATE: March 24, 2004

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