SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
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þ
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QUARTERLY REPORT PURSUANT TO SECTION 13 or 15 (D) OF THE
SECURITIES EXCHANGE ACT OF 1934
|
For the quarterly period ended
September 30, 2007
or
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|
o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
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Commission File Number
001-12103
PEOPLES FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
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Mississippi
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64-0709834
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(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification No.)
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Lameuse and Howard Avenues, Biloxi, Mississippi
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39533
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(Address of principal executive offices)
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(Zip Code)
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(228) 435-5511
(Registrants telephone number, including area code)
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
þ
No
o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or
a non-accelerated filer. See definition of accelerated filer and large accelerated filer in
Rule 12b-2 of the Exchange Act. (Check one:)
Large Accelerated filer
o
Accelerated filer
þ
Non-Accelerated filer
o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act). Yes
o
No
þ
Indicate the number of shares outstanding of each of the issuers classes of common stock, as of
the last practicable date. Peoples Financial Corporation has only one class of common stock
authorized. At October 31, 2007, there were 15,000,000 shares of $1 par value common stock
authorized, and 5,431,444 shares issued and outstanding.
TABLE OF CONTENTS
PART I
FINANCIAL INFORMATION
PEOPLES FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CONDITION
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(Unaudited)
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(Audited)
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(Unaudited)
|
|
September 30, December 31, and September 30,
|
|
2007
|
|
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2006
|
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2006
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|
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Assets
|
|
|
|
|
|
|
|
|
|
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Cash and due from banks
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$
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35,630,906
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$
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37,793,493
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$
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64,824,795
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Federal funds sold
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|
6,454,000
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|
|
|
6,400,000
|
|
|
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6,442,000
|
|
Held to maturity securities, market value of
$8,640,000 - September 30, 2007;
$85,519,000 - December 31, 2006;
$107,754,000 - September 30, 2006
|
|
|
8,628,186
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|
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|
85,574,260
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|
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107,845,418
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|
Available for sale securities, at market value
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394,940,089
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397,207,489
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373,505,852
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Federal Home Loan Bank stock, at cost
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921,100
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1,128,500
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1,115,100
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Loans
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449,998,171
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|
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401,194,010
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403,182,940
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Less: Allowance for loan losses
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9,459,090
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|
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|
10,841,367
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|
|
|
10,928,307
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|
|
|
Loans, net
|
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|
440,539,081
|
|
|
|
390,352,643
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|
|
392,254,633
|
|
Bank premises and equipment, net of
accumulated depreciation
|
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|
27,429,772
|
|
|
|
19,658,585
|
|
|
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18,148,828
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|
Accrued interest receivable
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|
6,835,859
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|
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8,142,230
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|
|
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7,449,079
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Other assets
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19,325,221
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|
17,765,868
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19,129,164
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|
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Total assets
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$
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940,704,214
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|
|
$
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964,023,068
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|
|
$
|
990,714,869
|
|
|
|
|
2
PEOPLES FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CONDITION (Continued)
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|
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(Unaudited)
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|
(Audited)
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|
(Unaudited)
|
|
September 30, December 31, and September 30,
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|
2007
|
|
|
2006
|
|
|
2006
|
|
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Liabilities & Shareholders Equity
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Liabilities:
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Deposits:
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Demand, non-interest bearing
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$
|
137,663,897
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$
|
148,455,754
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|
$
|
173,023,256
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|
Savings and demand, interest bearing
|
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242,180,702
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|
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271,331,272
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|
|
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298,054,632
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Time, $100,000 or more
|
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171,903,684
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|
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132,846,509
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131,172,939
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|
Other time deposits
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58,002,480
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|
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60,536,259
|
|
|
|
61,279,315
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|
|
|
Total deposits
|
|
|
609,750,763
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|
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|
613,169,794
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|
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663,530,142
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|
Federal funds purchased and securities
sold under agreements to repurchase
|
|
|
207,974,079
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|
|
|
226,032,370
|
|
|
|
212,157,926
|
|
Borrowings from Federal Home Loan Bank
|
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|
7,141,740
|
|
|
|
7,267,349
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|
|
|
10,609,371
|
|
Other liabilities
|
|
|
12,821,013
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|
|
|
19,320,860
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|
|
|
9,489,636
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|
|
|
|
Total liabilities
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|
|
837,687,595
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865,790,373
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895,787,075
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|
Shareholders Equity:
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Common Stock, $1 par value, 15,000,000
shares authorized, 5,433,808,
5,548,199 and 5,548,199
shares issued and outstanding at
September 30, 2007, December 31,
2006 and September 30,
2006, respectively
|
|
|
5,433,808
|
|
|
|
5,548,199
|
|
|
|
5,548,199
|
|
Surplus
|
|
|
65,780,254
|
|
|
|
65,780,254
|
|
|
|
65,780,254
|
|
Undivided profits
|
|
|
33,267,571
|
|
|
|
29,253,825
|
|
|
|
25,536,642
|
|
Accumulated other comprehensive loss, net
of tax
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|
|
(1,465,014
|
)
|
|
|
(2,349,583
|
)
|
|
|
(1,937,301
|
)
|
|
|
|
Total shareholders equity
|
|
|
103,016,619
|
|
|
|
98,232,695
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|
|
|
94,927,794
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|
|
|
|
Total liabilities and shareholders equity
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|
$
|
940,704,214
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|
|
$
|
964,023,068
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|
|
$
|
990,714,869
|
|
|
|
|
See Selected Notes to Consolidated Financial Statements.
3
PEOPLES FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
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For the Quarters Ended
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|
For the Nine Months Ended
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|
|
|
September 30,
|
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|
September 30,
|
|
|
|
2007
|
|
|
2006
|
|
|
2007
|
|
|
2006
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|
|
Interest income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest and fees on loans
|
|
$
|
8,919,024
|
|
|
$
|
7,847,283
|
|
|
$
|
25,131,638
|
|
|
$
|
20,901,766
|
|
Interest and dividends on investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U. S. Treasury
|
|
|
965,272
|
|
|
|
1,127,800
|
|
|
|
3,432,861
|
|
|
|
4,451,151
|
|
U. S. Government agencies and corporations
|
|
|
3,723,883
|
|
|
|
3,717,040
|
|
|
|
12,140,300
|
|
|
|
8,250,066
|
|
States and political subdivisions
|
|
|
229,574
|
|
|
|
216,430
|
|
|
|
686,689
|
|
|
|
633,821
|
|
Other investments
|
|
|
390,273
|
|
|
|
21,730
|
|
|
|
830,041
|
|
|
|
147,549
|
|
Interest on federal funds sold
|
|
|
107,931
|
|
|
|
220,691
|
|
|
|
189,642
|
|
|
|
760,047
|
|
|
|
|
Total interest income
|
|
|
14,335,957
|
|
|
|
13,150,974
|
|
|
|
42,411,171
|
|
|
|
35,144,400
|
|
|
|
|
Interest expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
3,862,267
|
|
|
|
3,138,781
|
|
|
|
11,093,430
|
|
|
|
7,976,709
|
|
Borrowings from Federal Home Loan Bank
|
|
|
138,604
|
|
|
|
120,014
|
|
|
|
418,451
|
|
|
|
362,405
|
|
Federal funds purchased and securities sold
under agreements to repurchase
|
|
|
2,474,717
|
|
|
|
2,285,413
|
|
|
|
8,044,886
|
|
|
|
4,186,418
|
|
|
|
|
Total interest expense
|
|
|
6,475,588
|
|
|
|
5,544,208
|
|
|
|
19,556,767
|
|
|
|
12,525,532
|
|
|
|
|
Net interest income
|
|
|
7,860,369
|
|
|
|
7,606,766
|
|
|
|
22,854,404
|
|
|
|
22,618,868
|
|
Provision for allowance for losses on loans
|
|
|
(1,197,000
|
)
|
|
|
48,000
|
|
|
|
(1,097,000
|
)
|
|
|
125,000
|
|
|
|
|
Net interest income after provision for
allowance for
losses on loans
|
|
$
|
9,057,369
|
|
|
$
|
7,558,766
|
|
|
$
|
23,951,404
|
|
|
$
|
22,493,868
|
|
|
|
|
4
PEOPLES FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (Continued)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Quarters Ended
|
|
|
For the Nine Months Ended
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
2007
|
|
|
2006
|
|
|
2007
|
|
|
2006
|
|
|
Other operating income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trust department income and fees
|
|
$
|
495,172
|
|
|
$
|
498,627
|
|
|
$
|
1,393,417
|
|
|
$
|
1,228,865
|
|
Service charges on deposit accounts
|
|
|
1,710,913
|
|
|
|
1,391,013
|
|
|
|
5,014,671
|
|
|
|
3,696,281
|
|
Gain (loss) on sale of securities
|
|
|
4,688
|
|
|
|
|
|
|
|
(614,327
|
)
|
|
|
|
|
Other income
|
|
|
293,266
|
|
|
|
418,227
|
|
|
|
1,321,953
|
|
|
|
1,201,212
|
|
|
|
|
Total other operating income
|
|
|
2,504,039
|
|
|
|
2,307,867
|
|
|
|
7,115,714
|
|
|
|
6,126,358
|
|
|
|
|
Other operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and employee benefits
|
|
|
3,743,041
|
|
|
|
3,295,811
|
|
|
|
10,608,272
|
|
|
|
9,434,025
|
|
Net occupancy
|
|
|
524,162
|
|
|
|
370,838
|
|
|
|
1,443,656
|
|
|
|
1,476,070
|
|
Equipment rentals, depreciation and maintenance
|
|
|
810,879
|
|
|
|
726,905
|
|
|
|
2,429,454
|
|
|
|
2,077,174
|
|
Other expense
|
|
|
1,508,815
|
|
|
|
1,358,319
|
|
|
|
4,411,652
|
|
|
|
3,718,326
|
|
|
|
|
Total other operating expense
s
|
|
|
6,586,897
|
|
|
|
5,751,873
|
|
|
|
18,893,034
|
|
|
|
16,705,595
|
|
|
|
|
Income before income taxes
|
|
|
4,974,511
|
|
|
|
4,114,760
|
|
|
|
12,174,084
|
|
|
|
11,914,631
|
|
Income taxes
|
|
|
1,580,000
|
|
|
|
1,430,000
|
|
|
|
4,078,000
|
|
|
|
4,140,000
|
|
|
|
|
Net income
|
|
$
|
3,394,511
|
|
|
$
|
2,684,760
|
|
|
$
|
8,096,084
|
|
|
$
|
7,774,631
|
|
|
|
|
Basic and diluted earnings per share
|
|
$
|
.62
|
|
|
$
|
.48
|
|
|
$
|
1.47
|
|
|
$
|
1.40
|
|
|
|
|
See Selected Notes to Consolidated Financial Statements.
5
PEOPLES FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compre-
|
|
|
|
|
|
|
|
|
|
# of Common
|
|
|
Common
|
|
|
|
|
|
|
Undivided
|
|
|
hensive
|
|
|
Comprehen-
|
|
|
|
|
|
|
Shares
|
|
|
Stock
|
|
|
Surplus
|
|
|
Profits
|
|
|
Income
|
|
|
sive Income
|
|
|
Total
|
|
|
|
|
Balance, January 1, 2006
|
|
|
5,549,128
|
|
|
$
|
5,549,128
|
|
|
$
|
65,780,254
|
|
|
$
|
18,942,855
|
|
|
$
|
(2,769,106
|
)
|
|
|
|
|
|
$
|
87,503,131
|
|
Comprehensive Income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,774,631
|
|
|
|
|
|
|
$
|
7,774,631
|
|
|
|
7,774,631
|
|
Net
unrealized
gain on
available for
sale
securities,
net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
831,805
|
|
|
|
831,805
|
|
|
|
831,805
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
comprehensive
income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
8,606,436
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retirement of common stock
|
|
|
(929
|
)
|
|
|
(929
|
)
|
|
|
|
|
|
|
(15,722
|
)
|
|
|
|
|
|
|
|
|
|
|
(16,651
|
)
|
Dividend
declared
($ .21 per
share)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,165,122
|
)
|
|
|
|
|
|
|
|
|
|
|
(1,165,122
|
)
|
|
|
|
|
|
|
|
|
|
|
Balance, September 30,
2006
|
|
|
5,548,199
|
|
|
$
|
5,548,199
|
|
|
$
|
65,780,254
|
|
|
$
|
25,536,642
|
|
|
$
|
(1,937,301
|
)
|
|
|
|
|
|
$
|
94,927,794
|
|
|
|
|
|
|
|
|
|
|
|
Note: Balances as of January 1, 2006 were audited.
6
PEOPLES FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compre-
|
|
|
|
|
|
|
|
|
|
# of Common
|
|
|
Common
|
|
|
|
|
|
|
Undivided
|
|
|
hensive
|
|
|
Comprehen-
|
|
|
|
|
|
|
Shares
|
|
|
Stock
|
|
|
Surplus
|
|
|
Profits
|
|
|
Income
|
|
|
sive Income
|
|
|
Total
|
|
|
|
|
Balance, January 1,
2007
|
|
|
5,548,199
|
|
|
$
|
5,548,199
|
|
|
$
|
65,780,254
|
|
|
$
|
29,253,825
|
|
|
$
|
(2,349,583
|
)
|
|
|
|
|
|
$
|
98,232,695
|
|
Comprehensive
Income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,096,084
|
|
|
|
|
|
|
$
|
8,096,084
|
|
|
|
8,096,084
|
|
Net unrealized gain
on available for
sale securities,
net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
787,694
|
|
|
|
787,694
|
|
|
|
787,694
|
|
Reclassification adjustment for
available for sale
securities called
or sold in the
current year, net
of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
96,875
|
|
|
|
96,875
|
|
|
|
96,875
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
comprehensive
income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
8,980,653
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retirement of
common stock
|
|
|
(114,391
|
)
|
|
|
(114,391
|
)
|
|
|
|
|
|
|
(2,703,393
|
)
|
|
|
|
|
|
|
|
|
|
|
(2,817,784
|
)
|
Dividend declared
($ .25 per share)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,378,945
|
)
|
|
|
|
|
|
|
|
|
|
|
(1,378,945
|
)
|
|
|
|
|
|
|
|
|
|
|
Balance, September
30, 2007
|
|
|
5,433,808
|
|
|
$
|
5,433,808
|
|
|
$
|
65,780,254
|
|
|
$
|
33,267,571
|
|
|
$
|
(1,465,014
|
)
|
|
|
|
|
|
$
|
103,016,619
|
|
|
|
|
|
|
|
|
|
|
|
Note: Balances as of January 1, 2007 were audited.
See Selected Notes to Consolidated Financial Statements.
7
PEOPLES FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
|
|
|
|
|
|
|
|
|
For the Nine Months Ended September 30,
|
|
2007
|
|
|
2006
|
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
8,096,084
|
|
|
$
|
7,774,631
|
|
Adjustments to reconcile net income to net cash provided
by (used in) operating activities:
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
1,385,000
|
|
|
|
1,177,000
|
|
Provision for allowance for losses on loans
|
|
|
(1,097,000
|
)
|
|
|
125,000
|
|
Provision for losses on other real estate
|
|
|
|
|
|
|
3,129
|
|
Gain on sale of bank premises
|
|
|
(192,200
|
)
|
|
|
(159,669
|
)
|
Gain on sales of other real estate
|
|
|
(10,470
|
)
|
|
|
(150,000
|
)
|
Loss on sales of securities
|
|
|
614,327
|
|
|
|
|
|
Changes in assets and liabilities:
|
|
|
|
|
|
|
|
|
Accrued interest receivable
|
|
|
1,306,371
|
|
|
|
(3,133,721
|
)
|
Other assets
|
|
|
(764,856
|
)
|
|
|
(370,722
|
)
|
Other liabilities
|
|
|
(5,928,288
|
)
|
|
|
1,393,290
|
|
|
|
|
Net cash provided by operating activities
|
|
|
3,408,968
|
|
|
|
6,658,938
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
Proceeds from maturities and calls of held to maturity
securities
|
|
|
82,460,000
|
|
|
|
212,720,000
|
|
Proceeds from maturities, sales and calls of available
for sale securities
|
|
|
137,413,444
|
|
|
|
18,250,292
|
|
Purchases of investments in held to maturity securities
|
|
|
(5,513,926
|
)
|
|
|
(186,518,459
|
)
|
Purchases of investments in available for sale securities
|
|
|
(134,426,587
|
)
|
|
|
(212,094,319
|
)
|
Purchases (sales) of investments in Federal Home Loan
Bank
|
|
|
207,400
|
|
|
|
(38,500
|
)
|
Loans, net increase
|
|
|
(49,108,938
|
)
|
|
|
(54,040,715
|
)
|
Acquisition of premises and equipment
|
|
|
(9,213,987
|
)
|
|
|
(1,595,372
|
)
|
Proceeds from sale of bank premises
|
|
|
250,000
|
|
|
|
317,120
|
|
Proceeds from sales of other real estate
|
|
|
55,000
|
|
|
|
238,000
|
|
|
|
|
Other assets
|
|
|
(564,215
|
)
|
|
|
(416,457
|
)
|
|
|
|
Net cash
provided by (used in) investing activities
|
|
|
21,558,191
|
|
|
|
(223,178,410
|
)
|
|
|
|
8
PEOPLES FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(Unaudited)
|
|
|
|
|
|
|
|
|
For the Nine Months Ended September 30,
|
|
2007
|
|
|
2006
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
Demand and savings deposits, net decrease
|
|
$
|
(39,942,427
|
)
|
|
$
|
(6,602,047
|
)
|
Time deposits, net increase
|
|
|
36,523,396
|
|
|
|
77,914,847
|
|
Borrowings from Federal Home Loan Bank
|
|
|
45,800,375
|
|
|
|
17,240,727
|
|
Repayments to Federal Home Loan Bank
|
|
|
(45,925,984
|
)
|
|
|
(13,983,361
|
)
|
Retirement of common stock
|
|
|
(2,817,784
|
)
|
|
|
(16,651
|
)
|
Cash dividends
|
|
|
(2,655,031
|
)
|
|
|
(2,274,948
|
)
|
Federal funds purchased and securities sold under
agreements to repurchase,
net increase (decrease)
|
|
|
(18,058,291
|
)
|
|
|
62,890,176
|
|
|
|
|
Net cash provided by (used in) financing activities
|
|
|
(27,075,746
|
)
|
|
|
135,168,743
|
|
|
|
|
Net decrease in cash and cash equivalents
|
|
|
(2,108,587
|
)
|
|
|
(81,350,729
|
)
|
|
|
|
Cash and cash equivalents, beginning of period
|
|
|
44,193,493
|
|
|
|
152,617,524
|
|
|
|
|
Cash and cash equivalents, end of period
|
|
$
|
42,084,906
|
|
|
$
|
71,266,795
|
|
|
|
|
See Selected Notes to Consolidated Financial Statements.
9
PEOPLES FINANCIAL CORPORATION AND SUBSIDIARIES
SELECTED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Nine Months Ended September 30, 2007 and 2006
1. Basis of Presentation:
The accompanying unaudited consolidated financial statements and notes thereto contain all
adjustments, consisting only of normal recurring adjustments, necessary to present fairly, in
accordance with accounting principles generally accepted in the United States of America, the
financial position of the Company and its subsidiaries as of September 30, 2007 and the results of
their operations and their cash flows for the periods presented. The interim financial information
should be read in conjunction with the annual consolidated financial statements and the notes
thereto included in the Companys 2006 Annual Report.
The preparation of financial statements in conformity with accounting principles generally accepted
in the United States of America 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 consolidated financial statements and the reported amounts of revenues and
expenses during the reported period. Actual results could differ from those estimates.
The results of operations for the nine months ended September 30, 2007, are not necessarily
indicative of the results to be expected for the full year.
2. Earnings Per Share:
Per share data is based on the weighted average shares of common stock outstanding of 5,512,283
and 5,548,334 for the nine months ended September 30, 2007 and 2006, respectively, and 5,454,281
and 5,548,199 for the quarters ended September 30, 2007 and 2006, respectively.
3. Statements of Cash Flows:
The Company has defined cash and cash equivalents to include cash and due from banks and federal
funds sold. The Company paid $19,557,000 and $12,285,000 for the nine months ended September 30,
2007 and 2006, respectively, for interest on deposits and borrowings. Income tax payments of
$4,194,000 and $4,001,000 were made during the nine months ended September 30, 2007 and 2006,
respectively. Loans transferred to other real estate amounted to $20,000 and $41,000 during the
nine months ended September 30, 2007 and 2006, respectively.
10
4. Investments:
Securities with gross unrealized losses at September 30, 2007, aggregated by investment category
and length of time that individual securities have been in a continuous loss position are as
follows (in 000s):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less Than Twelve
|
|
|
|
|
|
|
|
|
|
Months
|
|
|
Over Twelve Months
|
|
|
Total
|
|
|
|
|
|
|
|
Gross
|
|
|
|
|
|
|
Gross
|
|
|
|
|
|
|
Gross
|
|
|
|
|
|
|
|
Unreal-
|
|
|
|
|
|
|
Unreal-
|
|
|
Fair
|
|
|
Unreal-
|
|
|
|
Fair Value
|
|
|
ized Loss
|
|
|
Fair Value
|
|
|
ized Loss
|
|
|
Value
|
|
|
ized Loss
|
|
|
|
|
U. S. Treasury
|
|
$
|
|
|
|
$
|
|
|
|
$
|
8,950
|
|
|
$
|
45
|
|
|
$
|
8,950
|
|
|
$
|
45
|
|
U. S. Govt. Agencies
|
|
|
50,676
|
|
|
|
437
|
|
|
|
60,002
|
|
|
|
488
|
|
|
|
110,678
|
|
|
|
925
|
|
States and
political
subdivisions
|
|
|
7,146
|
|
|
|
168
|
|
|
|
8,460
|
|
|
|
200
|
|
|
|
15,606
|
|
|
|
368
|
|
Mortgage backed
securities
|
|
|
25,516
|
|
|
|
422
|
|
|
|
|
|
|
|
|
|
|
|
25,516
|
|
|
|
422
|
|
FHLMC preferred
stock
|
|
|
|
|
|
|
|
|
|
|
2,489
|
|
|
|
586
|
|
|
|
2,489
|
|
|
|
586
|
|
|
|
|
Total
|
|
$
|
83,338
|
|
|
$
|
1,027
|
|
|
$
|
79,901
|
|
|
$
|
1,319
|
|
|
$
|
163,239
|
|
|
$
|
2,346
|
|
|
|
|
Management evaluates securities for other-than-temporary impairment on a monthly basis. In
performing this evaluation, the length of time and the extent to which the fair value has been less
than cost and the fact that the Companys securities are primarily issued by U. S. Treasury and U.
S. Government Agencies are considered. In addition, the Company assesses the cause of the decline
in value and the intent and ability of the Company to hold these securities until maturity. While
available for sale securities have been sold for liquidity purposes, the Company has traditionally
held its securities, including those classified as available for sale, until maturity. As a
result of this evaluation, the Company has determined that the declines summarized in the table
above are not deemed to be other-than-temporary.
5. Past Due and Impaired Loans:
Loans past due ninety days or more and still accruing were $272,000 and $1,366,000 at September 30,
2007 and 2006, respectively. Nonaccrual loans amounted to approximately $136,000 and $402,000 at
September 30, 2007 and 2006, respectively.
11
At September 30, 2007 and 2006, the Companys other individually evaluated impaired loans
included performing loans and totaled $8,314,000 and $13,026,000. The average recorded investment
in impaired loans amounted to approximately $8,328,000 and $13,504,000 at September 30, 2007 and
2006, respectively. The Company had $5,032,000 and $4,619,000 of specific allowance related to
impaired loans at September 30, 2007 and 2006, respectively. Interest income recognized on impaired
loans was $172,000 and $289,000 during the nine months ended September 30, 2007 and 2006,
respectively. Interest income recognized on impaired loans if the Company had used the cash-basis
method of accounting would have approximated $224,000 and $300,000 during the nine months ended
September 30, 2007 and 2006, respectively.
6. Allowance for Loan Losses:
Transactions in the allowance for loan losses were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Nine
|
|
|
|
|
|
|
For the Nine
|
|
|
|
Months Ended
|
|
|
For the Year
|
|
|
Months Ended
|
|
|
|
September 30,
|
|
|
Ended December
|
|
|
September 30,
|
|
|
|
2007
|
|
|
31, 2006
|
|
|
2006
|
|
|
|
|
Balance, beginning of
period
|
|
$
|
10,841,367
|
|
|
$
|
10,966,022
|
|
|
$
|
10,966,022
|
|
Provision for loan losses
|
|
|
(1,097,000
|
)
|
|
|
141,000
|
|
|
|
125,000
|
|
Recoveries
|
|
|
211,395
|
|
|
|
463,345
|
|
|
|
316,646
|
|
Loans charged off
|
|
|
(496,672
|
)
|
|
|
(729,000
|
)
|
|
|
(479,361
|
)
|
|
|
|
Balance, end of period
|
|
$
|
9,459,090
|
|
|
$
|
10,841,367
|
|
|
$
|
10,928,307
|
|
|
|
|
7. Other Comprehensive Income:
The income tax benefit on the accumulated other comprehensive income was $455,000 and $428,000 at
September 30, 2007 and 2006, respectively.
8. Federal Funds Purchased and Securities Sold Under Agreements to Repurchase:
On June 27, 2007, the Board of Directors authorized the Company to establish an additional
$10,000,000 unsecured line of credit. As a result, the Company now has facilities in place to
purchase federal funds up to $111,000,000 under established credit arrangements in order to meet
its liquidity needs.
9. Notes Payable:
On June 27, 2007, the Board of Directors authorized the Company to open a $5,000,000 unsecured line
of credit with The Bankers Bank. The line draws interest at 1/2% under New York Prime and
requires interest only payments quarterly with all principal and remaining accrued interest due at
maturity, which is July 6, 2009.
12
10. Income Taxes:
The Financial Accounting Standards Board (the FASB) issued FASB Interpretation No. 48,
Accounting for Uncertainty in Income Taxes An Interpretation of FASB Statement No. 109 (FIN
48). This interpretation clarifies the accounting and disclosure for uncertainty in income tax
positions and is effective for the Company for the year beginning January 1, 2007. The Company has
considered the recognition and measurement requirements of FIN 48 of the benefits recorded in its
financial statements for tax positions taken or expected to be taken in its tax returns. Based on
its evaluation of these tax positions for open tax years 2003 2006, the unrecognized tax benefit,
including applicable interest and penalties, is not material to the financial position of the
Company as of January 1, 2007.
11. Shareholders Equity:
As of July 25, 2007, the Company repurchased and retired 119,184 shares, including 55,974 shares
repurchased and retired since July 1, 2007, under a stock repurchase plan originally approved on
November 26, 2002 and extended on November 22, 2005. At July 25, 2007, the Company had the
authorization to repurchase and retire an additional 20,290 shares under the plan approved on
November 26, 2002 and extended November 22, 2005.
On July 25, 2007, the Board of Directors approved a stock repurchase plan under which 2.50%, or
approximately 136,000, of the outstanding shares of Company stock may be repurchased and retired.
12. Certain reclassifications, which had no effect on prior year net income, have been made to
the prior period statements to conform to current year presentation.
13
Item 2 Managements Discussion and Analysis of Financial Condition and Results of Operations
The following presents Managements discussion and analysis of the consolidated financial
condition and results of operations of Peoples Financial Corporation and Subsidiaries (the Company)
for the nine months ended September 30, 2007 and 2006. These comments highlight the significant
events and should be considered in combination with the Consolidated Financial Statements included
in this report on Form 10-Q.
Forward-Looking Information
Congress passed the Private Securities Litigation Act of 1995 in an effort to encourage
corporations to provide information about a companys 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 Companys actual results and experience to differ from the anticipated
results and expectations expressed in such forward-looking statements.
Overview
Total assets decreased from $991,000,000 at September 30, 2006 to $941,000,000 at September 30,
2007. The Company has maintained most of the deposit growth realized since Hurricane Katrina in
August of 2005, but some volatility has been experienced during the last two quarters. Further
significant decreases in total deposits is not anticipated over the next several quarters.
During the third quarter of 2007, non-performing loans, especially loans on nonaccrual, have
decreased significantly. The Company anticipated an overall material deterioration in the quality
of its loan portfolio as a result of Hurricane Katrina. Fortunately, this deterioration has not
been realized and, along with the improvement in asset quality during 2007, contributed to
Managements decision to record a negative provision for loan losses during the third quarter.
During the first nine months of 2007, net income was $8,096,000, as compared with $7,775,000 for
the first nine months of 2006. Earnings for the first nine months of 2007 included a negative loan
loss provision of $724,000, net of taxes, and a loss on the sale of securities of $405,000, net of
taxes. Income from operations, when adjusted for these non-recurring events, was $7,777,000 for the
nine months ended September 30, 2007.
14
The following compares financial highlights for the nine months ended September 30, 2007 and 2006:
|
|
|
|
|
|
|
|
|
For the nine months ended September 30,
|
|
2007
|
|
|
2006
|
|
|
Net income per share
|
|
$
|
1.47
|
|
|
$
|
1.40
|
|
Book value per share
|
|
$
|
18.96
|
|
|
$
|
17.11
|
|
Return on average total assets
|
|
|
1.12
|
%
|
|
|
1.12
|
%
|
Allowance for loan losses as a % of loans,
net of unearned discount
|
|
|
2.10
|
%
|
|
|
2.71
|
%
|
Financial Condition
Held to Maturity Securities
Held to maturity securities decreased $99,217,000 at September 30, 2007, compared with September
30, 2006. The significant increase in the balances of deposits and non-deposit products after
Hurricane Katrina in August 2005 has outpaced loan demand during the last twenty-four months.
These funds were initially invested in short term U.S. Treasury securities and classified as held
to maturity. Proceeds from the maturity of these investments are now primarily funding the
purchase of U.S. Treasury securities, U.S. Agency securities and mortgage-backed securities with
longer maturities and which are being classified as available for sale.
Gross unrealized gains for held to maturity securities were $37,000 and $61,000 at September 30,
2007 and 2006, respectively. Gross unrealized losses were $25,000 and $152,000 at September 30,
2007 and 2006, respectively. The following schedule reflects the mix of the held to maturity
investment portfolio at September 30, 2007 and 2006:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
2007
|
|
|
2006
|
|
|
|
Amount
|
|
|
%
|
|
|
Amount
|
|
|
%
|
|
|
|
|
U.S. Treasury
|
|
$
|
3,999,145
|
|
|
|
46
|
%
|
|
$
|
43,499,182
|
|
|
|
40
|
%
|
U.S. Government agencies
|
|
|
|
|
|
|
|
|
|
|
58,904,984
|
|
|
|
55
|
%
|
States & political subdivisions
|
|
|
4,629,041
|
|
|
|
54
|
%
|
|
|
5,441,252
|
|
|
|
5
|
%
|
|
|
|
Totals
|
|
$
|
8,628,186
|
|
|
|
100
|
%
|
|
$
|
107,845,418
|
|
|
|
100
|
%
|
|
|
|
15
Available for Sale Securities
Available for sale securities increased $21,434,000 at September 30, 2007, compared with September
30, 2006, as a result of managing the Companys liquidity position, as discussed above. The Company
has recently invested in mortgage-backed securities, which are in either FNMA or FHLMC Gold pools.
Management has evaluated its portfolio of these securities, carefully considering the potential
effects of the recent subprime lending crisis, and has determined that there is no material risk to
its mortgage-backed securities.
Gross unrealized gains were $1,237,000 and $640,000 and gross unrealized losses were $2,322,000 and
$3,568,000 at September 30, 2007 and 2006, respectively. The following schedule reflects the mix
of available for sale securities at September 30, 2007 and 2006:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
2007
|
|
|
2006
|
|
|
|
Amount
|
|
|
%
|
|
|
Amount
|
|
|
%
|
|
|
|
|
U.S. Treasury
|
|
$
|
76,466,040
|
|
|
|
19
|
%
|
|
$
|
53,617,300
|
|
|
|
14
|
%
|
U.S. Government agencies
|
|
|
269,818,394
|
|
|
|
69
|
%
|
|
|
299,165,147
|
|
|
|
80
|
%
|
Mortgage-backed securities
|
|
|
25,516,408
|
|
|
|
6
|
%
|
|
|
|
|
|
|
|
|
States and political subdivisions
|
|
|
18,834,535
|
|
|
|
5
|
%
|
|
|
16,786,495
|
|
|
|
5
|
%
|
Other securities
|
|
|
4,304,712
|
|
|
|
1
|
%
|
|
|
3,936,910
|
|
|
|
1
|
%
|
|
|
|
Totals
|
|
$
|
394,940,089
|
|
|
|
100
|
%
|
|
$
|
373,505,852
|
|
|
|
100
|
%
|
|
|
|
Loans
Loans increased $46,815,000 at September 30, 2007, as compared with September 30, 2006. Slower
than expected recovery funding and increasing insurance costs have resulted in minimal loan growth
on the Mississippi Gulf Coast since Hurricane Katrina in August 2005. The Company has supplemented
its loan portfolio with out of area and syndicated national casino credits as loan demand
fluctuates in its trade area. With the large increase in deposits since Hurricane Katrina far
exceeding local loan demand, out of area loans and syndicated national casino loans have been more
aggressively pursued and such loans increased $15,865,000 and $25,733,000, respectively, at
September 30, 2007 as compared with September 30, 2006.
Bank Premises and Equipment
Bank premises and equipment increased $9,281,000 at September 30, 2007, as compared with September
30, 2006, primarily as a result of construction projects including the expansion of the Main Office
and renovations at our Orange Grove branch.
Accrued Interest Receivable
Accrued interest receivable decreased $613,000 at September 30, 2007, as compared with September
30, 2006, due to an decrease in interest earning assets during the quarter.
16
Deposits
Total deposits decreased $53,779,000 at September 30, 2007, as compared with September 30,
2006. Typically, significant increases or decreases in total deposits and/or significant
fluctuations among the different types of deposits from quarter to quarter are anticipated by
Management as customers in the casino and construction industries and county and municipal areas
reallocate their resources periodically. Since Hurricane Katrina in August 2005, the Company has
realized a significant increase in demand and savings deposits and jumbo CDs as municipal
customers receive federal and state funding and commercial and personal customers have received
insurance proceeds, block grants, SBA loans and other forms of assistance.
During 2007, fluctuations in total deposits and among the types of deposits have been affected by
the transfer of funds from demand and savings deposits and into certificates of deposit in the
Companys bank subsidiary and in other financial institutions. The Companys trade area has
experienced a very competitive rate environment, particularly since the beginning of 2007. As a
result, the cost of funds has increased, particularly for certificates of deposit. In some cases,
the Company has determined that it would not match a higher rate offered to our customer by a
competitor, even if this action resulted in a customer transferring their funds to another
financial institution.
The Company has managed its funds including structuring the maturity of investment securities and
the classification of investments as well as utilizing other funding sources and structuring their
maturity to manage the potential volatility of its deposits.
Federal Funds Purchased and Securities Sold Under Agreements to Repurchase
Federal funds purchased and securities sold under agreements to repurchase decreased $4,184,000
at September 30, 2007, as compared with September 30, 2006, as a result of the reallocation of
funds by certain commercial customers between deposit and non-deposit products.
Borrowings from Federal Home Loan Bank
The Company obtains funds from the Federal Home Loan Bank as a part of the management of its
liquidity position. Borrowings from Federal Home Loan Bank decreased
$3,468,000 at September 30, 2007
as compared with September 30, 2006 according to those liquidity needs.
Other Liabilities
Other liabilities increased $3,331,000 at September 30, 2007, as compared with September 30, 2006.
This increase is primarily a result of an increase in the liability for the Companys retiree
health plan of $1,158,000 due to the adoption of SFAS 158 at December 31, 2006 and to the increase
in liabilities related to deferred compensation plans.
Shareholders Equity and Capital Adequacy
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.
One
17
measure of capital adequacy is the primary capital ratio which was 11.69% at September 30,
2007, as compared with 11.40% at September 30, 2006. These ratios are well above the regulatory
minimum of 6.00%. Management continues to emphasize the importance of maintaining the
appropriate capital levels of the Company and has established the goal of maintaining its primary
capital ratio at 8.00%, which is the minimum requirement for classification as being
well-capitalized by the banking regulatory authorities.
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 Companys income. Managements objective is to provide the largest possible
amount of income while balancing interest rate, credit, liquidity and capital risk.
The Companys net interest margin on a tax-equivalent basis, which is net income as a percentage of
average earning assets, was 3.51% at September 30, 2007, down 32 basis points from 3.83% at
September 30, 2006. The table that follows this discussion analyzes the changes in tax-equivalent
net interest income for the nine months ended September 30, 2007 and 2006.
Average earning assets increased $81,266,000, or 10%, from $799,445,000 in September 2006 to
$880,711,000 in September 2007. The average yield on earning assets improved 55 basis points, from
5.92% at September 30, 2006 to 6.47% at September 30, 2007. The increase in the yield is
attributable to increases in prime rate since January 1, 2006. The large increase in funds from
deposit and funds management account growth during the last twenty-four months has funded the
increase in loan demand and the remaining funds have been invested in U.S. Treasury and Agency
securities and classified as held to maturity in 2006 and as available for sale in 2007. The loan
portfolio generally has a 40%/60% blend of fixed/floating rate term. This fact, coupled with the
relatively shorter term duration of investment maturities results in the Company being more asset
sensitive to changes in market interest rates.
Average interest bearing liabilities increased $97,418,000, or 16%, from $622,915,000 in September
2006 to $720,333,000 in September 2007. The average rate paid on interest bearing liabilities
increased 94 basis points, from 2.68% in September 2006 to 3.62% in September 2007. This
significant increase, as well as the decrease in the net tax-equivalent yield on earning assets, is
largely the result of rates paid on certificates of deposits and funds management accounts, a
non-deposit product classified as federal funds purchased and securities sold under agreement to
repurchase.
18
Analysis of Average Balances, Interest Earned/Paid and Yield
(In Thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Nine Months Ended
|
|
|
For the Nine Months Ended
|
|
|
|
September 30, 2007
|
|
|
September 30, 2006
|
|
|
|
|
|
|
|
Interest
|
|
|
|
|
|
|
|
|
|
|
Interest
|
|
|
|
|
|
|
Average
|
|
|
Earned/
|
|
|
|
|
|
|
Average
|
|
|
Earned/
|
|
|
|
|
|
|
Balance
|
|
|
Paid
|
|
|
Yield
|
|
|
Balance
|
|
|
Paid
|
|
|
Yield
|
|
|
|
|
INTEREST INCOME:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans (2)(3)
|
|
$
|
421,795
|
|
|
$
|
25,132
|
|
|
|
7.94
|
%
|
|
$
|
371,693
|
|
|
$
|
20,902
|
|
|
|
7.50
|
%
|
Federal funds sold
|
|
|
4,839
|
|
|
|
189
|
|
|
|
5.21
|
%
|
|
|
18,138
|
|
|
|
760
|
|
|
|
5.59
|
%
|
Held to maturity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Taxable
|
|
|
28,085
|
|
|
|
1,060
|
|
|
|
5.03
|
%
|
|
|
153,559
|
|
|
|
5,288
|
|
|
|
4.59
|
%
|
Non-taxable (1)
|
|
|
4,830
|
|
|
|
229
|
|
|
|
6.32
|
%
|
|
|
5,949
|
|
|
|
314
|
|
|
|
7.04
|
%
|
Available for sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Taxable
|
|
|
397,409
|
|
|
|
15,161
|
|
|
|
5.09
|
%
|
|
|
230,558
|
|
|
|
7,413
|
|
|
|
4.29
|
%
|
Non-taxable (1)
|
|
|
18,382
|
|
|
|
811
|
|
|
|
5.89
|
%
|
|
|
14,650
|
|
|
|
646
|
|
|
|
5.88
|
%
|
Other
|
|
|
5,371
|
|
|
|
183
|
|
|
|
4.54
|
%
|
|
|
4,898
|
|
|
|
148
|
|
|
|
4.03
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
880,711
|
|
|
$
|
42,765
|
|
|
|
6.47
|
%
|
|
$
|
799,445
|
|
|
$
|
35,471
|
|
|
|
5.92
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INTEREST EXPENSE:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Savings and
demand,
interest
bearing
|
|
$
|
276,246
|
|
|
$
|
4,225
|
|
|
|
2.04
|
%
|
|
$
|
309,084
|
|
|
$
|
4,040
|
|
|
|
1.74
|
%
|
Time deposits
|
|
|
206,536
|
|
|
|
6,869
|
|
|
|
4.43
|
%
|
|
|
143,819
|
|
|
|
3,938
|
|
|
|
3.65
|
%
|
Federal funds
purchased and
securities sold
under agreements to
repurchase
|
|
|
228,248
|
|
|
|
8,045
|
|
|
|
4.70
|
%
|
|
|
161,824
|
|
|
|
4,186
|
|
|
|
3.45
|
%
|
Borrowings from FHLB
|
|
|
9,303
|
|
|
|
418
|
|
|
|
5.99
|
%
|
|
|
8,188
|
|
|
|
362
|
|
|
|
5.89
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
720,333
|
|
|
$
|
19,557
|
|
|
|
3.62
|
%
|
|
$
|
622,915
|
|
|
$
|
12,526
|
|
|
|
2.68
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net tax-equivalent
yield on earning
assets
|
|
|
|
|
|
|
|
|
|
|
3.51
|
%
|
|
|
|
|
|
|
|
|
|
|
3.83
|
%
|
|
|
|
(1)
|
|
All interest earned is reported on a taxable equivalent basis using a tax rate of 34% in 2007
and 2006.
|
|
(2)
|
|
Loan fees of $683 and $425 for 2007 and 2006, respectively, are included in these figures.
|
|
(3)
|
|
Includes nonaccrual loans.
|
19
Provision for Loan Losses
Management continuously monitors the Companys relationships with its loan customers, especially
those in concentrated industries such as gaming/casino and hotel/motel, as well as the exposure for
out of area loans, 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. Management utilized these analyses, with special emphasis on the impact of Hurricane
Katrina on the loan portfolio and underlying collateral, in determining the adequacy of its
allowance for loan losses at September 30, 2007. In determining potential loan losses as a result
of Hurricane Katrina since August 2005, the Company evaluated its commercial and residential loan
portfolios separately.
Management continues its evaluation in recognition of the extraordinary impact of Katrina on
its trade area, attempting to quantify potential losses in accordance with the Companys
established methodology. Loan performance and deposit overdrafts are closely monitored in order to
identify developing problems as early as possible.
Since Hurricane Katrina struck the Mississippi Gulf Coast in August of 2005, many issues have been
considered in the Companys evaluation. Uncertainty regarding the impact of federal assistance,
settlement of insurance claims, the availability and affordability of windstorm insurance, the
rate and pace of recovery in the Companys trade area, increasing construction costs and the
ability of customers to service their debt must be carefully considered.
The overall material deterioration in asset quality anticipated by the effects of Hurricane Katrina
during the initial evaluation has not been realized and the Company has identified no additional
significant potential losses as a result of Hurricane Katrina since its initial evaluation in
September 2005. During the third quarter of 2007, non-performing loans have decreased
significantly with loans past due 90 days and still accruing dropping from $1,489,000 at June 30,
2007 to $272,000 at September 30, 2007 and nonaccrual loans falling from $3,803,000 at June 30,
2007 to $136,000 at September 30, 2007.
Additionally, Management has considered the historical data available from the impact of other
natural disasters on the Mississippi Gulf Coast and other coastal communities, including the length
of time between the storms landfall and identification of all losses. Past bank experience with
hurricanes and FDIC research have shown that the actual loss position generally becomes apparent
within a two year window after the event.
Strong asset quality and the passage of time strongly contributed to Managements decision to
record a negative provision for loan losses of $1,250,000 during the third quarter.
The Company recorded a provision of $153,000 during the first nine months of 2007 which relates to
potential losses on overdrawn deposit accounts. This provision is included in the provision for
allowance for losses on loans in the consolidated income statement.
20
Trust Department Income and Fees
Trust Department income and fees increased $165,000 for the first nine months of 2007 as compared
with the first nine months of 2006, as a result of an increase in cash management accounts funded
with insurance and other proceeds.
Service Charges on Deposit Accounts
Service charges on deposit accounts increased $1,318,000 for the nine months ended September 30,
2007, as compared with the nine months ended September 30, 2006. This increase is almost equally
the result of an increase in ATM fee income as transactions at casino ATMs have significantly
increased during this period and an increase in NSF fee income due to an increase in the fee
charged.
Loss on Sale of Securities
The Company realized a loss from the sale of available for sale securities during the first nine
months of 2007 of $614,000. The proceeds of these sales were used to fund the liquidity needs of
the bank subsidiary.
Other Income
Other income increased $121,000 for the nine months ended September 30, 2007 as compared with the
nine months ended September 30, 2006, primarily as a result of the gain from the sale of bank
premises of $192,000.
Salaries and Employee Benefits
Salaries and employee benefits increased $1,174,000 for the first nine months of 2007 as compared
with the first nine months of 2006. The Company increased salaries to its employees in order to
reward performance and retain personnel within the competitive local employment environment.
Equipment Rentals, Depreciation and Maintenance
Equipment rentals, depreciation and maintenance increased $352,000 for the nine months ended
September 30, 2007 as compared with the nine months ended September 30, 2006 as a result of an
increase in depreciation costs from banking premises acquired during 2006 and 2007.
Other Expense
Other expense increased $693,000 for the nine months ended September 30, 2007 as compared with the
nine months ended September 30, 2006, primarily as a result of the increase in expenses related to
offsite ATMs as transactions increase.
LIQUIDITY
Liquidity represents the Companys 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. Deposits, payments
of principal and interest on loans, proceeds from maturities of investment securities and earnings
on investment securities are the principal sources of funds for the Company. Since Hurricane
Katrina, the Companys deposits and non-deposit accounts have increased significantly,
21
as discussed
previously. Management carefully monitors its liquidity needs, particularly relating to these
potentially volatile deposits. The Company is currently investing in short-term U. S. Treasury and
Agency Securities. It is anticipated that loan demand will be funded in future quarters from the
maturity of these investments.
Item 4: Controls and Procedures
As of September 30, 2007, an evaluation was performed under the supervision and with the
participation of the Chief Executive Officer and Chief Financial Officer of the effectiveness of
the Companys disclosure controls and procedures (as defined in Exchange Act Rules 13a-15e). Based
on that evaluation, the Chief Executive Officer and the Chief Financial Officer have concluded that
the Companys disclosure controls and procedures are effective to ensure that the information
required to be disclosed by the Company in the reports it files or submits under the Securities
Exchange Act of 1934 is recorded, processed, summarized and reported, within the time periods
specified in the Securities and Exchange Commissions rules and forms.
There were no changes in the Companys internal control over financial reporting that occurred
during the period ended September 30, 2007 that have materially affected, or are reasonably likely
to materially affect, the Companys internal control over financial reporting.
PART II
OTHER INFORMATION
Item 1 Legal Proceedings
The Companys bank subsidiary (the Bank) filed suit against USF&G in 1998 to recover damages for
USF&Gs bad faith failure to defend and indemnify the Bank in connection with a lawsuit filed
against the Bank in 1996. The Bank obtained legal representation from a local plaintiffs attorney
and customer (Attorney) on a contingent basis.
In December 2000, the case was transferred from the judge to whom it was originally assigned to a
second judge (the Judge). The Judge had previously handled some discovery matters in the case.
The Bank had made a routine loan to the Judge in November 1998, which was guaranteed by the
Attorney. The loan was repaid in February 2000 by someone other than the Judge, apparently at the
request of the Attorney. Neither the Attorney nor the Judge disclosed the loan or the repayment to
USF&G or its counsel.
During the course of the case, the Bank and USF&G filed competing motions for summary judgment.
The Judge granted summary judgment in the Banks favor on the issue of liability and subsequently
presided over a settlement conference in which he expressed his opinion about the value of the case
in monetary terms. The case was settled on December 24, 2001, for $1.5 million
22
In 2003, the Attorney, the Judge and other parties were indicted for alleged fraud, bribery, etc.
involving various events, including allegations concerning the Bank v. USF&G lawsuit. Neither the
Bank nor any Bank employee was indicted. Following the indictments, USF&G filed a civil action
against the Attorney, the Judge and the Bank alleging fraud in connection with the outcome of the
Bank v. USF&G lawsuit. The complaint demands $2.5 million in compensatory damages and $10 million
in punitive damages, prejudgment interest and attorneys fees, etc. The USF&G v. Bank suit was
stayed until 30 days following the completion of the criminal case. There has been no discovery.
The criminal case against the Attorney, the Judge and other parties concluded on August 12,
2005. No guilty verdicts were returned. The defendants received not guilty verdicts on several
counts and there was no verdict (mistrial) on a number of other counts, including the Bank v. USF&G
matter. On September 16, 2005, the U. S. Attorneys office announced that it will retry the
Attorney, the Judge and other parties on fraud and bribery charges related to the Bank v. USF&G
matter. The new trial began on February 7, 2007. On March 31, 2007, guilty verdicts on counts of
bribery, conspiracy, mail fraud/honest services fraud and racketeer influenced corrupt
organizations (RICO) violations were returned against the Attorney, the Judge and other parties.
The Attorney, the Judge and other parties have indicated that they plan to appeal the guilty
verdicts. Despite the verdicts in the criminal case, the USF&G v. Bank suit remains subject to the
stay order until the stay order is lifted by the judge in that case.
Item 4 Submission of Matters to a Vote of Security Holders
None.
Item 5 Other Information
As a part of a periodic evaluation of the compensation program that the Company provides for its
executives, it was determined that the deferred compensation plans should be amended to clarify
certain provisions of the plans and to adopt applicable provisions of Section 409A of the Internal
Revenue Code of 1986, as amended. On September 28, 2007 the Board of Directors approved the
Companys amended and restated Deferred Compensation Plan. Lauri A. Wood, the Companys Chief
Financial Officer, and A. Wes Fulmer, Thomas J. Sliman and Robert M. Tucei, each a named executive
officer of the Company, participate in the Companys Deferred Compensation Plan. Additionally, the
Board of Directors approved the amended and restated Executive Supplemental Income Plan Agreements
between the Company and Chevis C. Swetman, the Companys Chief Executive Officer, Ms. Wood, Mr.
Fulmer, Mr. Sliman and Mr. Tucei.
The Company filed Form 8-K on October 4, 2007, disclosing this activity. Pursuant to Instruction
B.4 to Form 8-K, the documents relating to the Deferred Compensation Plan and Executive
Supplemental Income Plan are filed as Exhibit 10.1 through
Exhibit 10.4 to this Form 10-Q. Exhibit 10.4 is the
Executive Supplemental Plan Agreement for Lauri A. Wood. This
Agreement is identical to the Executive Supplemental Plan Agreement
for Thomas J. Sliman and Robert M. Tucei. Accordingly, Exhibit 10.4
applies to Ms. Wood, Mr. Sliman and Mr. Tucei.
23
Item 6 Exhibits and Reports on Form 8-K
(a) Exhibits
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Exhibit 10.1:
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Deferred Compensation Plan
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Exhibit 10.2:
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Executive Supplemental Income Plan Agreement Chevis C. Swetman
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Exhibit 10.3:
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Executive Supplemental Income Plan Agreement A. Wes Fulmer
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Exhibit 10.4:
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Executive Supplemental Income Plan Agreement Lauri A. Wood
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Exhibit 31.1:
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Certification of Chief Executive Officer Pursuant to
Section 302 of the Sarbanes Oxley Act of 2002
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Exhibit 31.2:
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Certification of Chief Financial Officer Pursuant
to Section 302 of the Sarbanes Oxley Act of 2002
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Exhibit 32.1:
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Certification of Chief Executive Officer Pursuant
to 18 U.S.C. ss. 1350
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Exhibit 32.2:
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Certification of Chief Financial Officer Pursuant
to 18 U.S.C. ss. 1350
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(b) Reports on Form 8-K
A Form 8-K was July 16, 2007, October 4, 2007 and October 15, 2007.
24
SIGNATURES
Pursuant to the requirement 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.
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PEOPLES FINANCIAL CORPORATION
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(Registrant)
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Date:
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November 9, 2007
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By:
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/s/ Chevis C. Swetman
Chevis C. Swetman
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Chairman, President and Chief Executive Officer
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Date:
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November 9, 2007
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By:
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/s/ Lauri A. Wood
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Lauri A. Wood
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Chief Financial Officer and Controller
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(principal financial and accounting officer)
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25
Exhibit 10.2
EXECUTIVE SUPPLEMENTAL INCOME AGREEMENT
(as amended and restated as of October 1, 2007)
This Agreement, effective as of October 1, 2007 (the
Effective Date
), is made by and between
THE PEOPLES BANK, BILOXI, MISSISSIPPI, 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 their
entirety, an agreement with an initial effective date of January 1, 1988, and a restated agreement
effective October 1, 2002 (hereinafter the
Prior Agreements
), made by and between the Company and
the Executive.
INTRODUCTION
The Company and the Executive entered into the Prior Agreements in order to provide certain
benefits to the Executive as an officer of the Company upon the Executives retirement.
The Company and the Executive, by this current Agreement, desire to amend and desire to
restate the Prior Agreements in their entirety to include and reflect the terms set forth herein
and to incorporate the benefit accumulated to date by the Executive under the Prior Agreements, to
reflect the applicable provisions of Section 409A of the Internal Revenue Code of 1986, as amended,
and to clarify certain provisions of the Prior Agreements.
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 and except to the extent defined otherwise in
Code Section 409A or where the context clearly indicates otherwise, the following words and phrases
shall have the meanings specified:
1.1.1
Beneficiary
means the person or trust that an Executive designates in writing
in accordance with Section 4.1 hereof.
1.1.2
Change of Control
means:
1.1.2.1 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
Companys or Holding Companys outstanding capital stock then entitled to vote
generally in the election of directors; or
1.1.2.2 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
1.1.2.3 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
1.1.2.4 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 Companys or Holding Companys outstanding shares of Common
Stock or shares of capital stock having fifty percent (50%) or more of the combined
voting power of the Companys or Holding Companys 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
1.1.2.5 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 (1.1.2).
1.1.2.6 Notwithstanding the preceding, a Shareholder, as hereinafter defined
in Subsection 1.1.14, may make the following transfers and such transfers shall be
deemed not to be a Change of Control under this Subsection 1.1.2:
2
1.1.2.6.1 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;
1.1.2.6.2 To any individual or entity by bona fide gift;
1.1.2.6.3 To any spouse or former spouse of any Shareholder
pursuant to the terms of a decree of divorce;
1.1.2.6.4 To any officer or employee of the Company pursuant to
any incentive stock option plan established by the Shareholder;
1.1.2.6.5 To any family member of any Shareholder;
1.1.2.6.6 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
1.1.2.6.7
To any
existing Shareholder as
of the Effective Date.
Notwithstanding the preceding, for purposes of determining whether a distribution may be made
following a change of control, the change must be a change in the ownership or effective control of
the Company, or its parent, Peoples Financial Corporation, or a change in the ownership of a
substantial portion of the assets of the Company or its parent corporation, Peoples Financial
Corporation, all within the meaning of Treas. Reg. Section 1.409A-3(i)(5). In the event a change
constitutes a change under the preceding (without regard to this paragraph) but does not constitute
a change under Treas. Reg. Section 1.409A-3(i)(5), such distribution shall be made at the earliest
time permitted under Article 2 or 3.
1.1.3
Claimant
means the Executive or Beneficiary who believes he/she has not received the
benefits under this Agreement to which he/she is entitled to receive.
1.1.4
Code
means the Internal Revenue Code of 1986, as amended.
1.1.5
Company
means The Peoples Bank, Biloxi, Mississippi.
1.1.6
Disability
or
Disabled
means the Executive: (i) is unable to engage in any
substantial gainful activity by reason of any medically determinable physical or mental impairment
which can be expected to result in death or can be expected to last for
a continuous period of not less than twelve (12) months; or (ii) is, by reason of any
medically determinable physical or mental impairment which can be expected to result in death or
can be expected to last for a continuous period of not less than twelve (12) months, receiving
income replacement benefits for a period of not less than three (3)
3
months under an accident and health plan covering employees or directors of the Company. Medical
determination of Disability may be made by either the Social Security Administration or by the
provider of an accident or health plan covering employees or directors of the Company provided that
the definition of disability applied under such disability insurance program complies with the
requirements of the preceding sentence. Upon the request of the plan administrator, the Executive
must submit proof to the plan administrator of the Social Security Administrations or the
providers determination.
1.1.7
Discount Rate
means the rate reviewed and determined at least annually by the Board of
Directors for purposes of calculating benefits hereunder. The rate determined by the Board of
Directors shall apply to all calculations thereafter until such rate is changed by the Board of
Directors.
1.1.8
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 under this Agreement, including any amendment and restatement
of the Prior Agreements, for five (5) years.
1.1.9
ERISA
means the Employee Income Security Act of 1974, as amended.
1.1.10
Executive Benefit Accrual
means the amount accrued as a liability to the Executive by
the Company on its accounting records under Generally Accepted Accounting Principles (GAAP) by
virtue of the terms of the Prior Agreements and by virtue of the terms of this Agreement.
1.1.11
Normal Retirement Date
means the date the Executive attains age sixty-five (65).
1.1.12
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) Separation From Service; or, (ii) the
Companys termination of the Agreement under Section 7.3.
1.1.13
Separation From Service or Separates From Service
means a cessation of services
rendered by the Executive within the meaning of Treas. Reg. Section 1.409A-1(h).
1.1.14
Shareholder
means the existing owners of all issued and outstanding stock of the
Company or Peoples Financial Corporation as of the date this Agreement is signed.
1.1.15
Specified Employee
means an employee who is described in Treas. Reg. Section
1.409A-1(i).
4
Article 2
Lifetime Benefits
2.1
Normal Retirement Benefit.
If Separation From Service occurs on or after the Normal
Retirement Date and prior to a Change of Control, 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 Executives 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 Separation From Service. 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 Separation From Service occurs on or after the Early
Retirement Date and prior to the Normal Retirement Date and prior to a Change of Control, 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 Separation From Service 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 twenty
percent (20%) of Salary. Based on these assumptions the percentage of Salary payable under
this subsection 2.2.1 would equal 20% 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 13.4% (20% 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 Separation From Service. 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
Separation From Service Prior to the Early Retirement Date or Prior to the Normal
Retirement Date.
Subject to the provisions of Sections 2.6 and 5.3, if Separation
From Service occurs, for reasons other than death or Disability, and prior to a Change of
Control and prior to either the Early Retirement Date or to the Normal Retirement Date, the Company
shall pay to the Executive the benefit described in this Section 2.3 in lieu of any other benefit
under this Agreement.
5
2.3.1
Amount of Benefit.
The benefit under this Section 2.3 is the Executive Benefit
Accrual as of Separation From Service.
2.3.2
Payment of Benefit.
The Company shall pay the Executive the benefit set forth in
subsection 2.3.1 in a single lump-sum within sixty (60) days of Separation From Service.
2.4
Disability Benefit.
Upon Disability prior to the Normal Retirement Date, the Company
shall pay to the Executive the benefit described in this Section 2.4 in lieu of any other benefit
under this Agreement.
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 Executives 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 following Disability
and prior to receiving any payment under this Agreement, the Company shall pay the
Beneficiary the annual benefit 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 Separation From Service and
prior to Disability, 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 shall be 100% of the normal
retirement benefit set forth in subsection 2.1.1.
2.5.2
Payment of Benefit.
The Company shall pay the annual benefit determined under
subsection 2.5.1 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 the
Executives Normal Retirement Date, or, in
the event the Executive has already attained the Normal Retirement Date, the last day of the
month following the month of Separation From Service. In the event the Executive dies prior to
reaching his Normal Retirement Date, the benefit is then payable to his Beneficiary beginning on
the last day of the month commencing with the month following the Executives death.
6
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.
2.7
Restriction on Distributions to Specified Employees
. Notwithstanding any provision of this
Agreement to the contrary, if the Executive is considered a Specified Employee at Separation From
Service, the provisions of this Section 2.7 shall govern all distributions hereunder. Benefit
distributions that are made due to a Separation From Service occurring while the Executive is a
Specified Employee shall not be made during the first six (6) months following Separation From
Service, rather any distribution which would otherwise be paid to the Executive during such period
shall be accumulated and paid to the Executive in a lump sum on the first day of the seventh month
following the Separation From Service. All subsequent distributions shall be paid in the manner
specified.
2.8
Distributions Upon Income Inclusion Under Section 409A of the Code
. If any amount is
required to be included in income by the Executive prior to receipt due to a failure of this
Agreement to meet the requirements of Code Section 409A, the Executive may petition the plan
administrator for a distribution of that portion of the Executive Benefit Accrual that is required
to be included in the Executives income. Upon the grant of such a petition, which grant shall not
be unreasonably withheld, the Company shall distribute to the Executive immediately available funds
in an amount equal to the portion of the Executive Benefit Accrual required to be included in
income as a result of the failure of this Agreement to meet the requirements of Code Section 409A,
which amount shall not exceed the Executives unpaid Executive Benefit Accrual. If the petition is
granted, such distribution shall be made within ninety (90) days of the date when the Executives
petition is granted. Such a distribution shall affect and reduce the Executives benefits to be
paid under this Agreement.
2.9
No Suspension Upon Re-employment.
Once benefit payments commence hereunder, such payments
shall continue to be made notwithstanding the re-employment of the Executive by the Company except
as provided in Section 5.1 or 5.2.
Article 3
Beneficiaries
3.1
Death During Active Service.
The Company shall pay to the Beneficiary the benefit
described in this Section 3.1 if the Executive dies: (i) prior to Separation From Service and prior
to Disability before the Normal Retirement Date and (ii) prior to a Change of Control.
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 Executives 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.
7
3.2
Death During Benefit Period.
If benefit payments have commenced or were scheduled to
commence under Article 2 of this Agreement, but before receiving all such payments the Executive
dies, the Company shall then pay the remaining benefits to the Executives Beneficiary at the same
time and in the same amounts that would have been paid to the Executive had the Executive survived.
Notwithstanding the preceding, the Executive or his Beneficiary shall not be entitled to a benefit
under both Article 2 and 3 hereof, it being the intent that there shall not be any duplication of
benefits hereunder.
Article 4
Beneficiaries
4.1
Beneficiary Designations.
The Executive may designate or change his Beneficiary at any
time and from time to time (without the consent of any prior Beneficiary). An Executives
Beneficiary shall be as designated on a Beneficiary Designation in the form of Exhibit A to this
Agreement or another form acceptable to the Company. The Executive may change his Beneficiary
designation by properly executing a new Beneficiary Designation and delivering that form to the
Company, provided however, no change shall be effective until received by the Company, and provided
further, that no change shall be effective unless received by the Company before the Executives
death. Furthermore, each designation so made shall cancel and supersede all previous designations.
The designated Beneficiary, designated successor Beneficiary, and any other person entitled to
payments under this Agreement shall be referred to in this Agreement as the Beneficiary
irrespective of the number thereof. The divorce of the Executive from his spouse shall, without any
further action, automatically revoke the designation of such spouse as a Beneficiary of the
Executives benefits under this Agreement but shall not result in the automatic revocation of any
other Beneficiary designated by the Executive. The preceding sentence shall not preclude the
Executive from executing a new Beneficiary designation after his divorce is final and naming his
former spouse as a Beneficiary of all or part of his benefits. If no Beneficiary shall have been
properly designated, or if no Beneficiary shall survive the Executive, the benefits shall be
payable to the Executives estate. All rights of a Beneficiary shall be derivative of the rights
of the Executive, therefore, a Beneficiary shall not be entitled to any benefits hereunder if the
Executive is not entitled to any benefits hereunder. During the lifetime of the Executive, a
Beneficiary shall have no rights under this Agreement.
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.
8
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 Executives 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
Executives 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, including any amendment and restatement of the Prior
Agreements, 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.
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.
9
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:
6.1.3.1 The specific reasons for the denial;
6.1.3.2 A reference to the specific provisions of the Plan on which the denial
is based;
6.1.3.3 A description of any additional information or material necessary for
the Claimant to perfect the claim and an explanation of why it is needed;
6.1.3.4 An explanation of the Plans review procedures and the time limits
applicable to such procedures; and
6.1.3.5 A statement of the Claimants 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 Companys 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 Claimants 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
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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:
6.2.5.1 The specific reasons for the denial;
6.2.5.2 A reference to the specific provisions of the Plan on which the denial
is based;
6.2.5.3 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
Claimants claim for benefits; and
6.2.5.4 A statement of the Claimants right to bring a civil action under
ERISA Section 502(a).
Article 7
Amendments and Termination
7.1
Amendments
. This Agreement may be amended only by a written agreement signed by the
Company and the Executive, provided, however, the Company may unilaterally amend this Agreement to
conform with written directives to the Company from its auditors or banking regulators or to comply
with legislative changes or tax law, including, without limitation, Code Section 409A, provided,
however, any such unilateral amendment shall comply with Section 409A.
7.2
Plan Termination Generally
. This Agreement may be terminated by the Company. The benefit
hereunder shall be the Executive Benefit Accrual as of the date the Agreement is terminated,
except, however, in the event a Change of Control has occurred, the benefit shall be the benefit
described in Section 2.5. Except as provided in Section 7.3, the termination of this Agreement
shall not cause a distribution of benefits under this Agreement. Rather, after such termination
benefit distributions will be made at the earliest distribution event permitted under Article 2 or
Article 3.
7.3
Plan Terminations Under Section 409A
. Notwithstanding anything to the contrary in Section
7.2, if this Agreement terminates in accordance with the provisions of Treas. Reg. Section
1.409A-3(j)(4)(ix), the Company will distribute the Executive Benefit Accrual, determined as of the
date of the termination of the Agreement, to the Executive in a lump sum, subject to all of the
requirements of such regulations.
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.
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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 Companys right to discharge the Executive. It also does not require the Executive to remain an
employee nor interfere with the Executives 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.
To the extent not preempted by ERISA, this Agreement and all rights
hereunder shall be governed by the laws of the State of Mississippi without regard to its conflicts
of laws provisions.
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 Executives 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:
8.8.1 Interpreting the provisions of the Agreement, including making any factual
determinations;
8.8.2 Establishing and revising the method of accounting for the Agreement;
8.8.3 Maintaining a record of benefit payments; and
8.8.4 Establishing rules and prescribing any forms necessary or desirable to
administer the Agreement.
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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 and his Beneficiary, it being the intention
of the Company that there shall not be any duplication of benefits hereunder.
8.11
Construction and Compliance with Section 409A.
This Agreement shall be interpreted and
administered consistent with Code Section 409A. All references to a particular statute shall be
deemed to refer to all regulations and authoritative guidance issued thereunder and all references
to a particular statute, regulation, or guidance of general applicability shall be deemed to refer
to any superseding statute, regulation, or guidance of general applicability.
IN WITNESS WHEREOF, the Executive and a duly authorized Company officer have executed this
Agreement as of the date indicated below, but effective as of October 1, 2007.
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COMPANY:
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EXECUTIVE:
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THE PEOPLES BANK, BILOXI, MISSISSIPPI
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By:
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CHEVIS C. SWETMAN
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Its:
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Date:
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Date:
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13
EXHIBIT A
TO THE
EXECUTIVE SUPPLEMENTAL INCOME AGREEMENT
(as amended and restated as of October 1, 2007)
BENEFICIARY DESIGNATION
Executive:
CHEVIS C. SWETMAN
The Beneficiary or beneficiaries of any payments to be made under this Agreement following my
death shall be:
Primary Beneficiary
I designate the following as primary beneficiary (beneficiaries) of my benefits under this
Agreement if I die before the receipt of all of my benefits:
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Address (No., Street, City, State, Zip Code):
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SS#:
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Date of Birth:
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% of Benefits:
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Address (No., Street, City, State, Zip Code):
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Address (No., Street, City, State, Zip Code):
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(attach a separate sheet if additional space is needed)
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Contingent Beneficiary
Should all of the primary beneficiaries designated above predecease me and I die before the
receipt of all of my Benefits, I designate the following as the contingent beneficiary
(beneficiaries) of my Benefits under this Agreement:
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(attach a separate sheet if additional space is needed)
I understand that if I designate more than one beneficiary in a class above (i.e. primary or
contingent), each beneficiary in that class will receive an equal share of the benefits unless I
specify a different percentage. If I designate more than one beneficiary
in a class above (i.e. primary or contingent), the share of a beneficiary who predeceases me
will be divided pro rata among the remaining designated beneficiaries in that class unless I
specify an alternate disposition. Unless I specify an alternate disposition, I also understand that
a beneficiary who survives me but who dies before the complete distribution of his/her benefits
shall be entitled to designate the beneficiary of any benefits remaining after his/her death and
that upon his/her failure to properly designate a beneficiary, the beneficiarys remaining benefits
shall be paid to his/her estate.
I understand that this designation shall be subject to the terms of this Agreement.
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Signature of Witness Date
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CHEVIS C. SWETMAN Date
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15
Exhibit 10.3
EXECUTIVE SUPPLEMENTAL INCOME AGREEMENT
(as amended and restated as of October 1, 2007)
This
Agreement, effective as of October 1, 2007 (the
Effective Date
), is made by and between
THE PEOPLES BANK, BILOXI, MISSISSIPPI, 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 their
entirety, an agreement with an initial effective date of January 1, 1995, and a restated agreement
effective October 1, 2002 (hereinafter the
Prior
Agreements
), made by and between the Company and
the Executive.
INTRODUCTION
The Company and the Executive entered into the Prior Agreements in order to provide certain
benefits to the Executive as an officer of the Company upon the Executives retirement.
The Company and the Executive, by this current Agreement, desire to amend and desire to
restate the Prior Agreements in their entirety to include and reflect the terms set forth herein
and to incorporate the benefit accumulated to date by the Executive under the Prior Agreements, to
reflect the applicable provisions of Section 409A of the Internal Revenue Code of 1986, as amended,
and to clarify certain provisions of the Prior Agreements.
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 and except to the extent defined otherwise in
Code Section 409A or where the context clearly indicates otherwise, the following words and phrases
shall have the meanings specified:
1.1.1
Beneficiary
means the person or trust that an Executive designates in writing
in accordance with Section 4.1 hereof.
1.1.2
Change of Control
means:
1.1.2.1 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
Companys or Holding Companys outstanding capital stock then entitled to vote
generally in the election of directors; or
1.1.2.2 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
1.1.2.3 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
1.1.2.4 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 Companys or Holding Companys outstanding shares of Common
Stock or shares of capital stock having fifty percent (50%) or more of the combined
voting power of the Companys or Holding Companys 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
1.1.2.5 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 (1.1.2).
1.1.2.6 Notwithstanding the preceding, a Shareholder, as hereinafter defined
in Subsection 1.1.14, may make the following transfers and such transfers shall be
deemed not to be a Change of Control under this Subsection 1.1.2:
2
1.1.2.6.1 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;
1.1.2.6.2 To any individual or entity by bona fide gift;
1.1.2.6.3 To any spouse or former spouse of any Shareholder
pursuant to the terms of a decree of divorce;
1.1.2.6.4 To any officer or employee of the Company pursuant to any
incentive stock option plan established by the Shareholder;
1.1.2.6.5 To any family member of any Shareholder;
1.1.2.6.6 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
1.1.2.6.7 To any existing Shareholder as of the Effective Date.
Notwithstanding the preceding, for purposes of determining whether a distribution may be made
following a change of control, the change must be a change in the ownership or effective control of
the Company, or its parent, Peoples Financial Corporation, or a change in the ownership of a
substantial portion of the assets of the Company or its parent corporation, Peoples Financial
Corporation, all within the meaning of Treas. Reg. Section 1.409A-3(i)(5). In the event a change
constitutes a change under the preceding (without regard to this paragraph) but does not constitute
a change under Treas. Reg. Section 1.409A-3(i)(5), such distribution shall be made at the earliest
time permitted under Article 2 or 3.
1.1.3
Claimant
means the Executive or Beneficiary who believes he/she has not received the
benefits under this Agreement to which he/she is entitled to receive.
1.1.4
Code
means the Internal Revenue Code of 1986, as amended.
1.1.5
Company
means The Peoples Bank, Biloxi, Mississippi.
1.1.6
Disability
or
Disabled
means the Executive: (i) is unable to engage in any
substantial gainful activity by reason of any medically determinable physical or mental impairment
which can be expected to result in death or can be expected to last for a continuous period of not
less than twelve (12) months; or (ii) is, by reason of any medically determinable physical or
mental impairment which can be expected to result in death or can be expected to last for a
continuous period of not less than twelve (12) months, receiving income replacement benefits for a
period of not less than three (3)
3
months under an accident and health plan covering employees or directors of the Company. Medical
determination of Disability may be made by either the Social Security Administration or by the
provider of an accident or health plan covering employees or directors of the Company provided that
the definition of disability applied under such disability insurance program complies with the
requirements of the preceding sentence. Upon the request of the plan administrator, the Executive
must submit proof to the plan administrator of the Social Security Administrations or the
providers determination.
1.1.7
Discount Rate
means the rate reviewed and determined at least annually by the Board of
Directors for purposes of calculating benefits hereunder. The rate determined by the Board of
Directors shall apply to all calculations thereafter until such rate is changed by the Board of
Directors.
1.1.8
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 under this Agreement, including any amendment and restatement
of the Prior Agreements, for five (5) years.
1.1.9
ERISA
means the Employee Income Security Act of 1974, as amended.
1.1.10
Executive Benefit Accrual
means the amount accrued as a liability to the Executive by
the Company on its accounting records under Generally Accepted Accounting Principles (GAAP) by
virtue of the terms of the Prior Agreements and by virtue of the terms of this Agreement.
1.1.11
Normal Retirement Date
means the date the Executive attains age sixty-five (65).
1.1.12
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) Separation From Service; or, (ii) the
Companys termination of the Agreement under Section 7.3.
1.1.13
Separation From Service or Separates From Service
means a
cessation of services rendered by the Executive within the meaning of Treas. Reg. Section
1.409A-1(h).
1.1.14
Shareholder
means the existing owners of all issued and outstanding stock of the
Company or Peoples Financial Corporation as of the date this Agreement is signed.
1.1.15
Specified Employee
means an employee who is described in Treas. Reg. Section
1.409A-1(i).
4
Article 2
Lifetime Benefits
2.1
Normal Retirement Benefit.
If Separation From Service occurs on or after the Normal
Retirement Date and prior to a Change of Control, 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 Executives 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 Separation From Service. 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 Separation From Service occurs on or after the Early
Retirement Date and prior to the Normal Retirement Date and prior to a Change of Control, 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 Separation From Service and the Normal Retirement Date. By way of example,
assume the Executive elects to retire at age 59
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/
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, which is 66 months prior to the Normal
Retirement Date. Assume further the annual benefit under subsection 2.1.1 equals twenty
percent (20%) of Salary. Based on these assumptions the percentage of Salary payable under
this subsection 2.2.1 would equal 20% 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 13.4% (20% 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 Separation From Service. 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
Separation From Service Prior to the Early Retirement Date or Prior to the Normal
Retirement Date.
Subject to the provisions of Sections 2.6 and 5.3, if Separation From Service
occurs, for reasons other than death or Disability, and prior to a Change of Control and prior to
either the Early Retirement Date or to the Normal Retirement Date, the Company shall pay to the
Executive the benefit described in this Section 2.3 in lieu of any other benefit under this
Agreement.
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2.3.1
Amount of Benefit.
The benefit under this Section 2.3 is the Executive Benefit
Accrual as of Separation From Service.
2.3.2
Payment of Benefit.
The Company shall pay the Executive the benefit set forth in
subsection 2.3.1 in a single lump-sum within sixty (60) days of Separation From Service.
2.4
Disability Benefit.
Upon Disability prior to the Normal Retirement Date, the Company
shall pay to the Executive the benefit described in this Section 2.4 in lieu of any other benefit
under this Agreement.
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 Executives 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 following Disability
and prior to receiving any payment under this Agreement, the Company shall pay the
Beneficiary the annual benefit 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 Separation From Service and
prior to Disability, 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 shall be 100% of the normal
retirement benefit set forth in subsection 2.1.1.
2.5.2
Payment of Benefit.
The Company shall pay the annual benefit determined under
subsection 2.5.1 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 the
Executives Normal Retirement Date, or, in the event the Executive has already attained the Normal
Retirement Date, the last day of the month following the month of Separation From Service. In the
event the Executive dies prior to reaching his Normal Retirement Date, the benefit is then payable
to his Beneficiary beginning on the last day of the month commencing with the month following the
Executives death.
6
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.
2.7
Restriction on Distributions to Specified Employees
. Notwithstanding any provision of this
Agreement to the contrary, if the Executive is considered a Specified Employee at Separation From
Service, the provisions of this Section 2.7 shall govern all distributions hereunder. Benefit
distributions that are made due to a Separation From Service occurring while the Executive is a
Specified Employee shall not be made during the first six (6) months following Separation From
Service, rather any distribution which would otherwise be paid to the Executive during such period
shall be accumulated and paid to the Executive in a lump sum on the first day of the seventh month
following the Separation From Service. All subsequent distributions shall be paid in the manner
specified.
2.8
Distributions Upon Income Inclusion Under Section 409A of the Code
. If any amount is
required to be included in income by the Executive prior to receipt due to a failure of this
Agreement to meet the requirements of Code Section 409A, the Executive may petition the plan
administrator for a distribution of that portion of the Executive Benefit Accrual that is required
to be included in the Executives income. Upon the grant of such a petition, which grant shall not
be unreasonably withheld, the Company shall distribute to the Executive immediately available funds
in an amount equal to the portion of the Executive Benefit Accrual required to be included in
income as a result of the failure of this Agreement to meet the requirements of Code Section 409A,
which amount shall not exceed the Executives unpaid Executive Benefit Accrual. If the petition is
granted, such distribution shall be made within ninety (90) days of the date when the Executives
petition is granted. Such a distribution shall affect and reduce the Executives benefits to be
paid under this Agreement.
2.9
No Suspension Upon Re-employment.
Once benefit payments commence hereunder, such payments
shall continue to be made notwithstanding the re-employment of the Executive by the Company except
as provided in Section 5.1 or 5.2.
Article 3
Beneficiaries
3.1
Death During Active Service.
The Company shall pay to the Beneficiary the benefit
described in this Section 3.1 if the Executive dies: (i) prior to Separation From Service and prior
to Disability before the Normal Retirement Date and (ii) prior to a Change of Control.
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 Executives 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.
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3.2
Death During Benefit Period.
If benefit payments have commenced or were scheduled to
commence under Article 2 of this Agreement, but before receiving all such payments the Executive
dies, the Company shall then pay the remaining benefits to the Executives Beneficiary at the same
time and in the same amounts that would have been paid to the Executive had the Executive survived.
Notwithstanding the preceding, the Executive or his Beneficiary shall not be entitled to a benefit
under both Article 2 and 3 hereof, it being the intent that there shall not be any duplication of
benefits hereunder.
Article 4
Beneficiaries
4.1
Beneficiary Designations.
The Executive may designate or change his Beneficiary at any
time and from time to time (without the consent of any prior Beneficiary). An Executives
Beneficiary shall be as designated on a Beneficiary Designation in the form of Exhibit A to this
Agreement or another form acceptable to the Company. The Executive may change his Beneficiary
designation by properly executing a new Beneficiary Designation and delivering that form to the
Company, provided however, no change shall be effective until received by the Company, and provided
further, that no change shall be effective unless received by the Company before the Executives
death. Furthermore, each designation so made shall cancel and supersede all previous designations.
The designated Beneficiary, designated successor Beneficiary, and any other person entitled to
payments under this Agreement shall be referred to in this Agreement as the Beneficiary
irrespective of the number thereof. The divorce of the Executive from his spouse shall, without any
further action, automatically revoke the designation of such spouse as a Beneficiary of the
Executives benefits under this Agreement but shall not result in the automatic revocation of any
other Beneficiary designated by the Executive. The preceding sentence shall not preclude the
Executive
from executing a new Beneficiary designation after his divorce is final and naming his former
spouse as a Beneficiary of all or part of his benefits. If no Beneficiary shall have been properly
designated, or if no Beneficiary shall survive the Executive, the benefits shall be payable to the
Executives estate. All rights of a Beneficiary shall be derivative of the rights of the
Executive, therefore, a Beneficiary shall not be entitled to any benefits hereunder if the
Executive is not entitled to any benefits hereunder. During the lifetime of the Executive, a
Beneficiary shall have no rights under this Agreement.
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.
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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 Executives 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
Executives 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, including any amendment and restatement of the Prior
Agreements, 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.
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.
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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:
6.1.3.1 The specific reasons for the denial;
6.1.3.2 A reference to the specific provisions of the Plan on which the denial
is based;
6.1.3.3 A description of any additional information or material necessary for
the Claimant to perfect the claim and an explanation of why it is needed;
6.1.3.4 An explanation of the Plans review procedures and the time limits
applicable to such procedures; and
6.1.3.5 A statement of the Claimants 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 Companys 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 Claimants 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
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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:
6.2.5.1 The specific reasons for the denial;
6.2.5.2 A reference to the specific provisions of the Plan on which the denial
is based;
6.2.5.3 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
Claimants claim for benefits; and
6.2.5.4 A statement of the Claimants right to bring a civil action under
ERISA Section 502(a).
Article 7
Amendments and Termination
7.1
Amendments
. This Agreement may be amended only by a written agreement signed by the
Company and the Executive, provided, however, the Company may unilaterally amend this Agreement to
conform with written directives to the Company from its auditors or banking regulators or to comply
with legislative changes or tax law, including, without limitation, Code Section 409A, provided,
however, any such unilateral amendment shall comply with Section 409A.
7.2
Plan Termination Generally
. This Agreement may be terminated by the Company. The benefit
hereunder shall be the Executive Benefit Accrual as of the date the Agreement is terminated,
except, however, in the event a Change of Control has occurred, the benefit shall be the benefit
described in Section 2.5. Except as provided in Section 7.3, the termination of this Agreement
shall not cause a distribution of benefits under this Agreement. Rather, after such termination
benefit distributions will be made at the earliest distribution event permitted under Article 2 or
Article 3.
7.3
Plan Terminations Under Section 409A
. Notwithstanding anything to the contrary in Section
7.2, if this Agreement terminates in accordance with the provisions of Treas. Reg. Section
1.409A-3(j)(4)(ix), the Company will distribute the Executive Benefit Accrual, determined as of the
date of the termination of the Agreement, to the Executive in a lump sum, subject to all of the
requirements of such regulations.
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.
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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 Companys right to discharge the Executive. It also does not require the Executive to remain an
employee nor interfere with the Executives 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.
To the extent not preempted by ERISA, this Agreement and all rights
hereunder shall be governed by the laws of the State of Mississippi without regard to its conflicts
of laws provisions.
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 Executives 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:
8.8.1 Interpreting the provisions of the Agreement, including making any factual
determinations;
8.8.2 Establishing and revising the method of accounting for the Agreement;
8.8.3 Maintaining a record of benefit payments; and
8.8.4 Establishing rules and prescribing any forms necessary or desirable to
administer the Agreement.
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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 and his Beneficiary, it being the intention
of the Company that there shall not be any duplication of benefits hereunder.
8.11
Construction and Compliance with Section 409A.
This Agreement shall be interpreted and
administered consistent with Code Section 409A. All references to a particular statute shall be
deemed to refer to all regulations and authoritative guidance
issued thereunder and all references to a particular statute, regulation, or guidance of
general applicability shall be deemed to refer to any superseding statute, regulation, or guidance
of general applicability.
IN WITNESS WHEREOF, the Executive and a duly authorized Company officer have executed this
Agreement as of the date indicated below, but effective as of October 1, 2007.
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COMPANY:
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EXECUTIVE:
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THE PEOPLES BANK, BILOXI, MISSISSIPPI
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By:
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A. WES FULMER
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Its:
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Date:
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13
EXHIBIT A
TO THE
EXECUTIVE SUPPLEMENTAL INCOME AGREEMENT
(as amended and restated as of October 1, 2007)
BENEFICIARY DESIGNATION
Executive:
A. WES FULMER
The Beneficiary or beneficiaries of any payments to be made under this Agreement following my
death shall be:
Primary Beneficiary
I designate the following as primary beneficiary (beneficiaries) of my benefits under this
Agreement if I die before the receipt of all of my benefits:
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Address (No., Street, City, State, Zip Code):
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SS#:
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% of Benefits:
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(attach a separate sheet if additional space is needed)
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Contingent Beneficiary
Should all of the primary beneficiaries designated above predecease me and I die before the
receipt of all of my Benefits, I designate the following as the contingent beneficiary
(beneficiaries) of my Benefits under this Agreement:
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I understand that if I designate more than one beneficiary in a class above (i.e. primary or
contingent), each beneficiary in that class will receive an equal share of the benefits unless I
specify a different percentage. If I designate more than one beneficiary in a class above (i.e.
primary or contingent), the share of a beneficiary who predeceases me will be divided pro rata
among the remaining designated beneficiaries in that class unless I specify an alternate
disposition. Unless I specify an alternate disposition, I also understand that a beneficiary who
survives me but who dies before the complete distribution of his/her benefits shall be entitled to
designate the beneficiary of any benefits remaining after his/her death and that upon his/her
failure to properly designate a beneficiary, the beneficiarys remaining benefits shall be paid to
his/her estate.
I understand that this designation shall be subject to the terms of this Agreement.
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Signature of Witness Date
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A. WES FULMER Date
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15
Exhibit
10.4
EXECUTIVE SUPPLEMENTAL INCOME AGREEMENT
(as amended and restated as of October 1, 2007)
This
Agreement, effective as of October 1, 2007 (the
Effective Date
), is made by and between
THE PEOPLES BANK, BILOXI, MISSISSIPPI, 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 their
entirety, an agreement with an initial effective date of January 1, 1992, and a restated agreement
effective October 1, 2002 (hereinafter the
Prior
Agreements
)
, made by and between the Company and
the Executive.
INTRODUCTION
The Company and the Executive entered into the Prior Agreements in order to provide certain
benefits to the Executive as an officer of the Company upon the Executives retirement.
The Company and the Executive, by this current Agreement, desire to amend and desire to
restate the Prior Agreements in their entirety to include and reflect the terms set forth herein
and to incorporate the benefit accumulated to date by the Executive under the Prior Agreements, to
reflect the applicable provisions of Section 409A of the Internal Revenue Code of 1986, as amended,
and to clarify certain provisions of the Prior Agreements.
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 and except to the extent defined otherwise in
Code Section 409A or where the context clearly indicates otherwise, the following words and phrases
shall have the meanings specified:
1.1.1
Beneficiary
means the person or trust that an Executive designates in writing
in accordance with Section 4.1 hereof.
1.1.2
Change of Control
means:
1.1.2.1 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
Companys or Holding Companys outstanding capital stock then entitled to vote
generally in the election of directors; or
1.1.2.2 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
1.1.2.3 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
1.1.2.4 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 Companys or Holding Companys outstanding shares of Common
Stock or shares of capital stock having fifty percent (50%) or more of the combined
voting power of the Companys or Holding Companys 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
1.1.2.5 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 (1.1.2).
1.1.2.6 Notwithstanding the preceding, a Shareholder, as hereinafter defined
in Subsection 1.1.14, may make the following transfers and such transfers shall be
deemed not to be a Change of Control under this Subsection 1.1.2:
2
1.1.2.6.1 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;
1.1.2.6.2 To any individual or entity by bona fide gift;
1.1.2.6.3 To any spouse or former spouse of any Shareholder pursuant
to the terms of a decree of divorce;
1.1.2.6.4 To any officer or employee of the Company pursuant to any
incentive stock option plan established by the Shareholder;
1.1.2.6.5 To any family member of any Shareholder;
1.1.2.6.6 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
1.1.2.6.7 To any existing Shareholder as of the Effective Date.
Notwithstanding the preceding, for purposes of determining whether a distribution may be made
following a change of control, the change must be a change in the ownership or effective control of
the Company, or its parent, Peoples Financial Corporation, or a change in the ownership of a
substantial portion of the assets of the Company or its parent corporation, Peoples Financial
Corporation, all within the meaning of Treas. Reg. Section 1.409A-3(i)(5). In the event a change
constitutes a change under the preceding (without regard to this paragraph) but does not constitute
a change under Treas. Reg. Section 1.409A-3(i)(5), such distribution shall be made at the earliest
time permitted under Article 2 or 3.
1.1.3
Claimant
means the Executive or Beneficiary who believes he/she has not received the
benefits under this Agreement to which he/she is entitled to receive.
1.1.4
Code
means the Internal Revenue Code of 1986, as amended.
1.1.5
Company
means The Peoples Bank, Biloxi, Mississippi.
1.1.6
Disability
or
Disabled
means the Executive: (i) is unable to engage in any
substantial gainful activity by reason of any medically determinable physical or mental impairment
which can be expected to result in death or can be expected to last for a continuous period of not
less than twelve (12) months; or (ii) is, by reason of any medically determinable physical or
mental impairment which can be expected to result in death or can be expected to last for a
continuous period of not less than twelve (12) months, receiving income replacement benefits for a
period of not less than three (3)
3
months under an accident and health plan covering employees or directors of the Company. Medical
determination of Disability may be made by either the Social Security Administration or by the
provider of an accident or health plan covering employees or
directors of the Company provided that the definition of disability applied under such disability
insurance program complies with the requirements of the preceding sentence. Upon the request of
the plan administrator, the Executive must submit proof to the plan administrator of the Social
Security Administrations or the providers determination.
1.1.7
Discount Rate
means the rate reviewed and determined at least annually by the Board of
Directors for purposes of calculating benefits hereunder. The rate determined by the Board of
Directors shall apply to all calculations thereafter until such rate is changed by the Board of
Directors.
1.1.8
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 under this Agreement, including any amendment and restatement
of the Prior Agreements, for five (5) years.
1.1.9
ERISA
means the Employee Income Security Act of 1974, as amended.
1.1.10
Executive Benefit Accrual
means the amount accrued as a liability to the Executive by
the Company on its accounting records under Generally Accepted Accounting Principles (GAAP) by
virtue of the terms of the Prior Agreements and by virtue of the terms of this Agreement.
1.1.11
Normal Retirement Date
means the date the Executive attains age sixty-five (65).
1.1.12
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) Separation From Service; or, (ii) the
Companys termination of the Agreement under Section 7.3.
1.1.13
Separation From Service or Separates From Service
means a cessation of services
rendered by the Executive within the meaning of Treas. Reg. Section 1.409A-1(h).
1.1.14
Shareholder
means the existing owners of all issued and outstanding stock of the
Company or Peoples Financial Corporation as of the date this Agreement is signed.
1.1.15
Specified Employee
means an employee who is described in Treas. Reg. Section
1.409A-1(i).
4
Article 2
Lifetime
Benefits
2.1
Normal Retirement Benefit.
If Separation From Service occurs
on or after the Normal Retirement
Date and prior to a Change of Control, 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 Executives 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 Separation From Service. 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 Separation From Service occurs on or after the Early
Retirement Date and prior to the Normal Retirement Date and prior to a Change of Control, 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 Separation From Service 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 twenty percent (20%)
of Salary. Based on these assumptions the percentage of Salary payable under this subsection
2.2.1 would equal 20% times 67% (100% minus the product of 66 times 0.5%). The resulting
annual benefit under subsection 2.2.1, based on the assumptions in this example, would equal
13.4% (20% 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 Separation From Service. 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
Separation From Service Prior to the Early Retirement Date or Prior to Normal Retirement
Date.
Subject to the provisions of Sections 2.6 and 5.3, if Separation From Service occurs, for
reasons other than death or Disability, and prior to a Change of
Control and prior to either the Early
Retirement Date or to the Normal Retirement Date, the Company shall pay to the Executive the benefit
described in this Section 2.3 in lieu of any other benefit under this Agreement.
5
2.3.1
Amount of Benefit.
The benefit under this Section 2.3 is the Executive Benefit
Accrual as of Separation From Service.
2.3.2
Payment of Benefit.
The Company shall pay the Executive the benefit set forth in
subsection 2.3.1 in a single lump-sum within sixty (60) days of Separation From Service.
2.4
Disability Benefit.
Upon Disability prior to the Normal Retirement Date, the Company
shall pay to the Executive the benefit described in this Section 2.4 in lieu of any other benefit
under this Agreement.
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 Executives 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 following Disability and
prior to receiving any payment under this Agreement, the Company shall pay the Beneficiary
the annual benefit 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 Separation From Service and
prior to Disability, 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 shall be 100% of the normal
retirement benefit set forth in subsection 2.1.1.
2.5.2
Payment of Benefit.
The Company shall pay the annual benefit determined under
subsection 2.5.1 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 the
Executives Normal Retirement Date, or, in the event the Executive has already attained the Normal
Retirement Date, the last day of the month following the month of Separation From Service. In the
event the Executive dies prior to reaching her Normal Retirement Date, the benefit is then payable
to her Beneficiary beginning on the last day of the month commencing with the month following the
Executives death.
6
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.
2.7
Restriction on Distributions to Specified Employees
. Notwithstanding any provision of this
Agreement to the contrary, if the Executive is considered a Specified Employee at Separation From
Service, the provisions of this Section 2.7 shall govern all distributions hereunder. Benefit
distributions that are made due to a Separation From Service occurring while the Executive is a
Specified Employee shall not be made during the first six (6) months following Separation From
Service, rather any distribution which would otherwise be paid to the Executive during such period
shall be accumulated and paid to the Executive in a lump sum on the first day of the seventh month
following the Separation From Service. All subsequent distributions shall be paid in the manner
specified.
2.8
Distributions Upon Income Inclusion Under Section 409A of the Code
. If any amount is
required to be included in income by the Executive prior to receipt due to a failure
of this Agreement to meet the requirements of Code Section 409A, the Executive may petition
the plan administrator for a distribution of that portion of the Executive Benefit Accrual that is
required to be included in the Executives income. Upon the grant of such a petition, which grant
shall not be unreasonably withheld, the Company shall distribute to the Executive immediately
available funds in an amount equal to the portion of the Executive Benefit Accrual required to be
included in income as a result of the failure of this Agreement to meet the requirements of Code
Section 409A, which amount shall not exceed the Executives unpaid Executive Benefit Accrual. If
the petition is granted, such distribution shall be made within ninety (90) days of the date when
the Executives petition is granted. Such a distribution shall affect and reduce the Executives
benefits to be paid under this Agreement.
2.9
No Suspension Upon Re-employment.
Once benefit payments commence hereunder, such payments
shall continue to be made notwithstanding the re-employment of the Executive by the Company except
as provided in Section 5.1 or 5.2.
Article 3
Beneficiaries
3.1
Death During Active Service.
The Company shall pay to the Beneficiary the benefit
described in this Section 3.1 if the Executive dies: (i) prior to Separation From Service and prior
to Disability before the Normal Retirement Date and (ii) prior to a Change of Control.
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 Executives 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.
7
3.2
Death During Benefit Period.
If benefit payments have commenced or were scheduled to
commence under Article 2 of this Agreement, but before receiving all such payments the Executive
dies, the Company shall then pay the remaining benefits to the Executives Beneficiary at the same
time and in the same amounts that would have been paid to the Executive had the Executive survived.
Notwithstanding the preceding, the Executive or her Beneficiary shall not be entitled to a benefit
under both Article 2 and 3 hereof, it being the intent that there shall not be any duplication of
benefits hereunder.
Article 4
Beneficiaries
4.1
Beneficiary Designations.
The Executive may designate or change her Beneficiary at any
time and from time to time (without the consent of any prior Beneficiary). An Executives
Beneficiary shall be as designated on a Beneficiary Designation in the form of Exhibit A to this
Agreement or another form acceptable to the Company. The Executive may
change her Beneficiary designation by properly executing a new Beneficiary Designation and
delivering that form to the Company, provided however, no change shall be effective until received
by the Company, and provided further, that no change shall be effective unless received by the
Company before the Executives death. Furthermore, each designation so made shall cancel and
supersede all previous designations. The designated Beneficiary, designated successor Beneficiary,
and any other person entitled to payments under this Agreement shall be referred to in this
Agreement as the Beneficiary irrespective of the number thereof. The divorce of the Executive
from her spouse shall, without any further action, automatically revoke the designation of such
spouse as a Beneficiary of the Executives benefits under this Agreement but shall not result in
the automatic revocation of any other Beneficiary designated by the Executive. The preceding
sentence shall not preclude the Executive from executing a new Beneficiary designation after her
divorce is final and naming her former spouse as a Beneficiary of all or part of her benefits. If
no Beneficiary shall have been properly designated, or if no Beneficiary shall survive the
Executive, the benefits shall be payable to the Executives estate. All rights of a Beneficiary
shall be derivative of the rights of the Executive, therefore, a Beneficiary shall not be entitled
to any benefits hereunder if the Executive is not entitled to any benefits hereunder. During the
lifetime of the Executive, a Beneficiary shall have no rights under this Agreement.
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.
8
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 Executives 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
Executives 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, including any amendment and restatement of the Prior
Agreements, 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.
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.
9
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:
6.1.3.1 The specific reasons for the denial;
6.1.3.2 A reference to the specific provisions of the Plan on which the denial
is based;
6.1.3.3 A description of any additional information or material necessary for
the Claimant to perfect the claim and an explanation of why it is needed;
6.1.3.4 An explanation of the Plans review procedures and the time limits
applicable to such procedures; and
6.1.3.5 A statement of the Claimants 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 Companys 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 Claimants 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
10
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:
6.2.5.1 The specific reasons for the denial;
6.2.5.2 A reference to the specific provisions of the Plan on which the denial
is based;
6.2.5.3 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
Claimants claim for benefits; and
6.2.5.4 A statement of the Claimants right to bring a civil action under ERISA
Section 502(a).
Article 7
Amendments and Termination
7.1
Amendments
. This Agreement may be amended only by a written agreement signed by the
Company and the Executive, provided, however, the Company may unilaterally
amend this Agreement to conform with written directives to the Company from its auditors or
banking regulators or to comply with legislative changes or tax law, including, without limitation,
Code Section 409A, provided, however, any such unilateral amendment shall comply with Section 409A.
7.2
Plan Termination Generally
. This Agreement may be terminated by the Company. The benefit
hereunder shall be the Executive Benefit Accrual as of the date the Agreement is terminated,
except, however, in the event a Change of Control has occurred, the benefit shall be the benefit
described in Section 2.5. Except as provided in Section 7.3, the termination of this Agreement
shall not cause a distribution of benefits under this Agreement. Rather, after such termination
benefit distributions will be made at the earliest distribution event permitted under Article 2 or
Article 3.
7.3
Plan Terminations Under Section 409A
. Notwithstanding anything to the contrary in Section
7.2, if this Agreement terminates in accordance with the provisions of Treas. Reg. Section
1.409A-3(j)(4)(ix), the Company will distribute the Executive Benefit Accrual, determined as of the
date of the termination of the Agreement, to the Executive in a lump sum, subject to all of the
requirements of such regulations.
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.
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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 Companys right to discharge the Executive. It also does not require the Executive to remain an
employee nor interfere with the Executives 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.
To the extent not preempted by ERISA, this Agreement and all rights
hereunder shall be governed by the laws of the State of Mississippi without regard to its conflicts
of laws provisions.
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 Executives 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:
8.8.1 Interpreting the provisions of the Agreement, including making any factual
determinations;
8.8.2 Establishing and revising the method of accounting for the Agreement;
8.8.3 Maintaining a record of benefit payments; and
8.8.4 Establishing rules and prescribing any forms necessary or desirable to administer
the Agreement.
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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 and her Beneficiary, it being the intention
of the Company that there shall not be any duplication of benefits hereunder.
8.11
Construction and Compliance with Section 409A.
This Agreement shall be interpreted and
administered consistent with Code Section 409A. All references to a particular statute shall be
deemed to refer to all regulations and authoritative guidance issued thereunder and all references
to a particular statute, regulation, or guidance of general applicability shall be deemed to refer
to any superseding statute, regulation, or guidance of general applicability.
IN WITNESS WHEREOF, the Executive and a duly authorized Company officer have executed this
Agreement as of the date indicated below, but effective as of October 1, 2007.
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COMPANY:
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EXECUTIVE:
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THE PEOPLES BANK, BILOXI, MISSISSIPPI
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By:
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LAURI A. WOOD
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Its:
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Date:
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Date:
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13
EXHIBIT A
TO THE
EXECUTIVE SUPPLEMENTAL INCOME AGREEMENT
(as amended and restated as of October 1, 2007)
BENEFICIARY DESIGNATION
Executive:
LAURI A. WOOD
The Beneficiary or beneficiaries of any payments to be made under this Agreement following my
death shall be:
Primary Beneficiary
I designate the following as primary beneficiary (beneficiaries) of my benefits under this
Agreement if I die before the receipt of all of my benefits:
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Full Name:
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Relationship:
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Address (No., Street, City, State, Zip Code):
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SS#:
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Date of Birth:
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% of Benefits:
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Full Name:
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Relationship:
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Address (No., Street, City, State, Zip Code):
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SS#:
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Date of Birth:
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% of Benefits:
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Full Name:
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Relationship:
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Address (No., Street, City, State, Zip Code):
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SS#:
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Date of Birth:
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(attach a separate sheet if additional space is needed)
14
Contingent
Beneficiary
Should all of the primary beneficiaries designated above predecease me and I die before the
receipt of all of my Benefits, I designate the following as the contingent beneficiary
(beneficiaries) of my Benefits under this Agreement:
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Full Name:
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Address (No., Street, City, State, Zip Code):
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SS#:
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Full Name:
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Relationship:
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Address (No., Street, City, State, Zip Code):
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SS#:
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Date of Birth:
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% of Benefits:
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Full Name:
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Relationship:
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Address (No., Street, City, State, Zip Code):
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SS#:
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Date of Birth:
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% of Benefits:
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(attach a separate sheet if additional space is needed)
I understand that if I designate more than one beneficiary in a class above (i.e. primary or
contingent), each beneficiary in that class will receive an equal share of the benefits unless I
specify a different percentage. If I designate more than one beneficiary in a class above (i.e.
primary or contingent), the share of a beneficiary who predeceases me will be divided pro rata
among the remaining designated beneficiaries in that class unless I specify an alternate
disposition. Unless I specify an alternate disposition, I also understand that a beneficiary who
survives me but who dies before the complete distribution of his/her benefits shall be entitled to
designate the beneficiary of any benefits remaining after his/her death and that upon his/her
failure to properly designate a beneficiary, the beneficiarys remaining benefits shall be paid to
his/her estate.
I understand that this designation shall be subject to the terms of this Agreement.
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Signature of Witness
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Date
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LAURI A. WOOD
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Date
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15