To Our Shareholders,
The year 2016 will be remembered as the year we returned to profitability. We again achieved
significant asset quality improvement by decreasing non-accrual loans (22%) from 2015, lowering
charge-offs by 14% from the prior year and significantly reducing our loan loss provision.
Following up on last year, in 2016 we implemented several products and services including:
1) Reissued all new debit cards with new EMV chip technology and expanded instant card
issue service to fourteen branch locations.
2) All thirty-two state-of-the-art ATMs have been installed and are now EMV chip compliant
prior to the mandatory compliance date of October 2017. The estimated cost of this
project was $1 Million.
3) The enhanced debit card fraud protection capability through “Card Guardian” text message
alert service saved the bank over $100,000 in 2016.
Since 1896 it has been our culture to deliver exemplary customer service while meeting the banking
and financial services needs of the Mississippi Gulf Coast. On April 13, 2017 we will celebrate
the 121st anniversary of The Peoples Bank, I am extremely grateful for the dedication and support
of our board of directors and our talented and committed team of bankers. We look forward to
continuing our legacy of service to our coastal community for many years to come.
Sincerely yours,
Chevis C. Swetman
Chairman of the Board
President & Chief Executive Officer
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Peoples Financial Corporation (the “Company”) is a one-bank holding company headquartered in Biloxi, Mississippi. The
following presents Management’s discussion and analysis of the consolidated financial condition and results of operations
of the Company and its consolidated subsidiaries for the years ended December 31, 2016, 2015 and 2014. These comments
highlight the significant events for these years and should be considered in combination with the Consolidated Financial
Statements and Notes to Consolidated Financial Statements included in this annual report.
FORWARD-LOOKING INFORMATION
Congress passed the Private Securities Litigation Act of 1995 in an effort to encourage corporations to provide information
about a company’s anticipated future financial performance. This act provides a safe harbor for such disclosure which protects
the companies from unwarranted litigation if actual results are different from management expectations. This report contains
forward-looking statements and reflects industry conditions, company performance and financial results. These forward-
looking statements are subject to a number of factors and uncertainties which could cause the Company’s actual results and
experience to differ from the anticipated results and expectations expressed in such forward-looking statements. Such factors and
uncertainties include, but are not limited to: changes in interest rates and market prices, changes in local economic and business
conditions, increased competition for deposits and loans, a deviation in actual experience from the underlying assumptions used
to determine and establish the allowance for loan losses, changes in the availability of funds resulting from reduced liquidity,
changes in government regulations and acts of terrorism, weather or other events beyond the Company’s control.
NEW ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board (“FASB”) issued new accounting standards updates in 2016, which have been
disclosed in Note A to the Consolidated Financial Statements. The Company does not generally expect that these updates will
have a material impact on its financial position or results of operations. However the effect of Accounting Standards Update
2016-13 is still being considered.
CRITICAL ACCOUNTING POLICIES
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of
America (“GAAP”) 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. The Company evaluates these estimates and assumptions on an on-going
basis using historical experience and other factors, including the current economic environment. We adjust such estimates and
assumptions when facts and circumstances dictate. Certain critical accounting policies affect the more significant estimates and
assumptions used in the preparation of the consolidated financial statements.
Investments
Investments which are classified as available for sale are stated at fair value. A decline in the market value of an investment
below cost that is deemed to be other-than-temporary is charged to earnings for the decline in value deemed to be credit related
and a new cost basis in the security is established. The decline in value attributed to non-credit related factors is recognized in
other comprehensive income. The determination of the fair value of securities may require Management to develop estimates
and assumptions regarding the amount and timing of cash flows.
Allowance for Loan Losses
The Company’s allowance for loan losses (“ALL”) reflects the estimated losses resulting from the inability of its borrowers to
make loan payments. The ALL is established and maintained at an amount sufficient to cover the estimated loss associated with
the loan portfolio of the Company as of the date of the financial statements. Credit losses arise not only from credit risk, but also
from other risks inherent in the lending process including, but not limited to, collateral risk, operation risk, concentration risk
and economic risk. As such, all related risks of lending are considered when assessing the adequacy of the ALL. On a quarterly
basis, Management estimates the probable level of losses to determine whether the allowance is adequate to absorb reasonably
foreseeable, anticipated losses in the existing portfolio based on our past loan loss experience, known and inherent risk in the
portfolio, adverse situations that may affect the borrowers’ ability to repay and the estimated value of any underlying collateral
and current economic conditions. Management believes that the ALL is adequate and appropriate for all periods presented in
these financial statements. If there was a deterioration of any of the factors considered by Management in evaluating the ALL, the
estimate of loss would be updated, and additional provisions for loan losses may be required. The analysis divides the portfolio
into two segments: a pool analysis of loans based upon a five year average loss history which is updated on a quarterly basis and
which may be adjusted by qualitative factors by loan type and a specific reserve analysis for those loans considered impaired
under GAAP. All credit relationships with an outstanding balance of $100,000 or greater that are included in Management’s loan
watch list are individually reviewed for impairment. All losses are charged to the ALL when the loss actually occurs or when a
determination is made that a loss is likely to occur; recoveries are credited to the ALL at the time of receipt.
1
Other Real Estate
Other real estate (“ORE”) includes real estate acquired through foreclosure. Each other real estate property is carried at fair
value, less estimated costs to sell. Fair value is principally based on appraisals performed by third-party valuation specialists.
If Management determines that the fair value of a property has decreased subsequent to foreclosure, the Company records a
write down which is included in non-interest expense.
Employee Benefit Plans
Employee benefit plan liabilities and pension costs are determined utilizing actuarially determined present value calculations.
The valuation of the benefit obligation and net periodic expense is considered critical, as it requires Management and its
actuaries to make estimates regarding the amount and timing of expected cash outflows including assumptions about mortality,
expected service periods and the rate of compensation increases.
Income Taxes
GAAP requires the asset and liability approach for financial accounting and reporting for deferred income taxes. We use the
asset and liability method of accounting for deferred income taxes and provide deferred income taxes for all significant income
tax temporary differences. See Note I to the Consolidated Financial Statements for additional details. As part of the process of
preparing our consolidated financial statements, the Company is required to estimate our income taxes in each of the jurisdictions
in which we operate. This process involves estimating our actual current tax exposure together with assessing temporary
differences resulting from differing treatment of items, such as the provision for the allowance for loan losses, for tax and
financial reporting purposes. These differences result in deferred tax assets and liabilities that are included in our consolidated
statement of condition. We must also assess the likelihood that our deferred tax assets will be recovered from future taxable
income, and to the extent we believe that recovery is not likely, we must establish a valuation allowance. Significant management
judgment is required in determining our provision for income taxes, our deferred tax assets and liabilities and any valuation
allowance recorded against our net deferred tax assets. To the extent the Company establishes a valuation allowance or adjusts
this allowance in a period, we must include an expense within the tax provision in the consolidated statement of operations.
OVERVIEW
The Company is a community bank serving the financial and trust needs of its customers in our trade area, which is defined as
those portions of Mississippi, Louisiana and Alabama which are within a fifty mile radius of the Waveland, Wiggins and Gautier
branches, the bank subsidiary’s three most outlying locations. Maintaining a strong core deposit base and providing commercial
and real estate lending in our trade area are the traditional focuses of the Company. Growth has largely been achieved through
de novo branching activity, and it is expected that these strategies will continue to be emphasized in the future.
The Company recorded net income of $167,000 for 2016 compared with a net loss of $4,592,000 for 2015 and a net loss of
$10,004,000 for 2014. Results in 2016 included a decrease in net interest income and non-interest income, which were offset
by a decrease in the provision for the allowance for loan losses and non-interest expense, as compared with 2015. Results in
2015 were primarily impacted by a decrease in net interest income and non-interest income and an increase in non-interest
expense, which were partially offset by a decrease in the provision for the allowance for loan losses and income tax expense,
as compared with 2014.
Managing the net interest margin in the Company’s highly competitive market continues to be very challenging. Net interest
income was impacted primarily by the decrease in interest income on loans of $527,000 and the decrease in interest income on
taxable available for sale securities of $573,000 for 2016 as compared with 2015. The decrease in interest income on loans was
primarily the result of the decrease in average loans as principal payments, maturities, charge-offs and foreclosures on existing
loans significantly exceeded new loans. The decrease in interest income on taxable available for sales securities is the result of
shorter durations, and therefore lower yields, on new investments, in anticipation of rising rates as well as proceeds from calls
and maturities of U.S. Agency securities being invested in U.S. Treasury securities which generally have a lower rate.
Net interest income was impacted primarily by the decrease in interest income on loans of $1,296,000 and the decrease in
interest income on taxable available for sale securities of $1,324,000 for 2015 as compared with 2014. The decrease in interest
income on loans was primarily the result of a loan with an original balance of $20,000,000 on which the contractual rate is
below the weighted average rate of other loans, which decreased the yield on average loans. The decrease in interest income
on taxable available for sales securities is the result of shorter durations, and therefore lower yields, on new investments, in
anticipation of rising rates.
Monitoring asset quality, estimating potential losses in our loan portfolio and addressing non-performing loans continue to
be emphasized as the local economy has negatively impacted collateral values and borrowers’ ability to repay their loans.
The Company’s nonaccrual loans totaled $11,854,000, $15,186,000 and $33,298,000 at December 31, 2016, 2015 and 2014,
respectively. Most of these loans are collateral-dependent, and the Company has rigorously evaluated the value of its collateral
2
to determine potential losses. The Company is working diligently to address and reduce its non-performing assets, and some
stability in collateral values has occurred. The provision for the allowance for loan losses was $568,000, $2,582,000 and
$7,404,000 for 2016, 2015 and 2014, respectively
Non-interest income decreased $349,000 for 2016 as compared with 2015 results and $1,721,000 for 2015 as compared
with 2014 results. Service charges on deposit accounts decreased $500,000 for 2016 as compared with 2015 and decreased
$1,637,000 for 2015 as compared with 2014 primarily as a result of decreased ATM fee income.
Non-interest expense decreased $4,902,000 for 2016 as compared with 2015 and increased $898,000 for 2015 as compared
with 2014. The decrease for 2016 was the result of the decrease in salaries and employee benefits of $628,000, ORE expenses
of $1,396,000 and ATM expenses of $628,000 as compared with 2015. There was not an impairment loss in 2016 but results for
2015 were impacted by a write-down of $1,695,000 from the credit impairment of a municipal security. The increase for 2015
was also the result of the increase in ORE expenses of $654,000, partially offset by decreases in salaries and employee benefits
of $309,000 and ATM expenses of $1,226,000 as compared with 2014.
The Company recorded income tax expense of $78,000 for 2016 relating to the resolution of a recent examination by the
Internal Revenue Service and an income tax benefit of $762,000 for 2015 relating to change in the valuation allowance. The
Company recorded income tax expense of $4,726,000 for 2014 as a result of establishing a valuation allowance of $8,140,000
based on an evaluation of the Company’s deferred tax assets in 2014.
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.
Changes in the volume and mix of interest-earning assets and interest-bearing liabilities combined with changes in market rates
of interest directly affect net interest income.
2016 as compared with 2015
The Company’s average interest-earning assets decreased approximately $1,598,000, or .27%, from approximately $600,280,000
for 2015 to approximately $598,682,000 for 2016. Average balances due from depository institutions increased approximately
$20,338,000 primarily as a result of the decrease in average loans of approximately $28,475,000 due to principal payments,
maturities, charge-offs and foreclosures on existing loans significantly exceeding new loans The average yield on interest-
earning assets was 3.33% for 2015 compared with 3.19% for 2016. The yield on average loans increased from 4.14% for
2015 to 4.34% as a result of the increase in prime rate during 2015 and 2016. This increase was offset by the yield on taxable
available for sale securities, which decreased from 1.72% for 2015 to 1.36% for 2016 as recent investment purchases have
shorter durations, and therefore lower yields, in anticipation of rising rates.
Average interest-bearing liabilities decreased approximately $4,539,000, or 1%, from approximately $450,224,000 for 2015 to
approximately $445,685,000 for 2016. Average borrowings from the Federal Home Loan Bank (“FHLB”) decreased due to the
liquidity needs of the bank subsidiary. The average rate paid on interest-bearing liabilities increased 4 basis points, from .19%
for 2015 to .23% for 2016.
The Company’s net interest margin on a tax-equivalent basis, which is net interest income as a percentage of average earning
assets, was 3.18% for 2015 as compared with 3.02% for 2016.
2015 as compared with 2014
The Company’s average interest-earning assets decreased approximately $47,537,000, or 7%, from approximately $647,817,000
for 2014 to approximately $600,280,000 for 2015. The Company’s average balance sheet decreased primarily as decreased public
funds enabled us to reduce our investment in securities. The average yield on interest-earning assets was 3.54% for 2014 compared
with 3.33% for 2015. The yield on average loans decreased in 2015 as compared with 2014 as discussed in the Overview. The yield
on taxable available for sale securities decreased from 1.99% for 2014 to 1.72% for 2015 as recent investment purchases have
shorter durations, and therefore lower yields, in anticipation of rising rates.
Average interest-bearing liabilities decreased approximately $54,295,000, or 11%, from approximately $504,519,000 for 2014
to approximately $450,224,000 for 2015. Average borrowings from the FHLB decreased due to the liquidity needs of the bank
subsidiary. The average rate paid on interest-bearing liabilities decreased 10 basis points, from .29% for 2014 to .19% for 2015.
This decrease was due to an immaterial interest expense adjustment on time deposits in 2014.
The Company’s net interest margin on a tax-equivalent basis, which is net interest income as a percentage of average earning
assets, was 3.32% for 2014 as compared with 3.18% for 2015.
3
The tables below analyze the changes in tax-equivalent net interest income for the years ended December 31, 2016, 2015 and 2014.
ANALYSIS OF AVERAGE BALANCES, INTEREST EARNED/PAID AND YIELD (IN THOUSANDS)
2016
2015
2014
Average
Balance Earned/Paid Rate
Interest
Average
Balance Earned/Paid Rate
Interest
Average
Balance Earned/Paid Rate
Interest
$ 327,819
$ 14,232
4.34%
$ 356,294
$ 14,759
4.14%
$ 362,649
$ 16,055
4.43%
31,559
277
0.88%
11,221
63
0.56%
7,305
21
0.29%
8,562
19,596
188,512
20,902
1,732
184
725
2.15%
3.70%
2,558
1,123
22
1.36%
5.37%
1.27%
452
17,645
184,458
27,744
2,466
9
600
1.99%
3.40%
3,178
1,338
22
1.72%
4.82%
0.89%
13,696
474
3.46%
225,742
34,360
4,065
4,502
1,889
18
1.99%
5.50%
0.44%
Loans (1) (2)
Balances due from
depository institutions
Held to maturity:
Taxable
Non taxable (3)
Available for sale:
Taxable
Non taxable (3)
Other
Total
$ 598,682
$ 19,121
3.19%
$ 600,280
$ 19,969
3.33%
$ 647,817
$ 22,959
3.54%
Savings and
interest-bearing DDA
Time deposits
Borrowings from FHLB
$ 359,801
77,644
8,240
$ 437
457
131
0.12%
0.59%
1.59%
$ 349,782
74,923
25,519
$ 306
371
198
0.09%
0.50%
0.78%
$ 358,106
89,564
56,849
$ 274
937
230
0.08%
1.05%
0.40%
Total
$ 445,685
$ 1,025
0.23%
$ 450,224
$ 875
0.19%
$ 504,519
$ 1,441
0.29%
Net tax-equivalent spread
Net tax-equivalent margin
on earning assets
2.97%
3.02%
3.14%
3.18%
3.25%
3.32%
(1) Loan fees of $389, $333 and $557 for 2016, 2015 and 2014, respectively, are included in these figures.
(2) Includes nonaccrual loans.
(3) All interest earned is reported on a taxable equivalent basis using a tax rate of 34% in 2016, 2015 and 2014.
4
ANALYSIS OF CHANGES IN INTEREST INCOME AND EXPENSE (IN THOUSANDS)
Interest earned on:
Loans
Balances due from depository institutions
Held to maturity securities:
Taxable
Non taxable
Available for sale securities:
Taxable
Non taxable
Other
For the Year Ended December 31, 2016 Compared With December 31, 2015
Volume
$ (1,180)
114
161
66
70
(330)
(7)
Rate
Rate/Volume
Total
$ 709
35
$ (56)
65
$ (527)
214
1
53
(675)
153
9
13
6
(15)
(38)
(2)
175
125
(620)
(215)
Total
$ (1,106)
$ 285
$ (27)
$ (848)
Interest paid on:
Savings and interest-bearing DDA
Time deposits
Borrowings from FHLB
Total
$ 9
13
(134)
$ (112)
$ 119
70
207
$ 396
$ 3
3
(140)
$ (134)
$ 131
86
(67)
$ 150
For the Year Ended December 31, 2015 Compared With December 31, 2014
Rate
Rate/Volume
Total
Interest earned on:
Loans
Balances due from depository institutions
Held to maturity securities:
Taxable
Non taxable
Available for sale securities:
Taxable
Non taxable
Other
Total
Interest paid on:
Savings and interest-bearing DDA
Time deposits
Borrowings from FHLB
Total
$ 18
11
(6)
112
45
(7)
$ 173
$ (1)
80
(116)
$ (37)
$ (1,296)
42
9
126
(1,324)
(551)
4
$ (2,990)
$ 32
(566)
(32)
$ (566)
Volume
$ (281)
11
9
152
(823)
(364)
(7)
$ (1,033)
20
(20)
(613)
(232)
18
$ (1,303)
$ (1,860)
$ (6)
(153)
(127)
$ (286)
$ 39
(493)
211
$ (243)
5
Provision for Allowance for Loan Losses
In the normal course of business, the Company assumes risk in extending credit to its customers. This credit risk is managed
through compliance with the loan policy, which is approved by the Board of Directors. The policy establishes guidelines
relating to underwriting standards, including but not limited to financial analysis, collateral valuation, lending limits, pricing
considerations and loan grading. The Company’s Loan Review and Special Assets Departments play key roles in monitoring
the loan portfolio and managing problem loans. New loans and, on a periodic basis, existing loans are reviewed to evaluate
compliance with the loan policy. Loan customers in concentrated industries such as gaming and hotel/motel, as well as the
exposure for out of area; residential and land development; construction and commercial real estate loans, and their direct and
indirect impact on the Company’s operations are evaluated on a monthly basis. Loan delinquencies and deposit overdrafts are
closely monitored in order to identify developing problems as early as possible. Lenders experienced in workout scenarios
consult with loan officers and customers to address non-performing loans. A monthly watch list of credits which pose a potential
loss to the Company is prepared based on the loan grading system. This list forms the foundation of the Company’s allowance
for loan loss computation.
Management relies on its guidelines and existing methodology to monitor the performance of its loan portfolio and to identify
and estimate potential losses based on the best available information. The potential effect of declines in real estate values and
actual losses incurred by the Company were key factors in our analysis. Much of the Company’s loan portfolio is collateral-
dependent, requiring careful consideration of changes in the value of the collateral. Note A to the Consolidated Financial
Statements discloses a summary of the accounting principles applicable to impaired and nonaccrual loans as well as the
allowance for loan losses. Note C to the Consolidated Financial Statements presents additional analyses of the composition,
aging and performance of the loan portfolio as well as the transactions in the allowance for loan losses.
The Company’s analysis includes evaluating the current value of collateral securing all nonaccrual loans. Nonaccrual loans
totaled $11,854,000, $15,186,000 and $33,298,000 with specific reserves on these loans of $303,000, $1,697,000 and $2,507,000
as of December 31, 2016, 2015 and 2014, respectively. The specific reserves allocated to nonaccrual loans are relatively low as
collateral values appear sufficient to cover loan losses or the loan balances have been charged down to their realizable value.
The Company’s on-going, systematic evaluation resulted in the Company recording a total provision for the allowance for loan
losses of $568,000, $2,582,000 and $7,404,000 in 2016, 2015 and 2014, respectively. As a result of receiving new information and
updated appraisals on several collateral-dependent loans, the Company increased its provision for loan losses during the fourth
quarter of 2016 and for all of 2015 and 2014. The new appraisals caused Management to update the evaluation of these loans
and increase the loan loss provision significantly for several non-performing loans in its residential development and commercial
real estate segments during these years. The allowance for loan losses as a percentage of loans was 1.73%, 2.39% and 2.54% at
December 31, 2016, 2015 and 2014, respectively. The Company believes that its allowance for loan losses is appropriate as of
December 31, 2016.
The allowance for loan losses is an estimate, and as such, events may occur in the future which may affect its accuracy. The
Company anticipates that it is possible that additional information will be gathered in the future which may require an adjustment to
the allowance for loan losses. Management will continue to closely monitor its portfolio and take such action as it deems appropriate
to accurately report its financial condition and results of operations.
Non-interest Income
2016 as compared with 2015
Total non-interest income decreased $349,000 in 2016 as compared with 2015. Service charges on deposit accounts decreased
$500,000 primarily as a result of decreased ATM fees. ATM fees decreased $416,000 as the Company’s off-site ATMs at a
casino transferred to another vendor during 2015 which reduced ATM transactions. Securities were sold during 2016 for a gain
of $158,000 in 2016 as compared with a gain of $8,000 in 2015.
2015 as compared with 2014
Total non-interest income decreased $1,721,000 in 2015 as compared with 2014. Trust department income and fees increased
$179,000 as a result of the increase in market value, on which fees are based, of personal trust accounts and an increase in fees
charged. Service charges on deposit accounts decreased $1,637,000 primarily as a result of decreased ATM fees. ATM fees
decreased $1,386,000 as the Company’s off-site ATMs at a casino transferred to another vendor during 2015 which reduced
ATM transactions. The Company realized a loss of $218,000 from operations of its investment in a low income housing
partnership in 2015 as compared with a loss from operations of $64,000 in 2014 as a result of decreased occupancy.
Non-interest Expense
2016 as compared with 2015
Total non-interest expense decreased $4,902,000 in 2016 as compared with 2015. Salaries and employee benefits decreased
$628,000 primarily as a result of decreased salaries and health insurance costs. Salaries decreased $247,000 due to attrition.
6
Health insurance costs decreased $434,000 as a result of decreasing claims. The Company recorded a loss of $1,695,000 from
the credit impairment of a municipal security during 2015. Other expense decreased $2,682,000 for 2016 as compared with
2015. This decrease was primarily the result of a decrease in ATM expenses, legal and other real estate expenses. ATM expense
decreased $628,000 as a result of decreased ATM activity as off-site ATMs at a casino transferred to another vendor. Legal
expenses decreased $252,000 primarily as a result of legal fees associated with non-performing loans. Decreased write downs
of other real estate to fair value and a reduction in losses on sales of ORE caused these expenses to decrease $1,396,000 in 2016
as compared with 2015.
2015 as compared with 2014
Total non-interest expense increased $898,000 in 2015 as compared with 2014. Salaries and employee benefits decreased
$309,000 primarily as a result of decreased salaries and health insurance costs. Salaries decreased $113,000 due to attrition.
Health insurance costs decreased $150,000 as a result of decreasing claims. Equipment rentals, depreciation and maintenance
decreased $245,000 as 2014 results included additional servicing costs associated with bank-wide hardware and software
conversion costs. The Company recorded a loss of $1,695,000 from the credit impairment of a municipal security during
2015. Other expense decreased $128,000 for 2015 as compared with 2014. This decrease was the result of a decrease in ATM
expenses and increases in legal and other real estate expenses. ATM expense decreased $1,226,000 as a result of decreased
ATM activity as off-site ATMs at a casino transferred to another vendor. Legal expenses increased $292,000 primarily as a
result of legal fees associated with non-performing loans. Increased write downs of other real estate to fair value and losses on
sales of ORE caused these expenses to increase $654,000 in 2015 as compared with 2014.
Income Taxes
Income taxes have been impacted by non-taxable income and federal tax credits during 2016, 2015 and 2014. The Company
recognized an income tax benefit of $762,000 in 2015, and income tax expense of $78,000 and $4,726,000 in 2016 and 2014,
respectively. During 2014, Management established a valuation allowance against its net deferred tax asset of approximately
$8,140,000, which caused the expense to increase during this period. As of December 31, 2016, the valuation allowance is still
in place. The 2015 benefit was the result of changes in certain components of the Company’s deferred tax assets and liabilities.
Note I to the Consolidated Financial Statements presents a reconciliation of income taxes for these three years and further
analysis of the valuation allowance.
FINANCIAL CONDITION
Cash and due from banks increased $9,720,000 at December 31, 2016, compared with December 31, 2015 in the management
of the bank subsidiary’s liquidity position.
Available for sale securities increased $30,771,000 and held to maturity securities increased $29,125,000 at December 31, 2016
compared with December 31, 2015 as the Company invested some of its excess funding in order to increase interest income.
Loans decreased $22,202,000 at December 31, 2016 compared with December 31, 2015, as principal payments, maturities,
charge-offs and foreclosures on existing loans exceeded new loans.
Total deposits increased $62,309,000 at December 31, 2016, as compared with December 31, 2015. Typically, significant
increases or decreases in total deposits and/or significant fluctuations among the different types of deposits from year to year
are anticipated by Management as customers in the casino industry and county and municipal entities reallocate their resources
periodically.
Borrowings from the FHLB decreased $12,152,000 at December 31, 2016 as compared with December 31, 2015 based on the
liquidity needs of the bank subsidiary.
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. The primary and risk-based capital ratios are important indicators of the strength of
a Company’s capital. These figures are presented in the Five-Year Comparative Summary of Selected Financial Information.
The Company has established the goal of being classified as “well-capitalized” by the banking regulatory authorities.
Significant transactions affecting shareholders’ equity during 2016 are described in Note J to the Consolidated Financial
Statements. The Statement of Changes in Shareholders’ Equity also presents all activity in the Company’s equity accounts.
7
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. Note L to the Consolidated
Financial Statements discloses information relating to financial instruments with off-balance-sheet risk, including letters
of credit and outstanding unused loan commitments. The Company closely monitors the potential effects of funding these
commitments on its liquidity position. Management monitors these funding requirements in such a manner as to satisfy these
demands and to provide the maximum return on its earning assets.
The Company monitors and manages its liquidity position diligently through a number of methods, including through the
computation of liquidity risk targets and the preparation of various analyses of its funding sources and utilization of those
sources on a monthly basis. The Company also uses proforma liquidity projections which are updated on a continuous basis in
the management of its liquidity needs and also conducts contingency testing on its liquidity plan. The Company has also been
approved to participate in the Federal Reserve’s Discount Window Primary Credit Program, which it intends to use only as a
contingency. Management carefully monitors its liquidity needs, particularly relating to potentially volatile deposits, and the
Company has encountered no problems with meeting its liquidity needs.
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.
The Company also uses other sources of funds, including borrowings from the FHLB. The Company generally anticipates
relying on deposits, purchases of federal funds and borrowings from the FHLB for its liquidity needs in 2017.
REGULATORY MATTERS
During 2016, Management identified opportunities for improving information technology operations and security, risk
management and earnings, addressing asset quality concerns, analyzing and assessing the Bank’s management and staffing
needs, and managing concentrations of credit risk as a result of its own investigation as well as examinations performed by
certain bank regulatory agencies. In concert with the regulators, the Company has identified specific corrective steps and
actions to enhance its information technology operations and security, risk management, earnings, asset quality and staffing.
The Company and the Bank may not declare or pay any cash dividends without the prior written approval of their regulators.
OFF-BALANCE SHEET ARRANGEMENTS
The Company is a party to off-balance-sheet arrangements in the normal course of business to meet the financing needs of its
customers. The Company uses the same credit policies in making commitments and conditional obligations as it does for on-
balance-sheet arrangements. Since some of the commitments and irrevocable letters of credit may expire without being drawn
upon, the total amount does not necessarily represent future cash requirements. As discussed previously, the Company carefully
monitors its liquidity needs and considers its cash requirements, especially for loan commitments, in making decisions on
investments and obtaining funds from its other sources. Further information relating to off-balance-sheet instruments can be
found in Note L to the Consolidated Financial Statements.
8
P E O P L E S F I N A N C I A L C O R P O R A T I O N A N D S U B S I D I A R I E S
C O N S O L I D A T E D S T A T E M E N T S O F C O N D I T I O N
(In thousands except share data)
DECEMBER 31,
Assets
Cash and due from banks
Available for sale securities
Held to maturity securities, fair value of $46,935 - 2016;
$19,220 - 2015; $17,859 - 2014
Other investments
Federal Home Loan Bank Stock, at cost
Loans
Less: Allowance for loan losses
Loans, net
Bank premises and equipment, net of accumulated depreciation
Other real estate
Accrued interest receivable
Cash surrender value of life insurance
Other assets
Total assets
Liabilities and Shareholders’ Equity
Liabilities:
Deposits:
Demand, non-interest bearing
Savings and demand, interest bearing
Time, $100,000 or more
Other time deposits
Total deposits
Borrowings from Federal Home Loan Bank
Employee and director benefit plans liabilities
Other liabilities
Total liabilities
Shareholders’ Equity:
Common Stock, $1 par value, 15,000,000 shares
authorized, 5,123,186 shares issued and outstanding at
December 31, 2016, 2015 and 2014
Surplus
Undivided profits
Accumulated other comprehensive income (loss), net of tax
Total shareholders’ equity
2016
2015
2014
$ 41,116
233,578
$ 31,396
202,807
$ 23,556
215,122
48,150
2,693
539
315,355
5,466
309,889
21,644
8,513
1,855
19,249
788
19,025
2,744
1,637
337,557
8,070
329,487
22,446
9,916
1,832
18,735
979
17,784
2,962
2,504
362,407
9,206
353,201
23,784
7,646
2,125
18,145
2,066
$ 688,014
$ 641,004
$ 668,895
$ 132,381
364,975
38,650
39,010
575,016
6,257
16,768
1,512
599,553
5,123
65,780
19,318
(1,760)
88,461
$ 122,743
315,141
35,389
39,434
512,707
18,409
16,283
1,766
549,165
5,123
65,780
19,151
1,785
91,839
$ 103,607
336,740
35,925
40,648
516,920
38,708
16,957
1,359
573,944
5,123
65,780
23,743
305
94,951
Total liabilities and shareholders’ equity
$ 688,014
$ 641,004
$ 668,895
See Notes to Consolidated Financial Statements.
9
P E O P L E S F I N A N C I A L C O R P O R A T I O N A N D S U B S I D I A R I E S
C O N S O L I D A T E D S T A T E M E N T S O F O P E R A T I O N S
2016
2015
2014
$ 14,232
$ 14,759
$ 16,055
(In thousands except per share data)
YEARS ENDED DECEMBER 31,
Interest income:
Interest and fees on loans
Interest and dividends on securities:
U.S. Treasuries
U.S. Government agencies
Mortgage-backed securities
States and political subdivisions
Other investments
Interest on balances due from depository institutions
Total interest income
Interest expense:
Deposits
Borrowings from Federal Home Loan Bank
Total interest expense
Net interest income
Provision for allowance for loan losses
1,133
872
600
1,325
53
278
18,493
894
131
1,025
17,468
568
Net interest income after provision for allowance for loan losses
16,900
Non-interest income:
Trust department income and fees
Service charges on deposit accounts
Gain on liquidation, sales and calls of securities
Loss on other investments
Increase in cash surrender value of life insurance
Other income
Total non-interest income
Non-interest expense:
Salaries and employee benefits
Net occupancy
Equipment rentals, depreciation and maintenance
Loss on credit impairment of securities
Other expense
Total non-interest expense
Income (loss) before income taxes
Income tax (benefit) expense
Net income (loss)
Basic and diluted earnings (loss) per share
Dividends declared per share
See Notes to Consolidated Financial Statements.
1,614
3,763
158
(51)
406
659
6,549
11,088
2,323
2,954
6,839
23,204
245
78
$ 167
$ .03
$
10
626
1,956
596
1,280
31
63
19,311
677
198
875
18,436
2,582
15,854
1,642
4,263
8
(218)
489
714
6,898
11,716
2,365
2,809
1,695
9,521
28,106
(5,354)
(762)
587
3,027
888
1,560
18
21
22,156
1,211
230
1,441
20,715
7,404
13,311
1,463
5,900
99
(64)
589
632
8,619
12,025
2,480
3,054
9,649
27,208
(5,278)
4,726
$ (4,592)
$ (.90)
$
$ (10,004)
$ (1.95)
$
.10
P E O P L E S F I N A N C I A L C O R P O R A T I O N A N D S U B S I D I A R I E S
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(In thousands)
YEARS ENDED DECEMBER 31,
Net income (loss)
Other comprehensive income (loss), net of tax:
Net unrealized gain (loss) on available for sale securities,
net of tax of $390 and $3,506 for the years ended
December 31, 2015 and 2014, respectively
Reclassification adjustment for realized gains on available
for sale securities called or sold in current year, net of
tax of $3 and $34 for the years ended December 31, 2015
and 2014, respectively
Gain (loss) from unfunded post-retirement benefit
obligation, net of tax of $372 and $217 for the years
ended December 31, 2015 and 2014, respectively
Total other comprehensive income (loss)
2016
$ 167
2015
$ (4,592)
2014
$ (10,004)
(3,345)
762
6,806
(158)
(5)
(65)
(42)
(3,545)
723
1,480
(421)
6,320
Total comprehensive loss
$ (3,378)
$ (3,112)
$ (3,684)
See Notes to Consolidated Financial Statements.
11
P E O P L E S F I N A N C I A L C O R P O R A T I O N A N D S U B S I D I A R I E S
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(In thousands except share and per share data)
Number of
Common
Shares
Common
Stock
Balance, January 1, 2014
5,123,186
$ 5,123
Net loss
Other comprehensive income
Cash dividend ($.10 per share)
Surplus
$ 65,780
Accumulated
Other
Undivided Comprehensive
Income (Loss)
Profits
Total
$ 34,259
(10,004)
(512)
$ (6,015)
$ 99,147
6,320
(10,004)
6,320
(512)
Balance, December 31, 2014
5,123,186
5,123
65,780
23,743
305
94,951
Net loss
Other comprehensive income
(4,592)
1,480
(4,592)
1,480
Balance, December 31, 2015
5,123,186
5,123
65,780
19,151
1,785
91,839
Net income
Other comprehensive loss
167
167
(3,545)
(3,545)
Balance, December 31, 2016
5,123,186
$ 5,123
$ 65,780
$ 19,318
$ (1,760)
$ 88,461
See Notes to Consolidated Financial Statements.
12
P E O P L E S F I N A N C I A L C O R P O R A T I O N A N D S U B S I D I A R I E S
C O N S O L I D A T E D S T A T E M E N T S O F C A S H F L O W S
2016
2015
2014
$
167
$
(4,592)
$
(10,004)
(In thousands)
YEARS ENDED DECEMBER 31,
Cash flows from operating activities:
Net income (loss)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation
Provision for allowance for loan losses
Writedown of other real estate
(Gain) loss on sales of other real estate
Loss on credit impairment of securities
Loss on other investments
Amortization of available for sale securities
(Accretion) amortization of held to maturity securities
Gain on liquidation, sales and calls of securities
Increase in cash surrender value of life insurance
Change in accrued interest receivable
Change in other assets
Change in other liabilities
Net cash provided by operating activities
Cash flows from investing activities:
Proceeds from maturities, liquidation, sales and
calls of available for sale securities
Purchases of available for sale securities
Proceeds from maturities of held to maturity securities
Purchases of held to maturity securities
Redemption of Federal Home Loan Bank Stock
Redemption of other investments
Proceeds from sales of other real estate
Loans, net change
Acquisition of premises and equipment
Investment in cash surrender value of life insurance
Net cash provided by (used in) investing activities
Cash flows from financing activities:
Demand and savings deposits, net change
Time deposits, net change
Cash dividends
Borrowings from Federal Home Loan Bank
Repayments to Federal Home Loan Bank
Net cash provided by (used in) financing activities
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents, beginning of year
Cash and cash equivalents, end of year
9,720
31,396
$ 41,116
See Notes to Consolidated Financial Statements.
13
1,823
568
782
(251)
51
30
181
(158)
(406)
(23)
191
189
3,144
149,715
(183,861)
510
(29,816)
1,098
2,775
17,127
(1,021)
(108)
(43,581)
59,472
2,837
98,920
(111,072)
50,157
1,754
2,582
937
789
1,695
218
224
83
(8)
(489)
293
1,087
66
4,639
56,593
(45,042)
210
(1,534)
867
3,506
13,630
(416)
(101)
27,713
(2,463)
(1,750)
992,545
(1,012,844)
(24,512)
7,840
23,556
31,396
$
1,817
7,404
1,261
(47)
64
250
(3)
(99)
(589)
482
810
5,218
6,564
72,374
(1,995)
660
(7,299)
1,330
236
2,115
4,465
(293)
(100)
71,493
(23,414)
(27,863)
(512)
2,013,013
(2,051,989)
(90,765)
(12,708)
36,264
23,556
$
P E O P L E S F I N A N C I A L C O R P O R A T I O N A N D S U B S I D I A R I E S
N O T E S T O C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S
NOTE A – BUSINESS AND SUMMA RY OF SI GN I F IC A N T A CC OU N T I N G POL I C I E S:
Business of The Company
Peoples Financial Corporation (the “Company”) is a one-bank holding company headquartered in Biloxi, Mississippi. Its two operating
subsidiaries are The Peoples Bank, Biloxi, Mississippi (the “Bank”), and PFC Service Corp. Its principal subsidiary is the Bank, which
provides a full range of banking, financial and trust services to state, county and local government entities and individuals and small and
commercial businesses operating in those portions of Mississippi, Louisiana and Alabama which are within a fifty mile radius of the Waveland,
Wiggins and Gautier branches, the Bank’s three most outlying locations (the “trade area”).
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany
transactions and balances have been eliminated in consolidation.
Basis of Accounting
The Company and its subsidiaries recognize assets and liabilities, and income and expense, on the accrual basis of accounting. The preparation
of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) 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. Material estimates common to the banking industry that are particularly susceptible to significant
change in the near term include, but are not limited to, the determination of the allowance for loan losses, the valuation of other real estate
acquired in connection with foreclosure or in satisfaction of loans, assumptions relating to employee and director benefit plan liabilities and
valuation allowances associated with the realization of deferred tax assets, which are based on future taxable income.
New Accounting Pronouncements
In February 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02,
Leases (Topic 82). ASU 2016-02 provides certain targeted improvements to align lessor accounting with the lessee accounting model. This
update will be effective for fiscal years, and interim periods within those fiscal years, beginning after January 1, 2019. The adoption of this
ASU is not expected to have a material effect on the Company’s financial position, results of operations or cash flows.
In March 2016, FASB issued ASU 2016-03, Intangibles – Goodwill and Other (Topic 350); Business Combinations (Topic 805); Consolidation
(Topic 810); Derivatives and Hedging (Topic 815): Effective Date and Transition Guidance. ASU 2016-03 amends the guidance in ASUs
2014-02, 2014-03, 2014-07 and 2014-18 to remove their effective dates and render them effective immediately. The adoption of this ASU is
not expected to have a material effect on the Company’s financial position, results of operations or cash flows.
In March 2016, FASB issued ASU 2016-07, Investments – Equity Method and Joint Ventures (Topic 323): Simplifying the Transition to the
Equity Method of Accounting. ASU 2016-07 eliminates the requirement that when an investment qualifies for use of the equity method as
a result of an increase in the level of ownership interest or degree of influence, an investor must adjust the investment, results of operations
and retained earnings retroactively on a step by step basis. This update will be effective for fiscal years, and interim periods within those
fiscal years, beginning after January 1, 2016. The adoption of this ASU is not expected to have a material effect on the Company’s financial
position, results of operations or cash flows.
In June 2016, FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial
Instruments. ASU 2016-13 requires the measurement of all expected credit losses for financial assets held at the reporting date based on
historical experience, current conditions and reasonable and supportable forecasts. Adoption of ASU 2016-13 will require financial institutions
and other organizations to use forward-looking information to better inform their credit loss estimates. In addition, the ASU amends the
accounting for credit losses on available for sale debt securities and purchased financial assets with credit deterioration. This update will be
effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early application will be permitted
for all organizations for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The Company is in the
process of determining the effect of ASU 2016-13 on its financial position, results of operations and cash flows.
In August 2016, FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash
Payments (a consensus of the FASB Emerging Issues Task Force). ASU 2016-15 provides classification guidance in order to reduce diversity
in practice for certain transactions. Such transactions include debt prepayment or debt extinguishment costs, settlement of zero-coupon
debt instruments, contingent consideration payments made after a business combination, proceeds from the settlement of insurance claims,
proceeds from the settlement of corporate-owned life insurance, distributions received from equity method investments, beneficial interests in
securitization transactions and separately identifiable cash flows and application of the predominance principle. This update will be effective
for fiscal years, and interim periods within those fiscal years, beginning after January 1, 2017. Early application will be permitted for all
organizations for fiscal years, and interim periods within those fiscal years. The adoption of this ASU is not expected to have a material effect
on the Company’s financial position, results of operations or cash flows.
14
In October 2016, FASB issued ASU 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory. ASU 2016-
16 requires that an entity recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer
occurs. This update will be effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. The
adoption of this ASU is not expected to have a material effect on the Company’s financial position, results of operations or cash flows.
In November 2016, FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash. ASU 2016-18 requires that a statement
of cash flows explain the change during the period in the total of cash, cash equivalents and amounts generally described as restricted cash
or restricted cash equivalents. This update will be effective for fiscal years, and interim periods within those fiscal years, beginning after
December 15, 2017. Early application will be permitted for all organizations for fiscal years, and interim periods within those fiscal years.
The adoption of this ASU is not expected to have a material effect on the Company’s financial position, results of operations or cash flows.
In December 2016, FASB issued ASU 2016-19, Technical Corrections and Improvements. ASU 2016-19 includes amendments to provide
guidance clarification and references corrections and provide minor structure changes to headings or minor editing to text to improve
usefulness and understandability. This update will be effective for fiscal years, and interim periods within those fiscal years, beginning
after December 15, 2016. The adoption of this ASU is not expected to have a material effect on the Company’s financial position, results of
operations or cash flows.
In January 2017, FASB issued ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business. ASU 2017-01
clarifies the definition of a business to determinate whether a business has been acquired or sold. This update will be effective for fiscal years,
and interim periods within those fiscal years, beginning after December 15, 2017. Early application will be permitted for all organizations
under certain circumstances. The adoption of this ASU is not expected to have a material effect on the Company’s financial position, results
of operations or cash flows.
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 $4,240,000, $2,084,000 and $417,000 for the years ending December 31, 2016, 2015 and
2014, respectively.
Securities
The classification of securities is determined by Management at the time of purchase. Securities are classified as held to maturity when
the Company has the positive intent and ability to hold the security until maturity. Securities held to maturity are stated at amortized cost.
Securities not classified as held to maturity are classified as available for sale and are stated at fair value. Unrealized gains and losses, net of
tax, on these securities are recorded in shareholders’ equity as accumulated other comprehensive income. The amortized cost of available
for sale securities and held to maturity securities is adjusted for amortization of premiums and accretion of discounts to maturity, determined
using the interest method. Such amortization and accretion is included in interest income on securities. A decline in the market value of
any investment below cost that is deemed to be other-than-temporary is charged to earnings for the decline in value deemed to be credit
related and a new cost basis in the security is established. The decline in value attributed to non-credit related factors is recognized in other
comprehensive income. In estimating other-than-temporary losses, Management considers the length of time and the extent to which the
fair value has been less than cost, the financial condition and nature of the issuer, the cause of the decline, especially if related to a change
in interest rates, and the intent and ability of the Company to retain the investment in the issuer for a period of time sufficient to allow for
any anticipated recovery in fair value. The specific identification method is used to determine realized gains and losses on sales of securities,
which are reported as gain (loss) on sales and calls of securities in non-interest income.
Other Investments
Other investments include a low income housing partnership in which the Company is a 99% limited partner. The partnership has qualified
to receive annual low income housing federal tax credits that are recognized as a reduction of the current tax expense. The investment is
accounted for using the equity method.
Federal Home Loan Bank Stock
The Company is a member of the Federal Home Loan Bank of Dallas (“FHLB”) and as such is required to maintain a minimum investment
in its stock that varies with the level of FHLB advances outstanding. The stock is bought from and sold to the FHLB based on its $100 par
value. The stock does not have a readily determinable fair value and as such is classified as restricted stock, carried at cost and evaluated for
impairment in accordance with GAAP.
Loans
The loan portfolio consists of commercial and industrial and real estate loans within the Company’s trade area that we have the intent
and ability to hold for the foreseeable future or until maturity. The loan policy establishes guidelines relating to pricing; repayment terms;
collateral standards including loan to value limits, appraisal and environmental standards; lending authority; lending limits and documentation
requirements.
Loans are stated at the amount of unpaid principal, reduced by unearned income and the allowance for loan losses. Interest on loans is
recognized on a daily basis over the terms of each loan based on the unpaid principal balance. Loan origination fees are recognized as income
when received. Revenue from these fees is not material to the financial statements.
The Company continuously monitors its relationships with its loan customers in concentrated industries such as gaming and hotel/motel, as
well as the exposure for out of area, land development, construction and commercial real estate loans, and their direct and indirect impact on
15
its operations. Loan delinquencies and deposit overdrafts are monitored on a weekly basis in order to identify developing problems as early as
possible. On a monthly basis, a watch list of credits based on our loan grading system is prepared. Grades are applied to individual loans based
on factors including repayment ability, financial condition of the borrower and payment performance. Loans with lower grades are placed on
the watch list of credits. The watch list is the primary tool for monitoring the credit quality of the loan portfolio. Once loans are determined
to be past due, the loan officer and the special assets department work vigorously to return the loans to a current status.
The Company places loans on a nonaccrual status when, in the opinion of Management, they possess sufficient uncertainty as to timely
collection of interest or principal so as to preclude the recognition in reported earnings of some or all of the contractual interest. Accrued
interest on loans classified as nonaccrual is reversed at the time the loans are placed on nonaccrual. Interest received on nonaccrual loans is
applied against principal. Loans are restored to accrual status when the obligation is brought current or has performed in accordance with the
contractual terms for a reasonable period of time and the ultimate collectibility of the total contractual principal and interest is no longer in
doubt. The placement of loans on and removal of loans from nonaccrual status must be approved by Management.
Loans which become 90 days delinquent are reviewed relative to collectibility. Unless such loans are in the process of terms revision to bring
them to a current status or foreclosure or in the process of collection, these loans are placed on nonaccrual and, if deemed uncollectible,
are charged off against the allowance for loan losses. That portion of a loan which is deemed uncollectible will be charged off against the
allowance as a partial charge off. All charge offs must be approved by Management and are reported to the Board of Directors.
Allowance for Loan Losses
The allowance for loan losses (“ALL”) is a valuation account available to absorb losses on loans.The ALL is established through provisions
for loan losses charged against earnings. Loans deemed to be uncollectible are charged against the ALL, and subsequent recoveries, if any,
are credited to the allowance.
The ALL 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. On a quarterly basis, the Company’s problem asset
committee meets to review the watch list of credits, which is formulated from the loan grading system. Members of this committee include
loan officers, collection officers, the special assets director, the chief lending officer, the chief credit officer, the chief financial officer and
the chief executive officer. The evaluation includes Management’s assessment of several factors: review and evaluation of specific loans,
changes in the nature and volume of the loan portfolio, current and anticipated economic conditions and the related impact on specific
borrowers and industry groups, a study of loss experience, a review of classified, nonperforming and delinquent loans, the estimated value of
any underlying collateral, an estimate of the possibility of loss based on the risk characteristics of the portfolio, adverse situations that may
affect the borrower’s ability to repay and the results of regulatory examinations. This evaluation is inherently subjective as it requires material
estimates that may be susceptible to significant change.
The ALL consists of specific and general components. The specific component relates to loans that are classified as impaired. The general
component of the allowance relates to loans that are not impaired. Changes to the components of the ALL are recorded as a component of
the provision for the allowance for loan losses. Management must approve changes to the ALL and must report its actions to the Board of
Directors. The Company believes that its allowance for loan losses is appropriate at December 31, 2016.
The Company considers a loan to be impaired when, based upon current information and events, it believes it is probable that the Company
will be unable to collect all amounts due according to the contractual terms of the loan agreement. The Company’s impaired loans include
troubled debt restructurings and performing and non-performing major loans for which full payment of principal or interest is not expected.
Payments received for impaired loans not on nonaccrual status are applied to principal and interest.
All impaired loans are reviewed, at a minimum, on a quarterly basis. The Company calculates the specific allowance required for impaired
loans based on the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s observable market
price or the fair value of its collateral. Most of the Company’s impaired loans are collateral-dependent.
The fair value of the collateral for collateral-dependent loans is based on appraisals performed by third-party valuation specialists, comparable
sales and other estimates of fair value obtained principally from independent sources such as the Multiple Listing Service or county tax
assessment valuations, adjusted for estimated selling costs. The Company has a Real Estate Appraisal Policy (the “Policy”) which is in
compliance with the guidelines set forth in the “Interagency Appraisal and Evaluation Guidelines” which implement Title XI of the Financial
Institutions Reform, Recovery and Enforcement Act of 1989 (“FIRREA”) and the revised “Interagency Appraisal and Evaluation Guidelines”
issued in 2010. The Policy further requires that appraisals be in writing and conform to the Uniform Standards of Professional Appraisal
Practice (“USPAP”). An appraisal prepared by a state-licensed or state-certified appraiser is required on all new loans secured by real estate
in excess of $250,000. Loans secured by real estate in an amount of $250,000 or less, or that qualify for an exemption under FIRREA, must
have a summary appraisal report or in-house evaluation, depending on the facts and circumstances. Factors including the assumptions and
techniques utilized by the appraiser, which could result in a downward adjustment to the collateral value estimates indicated in the appraisal,
are considered by the Company.
When Management determines that a loan is impaired and the loan is collateral-dependent, an evaluation of the fair value of the collateral
is performed. The Company maintains established criteria for assessing whether an existing appraisal continues to reflect the fair value of
the property for collateral-dependent loans. Appraisals are generally considered to be valid for a period of at least twelve months. However,
appraisals that are less than 12 months old may need to be adjusted. Management considers such factors as the property type, property
condition, current use of the property, current market conditions and the passage of time when determining the relevance and validity of the
16
most recent appraisal of the property. If Management determines that the most recent appraisal is no longer valid, a new appraisal is ordered
from an independent and qualified appraiser.
During the interim period between ordering and receipt of the new appraisal, Management considers if the existing appraisal should be
discounted to determine the estimated fair value of collateral. Discounts are applied to the existing appraisal and take into consideration
the property type, condition of the property, external market data, internal data, reviews of recently obtained appraisals and evaluations of
similar properties, comparable sales of similar properties and tax assessment valuations. When the new appraisal is received and approved by
Management, the valuation stated in the appraisal is used as the fair value of the collateral in determining impairment, if any. If the recorded
investment in the impaired loan exceeds the measure of fair value, a valuation allowance is required as a specific component of the allowance
for loan losses. Any specific reserves recorded in the interim are adjusted accordingly.
The general component of the ALL is the loss estimated by applying historical loss percentages to non-classified loans which have been
divided into segments. These segments include gaming; residential and land development; real estate, construction; real estate, mortgage;
commercial and industrial and all other. The loss percentages are based on each segment’s historical five year average loss experience which
may be adjusted by qualitative factors such as changes in the general economy, or economy or real estate market in a particular geographic
area or industry.
Bank Premises and Equipment
Bank premises and equipment are stated at cost, less accumulated depreciation. Depreciation is computed by the straight-line method based
on the estimated useful lives of the related assets.
Other Real Estate
Other real estate (“ORE”) includes real estate acquired through foreclosure. Each other real estate property is carried at fair value, less
estimated costs to sell. Fair value is principally based on appraisals performed by third-party valuation specialists. Any excess of the carrying
value of the related loan over the fair value of the real estate at the date of foreclosure is charged against the ALL. Any expense incurred
in connection with holding such real estate or resulting from any writedowns in value subsequent to foreclosure is included in non-interest
expense. When the other real estate property is sold, a gain or loss is recognized on the sale for the difference, if any, between the sales
proceeds and the carrying amount of the property. If the fair value of the ORE, less estimated costs to sell at the time of foreclosure, decreases
during the holding period, the ORE is written down with a charge to non-interest expense. Generally, ORE properties are actively marketed
for sale and Management is continuously monitoring these properties in order to minimize any losses.
Trust Department Income and Fees
Corporate trust fees are accounted for on an accrual basis and personal trust fees are recorded when received.
Income Taxes
Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax bases. Additionally, the recognition of future tax benefits, such as
net operating loss carry forwards, is required to the extent that realization of such benefits is more likely than not. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which the assets and liabilities are expected
to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income tax expense in the
period that includes the enactment date.
In the event the future tax consequences of differences between the financial reporting bases and the tax bases of the Company’s assets and
liabilities results in deferred tax assets, an evaluation of the probability of being able to realize the future benefits indicated by such asset is
required. A valuation allowance is provided for the portion of the deferred tax asset when it is more likely than not that some portion or all
of the deferred tax asset will not be realized. In assessing the realizability of the deferred tax assets, Management considers the scheduled
reversals of deferred tax liabilities, projected future taxable income and tax planning strategies. The Company currently evaluates income tax
positions judged to be uncertain. A loss contingency reserve is accrued if it is probable that the tax position will be challenged, it is probable
that the future resolution of the challenge will confirm that a loss has been incurred and the amount of such loss can be reasonably estimated.
Post-Retirement Benefit Plan
The Company accounts for its post-retirement benefit plan under Accounting Standards Codification (“Codification” or “ASC”) Topic 715,
Retirement Benefits (“ASC 715”). The under or over funded status of the Company’s post-retirement benefit plan is recognized as a liability
or asset in the statement of condition. Changes in the plan’s funded status are reflected in other comprehensive income. Net actuarial gains
and losses and adjustments to prior service costs that are not recorded as components of the net periodic benefit cost are charged to other
comprehensive income.
Earnings Per Share
Basic and diluted earnings per share are computed on the basis of the weighted average number of common shares outstanding of 5,123,186
in 2016, 2015 and 2014.
Accumulated Other Comprehensive Income (Loss)
At December 31, 2016, 2015 and 2014, accumulated other comprehensive income (loss) consisted of net unrealized gains (losses) on available
for sale securities and over (under) funded liabilities related to the Company’s post-retirement benefit plan.
17
Statements of Cash Flows
The Company has defined cash and cash equivalents to include cash and due from banks. The Company paid $1,020,177, $874,890 and
$1,447,133 in 2016, 2015 and 2014, respectively, for interest on deposits and borrowings. Income tax payments totaled $78,435 and $320,000
in 2016 and 2014, respectively. Loans transferred to other real estate amounted to $1,903,427, $7,502,496 and $1,345,170 in 2016, 2015 and
2014, respectively.
Fair Value Measurement
The Company reports certain assets and liabilities at their estimated fair value. These assets and liabilities are classified and disclosed in one
of three categories based on the inputs used to develop the measurements. The categories establish a hierarchy for ranking the quality and
reliability of the information used to determine fair value.
Reclassification
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.
18
NOTE B – SECURITIES :
The amortized cost and fair value of securities at December 31, 2016, 2015 and 2014, respectively, are as follows (in thousands):
Amortized Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
December 31, 2016:
Available for sale securities:
Debt securities:
U.S. Treasuries
U.S. Government agencies
Mortgage-backed securities
States and political subdivisions
Total debt securities
Equity securities
Total available for sale securities
Held to maturity securities:
U.S. Government agencies
States and political subdivisions
Corporate bond
Total held to maturity securities
December 31, 2015:
Available for sale securities:
Debt securities:
U.S. Treasuries
U.S. Government agencies
Mortgage-backed securities
States and political subdivisions
Total debt securities
Equity securities
Total available for sale securities
Held to maturity securities:
States and political subdivisions
Corporate bond
Total held to maturity securities
December 31, 2014:
Available for sale securities:
Debt securities:
U.S. Treasuries
U.S. Government agencies
Mortgage-backed securities
States and political subdivisions
Total debt securities
Equity securities
Total available for sale securities
Held to maturity securities:
States and political subdivisions
Total held to maturity securities
$ 149,676
24,973
43,939
17,513
236,101
458
$ 236,559
$ 10,009
36,677
1,464
$ 48,150
$ 63,845
84,849
30,106
22,833
201,633
650
$ 202,283
$ 17,507
1,518
$ 19,025
$ 29,787
119,805
35,671
29,832
215,095
650
$ 215,745
$ 17,784
$ 17,784
19
$ 39
58
74
450
621
$ (2,091)
(206)
(1,305)
(3,602)
$ 621
$ (3,602)
$ 0
29
$ 29
$ 20
176
155
894
1,245
$ (315)
(927)
(2)
$ (1,244)
$ (111)
(479)
(131)
(721)
$ 1,245
$ (721)
$ 222
$ 222
$ 27
115
282
1,180
1,604
$ (16)
(11)
$ (27)
$ (160)
(1,931)
(136)
(2,227)
$ 1,604
$ (2,227)
Fair Value
$ 147,624
24,825
42,708
17,963
233,120
458
$ 233,578
$ 9,694
35,779
1,462
$ 46,935
$ 63,754
84,546
30,130
23,727
202,157
650
$ 202,807
$ 17,713
1,507
$ 19,220
$ 29,654
117,989
35,817
31,012
214,472
650
$ 215,122
$ 132
$ 132
$ (57)
$ (57)
$ 17,859
$ 17,859
The amortized cost and fair value of debt securities at December 31, 2016, (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.
Available for sale securities:
Due in one year or less
Due after one year through five years
Due after five years through ten years
Due after ten years
Mortgage-backed securities
Total
Held to maturity securities:
Due in one year or less
Due after one year through five years
Due after five years through ten years
Due after ten years
Total
Amortized Cost
$ 33,318
129,693
28,818
333
43,939
$ 236,101
$ 2,745
7,649
20,111
17,645
$ 48,150
Fair Value
$ 33,371
128,893
27,797
351
42,708
$ 233,120
$ 2,742
7,638
19,593
16,962
$ 46,935
Available for sale and held to maturity securities with gross unrealized losses at December 31, 2016, 2015 and 2014, aggregated by investment
category and length of time that individual securities have been in a continuous loss position, are as follows (in thousands):
Less Than Twelve Months
Over Twelve Months
Total
December 31, 2016:
U.S. Treasuries
U.S. Government agencies
Mortgage-backed securities
States and political subdivisions
Corporate bond
Total
December 31, 2015:
U.S. Treasuries
U.S. Government agencies
Mortgage-backed securities
States and political subdivisions
Corporate bond
Total
December 31, 2014:
U.S. Treasuries
U.S. Government agencies
Mortgage-backed securities
States and political subdivisions
Total
Fair Value
$ 97,634
24,478
37,663
24,627
Gross
Unrealized
Losses
$ 2,091
521
1,305
926
$ 184,402
$ 4,843
$ 39,889
14,894
16,557
2,225
1,507
$ 75,072
$ 4,968
9,954
5,485
$ 20,407
$ 111
87
131
8
11
$ 348
$ 15
22
32
$ 69
Fair Value
Gross
Unrealized
Losses
$ 0
$ 0
589
1,462
$ 2,051
1
2
$ 3
$ 0
12,581
$ 0
392
1,362
8
$ 13,943
$ 400
$ 14,795
92,923
19,436
1,444
$ 128,598
$ 145
1,909
136
25
$ 2,215
Fair Value
$ 97,634
24,478
37,663
25,216
1,462
$ 186,453
$ 39,889
27,475
16,557
3,587
1,507
$ 89,015
$ 19,763
102,877
19,436
6,929
$ 149,005
Gross
Unrealized
Losses
$ 2,091
521
1,305
927
2
$ 4,846
$ 111
479
131
16
11
$ 748
$ 160
1,931
136
57
$ 2,284
At December 31, 2016, 20 of the 31 securities issued by the U.S. Treasury, 5 of the 7 securities issued by U.S. Government agencies, 16 of the
19 mortgage-backed securities, 59 of the 147 securities issued by states and political subdivisions and the corporate bond contained unrealized losses.
Management evaluates securities for other-than-temporary impairment on a monthly basis. In performing this evaluation, the length of time and
the extent to which the fair value has been less than cost, the fact that the Company’s securities are primarily issued by U.S. Treasury and U.S.
Government agencies and the cause of the decline in value are considered. In addition, the Company does not intend to sell and it is not more
likely than not that we will be required to sell these securities before maturity. While some available for sale securities have been sold for liquidity
purposes or for gains, the Company has traditionally held its securities, including those classified as available for sale, until maturity. As a result of
this evaluation, the Company has determined that the declines summarized in the tables above are not deemed to be other-than-temporary.
As part of its routine evaluation of securities for other-than-temporary impairment, the Company identified a potential credit loss on bonds issued
by a municipality with a carrying value of $1,875,000 during 2015. The Company’s evaluation considered the failure of the issuer to make
scheduled interest payments and expectations of future performance. Principal and interest payments due under the current terms of the bonds
are funded by sales and property tax collections by the related municipality. During the third quarter of 2015, the assessed value of the related
real estate parcels was significantly reduced, which will reduce the level of future cash flows supporting the principal and interest payments on
the bonds. The present value of the expected future cash flows was calculated by the Company. Based on its evaluation, it was determined that
the investment in the bonds was impaired and that a credit loss should be recognized in earnings. During 2015, the Company recorded a loss of
$1,695,000 from the credit impairment of these bonds. Accrued interest of $92,564 relating to these securities was also charged off during 2015.
During 2016, payments totaling $223,861 were received from the municipality which resulted in the Company recognizing a gain of $53,861.
20
Proceeds from sales of available for sale debt securities were $29,641,206, $5,007,993 and $44,279,605 during 2016, 2015 and 2014,
respectively. Available for sale debt securities were sold and called for realized gains of $157,925, $7,993 and $98,859 during 2016, 2015 and
2014, respectively.
Securities with a fair value of $180,659,168, $168,724,920 and $200,474,637 at December 31, 2016, 2015 and 2014, 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 at December 31, 2016, 2015 and 2014 is as follows (in thousands):
December 31,
Gaming
Residential and land development
Real estate, construction
Real estate, mortgage
Commercial and industrial
Other
Total
2016
$ 31,311
291
32,503
206,172
37,035
8,043
$ 315,355
2015
$ 31,655
933
35,414
219,925
42,480
7,150
$ 337,557
2014
$ 31,353
10,119
34,010
234,713
37,534
14,678
$ 362,407
In the ordinary course of business, the Company’s bank subsidiary extends loans to certain officers and directors and their personal business interests
at, in the opinion of Management, the same terms, including interest rates and collateral, as those prevailing at the time for comparable loans of
similar credit risk with persons not related to the Company or its subsidiaries. These loans do not involve more than normal risk of collectibility 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):
Balance, January 1
New loans and advances
Repayments
Balance, December 31
2016
$ 7,608
312
(1,262)
$ 6,658
2015
$ 7,760
3,958
(4,110)
$ 7,608
2014
$ 6,761
2,516
(1,517)
$ 7,760
As part of its evaluation of the quality of the loan portfolio, Management monitors the Company’s credit concentrations on a monthly basis.
Total outstanding concentrations were as follows (in thousands):
December 31,
Gaming
Hotel/motel
Out of area
2016
$ 31,311
40,319
14,461
2015
$ 31,655
39,460
14,526
2014
$ 31,353
47,144
19,179
The age analysis of the loan portfolio, segregated by class of loans, as of December 31, 2016, 2015 and 2014 is as follows (in thousands):
Number of Days Past Due
30-59
60-89 Greater Than 90 Total Past Due
Current
Loans Past Due
Greater Than
90 Days and Still
Accruing
Total Loans
December 31, 2016:
Gaming
Residential and land development
Real estate, construction
Real estate, mortgage
Commercial and industrial
Other
Total
December 31, 2015:
Gaming
Residential and land development
Real estate, construction
Real estate, mortgage
Commercial and industrial
Other
Total
December 31, 2014:
Gaming
Residential and land development
Real estate, construction
Real estate, mortgage
Commercial and industrial
Other
Total
$ 0
$ 0
902
4,608
867
44
$ 6,421
216
1,923
36
$ 2,175
$ 0
$ 0
448
3,673
31
851
7,094
1,206
67
$ 9,218
$ 0
291
1,082
4,471
8
80
$ 5,932
$ 0
323
1,346
1,352
237
$ 4,152
$ 3,258
$ 0
$ 0
1,665
3,257
1,154
168
$ 6,244
85
3,101
7
10
$ 3,203
$ 0
5,262
1,944
12,007
205
$ 19,418
21
$ 0
291
2,200
11,002
875
160
$ 14,528
$ 0
323
2,645
12,119
1,474
67
$ 16,628
$ 0
5,262
3,694
18,365
1,366
178
$ 28,865
$ 31,311
30,303
195,170
36,160
7,883
$ 300,827
$ 31,655
610
32,769
207,806
41,006
7,083
$ 320,929
$ 31,353
4,857
30,316
216,348
36,168
14,500
$ 333,542
$ 31,311
291
32,503
206,172
37,035
8,043
$ 315,355
$ 31,655
933
35,414
219,925
42,480
7,150
$ 337,557
$ 31,353
10,119
34,010
234,713
37,534
14,678
$ 362,407
$ 0
$ )
$ 0
146
$ 146
$ 0
30
733
$ 763
The Company monitors the credit quality of its loan portfolio through the use of a loan grading system. A score of 1 – 5 is assigned to the
loan based on factors including repayment ability, trends in net worth and/or financial condition of the borrower and guarantors, employment
stability, management ability, loan to value fluctuations, the type and structure of the loan, conformity of the loan to bank policy and payment
performance. Based on the total score, a loan grade of A, B, C, S, D, E or F is applied. A grade of A will generally be applied to loans for
customers that are well known to the Company and that have excellent sources of repayment. A grade of B will generally be applied to loans
for customers that have excellent sources of repayment which have no identifiable risk of collection. A grade of C will generally be applied
to loans for customers that have adequate sources of repayment which have little identifiable risk of collection. A grade of S will generally be
applied to loans for customers who meet the criteria for a grade of C but also warrant additional monitoring by placement on the watch list.
A grade of D will generally be applied to loans for customers that are inadequately protected by current sound net worth, paying capacity of
the borrower, or pledged collateral. Loans with a grade of D have unsatisfactory characteristics such as cash flow deficiencies, bankruptcy
filing by the borrower or dependence on the sale of collateral for the primary source of repayment, causing more than acceptable levels of risk.
Loans 60 to 89 days past due receive a grade of D. A grade of E will generally be applied to loans for customers with weaknesses inherent
in the D classification and in which collection or liquidation in full is questionable. In addition, on a monthly basis the Company determines
which loans are 90 days or more past due and assigns a grade of E to them. A grade of F is applied to loans which are considered uncollectible
and of such little value that their continuance in an active bank is not warranted. Loans with this grade are charged off, even though partial or
full recovery may be possible in the future.
An analysis of the loan portfolio by loan grade, segregated by class of loans, as of December 31, 2016, 2015 and 2014 is as follows (in
thousands):
A, B or C
S
D
E
F
Total
Loans With A Grade Of:
December 31, 2016:
Gaming
Residential and land development
Real estate, construction
Real estate, mortgage
Commercial and industrial
Other
Total
December 31, 2015:
Gaming
Residential and land development
Real estate, construction
Real estate, mortgage
Commercial and industrial
Other
Total
December 31, 2014:
Gaming
Residential and land development
Real estate, construction
Real estate, mortgage
Commercial and industrial
Other
Total
$ 31,311
$
$
29,954
155,671
13,926
7,996
$ 238,858
435
17,651
21,680
$ 39,766
517
22,901
867
42
$ 24,327
$
291
1,597
9,949
562
5
$ 12,404
$ 31,655
610
31,935
167,286
24,466
7,114
$ 263,066
$ 31,353
3,520
27,474
191,458
32,505
14,583
$ 300,893
$
$
$
16,678
15,007
1
$ 31,686
$
1,319
723
4,051
25
6
$ 6,124
883
23,686
2,368
35
$ 26,972
$
17
2,496
16,591
1,579
89
$ 20,772
323
2,596
12,275
639
$ 15,833
$
5,263
3,317
22,613
3,425
$ 34,618
$
$
$
$
$
$
$ 31,311
291
32,503
206,172
37,035
8,043
$ 315,355
$ 31,655
933
35,414
219,925
42,480
7,150
$ 337,557
$ 31,353
10,119
34,010
234,713
37,534
14,678
$ 362,407
A loan may be impaired but not on nonaccrual status when the loan is well secured and in the process of collection. Total loans on nonaccrual
as of December 31, 2016, 2015 and 2014 are as follows (in thousands):
December 31,
Residential and land development
Real estate, construction
Real estate, mortgage
Commercial and industrial
Other
Total
2016
$ 291
1,598
9,445
515
5
$ 11,854
2015
$ 323
2,523
11,759
581
2014
$ 8,233
3,287
21,398
380
$ 15,186
$ 33,298
Prior to 2014, certain loans were modified by granting interest rate concessions to these customers with such loans being classified as
troubled debt restructurings. During 2016, 2015 and 2014, the Company did not restructure any additional loans. Specific reserves of
$100,000, $107,000 and $50,000 have been allocated to troubled debt restructurings as of December 31, 2016, 2015, and 2014, respectively.
The Bank had no commitments to lend additional amounts to customers with outstanding loans classified as troubled debt restructurings
as of December 31, 2016, 2015 and 2014.
22
Impaired loans, which include loans classified as nonaccrual and troubled debt restructurings, segregated by class of loans, as of December
31, 2016, 2015 and 2014 were as follows (in thousands):
Unpaid
Principal Balance
Recorded
Investment
Related
Allowance
Average
Recorded
Investment
Interest
Income
Recognized
December 31, 2016:
With no related allowance recorded:
Real estate, construction
Real estate, mortgage
Commercial and industrial
Total
With a related allowance recorded:
Residential and land development
Real estate, construction
Real estate, mortgage
Other
Total
Total by class of loans:
Residential and land development
Real estate, construction
Real estate, mortgage
Commercial and industrial
Other
Total
December 31, 2015:
With no related allowance recorded:
Real estate, construction
Real estate, mortgage
Commercial and industrial
Total
With a related allowance recorded:
Residential and land development
Real estate, construction
Real estate, mortgage
Total
Total by class of loans:
Residential and land development
Real estate, construction
Real estate, mortgage
Commercial and industrial
Total
December 31, 2014:
With no related allowance recorded:
Residential and land development
Real estate, construction
Real estate, mortgage
Commercial and industrial
Total
With a related allowance recorded:
Real estate, construction
Real estate, mortgage
Total
Total by class of loans:
Residential and land development
Real estate, construction
Real estate, mortgage
Commercial and industrial
Total
$ 1,331
9,282
515
11,128
291
267
1,347
5
1,910
291
1,598
10,629
515
5
$ 13,038
$ 1,842
9,014
581
11,437
323
681
3,977
4,981
323
2,523
12,991
581
$ 16,418
$ 8,233
2,178
16,243
380
27,034
1,109
5,992
7,101
8,233
3,287
22,235
380
$ 34,135
$
$
$
66
141
195
1
403
66
141
195
1
403
109
252
1,443
1,804
109
252
1,443
$ 1,804
$
422
2,135
2,557
422
2,135
$ 2,557
$ 1,395
10,582
538
12,515
304
283
1,080
1
1,668
304
1,678
11,662
538
1
$ 14,183
$ 1,878
9,175
653
11,706
343
780
3,920
5,043
343
2,658
13,095
653
$ 16,749
$ 8,380
2,222
18,258
384
29,244
1,115
5,996
7,111
8,380
3,337
24,254
384
$ 36,355
$
23
23
30
30
53
$
53
$
21
21
18
18
39
$
39
$
26
26
9
9
35
$
35
$ 2,023
11,811
553
14,387
291
267
1,347
5
1,910
291
2,290
13,158
553
5
$ 16,297
$ 2,228
9,771
619
12,618
323
814
3,977
5,114
323
3,042
13,748
619
$ 17,732
$ 9,513
2,198
19,517
380
31,608
1,109
6,591
7,700
9,513
3,307
26,108
380
$ 39,308
23
Transactions in the allowance for loan losses for the years ended December 31, 2016, 2015 and 2014, and the balances of loans, individually
and collectively evaluated for impairment, as of December 31, 2016, 2015 and 2014 are as follows (in thousands):
December 31, 2016:
Allowance for Loan Losses:
Beginning Balance
Charge-offs
Recoveries
Provision
Ending Balance
Allowance for Loan Losses:
Ending balance: individually
evaluated for impairment
Ending balance: collectively
evaluated for impairment
Total Loans:
Ending balance: individually
evaluated for impairment
Ending balance: collectively
evaluated for impairment
December 31, 2015:
Allowance for Loan Losses:
Beginning Balance
Charge-offs
Recoveries
Provision
Ending Balance
Allowance for Loan Losses:
Ending balance: individually
evaluated for impairment
Ending balance: collectively
evaluated for impairment
Total Loans:
Ending balance: individually
evaluated for impairment
Ending balance: collectively
evaluated for impairment
December 31, 2014:
Allowance for Loan Losses:
Beginning Balance
Charge-offs
Recoveries
Provision
Ending Balance
Allowance for Loan Losses:
Ending balance: individually
evaluated for impairment
Ending balance: collectively
evaluated for impairment
Total Loans:
Ending balance: individually
evaluated for impairment
Ending balance: collectively
evaluated for impairment
Residential
and Land
Development
Real Estate, Real Estate,
Mortgage
Construction
Commercial
and
Industrial
Gaming
Other
Total
$
582
$
189
$
(37)
545
(123)
66
$
$
$
$
66
$
545
$
$
$
$
589
(260)
71
(201)
199
$
$
5,382
(2,499)
107
810
3,800
$ 1,075
(509)
62
23
651
$
$
$
253
(254)
110
96
205
$ 8,070
(3,522)
350
568
5,466
$
141
$
424
$
214
$
15
$
860
58
$
3,376
$
437
$
190
$
4,606
$
$
291
$
2,114
$ 32,850
$ 1,430
$
47
$ 36,732
$ 31,311
$
$ 30,389
$ 173,322
$ 35,605
$
7,996
$ 278,623
$
$
$
$
$
573
$
251
(1,504)
9
582
1,442
189
$
$
$
109
80
582
$
$
$
$
860
(955)
102
582
589
$
$
6,609
(1,171)
190
(246)
5,382
$
587
(275)
19
744
$ 1,075
484
$
1,751
105
$
3,631
$
$
614
461
$
$
$
$
326
(203)
79
51
253
$
9,206
(4,108)
390
2,582
$ 8,070
4
$
2,962
249
$
5,108
$
323
$
3,479
$ 35,961
$ 3,003
$
35
$ 42,801
$ 31,655
$
610
$ 31,935
$ 183,964
$ 39,477
$ 7,115
$ 294,756
$
$
$
$
$
977
(992)
260
328
573
$
776
(2,060)
1,535
251
$
$
$
251
573
$
$
$
$
695
(127)
35
257
860
$
$
5,553
(368)
193
1,231
6,609
$
632
(3,948)
20
3,883
587
$
$
$
301
(235)
90
170
326
$
$
8,934
(7,730)
598
7,404
9,206
742
$
2,706
118
$
3,903
$
$
289
$
6
$
3,743
298
$
320
$
5,463
$ 7,232
$
6,830
$ 39,204
$ 2,035
$
89
$ 55,390
$ 31,353
$ 2,887
$ 27,180
$ 195,509
$ 35,499
$ 14,589
$ 307,017
24
NOTE D – BANK PR EMISES A N D E QU IP M E N T:
Bank premises and equipment are shown as follows (in thousands):
December 31,
Land
Building
Furniture, fixtures and equipment
Totals, at cost
Less: Accumulated depreciation
Totals
Estimated Useful Lives
5 – 40 years
3 – 10 years
2016
5,792
$
30,650
16,422
52,864
31,220
$ 21,644
$
2015
5,982
30,641
15,879
52,502
30,056
$ 22,446
$
2014
5,982
30,593
15,511
52,086
28,302
$ 23,784
NOTE E – OTHE R REAL ESTAT E :
The Company’s other real estate consisted of the following as of December 31, 2016, 2015 and 2014, respectively (in thousands except
number of properties):
2016
2015
2014
Number of
Properties
19
3
3
Balance
$ 7,658
202
653
Number of
Properties
19
3
4
Balance
$ 8,792
368
756
25
$ 8,513
26
$ 9,916
Number of
Properties
15
10
14
1
40
Balance
$ 5,034
431
2,030
151
$ 7,646
Construction, land development and other land
1-4 family residential properties
Nonfarm nonresidential
Other
Total
NOTE F – DEPOSITS:
At December 31, 2016, the scheduled maturities of time deposits are as follows (in thousands):
2017
2018
2019
2020
2021
Total
$
$
54,491
17,645
2,942
1,549
1,033
77,660
Time deposits of $100,000 or more at December 31, 2016 included brokered deposits of $5,000,000, which mature in 2017.
Time deposits of $250,000 or more totaled approximately $25,143,000, $24,090,000 and $25,321,000 at December 31, 2016, 2015 and 2014,
respectively.
Deposits held for related parties amounted to $17,713,230, $7,640,079 and $6,607,646 at December 31, 2016, 2015 and 2014, respectively.
Overdrafts totaling $800,557, $663,511 and $822,730 were reclassified as loans at December 31, 2016, 2015 and 2014, respectively.
NOTE G – FEDER AL F UNDS P U R C HA SE D:
At December 31, 2016, the Company had facilities in place to purchase federal funds up to $40,000,000 under established credit arrangements.
NOTE H – BORROWINGS:
At December 31, 2016, the Company was able to borrow up to $31,367,467 from the Federal Reserve Bank Discount Window Primary Credit
Program. The borrowing limit is based on the amount of collateral pledged, with certain loans from the Bank’s portfolio serving as collateral.
Borrowings bear interest at 25 basis points over the current fed funds rate and have a maturity of one day.There was no outstanding balance
at December 31, 2016.
At December 31, 2016, the Company had $6,256,591 outstanding in advances under a $33,170,021 line of credit with the FHLB. One
advance in the amount of $5,000,000 bears interest at a variable rate of 43.2 basis points above the 1 month LIBOR rate, which was
1.112% at December 31, 2016, and matures in 2017. New advances may subsequently be obtained based on the liquidity needs of the bank
subsidiary. The remaining balance consists of smaller advances bearing interest from 2.604% to 7.00% with maturity dates from 2030 – 2040.
The advances are collateralized by specific loans, for which certain documents are held in custody by the FHLB, and, if needed, specific
investment securities that are held in safekeeping at the FHLB.
25
NOTE I – INCOME TAXE S:
Deferred taxes (or deferred charges) as of December 31, 2016, 2015 and 2014, included in other assets, were as follows (in thousands):
December 31,
2016
2015
2014
Deferred tax assets:
Allowance for loan losses
Employee benefit plans’ liabilities
Unrealized loss on available for sale securities, charged from equity
Loss on credit impairment of securities
Earned retiree health benefits plan liability
General business and AMT credits
Tax net operating loss carry forward
Other
Valuation allowance
Deferred tax assets
Deferred tax liabilities:
Unrealized gain on available for sale securities, charged to equity
Unearned retiree health benefits plan asset
Bank premises and equipment
Other
Deferred tax liabilities
Net deferred taxes
Income taxes consist of the following components (in thousands):
Years Ended December 31,
Current
Deferred:
Federal
Change in valuation allowance
Total deferred
Totals
$
$
$
1,858
4,784
1,013
576
1,638
1,605
3,423
1,731
(11,560)
5,068
720
4,011
337
5,068
2016
78
(247)
247
$
2,744
4,633
$
3,130
4,490
210
576
1,638
2,011
2,514
1,535
(10,106)
5,545
180
734
4,369
262
5,545
2015
(2,728)
1,966
(762)
(762)
1,638
1,735
651
1,637
(8,140)
5,351
362
4,760
229
5,351
2014
(137)
$
$
(3,277)
8,140
4,863
$ 4,726
$
$
$
78
$
Income taxes amounted to less than the amounts computed by applying the U.S. Federal income tax rate of 34.0% for 2016, 2015 and 2014
to income (loss) before income taxes. The reasons for these differences are shown below (in thousands):
Taxes computed at statutory rate
Increase (decrease) resulting from:
Tax-exempt interest income
Income from BOLI
Federal tax credits
Other
Change in valuation allowance
Total income tax expense (benefit)
2016
Tax
83
Rate
34
2015
2014
Tax
(1,820)
Rate
(34)
$
Tax
(1,794)
Rate
(34)
$
(417)
(144)
(298)
607
247
78
(170)
(59)
(121)
247
101
32
(447)
(166)
(298)
3
1,966
(762)
(8)
(3)
(6)
37
(14)
$
(532)
(200)
(298)
(590)
8,140
4,726
(10)
(4)
(6)
(10)
154
90
$
$
$
A valuation allowance is recognized against deferred tax assets when, based on the consideration of all available positive and negative
evidence using a more likely than not criteria, it is determined that all or a portion of these tax benefits may not be realized. This assessment
requires consideration of all sources of taxable income available to realize the deferred tax asset including taxable income in prior carry-back
years, future reversals of existing temporary differences, tax planning strategies and future taxable income exclusive of reversing temporary
differences and carryforwards. The Company incurred losses on a cumulative basis for the three-year period ended December 31, 2014, which
is considered to be significant negative evidence. The positive evidence considered in support was insufficient to overcome this negative
evidence. As a result, the Company established a full valuation allowance for its net deferred tax asset in the amount of $8,140,000 as of
December 31, 2014.
The Company intends to maintain this valuation allowance until it determines it is more likely than not that the asset can be realized through
current and future taxable income. If not utilized, the Company’s federal net operating loss of $7,000,000 will begin to expire in 2034.
The Company has reviewed its income tax positions and specifically considered the recognition and measurement requirements of the
benefits recorded in its financial statements for tax positions taken or expected to be taken in its tax returns. The Company currently has no
unrecognized tax benefits that, if recognized, would favorably affect the income tax rate in future periods.
26
Income tax expense (or benefit) for each year is allocated to continuing operations, discontinued operations, other comprehensive income
and other charges or credits recorded directly to shareholders’ equity. This allocation is commonly referred to as intra-period tax allocation
as outlined in Accounting Standards Codification Topic 740, Income Taxes (“ASC 740”). ASC 740 also includes an exception to the general
principle of intra-period tax allocation discussed above. This exception requires that all items, i.e., discontinued operations and items charged
or credited directly to other comprehensive income, be considered in determining the amount of the tax benefit that results from a loss from
continuing operations. That is, when a company has a current period loss from continuing operations, management must consider income
recorded in other categories in determining the tax benefit that is allocated to continuing operations. The ASC 740 exception, however, only
relates to the allocation of the current year tax provision, which may be zero, and does not change a company’s overall tax provision.
Accordingly, for the year ended December 31, 2015, the Company recorded a tax benefit of $762,000 in continuing operations and a
corresponding income tax expense in other comprehensive income associated with the increase in the unrealized gain on available for sale
securities and the decrease in the unfunded post-retirement benefit obligation.
The Company recorded income tax expense of $78,000 during the second quarter of 2016 relating to the resolution of a recent examination
by the Internal Revenue Service.
NOTE J – SHARE HOL DE RS’ EQU IT Y:
Shareholders’ equity of the Company includes the undistributed earnings of the bank subsidiary. Dividends to the Company’s shareholders
can generally be paid only from dividends paid to the Company by its bank subsidiary. Consequently, dividends are dependent upon the
earnings, capital needs, regulatory policies and statutory limitations affecting the bank subsidiary. Dividends paid by the bank subsidiary are
subject to the written approval of the Commissioner of Banking and Consumer Finance of the State of Mississippi and the Federal Deposit
Insurance Corporation (the “FDIC”). At December 31, 2016, $11,408,685 of undistributed earnings of the bank subsidiary included in
consolidated surplus and retained earnings was available for future distribution to the Company as dividends. Dividends paid by the Company
are subject to the written approval of the Federal Reserve Bank (“FRB”).
On February 25, 2009, the Board approved the repurchase of up to 3% of the outstanding shares of the Company’s common stock. As a result
of this repurchase plan, 47,756 shares have been repurchased and retired through December 31, 2016.
The Company and the bank subsidiary are 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 financial statements. Under capital adequacy guidelines and the regulatory
framework for prompt corrective action, specific capital guidelines must be met that involve quantitative measures of the assets, liabilities
and certain off-balance sheet items as calculated under regulatory accounting practices. The capital amounts and classification of the bank
subsidiary and the Company are also subject to qualitative judgments by the regulators about components, risk weightings and other factors.
New rules relating to risk-based capital requirements and the method for calculating components of capital and of computing risk-weighted
assets to make them consistent with agreements that were reached by the Basel Committee on Banking Supervision and certain provisions of
the Dodd-Frank Act became effective for the Company January 1, 2015. The rules establish a new Common equity tier 1 minimum capital
requirement, increase the minimum capital ratios and assign a higher risk weight to certain assets based on the risk associated with these assets.
Quantitative measures established by regulation to ensure capital adequacy require the bank subsidiary to maintain minimum amounts and ratios
of Total, Common equity tier 1 and Tier 1 capital to risk-weighted assets, and Tier 1 capital to average assets. Beginning January 1, 2016, the
Company must hold a capital conservation buffer composed of Common equity tier 1 capital above its minimum risk-based capital requirements
in order to avoid limitations on capital distributions, including dividend payments and certain discretionary bonus payments to executive officers.
As of December 31, 2016, the most recent notification from the FDIC categorized the bank subsidiary as well capitalized under the regulatory
framework for prompt corrective action. To be categorized as well capitalized, the bank subsidiary must have a Total risk-based capital ratio of
10.00% or greater, a Common equity tier 1 capital ratio of 6.50% or greater, a Tier 1 risk-based capital ratio of 8.00% or greater and a Leverage
capital ratio of 5.00% or greater, with a capital conservation buffer above these requirements of .625% for 2016. The buffer will increase
annually until it is fully phased-in to 2.50% at January 1, 2019. There are no conditions or events since that notification that Management
believes have changed the bank subsidiary’s category.
The Company’s actual capital amounts and ratios and required minimum capital amounts and ratios for 2016, 2015 and 2014, are as follows
(in thousands):
December 31, 2016:
Total Capital (to Risk Weighted Assets)
Common Equity Tier 1 Capital (to Risk Weighted Assets)
Tier 1 Capital (to Risk Weighted Assets)
Tier 1 Capital (to Average Assets)
December 31, 2015:
Total Capital (to Risk Weighted Assets)
Common Equity Tier 1 Capital (to Risk Weighted Assets)
Tier 1 Capital (to Risk Weighted Assets)
Tier 1 Capital (to Average Assets)
December 31, 2014:
Total Capital (to Risk Weighted Assets)
Tier 1 Capital (to Risk Weighted Assets)
Tier 1 Capital (to Average Assets)
Actual
Ratio
22.94%
21.69%
21.69%
13.12%
21.83%
20.58%
20.58%
13.18%
21.95%
20.70%
13.29%
For Capital Adequacy Purposes
Ratio
Amount
$
$
$
33,220
18,687
24,915
27,464
34,954
19,662
26,215
27,291
36,528
18,264
28,437
8.00%
4.50%
6.00%
4.00%
8.00%
4.50%
6.00%
4.00%
8.00%
4.00%
4.00%
$
$
$
Amount
95,262
90,068
90,068
90,068
95,395
89,901
89,901
89,901
100,243
94,493
94,493
27
The bank subsidiary’s actual capital amounts and ratios and required minimum capital amounts and ratios and capital amounts and ratios to
be well capitalized for 2016, 2015 and 2014, are as follows (in thousands):
Actual
Amount
Ratio
For Capital Adequacy Purposes To Be Well Capitalized
Ratio
Amount
Amount
Ratio
December 31, 2016:
Total Capital (to Risk Weighted Assets)
Common Equity Tier 1 Capital (to Risk
Weighted Assets)
Tier 1 Capital (to Risk Weighted Assets)
Tier 1 Capital (to Average Assets)
December 31, 2015:
Total Capital (to Risk Weighted Assets)
Common Equity Tier 1 Capital (to Risk
Weighted Assets)
Tier 1 Capital (to Risk Weighted Assets)
Tier 1 Capital (to Average Assets)
December 31, 2014:
Total Capital (to Risk Weighted Assets)
Tier 1 Capital (to Risk Weighted Assets)
Tier 1 Capital (to Average Assets)
$ 91,882
22.29%
$
32,975
8.00%
$ 41,219
10.00%
86,726
86,726
86,726
21.04%
21.04%
12.47%
18,548
24,731
27,820
4.50%
6.00%
4.00%
26,792
32,975
34,775
6.50%
8.00%
5.00%
$ 91,963
21.09%
$ 34,889
8.00%
$ 43,611
10.00%
86,479
86,479
86,479
19.83%
19.83%
13.47%
19,625
26,166
25,680
4.50%
6.00%
4.00%
28,347
34,889
32,100
6.50%
8.00%
5.00%
$ 96,427
90,720
90,720
21.28%
20.02%
13.15%
$
36,247
18,124
27,599
8.00%
4.00%
4.00%
$ 45,309
27,186
34,499
10.00%
6.00%
5.00%
NOTE K – OTH ER INC OME A N D EX P E N SE S :
Other income consisted of the following (in thousands):
Years Ended December 31,
Other service charges, commissions and fees
Rentals
Other
Totals
Other expenses consisted of the following (in thousands):
Years Ended December 31,
Advertising
Data processing
FDIC and state banking assessments
Legal and accounting
Other real estate
ATM expense
Trust expense
Other
Totals
2016
116
320
223
659
2016
544
1,346
901
566
868
555
370
1,689
6,839
$
$
$
$
2015
109
393
212
714
2015
505
1,403
928
785
2,264
1,183
355
2,098
9,521
$
$
$
$
2014
84
435
113
632
2014
552
1,339
1,033
493
1,610
2,409
323
1,890
9,649
$
$
$
$
NOTE L – FINANC IAL INST RU MEN TS W I T H OF F-B A L A N C E -SHE E T R I SK:
The Company is a party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of
its customers. These financial instruments include commitments to extend credit and irrevocable letters of credit. These instruments involve,
to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the balance sheet. The contract amounts
of those instruments reflect the extent of involvement the bank subsidiary has in particular classes of financial instruments. The Company’s
exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and
irrevocable letters of credit is represented by the contractual amount of those instruments. The Company uses the same credit policies in
making commitments and conditional obligations as it does for on-balance-sheet instruments.
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any conditions established in the
agreement. Irrevocable letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a
third party. Commitments and irrevocable letters of credit generally have fixed expiration dates or other termination clauses and may require
payment of a fee. Since some of the commitments and irrevocable letters of credit may expire without being drawn upon, the total amounts
do not necessarily represent future cash requirements. The Company evaluated each customer’s creditworthiness on a case-by-case basis. The
amount of collateral obtained upon extension of credit is based on Management’s credit evaluation of the customer. Collateral obtained varies
but may include equipment, real property and inventory.
The Company generally grants loans to customers in its trade area.
At December 31, 2016, 2015 and 2014, the Company had outstanding irrevocable letters of credit aggregating $410,286, $1,919,678 and
$1,879,678, respectively. At December 31, 2016, 2015 and 2014, the Company had outstanding unused loan commitments aggregating
$42,401,431, $41,935,725 and $66,663,320, respectively. Approximately $16,476,000, $11,335,000 and $30,910,000 of outstanding
commitments were at fixed rates and the remainder was at variable rates at December 31, 2016, 2015 and 2014, respectively.
28
NOTE M – CONTINGE NC IES:
The Bank is involved in various legal matters and claims which are being defended and handled in the ordinary course of business. None of
these matters are expected, in the opinion of Management, to have a material adverse effect upon the financial position or results of operations
of the Company.
NOTE N – CO ND EN SED PAREN T C OMPA N Y O N LY FI N A N C I A L I N FO R M AT I ON :
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 SHEE T S (IN THO U S A N D S):
December 31,
Assets
Investments in subsidiaries, at underlying equity:
Bank subsidiary
Nonbank subsidiary
Cash in bank subsidiary
Other assets
Total assets
$
$
85,118
1
191
3,151
88,461
2016
Liabilities and Shareholders’ Equity:
Other liabilities
Total liabilities
Shareholders’ equity
Total liabilities and shareholders’ equity
$
$
88,461
88,461
2016
CONDENSED STATEMENTS OF OPE R AT I O N S ( IN T HOU S AN D S):
Years Ended December 31,
Income
Distributed income of bank subsidiary
Undistributed income (loss) of bank subsidiary
Other loss
Total income (loss)
Expenses
Other
Total expenses
Income (loss) before income taxes
Income tax benefit
Net income (loss)
75
247
(32)
290
123
123
167
167
$
$
$
167
2016
CONDENSED STATEMENTS OF C A S H FL OW S ( IN T HOU S AN D S):
Years Ended December 31,
Cash flows from operating activities:
Net income (loss)
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Loss on other investments
Undistributed (income) loss of subsidiaries
Other assets
Other liabilities
Net cash used in operating activities
Cash flows from investing activities:
Redemption of equity securities
Net cash provided by investing activities
Cash flows from financing activities:
Dividends paid
Net cash used in financing activities
Net increase (decrease) in cash
Cash, beginning of year
Cash, end of year
51
(247)
(8)
163
28
191
200
200
(37)
$
29
$
$
$
$
$
$
$
$
$
$
2015
88,415
1
28
3,395
91,839
91,839
91,839
2015
(4,242)
(208)
(4,450)
142
142
(4,592)
$
(4,592)
$
2014
91,179
1
160
3,611
94,951
94,951
94,951
2014
(10,025)
(53)
(10,078)
124
124
(10,202)
(198)
(10,004)
2015
2014
$
(4,592)
$
(10,004)
218
4,242
(132)
(132)
160
28
$
$
64
10,025
25
(161)
(51)
236
236
(512)
(512)
(327)
487
160
NOTE O – EMPLOYE E AND DIR E C TOR B E N E F IT PL A N S :
The Company sponsors the Peoples Financial Corporation Employee Stock Ownership Plan (“ESOP”). Employees who are in a position
requiring at least 1,000 hours of service during a plan year and who are 21 years of age are eligible to participate in the ESOP. The Plan
included 401(k) provisions and the former Gulf National Bank Profit Sharing Plan. Effective January 1, 2001, the ESOP was amended to
separate the 401(k) funds into the Peoples Financial Corporation 401(k) Profit Sharing Plan. The separation had no impact on the eligibility
or benefits provided to participants of either plan. The 401(k) provides for a matching contribution of 75% of the amounts contributed by the
employee (up to 6% of compensation). Contributions are determined by the Board of Directors and may be paid either in cash or Peoples
Financial Corporation common stock. Total contributions to the plans charged to operating expense were $276,000, $260,000 and $280,000
in 2016, 2015 and 2014, respectively.
Compensation expense of $7,804,295, $7,576,755 and $7,678,640 was the basis for determining the ESOP contribution allocation to
participants for 2016, 2015 and 2014, respectively. The ESOP held 276,628, 285,785 and 315,269 allocated shares at December 31, 2016,
2015 and 2014, respectively.
The Company established an Executive Supplemental Income Plan and a Directors’ Deferred Income Plan, which provide for pre-retirement
and post-retirement benefits to certain key executives and directors. Benefits under the Executive Supplemental Income Plan are based upon the
position and salary of the officer at retirement or death. Normal retirement benefits under the plan are equal to 67% of salary for the president
and chief executive officer, 58% of salary for the executive vice president and 50% of salary for all other executive officers and are payable
monthly over a period of fifteen years. Under the Directors’ Deferred Income Plan, the directors are given an opportunity to defer receipt of
their annual directors’ fees until age sixty-five. For those who choose to participate, benefits are payable monthly for ten years beginning
the first day of the month following the director’s normal retirement date. The normal retirement date is the later of the normal retirement
age (65) or separation of service. Interest on deferred fees accrues at an annual rate of ten percent, compounded annually. The Company has
acquired insurance policies, with the bank subsidiary as owner and beneficiary, which 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 $17,176,771, $16,820,058 and $16,370,384 at
December 31, 2016, 2015 and 2014, respectively. The present value of accumulated benefits under these plans, using an interest rate of 4.25%
in 2016 and 4.50% in 2015 and 2014, and the interest ramp-up method has been accrued. The accrual amounted to $12,221,421, $11,813,343
and $11,465,119 at December 31, 2016, 2015 and 2014, respectively, and is included in Employee and director benefit plans liabilities.
The Company also has additional plans for post-retirement benefits for certain key executives. The Company has acquired insurance policies,
with the bank subsidiary as owner and beneficiary, which 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 $1,604,333, $1,473,607 and $1,346,910 at December 31, 2016, 2015
and 2014, respectively. The present value of accumulated benefits under these plans using an interest rate of 4.25% in 2016 and 2015 and
4.50% in 2014, and the projected unit cost method has been accrued. The accrual amounted to $1,544,017, $1,519,537 and $1,450,280 at
December 31, 2016, 2015 and 2014, respectively, and is included in Employee and director benefit plans liabilities.
Additionally, there are two endorsement split dollar policies, with the bank subsidiary as owner and beneficiary, which provide a guaranteed
death benefit to the participants’ beneficiaries. These contracts are carried at their cash surrender value, which amounted to $292,063, $284,664
and $277,278 at December 31, 2016, 2015 and 2014, respectively. The present value of accumulated benefits under these plans using an
interest rate of 4.25% in 2016 and 4.50% in 2015 and 2014 and the projected unit cost method has been accrued. The accrual amounted to
$88,798, $82,202 and $80,997 at December 31, 2016, 2015 and 2014, respectively, and is included in Employee and director benefit plans
liabilities.
The Company has additional plans for post-retirement benefits for directors. The Company has acquired insurance policies, with the bank
subsidiary as owner and beneficiary, which 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 $166,822, $157,051 and $150,687 at December 31, 2016, 2015 and 2014, respectively.
The present value of accumulated benefits under these plans using an interest rate of 4.25% in 2016 and 4.50% in 2015 and 2014, and the
projected unit cost method has been accrued. The accrual amounted to $216,020, $212,662 and $210,207 at December 31, 2016, 2015 and
2014, respectively, and is included in Employee and director benefit plans liabilities.
The Company provides post-retirement health insurance to certain of its retired employees. Employees are eligible to participate in the
retiree health plan if they retire from active service no earlier than their Social Security normal retirement age, which varies from 65 to
67 based on the year of birth. In addition, the employee must have at least 25 continuous years of service with the Company immediately
preceding retirement. However, any active employee who was at least age 65 as of January 1, 1995, does not have to meet the 25 years of
service requirement. The accumulated post-retirement benefit obligation at January 1, 1995, was $517,599, which the Company elected to
amortize over 20 years. The Company reserves the right to modify, reduce or eliminate these health benefits. The Company has chosen to
not offer this post-retirement benefit to individuals entering the employ of the Company after December 31, 2006. Effective January 1, 2012,
the Company amended the retiree health plan. This amendment requires that employees who are eligible and enroll in the bank subsidiary’s
group medical and dental health care plans upon their retirement must enroll in Medicare Parts A, B and D when first eligible upon their
retirement from the bank subsidiary. This results in the bank subsidiary’s programs being secondary insurance coverage for retired employees
and any dependent(s), if applicable, while Medicare Parts A and B will be their primary coverage, and Medicare Part D will be the sole and
exclusive prescription drug benefit plan for retired employees. This amendment reduced the accumulated post-retirement benefit obligation
by $3,799,308 as of December 31, 2011. Effective January 1, 2014, the Company amended the retiree health plan. This amendment reduces
the age for eligibility to 60 for those employees meeting all other eligibility requirements. This amendment increased the accumulated post-
retirement benefit obligation by $1,150,229 as of December 31, 2013.
30
The following is a summary of the components of the net periodic post-retirement benefit cost (credit)(in thousands):
Years Ended December 31,
Service cost
Interest cost
Amortization of net gain
Amortization of prior service credit
Net periodic post-retirement benefit cost (credit)
2016
93
101
(73)
(81)
40
$
$
2015
94
102
(44)
(82)
70
$
$
2014
105
132
(14)
(81)
142
$
$
The discount rate used in determining the accumulated post-retirement benefit obligation was 4.00% in 2016, 4.20% in 2015 and 4.00% in
2014. The assumed health care cost trend rate used in measuring the accumulated post-retirement benefit obligation was 6.50% in 2016. The
rate was assumed to decrease gradually to 5.00% for 2022 and remain at that level thereafter. If the health care cost trend rate assumptions
were increased 1.00%, the accumulated post-retirement benefit obligation as of December 31, 2016, would be increased by 13.78%, and the
aggregate of the service and interest cost components of the net periodic post-retirement benefit cost for the year then ended would have
increased by 17.23%. If the health care cost trend rate assumptions were decreased 1.00%, the accumulated post-retirement benefit obligation
as of December 31, 2016, would be decreased by 11.28%, and the aggregate of the service and interest cost components of the net periodic
post-retirement benefit cost for the year then ended would have decreased by 13.83%.
The following table presents the estimated benefit payments for each of the next five years and in the aggregate for the next five years (in
thousands):
2017
2018
2019
2020
2021
2022 – 2026
$ 145
119
56
77
106
922
The following is a reconciliation of the accumulated post-retirement benefit obligation, which is included in Employee and director benefit
plans liabilities (in thousands):
Accumulated post-retirement benefit obligation as of December 31, 2015
Service cost
Interest cost
Actuarial gain
Benefits paid
Accumulated post-retirement benefit obligation as of December 31, 2016
$ 2,508
93
101
(113)
(75)
$ 2,514
The following is a summary of the change in plan assets (in thousands):
Fair value of plan assets at beginning of year
Actual return on assets
Employer contribution
Benefits paid, net
Fair value of plan assets at end of year
2016
75
(75)
$
$
2015
37
(37)
$
$
Amounts recognized in the Accumulated Other Comprehensive Income (Loss), net of tax, were (in thousands):
For the year ended December 31,
2016
2015
Net gain (loss)
Prior service charge
Total accumulated other comprehensive income
$
$
723
676
1,399
$
$
697
730
1,427
2014
64
(64)
2014
(80)
783
703
$
$
$
$
Amounts recognized in the accumulated post-retirement benefit obligation and other comprehensive income (loss) were (in thousands):
For the year ended December 31,
Unrecognized actuarial gain
Amortization of prior service cost
Total accumulated other comprehensive loss
$
$
2016
39
(81)
(42)
The prior service credit that will be recognized in accumulated other comprehensive income during 2017 is $81,381.
31
NOTE P – FAIR VAL UE MEAS U R EMEN TS A N D D IS C L OS U R E S:
The Company utilizes fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value
disclosures. Available for sale securities are recorded at fair value on a recurring basis. Additionally, from time to time, the Company may
be required to record other assets at fair value on a non-recurring basis, such as impaired loans and ORE. These non-recurring fair value
adjustments typically involve the application of lower of cost or market accounting or write-downs of individual assets. Additionally, the
Company is required to disclose, but not record, the fair value of other financial instruments.
Fair Value Hierarchy
The Company groups assets and liabilities at fair value in three levels, based on the markets in which the assets and liabilities are traded and
the reliability of the assumptions used to determine fair value. These levels are:
Level 1 - Valuation is based upon quoted prices for identical instruments traded in active markets.
Level 2 - Valuation is based upon quoted market prices for similar instruments in active markets, quoted prices for identical or similar
instruments in markets that are not active and model-based valuation techniques for which all significant assumptions are observable in the
market.
Level 3 - Valuation is generated from model-based techniques that use at least one significant assumption not observable in the market. These
unobservable assumptions reflect estimates of assumptions that market participants would use in pricing the asset or liability. Valuation
techniques include the use of option pricing models, discounted cash flow models and similar techniques.
Following is a description of valuation methodologies used to determine the fair value of financial assets and liabilities.
Cash and Due from Banks
The carrying 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. The Company’s available for sale securities are reported at
their estimated fair value, which is determined utilizing several sources. The primary source is Interactive Data Corporation, which utilizes
pricing models that vary based by asset class and include available trade, bid and other market information and whose methodology includes
broker quotes, proprietary models and vast descriptive databases. Another source for determining fair value is matrix pricing, which is a
mathematical technique used widely in the industry to value debt securities without relying exclusively on quoted prices for the specific
securities but rather by relying on the securities’ relationship to other benchmark securities. The Company’s available for sale securities for
which fair value is determined through the use of such pricing models and matrix pricing are classified as Level 2 assets. If the fair value of
available for sale securities is generated through model-based techniques including the discounting of estimated cash flows, such securities
are classified as Level 3 assets.
Held to Maturity Securities
The fair value of held to maturity securities is based on quoted market prices.
Other Investments
The carrying amount shown as other investments approximates fair value.
Federal Home Loan Bank Stock
The carrying amount shown as Federal Home Loan Bank Stock approximates fair value.
Loans
The fair value of fixed rate 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. The fair value of floating rate loans is estimated to be its carrying value. At each reporting period, the Company
determines which loans are impaired. Accordingly, the Company’s impaired loans are reported at their estimated fair value on a non-recurring
basis. An allowance for each impaired loan, which are generally collateral-dependent, is calculated based on the fair value of its collateral.
The fair value of the collateral is based on appraisals performed by third-party valuation specialists. Factors including the assumptions and
techniques utilized by the appraiser are considered by Management. If the recorded investment in the impaired loan exceeds the measure
of fair value of the collateral, a valuation allowance is recorded as a component of the allowance for loan losses. Impaired loans are non-
recurring Level 3 assets.
Other Real Estate
In the course of lending operations, Management may determine that it is necessary to foreclose on the related collateral. Other real estate
acquired through foreclosure is carried at fair value, less estimated costs to sell. The fair value of the collateral is based on appraisals
performed by third-party valuation specialists. Factors including the assumptions and techniques utilized by the appraiser are considered by
Management. If the current appraisal is more than one year old and/or the loan balance is more than $200,000, a new appraisal is obtained.
Otherwise, the Bank’s in-house property evaluator and Management will determine the fair value of the collateral, based on comparable
sales, market conditions, Management’s plans for disposition and other estimates of fair value obtained from principally independent sources,
adjusted for estimated selling costs. Other real estate is a non-recurring Level 3 asset.
Cash Surrender Value of Life Insurance
The carrying amount of cash surrender value of bank-owned life insurance approximates fair value.
Deposits
The fair value of non-interest bearing demand and interest bearing savings and demand deposits is the amount reported in the financial
statements. The fair value of time deposits is estimated by discounting the cash flows using current rates for time deposits with similar
32
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.
Borrowings from Federal Home Loan Bank
The fair value of FHLB fixed rate borrowings is estimated using discounted cash flows based on current incremental borrowing rates for
similar types of borrowing arrangements. The fair value of FHLB variable rate borrowings is estimated to be its carrying value.
The balances of available for sale securities, which are the only assets measured at fair value on a recurring basis, by level within the fair value
hierarchy and by investment type, as of December 31, 2016, 2015 and 2014, were as follows (in thousands):
December 31, 2016:
U.S. Treasuries
U.S. Government agencies
Mortgage-backed securities
States and political subdivisions
Equity securities
Total
December 31, 2015:
U.S. Treasuries
U.S. Government agencies
Mortgage-backed securities
States and political subdivisions
Equity securities
Total
December 31, 2014:
U.S. Treasuries
U.S. Government agencies
Mortgage-backed securities
States and political subdivisions
Equity securities
Total
Total
$ 147,624
24,825
42,708
17,963
458
$ 233,578
$ 63,754
84,546
30,130
23,727
650
$ 202,807
$ 29,654
117,989
35,817
31,012
650
$ 215,122
Level 1
Fair Value Measurements Using
Level 2
Level 3
$
$
$
$
$
$
$ 147,624
24,825
42,708
17,963
458
$ 233,578
$
63,754
84,546
30,130
23,547
650
$ 202,627
$ 29,654
117,989
35,817
31,012
650
$ 215,122
$
$
$
180
$
180
$
$
Impaired loans, which are measured at fair value on a non-recurring basis, by level within the fair value hierarchy as of December 31, 2016,
2015 and 2014 were as follows (in thousands):
December 31:
2016
2015
2014
$
Total
5,006
4,981
10,610
Level 1
Fair Value Measurements Using
Level 2
$
$
$
Level 3
5,006
4,981
10,610
Other real estate, which is measured at fair value on a non-recurring basis, by level within the fair value hierarchy as of December 31, 2016,
2015 and 2014 are as follows (in thousands):
December 31:
2016
2015
2014
$
Total
8,513
9,916
7,646
Level 1
Fair Value Measurements Using
Level 2
$
$
$
Level 3
8,513
9,916
7,646
The following table presents a summary of changes in the fair value of other real estate which is measured using Level 3 inputs (in thousands):
Balance, beginning of year
Loans transferred to ORE
Sales
Writedowns
Balance, end of year
2015
7,646
7,502
(4,295)
(937)
9,916
$
$
2014
9,630
1,345
(2,068)
(1,261)
7,646
$
$
2016
9,916
1,903
(2,524)
(782)
8,513
$
$
33
The carrying value and estimated fair value of financial instruments, by level within the fair value hierarchy, at December 31, 2016, 2015 and
2014, are as follows (in thousands):
Carrying Amount
Level 1
Level 2
Level 3
Total
Fair Value Measurements Using
December 31,2016:
Financial Assets:
Cash and due from banks
Available for sale securities
Held to maturity securities
Other investments
Federal Home Loan Bank stock
Loans, net
Other real estate
Cash surrender value of life insurance
Financial Liabilities:
Deposits:
Non-interest bearing
Interest bearing
Borrowings from
Federal Home Loan Bank
December 31,2015:
Financial Assets:
Cash and due from banks
Available for sale securities
Held to maturity securities
Other investments
Federal Home Loan Bank stock
Loans, net
Other real estate
Cash surrender value of life insurance
Financial Liabilities:
Deposits:
Non-interest bearing
Interest bearing
Borrowings from
Federal Home Loan Bank
December 31,2014:
Financial Assets:
Cash and due from banks
Available for sale securities
Held to maturity securities
Other investments
Federal Home Loan Bank stock
Loans, net
Other real estate
Cash surrender value of life insurance
Financial Liabilities:
Deposits:
Non-interest bearing
Interest bearing
Borrowings from
Federal Home Loan Bank
$ 41,116
233,578
48,150
2,693
539
309,889
8,513
19,249
132,381
442,635
6,257
$ 31,396
202,807
19,025
2,744
1,637
329,487
9,916
18,735
122,743
389,964
18,409
$ 23,556
215,122
17,784
2,962
2,504
353,201
7,646
18,145
103,607
413,313
38,708
$
41,116
233,578
46,935
2,693
539
313,613
8,513
19,249
132,381
442,937
6,491
$ 31,396
202,807
19,220
2,744
1,637
331,026
9,916
18,735
122,743
390,205
19,731
$ 23,556
215,122
17,859
2,962
2,504
355,004
7,646
18,145
103,607
413,672
40,720
$ 41,116
2,693
$
233,578
46,935
$
539
19,249
6,491
313,613
8,513
442,937
132,381
$
31,396
2,744
$
202,627
19,220
$
180
1,637
18,735
19,731
331,026
9,916
390,205
122,743
$ 23,556
$
$
215,122
17,859
2,504
18,145
40,720
355,004
7,646
413,672
2,962
103,607
34
P E O P L E S F I N A N C I A L C O R P O R A T I O N A N D S U B S I D I A R I E S
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
To the Board of Directors and Shareholders
Peoples Financial Corporation
Biloxi, Mississippi
We have audited the accompanying consolidated statements of condition of Peoples Financial Corporation and subsidiaries (the “Company”)
as of December 31, 2016, 2015 and 2014, and the related consolidated statements of operations, comprehensive loss, 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 the standards of the Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.
Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate
in the circumstances, but not for the purpose of expressing an opinion of the effectiveness of the Company’s internal control over financial
reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, 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 as of December 31, 2016, 2015 and 2014, and the results of their operations and their cash flows for
the years then ended in conformity with accounting principles generally accepted in the United States of America.
Atlanta, Georgia
March 15, 2017
35
FIVE-YEAR COMPARATIVE SU MMA RY OF SE L E C T E D FI NA N C I A L I N FOR M AT I ON
(In thousands except per share data)
Balance Sheet Summary
Total assets
Available for sale securities
Held to maturity securities
Loans, net of unearned discount
Deposits
Borrowings from FHLB
Shareholders’ equity
Summary of Operations
Interest income
Interest expense
Net interest income
Provision for loan losses
Net interest income after
provision for loan losses
Non-interest income
Non-interest expense
Income (loss) before taxes
Income tax expense (benefit)
Net income (loss)
Per Share Data
2016
2015
2014
2013
2012
$ 688,014
$ 641,004
$ 668,895
$ 762,264
$ 804,912
233,578
48,150
315,355
575,016
6,257
88,461
202,807
215,122
275,440
258,875
19,025
337,557
512,707
18,409
91,839
17,784
362,407
516,920
38,708
94,951
11,142
375,349
568,197
77,684
99,147
7,125
431,083
669,953
7,912
110,754
$ 18,493
$
19,311
$
22,156
$
24,956
$ 24,628
1,025
17,468
568
16,900
6,549
23,204
245
78
167
$
875
18,436
2,582
15,854
6,898
28,106
(5,354)
(762)
1,441
20,715
7,404
13,311
8,619
27,208
(5,278)
4,726
1,447
23,509
9,661
13,848
9,067
25,654
(2,739)
(2,201)
2,067
22,561
4,264
18,297
9,529
25,277
2,549
(92)
$
(4,592)
$
(10,004)
$
(538)
$
2,641
Basic and diluted earnings per share
$
.03
$
(.90)
$
(1.95)
$
(.10)
$
Dividends per share
Book value
17.27
17.93
.10
18.53
19.35
.51
.20
21.56
Weighted average number of shares
5,123,186
5,123,186
5,123,186
5,128,889
5,136,918
Selected Ratios
Return on average assets
Return on average equity
.02%
.19%
(.69%)
(4.92%)
Primary capital to average assets
13.99%
15.06%
(1.38%)
(10.31%)
14.38%
(.07%)
(.51%)
.32%
2.40%
13.64%
14.71%
Risk-based capital ratios:
Tier 1
Total
21.69%
22.94%
20.58%
21.83%
20.70%
21.95%
21.54%
22.79%
20.04%
21.29%
36
Summary of Quarterly Results of Operations (in thousands except per share data):
Quarter Ended, 2016
March 31
June 30
September 30
December 31
Interest income
Net interest income
Provision for loan losses
Income (loss) before income taxes
Net income (loss)
Basic and diluted earnings (loss) per share
Quarter Ended, 2015
Interest income
Net interest income
Provision for loan losses
Loss before income taxes
Net income (loss)
Basic and diluted earnings (loss) per share
$
4,780
4,538
113
76
76
.01
$
March 31
4,965
4,755
986
(1,151)
(1,151)
(.22)
$
$
4,550
4,283
24
139
61
.01
June 30
4,808
4,594
1,536
(1,605)
(1,605)
(.32)
$
4,593
4,326
$
4,570
4,321
431
(376)
(376)
(.07)
$
December 31
4,791
4,576
(225)
(45)
717
.14
406
406
.08
$
September 30
4,747
4,511
285
(2,553)
(2,553)
(.50)
Market Information
The Company’s stock is traded under the symbol PFBX and is quoted in publications under “PplFnMS”. The following table sets forth the
high and low sale prices of the Company’s common stock as reported on the NASDAQ Stock Market.
Year
2016
2015
Quarter
1st
2nd
3rd
4th
1st
2nd
3rd
4th
$
$
High
9.50
11.26
11.41
16.40
12.44
10.99
11.15
9.85
Dividend per share
$
$
$
$
Low
8.53
8.90
10.23
10.50
10.00
9.21
9.31
8.90
Performance Graph
The graph below compares the Company’s annual percentage change in cumulative total shareholder return on common shares over the
last five years with the cumulative total return of a broad equity market index of companies, the NASDAQ Market Index, and a peer group
consisting of the Morningstar Industry Group, Regional - Southeast Banks (“Morningstar”). This presentation assumes $100 was invested in
shares of the relevant issuers on January 1, 2012, and that dividends received were immediately invested in additional shares. The graph plots
the value of the initial $100 investment at one year intervals. For purposes of constructing this data, the returns of each component issuer have
Comparison of 5 Year Cumulative Total Return
been weighted according to that issuer’s market capitalization.
Assumes Initial Investment of $100
December 2016
Comparison of 5 Year Cumulative Total Return
Assumes Initial Investment of $100
300.00
250.00
200.00
150.00
100.00
50.00
0.00
2011
2012
2013
2014
2015
2016
Peoples Financial Corporation
NASDAQ Composite-Total Returns
Morningstar Group Index
37
P E O P L E S F I N A N C I A L C O R P O R A T I O N A N D S U B S I D I A R I E S
C O R P O R AT E I N F O R M AT I O N
Corporate Office
Mailing Address
P. O. Box 529
Biloxi, MS 39533-0529
Physical Address
Shareholder Information
For investor relations and general information about Peoples
Financial Corporation:
Paul D. Guichet, Vice-President
The Peoples Bank, Biloxi, Mississippi
P.O. Box 529, Biloxi, MS 39533-0529
152 Lameuse Street Biloxi, MS 39530
(228) 435-8761
(228) 435-8205
Website
www.thepeoples.com
Corporate Stock
e-mail: investorrelations@thepeoples.com
For information about the common stock of Peoples
Financial Corporation, including dividend reinvestment and
other transfer agent inquiries:
Asset Management and Trust Services Department
The common stock of Peoples Financial Corporation is
The Peoples Bank, Biloxi, Mississippi
traded on the NASDAQ Capital Market under the symbol:
P.O. Box 1416, Biloxi, MS 39533-1416
PFBX.
The current market makers are:
(228) 435-8208
e-mail: investorrelations@thepeoples.com
FIG Partners LLC
Hovde Capital Advisors
Knight Equity Markets, L.P.
Raymond James Financial, Inc.
Sterne, Agee & Leach, Inc.
Stifel Nicolaus & Co.
Independent Registered Public Accounting Firm
Porter Keadle Moore, LLC
Atlanta, Georgia
S.E.C. Form 10-K Requests
A copy of the Annual Report on Form 10-K, as filed with
the Securities and Exchange Commission, may be obtained
without charge by directing a written request to:
Lauri A. Wood, Chief Financial Officer and Controller
Peoples Financial Corporation
P. O. Box 529, Biloxi, Mississippi 39533-0529
(228) 435-8412
e-mail: lwood@thepeoples.com
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P E O P L E S F I N A N C I A L C O R P O R A T I O N A N D S U B S I D I A R I E S
B R A N C H L O C AT I O N S
The Peoples Bank, Biloxi, Mississippi
BILOXI BRANCHES
Main
OTHER BRANCHES
Bay St. Louis
152 Lameuse Street, Biloxi, Mississippi 39530
408 Highway 90 East, Bay St. Louis, Mississippi 39520
(228) 435-5511
(228) 897-8710
Asset Management and Trust Department
Diamondhead
Personal and Corporate Trust Services
5429 West Aloha Drive, Diamondhead, Mississippi 39525
758 Vieux Marche, Biloxi, Mississippi 39530
(228) 897-8714
(228) 435-8208
Cedar Lake
D’Iberville - St. Martin
10491 Lemoyne Boulevard, D’Iberville, Mississippi 39540
1740 Popps Ferry Road, Biloxi, Mississippi 39532
(228) 435-8202
(228) 435-8688
Keesler Air Force Base
1507 Meadows Drive
Keesler AFB, MS 39534
(228) 435-8690
Gautier
2609 Highway 90, Gautier, Mississippi 39553
(228) 497-1766
Long Beach
298 Jeff Davis Avenue, Long Beach, Mississippi 39560
West Biloxi
(228) 897-8712
2560 Pass Road, Biloxi, Mississippi 39531
(228) 435-8203
Ocean Springs
GULFPORT BRANCHES
Armed Forces Retirement Home
2015 Bienville Boulevard, Ocean Springs, Mississippi 39564
(228) 435-8204
1800 Beach Drive, Gulfport, Mississippi 39507
Pass Christian
(228) 897-8724
301 East Second Street, Pass Christian, Mississippi 39571
Downtown Gulfport
1105 30th Avenue, Gulfport, Mississippi 39501
Saucier
(228) 897-8719
(228) 897-8715
17689 Second Street, Saucier, Mississippi 39574
Handsboro
0412 E. Pass Road, Gulfport, Mississippi 39507
Waveland
(228) 897-8716
(228) 897-8717
470 Highway 90, Waveland, Mississippi 39576
Orange Grove
12020 Highway 49 North, Gulfport, Mississippi 39503 Wiggins
(228) 467-7257
(228) 897-8718
1312 S. Magnolia Drive, Wiggins, Mississippi 39577
(228) 897-8722
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P E O P L E S F I N A N C I A L C O R P O R A T I O N A N D S U B S I D I A R I E S
B O A R D O F D I R E C T O R S A N D E X E C U T I V E O F F I C E R S
BOAR D OF DI RE CTORS
Peoples Financial Corporation
Chevis C. Swetman, Chairman of the Board
Dan Magruder, Vice-Chairman, Retired Business Executive
Drew Allen, President, Allen Beverages, Inc.
Rex E. Kelly, Principal, Strategic Communications
Jeffrey H. O’Keefe, President, Bradford-O’Keefe Funeral Homes, Inc.
OFFI CE RS
Peoples Financial Corporation
Chevis C. Swetman, President and Chief Executive Officer
A. Wes Fulmer, Executive Vice-President
Ann F. Guice, First Vice-President
J. Patrick Wild, Second Vice-President
Evelyn R. Herrington, Vice-President and Secretary
Lauri A. Wood, Chief Financial Officer and Controller
BOA RD OF DIR EC TO RS
The Peoples Bank, Biloxi, Mississippi
Chevis C. Swetman, Chairman
Liz Corso Joachim, Vice-Chairperson, President, Frank P. Corso, Inc.
Drew Allen, President, Allen Beverages, Inc.
A. Wes Fulmer, Executive Vice-President, Peoples Financial Corporation
and The Peoples Bank, Biloxi, Mississippi
Rex E. Kelly, Principal, Strategic Communications
Dan Magruder, Retired Business Executive
Jeffrey H. O’Keefe, President, Bradford-O’Keefe Funeral Homes, Inc.
SENI OR MANAGEM ENT
The Peoples Bank, Biloxi, Mississippi
Chevis C. Swetman, President and Chief Executive Officer
A. Wes Fulmer, Executive Vice-President
Lauri A. Wood, Senior Vice-President and Cashier
Ann F. Guice, Senior Vice-President
J. Patrick Wild, Senior Vice-President
Evelyn R. Herrington, Senior Vice-President
40