-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, S+13eVoh2GongMQpBt5H+c49odAfuI774JX8bnd6q9HD5sJpkyDJmd5hLj9Dz6D4 1UYgMg5tLxYC4OIgnVWuxA== 0000950134-97-002161.txt : 19970326 0000950134-97-002161.hdr.sgml : 19970326 ACCESSION NUMBER: 0000950134-97-002161 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970325 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: PEOPLES FINANCIAL CORP CENTRAL INDEX KEY: 0000770460 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 640709834 STATE OF INCORPORATION: MI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 002-98268 FILM NUMBER: 97562638 BUSINESS ADDRESS: STREET 1: 211 LINCOLN WAY EAST STREET 2: P O BOX 529 CITY: MASSILLON STATE: OH ZIP: 44646 BUSINESS PHONE: 6014355511 MAIL ADDRESS: STREET 1: PO BOX 559 STREET 2: PO BOX 559 CITY: BILOXI STATE: MS ZIP: 395330529 10-K 1 FORM 10-K FOR FISCAL YEAR END DECEMBER 31, 1996 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1996 ----------------------------------------- Commission File Number 2-98268 -------------------------------------------- PEOPLES FINANCIAL CORPORATION - ------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Mississippi 64-0709834 - ------------------------------- ------------------------ (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification number) Lameuse and Howard Avenues, Biloxi, Mississippi 39533 - ------------------------------------------------------------------------------- (Address of principal executive offices) (Zip code) 601-435-5511 --------------------------------------------------------------------- (Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: Name of Each Exchange on Title of Each Class Which Registered ------------------- ------------------------ None None Securities registered pursuant to Section 12(g) of the Act: NONE --------------------------------------------- (Title of each class) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO ----- ----- Indicate by check mark if disclosure of delinquent filers pursuant to item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the Registrant's knowledge in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to the Form 10-K. _____ Cover Page 1 of 2 Pages 2 The aggregate market value of the voting stock held by non-affiliates of the registrant as of March 1, 1997 was approximately $49,030,000. For purposes of this calculation only, shares held by non-affiliates are deemed to consist of (a) shares held by all shareholders other than directors and executive officers plus (b) shares held by directors and executive officers as to which beneficial ownership has been disclaimed. On March 1, 1997 the registrant had outstanding 738,168 shares of common stock, par value of $1.00 per share. DOCUMENTS INCORPORATED BY REFERENCE Portions of the Registrant's Annual Report to Stockholders for the year ended December 31, 1996 are incorporated by reference into Parts I, II and III of this report. Portions of the Registrant's Definitive Proxy Statement issued in connection with the Annual Meeting of Shareholders to be held April 9, 1997, are incorporated by reference into Part III of this report. Cover Page 2 of 2 Pages 3 PART I ITEM 1 - DESCRIPTION OF BUSINESS THE REGISTRANT Peoples Financial Corporation (the "Company") was established as a one bank holding company on December 18, 1984. Under a "Reorganization and Merger Agreement" dated March 21, 1985, and approved on July 8, 1985, Peoples Financial Corporation acquired all the outstanding stock of consenting shareholders of The Peoples Bank of Biloxi (the "Bank") on September 30, 1985, in exchange for 25,086 shares of its common stock. A settlement was reached with dissenting shareholders to acquire their stock at $1,000.00 per share, and this amount was paid during 1986, with interest at 9% per annum. The transaction was accounted for as a pooling-of-interest. The Company is now engaged, through its subsidiary, in the banking business. The Bank is the Company's principal asset and primary source of revenue. NONBANK SUBSIDIARY On August 22, 1985, PFC Service Corp. ("PFC") was chartered and began operations as the second wholly-owned subsidiary of Peoples Financial Corporation on October 3, 1985. The purpose of PFC is principally the leasing of automobiles and equipment under direct financing and sales-type leases expiring in various periods through 1993. The Bank acquired all remaining leases from PFC during 1990. PFC is inactive at this time. ACQUISITIONS On August 19, 1988, the Company acquired Gulf National Bank ("GNB") and merged GNB into the Bank with shareholders of GNB receiving shares of 4% convertible preferred stock. The preferred stock was mandatorily convertible into Company common stock five years and one month after August 19, 1988, at the rate of one share of common stock for each 24 shares of preferred stock. This conversion was executed on September 19, 1993. On August 16, 1991, the Company purchased certain assets and assumed the insured deposits of the Main Office of the former Southern Federal Bank for Savings from the Resolution Trust Corporation and merged those assets and deposits into the Bank. THE BANK The Bank, which was originally chartered in 1896 in Biloxi, Mississippi, currently offers many customary banking services to its customers including interest bearing and non-interest bearing checking accounts; savings accounts; certificates of deposit; IRA accounts; business, real estate, construction, personal and installment loans; collection services; trust services; safe deposit box facilities; night drop facilities and automated teller machines. The Bank is a state chartered bank 1 4 whose deposits are insured under the Federal Insurance Act. The Bank is not a member of the Federal Reserve System. The legal name of the Bank was changed to The Peoples Bank, Biloxi, Mississippi, during 1991. The Bank has a large number of customers acquired over a period of many years and is not dependent upon a single customer or upon a few customers. The Bank also provides services to customers representing a wide variety of industries including seafood, retail, hospitality, gaming and construction. The Main Office, operations center and trust services of the Bank are located in downtown Biloxi, MS. The Bank also has eleven (11) branches from Bay St. Louis, MS, to Ocean Springs, MS. The Bank has automated teller machines ("ATM") at its Main Office, all branch locations and at numerous non-proprietary locations. At December 31, 1996, the Bank employed 194 full-time employees and 29 part-time employees. COMPETITION The Bank is in direct competition with approximately eight (8) commercial banks and three (3) non-bank institutions. These banks range in size from approximately $13 million to approximately $4.4 billion. The Bank also competes for deposits and loans with insurance companies, finance companies and automobile finance companies. TRUST SERVICES The Bank's Asset Management and Trust Services Department offers personal trust, agencies and estate services including living and testamentary trusts, executorships, guardianships, and conservatorships. Benefit accounts maintained by the Department primarily include self-directed individual retirement accounts. Escrow management, stock transfer and bond paying agency accounts are available to corporate customers. MISCELLANEOUS The Bank holds no patents, licenses (other than licenses required to be obtained from appropriate bank regulatory agencies), franchises or concessions. During 1994, the Bank obtained the rights to the registered trademark, "The Mint". There has been no significant change in the kind of services offered by the Bank during the last three fiscal years. The Bank has not engaged in any research activities relating to the development of new services or the improvement of existing services except in the normal course of its business activities. The Bank presently has no plans for any new line of business requiring the investment of a material amount of total assets. 2 5 Most of the Bank's business originates from within Harrison, Hancock and west Jackson Counties in Mississippi; however, some business is obtained from Claiborne County and the other counties in southern Mississippi. There has been no material effect upon the Bank's capital expenditures, earnings or competitive position as a result of federal, state or local environmental regulations. REGULATION AND SUPERVISION The Company is a registered one bank holding company under the Bank Holding Company Act. As such, the Company is required to file periodic reports and such additional information as the Federal Reserve may require. The Federal Reserve Board may also make examinations of the Company and its subsidiaries. The Bank Holding Company Act requires every bank holding company to obtain the prior approval of the Federal Reserve Board before it may acquire substantially all the assets of any bank or ownership or control of any voting shares of any bank if, after the acquisition, it would own or control, directly or indirectly, more than 5 percent of the voting shares of the bank. A bank holding company is generally prohibited from engaging in, or acquiring direct or indirect control of, voting shares of any company engaged in non-banking activities. One of the principal exceptions to this prohibition is for activities found by the Federal Reserve to be so closely related to banking or the managing or controlling of banks as to be a proper incident thereto. Some of the activities the Federal Reserve Board has determined by regulation to be closely related to banking are the making and servicing of loans, performing certain bookkeeping or data processing services, acting as fiduciary or investment or financial advisor, making equity or debt investments in corporations or projects designed primarily to promote community welfare, leasing transactions if the functional equivalent of an extension of credit and mortgage banking or brokerage. A bank holding company and its subsidiaries are also prohibited from acquiring any voting shares of or interest in, any banks located outside the state in which the operations of the bank holding company's subsidiaries are located, unless the acquisition is specially authorized by the statute of the state in which the target is located. Certain southern states, including Mississippi, have enacted legislation which authorizes interstate acquisitions of a banking organization by bank holding companies within the south, subject to certain conditions and restrictions. The Bank is subject to the regulation of and examination by the Mississippi Department of Banking and Consumer Finance ("Department of Banking") and the Federal Deposit Insurance Corporation ("FDIC"). Areas subject to regulation include reserves, investments, loans, mergers, branching, issuance of securities, payment of dividends, capital adequacy, management practices and all other aspects of banking operations. In addition to regular examinations, the Bank must furnish periodic reports to its regulatory authorities containing a full and accurate statement of affairs. The Bank is subject to deposit insurance assessments by the FDIC and the Department of Banking. 3 6 The earnings of commercial banks and bank holding companies are affected not only by general economic conditions but also by the policies of various governmental regulatory authorities, including the Federal Reserve Board. In particular, the Federal Reserve Board regulates money and credit conditions, and interest rates, primarily through open market operations in U. S. Government securities, varying the discount rate of member and nonmember bank borrowing, setting reserve requirements against bank deposits and regulating interest rates payable by banks on certain deposits. These policies influence to a varying extent the overall growth and distribution of bank loans, investments and deposits and the interest rates charged on loans. The monetary policies of the Federal Reserve Board have had a significant effect on the operating results of commercial banks in the past and are expected to continue to do so in the future. SUPPLEMENTAL STATISTICAL INFORMATION Schedules I-A through VII present certain statistical information regarding the Company. This information is not audited and should be read in conjunction with the Company's Consolidated Financial Statements and Notes to Consolidated Financial Statements found at pages 14 - 40 of the 1996 Annual Report to Shareholders. DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS' EQUITY AND INTEREST RATES AND DIFFERENTIALS Net Interest Income, the difference between Interest Income and Interest Expense, is the most significant component of the Company's earnings. For interest analytical purposes, Management adjusts Net Interest Income to a "taxable equivalent" basis using a 34% Federal Income Tax rate on tax-exempt items (primarily interest on municipal securities). Another significant statistic in the analysis of Net Interest Income is the effective interest differential, also called the net yield on earning assets. The net yield is the difference between the rate of interest earned on earning assets and the effective rate paid for all funds, non-interest bearing as well as interest bearing. Since a portion of the Bank's deposits do not bear interest, such as demand deposits, the rate paid for all funds is lower than the rate on interest bearing liabilities alone. Recognizing the importance of interest differential to total earnings, Management places great emphasis on managing interest rate spreads. Although interest differential is affected by national, regional and area economic conditions, including the level of credit demand and interest rates, there are significant opportunities to influence interest differential through appropriate loan and investment policies which are designed to maximize the interest differential while maintaining sufficient liquidity and availability of "incremental funds" for purposes of meeting existing commitments and investment in lending and investment opportunities that may arise. 4 7 The information included in Schedule I-F presents the change in interest income and interest expense along with the reason(s) for these changes. The change attributable to volume is computed as the change in volume times the old rate. The change attributable to rate is computed as the change in rate times the old volume. The change in rate/volume is computed as the change in rate times the change in volume. SUMMARY OF LOAN LOSS EXPERIENCE In the normal course of business, the Bank assumes risks in extending credit. The Bank manages these risks through its lending policies, loan review procedures and the diversification of its loan portfolio. Although it is not possible to predict loan losses with complete accuracy, Management constantly reviews the characteristics of the loan portfolio to determine its overall risk profile and quality. Constant attention to the quality of the loan portfolio is achieved by the loan review process. Throughout this ongoing process, Management is advised of the condition of individual loans and of the quality profile of the entire loan portfolio. Any loan or portion thereof which is classified "loss" by regulatory examiners or which is determined by Management to be uncollectible because of such factors as the borrower's failure to pay interest or principal, the borrower's financial condition, economic conditions in the borrower's industry or the inadequacy of underlying collateral, is charged-off. Provisions are charged to operating expense based upon historical loss experience, and additional amounts are provided when, in the opinion of Management, such provisions are not adequate based upon the current factors affecting loan collectibility. The allocation of the allowance for loan losses by loan category is based on the factors mentioned in the preceding paragraphs. Accordingly, since all of these factors are subject to change, the allocation is not necessarily indicative of the breakdown of future losses. The comments concerning the provision for loan losses and the allowance for loan losses presented in "Management's Discussion and Analysis" at pages 9 - 12 of the 1996 Annual Report to Shareholders are incorporated herein by reference. RETURN ON EQUITY AND ASSETS The information under the captions "Five-Year Comparative Summary of Selected Financial Information" on page 8 and "Management's Discussion and Analysis" on pages 9 - 12 of the 1996 Annual Report are incorporated herein by reference. 5 8 DIVIDEND PAYOUT
Years Ended December 31, ------------------------------------------- 1996 1995 1994 ------------------------------------------- Dividend payout ratio 12.98% 11.17% 11.96% ===========================================
6 9 SCHEDULE I-A Distribution of Average Assets, Liabilities and Shareholders' Equity for the Periods Indicated (2)
Years Ended December 31, (In thousands) 1996 1995 1994 - ------------------------------------------------------------------------------------ ASSETS: Cash and due from financial institutions $ 24,431 $ 22,580 $ 22,105 Available for sale securities: Taxable securities 52,263 3,503 Other securities 925 319 198 Held to maturity securities: Taxable securities 143,270 151,105 171,372 Non-taxable securities 4,717 4,501 4,180 Net loans (1) 219,652 220,095 192,926 Federal funds sold and securities purchased under agreements to resell 11,032 11,387 9,088 Other assets 11,991 16,554 16,914 -------- -------- -------- TOTAL ASSETS $468,281 $430,044 $416,783 ======== ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY: Non-interest bearing deposits $ 66,215 $ 72,036 $ 84,240 Interest bearing deposits 339,438 301,541 282,163 -------- -------- -------- Total deposits 405,653 373,577 366,403 Federal funds purchased and securities sold under agreements to repurchase 1,941 1,414 1,479 Other liabilities 3,585 3,394 3,047 -------- -------- -------- Total liabilities 411,179 378,385 370,929 Shareholders' equity 57,102 51,659 45,854 -------- -------- -------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $468,281 $430,044 $416,783 ======== ======== ========
(1) Gross loans and discounts, net of unearned income and allowance for loan losses. (2) All averages are computed on a daily basis with the exception of deposits, which were computed on a monthly basis. Daily averages were not available for deposits. 7 10 SCHEDULE I-B Average Amount Outstanding for Major Categories of Interest Earning Assets and Interest Bearing Liabilities for the Periods Indicated
Years Ended December 31, (In thousands) 1996 1995 1994 - ------------------------------------------------------------------------------------ INTEREST EARNING ASSETS: Loans (1) (2) $ 224,231 $ 224,819 $ 198,044 Federal funds sold and securities purchased under agreements to resell 11,032 11,387 9,088 Available for sale securities: Taxable securities 52,263 3,503 Other securities 945 319 198 Held to maturity securities: Taxable securities 143,270 151,105 171,372 Non-taxable securities 4,717 4,501 4,180 ---------- ---------- ---------- TOTAL INTEREST EARNING ASSETS $ 436,458 $ 395,634 $ 382,882 ========== ========== ========== INTEREST BEARING LIABILITIES: Savings and negotiable interest bearing deposits $ 185,537 $ 189,454 $ 199,941 Time deposits 153,901 112,087 82,222 Federal funds purchased and securities sold under agreements to repurchase 1,941 1,414 1,479 Other borrowed funds 232 243 253 ---------- ---------- ---------- TOTAL INTEREST BEARING LIABILITIES $ 341,611 $ 303,198 $ 283,895 ========== ========== ==========
(1) Net of unearned income. (2) Includes nonaccrual loans. (3) All averages are computed on a daily basis with the exception of deposits, which were computed on a monthly basis. Daily averages were not available for deposits. 8 11 SCHEDULE I-C Interest Earned or Paid on the Major Categories of Interest Earning Assets and Interest Bearing Liabilities for the Periods Indicated
Years Ended December 31, (In thousands) 1996 1995 1994 - ------------------------------------------------------------------------------- INTEREST EARNED ON: Loans (2) $ 20,414 $ 21,364 $ 17,094 Federal funds sold and securities purchased under agreements to resell 582 667 345 Available for sale securities: Taxable securities 3,343 198 -0- Other securities 45 17 16 Held to maturity securities: Taxable securities 8,460 8,840 9,296 Non-taxable securities 612 603 658 ---------- ---------- ---------- TOTAL INTEREST EARNED (1) $ 33,456 $ 31,689 $ 27,409 ========== ========== ========== INTEREST PAID ON: Savings and negotiable interest bearing deposits $ 5,951 $ 5,879 $ 5,792 Time deposits 8,332 6,403 3,647 Federal funds purchased and securities sold under agreements to repurchase 110 77 69 Other borrowed funds 13 13 14 ---------- ---------- ---------- TOTAL INTEREST PAID $ 14,406 $ 12,372 $ 9,522 ========== ========== ==========
(1) All interest earned is reported on a taxable equivalent basis using a tax rate of 34% in 1996, 1995 and 1994. (2) Loan fees of $334,000, $444,000 and $462,000 for 1996, 1995 and 1994, respectively, are included in these figures. 9 12 SCHEDULE I-D Average Interest Rate Earned or Paid for Major Categories of Interest Earning Assets and Interest Bearing Liabilities for the Periods Indicated
Years Ended December 31, 1996 1995 1994 - --------------------------------------------------------------------------------- AVERAGE RATE EARNED ON: Loans 9.10% 9.50% 8.63% Federal funds sold and securities purchased under agreements to resell 5.28 5.85 3.80 Available for sale securities: Taxable securities 6.39 5.65 N/A Other securities 4.76 5.33 8.08 Held to maturity securities: Taxable securities 5.90 5.85 5.42 Non-taxable securities (2) 12.97 13.40 15.74 ----- ----- ----- TOTAL (weighted average rate) (1) 7.67% 8.01% 7.16% ===== ===== ===== AVERAGE RATE PAID ON: Savings and negotiable interest bearing deposits 3.21% 3.10% 2.90% Time deposits 5.41 5.71 4.44 Federal funds purchased and securities sold under agreements to repurchase 5.67 5.45 4.67 Other borrowed funds 5.60 5.35 5.53 ----- ----- ----- TOTAL (weighted average rate) 5.62% 4.08% 3.35% ===== ===== =====
(1) All interest earned is reported on a taxable equivalent basis using a tax rate of 34% in 1996, 1995 and 1994. (2) Relates to accounting for bonds purchased at a discount prior to January 1, 1992. Such bonds were reflected on the books at cost. The effect of not adjusting for the accretion of discount for bonds acquired prior to January 1, 1992, is not material to the financial statements. However, the yields are higher during the period in which these bonds mature as a result of all accretion being recognized at maturity. 10 13 SCHEDULE I-E Net Interest Earnings and Net Yield on Interest Earning Assets
Years Ended December 31, (In thousands except percentages) 1996 1995 1994 - ------------------------------------------------------------------------------- Total interest income (1) $ 33,456 $ 31,689 $ 27,409 Total interest expense 14,406 12,372 9,522 ---------- ---------- ---------- Net interest earnings $ 19,050 $ 19,317 $ 17,887 ========== ========== ========== Net yield on interest earning assets 4.36% 4.88% 4.67% ========== ========== ==========
(1) All interest earned is reported on a taxable equivalent basis using a tax rate of 34% in 1996, 1995 and 1994. 11 14 SCHEDULE I-F Analysis of Changes In Interest Income and Interest Expense (In thousands)
Attributable to: -------------------------------------- Increase Rate / 1996 1995 (Decrease) Volume Rate Volume ---------- ---------- ---------- ---------- ---------- ---------- INTEREST INCOME:(1) Loans (2) (3) $ 20,414 $ 21,364 $ (950) $ (56) $ (896) $ 2 Federal funds sold and securities purchased under agreements to resell 582 667 (85) (21) (66) 2 Available for sale securities: Taxable securities 3,343 198 3,145 2,756 26 363 Other securities 45 17 28 33 (2) (3) Held to maturity securities: Taxable securities 8,460 8,840 (380) (458) 83 (5) Non-taxable securities 612 603 9 29 (19) (1) ---------- ---------- ---------- ---------- ---------- ---------- Total $ 33,456 $ 31,689 $ 1,767 $ 2,283 $ (874) $ 358 ========== ========== ========== ========== ========== ========== INTEREST EXPENSE: Savings and negotiable interest bearing deposits $ 5,951 $ 5,879 $ 72 $ (118) $ 194 $ (4) Time deposits 8,332 6,403 1,929 2,389 (335) (125) Federal funds purchased and securities sold under agreements to repurchase 110 77 33 29 3 1 Other borrowed funds 13 13 -0- (1) 1 -0- ---------- ---------- ---------- ---------- ---------- ---------- Total $ 14,406 $ 12,372 $ 2,034 $ 2,299 $ (137) $ (128) ========== ========== ========== ========== ========== ==========
(1) All interest earned is reported on a taxable equivalent basis using a tax rate of 34% in 1996 and 1995. (2) Loan fees are included in these figures. (3) Includes interest on nonaccrual loans. 12 15 SCHEDULE I-F (continued) Analysis of Changes in Interest Income and Interest Expense (In thousands)
Attributable to: -------------------------------------- Increase Rate/ 1995 1994 (Decrease) Volume Rate Volume ---------- ---------- ---------- ---------- ---------- ---------- INTEREST INCOME:(1) Loans (2) (3) $ 21,364 $ 17,094 $ 4,270 $ 2,311 $ 1,726 $ 233 Federal funds sold and securities purchased under agreements to resell 667 345 322 87 186 49 Available for sale securities: Taxable securities 198 -0- 198 198 -0- -0- Other securities 17 16 1 10 (5) (4) Held to maturity securities: Taxable securities 8,840 9,296 (456) (1,099) 730 (87) Non-taxable securities 603 658 (55) 50 (98) (7) ---------- ---------- ---------- ---------- ---------- ---------- Total $ 31,689 $ 27,409 $ 4,280 $ 1,557 $ 2,539 $ 184 ========== ========== ========== ========== ========== ========== INTEREST EXPENSE: Savings and negotiable interest bearing deposits $ 5,879 $ 5,792 $ 87 $ (304) $ 412 $ (21) Time deposits 6,403 3,647 2,756 1,325 1,050 381 Federal funds purchased and securities sold under agreements to repurchase 77 69 8 (3) 12 (1) Other borrowed funds 13 14 (1) (1) (1) 1 ---------- ---------- ---------- ---------- ---------- ---------- Total $ 12,372 $ 9,522 $ 2,850 $ 1,017 $ 1,473 $ 360 ========== ========== ========== ========== ========== ==========
(1) All interest earned is reported on a taxable equivalent basis using a tax rate of 34% in 1995 and 1994. (2) Loan fees are included in these figures. (3) Includes interest on nonaccrual loans. 13 16 SCHEDULE II-A Securities Portfolio Book Value of Securities Portfolio at the Dates Indicated
December 31, (In thousands): 1996 1995 1994 - ------------------------------------------------------------------------------------ Available for sale securities: U.S. Government, agency and corporate $ 51,921 $ 20,145 $ -0- obligations Other securities 1,238 685 198 ---------- ---------- ---------- Total $ 53,159 $ 20,830 $ 198 ========== ========== ========== Held to maturity securities: U.S. Government, agency and corporate $ 122,090 $ 160,656 $ 155,236 obligations States and political subdivisions 5,780 4,486 4,262 ---------- ---------- ---------- Total $ 127,870 $ 165,142 $ 159,498 ========== ========== ==========
14 17 SCHEDULE II-B Maturity of Securities Portfolio at December 31, 1996 And Weighted Average Yields of Such Securities
Maturity (In thousands except percentage data) -------------------------------------------------------------------------------------------------------- After one but After five but Within one year within five years within ten years After ten years -------------------------------------------------------------------------------------------------------- Amount Yield Amount Yield Amount Yield Amount Yield -------------------------------------------------------------------------------------------------------- Available for sale securities: U.S. Government, agency and corporate obligations $ 1,995 5.31% $ 23,711 5.85% $ 22,316 6.70% $ 3,899 7.13% Other -0- N/A -0- N/A -0- N/A 1,238 22.73% ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- Totals $ 1,995 5.31% $ 23,711 5.85% $ 22,316 6.70% $ 5,137 7.91% ========== ========== ========== ========== ========== ========== ========== ========== Held to maturity securities: U. S Government, agency and corporate obligations $ 53,706 8.68% $ 65,416 6.24% $ 2,968 6.79% $ -0- N/A States and political subdivisions 393 5.37% 1,729 6.45% 2,060 6.49% $ 1,598 5.42% ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- Totals $ 54,099 8.66% $ 67,145 6.25% $ 5,028 6.67% $ 1,598 5.42% ========== ========== ========== ========== ========== ========== ========== ==========
Note: The weighted average yields are calculated on the basis of cost. Average yields on investments in states and political subdivisions are based on their contractual yield. 15 18 SCHEDULE III-A Loan Portfolio Loans by Type Outstanding (1)
December 31, (In thousands): 1996 1995 1994 1993 1992 - ---------------------------------------------------------------------------------------------------- Real estate, construction $ 14,704 $ 16,473 $ 14,056 $ 5,333 $ 1,077 Real estate, mortgage 137,766 138,254 131,584 118,838 105,947 Loans to finance agricultural production and other loans to farmers 10,483 9,962 11,259 6,528 10,032 Commercial and industrial loans 48,057 39,228 42,505 30,675 19,065 Loans to individuals for household, family and other consumer expenditures 11,179 11,903 13,114 12,533 11,963 Obligations of states and political subdivisions 4,496 5,469 6,752 7,636 10,580 All other loans 1,824 2,780 3,572 3,599 21,837 ---------- ---------- ---------- ---------- ---------- Totals $ 228,509 $ 224,069 $ 222,842 $ 185,142 $ 180,501 ========== ========== ========== ========== ==========
(1) No foreign debt outstanding. 16 19 SCHEDULE III-B Maturities and Sensitivity to Changes in Interest Rates of the Loan Portfolio as of December 31, 1996
Maturity (In thousands) ------------------------------------------------- Over one One year or year through less 5 years Over 5 years Total ------------------------------------------------- Loans: Real estate, construction $ 5,325 $ 8,198 $ 1,181 $ 14,704 Real estate, mortgage 32,363 96,625 8,778 137,766 Loans to finance agricultural production and other loans to farmers 9,576 907 -0- 10,483 Commercial and industrial loans 26,935 18,841 2,281 48,057 Loans to individuals for household, family and other consumer expenditures 4,743 6,304 132 11,179 Obligations of states and political subdivisions 87 1,195 3,214 4,496 All other loans 1,801 23 -0- 1,824 ---------- ---------- ---------- ---------- Totals $ 80,830 $ 132,093 $ 15,586 $ 228,509 ========== ========== ========== ========== Loans with pre- determined interest rates $ 29,800 $ 66,450 $ 6,380 $ 102,630 Loans with floating interest rates 51,030 65,643 9,206 125,879 ---------- ---------- ---------- ---------- Totals $ 80,830 $ 132,093 $ 15,586 $ 228,509 ========== ========== ========== ==========
17 20 SCHEDULE III-C Non-Performing Loans
December 31, (In thousands): 1996 1995 1994 1993 1992 - --------------------------------------------------------------------------------------------- Loans accounted for on a non-accrual basis (1) $ 546 $ 610 $ 138 $ 1,628 $ 3,277 Loans which are contractually past due 90 or more days as to interest or principal payment, but are not included above 3,026 146 474 536 26 Loans the term of which have been renegotiated to provide a reduction or deferral of interest or principal because of a deterioration in the financial position of the borrower, but are not included above (2) 2,304 2,328 2,502 2,703 2,792
(1) The Bank places loans on a nonaccrual status when, in the opinion of Management, they possess sufficient uncertainty as to timely collection of interest or principal so as to preclude the recognition in reported earnings of some or all of the contractual interest. The amount of interest that would have been earned on these loans had they been on accrual during 1996 was approximately $48,000. The Bank did receive $16,000 in interest payments during 1996 so that the net effect of recording income on nonaccrual loans on the cash basis was to reduce interest income by approximately $32,000 in 1996. (2) Foregone interest on loans whose interest rates were renegotiated was $32,000 in 1996. These loans were renegotiated for a second time in March of 1996 at a current market rate. 18 21 SCHEDULE IV-A Summary of Loan Loss Expenses (In thousands except percentage data)
1996 1995 1994 1993 1992 ---------- ---------- ---------- ---------- ---------- Average amount of loans outstanding (1) $ 224,231 $ 224,819 $ 198,044 $ 185,911 $ 170,761 ========== ========== ========== ========== ========== Balance of allowance for loan losses at the beginning of period $ 4,353 $ 4,901 $ 5,100 $ 4,206 $ 2,584 Loans charged-off: Commercial, financial and agricultural 77 601 79 384 1,144 Consumer and other 62 101 58 143 248 ---------- ---------- ---------- ---------- ---------- Total loans charged-off 139 702 137 527 1,392 Recoveries of loans previously charged-off: Commercial, financial and agricultural 403 63 142 1,045 588 Consumer and other 56 91 96 101 104 ---------- ---------- ---------- ---------- ---------- Total recoveries 459 154 238 1,146 692 ---------- ---------- ---------- ---------- ---------- Net loans (recovered) charged- (320) 548 (101) (619) 700 off Provision for (reduction of) loan losses charged to operating expense (150) -0- (300) 275 2,322 ---------- ---------- ---------- ---------- ---------- Balance of allowance for loan losses at end of period $ 4,523 $ 4,353 $ 4,901 $ 5,100 $ 4,206 ========== ========== ========== ========== ========== Ratio of net charge-offs during period to average loans outstanding (0.14)% 0.24% (0.05)% (0.33)% 0.41% ========== ========== ========== ========== ==========
(1) Net of unearned income. 19 22 SCHEDULE IV-B Allocation of the Allowance for Loan Losses
1996 1995 1994 1993 1992 ----------------------------------------------------------------------------------------- % of % of % of % of % of Loans Loans Loans Loans Loans to to to to to Balance at December Total Total Total Total Total 31, (In thousands) Amount Loans Amount Loans Amount Loans Amount Loans Amount Loans - ----------------------------------------------------------------------------------------------------------------------------------- Real estate, construction $ 294 6 $ 329 7 $ 281 6 $ 107 3 $ 22 1 Real estate, mortgage 2,755 60 2,765 62 2,561 59 3,565 64 2,649 59 Loans to finance agricultural production and other loans to farmers 210 5 199 4 225 5 131 3 200 6 Commercial and industrial loans 961 21 785 18 1,250 19 614 17 381 10 Loans to individuals for household, family and other consumer expenditures 223 5 238 5 262 6 251 7 240 6 Obligations of states and political subdivisions -0- 2 -0- 3 -0- 3 -0- 4 -0- 6 All other loans 36 1 18 1 71 2 80 2 440 12 Unallocated 44 N/A 19 N/A 251 N/A 352 N/A 274 N/A ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- Totals $ 4,523 100 $ 4,353 100 $ 4,901 100 $ 5,100 100 $ 4,206 100 ======= ======= ======= ======= ======= ======= ======= ======= ======= =======
20 23 SCHEDULE V Summary of Average Deposits and Their Yields
1996 1995 1994 ----------------------------------------------------------------- Years Ended December 31, (In thousands except for percentage data) Amount Rate Amount Rate Amount Rate - --------------------------------------------------------------------------------------------- Demand deposits in domestic offices $ 66,215 N/A $ 72,036 N/A $ 84,240 N/A Negotiable interest bearing deposits in domestic offices 149,314 3.44% 152,639 3.30% 157,434 3.07% Savings deposits in domestic offices 36,223 2.25% 36,815 2.33% 42,507 2.26% Time deposits in domestic offices 153,901 5.41% 112,087 5.71% 82,222 4.44% -------- -------- -------- -------- -------- -------- Total deposits $405,653 3.52% $373,577 3.29% $366,403 2.58% ======== ======== ======== ======== ======== ========
Certificates of deposit outstanding in amounts $100,000 or more (in thousands) by the amount of time remaining until maturity as of December 31, 1996, are as follows: Remaining maturity: 3 months or less $66,763 Over 3 through 6 months 8,078 Over 6 months through 12 months 7,841 Over 12 months 2,291 ------- Total $84,973 =======
21 24 SCHEDULE VI Short Term Borrowings (In thousands except percentage data)
1996 1995 1994 ----------------------------------- Amount outstanding at December 31, $ 16,500 $ 12,150 $ 15,900 Weighted average interest rate at December 31, 6.00% 5.00% 6.00% Maximum outstanding at any month-end during year $ 16,500 $ 12,150 $ 15,900 Average amount outstanding during year $ 1,941 $ 1,414 $ 1,479 Weighted average interest rate 5.67% 5.45% 4.67%
Note: Short term borrowings include federal funds purchased from other banks and securities sold under agreements to repurchase. 22 25 SCHEDULE VII Interest Sensitivity/Gap Analysis
December 31, 1996 (In 0 - 3 4 - 12 1 - 5 Over 5 thousands) Months Months Years Years Total - ------------------------------------------------------------------------------------------------------- ASSETS: Loans $ 32,213 $ 48,374 $ 131,934 $ 15,442 $ 227,963 Available for sale securities -0- 1,995 23,711 27,453 53,159 Held to maturity securities 25,964 28,135 67,145 6,626 127,870 ------------ ------------ ------------ ------------ ------------ Total assets $ 58,177 $ 78,504 $ 222,790 $ 49,521 $ 408,992 ============ ============ ============ ============ ============ FUNDING SOURCES: Interest bearing deposits $ 234,147 $ 45,005 $ 15,350 $ 94 $ 294,596 Long-term funds 2 10 53 162 227 ------------ ------------ ------------ ------------ ------------ Total funding sources $ 234,149 $ 45,015 $ 15,403 $ 256 $ 294,823 ============ ============ ============ ============ ============ REPRICING/MATURITY GAP: Period $ (175,972) $ 33,489 $ 207,387 $ 49,265 Cumulative (175,972) (142,483) 64,904 114,169 Period Gap/Total Assets (43.03)% 8.19 % 50.71% 12.05% Cumulative Gap/Total Assets (43.03)% (34.84)% 15.87% 27.91%
(1) Amounts stated include fixed and variable rate investments of the balance sheet that are still accruing interest. Variable rate instruments are included in the next period in which they are subject to a change in rate. The principal portions of scheduled payments on fixed rate instruments are included in periods in which they become due or mature. 23 26 ITEM 2 - PROPERTIES The principal properties of the Company are its 13 business locations, including the Main Office, which is located at 152 Lameuse Street in Biloxi, MS. All such properties are owned by the Company. The operations center is subject to a mortgage from the Small Business Administration. The address of the Main Office and branch locations are listed on page 43 of the Annual Report to Shareholders. ITEM 3 - LEGAL PROCEEDINGS The information included in Note J to the Consolidated Financial Statements included in the 1996 Annual Report to Shareholders is incorporated herein by reference. ITEM 4 - SUBMISSION OF MATTERS TO VOTE OF SECURITIES HOLDERS None. PART II ITEM 5 - MARKET INFORMATION The information provided on page 13 of the 1996 Annual Report is incorporated herein by reference. ITEM 6 - SELECTED FINANCIAL DATA The information under the caption "Five Year Comparative Summary of Selected Financial Information" on page 8 of the 1996 Annual Report is incorporated herein by reference. ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The information under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations" on pages 9 - 12 of the 1996 Annual Report is incorporated herein by reference. 24 27 ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA The following consolidated financial statements of the Company and consolidated subsidiaries and the independent auditors' report appearing on pages 14 - 41 of the 1996 Annual Report are incorporated herein by reference: Consolidated Statements of Condition on pages 14 and 15 Consolidated Statements of Income on page 16 Consolidated Statements of Shareholders' Equity on page 17 Consolidated Statements of Cash Flows on page 19 Notes to Consolidated Financial Statements on pages 20 - 40 Independent Auditors' Report on page 41 ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The information in Sections II and IX contained in the Proxy Statement in connection with the Annual Meeting of Shareholders to be held April 9, 1997, which was filed by the Company in definitive form with the Commission on March 5, 1997, is incorporated herein by reference. ITEM 11 - EXECUTIVE COMPENSATION The information in Section V contained in the Proxy Statement in connection with the Annual Meeting of Shareholders to be held April 9, 1997, which was filed by the Company in definitive form with the Commission on March 5, 1997, is incorporated herein by reference. 25 28 ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information in Sections III and IV contained in the Proxy Statement in connection with the Annual Meeting of Shareholders to be held April 9, 1997, which was filed by the Company in definitive form with the Commission on March 5, 1997, is incorporated herein by reference. ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information in Sections V, VI, VII and VIII contained in the Proxy Statement in connection with the Annual Meeting of Shareholders to be held April 9, 1997, which was filed by the Company in definitive form with the Commission on March 5, 1997, and is incorporated herein by reference. PART IV ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8 - K (a) 1. Index of Financial Statements: See Item 8. (a) 2. Index of Financial Schedules: All other schedules have been omitted as not applicable or not required or because the information has been included in the financial statements or applicable notes. (a) 3. Index of Exhibits:
Incorporated by Reference to Exhibit Registration or Form of Number in Description File Number Report Date of Report Report --------------------------------------------------------------------------- (3.1) Articles of 33-15595 10-K 12/31/93 3.1 Incorporation (3.2) By-Laws 33-15595 10-K 12/31/93 3.2
26 29
Incorporated by Reference to Exhibit Registration or Form of Number in Description File Number Report Date of Report Report ----------------------------------------------------------------------------------------------------------------------- (10.1) Description of Automobile 33-15595 10-K 12/31/88 10.1 Plan (10.2) Description of Directors' 33-15595 10-K 12/31/88 10.2 Deferred Income Plan (10.3) Description of Executive 33-15595 10-K 12/31/88 10.3 Supplemental Plan (10.4) Split-Dollar Insurance 33-15595 10-K 12/31/93 10.4 Agreement (10.5) Deferred Compensation Plan 33-15595 10-K 12/31/93 10.5 (13) Annual Report to Shareholders for year ended December 31, 1996 * (c) (21) Proxy Statement for Annual Meeting of Shareholders to be held April 9, 1997 (22) Subsidiaries of the 33-15595 10-K 12/31/88 22 registrant (23) Consent of Certified Public Accountants * (27) Financial Data Schedule *
(b) No report on Form 8-K was filed during the fourth quarter of the year ended December 31, 1996. (c) Furnished for the information of the Commission only and not deemed "filed" except for those portions which are specifically incorporated herein. * Filed herewith. 27 30 SIGNATURES Pursuant to the requirements of Section 13 of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. PEOPLES FINANCIAL CORPORATION (Registrant) Date: March 19, 1997 ------------------------- BY: /s/ Chevis C. Swetman --------------------------- Chevis C. Swetman, Chairman of the Board Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. BY: /s/ Drew Allen BY: /s/ Chevis C. Swetman ------------------------------------- -------------------------- Date: March 19, 1997 Date: March 19, 1997 ---------------------------------- ------------------------ Drew Allen Chevis C. Swetman Director President, Chief Executive Officer and Director BY: /s/ William A. Barq BY: /s/ F. Walker Tucei ------------------------------------- -------------------------- Date: March 19, 1997 Date: March 19, 1997 ----------------------------------- ------------------------ William A. Barq F. Walker Tucei Director Director BY: /s/ Andy Carpenter BY: /s/ Lauri A. Wood ------------------------------------- -------------------------- Date: March 19, 1997 Date: March 19. 1997 ----------------------------------- ------------------------ Andy Carpenter Lauri A. Wood Executive Vice President and Director Principal Financial and Accounting Officer
28 31 INDEX TO EXHIBITS
EXHIBIT NUMBER DESCRIPTION - ------- ----------- 13 Annual Report to Shareholders for year ended December 31, 1996 23 Consent of Certified Public Accountants 27 Financial Data Schedule
EX-13 2 ANNUAL REPORT TO SECURITY HOLDERS 1 Exhibit 13: Annual Report to Shareholders 2 CONSOLIDATED STATEMENTS OF CONDITION Peoples Financial Corporation and Subsidiaries
December 31, 1996 1995 1994 - ---------------------------------------------------------------------------------------- ASSETS Cash and due from banks $ 26,873,638 $ 24,220,348 $ 20,779,080 Available for sale securities 53,159,353 20,829,655 198,083 Held to maturity securities, fair value of $128,879,000 - 1996; $167,384,000 - 1995; $156,660,000 - 1994 127,870,283 165,142,083 159,498,209 Loans 228,508,895 224,069,011 222,841,508 Less: Unearned income 17,295 22,531 11,682 Allowance for loan losses 4,522,704 4,352,967 4,901,453 ------------ ------------ ------------ Loans, net 223,968,896 219,693,513 217,928,373 Bank premises and equipment, net 8,626,068 8,789,642 8,636,809 Other real estate 264,962 726,838 946,526 Accrued interest receivable 3,891,465 3,169,666 3,322,214 Other assets 2,958,967 2,919,601 2,548,002 Intangible assets 495,993 813,825 1,131,657 ------------ ------------ ------------ TOTAL ASSETS $448,109,625 $446,305,171 $414,988,953 ============ ============ ============
See Notes to Consolidated Financial Statements. 3 CONSOLIDATED STATEMENTS OF CONDITION (continued) Peoples Financial Corporation and Subsidiaries
December 31, 1996 1995 1994 - ------------------------------------------------------------------------------------------------------ LIABILITIES & SHAREHOLDERS' EQUITY Liabilities: Deposits: Demand, non-interest bearing $ 73,535,221 $ 63,255,936 $ 67,741,827 Savings and demand, interest bearing 153,596,132 174,721,683 196,772,760 Time, $100,000 or more 84,973,369 84,117,293 33,959,293 Other time deposits 56,027,287 54,076,823 49,716,535 ------------- ------------- ------------- Total deposits 368,132,009 376,171,735 348,190,415 Accrued interest payable 1,005,508 1,139,768 450,156 Federal funds purchased 16,500,000 12,150,000 15,900,000 Notes payable 226,608 437,520 622,862 Other liabilities 1,891,296 1,823,743 1,384,450 ------------- ------------- ------------- TOTAL LIABILITIES 387,755,421 391,722,766 366,547,883 SHAREHOLDERS' EQUITY: Common Stock, $1 par value, 1,500,000 shares authorized, 738,168 shares issued and outstanding at December 31, 1996, 1995 and 1994, after giving retroactive effect to one stock split effective October 16, 1996 and Two for two for one stock split effective November 22, 1995 738,168 738,168 738,168 Surplus 53,926,262 48,926,262 43,176,262 Undivided profits 5,428,068 5,075,542 4,901,640 Unrealized gain on available for sale securities, net of tax 261,706 336,945 Additional minimum liability in excess of prior service cost, net of tax (294,512) Note payable offset associated with employee stock ownership plan (200,000) (375,000) ------------- ------------- ------------- TOTAL SHAREHOLDERS' EQUITY 60,354,204 54,582,405 48,441,070 ------------- ------------- ------------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 448,109,625 $ 446,305,171 $ 414,988,953 ============= ============= =============
See Notes to Consolidated Financial Statements. 4 CONSOLIDATED STATEMENTS OF INCOME Peoples Financial Corporation and Subsidiaries
Years Ended December 31, 1996 1995 1994 - --------------------------------------------------------------------------------------------------------------------- INTEREST INCOME: Interest and fees on loans $ 20,414,470 $ 21,364,008 $ 17,093,692 Interest and dividends on securities: U. S. Treasury 7,992,855 8,138,663 8,812,526 U. S. Government agencies and corporations 3,809,117 898,990 483,115 States and political subdivisions 403,698 398,584 434,683 Other investments 45,322 17,590 16,111 Interest on federal funds sold 582,321 667,429 345,468 ----------------------- ----------------------- ----------------------- TOTAL INTEREST INCOME 33,247,783 31,485,264 27,185,595 ----------------------- ----------------------- ----------------------- INTEREST EXPENSE: Time deposits of $100,000 or more 5,092,411 3,315,121 1,320,796 Other deposits 9,190,266 8,967,278 8,118,392 Mortgage indebtedness 12,512 13,082 13,623 Federal funds purchased 110,324 76,757 69,498 ----------------------- ----------------------- ----------------------- TOTAL INTEREST EXPENSE 14,405,513 12,372,238 9,522,309 ----------------------- ----------------------- ----------------------- NET INTEREST INCOME 18,842,270 19,113,026 17,663,286 REDUCTION OF ALLOWANCE FOR LOSSES ON LOANS 150,000 300,000 ----------------------- ----------------------- ----------------------- NET INTEREST INCOME AFTER REDUCTION OF ALLOWANCE FOR LOSSES ON LOANS 18,992,270 19,113,026 17,963,286 ----------------------- ----------------------- ----------------------- OTHER OPERATING INCOME: Trust department income and fees 932,502 1,013,858 886,449 Service charges on deposit accounts 3,763,566 3,384,659 2,479,815 Other service charges, commissions and fees 246,579 262,970 281,063 Other income 621,730 578,361 314,178 ----------------------- ----------------------- ----------------------- TOTAL OTHER OPERATING INCOME 5,564,377 5,239,848 3,961,505 ----------------------- ----------------------- -----------------------
5 OTHER OPERATING EXPENSE: Salaries and employee benefits 7,932,306 6,886,597 6,358,110 Net occupancy 780,928 940,164 801,464 Equipment rentals, depreciation and maintenance 1,633,110 1,481,108 1,528,297 Other expense 5,071,101 5,227,131 4,778,758 ----------- ----------- ----------- TOTAL OTHER OPERATING EXPENSE 15,417,445 14,535,000 13,466,629 ----------- ----------- ----------- INCOME BEFORE INCOME TAXES 9,139,202 9,817,874 8,458,162 Income taxes 2,993,145 3,146,577 2,842,623 ----------- ----------- ----------- NET INCOME $ 6,146,057 $ 6,671,297 $ 5,615,539 =========== =========== =========== EARNINGS PER SHARE $ 8 $ 9 $ 8 =========== =========== ===========
See Notes to Consolidated Financial Statements. 6 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY Peoples Financial Corporations and Subsidiaries
Additional minimum Unrealized liability in gain on excess of Note Number available for prior payable of sale service offset common Common Undivided securities, cost, net of associated shares stock Surplus profits net of tax tax with ESOP Total --------------------------------------------------------------------------------------------------------- BALANCE, JANUARY 1, 1994 369,084 $369,084 $38,545,346 $4,955,066 $ -0- $ -0- $ (550,000) $43,319,496 Two-for-one stock split 369,084 369,084 (369,084) ---------------------------------------------------------------------------------------------------------- BALANCE, JANUARY 1, 1994, AS RESTATED 738,168 738,168 38,176,262 4,955,066 -0- -0- (550,000) 43,319,496 Net income 5,615,539 5,615,539 Cash dividends, common ($ .90625 per share) (668,965) (668,965) Transfer of undivided profits 5,000,000 (5,000,000) Reduction to note payable offset associated with esop 175,000 175,000 ---------------------------------------------------------------------------------------------------------- BALANCE, DECEMBER 31, 1994, AS RESTATED 738,168 738,168 43,176,262 4,901,640 -0- -0- (375,000) 48,441,070 Net income 6,671,297 6,671,297 Cash dividends, common ($1.0125 per share) (747,395) (747,395) Transfer of undivided profits 5,750,000 (5,750,000) Net change in unrealized gain on available for sale securities, net of tax 336,945 336,945 Additional minimum liability in excess of prior service cost, net of tax (294,512) (294,512) Reduction to note payable offset associated with esop 175,000 175,000 --------------------------------------------------------------------------------------------------------- BALANCE, DECEMBER 31, 1995, AS RESTATED 738,168 738,168 48,926,262 5,075,542 336,945 (294,512) (200,000) 54,582,405
7 Net income 6,146,057 6,146,057 Cash dividends, common ($1.075 per share) (793,531) (793,531) Transfer of undivided profits 5,000,000 (5,000,000) Net change in unrealized gain on available for sale securities, net of tax (75,239) (75,239) Additional minimum liability in excess of prior service cost, net of tax 294,512 294,512 Reduction to note payable offset associated with esop 200,000 200,000 -------------------------------------------------------------------------------------------------------- BALANCE, DECEMBER 31, 1996 738,168 $ 738,168 $ 53,926,262 $ 5,428,068 $ 261,706 $ -0- $ -0- $ 60,354,204 ==========================================================================================================
See Notes to Consolidated Financial Statements. 8 CONSOLIDATED STATEMENTS OF CASH FLOWS Peoples Financial Corporation and Subsidiaries
Years Ended December 31, 1996 1995 1994 - ----------------------------------------------------------------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 6,146,057 $ 6,671,297 $ 5,615,539 Adjustments to reconcile net income to net cash provided by operating activities: Proceeds from sales of other real estate and other property 322,700 242,720 815,382 Gain on sales of other real estate and other property (145,850) (29,071) (263,191) Depreciation and amortization 1,322,449 1,297,275 1,359,309 Pension plan termination cost 446,230 Reduction of allowance for loan losses (150,000) (300,000) Provision for losses on other real estate 154,376 159,247 152,637 Purchase of other real estate (100,708) Changes in assets and liabilities: Accrued interest receivable (721,799) 152,548 (785,704) Other assets 112,665 (291,618) (13,043) Accrued interest payable (134,260) 689,612 119,787 Other liabilities 67,553 335,943 133,782 ----------------------------------------------- NET CASH PROVIDED BY OPERATING ACTIVITIES 7,420,121 9,127,245 6,834,498 ----------------------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from maturities and calls of available for sale securities 19,935,000 Investment in available for sale securities (52,377,557) (20,120,942) Proceeds from maturities and calls of held to maturity securities 160,217,482 111,143,796 126,275,000 Investment in held to maturity securities (122,945,682) (116,787,670) (128,752,432) Loans, net increases (4,125,383) (1,817,640) (37,975,518) Acquisition of premises and equipment (710,393) (1,132,276) (1,527,437) Retirement of premises and equipment 212,089 Federal funds sold 1,800,000 Other assets (266,129) (229,054) (90,642) ------------------------------------------------ NET CASH USED IN INVESTING ACTIVITIES (272,662) (28,943,786) (40,058,940) ------------------------------------------------
9 CASH FLOWS FROM FINANCING ACTIVITIES: Demand and savings deposits, net increase (decrease) (10,846,266) (26,536,968) 15,735,820 Time deposits made, net increase 2,806,540 54,518,288 8,029,105 Principal payments on notes (10,912) (10,342) (9,801) Cash dividends (793,531) (747,395) (668,965) Federal funds purchased, net increase (decrease) 4,350,000 (3,750,000) 15,900,000 Pension plan additional minimum liability contributed (215,774) -------------------------------------------- NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (4,494,169) 23,257,809 38,986,159 -------------------------------------------- NET INCREASE IN CASH AND CASH EQUIVALENTS 2,653,290 3,441,268 5,761,717 CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 24,220,348 20,779,080 15,017,363 -------------------------------------------- CASH AND CASH EQUIVALENTS, END OF YEAR $ 26,873,638 $ 24,220,348 $ 20,779,080 ============================================
See Notes to Consolidated Financial Statements. 10 Notes To Consolidated Financial Statements Peoples Financial Corporation and Subsidiaries NOTE A - ACCOUNTING POLICIES: Business of The Company Peoples Financial Corporation is a one-bank holding company headquartered in Biloxi, Mississippi. Its two operating subsidiaries are The Peoples Bank, Biloxi, Mississippi, and PFC Service Corp. Its principal subsidiary is The Peoples Bank, Biloxi, Mississippi, which provides a full range of banking, financial and trust services to individuals and small and commercial businesses operating in 12 locations in Harrison, Hancock and west Jackson counties. Principles of Consolidation The consolidated financial statements include the accounts of Peoples Financial Corporation and its wholly owned subsidiaries, The Peoples Bank, Biloxi, Mississippi, and PFC Service Corp. All significant intercompany transactions and balances have been eliminated. Basis of Accounting Peoples Financial Corporation and Subsidiaries recognize assets and liabilities, and income and expense, on the accrual basis of accounting. The preparation of financial statements in conformity with generally accepted accounting principles requires Management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. Cash and Due from Banks The Company is required to maintain average reserve balances in its vault or on deposit with the Federal Reserve Bank. The average amount of these reserve requirements was approximately $8,388,000, $9,193,000 and $9,770,000 for the years ending December 31, 1996, 1995 and 1994, respectively. The Company's bank subsidiary maintained account balances in excess of amounts insured by the Federal Deposit Insurance Corporation. At December 31, 1996, the bank subsidiary had excess deposits of $1,951,936. These amounts were uninsured and uncollateralized. Securities In May 1993, the Financial Accounting Standards Board issued SFAS 115, "Accounting for Certain Investments in Debt and Equity Investments." SFAS 115 prescribes the accounting and reporting for certain investments in equity securities and debt securities. Investments are to be classified in one of three categories: held to maturity, trading or available for sale. The classification of an investment determines its accounting treatment. This Statement became effective for the Company on January 1, 1994. Available for sale securities are stated at fair value. The unrealized difference, if any, between amortized cost and fair value of these securities is excluded from earnings and is reported, net of 11 deferred taxes, as a component of shareholders' equity. Held to maturity securities are stated at cost, adjusted for amortization of premiums and accretion of discounts. Most of the Company's portfolio is classified as held to maturity since it has the positive intent and ability to hold its investments until maturity. Gains or losses, if any, are recognized as income when realized and are computed based on the amortized cost of the specific securities sold. Loans Loans are stated at the amount of unpaid principal, reduced by unearned income and the allowance for loan losses. Interest on loans is recognized over the terms of the loan based on the unpaid principal balances. Loan origination fees are recognized as income when received. Revenue from these fees is not material to the financial statements. The Company places loans on a nonaccrual status when, in the opinion of Management, they possess sufficient uncertainty as to timely collection of interest or principal so as to preclude the recognition in reported earnings of some or all of the contractual interest. Accrued interest on loans classified as nonaccrual is reversed at the time the loans are placed on nonaccrual. In June 1993, the Financial Accounting Standards Board issued Statement No. 114, "Accounting by Creditors for Impairment of a Loan" and in October 1994, issued Statement No. 118, "Accounting by Creditors for Impairment of a Loan - Income Recognition and Disclosure." These Statements became effective for the Company on January 1, 1995. SFAS 114 and 118 address loan impairment and the related measurement methods. The Statements stipulate that loans shall be identified as being impaired if it is doubtful that all principal and interest due contractually under the terms of the loan agreement will be collected. When a loan is impaired as defined by the Statements, measurement of impairment shall be based on the present value of the expected future cash flows discounted at that loan's effective interest rate except that, as a practical expedient, measurement may be based on a loan's observable market price, or the fair value of the collateral if the loan is collateral dependent. The Company has determined that all loans which have been classified as impaired are also collateral dependent. Accordingly, the allowance for losses on these impaired loans has been computed using the fair value of the underlying collateral. The loans which have been classified as impaired under SFAS 114 had previously been identified by the Company as loans for which a specific reserve should be established. The Company had in prior years computed the allowance on such loans in a similar manner as that required under SFAS 114. Therefore, no additional allowance was required at January 1, 1995, in order to implement SFAS 114. The provisions of SFAS 118 concerning recognition of interest income on impaired loans allow for the Company to continue its present recognition polices discussed above. Allowance for Loan Losses The allowance for loan losses is based on Management's evaluation of the loan portfolio under current economic conditions and is an amount that Management believes will be adequate to absorb probable losses on loans existing at the reporting date. The evaluation includes the nature and volume of the loan portfolio, a study of loss experience, a review of delinquencies, the estimated value of any underlying collateral and an estimate of the possibility of loss based on the risk characteristics of the portfolio. 12 Bank Premises and Equipment Bank premises and equipment are stated at cost, less accumulated depreciation. Depreciation is computed primarily by the straight-line method based on the estimated useful lives of the related assets. Other Real Estate Other real estate acquired through foreclosure is carried at the lower of cost (primarily outstanding loan balance) or estimated market value, less estimated costs to sell. If, at foreclosure, the carrying value of the loan is greater than the estimated market value of the property acquired, the excess is charged against the allowance for loan losses and any subsequent adjustments are charged to expense. Costs of operating and maintaining the properties, net of related income and gains (losses) on their disposition, are charged to expense as incurred. Intangible Assets The excess of the purchase price over the value of the net tangible assets acquired in the Gulf National Bank acquisition on August 19, 1988, was assigned primarily to the value of core deposits and is being amortized over 10 years. The core deposits acquired in the main branch of the Southern Federal Bank for Savings acquisition on August 16, 1991, are being amortized over the estimated lives of the demand deposits (72 months), savings deposits (84 months) and certificates (84 months) acquired. Trust Department Income and Fees Trust fees are recorded when received. These fees amounted to $932,502, $1,013,858 and $886,449 in 1996, 1995 and 1994, respectively. Income Taxes The Company files a consolidated tax return with its wholly owned subsidiaries. The tax liability of each entity is allocated based on the entity's contribution to consolidated taxable income. The provision for applicable income taxes is based upon reported income and expenses as adjusted for differences between reported income and taxable income. The primary differences are exempt income on state, county and municipal securities; differences in provisions for losses on loans as compared to the amount allowable for income tax purposes; directors' and officers' insurance; depreciation for income tax purposes over that reported for financial statements and gains reported under the installment sales method for tax purposes. Leases All leases are accounted for as operating leases in accordance with the terms of the leases. Earnings Per Share Primary earnings per share is computed on the basis of the weighted average number of common shares outstanding, 738,168 in 1996, 1995 and 1994. Statements of Cash Flows The Company has defined cash and cash equivalents to include cash and due from banks. The Company paid $14,539,773, $11,682,626 and $9,402,522 in 1996, 1995 and 1994, 13 respectively, for interest on deposits and borrowings. Income tax payments totaled $2,869,605, $3,498,388 and $2,787,144 in 1996, 1995 and 1994, respectively. Loans transferred to other real estate amounted to $52,500 and $371,750 in 1995 and 1994, respectively. No loans were transferred to other real estate in 1996. After receiving regulatory approval, the Company transferred property with a book value of $130,650 from other real estate into banking premises during 1996. Reclassifications Certain reclassifications have been made to the prior year statements to conform to current year presentation. The reclassifications had no effect on prior year net income. NOTE B - SECURITIES: The amortized cost and estimated fair value of securities at December 31, 1996, 1995 and 1994, respectively, are as follows (in thousands):
GROSS GROSS AMORTIZED UNREALIZED UNREALIZED ESTIMATED DECEMBER 31, 1996 COST GAINS LOSSES FAIR VALUE - -------------------------------------------------------------------------------------------- Available for sale securities: Debt securities: U. S. Treasury $ 5,969 $ 2 $ (37) $ 5,934 U. S. Government agencies and corp 46,594 41 (648) 45,987 -------- -------- -------- -------- Total debt securities 52,563 43 (685) 51,921 Equity securities 198 1,040 1,238 -------- -------- -------- -------- Total available for sale securities $ 52,761 $ 1,083 $ (685) $ 53,159 ======== ======== ======== ======== Held to maturity securities: U. S. Treasury $108,568 $ 830 $ (188) $109,210 U. S. Government agencies and corp 13,522 34 (39) 13,517 States and political subdivisions 5,780 373 (1) 6,152 -------- -------- -------- -------- Total held to maturity securities $127,870 $ 1,237 $ (228) $128,879 ======== ======== ======== ========
14
Gross Gross Amortized unrealized unrealized Estimated December 31, 1995 cost gains losses fair value - -------------------------------------------------------------------------------------------- Available for sale securities: Debt securities: U. S. Treasury $ 2,949 $ 52 $ $ 3,001 U. S. Government agencies and corp 17,172 3 (31) 17,144 -------- -------- -------- -------- Total debt securities 20,121 55 (31) 20,145 Equity securities 198 487 685 -------- -------- -------- -------- Total available for sale securities $ 20,319 $ 542 $ (31) $ 20,830 ======== ======== ======== ======== Held to maturity securities: U. S. Treasury $152,632 $ 1,858 $ (182) $154,308 U. S. Government agencies and corp 8,024 82 (22) 8,084 States and political subdivisions 4,486 509 (3) 4,992 -------- -------- -------- -------- Total held to maturity securities $165,142 $ 2,449 $ (207) $167,384 ======== ======== ======== ========
Gross Gross Amortized unrealized unrealized Estimated December 31, 1994 cost gains losses fair value - -------------------------------------------------------------------------------------------- Available for sale securities: Equity securities $ 198 $ $ $ 198 -------- -------- -------- -------- Total available for sale securities $ 198 $ $ $ 198 ======== ======== ======== ======== Held to maturity securities: U. S. Treasury $146,214 $ 183 $ (3,012) $143,385 U. S. Government agencies and corp 9,022 (352) 8,670 States and political subdivisions 4,262 440 (97) 4,605 -------- -------- -------- -------- Total held to maturity securities $159,498 $ 623 $ (3,461) $156,660 ======== ======== ======== ========
15 The amortized cost and estimated fair value of debt securities at December 31, 1996, (in thousands) by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
ESTIMATED FAIR AMORTIZED COST VALUE ----------------------------------------- Available for sale securities: Due in one year or less $ 1,998 $ 1,995 Due after one year through five years 23,935 23,711 Due after five years through ten years 22,630 22,316 Due after ten years 4,000 3,899 ------------- ------------- Totals $ 52,563 $ 51,921 ============= ============= Held to maturity securities: Due in one year or less $54,099 $54,209 Due after one year through five years 67,145 67,722 Due after five years through ten years 5,028 5,284 Due after ten years 1,598 1,664 ------------- ------------- Totals $ 127,870 $ 128,879 ============= =============
Available for sale securities include equity securities of Hibernia Corporation. The Company had acquired common and preferred shares of Progressive Bancorporation in 1993 from a debt previously contracted and had recorded the shares at their estimated value of $1.00. During 1995, Progressive was acquired by Hibernia Corporation. As a result of the merger, the Company received cash for its Progressive preferred shares and common stock of Hibernia in exchange for the Progressive common. The Company holds the Hibernia common as an 16 available for sale security and recorded the stock at its fair value, with an unrealized gain of $596,205 recorded, net of deferred tax, as an adjustment to shareholders' equity. During 1994, the Company purchased three multi-step up instruments issued by the Federal Home Loan Bank with a total par value of $4,000,000. These instruments had original maturity dates in 1996 and 2009 and provided for a call option by the issuer at each interest payment date until maturity. There was a fixed increase in the interest rate on an annual basis. The Company purchased these instruments in the management of its interest rate exposure since these notes carried a higher rate of interest than other agency notes available at the time of purchase. Appropriate review of the market value and risk associated with these investments is performed by Management. These investments were classified as held to maturity and carried at amortized cost in compliance with Management's positive intent and ability to hold these investments until maturity. During 1995 and 1996, these investments were called at par value. During 1996, the Company purchased a multi-step up instrument issued by the Federal Home Loan Bank with a par value of $2,000,000 which matures in 2001. This instrument, which the Company still held at December 31, 1996, has been classified as available for sale. Proceeds from maturities and calls of held to maturity securities during 1996, 1995 and 1994 were $160,217,482, $111,143,796 and $126,275,000, respectively. There were no sales of held to maturity securities during 1994, 1995 and 1996. Proceeds from maturities and calls of available for sale securities were $19,935,000 during 1996. There were no maturities of available for sale securities during 1995 and 1994. There were no sales of available for sale securities during 1994, 1995 and 1996. Securities with a carrying value of approximately $165,515,000, $172,802,000 and $146,350,000 at December 31, 1996, 1995 and 1994, respectively, were pledged to secure public deposits, federal funds purchased and other balances required by law. NOTE C - LOANS: The composition of the loan portfolio was as follows (in thousands):
December 31, 1996 1995 1994 - ---------------------------------------------------------------- Real estate, construction $ 14,704 $ 16,473 $ 14,056 Real estate, mortgage 137,766 138,254 131,584 Loans to finance agricultural production and other loans to farmers 10,483 9,962 11,259 Commercial and industrial loans 48,057 39,228 42,505 Loans to individuals for household, family and other consumer expenditures 11,179 11,903 13,114
17 Obligations of states and political subdivisions (primarily industrial revenue bonds and local government tax anticipation notes) 4,496 5,469 6,752 All other loans 1,824 2,780 3,572 --------- --------- --------- Totals $ 228,509 $ 224,069 $ 222,842 ========= ========= =========
Transactions in the allowance for loan losses are as follows (in thousands):
1996 1995 1994 ----------------------------------- Balance, January 1 $ 4,353 $ 4,901 $ 5,100 Recoveries 459 154 238 Loans charged off (139) (702) (137) Reduction of allowance for loan losses (150) (300) --------- --------- --------- Balance, December 31 $ 4,523 $ 4,353 $ 4,901 ========= ========= =========
In the ordinary course of business, the Company extends loans to certain officers and directors and their personal business interests at, in the opinion of Management, terms and rates comparable to other loans of similar credit risks. These loans do not involve more than normal risk of collectability and do not include other unfavorable features. An analysis of the activity with respect to such loans to related parties is as follows (in thousands):
1996 1995 1994 -------------------------------- Balance, January 1 $ 6,857 $ 6,066 $ 8,281 January 1 balance, loans of directors appointed in current year 224 New loans and advances 28,599 24,908 26,612 Repayments (27,789) (24,117) (28,827) -------- -------- -------- Balance, December 31 $ 7,891 $ 6,857 $ 6,066 ======== ======== ========
18 Industrial revenue bonds with a carrying value of $3,318,251, $4,037,834 and $4,204,037 at December 31, 1996, 1995 and 1994, respectively, were pledged to secure public deposits. Nonaccrual loans amounted to approximately $546,000, $610,000 and $138,000 and renegotiated loans amounted to approximately $2,303,562, $2,327,838 and $2,502,000 at December 31, 1996, 1995 and 1994, respectively. The Company recognized $167,982 in interest income on renegotiated loans during 1996. The amount of interest that would have been recognized during 1996 under the original terms of the loan agreements was $200,203. The total recorded investment in impaired loans amounted to $1,017,000 and $1,443,000 at December 31, 1996 and 1995, respectively. The amount of that recorded investment in impaired loans for which there is a related allowance for loan losses and the amount of that allowance was $149,000 at December 31, 1995. The amount of that recorded investment in impaired loans for which there is no related allowance for loan losses was $1,017,000 and $1,294,000 at December 31, 1996 and 1995, respectively. At December 31, 1996, the average recorded investment in impaired loans was $1,031,000. During 1996, the Company recognized $61,000 in interest income on impaired loans and received $57,000 in interest payments on impaired loans. NOTE D - BANK PREMISES AND EQUIPMENT: Bank premises and equipment are shown as follows (in thousands):
Estimated December 31, useful lives 1996 1995 1994 - ------------------------------------------------------------------------------ Land $ 1,314 $ 1,293 $ 1,303 Buildings 5-40 years 8,659 8,369 8,175 Furniture,fixtures and equipment 5-10 years 5,533 5,299 4,558 ------- ------- ------- Totals, at cost 15,506 14,961 14,036 Less: Accumulated depreciation 6,880 6,171 5,399 ------- ------- ------- Totals $ 8,626 $ 8,790 $ 8,637 ======= ======= =======
Depreciation expense charged to operations in 1996, 1995 and 1994 was $1,004,617, $979,442 and $1,041,477, respectively. 19 NOTE E - NOTES PAYABLE:
December 31, 1996 1995 1994 - ------------------------------------------------------------------------------- Small Business Administration, outstanding mortgage on property acquired.The note bears interest at 5 3/8% and is payable at $1,952 monthly through January 16, 2004 $226,608 $237,520 $247,862 First Alabama Bank, $1,250,000 line of credit of Peoples Financial Corporation Employee Stock Ownership Plan, secured by a pledge of 4,426 and 8,588 shares of Company common stock at December 31, 1995 and 1994, respectively, pledge of 36,550 shares of The Peoples Bank, Biloxi, Mississippi, and the guarantee of the Company; interest rate at 85% of the base rate of First Alabama Bancshares, Inc. (7.225% at December 31, 1995 and 1994), plus $43,750 principal quarterly 200,000 375,000 -------- -------- -------- Totals $226,608 $437,520 $622,862 ======== ======== ========
The maturities of notes payable for each of the next five years are as follows: 1997 $ 11,514 1998 12,149 1999 12,819 2000 13,525 2001 14,271 THEREAFTER 162,330 --------- TOTAL $ 226,608 =========
20 NOTE F - INCOME TAXES: Federal income taxes payable (or refundable) and deferred taxes (or deferred charges) as of December 31, 1996, 1995 and 1994, included in other assets or other liabilities, were as follows (in thousands):
December 31, 1996 1995 1994 - ---------------------------------------------------------------------------- Deferred tax assets: Allowance for loan losses $ 776 $ 827 $ 827 Employee benefit plans' liabilities 444 377 289 Other 129 173 157 ------- ------- ------- Deferred tax assets (1,349) (1,377) (1,273) ------- ------- ------- Deferred tax liabilities: Accumulated depreciation 865 795 797 Installment sales 15 16 18 Unrealized gains on available for sale securities, charged to equity 134 174 ------- ------- ------- Deferred tax liabilities 1,014 985 815 ------- ------- ------- Net deferred charges (335) (392) (458) Current (refundable) payable (183) 216 ------- ------- ------- Totals $ (335) $ (575) $ (242) ======= ======= =======
The Company has evaluated the need for a valuation allowance and, based on the weight of the available evidence, has determined that it is more likely than not that all deferred tax assets will eventually be realized. 21 Income taxes consist of the following components (in thousands):
Years Ended December 31, 1996 1995 1994 - ----------------------------------------------------------- Current $ 2,936 $ 3,081 $ 2,915 Deferred 57 66 (72) ------- ------- ------- Totals $ 2,993 $ 3,147 $ 2,843 ======= ======= =======
Deferred income taxes (benefits) resulted from the following (in thousands):
Years Ended December 31, 1996 1995 1994 - -------------------------------------------------------------------- Depreciation $ 70 $ (2) $ (25) Installment sales (1) (1) (130) Provision for loan losses 51 102 Officers' and directors' life insurance (67) (88) (3) Unrealized gain on available for sale securities (40) 174 Other 44 (17) (16) ----- ----- ----- Totals $ 57 $ 66 $ (72) ===== ===== =====
Income taxes amounted to less than the amounts computed by applying the U.S. Federal income tax rate of 34.0% for 1996, 1995 and 1994, to earnings before income taxes. The reason for these differences is shown below (in thousands):
Years Ended December 1996 1995 1994 31, AMOUNT % Amount % Amount % - ---------------------------------------------------------------------------------------------------- Taxes computed at statutory rate $ 3,107 34.0 $3,338 34.0 $ 2,876 34.0 Increase (decrease) resulting from: Tax-exempt interest income (288) (3.2) (286) (2.8) (246) (2.9) Deductible dividends to ESOP (1) (0.1) (3) (0.1) (15) (0.2)
22 Non-deductible interest 36 0.4 31 0.3 26 0.3 Non-deductible amortization 100 1.1 92 1.0 92 1.1 Other, net 39 0.5 (25) (0.3) 110 1.3 ------- ---- ------- ---- ------- ---- Total income taxes $ 2,993 32.7 $ 3,147 32.1 $ 2,843 33.6 ======= ==== ======= ==== ======= ====
During a prior year, the Internal Revenue Service began an audit of the Company's 1994 and 1993 returns. As a result of the examination, adjustments were proposed by the Internal Revenue Service. The Company agreed with the adjustments and paid an assessment of $102,000 on July 23, 1996, which included interest of $17,000. NOTE G - SHAREHOLDERS' EQUITY: On October 26, 1994, the Company's Board of Directors approved a two for one stock split of the common shares of the Company. As a result of this split, shareholders holding a total of 92,271 shares of Company stock received an additional 92,271 common shares. On November 22, 1995, the Company's Board of Directors approved a two for one stock split of the common shares of the Company. As a result of this split, shareholders holding a total of 184,542 shares of Company stock received an additional 184,542 common shares. On October 4, 1996, the Company's Board of Directors approved a two for one stock split of the common shares of the Company. As a result of this split, shareholders holding a total of 369,084 shares of Company stock received an additional 369,084 common shares. The Consolidated Statements of Condition and Shareholders' Equity have been restated to give retroactive effect to these splits. Additionally, all share and per share data have also been given retroactive effect for these splits. Banking regulations limit the amount of dividends that may be paid without prior approval of the Commissioner of Banking and Consumer Finance of the State of Mississippi. At December 31, 1996, approximately $1,459,193 of undistributed earnings of the bank subsidiary included in consolidated surplus and retained earnings was available for future distribution to the Company as dividends, subject to approval by the Board of Directors. NOTE H - OTHER EXPENSES: Other expenses consisted of the following:
Years Ended December 31, 1996 1995 1994 - --------------------------------------------------------------- Amortization $317,832 $317,832 $317,832 Advertising 498,820 346,248 375,860 Data processing 841,174 919,036 648,313
23
FDIC and state banking assessments 188,060 467,623 785,511 Legal and accounting 328,788 213,799 219,805 Postage and freight 160,448 111,521 136,975 Stationary, printing and supplies 242,367 284,841 207,681 Other real estate (15,465) 218,484 61,305 ATM expense 1,286,179 1,154,642 668,859 Federal Reserve service charges 96,416 91,163 90,449 Conferences and classes 110,119 138,416 147,414 Taxes and licenses 183,826 192,739 175,165 Consulting fees 27,270 23,100 25,350 Trust expense 151,223 191,175 166,729 Other 654,044 556,512 751,510 ----------- ----------- ----------- Totals $ 5,071,101 $ 5,227,131 $ 4,778,758 =========== =========== ===========
NOTE I - FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK: The Company is a party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit and irrevocable letters of credit. These instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the balance sheet. The contract amounts of those instruments reflect the extent of involvement the bank subsidiary has in particular classes of financial instruments. The Company's exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and irrevocable letters of credit is represented by the contractual amount of those instruments. The Company uses the same credit policies in making commitments and conditional obligations as it does for on-balance- sheet instruments. At December 31, 1996, 1995 and 1994, the Company had outstanding irrevocable letters of credit aggregating $1,170,107, $1,944,505 and $1,007,564, respectively. Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any conditions established in the agreement. Irrevocable letters of credit written are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. Commitments and irrevocable letters of credit generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since some of 24 the commitments and irrevocable letters of credit may expire without being drawn upon, the total amounts do not necessarily represent future cash requirements. The Company evaluated each customer's creditworthiness on a case-by-case basis. The amount of collateral obtained upon extension of credit is based on Management's credit evaluation of the customer. Collateral obtained varies but may include equipment, real property and inventory. The Company generally grants loans to customers in its primary trade area of Harrison, Hancock and west Jackson counties. The Company also grants loans on a limited basis in Claiborne County. NOTE J - CONTINGENCIES: In January 1996, a class action suit was filed against the Company's bank subsidiary related to the placement of collateral protection insurance by the bank subsidiary. The complaint does not specify a specific dollar amount in damages. Bank Management intends to vigorously contest the allegations of the complaint. The bank is involved in various other legal matters and claims which are being defended and handled in the ordinary course of business. None of these matters is expected, in the opinion of Management, to have a material adverse effect upon the financial position or results of operations of the Company. NOTE K - CONDENSED PARENT COMPANY ONLY FINANCIAL INFORMATION: Peoples Financial Corporation began its operations September 30, 1985, when it acquired all the outstanding stock of The Peoples Bank, Biloxi, Mississippi. A condensed summary of its financial information is shown below. CONDENSED BALANCE SHEETS (in thousands)
December 31, 1996 1995 1994 - ------------------------------------------------------------------- ASSETS Investments in subsidiaries, at underlying equity: Bank subsidiary $59,720 $54,135 $47,857 Nonbank subsidiary 55 53 52 Cash in bank subsidiary 48 74 100 Intangible assets 496 813 1,131 Other assets 656 210 214 ------- ------- ------- TOTAL ASSETS $60,975 $55,285 $49,354 ======= ======= =======
25 LIABILITIES AND SHAREHOLDERS' EQUITY Notes payable, nonaffiliates $ $ 200 $ 375 Deferred federal income taxes 621 503 538 ------- ------- ------- Total liabilities 621 703 913 Shareholders' equity 60,354 54,582 48,441 ------- ------- ------- TOTAL LIABILITIES AND $60,975 $55,285 $49,354 SHAREHOLDERS' EQUITY ======= ======= =======
CONDENSED STATEMENTS OF INCOME (in thousands)
Years Ended December 31, 1996 1995 1994 - ------------------------------------------------------------------------------ INCOME Earnings of unconsolidated bank subsidiary: Distributed earnings $ 800 $ 740 $ 550 Undistributed earnings 5,373 5,952 5,093 Earnings of unconsolidated nonbank subsidiary 2 2 2 Interest income 3 3 5 Other income 12 15 18 ------ ------ ------ TOTAL INCOME 6,190 6,712 5,668 ------ ------ ------ EXPENSES Other expense 59 52 68 ------ ------ ------ TOTAL EXPENSES 59 52 68 ------ ------ ------ INCOME BEFORE BENEFIT FROM INCOME TAXES 6,131 6,660 5,600 Benefit from income taxes 15 11 16 ------ ------ ------ NET INCOME $6,146 $6,671 $5,616 ====== ====== ======
26 CONDENSED STATEMENTS OF CASH FLOWS (in thousands)
Years Ended December 31, 1996 1995 1994 - ------------------------------------------------------------------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 6,146 $ 6,671 $ 5,616 Adjustments to reconcile net income to net cash provided by operating activities: Net income of unconsolidated subsidiaries (6,175) (6,694) (5,645) Changes in assets and liabilities: Accrued expenses (3) 4 7 ------- ------- ------- NET CASH USED IN OPERATING ACTIVITIES (32) (19) (22) ------- ------- ------- CASH FLOWS FROM INVESTING ACTIVITIES: Dividends from unconsolidated subsidiary 800 740 550 ------- ------- ------- NET CASH PROVIDED BY INVESTING ACTIVITIES 800 740 550 ------- ------- ------- CASH FLOWS FROM FINANCING ACTIVITIES: Dividends paid (794) (747) (669) ------- ------- ------- NET CASH USED IN FINANCING ACTIVITIES (794) (747) (669) ------- ------- ------- NET DECREASE IN CASH (26) (26) (141) CASH, BEGINNING OF YEAR 74 100 241 ------- ------- ------- CASH, END OF YEAR $ 48 $ 74 $ 100 ======= ======= =======
Peoples Financial Corporation paid income taxes of $2,869,605, $3,498,388 and $2,787,144 in 1996, 1995 and 1994, respectively. No interest was paid during the three years ended 27 December 31, 1996. NOTE L - EMPLOYEE BENEFIT PLANS: The Company sponsored the Peoples Financial Corporation Retirement Plan (Pension Plan), a non-contributory defined benefit pension plan covering substantially all salaried, full-time employees. Pension benefits are fully vested after 7 years and are based on average compensation during years of service, with 1985 compensation used for each year prior to 1985. A partial reduction in benefits was provided for each year less than 30 years of service. The Company's funding policy for years presented was to contribute no more than the minimum funding requirement for federal income tax purposes. No contribution was made in 1994. The following is a summary of the components of net periodic pension cost:
Years Ended December 31, 1996 1995 1994 - --------------------------------------------------------------------- Interest cost $ 47,827 $ 72,937 $ 72,640 Return on assets (36,147) (66,247) (66,956) -------- -------- -------- Net periodic pension cost $ 11,680 $ 6,690 $ 5,684 ======== ======== ========
Net pension cost was determined for 1995 and 1994 based on expected return on assets. Actual return on plan assets was $80,623 and $33,759 for the years ended December 31, 1995 and 1994, respectively, resulting in $14,376 and $33,197 differences between expected return and actual return on assets. Effective December 31, 1991, the Pension Plan was frozen and no additional benefits accrued under the Plan. The accrued benefit of each participant, other than a highly compensated employee within the meaning of Section 414(q)(A) or (B) of the Internal Revenue Code, was equal to the employee's accrued benefit calculated as of December 31, 1991. The accrued benefit of a highly compensated employee was equal to the employee's accrued benefit as of the December 31 preceding the Plan year in which the employee became a highly compensated employee, but no earlier than December 31, 1988. Future credited service counted for vesting purposes for those participants not fully vested at December 31, 1991. All participants were notified of these events on December 14, 1991, in accordance with ERISA. No new participants entered the Plan after December 31, 1991. The Pension Plan was amended on December 16, 1994, to comply with the Internal Revenue Code. The amendment was retroactively effective to January 1, 1989, unless specifically indicated to the contrary. On June 28, 1995, the Board of Directors of the Company voted to terminate the Plan effective September 1, 1995. The participants were notified of this event by June 29, 1995, in accordance with ERISA. Approval was received from the Internal Revenue Service on March 18, 1996, to terminate the Plan. Upon the Plan's termination, each participant became 100% vested in their accrued benefit. All assets of the Plan were distributed to participants either as a lump sum or by the purchase of an annuity with an insurance carrier on July 18 and August 28, 1996. The lump sum distributions were calculated using the GATT interest rate in effect as 28 of January 1, 1996 (6.06%) and a 50/50 blend of the 1983 Group Annuity Mortality for males and females. The loss realized as a result of the termination was $426,747. The Company was obligated to make further contributions to provide sufficient funds to settle the liabilities of the Plan. The Company made contributions of $95,890 and $215,774 to the Plan during 1996 and 1995, respectively, to fulfill its obligation. The following table sets forth the Pension Plan's funded status at December 31, 1995 and 1994, respectively:
December 31, 1995 1994 - ---------------------------------------------------------------------------------- Actuarial present value of benefit obligations: Vested benefit obligation $ 1,195,676 $ 887,455 Non-vested benefit obligation 2,016 ----------- ----------- Accumulated and projected benefit obligation 1,195,676 889,471 Plan assets at fair value 1,092,326 977,786 ----------- ----------- Projected benefit obligation less than (greater than) plan assets (103,350) 88,315 Unrecognized net loss from past experience different from that assumed and effects of changes in assumptions 446,230 45,481 Additional minimum liability (446,230) ----------- ----------- Prepaid (accrued) pension cost $ (103,350) $ 133,796 =========== ===========
A weighted average discount rate of 6.00% and 8.50% for 1995 and 1994, respectively, and a rate of increase in future compensation levels of 5% was used in determining the actuarial present value of the projected benefit obligation. The Company also sponsors the Peoples Financial Corporation Employee Stock Ownership Plan (ESOP). Company Management curtailed the Retirement Plan in 1991 and decided to terminate the Plan in 1995 because of their intent to make the ESOP, which is more flexible than the Pension Plan, the primary benefit plan, and because of the high cost of administering two plans. The employee stock ownership plan covers substantially all salaried, full-time employees. The effective date of the ESOP is December 24, 1984. On November 22, 1989, the plan was amended and restated effective January 1, 1989, to comply with Internal Revenue Code of 1986 and other regulations, to adopt 401(k) provisions for the plan, and effective December 31, 1989, to merge the former Gulf National Bank Profit Sharing Plan into the plan. On 29 December 31, 1991, the plan was amended effective January 1, 1991, except where specifically indicated to the contrary, to adjust, among other things, Employer Discretionary Matching Contribution and Vesting Schedule. On December 16, 1994, the plan was amended effective January 1, 1989, except where specifically indicated to the contrary, to comply with the Internal Revenue Code and to clarify the hardship distribution provisions. Contributions are determined by the Board of Directors and may be paid either in cash or Peoples Financial Corporation capital stock. Total contributions to the plan charged to operating expense were $240,000, $300,000 and $300,000 in 1996, 1995 and 1994, respectively. In November 1993, Statement of Position 93-6, "Employers' Accounting for Employee Stock Ownership Plans" was issued. This Statement prescribes the accounting treatment for transactions involving leveraged esop's. Specifically, the Statement applied to shares acquired by such plans after December 31, 1992 and was effective for fiscal years beginning after December 15, 1993. The ESOP was a leveraged esop. All shares held by the ESOP were acquired before that date. Application of the Statement is limited to disclosure of information relating to the description and administration of the plan. At December 31, 1996, 1995 and 1994, the ESOP owned 94,280, 94,064 and 94,144 shares of common stock of the Company. Of these shares, 4,426 and 8,588 shares were held in suspense at First Alabama Bancshares as security on the line of credit at December 31, 1995 and 1994, respectively. The remaining shares were allocated to participants' accounts. The agreement with First Alabama provided for the release of shares held as collateral as payments were made based on a fraction applied to the total shares held as collateral. The numerator of the fraction was the principal and interest paid during the plan year and the denominator was the numerator plus the principal and interest to be paid during all future years. Dividends on allocated shares are credited to participants' accounts. Dividends on unallocated shares were used to reduce the principal on the line of credit. The line of credit was paid off on April 18, 1996, and all shares held as collateral were released by First Alabama. The Company established an Executive Supplemental Income Plan and a Directors' Deferred Income Plan in 1985. These plans provide for non-vested pre-retirement and post-retirement benefits to certain key executives and directors. The Company has acquired insurance policies, with the bank subsidiary as owner and beneficiary, that it may use as a source to pay potential benefits to the plan participants. These contracts are carried at their cash surrender value, which amounted to $2,070,924, $1,816,846 and $1,633,496 at December 31, 1996, 1995 and 1994, respectively. The present value of accumulated benefits under these plans, using an interest rate of 10%, and the projected unit cost method has been accrued. The accrual amounted to $1,046,262, $837,469 and $599,167 at December 31, 1996, 1995 and 1994, respectively. The Company also has additional plans for non-vested post-retirement benefits for certain key executives and directors. The Company has acquired insurance policies, with the bank subsidiary as owner and beneficiary, that it may use as a source to pay potential benefits to the plan participants. Additionally, there are two split dollar policies of which certain executive officers are the owners and beneficiaries, and which are assigned to the bank subsidiary for the repayment of premiums paid by the Company. These contracts are carried at their cash surrender value, which amounted to $281,937, $ 268,891 and $208,224 at December 31, 1996, 1995 and 1994, respectively. The present value of accumulated benefits under these plans using an interest rate of 8.50% and the projected unit cost method has been accrued. 30 The accrual amounted to $259,508, $258,577 and $250,907 at December 31, 1996, 1995 and 1994, respectively. The Financial Accounting Standards Board issued SFAS 106, "Employers' Accounting for Post-Retirement Benefits Other Than Pensions." The Statement requires that the expected cost of providing these post-retirement benefits be recognized during the period of active employment. The Company provides post-retirement health insurance to certain of its retired employees. Employees are eligible to participate in the retiree health plan if they retire from active service no earlier than their Social Security normal retirement age, which varies from 65 to 67 based on the year of birth. In addition, the employee must have at least 25 continuous years of service with the Company immediately preceding retirement. However, any active employee who is at least age 65 as of January 1, 1995, does not have to meet the 25 years of service requirement. Statement 106 was adopted by the Company on January 1, 1995. The accumulated post-retirement benefit obligation at that date was $517,599, which the Company has elected to amortize over 20 years. Through December 31, 1994, the cost of providing these benefits was recognized on a cash basis when premiums were paid. These premiums amounted to $22,401 for the year ended December 31, 1994. The Company reserves the right to modify, reduce or eliminate these health benefits. The following is a summary of the components of the net periodic postretirement benefit cost:
Years Ended December 31, 1996 1995 - --------------------------------------------------------------- Service cost $ 49,154 $ 30,841 Interest cost 49,381 42,962 Amortization of net transition obligation 38,498 25,880 -------- -------- Net periodic postretirement benefit cost $137,033 $ 99,683 ======== ========
The discount rate used in determining the accumulated postretirement benefit obligation was 7.00% in 1996 and 1995. The assumed health care cost trend rate used in measuring the accumulated postretirement benefit obligation was 10.03% in 1996. The rate was assumed to decrease gradually to 6.00% for 2016 and remain at that level thereafter. If the health care cost trend rate assumptions were increased 1%, the accumulated postretirement benefit obligation as of December 31, 1996, would be increased by 21.99%, and the aggregate of the service and interest cost components of the net periodic postretirement benefit cost for the year then ended would have increased by 27.98%. 31
December 31, 1996 1995 - ----------------------------------------------------------------------------- Accumulated postretirement benefit obligation: Retirees $ 185,595 $ 242,875 Eligible to retire 101,298 116,307 Not eligible to retire 352,473 358,762 --------- --------- Total 639,366 717,944 Plan assets at fair value -0- -0- --------- --------- Accumulated postretirement benefit obligation in excess of plan assets 639,366 717,944 Unrecognized transition obligation (465,839) (491,719) Prior service cost not yet recognized in net periodic post- retirement benefit cost 95,042 Unrecognized net loss from past experience different from that assumed and from changes in assumptions (77,273) (146,962) --------- --------- Accrued postretirement benefit cost $ 191,296 $ 79,263 ========= =========
NOTE M - FAIR VALUE OF FINANCIAL INSTRUMENTS: In December 1991, the Financial Accounting Standards Board issued SFAS 107, "Disclosures About Fair Value of Financial Instruments." SFAS 107 requires all entities to disclose the fair value of financial instruments, both assets and liabilities recognized and not recognized in the statement of condition, for which it is practical to estimate its fair value. SFAS 107 excluded certain financial instruments and all nonfinancial instruments from its disclosure requirements. Accordingly, the aggregate fair value amounts presented do not represent the underlying value of the Company. In preparing these disclosures, Management made highly sensitive estimates and assumptions in developing the methodology to be utilized in the computation of fair value. These estimates and assumptions were formulated based on judgments regarding economic conditions and risk characteristics of the financial instruments that were present at the time the computations were 32 made. Events may occur that alter these conditions and thus perhaps change the assumptions as well. A change in the assumptions might affect the fair value of the financial instruments disclosed in this footnote. In addition, the tax consequences related to the realization of the unrealized gains and losses have not been computed or disclosed herein. Fair value estimates, methods and assumptions are set forth below for the Company's financial instruments. Cash and Due from Banks The amount shown as cash and due from banks approximates fair value. Available for Sale Securities The fair value of available for sale securities is based on quoted market prices. Held to Maturity Securities The fair value of held to maturity securities is based on quoted market prices. Loans The fair value of loans is estimated by discounting the future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings for the remaining maturities. The cash flows considered in computing the fair value of such loans are segmented into categories relating to the nature of the contract and collateral based on contractual principal maturities. Appropriate adjustments are made to reflect probable credit losses. Cash flows have not been adjusted for such factors as prepayment risk or the effect of the maturity of balloon notes. Deposits The fair value of non-interest bearing demand and interest bearing savings and demand deposits is the amount reported in the financial statements. The fair value of time deposits is estimated by discounting the cash flows using current rates of time deposits with similar remaining maturities. The cash flows considered in computing the fair value of such deposits are based on contractual maturities, since approximately 98% of time deposits provide for automatic renewal at current interest rates. Federal Funds Purchased The amount shown as federal funds purchased approximates fair value. Notes Payable The fair value of notes payable is computed by discounting the cash flows using current borrowing rates. Irrevocable Letters of Credit The fair value of irrevocable letters of credit is estimated using the fees currently charged to enter into similar agreements. 33 The following table presents carrying amounts and estimated fair values for financial assets and financial liabilities at December 31, 1996, 1995 and 1994 (in thousands):
1996 1995 1994 ---------------------------------------------------------------------------- CARRYING FAIR Carrying Fair Carrying Fair AMOUNT VALUE Amount Value Amount Value ---------------------------------------------------------------------------- Financial Assets: Cash and due from banks $ 26,874 $ 26,874 $ 24,220 $ 24,220 $ 20,779 $ 20,779 Available for sale securities 53,159 53,159 20,830 20,830 198 198 Held to maturity securities 127,870 128,879 165,142 167,384 159,498 156,660 Loans, net 223,969 225,492 219,694 219,269 217,928 216,954 Financial Liabilities: Deposits: Non-interest bearing 73,535 73,535 82,790 82,790 67,741 67,741 Interest bearing 294,597 294,728 293,382 293,561 280,449 280,468 -------- -------- -------- -------- -------- -------- Total deposits 368,132 368,263 376,172 376,351 348,190 348,209 Federal funds purchased 16,500 16,500 12,150 12,150 15,900 15,900 Notes payable 227 198 438 402 623 583 Irrevocable letters of credit -- 12 -- 19 -- 10
NOTE N - REGULATORY MATTERS: The bank subsidiary is subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory, and possibly additional discretionary, actions by the regulators that, if undertaken, could have a direct material effect on the bank's subsidiary's financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the bank subsidiary must meet specific capital guidelines that involve quantitative measures of the 34 bank subsidiary's assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices. The bank subsidiary's capital amounts and classification are also subject to qualitative judgements by the regulators about components, risk weightings and other factors. Quantitative measures established by regulation to ensure capital adequacy require the bank subsidiary to maintain minimum amounts and ratios of total and Tier 1 capital to risk-weighted assets, and Tier 1 capital to average assets. As of December 31, 1996, the most recent notification from the Federal Deposit Insurance Corporation categorized the bank subsidiary as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, the bank subsidiary must have a total risk-based capital ratio of 10% or greater, a Tier 1 risk-based capital ratio of 6% or greater and a leverage capital ratio of 5% or greater. There are no conditions or events since that notification that Management believes have changed the bank subsidiary's category. The bank subsidiary's actual capital amounts and ratios and required minimum capital amounts and ratios for 1996, 1995 and 1994, are as follows:
Actual For Capital Adequacy Purposes ------------------------------------------------------ Amount Ratio Amount Ratio ------------------------------------------------------ DECEMBER 31, 1996: TOTAL CAPITAL (TO RISK WEIGHTED ASSETS) $62,072,284 26.20% $18,952,160 8.00% TIER 1 CAqPITAL (TO RISK WEIGHTED ASSETS) 59,111,009 24.95 9,476,080 4.00 TIER 1 CAPITAL (TO AVERAGE ASSETS) 59,111,009 12.63 18,713,857 4.00 December 31, 1995: Total Capital (to Risk Weighted Assets) 56,363,238 24.89 18,112,782 8.00 Tier 1 Capital (to Risk Weighted Assets) 53,533,730 23.64 9,056,391 4.00 Tier 1 Capital (to Average Assets) 53,533,730 12.46 17,186,775 4.00 December 31, 1994: Total Capital (to Risk Weighted Assets 49,974,389 22.73 17,587,047 8.00 Tier 1 Capital (to Risk Weighted Assets) 47,226,413 21.48 8,793,524 4.00 Tier 1 Capital (to Average Assets) 47,226,413 11.34 16,662,655 4.00
35 INDEPENDENT AUDITORS' REPORT Peoples Financial Corporation and Subsidiaries Board of Directors Peoples Financial Corporation and Subsidiaries Biloxi, Mississippi We have audited the accompanying consolidated statements of condition of Peoples Financial Corporation and Subsidiaries as of December 31, 1996, 1995 and 1994, and the related consolidated statements of income, shareholders' equity and cash flows for the years then ended. These financial statements are the responsibility of the Company's Management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by Management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Peoples Financial Corporation and Subsidiaries at December 31, 1996, 1995 and 1994, and the results of its operations and its cash flows for the years then ended, in conformity with generally accepted accounting principles. Certified Public Accountants PILTZ, WILLIAMS, LAROSA & CO. Biloxi, Mississippi January 17, 1997 36 Board of Directors Peoples Financial Corporation Chevis C. Swetman, Chairman of the Board Andy Carpenter, Vice Chairman Drew Allen, President, Allen Beverages, Inc. William A. Barq, Former Owner and President (retired), Barq's Bottling Co., Inc. F. Walker Tucei, Executive Vice-President (retired), The Peoples Bank, Biloxi, Mississippi Officers Peoples Financial Corporation Chevis C. Swetman, President and CEO Andy Carpenter, Executive Vice-President Jeannette E. Romero, First Vice-President Thomas J. Sliman, Second Vice-President Robert M. Tucei, Vice-President and Secretary David M. Hughes, Vice-President Lauri A. Wood, Chief Financial Officer and Controller Officers The Peoples Bank COMMERCIAL LENDING A. Wes Fulmer, Vice-President Darnell M. Hebert, Assistant Vice-President CONSUMER LENDING Ralph A. Seymour, Assistant Vice-President Brian J. Kozlowski, Loan Officer COMPLIANCE Evelyn R. Madison, Compliance Officer AUDIT AND ACCOUNTING Gregory M. Batia, Assistant Auditor Caroline B. Randolph, Assistant Auditor - Trust Connie F. Lepoma, Accounting Officer INVESTMENTS Peggy M. Byrd, Vice-President Janet H. Wood, Investment Officer 37 LOAN PROCESSING Donna F. Bessetti, Vice-President Margaret H. Delahousey, Assistant Vice-President Jesse J. Migues, Assistant Cashier LOAN REVIEW Robert E. Smith, Jr., Assistant Vice-President F. Kay Woodbury, Loan Review Officer PERSONNEL Jackie L. Henson, Vice-President Janis C. Culler, Vice-President - Employee Benefits Patricia L. Levine, Assistant Vice-President - Personnel MARKETING Jeanne S. Adams, Marketing Director ASSET MANAGEMENT & TRUST SERVICES M. O. Lawrence, III, Vice-President - Trust Ann F. Guice, Trust Officer Louise C. Johns, Assistant Trust Officer Thomas H. Wicks, Assistant Trust Officer Diana T. Winland, Assistant Trust Officer PROPERTY Shirley A. Braun, Assistant Vice-President - Property Ray I. Cross, Assistant Vice-President - Appraisals OPERATIONS/OTHER SERVICES Sandra L. York, Vice-President - Data Processing Dennis J. Burke, Vice-President - Operations Robin J. Vignes, Assistant Vice-President - Security George S. Tranum, Assistant Vice-President - Telecommunications Susan B. Polovich, Assistant Operations Officer Cassandra F. Reid, Assistant Cashier Charlotte R. Balius, Bankcard Officer Cheryl A. Dubaz, ATM Officer Ardell M. Roberts, Assistant Cashier Hugh J. Kavanagh, Assistant Cashier Janice L. Smitherman, Administrative Officer Gloria A. Cothern, ACH/Returns Officer Yvonne P. Owen, Assistant Cashier Ronald L. Baldwin, Systems Support Technician Kathy S. Comstock, Savings Officer 38 BRANCH LOCATIONS AND OFFICERS The Peoples Bank BILOXI BRANCHES MAIN OFFICE, 152 Lameuse Street, Biloxi, Mississippi 39530, (601) 435-5511 VETERANS AVENUE OFFICE, 186 Veterans Avenue, Biloxi, Mississippi 39531, (601) 897-8711 R. Patrick Byrd, Branch Manager WEST BILOXI OFFICE, 2430 Pass Road, Biloxi, Mississippi 39531, (601) 435-8203 Robert A. Brashier, Assistant Vice-President GULFPORT BRANCHES HANDSBORO OFFICE, 0412 E. Pass Road, Gulfport, Mississippi 39507, (601) 897-8717 Andrew M. Welter, Branch Manager HIGHWAY 90 OFFICE, 3300 West Beach Boulevard, Gulfport, Mississippi 39501, (601) 897-8715 David M. Hughes, Senior Vice-President John W. McKellar, Vice-President C. J. Tennant, Commercial Loan Officer Diana W. Williams, Branch Manager James P. Estrada, Loan Officer ORANGE GROVE OFFICE, 12020 Highway 49 North, Gulfport, Mississippi 39503, (601) 897-8718 Mark A. Chatham, Assistant Vice-President OTHER BRANCHES BAY ST. LOUIS OFFICE, 408 Highway 90 East, Bay St. Louis, Mississippi 39520, (601) 897-8710 Jeannie M. Deen, Vice-President Read H. Breeland, Assistant Branch Manager DIAMONDHEAD OFFICE, 4408 West Aloha Drive, Diamondhead, Mississippi 39525, (601) 897-8714 J. Patrick Wild, Assistant Vice-President D'IBERVILLE-ST. MARTIN OFFICE, 10491 Lemoyne Boulevard, D'Iberville, Mississippi 39532, (601) 435-8202 Douglas E. Gill, Vice-President LONG BEACH OFFICE, 403 Jeff Davis Avenue, Long Beach, Mississippi 39560 (601) 897-8712 Brent G. Johnson, Assistant Vice-President OCEAN SPRINGS OFFICE, 2015 Bienville Boulevard, Ocean Springs, Mississippi 39564, (601) 435-8204 Ronnie F. Harrison, Assistant Vice-President PASS CHRISTIAN OFFICE, 125 Henderson Avenue, Pass Christian, Mississippi 39571, (601) 897-8719 Karen T. Boudreaux, Branch Manager 39 SHAREHOLDER INFORMATION Peoples Financial Corporation and Subsidiaries DIVIDEND SERVICES/ADDRESS CHANGE/STOCK TRANSFER: For complete information concerning the common stock of Peoples Financial Corporation, inquiries should be directed to: M. O. Lawrence, III, Vice-President, Asset Management & Trust Services Department P. O. Box 1416, Biloxi, Mississippi 39533-1416 (601) 435-8208 INDEPENDENT AUDITORS: Piltz, Williams, LaRosa & Company, Biloxi, Mississippi S.E.C. FORM 10-K REQUESTS: A copy of the Annual Report on Form 10-K, as filed with the Securities and Exchange Commission, may be obtained without charge by directing a written request to: Lauri A. Wood, Chief Financial Officer/Controller, Peoples Financial Corporation 152 Lameuse Street, P. O. Drawer 529, Biloxi, Mississippi 39533-0529, (601) 435-8412 EX-23 3 CONSENT OF CERTIFIED PUBLIC ACCOUNTANTS 1 Exhibit 23: Consent of Certified Public Accountants We consent to the use of our reports, dated January 17, 1997, in Form 10-K filing of the Peoples Financial Corporation. PILTZ, WILLIAMS, LAROSA & CO. Biloxi, Mississippi March 13, 1997 EX-27 4 FINANCIAL DATA SCHEDULE
9 YEAR DEC-31-1996 DEC-31-1996 26,873,638 0 0 0 53,159,353 127,870,283 128,879,000 228,508,895 4,522,704 448,109,625 368,132,009 0 1,891,296 226,608 0 0 738,168 59,616,036 448,109,625 20,414,470 12,250,992 582,321 33,247,783 14,282,677 14,405,513 18,842,270 (150,000) 0 15,417,445 9,139,202 9,139,202 0 0 6,146,057 8 8 4.36 546,000 3,026,000 2,304,000 0 4,352,967 139,000 458,737 4,522,704 4,522,704 0 50,000
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