10-Q

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

       For the quarterly period ended September 30, 2004

or

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

               Commission File Number  0 - 30050

PEOPLES FINANCIAL CORPORATION

(Exact name of registrant as specified in its charter)

Mississippi	64-0709834
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

Lameuse and Howard Avenues, Biloxi, Mississippi	39533
(Address of principal executive offices)	(Zip Code)

(228) 435-5511

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes   [X] No    [   ]

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the last practicable date.

Peoples Financial Corporation has only one class of common stock authorized. At November 1, 2004, there were 15,000,000 shares of $1 par value common stock authorized, and 5,555,419 shares issued and outstanding.

Page 1 of 20

TABLE OF CONTENTS

PART I
		CONDENSED CONSOLIDATED BALANCE SHEETS
		CONDENSED CONSOLIDATED STATEMENTS OF INCOME
		CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
		CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
		SELECTED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
	Item 2 — Management’s Discussion and Analysis of Financial Condition and Results of Operations
	Item 4: Controls and Procedures
PART II
	Item 5 — Other Information
	Item 6 — Exhibits and Reports on Form 8-K
SIGNATURES
Consent of Certified Public Accountants
Certification of CEO Pursuant to Section 302
Certification of CFO Pursuant to Section 302
Certification of CEO Pursuant to 18 U.S.C. Section 1350
Certification of CFO Pursuant to 18 U.S.C. Section 1350

PART I
FINANCIAL INFORMATION
PEOPLES FINANCIAL CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)

September 30, December 31, and September 30,	2004		2003		2003
Assets
Cash and due from banks	$	47,911,793	$	33,861,029	$	29,452,234
Held to maturity securities, market value of $3,078,000 - September 30, 2004; $4,527,000 - December 31, 2003; $7,858,000 - September 30, 2003		2,944,232		4,352,854		7,354,334
Available for sale securities, at market value		210,686,836		207,486,172		223,843,642
Federal Home Loan Bank Stock, at cost		1,395,200		1,974,200		1,964,300
Loans		323,722,208		297,922,945		286,269,051
Less: Allowance for loan losses		6,593,339		6,398,694		6,402,722
Loans, net		317,128,869		291,524,251		279,866,329
Bank premises and equipment, net of accumulated depreciation of $16,780,000 - September 30, 2004; $16,275,000 - December 31, 2003; and $15,914,000 - September 30, 2003		16,621,465		17,952,504		18,130,419
Other real estate		335,968		1,383,451		1,417,646
Accrued interest receivable		2,750,455		3,096,002		3,070,728
Other assets		17,044,290		13,804,039		13,922,481
Total assets	$	616,819,108	$	575,434,502	$	579,022,113

Page 2 of 20

PEOPLES FINANCIAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (Continued)
(Unaudited)

September 30, December 31, and September 30,	2004			2003			2003
Liabilities & Shareholders’ Equity
Liabilities:
Deposits:
Demand, non-interest bearing	$	96,184,626		$	76,423,904		$	89,320,951
Savings and demand, interest bearing		197,231,961			173,913,054			169,862,914
Time, $100,000 or more		60,448,594			58,182,870			60,321,462
Other time deposits		64,140,656			64,036,836			67,341,920
Total deposits		418,005,837			372,556,664			386,847,247
Federal funds purchased and securities sold under agreements to repurchase		98,221,499			95,039,261			95,663,210
Borrowings from Federal Home Loan Bank		7,201,167			17,069,848			6,791,786
Notes payable		4,183			110,235			264,920
Other liabilities		7,067,223			7,154,545			6,388,845
Total liabilities		530,499,909			491,930,553			495,956,008
Shareholders’ Equity:
Common Stock, $1 par value, 15,000,000 shares authorized, 5,555,419 shares issued and outstanding at September 30, 2004, 5,557,379 shares issued and outstanding at December 31, 2003 and 5,558,699 shares issued and outstanding at September 30, 2003		5,555,419			5,557,379			5,558,699
Surplus		65,780,254			65,780,254			65,780,254
Undivided profits		15,081,064			11,574,074			11,047,120
Unearned compensation					(94,899	)		(107,043	)
Accumulated other comprehensive income		(97,538	)		687,141			787,075
Total shareholders’ equity		86,319,199			83,503,949			83,066,105
Total liabilities and shareholders’ equity	$	616,819,108		$	575,434,502		$	579,022,113

See Report of Independent Registered Public Accounting Firm and Selected Notes to Condensed Consolidated Financial Statements.

Page 3 of 20

PEOPLES FINANCIAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)

	For The Quarters Ended September 30,				For The Nine Months Ended September 30,
	2004		2003		2004		2003
Interest income:
Interest and fees on loans	$	4,403,970	$	4,180,508	$	12,567,666	$	13,119,200
Interest and dividends on securities:
U. S. Treasury		351,134		338,278		972,783		986,570
U. S. Government agencies and corporations		1,196,517		1,496,709		3,777,752		4,287,439
States and political subdivisions		149,105		92,773		365,055		270,245
Other investments		54,160		60,682		177,775		194,345
Interest on federal funds sold		35,161		5,207		56,088		58,996
Total interest income		6,190,047		6,174,157		17,917,119		18,916,795
Interest expense:
Time deposits of $100,000 or more		229,412		249,717		592,371		1,022,659
Other deposits		717,852		691,255		2,021,141		2,521,050
Borrowings from Federal Home Loan Bank		108,276		113,933		334,663		321,081
Mortgage indebtedness				1,848				5,711
Federal funds purchased and securities sold under agreements to repurchase		264,112		234,213		745,757		729,252
Total interest expense		1,319,652		1,290,966		3,693,932		4,599,753
Net interest income		4,870,395		4,883,191		14,223,187		14,317,042
Provision for losses on loans		61,000		65,299		424,000		383,044
Net interest income after provision for losses on loans		4,809,395		4,817,892		13,799,187		13,933,998
Other operating income:
Trust department income and fees		328,945		345,707		1,079,125		1,106,719
Service charges on deposit accounts		1,406,102		1,696,696		4,410,645		5,135,318
Other service charges, commissions and fees		71,145		87,446		216,422		221,364
Gain on sale of banking premises						1,270,697
Other income		214,059		314,467		772,633		912,631
Total other operating income	$	2,020,251	$	2,444,316	$	7,749,522	$	7,376,032

Page 4 of 20

PEOPLES FINANCIAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Continued)
(Unaudited)

	For The Quarters Ended September 30,				For The Nine Months Ended September 30,
	2004		2003		2004		2003
Other operating expense:
Salaries and employee benefits	$	2,848,598	$	2,729,284	$	8,454,507	$	8,335,718
Net occupancy		381,399		335,896		1,063,583		979,711
Equipment rentals, depreciation and maintenance		509,658		593,606		1,762,753		2,092,522
Other expense		1,146,871		1,487,713		3,971,563		4,803,682
Total other operating expense		4,886,526		5,146,499		15,252,406		16,211,633
Income before income taxes		1,943,120		2,115,709		6,296,303		5,098,397
Income taxes		517,700		605,000		1,812,700		1,462,080
Net Income	$	1,425,420	$	1,510,709	$	4,483,603	$	3,636,317

See Report of Independent Registered Public Accounting Firm and Selected Notes to Condensed Consolidated Financial Statements.

Page 5 of 20

PEOPLES FINANCIAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(Unaudited)

															Accumu-
												Unearned			lated Other			Compre-
	# of			Common					Undivided			Compensa-			Comprehensive			hensive
	Shares			Stock			Surplus		Profits			tion			Income			Income			Total
Balance, January 1, 2003		5,583,472		$	5,583,472		$	65,780,254	$	8,510,341		$	(143,043	)	$	2,000,582					$	81,731,606
Comprehensive Income:
Net income										3,636,317								$	3,636,317			3,636,317
Net unrealized (loss) on available for sale securities, net of tax																(1,082,738	)		(1,082,738	)		(1,082,738	)
Reclassification adjustment for available for sale securities sold in current year, net of tax																(130,769	)		(130,769	)		(130,769	)
Total comprehensive income																		$	2,422,810
Allocation of ESOP shares													36,000									36,000
Retirement of stock		(24,773	)		(24,773	)				(320,968	)											(345,741	)
Cash dividends, ($ .14 per share)										(778,570	)											(778,570	)
Balance, September 30, 2003		5,558,699		$	5,558,699		$	65,780,254	$	11,047,120		$	(107,043	)	$	787,075					$	83,066,105

Page 6 of 20

PEOPLES FINANCIAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (continued)
(Unaudited)

															Accumu-
												Unearned			lated Other			Compre-
	# of			Common					Undivided			Compensa-			Comprehensive			hensive
	Shares			Stock			Surplus		Profits			tion			Income			Income			Total
Balance, January 1, 2004		5,557,379		$	5,557,379		$	65,780,254	$	11,574,074		$	(94,899	)	$	687,141					$	83,503,949
Comprehensive Income:
Net income										4,483,603								$	4,483,603			4,483,603
Net unrealized loss on available for sale securities, net of tax																(677,984	)		(677,984	)		(677,984	)
Reclassification adjustment for available for sale securities sold or liquidated in current year, net of tax																(106,695	)		(106,695	)		(106,695	)
Total comprehensive income																		$	3,698,924
Allocation of ESOP shares													94,899									94,899
Retirement of stock		(1,960	)		(1,960	)				(32,022	)											(33,982	)
Cash dividends, ($ .17 per share)										(944,591	)											(944,591	)
Balance, September 30, 2004		5,555,419		$	5,555,419		$	65,780,254	$	15,081,064		$			$	(97,538	)				$	86,319,199

See Report of Independent Registered Public Accounting Firm and Selected Notes to Condensed Consolidated Financial Statements.

Page 7 of 20

PEOPLES FINANCIAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

For The Nine Months Ended September 30,	2004			2003
Cash flows from operating activities:
Net income	$	4,483,603		$	3,636,317
Adjustments to reconcile net income to net cash provided by operating activities:
Loss on sale of available for sale securities		129,950
Gain on sales of other real estate		(100,750	)		(218,170	)
Gain on sale of bank premises		(1,270,697	)		(123,733	)
Depreciation and amortization		1,052,000			1,294,000
Provision for losses on loans		424,000			383,044
Provision for losses on other real estate		178,130			198,579
Changes in assets and liabilities:
Accrued interest receivable		345,547			(212,538	)
Other assets		(2,819,466	)		(473,115	)
Other liabilities		1,067,285			500,738
Net cash provided by operating activities		3,489,602			4,985,122
Cash flows from investing activities:
Proceeds from maturities and calls of held to maturity securities		1,408,622			10,233,356
Proceeds from maturities, sales and calls of available for sale securities		112,252,864			108,203,468
Investment in available for sale securities		(116,758,457	)		(182,411,069	)
(Investment in) redemption of Federal Home Loan Bank stock		579,000			(37,300	)
Loans, net		(26,140,868	)		24,599,979
Proceeds from sale of bank premises		2,837,500			479,673
Acquisition of premises and equipment		(1,287,764	)		(2,720,959	)
Proceeds from sales of other real estate		1,074,000			547,665
Other assets		(343,132	)		176,180
Net cash used in investing activities	$	(26,378,235	)	$	(40,929,007	)

Page 8 of 20

PEOPLES FINANCIAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(Unaudited)

For The Nine Months Ended September 30,	2004			2003
Cash flows from financing activities:
Demand and savings deposits, net increase	$	43,079,629		$	18,530,617
Time deposits, net increase (decrease)		2,369,544			(19,857,182	)
Principal payments on notes		(11,153	)		(33,451	)
Cash dividends		(1,778,198	)		(1,448,587	)
Retirement of stock		(33,982	)		(345,741	)
Federal funds purchased and securities sold under agreements to repurchase		3,182,238			28,417,507
Repayments to Federal Home Loan Bank		(30,123,630	)		(40,067,360	)
Borrowings from Federal Home Loan Bank		20,254,949			40,546,069
Net cash provided by financing activities		36,939,397			25,741,872
Net increase (decrease) in cash and cash equivalents		14,050,764			(10,202,013	)
Cash and cash equivalents, beginning of period		33,861,029			39,654,247
Cash and cash equivalents, end of period	$	47,911,793		$	29,452,234

See Report of Independent Registered Public Accounting Firm and Selected Notes to Condensed Consolidated Financial Statements.

Page 9 of 20

PEOPLES FINANCIAL CORPORATION AND SUBSIDIARIES
SELECTED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the Nine Months Ended September 30, 2004 and 2003

1. The accompanying unaudited condensed consolidated financial statements have been prepared with the accounting policies in effect as of December 31, 2003 as set forth in the Notes to the Consolidated Financial Statements of Peoples Financial Corporation and Subsidiaries (the Company). In the opinion of Management, all adjustments necessary for a fair presentation of the condensed consolidated financial statements have been included and are of a normal recurring nature. The accompanying unaudited condensed consolidated financial statements have been prepared also in accordance with the instructions to Form 10-Q and Rule 10-01 of Regulations S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. The statements include information required for interim financial statements.

2. The results of operations for the nine months ended September 30, 2004 and 2003, are not necessarily indicative of the results to be expected for the full year.

3. Per share data is based on the weighted average shares of common stock outstanding of 5,556,530 and 5,564,641 for the nine months ended September 30, 2004 and 2003, respectively.

4. At September 30, 2004 and 2003, the total recorded investment in impaired loans amounted to $8,173,000 and $6,962,000. The average recorded investment in impaired loans amounted to approximately $6,605,000 and $6,947,000 at September 30, 2004 and 2003, respectively. The amount of that recorded investment in impaired loans for which there is a related allowance for loan losses was $8,173,000 at September 30, 2004. The allowance for losses related to these loans amounted to approximately $1,284,000 at September 30, 2004. Interest not accrued on these loans amounted to $42,000 and $219,000 for the nine months ended September 30, 2004 and 2003, respectively. In compliance with a bankruptcy court order, interest in the amount of $136,000 has been received and recorded as interest income relating to one impaired loan, with an average balance of $5,736,000 for the nine months ended September 30, 2004.

5. Transactions in the allowance for loan losses were as follows:

	For the Nine Months			For the Year Ended			For the Nine Months
	Ended September 30,			December 31,			Ended September 30,
	2004			2003			2003
Balance, beginning of period	$	6,398,694		$	6,696,911		$	6,696,911
Recoveries		447,255			599,783			507,596
Loans charged off		(676,610	)		(1,345,000	)		(1,184,829	)
Provision for loan losses		424,000			447,000			383,044
Balance, end of period	$	6,593,339		$	6,398,694		$	6,402,722

Page 10 of 20

6. The Company has defined cash and cash equivalents to include cash and due from banks. The Company paid $3,600,000 and $4,636,000 for the nine months ended September 30, 2004 and 2003, respectively, and $5,938,000 for the twelve months ended December 31, 2003, for interest on deposits and borrowings. Income tax payments totaled $1,564,000 and $1,832,000 for the nine months ended September 30, 2004 and 2003, respectively, and $2,537,000 for the twelve months ended December 31, 2003. Loans transferred to other real estate amounted to $112,000 and $750,000 for the nine months ended September 30, 2004 and 2003, respectively, and $978,000 for the twelve months ended December 31, 2003.

7. The income tax effect on the accumulated other comprehensive income was ($404,000)and ($625,000) at September 30, 2004 and 2003, respectively.

8. Information pertaining to securities with gross unrealized losses at September 30, 2004, aggregated by investment category and length of time that individual securities have been in a continuous loss position is as follows:

	Less Than Twelve Months					Over Twelve Months					Total
			Gross Unrealized					Gross Unrealized					Gross Unrealized
	Fair Value		Loss			Fair Value		Loss			Fair Value		Loss
U. S. Treasury	$	37,873	$	(57	)	$	989	$	(29	)	$	38,862	$	(86	)
U. S. Government Agencies		32,573		(321	)		11,796		(287	)		44,369		(608	)
States and political subdivisions		3,735		(74	)							3,735		(74	)
Total	$	74,181	$	(452	)	$	12,785	$	(316	)	$	86,966	$	(768	)

Management evaluates securities for other-than-temporary impairment on a monthly basis. Consideration is given to the length of time and the extent to which the fair value has been less than cost, the fact that the Company’s securities are primarily issued by U. S. Treasury and U. S. Government Agencies, the cause of the decline in value, the intent and ability of the Company to hold these securities until maturity and that the Company has traditionally held virtually all of its securities, including those classified as available for sale, until maturity. Any sales of available for sale securities, which have been infrequent and immaterial, have been for liquidity purposes. As a result of this evaluation, the Company has determined that the declines summarized in the table above are not deemed to be other than temporary.

Page 11 of 20

Report of Independent Registered Public Accounting Firm

Board of Directors
Peoples Financial Corporation
Biloxi, Mississippi

We have reviewed the accompanying condensed consolidated balance sheets of Peoples Financial Corporation as of September 30, 2004, September 30, 2003 and December 31, 2003, and the related condensed consolidated statements of income, shareholders’ equity, and cash flows for the nine months ended September 30, 2004 and September 30, 2003. These financial statements are the responsibility of the Company’s management.

We conducted our review in accordance with standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material modifications that should be made to the accompanying condensed financial statements in order for them to be in conformity with United States generally accepted accounting principles for interim financial statements.

We have previously audited, in accordance with standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Peoples Financial Corporation as of December 31, 2003, and the related consolidated statements of income, shareholders’ equity and cash flows for the year then ended (not presented herein); and in our report dated January 21, 2004, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 2003, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

/s/ Piltz, Williams, LaRosa & Co.

PILTZ, WILLIAMS, LAROSA & CO.

November 10, 2004
Biloxi, Mississippi

Page 12 of 20

Item 2 — Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following presents Management’s discussion and analysis of the consolidated financial condition and results of operations of Peoples Financial Corporation and Subsidiaries (the Company) for the nine months ended September 30, 2004 and 2003. These comments highlight the significant events and should be considered in combination with the Condensed Consolidated Financial Statements included in this report on Form 10-Q.

Forward-Looking Information

Congress passed the Private Securities Litigation Act of 1995 in an effort to encourage corporations to provide information about a company’s anticipated future financial performance. This act provides a safe harbor for such disclosure which protects the companies from unwarranted litigation if actual results are different from management expectations. This report contains forward-looking statements and reflects industry conditions, company performance and financial results. These forward-looking statements are subject to a number of factors and uncertainties which could cause the Company’s actual results and experience to differ from the anticipated results and expectations expressed in such forward-looking statements.

Overview

Net income for the nine months ended September 30, 2004, was $4,484,000 as compared with $3,636,000 for the nine months ended September 30, 2003. This increase is largely attributable to the gain on the sale of bank premises of $838,000, net of taxes, in 2004. Managing the interest margin in its trade area’s extremely competitive environment continues to be a priority for the Company. A strong increase in loan volume of 13% at September 30, 2004, as compared with September 30, 2003, is the result of the improvement in the local economy.

The following schedule compares financial highlights for the nine months ended September 30, 2004 and 2003:

For the nine months ended September 30,	2004			2003
Net income per share	$	0.81		$	0.65
Book value per share	$	15.54		$	14.94
Return on average total assets		.99	%		.85	%
Return on average shareholders’ equity		7.04	%		5.88	%
Allowance for loan losses as a % of loans, net of unearned discount		2.04	%		2.24	%

Page 13 of 20

Financial Condition

Held to Maturity Securities

Held to maturity securities decreased $4,410,000 at September 30, 2004, as compared with September 30, 2003, as a result of the management of the Company’s liquidity position. Funds available from the maturity of these securities were generally used to fund the increase in the loan portfolio. Gross unrealized gains for held to maturity securities were $134,000 and $504,000 at September 30, 2004 and 2003, respectively. The following schedule reflects the mix of the held to maturity investment portfolio at September 30, 2004 and 2003:

September 30,	2004					2003
	Amount		%			Amount		%
U. S. Treasury securities	$					$	999,645		14	%
U. S. Government agencies							3,000,000		40	%
States and political subdivisions		2,944,232		100	%		3,354,689		46	%
Totals	$	2,944,232		100	%	$	7,354,334		100	%

Available for Sale Securities

Available for sale securities decreased $13,157,000 at September 30, 2004, as compared with September 30, 2003, as the result of the management of the Company’s liquidity position, as discussed above. Gross unrealized gains were $927,000 and $2,361,000 at September 30, 2004 and 2003, respectively, and gross unrealized losses were $1,083,000 and $1,189,000 at September 30, 2004 and 2003, respectively. The following schedule reflects the mix of available for sale securities at September 30, 2004 and 2003:

September 30,	2004					2003
	Amount		%			Amount		%
U. S. Treasury securities	$	72,083,380		34	%	$	55,514,592		25	%
U. S. Government agencies		121,455,358		58	%		157,581,451		70	%
States and political subdivisions		13,571,474		6	%		6,385,248		3	%
Other securities		3,576,624		2	%		4,362,351		2	%
Totals	$	210,686,836		100	%	$	223,843,642		100	%

Page 14 of 20

Federal Home Loan Bank Stock

The Company’s investment in Federal Home Loan Bank (“FHLB”) Stock decreased $569,000 at September 30, 2004, as compared with September 30, 2003, due to the redemption of stock by the FHLB.

Loans

Loans increased $37,453,000 at September 30, 2004, as compared with September 30, 2003. During the fourth quarter of 2003 and continuing through September 30, 2004, the local economy has stabilized which has resulted in increased loan demand. The Company expects that this demand will continue into the fourth quarter of 2004. This demand has primarily been funded through the maturity of investment securities.

Bank Premises and Equipment

Bank premises and equipment decreased $1,509,000 at September 2004, as compared with September 30, 2003, primarily due to the sale of two parcels of bank premises during 2004.

Other Real Estate

Other real estate decreased $1,082,000 at September 30, 2004, as compared with September 30, 2003, due to the sale of several parcels of other real estate during the twelve months ended September 30, 2004.

Other Assets

Other assets increased $3,122,000 at September 30, 2004, as compared with September 30, 2003, primarily due to an increase in deferred income taxes of $250,000, which was the result of unrealized losses on available for sale securities, and a receivable of $2,500,000 relating to the sale of bank premises structured as a like-kind exchange under Section 1031 of the Internal Revenue Code.

Deposits

Total deposits increased $31,159,000 at September 30, 2004, as compared with September 30, 2003. Significant increases or decreases in total deposits and/or significant fluctuations among the different types of deposits from quarter to quarter are anticipated by Management as customers in the casino industry and county and municipal areas reallocate their resources periodically. As discussed above, the Company has managed its funds including planning the timing and classification of investment maturities and using other funding sources and their maturity so as to achieve appropriate liquidity.

Notes Payable

Notes payable decreased $261,000 at September 30, 2004, compared with September 30, 2003, as a result of the maturity and/or early payoff of Company debt.

Other Liabilities

Other liabilities increased $678,000 at September 30, 2004, as compared with September 30, 2003, primarily due to the impact of increasing health care costs on the liability for post-retirement health benefits.

Page 15 of 20

Shareholders’ Equity and Capital Adequacy

Strength, security and stability have been the hallmark of the Company since its founding in 1985 and of its bank subsidiary since its founding in 1896. A strong capital foundation is fundamental to the continuing prosperity of the Company and the security of its customers and shareholders.

One measure of capital adequacy is the primary capital ratio which was 15.42% at September 30, 2004 as compared with 15.67% at September 30, 2003. These ratios are well above the regulatory minimum of 6.00%. Management continues to emphasize the importance of maintaining the appropriate capital levels of the Company.

RESULTS OF OPERATIONS

Net Interest Income

Net interest income, the amount by which interest income on loans, investments and other interest earning assets exceeds interest expense on deposits and other borrowed funds, is the single largest component of the Company’s income. Management’s objective is to provide the largest possible amount of income while balancing interest rate, credit, liquidity and capital risk. The following schedule summarizes net interest earnings and net yield on interest earning assets:

Net Interest Earnings and Net Yield on Interest Earning Assets

Nine Months Ended September 30, (In
thousands, except percentages)	2004			2003
Total interest income (1)	$	18,105		$	19,055
Total interest expense		3,694			4,600
Net interest earnings	$	14,411		$	14,455
Net yield on interest earning assets		3.67	%		3.83	%

(1) All interest earned is reported on a taxable equivalent basis using a tax rate of 34% in 2004 and 2003.

The schedule on page 17 provides an analysis of the change in total interest income and total interest expense for the nine months ended September 30, 2004 and 2003.

Page 16 of 20

Analysis of Changes in Interest Income and Interest Expense
(In Thousands)

	For the Nine Months		For the Nine Months					Attributable To:
	Ended September 30,		Ended September 30,
	2004		2003		Increase (Decrease)			Volume			Rate			Rate/ Volume
INTEREST INCOME: (1)
Loans (2)	$	12,568	$	13,119	$	(551	)	$	706		$	(1,193	)	$	(64	)
Federal funds sold		56		59		(3	)		124			(41	)		(86	)
Held to maturity:
Taxable securities		19		287		(268	)		(270	)		28			(26	)
Non-taxable securities		183		226		(43	)		(39	)		(5	)		1
Available for sale:
Taxable securities		4,731		4,987		(256	)		134			(380	)		(10	)
Non-taxable securities		370		183		187			156			17			14
Other securities		178		194		(16	)		(21	)		6			(1	)
Total	$	18,105	$	19,055	$	(950	)	$	790		$	(1,568	)	$	(172	)
INTEREST EXPENSE:
Savings and negotiable interest bearing deposits	$	1,065	$	1,180	$	(115	)	$	670		$	(501	)	$	(284	)
Time deposits		1,549		2,364		(815	)		(241	)		(639	)		65
Borrowings from FHLB		334		321		13			(5	)		19			(1	)
Federal funds purchased and securities sold under agreements to repurchase		746		729		17			101			(74	)		(10	)
Mortgage indebtedness				6		(6	)		(6	)
Total	$	3,694	$	4,600	$	(906	)	$	519		$	(1,195	)	$	(230	)

(1) All interest earned is reported on a taxable equivalent basis using a tax rate of 34% in 2004 and 2003.

(2) Loan fees are included in these figures. Includes nonaccrual loans.

Page 17 of 20

Provision for Loan Losses

Management continuously monitors the Company’s relationships with its loan customers, especially those in concentrated industries such as gaming and hotel/motel, and their direct and indirect impact on its operations. A thorough analysis of current economic conditions and the quality of the loan portfolio is conducted on a quarterly basis. These analyses are utilized in the computation of the adequacy of the allowance for loan losses. Based on these analyses, the Company provided $424,000 and $383,000 during the nine months ended September 30, 2004 and 2003, respectively, for loan losses. The provision in 2004 is primarily due to the increase in loans during the same period. The Company expects to provide for its loan loss provision on a monthly basis during the remaining quarter in 2004 at a similar level, as deemed necessary, based on its analyses.

Service Charges on Deposit Accounts

Service charges on deposit accounts decreased $725,000 for the nine months ended September 30, 2004, as compared with the nine months ended September 30, 2003, primarily due to the decrease in fee income from off-site ATMS no longer under contract with the Company.

Gain On Sale of Bank Premises

The Company realized a gain of $1,271,000 for the nine months ended September 30, 2004, from the sale of bank premises.

Other Expense

Other expense decreased $832,000 for the nine months ended September 30, 2004, as compared with the nine months ended September 30, 2003, as a result of a decrease in expenses for off-site ATMs no longer under contract with the Company.

LIQUIDITY

Liquidity represents the Company’s ability to adequately provide funds to satisfy demands from depositors, borrowers and other commitments by either converting assets to cash or accessing new or existing sources of funds. Management monitors these funds requirements in such a manner as to satisfy these demands and provide the maximum earnings on its earning assets. Deposits, payments of principal and interest on loans, proceeds from maturities of investment securities and earnings on investment securities are the principal sources of funds for the Company. As discussed previously, the Company has utilized non-traditional sources of funds including brokered certificates of deposit and borrowings from the Federal Home Loan Bank. These additional sources have allowed the Company to satisfy its liquidity needs. The Company will continue to utilize these sources of funds throughout 2004, as necessary.

Item 4: Controls and Procedures

Based on their evaluation, as of September 30, 2004, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(c) and 15d-15(c) and internal control over financial reporting (as defined in Exchange Act Rules 13a - - 15(f) and 15d — 15(f)) are effective. During the period ending September 30, 2004, there were no changes in internal controls over financial reporting that materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

Page 18 of 20

PART II

OTHER INFORMATION

Item 5 — Other Information

None.

Item 6 — Exhibits and Reports on Form 8-K

(a) Exhibits

Exhibit 23	Consent of Certified Public Accountants
Exhibit 31.1	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Exhibit 31.2	Certification Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Exhibit 32.1	Certification of Chief Executive Officer Pursuant to 18 U.S.C. ss.1350
Exhibit 32.2	Certification of Chief Financial Officer Pursuant to 18 U.S.C. ss. 1350.

(b) Reports on Form 8-K

A Form 8-K was filed by the Company on October 18,2004.

Page 19 of 20

SIGNATURES

Pursuant to the requirement of Section 13 of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

PEOPLES FINANCIAL CORPORATION
	(Registrant)
Date:	November 10, 2004
By:	/s/ Chevis C. Swetman
	Chevis C. Swetman
Chairman, President and Chief Executive Officer
Date:	November 10, 2004
By:	/s/ Lauri A. Wood
	Lauri A. Wood
	Chief Financial Officer and Controller
	(principal financial and accounting officer)

Page 20 of 20

EX-23

Exhibit 23: Consent of Certified Public Accountants

November 10, 2004

We consent to the use of our reports, dated November 10, 2004, in Form 10-Q filing of the Peoples Financial Corporation.

/s/ Piltz, Williams, LaRosa & Co.

PILTZ, WILLIAMS, LAROSA & CO.
Biloxi, Mississippi

EX-31.1

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PEOPLES FINANCIAL CORPORATION
PURSUANT TO SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002

I, Chevis C. Swetman, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Peoples Financial Corporation.

2. Based on my knowledge, the report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by the report;

3. Based on my knowledge, the financial statements, and other financial information included in the report, fairly present in all material respects the financial condition, results of operation and cash flows of the registrant as of, and for, the periods presented in the report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as such term is defined in Exchange Act Rules 13a-15(e) and 15d-15(e) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) designed such disclosure controls and procedures or caused such disclosure controls and procedures to be designed under our supervision to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which the periodic reports are being prepared;

b) designed such internal control over financial reporting or caused such internal control over financial reporting be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of

the registrant’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weakness in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial data; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

Dated: November 10, 2004

/s/ Chevis C. Swetman

Chevis C. Swetman,
President and Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER
PEOPLES FINANCIAL CORPORATION
PURSUANT TO SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002

I, Lauri A. Wood, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Peoples Financial Corporation.

2. Based on my knowledge, the report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by the report;

3. Based on my knowledge, the financial statements, and other financial information included in the report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in the report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as such term is defined in Exchange Act Rules 13a-15(e) and 15d-15(e) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) designed such disclosure controls and procedures or caused such disclosure controls and procedures to be designed under our supervision to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which the periodic reports are being prepared;

b) designed such internal control over financial reporting or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of

the registrant’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weakness in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: November 10, 2004

/s/ Lauri A. Wood

Lauri A. Wood,
Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PEOPLES FINANCIAL CORPORATION
PURSUANT TO 18 U.S.C. ss. 1350

I, Chevis C. Swetman, Chairman, President and Chief Executive Officer of Peoples Financial Corporation (the “Company”), hereby certify that the accompanying report on Form 10-Q for the period ending September 30, 2004 and filed with the Securities and Exchange Commission on the date hereof pursuant to Section 13(a) of the Securities Exchange Act of 1934 (the “Report”) by the Company fully complies with the requirements of that section.

I further certify that the information contained in the Report fairly presents, in all material aspects, the financial operations and results of operations of the Company.

By:	/s/ Chevis C. Swetman Chevis C. Swetman,
	Chairman, President and Chief Executive Officer
	November 10, 2004
	Date

EX-32.2

Exhibit 32.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER
PEOPLES FINANCIAL CORPORATION
PURSUANT TO 18 U.S.C. ss. 1350

I, Lauri A. Wood, Chief Financial Officer and Controller of Peoples Financial Corporation (the “Company”), hereby certify that the accompanying report on Form 10-Q for the period ending September 30, 2004 and filed with the Securities and Exchange Commission on the date hereof pursuant to Section 13(a) of the Securities Exchange Act of 1934 (the “Report”) by the Company fully complies with the requirements of that section.

I further certify that the information contained in the Report fairly presents, in all material aspects, the financial operations and results of operations of the Company.

By:	/s/ Lauri A. Wood
	Lauri A. Wood
	Chief Financial Officer and Controller
	November 10, 2004
	Date