To Our Shareholders,
We are extremely pleased with our financial results for 2017, our second consecutive year of
profitability. A variety of factors contributed to our financial progress including impressive growth
in non-interest income of 6% and significant asset quality improvement as loan recoveries increased
by 142%, loan charge-offs decreased by 92%, and the provision for loan losses was reduced 80%.
Additionally, during 2017 the company continued to expand initiatives designed to enhance
service to our customers and further increase operational efficiencies. Several of these initiatives
included enhancements to our mobile app, technology advancements, and implementing advanced
cybersecurity systems.
In December of 2017, the board of directors of Peoples Financial Corporation appointed two new
directors to the board of The Peoples Bank; Mr. Ron G. Barnes, President and Chief Executive
Officer of Coast Electric Power Association, has over 22 years of service in the utility industry.
Coast Electric is headquartered in Hancock County and provides power to approximately 80,000
homes and businesses along the Mississippi Gulf Coast. Also appointed to the bank board was
Ms. Paige R. Riley, a life-long resident of the Mississippi Gulf Coast and owner of the highly
successful Hillyer House gallery, a nationally recognized award winning gallery featuring exceptional
works of art from local, regional and national artists.
For over 121 years, our culture has focused on providing a variety of banking and financial services
and exceptional service to our customers. Our board of directors and employees are devoted to
continuing our legacy of service and contributing to the prosperity of the Mississippi Gulf Coast.
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, 2017, 2016 and 2015. 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 2017, 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.
GAAP Reconciliation and Explanation
This report contains non-GAAP financial measures determined by methods other than in accordance with GAAP. Such non-
GAAP financial measures include taxable equivalent interest income and taxable equivalent net interest income. Management
uses these non-GAAP financial measures because it believes they are useful for evaluating our operations and performance over
periods of time, as well as in managing and evaluating our business and in discussions about our operations and performance.
Management believes these non-GAAP financial measures provide users of our financial information with a meaningful measure
for assessing our financial results, as well as comparison to financial results for prior periods. These non-GAAP financial measures
should not be considered as a substitute for operating results determined in accordance with GAAP and may not be comparable
to other similarly titled financial measures used by other companies. A reconciliation of these operating performance measures to
GAAP performance measures for the years ended December 31, 2017, 2016 and 2015 is included in the table below.
RECONCILIATION OF NON-GAAP PERFORMANCE MEASURES (IN THOUSANDS)
Years ended December 31,
Interest income reconciliation:
Interest income - taxable equivalent
Taxable equivalent adjustment
Interest income (GAAP)
Net interest income reconciliation:
Net interest income - taxable equivalent
Taxable equivalent adjustment
Net interest income (GAAP)
$ 19,048
(545)
$ 18,503
$ 17,625
(545)
$ 17,080
2017
$ 19,121
(628)
$ 18,493
$ 18,096
(628)
$ 17,468
$ 19,969
(658)
$ 19,311
$ 19,094
(658)
$ 18,436
2016
2015
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 $2,758,000 for 2017 compared with net income of $167,000 for 2016 and a net loss of
$4,592,000 for 2015. Results in 2017 were significantly impacted by the continuing decrease in the provision for the allowance
for loan losses, a non-recurring gain from the redemption of death benefits on bank owned life insurance and a tax benefit.
2
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.
Managing the net interest margin in the Company’s highly competitive market continues to be very challenging. While the
decrease in interest and fees on loans of $1,262,000 was offset by an increase on interest and dividends on securities of
$1,130,000, net interest income was also impacted by the increase in interest expense of $398,000 for 2017 as compared with
2016. The increase in interest expense on deposits resulted from the increase in cost of funds during 2017. 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 $620,000 for 2016 as compared with 2015.
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 $13,810,000, $11,854,000 and $15,186,000 at December 31, 2017, 2016 and 2015,
respectively. Most of these loans are collateral-dependent, and the Company has rigorously evaluated the value of its collateral
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 $116,000, $568,000 and
$2,582,000 for 2017, 2016 and 2015, respectively.
Non-interest income increased $416,000 for 2017 as compared with 2016 and decreased $349,000 for 2016 as compared with
2015. Results for 2017 included a non-recurring gain of $429,000 from the redemption of death benefits on bank owned life
insurance. Results in 2016 included a decrease in service charges on deposit accounts of $500,000 for 2016 as compared with
2015 primarily as a result of decreased ATM fee income.
Non-interest expense decreased $953,000 for 2017 as compared with 2016 and decreased $4,902,000 for 2016 as compared
with 2015. The decrease for 2017 was primarily the result of a decrease in net occupancy of $202,000 and the decrease in FDIC
and state banking assessments of $477,000. 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 in 2016 but results for 2015 were impacted by a write-down of $1,695,000 from the credit impairment of a
municipal security.
In 2017, the Company recorded an income tax benefit as a result of the release of a part of its valuation allowance on deferred
assets and the correction of refunds for prior years. Income tax expense in 2016 related to the resolution of an examination by
the Internal Revenue Service. The income tax benefit for 2015 related to change in the valuation allowance.
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.
2017 as compared with 2016
The Company’s average interest-earning assets increased approximately $1,687,000, or .28%, from approximately $598,682,000
for 2016 to approximately $600,369,000 for 2017. Average loans decreased approximately $37,490,000 due to principal payments,
maturities, charge-offs and foreclosures on existing loans significantly exceeding new loans. Average taxable held to maturity
securities increased approximately $20,827,000 and average taxable available for sale securities increased approximately
$28,547,000 as funds not needed for liquidity and lending needs were invested in securities. The average yield on interest-earning
assets was 3.19% for 2016 compared with 3.17% for 2017. The yield on average loans increased from 4.34% for 2016 to 4.47%
for 2017 as a result of the increase in prime rate during 2016 and 2017. The yield on taxable held to maturity securities increased
from 2.15% for 2016 to 2.56% for 2017 and taxable available for sale securities increased from 1.36% for 2016 to 1.52% for 2017
as the Company changed its investment strategy to improve yield while not compromising duration and credit risk.
Average interest-bearing liabilities decreased approximately $8,058,000, or 2%, from approximately $445,685,000 for 2016 to
approximately $437,627,000 for 2017. Average borrowings from the Federal Home Loan Bank (“FHLB”) decreased due to the
reduced liquidity needs of the bank subsidiary. The average rate paid on interest-bearing liabilities increased 10 basis points, from
.23% for 2016 to .33% for 2017. The increase was the result of time deposit rates increasing in our trade area and the Company
paying off lower rate borrowings from the FHLB.
The Company’s net interest margin on a tax-equivalent basis, which is net interest income as a percentage of average earning
assets, was 3.02% for 2016 as compared with 2.94% for 2017.
3
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% for 2016 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 investment purchases had 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 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.
The tables below analyze the changes in tax-equivalent net interest income for the years ended December 31, 2017, 2016 and 2015.
ANALYSIS OF AVERAGE BALANCES, INTEREST EARNED/PAID AND YIELD (IN THOUSANDS)
2017
2016
2015
Average
Balance Earned/Paid Rate
Interest
Average
Balance Earned/Paid Rate
Interest
Average
Balance Earned/Paid Rate
Interest
$ 290,329
$ 12,970
4.47%
$ 327,819
$ 14,232
4.34%
$ 356,294
$ 14,759
4.14%
27,819
420
1.51%
31,559
277
0.88%
11,221
63
0.56%
29,389
19,082
753
717
2.56%
3.76%
217,059
15,677
1,014
3,298
864
26
1.52%
5.51%
2.56%
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%
Loans (1) (2)
Balances due from
depository institutions
Held to maturity:
Taxable
Non taxable (3)
Available for sale:
Taxable
Non taxable (3)
Other
Total
$ 600,369
$ 19,048
3.17%
$ 598,682
$ 19,121
3.19%
$ 600,280
$ 19,969
3.33%
Savings and
interest-bearing DDA
Time deposits
Borrowings from FHLB
$ 353,352
82,038
2,237
$ 739
637
47
0.21%
0.78%
2.10%
$ 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%
Total
$ 437,627
$ 1,423
0.33%
$ 445,685
$ 1,025
0.23%
$ 450,224
$ 875
0.19%
Net tax-equivalent spread
Net tax-equivalent margin
on earning assets
2.84%
2.94%
2.97%
3.02%
3.14%
3.18%
(1) Loan fees of $338, $389 and $333 for 2017, 2016 and 2015, 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 2017, 2016 and 2015. See disclosure of Non-
GAAP financial measures on page 2.
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
Total
Interest paid on:
Savings and interest-bearing DDA
Time deposits
Borrowings from FHLB
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
For the Year Ended
December 31, 2017 Compared With December 31, 2016
Rate
Rate/Volume
Total
$ 413
199
35
11
306
29
23
$ 1,016
$ 315
146
42
$ 503
$ (47)
(23)
86
47
(7)
(9)
$ 47
$ (5)
8
(31)
$ (28)
$ (1,262)
143
569
(8)
740
(259)
4
$ (73)
$ 302
180
(84)
$ 398
For the Year Ended
December 31, 2016 Compared With December 31, 2015
Rate
Rate/Volume
Total
$ 709
35
$ (56)
65
$ (527)
214
1
53
(675)
153
9
13
6
(15)
(38)
(2)
175
125
(620)
(215)
Volume
$ (1,628)
(33)
448
(19)
387
(281)
(10)
$ (1,136)
$ (8)
26
(95)
$ (77)
Volume
$ (1,180)
114
161
66
70
(330)
(7)
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
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
$13,810,000, $11,854,000 and $15,186,000 with specific reserves on these loans of $1,125,000, $303,000 and $1,697,000 as of
December 31, 2017, 2016 and 2015, 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 $116,000, $568,000 and $2,582,000 in 2017, 2016 and 2015, respectively. As a result of receiving new information and
updated appraisals on several collateral-dependent loans, the Company increased the provision for several loans in its real estate,
mortgage portfolio in 2017. This increase was partially offset by a large recovery in its residential and land development portfolio
during the year. As a result of receiving new information and updated appraisals on several collateral-dependent loans, the Company
increased its provision for loan losses during 2016 and 2015. The new appraisals caused Management to update the evaluation of
these loans and increase the loan loss provision 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 2.19%, 1.73% and 2.39% at
December 31, 2017, 2016 and 2015, respectively. The Company believes that its allowance for loan losses is appropriate as of
December 31, 2017.
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
2017 as compared with 2016
Total non-interest income increased $416,000 in 2017 as compared with 2016. This increase was primarily a result of the gain
of $429,000 from the redemption of death benefits on bank owned life insurance in 2017. Income from other investments
increased $93,000 in 2017 as compared with 2016 as operations of an investment in a low income housing partnership improved
as a result of increased occupancy. These increases were partially offset by a decrease in other income as 2016 results included
a gain of $88,000 from bank premises.
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.
Non-interest Expense
2017 as compared with 2016
Total non-interest expense decreased $953,000 in 2017 as compared with 2016. Salaries and employee benefits decreased
$139,000 primarily as a result of decreased health insurance costs due to decreased claims. Net occupancy costs decreased
6
$202,000 as liability insurance premiums decreased $125,000 as the Company reduced some of its coverage and as
telecommunications costs decreased $81,000 as the Company eliminated some redundant resources. FDIC and state banking
assessments decreased $477,000 as the regulators decreased the premiums for deposit insurance in 2017.
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.
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.
Income Taxes
The Company recognized an income tax benefit of $1,080,000 and $762,000 in 2017 and 2015, respectively, and income tax
expense of $78,000 in 2016. During 2014, Management established a valuation allowance against its net deferred tax asset of
approximately $8,140,000. As of December 31, 2017, the valuation allowance is still in place. The 2017 benefit was the result
of the impact of the elimination of alternative minimum tax credit carryforwards from new tax legislation and the correction of
refunds for prior years. 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 decreased $15,835,000 at December 31, 2017, compared with December 31, 2016 due to the bank
subsidiary’s reduced liquidity needs.
Available for sale securities increased $12,086,000 and held to maturity securities increased $3,013,000 at December 31, 2017
compared with December 31, 2016 as the Company invested some of its excess funding not currently needed for loans in order
to improve earnings.
Loans decreased $34,906,000 at December 31, 2017 compared with December 31, 2016, as principal payments, maturities,
charge-offs and foreclosures on existing loans exceeded new loans.
Total deposits decreased $45,446,000 at December 31, 2017, as compared with December 31, 2016. 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. Savings and demand, interest bearing balances specifically decreased $46,697,000 at December 31, 2017 as one
public customer transferred a large balance to another financial institution.
Borrowings from the FHLB increased $4,941,000 at December 31, 2017 as compared with December 31, 2016 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 2017 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.
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
7
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 2018.
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 $50,538 - 2017;
$46,935 - 2016; $19,220 - 2015
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, 5,083,186 shares issued and outstanding at
December 31, 2017 and 5,123,186 shares issued and
outstanding at December 31, 2016 and 2015
Surplus
Undivided profits
Accumulated other comprehensive income (loss), net of tax
Total shareholders’ equity
2017
2016
2015
$ 25,281
245,664
$ 41,116
233,578
$ 31,396
202,807
51,163
2,735
1,370
280,449
6,153
274,296
20,153
8,232
1,904
18,301
1,325
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
$ 650,424
$ 688,014
$ 641,004
$ 127,274
318,278
43,991
40,027
529,570
11,198
18,370
1,787
560,925
5,083
65,780
21,563
(2,927)
89,499
$ 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
Total liabilities and shareholders’ equity
$ 650,424
$ 688,014
$ 641,004
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
2017
2016
2015
$ 12,970
$ 14,232
$ 14,759
(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
1,602
531
1,320
1,634
26
420
18,503
1,376
47
1,423
17,080
116
Net interest income after provision for allowance for loan losses
16,964
Non-interest income:
Trust department income and fees
Service charges on deposit accounts
Gain on liquidation, sales and calls of securities
Income (loss) on other investments
Increase in cash surrender value of life insurance
Gain from death benefits from 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.
1,689
3,732
134
42
458
429
481
6,965
10,949
2,121
3,006
6,175
22,251
1,678
(1,080)
$ 2,758
$ .54
$ .01
10
1,133
872
600
1,325
53
278
18,493
894
131
1,025
17,468
568
16,900
1,614
3,763
158
(51)
406
659
6,549
11,088
2,323
2,954
6,839
23,204
245
78
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)
$ 167
$ .03
$
$ (4,592)
$ (.90)
$
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 INCOME (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 for the year ended December 31, 2015
Reclassification adjustment for realized gains on available
for sale securities called or sold in current year, net of
tax of $3 for the year ended December 31, 2015
Gain (loss) from unfunded post-retirement benefit
obligation, net of tax of $372 for the year ended
December 31, 2015
Total other comprehensive income (loss)
2017
$ 2,758
2016
2015
$ 167
$ (4,592)
127
(3,345)
762
(134)
(158)
(5)
(1,160)
(1,167)
(42)
(3,545)
723
1,480
Total comprehensive income (loss)
$ 1,591
$ (3,378)
$ (3,112)
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, 2015
5,123,186
$ 5,123
Net loss
Other comprehensive income
Surplus
$ 65,780
Accumulated
Other
Undivided Comprehensive
Income (Loss)
Profits
Total
$ 23,743
(4,592)
$ 305
$ 94,951
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
Balance, December 31, 2016
5,123,186
5,123
65,780
Net income
Retirement of stock
Cash dividend ($.01 per share)
Other comprehensive loss
(40,000)
(40)
167
167
(3,545)
(3,545)
19,318
2,758
(462)
(51)
(1,760)
88,461
2,758
(502)
(51)
(1,167)
(1,167)
Balance, December 31, 2017
5,083,186
$ 5,083
$ 65,780
$ 21,563
$ (2,927)
$ 89,499
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
(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
(Income) loss from other investments
Gain from death benefits from life insurance
Amortization of available for sale securities
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
(Purchase) redemption of Federal Home Loan Bank Stock
Proceeds from sales of other real estate
Loans, net change
Acquisition of premises and equipment
Investment in cash surrender value of life insurance
Proceeds from death benefits from 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
Retirement of stock
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
See Notes to Consolidated Financial Statements.
2017
2016
2015
$ 2,758
$
167
$
(4,592)
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
9,720
31,396
41,116
$
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
$
1,914
116
460
101
(42)
(429)
287
253
(134)
(458)
(49)
(537)
717
4,957
71,315
(83,561)
7,725
(10,991)
(831)
1,666
33,531
(423)
(94)
1,929
20,266
(51,804)
6,358
(51)
(502)
131,500
(126,559)
(41,058)
(15,835)
41,116
$ 25,281
13
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 May 2014, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2014-09, Revenue
from Contracts with Customers (Topic 606). This ASU prescribes the process related to the recognition of revenue to depict the transfer of
promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for
those goods or services. ASU 2014-09 became effective on January 1, 2018 for the Company. As most of the Company’s revenue streams are
excluded from the scope of the update, the adoption of this ASU will not have a material effect on the Company’s financial position, results
of operations or cash flows.
In June 2016, the 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. 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 January 2017, the FASB issued ASU 2017-03, Accounting Changes and Error Corrections (Topic 250) and Investments – Equity Method
and Joint Ventures (Topic 323): Amendments to SEC Paragraphs Pursuant to Staff Announcements at the September 22, 2016 and November
17, 2016 EITF Meetings. ASU 2017-03 incorporates into the Accounting Standards Codification recent SEC guidance about disclosing the
effect on financial statements of adopting the revenue, leases and credit losses standards. This update is effective upon issuance. 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 February 2017, the FASB issued ASU 2017-05, Other Income – Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic
610-20): Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets. ASU 2017-05
conforms the derecognition guidance on nonfinancial assets with the model for transactions in the new revenue standard. 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 March 2017, the FASB issued ASU 2017-07, Compensation – Retirement Benefits (Topic 715): Improving the Presentation of Net
Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. ASU 2017-07 amends the requirements related to the income statement
presentation of the components of net periodic benefit cost for an entity’s sponsored defined benefit pension and other postretirement plans.
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 March 2017, the FASB issued ASU 2017-08, Receivables – Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization
on Purchased Callable Debt Securities. ASU 2017-08 shortens the amortization period for the premium on such securities to the earliest
call date. This update will be effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018.
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 November 2017, the FASB issued ASU 2017-14, Income Statement – Reporting Comprehensive Income (Topic 220), Revenue Recognition
(Topic 605), and Revenue from Contracts with Customers (Topic 606). ASU 2017-14 brings existing SEC staff guidance into conformity
with the FASB’s adoption of amendments to Topic 606. 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 February 2018, the FASB issued ASU 2018-02, Income Statement – Reporting Comprehensive Income (Topic 220). ASU 2018-02 allows
a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts
and Jobs Act. This update will be effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018.
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 $564,000, $4,240,000 and $2,084,000 for the years ending December 31, 2017, 2016 and
2015, 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
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.
15
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, 2017.
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
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
16
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 5,123,076
in 2017 and 5,123,186 in 2016 and 2015.
Accumulated Other Comprehensive Income (Loss)
At December 31, 2017, 2016 and 2015, 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.
Statements of Cash Flows
The Company has defined cash and cash equivalents to include cash and due from banks. The Company paid $1,420,399, $1,020,177 and
$874,890 in 2017, 2016 and 2015, respectively, for interest on deposits and borrowings. Income tax payments totaled $78,435 in 2016. Loans
transferred to other real estate amounted to $1,946,045, $1,903,427 and $7,502,496 in 2017, 2016 and 2015, 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.
17
NOTE B – SECURITIES :
The amortized cost and fair value of securities at December 31, 2017, 2016 and 2015, respectively, are as follows (in thousands):
December 31, 2017:
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
Total held to maturity securities
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
Amortized Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
$ 0
96
292
388
$ (2,176)
(158)
(1,042)
(3,376)
$ 388
$ (3,376)
$ 0
227
$ 227
$ 39
58
74
450
621
$ (302)
(550)
$ (852)
$ (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
$ (16)
(11)
$ (27)
$ 124,820
19,989
89,207
14,178
248,194
458
$ 248,652
$ 8,185
42,978
$ 51,163
$ 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
18
Fair Value
$ 122,644
19,831
88,261
14,470
245,206
458
$ 245,664
$ 7,883
42,655
$ 50,538
$ 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
The amortized cost and fair value of debt securities at December 31, 2017, (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
$ 47,862
88,005
22,787
333
89,207
$ 248,194
$ 694
14,336
20,555
15,578
$ 51,163
Fair Value
$ 47,725
86,907
21,961
352
88,261
$ 245,206
$ 693
14,296
20,235
15,314
$ 50,538
Available for sale and held to maturity securities with gross unrealized losses at December 31, 2017, 2016 and 2015, 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, 2017:
U.S. Treasuries
U.S. Government agencies
Mortgage-backed securities
States and political subdivisions
Total
December 31, 2016:
U.S. Treasuries
U.S. Government agencies
Mortgage-backed securities
States and political subdivisions
Corporate bond
Total
Fair Value
$ 49,586
8,145
60,230
11,552
$ 129,513
$ 97,634
24,478
37,663
24,627
Gross
Unrealized
Losses
$ 364
37
415
168
$ 984
$ 2,091
521
1,305
926
$ 184,402
$ 4,843
December 31, 2015:
U.S. Treasuries
U.S. Government agencies
Mortgage-backed securities
States and political subdivisions
Corporate bond
Total
$ 39,889
14,894
16,557
2,225
1,507
$ 75,072
$ 111
87
131
8
11
$ 348
Fair Value
$ 73,0580
14,567
13,492
7,010
$ 108,127
Gross
Unrealized
Losses
$ 1,812
423
627
382
$ 3,244
$ 0
$ 0
589
1,462
$ 2,051
1
2
$ 3
$ 0
12,581
$ 0
392
1,362
8
$ 13,943
$ 400
Fair Value
$ 122,644
22,712
73,722
18,562
$ 237,640
$ 97,634
24,478
37,663
25,216
1,462
$ 186,453
$ 39,889
27,475
16,557
3,587
1,507
$ 89,015
Gross
Unrealized
Losses
$ 2,176
460
1,042
550
$ 4,228
$ 2,091
521
1,305
927
2
$ 4,846
$ 111
479
131
16
11
$ 748
At December 31, 2017, 25 of the 25 securities issued by the U.S. Treasury, 5 of the 6 securities issued by U.S. Government agencies, 27 of the 35
mortgage-backed securities, and 53 of the 148 securities issued by states and political subdivisions 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 2017 and 2016, payments were
received from the municipality which resulted in the Company recognizing a gain of $20,000 and $53,861, respectively.
19
Proceeds from sales of available for sale debt securities were $30,748,797, $29,641,206 and $5,007,993 during 2017, 2016 and 2015,
respectively. Available for sale debt securities were sold and called for realized gains of $133,986, $157,925 and $7,993 during 2017, 2016 and
2015, respectively.
Securities with a fair value of $196,702,218, $180,659,168 and $168,724,920 at December 31, 2017, 2016 and 2015, 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, 2017, 2016 and 2015 is as follows (in thousands):
December 31,
Gaming
Residential and land development
Real estate, construction
Real estate, mortgage
Commercial and industrial
Other
Total
2017
$ 26,142
263
31,947
189,201
26,360
6,536
$ 280,449
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
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
2017
$ 6,658
907
(1,022)
$ 6,543
2016
$ 7,608
312
(1,262)
$ 6,658
2015
$ 7,760
3,958
(4,110)
$ 7,608
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
2017
$ 26,142
34,882
14,597
2016
$ 31,311
40,319
14,461
2015
$ 31,655
39,460
14,526
The age analysis of the loan portfolio, segregated by class of loans, as of December 31, 2017, 2016 and 2015 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
$ 0
$ 0
$ 0
$ 0
December 31, 2017:
Gaming
Residential and land development
Real estate, construction
Real estate, mortgage
Commercial and industrial
Other
Total
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
747
5,321
375
26
$ 6,469
121
790
2
3
$ 916
$ 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
522
4,884
2,344
$ 7,750
$ 0
291
1,082
4,471
8
80
$ 5,932
$ 0
323
1,346
1,352
237
$ 26,142
263
30,557
178,206
23,639
6,507
$ 265,314
$ 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
$ 26,142
263
31,947
189,201
26,360
6,536
$ 280,449
$ 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
$ 0
$ )
$ 0
$ )
$ 0
146
$ 146
1,390
10,995
2,721
29
$ 15,135
$ 0
291
2,200
11,002
875
160
$ 14,528
$ 0
323
2,645
12,119
1,474
67
$ 16,628
$ 4,152
$ 3,258
20
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, 2017, 2016 and 2015 is as follows (in
thousands):
A, B or C
S
D
E
F
Total
Loans With A Grade Of:
December 31, 2017:
Gaming
Residential and land development
Real estate, construction
Real estate, mortgage
Commercial and industrial
Other
Total
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
$ 26,142
$
$
30,412
148,284
23,133
6,516
$ 234,487
11,550
$ 11,550
358
19,606
265
16
$ 20,245
$ 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
$
263
1,177
9,761
2,962
4
$ 14,167
$
291
1,597
9,949
562
5
$ 12,404
$ 31,655
610
31,935
167,286
24,466
7,114
$ 263,066
$
$
$
16,678
15,007
1
$ 31,686
883
23,686
2,368
35
$ 26,972
323
2,596
12,275
639
$ 15,833
$
$
$
$
$
$
$ 26,142
263
31,947
189,201
26,360
6,536
$ 280,449
$ 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
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, 2017, 2016 and 2015 are as follows (in thousands):
December 31,
Residential and land development
Real estate, construction
Real estate, mortgage
Commercial and industrial
Other
Total
2017
$ 263
1,177
9,548
2,818
4
$ 13,810
2016
$ 291
1,598
9,445
515
5
$ 11,854
2015
$ 323
2,523
11,759
581
$ 15,186
Prior to 2015, certain loans were modified by granting interest rate concessions to these customers with such loans being classified as
troubled debt restructurings. During 2017, 2016 and 2015, the Company did not restructure any additional loans. Specific reserves of
$86,000, $100,000 and $107,000 have been allocated to troubled debt restructurings as of December 31, 2017, 2016, and 2015, respectively.
The Bank had no commitments to lend additional amounts to customers with outstanding loans classified as troubled debt restructurings
as of December 31, 2017, 2016 and 2015.
21
Impaired loans, which include loans classified as nonaccrual and troubled debt restructurings, segregated by class of loans, as of December
31, 2017, 2016 and 2015 were as follows (in thousands):
Unpaid
Principal Balance
Recorded
Investment
Related
Allowance
Average
Recorded
Investment
Interest
Income
Recognized
December 31, 2017:
With no related allowance recorded:
Real estate, construction
Real estate, mortgage
Commercial and industrial
Other
Total
With a related allowance recorded:
Residential and land development
Real estate, construction
Real estate, mortgage
Commercial and industrial
Total
Total by class of loans:
Residential and land development
Real estate, construction
Real estate, mortgage
Commercial and industrial
Other
Total
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
$
967
8,025
884
4
9,880
263
210
2,672
1,934
5,079
263
1,177
10,697
2,818
4
$ 14,959
$ 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
$
40
105
725
342
1,212
40
105
725
342
$ 1,212
$
$
$
66
141
195
1
403
66
141
195
1
403
109
252
1,443
1,804
109
252
1,443
$ 1,804
$ 1,024
8,654
916
4
10,598
275
226
2,676
1,923
5,100
275
1,250
11,330
2,839
4
$ 15,698
$ 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
$
31
31
28
28
59
$
59
$
23
23
30
30
53
$
53
$
21
21
18
18
39
$
39
$ 1,441
8,920
922
4
11,287
263
210
3,556
1,934
5,963
263
1,651
12,476
2,856
4
$ 17,250
$ 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
22
Transactions in the allowance for loan losses for the years ended December 31, 2017, 2016 and 2015, and the balances of loans, individually
and collectively evaluated for impairment, as of December 31, 2017, 2016 and 2015 are as follows (in thousands):
Residential
and Land
Development
Real Estate, Real Estate,
Mortgage
Construction
Commercial
and
Industrial
Gaming
Other
Total
December 31, 2017:
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, 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
$
545
$
66
$
199
$
3,800
(8)
29
484
4,305
$
$
651
(36)
11
266
892
$
$
205
(235)
92
116
178
$ 5,466
(279)
850
116
6,153
$
32
(29)
202
$
(9)
$
536
$
686
(712)
40
$
$
40
$
536
$
$
$
$
105
$
1,082
$
636
$
6
$
1,869
97
$
3,223
$
256
$
172
$
4,284
$
$
263
$
1,536
$ 29,367
$ 3,228
$
18
$ 34,412
$ 26,142
$
$ 30,411
$ 159,834
$ 23,132
$
6,518
$ 246,037
$
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
23
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
2017
5,783
$
30,681
16,758
53,222
33,069
$ 20,153
$
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
NOTE E – OTHE R REAL ESTAT E :
The Company’s other real estate consisted of the following as of December 31, 2017, 2016 and 2015, respectively (in thousands except
number of properties):
2017
2016
2015
Construction, land development and other land
1-4 family residential properties
Nonfarm nonresidential
Total
NOTE F – DEPOSITS:
Number of
Properties
14
5
19
Balance
$ 6,670
1,562
$ 8,232
Number of
Properties
19
3
3
25
Balance
$ 7,658
202
653
$ 8,513
Number of
Properties
19
3
4
26
Balance
$ 8,792
368
756
$ 9,916
At December 31, 2017, the scheduled maturities of time deposits are as follows (in thousands):
2018
2019
2020
2021
2022
Total
$
$
53,797
24,780
2,061
1,498
1,882
84,018
Time deposits of $250,000 or more totaled approximately $20,494,000, $25,143,000 and $24,090,000 at December 31, 2017, 2016 and 2015,
respectively.
Deposits held for related parties amounted to $9,279,315, $17,713,230 and $7,640,079 at December 31, 2017, 2016 and 2015, respectively.
Overdrafts totaling $466,812, $800,557 and $663,511 were reclassified as loans at December 31, 2017, 2016 and 2015, respectively.
NOTE G – FEDER AL F UNDS P U R C HA SE D:
At December 31, 2017, 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, 2017, the Company was able to borrow up to $18,399,650 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, 2017.
At December 31, 2017, the Company had $11,197,954 outstanding in advances under a $63,980,560 line of credit with the FHLB. One
advance in the amount of $10,000,000 bears interest at 1.45% at December 31, 2017, and matures in 2018. 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.
24
NOTE I – INCOME TAXE S:
Deferred taxes (or deferred charges) as of December 31, 2017, 2016 and 2015, included in other assets, were as follows (in thousands):
December 31,
2017
2016
2015
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 carryforward
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
1,292
3,048
627
356
1,012
1,489
1,891
992
(7,934)
2,773
202
2,359
212
2,773
$
$
2017
(1,080)
$
4,023
(4,023)
$
$
$
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
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)
$
(1,080)
$
78
$
Income taxes amounted to less than the amounts computed by applying the U.S. Federal income tax rate of 34.0% for 2017, 2016 and 2015
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
Impact of tax rate change
Change in valuation allowance for
enacted change in tax rates
Realization of AMT credit
Other changes in valuation allowance
Total income tax (benefit) expense
2017
Tax
571
Rate
34
$
2016
Tax
83
Rate
34
$
2015
Tax
(1,820)
Rate
(34)
$
(362)
(302)
(298)
(656)
3,990
(22)
(18)
(18)
(39)
238
(3,990)
(742)
709
(1,080)
(238)
(44)
42
(65)
$
(417)
(144)
(298)
607
(170)
(59)
(121)
247
(447)
(166)
(298)
3
(8)
(3)
(6)
247
78
101
32
$
1,966
(762)
37
(14)
$
During 2017, the Company recorded an income tax benefit of $1,080,000. On December 22, 2017, the President signed into law The Tax
Cuts and Jobs Act (the “Act”). In addition to reducing U.S. corporate income tax rates from 34% to 21%, the Act repeals the alternative
minimum tax (“AMT”) regime for tax years beginning after December 31, 2017. For tax years beginning in 2018, 2019 and 2020, the AMT
credit carryforward can be utilized to offset regular tax with any remaining AMT carryforwards eligible for a refund of 50%. Any remaining
AMT credit carryforwards will become fully refundable beginning in the 2021 tax year. As a result, the Company has reclassified the AMT
credit carryforward to a tax receivable which resulted in a deferred tax benefit of $742,000. The Company also recorded a current tax benefit
of $338,000 to account for the carryback of general business tax credits to open tax years.
The Company also remeasured the net deferred tax asset and corresponding valuation allowance as a result of the Act. The impact was to
reduce the deferred tax asset and corresponding valuation allowance by $3,990,000.
25
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 $9,004,000 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.
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 unrealized gains on available for sale securities and the increase
in the unrecognized gain related to the post-retirement benefit obligation in accordance with the intra-period tax allocation rules as outlined
in Accounting Standards Codification Topic 740, Income Taxes.
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, 2017, $12,350,841 of undistributed earnings of the bank subsidiary included
in consolidated surplus and retained earnings was available for future distribution to the Company as dividends with regulatory approval.
Dividends paid by the Company are subject to the written approval of the Federal Reserve Bank (“FRB”).
On December 8, 2017, the Board approved the repurchase of up to 110,000 of the outstanding shares of the Company’s common stock. As a
result of this repurchase plan, 40,000 shares have been repurchased and retired through December 31, 2017.
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, 2017, 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 1.25% for 2017. 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.
26
The Company’s actual capital amounts and ratios and required minimum capital amounts and ratios for 2017, 2016 and 2015, are as follows
(in thousands):
December 31, 2017:
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, 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)
$
$
$
Amount
97,122
92,273
92,273
92,273
95,262
90,068
90,068
90,068
95,395
89,901
89,901
89,901
Actual
Ratio
25.12%
23.87%
23.87%
13.79%
22.94%
21.69%
21.69%
13.12%
21.83%
20.58%
20.58%
13.18%
For Capital Adequacy Purposes
Ratio
Amount
$
$
$
30,930
17,398
23,197
26,769
33,220
18,687
24,915
27,464
34,954
19,662
26,215
27,291
8.00%
4.50%
6.00%
4.00%
8.00%
4.50%
6.00%
4.00%
8.00%
4.50%
6.00%
4.00%
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 2017, 2016 and 2015, are as follows (in thousands):
Actual
Amount
Ratio
For Capital Adequacy Purposes To Be Well Capitalized
Ratio
Amount
Amount
Ratio
December 31, 2017:
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, 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)
$ 92,493
24.04%
$
30,778
8.00%
$ 38,473
10.00%
87,668
87,668
87,668
22.79%
22.79%
13.47%
17,313
23,084
26,031
4.50%
6.00%
4.00%
25,007
30,778
32,539
6.50%
8.00%
5.00%
$ 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%
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
$
$
$
$
2017
99
298
84
481
2017
538
1,289
424
422
740
582
307
1,873
6,175
27
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
$
$
$
$
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, 2017, 2016 and 2015, the Company had outstanding irrevocable letters of credit aggregating $154,308, $410,286 and
$1,919,678, respectively. At December 31, 2017, 2016 and 2015, the Company had outstanding unused loan commitments aggregating
$41,286,000, $42,401,431 and $41,935,725, respectively. Approximately $19,691,000, $16,476,000 and $11,335,000 of outstanding
commitments were at fixed rates and the remainder were at variable rates at December 31, 2017, 2016 and 2015, respectively.
N O T E M – CO NTINGE 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
$
85,543
1
742
3,213
89,499
2017
$
Liabilities and Shareholders’ Equity:
Other liabilities
Total liabilities
Shareholders’ equity
Total liabilities and shareholders’ equity
$
$
89,499
89,499
2017
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 income (loss)
Total income (loss)
Expenses
Other
Total expenses
Income (loss) before income taxes
Income tax benefit
Net income (loss)
1,250
1,592
47
2,889
131
131
2,758
2,758
$
$
28
$
$
$
$
$
2016
85,118
1
191
3,151
88,461
88,461
88,461
2016
75
247
(32)
290
123
123
167
$
$
$
$
$
2015
88,415
1
28
3,395
91,839
91,839
91,839
2015
(4,242)
(208)
(4,450)
142
142
(4,592)
$
167
$
(4,592)
$
2017
2,758
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:
Income (loss) from other investments
Undistributed (income) loss of subsidiaries
Other assets
Net cash provided by (used in) operating activities
Cash flows from investing activities:
Redemption of equity securities
Net cash provided by investing activities
Cash flows from financing activities:
Retirement of common stock
Dividends paid
Net cash used in financing activities
Net increase (decrease) in cash
Cash, beginning of year
Cash, end of year
(502)
(51)
(553)
551
191
742
(42)
(1,592)
(20)
1,104
$
2016
2015
$
167
$
(4,592)
51
(247)
(8)
(37)
200
200
218
4,242
(132)
163
28
191
$
(132)
160
28
$
N O T E O – EM P LOYE 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 $260,000, $276,000 and $260,000 in 2017,
2016 and 2015, respectively.
Compensation expense of $7,106,959, $7,804,295 and $7,576,755 was the basis for determining the ESOP contribution allocation to participants for
2017, 2016 and 2015, respectively. The ESOP held 270,455, 276,628 and 285,785 allocated shares at December 31, 2017, 2016 and 2015, 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 retirement from the board. 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 $16,222,847, $17,176,771 and $16,820,058 at
December 31, 2017, 2016 and 2015, respectively. The present value of accumulated benefits under these plans, using an interest rate of 4.25% in
2017 and 2016 and 4.50% in 2015, and the interest ramp-up method has been accrued. The accrual amounted to $12,628,641, $12,221,421 and
$11,813,343 at December 31, 2017, 2016 and 2015, 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 $1,605,421, $1,604,333 and $1,473,607 at December 31, 2017, 2016 and 2015,
respectively. The present value of accumulated benefits under these plans using an interest rate of 4.25% and the projected unit cost method
has been accrued. The accrual amounted to $1,573,004, $1,544,017 and $1,519,537 at December 31, 2017, 2016 and 2015, 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 $299,242,
$292,063 and $284,664 at December 31, 2017, 2016 and 2015, respectively. The present value of accumulated benefits under these plans
using an interest rate of 4.25% in 2017 and 2016 and 4.50% in 2015, and the projected unit cost method has been accrued. The accrual
amounted to $96,547, $88,798 and $82,202 at December 31, 2017, 2016 and 2015, 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 $173,892, $166,822 and $157,051 at December 31, 2017, 2016 and 2015, respectively.
The present value of accumulated benefits under these plans using an interest rate of 4.25% in 2017 and 2016 and 4.50% in 2015, and the
projected unit cost method has been accrued. The accrual amounted to $214,968, $216,020 and $212,662 at December 31, 2017, 2016 and
2015, respectively, and is included in Employee and director benefit plans liabilities.
29
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 age 60. 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 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.
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.
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)
2017
153
135
(81)
207
$
$
2016
93
101
(73)
(81)
40
$
$
2015
94
102
(44)
(82)
70
$
$
The discount rate used in determining the accumulated post-retirement benefit obligation was 3.60% in 2017, 4.00% in 2016 and 4.20% in 2015.
The assumed health care cost trend rate used in measuring the accumulated post-retirement benefit obligation was 6.00% in 2017. The rate was
assumed to decrease gradually to 4.50% for 2024 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, 2017, would be increased by 19.86%, 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 22.71%. If
the health care cost trend rate assumptions were decreased 1.00%, the accumulated post-retirement benefit obligation as of December 31, 2017,
would be decreased by 15.66%, 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 17.52%.
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):
2018
2019
2020
2021
2022
2023 – 2027
$ 77
49
68
95
106
987
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, 2016
Service cost
Interest cost
Actuarial loss
Benefits paid
Accumulated post-retirement benefit obligation as of December 31, 2017
$ 2,514
153
135
1,078
(48)
$ 3,832
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
2017
48
(48)
$
$
2016
75
(75)
$
$
Amounts recognized in the Accumulated Other Comprehensive Income (Loss), net of tax, were (in thousands):
For the year ended December 31,
2017
2016
Net gain
Prior service charge
Total accumulated other comprehensive income
$
$
11
622
633
$
$
723
676
1,399
30
2015
37
(37)
2015
697
730
1,427
$
$
$
$
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 loss
Amortization of prior service cost
Total accumulated other comprehensive loss
2017
1,079
81
1,160
$
$
The prior service credit that will be recognized in accumulated other comprehensive income during 2018 is $81,381.
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.
31
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 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, 2017, 2016 and 2015, were as follows (in thousands):
December 31, 2017:
U.S. Treasuries
U.S. Government agencies
Mortgage-backed securities
States and political subdivisions
Equity securities
Total
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
Total
$ 122,644
19,831
88,261
14,470
458
$ 245,664
$ 147,624
24,825
42,708
17,963
458
$ 233,578
$ 63,754
84,546
30,130
23,727
650
$ 202,807
Level 1
Fair Value Measurements Using
Level 2
Level 3
$
$
$
$
$
$
$ 122,644
19,831
88,261
14,470
458
$ 245,664
$ 147,624
24,825
42,708
17,963
458
$ 233,578
$
63,754
84,546
30,130
23,547
650
$ 202,627
$
$
$
$
$
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, 2017,
2016 and 2015 were as follows (in thousands):
December 31:
2017
2016
2015
$
Total
6,511
5,006
4,981
Level 1
Fair Value Measurements Using
Level 2
$
$
$
Level 3
6,511
5,006
4,981
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, 2017,
2016 and 2015 are as follows (in thousands):
December 31:
2017
2016
2015
$
Total
8,232
8,513
9,916
Level 1
Fair Value Measurements Using
Level 2
$
$
$
Level 3
8,232
8,513
9,916
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):
2015
7,646
7,502
(4,295)
(937)
9,916
Balance, beginning of year
Loans transferred to ORE
Sales
Writedowns
Balance, end of year
2017
8,513
1,946
(1,767)
(460)
8,232
2016
9,916
1,903
(2,524)
(782)
8,513
$
$
$
$
$
$
32
The carrying value and estimated fair value of financial instruments, by level within the fair value hierarchy, at December 31, 2017, 2016 and
2015, are as follows (in thousands):
Carrying Amount
Level 1
Level 2
Level 3
Total
Fair Value Measurements Using
December 31, 2017:
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, 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
$ 25,281
245,664
51,163
2,735
1,370
274,296
8,232
18,301
127,274
402,296
11,198
$ 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
$ 25,281
245,664
50,538
2,735
1,370
270,924
8,232
18,301
127,274
402,610
11,389
$
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
$ 25,281
2,735
127,274
$
245,664
50,538
1,370
18,301
11,389
$
270,924
8,232
402,610
$ 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
33
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 FIRM
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
FIVE-YEAR COMPARATIVE SUMMARY OF SELECTED FINANCIAL INFORMATION
(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)
2017
2016
2015
2014
2013
$ 650,424
$ 688,014
$ 641,004
$ 668,895
$ 762,264
245,664
51,163
280,449
529,570
11,198
89,499
233,578
202,807
215,122
48,150
315,355
575,016
6,257
88,461
19,025
337,557
512,707
18,409
91,839
17,784
362,407
516,920
38,708
94,951
275,440
11,142
375,349
568,197
77,684
99,147
$ 18,503
$
18,493
$
19,311
$
22,156
$ 24,956
1,423
17,080
116
16,964
6,965
22,251
1,678
(1,080)
$
2,758
$
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)
$
(4,592)
$
(10,004)
$
(538)
Per Share Data
Basic and diluted earnings per share
$
Dividends per share
Book value
.54
.01
17.84
$
.03
$
(.90)
$
(1.95)
$
(.10)
17.27
17.93
.10
18.53
19.35
Weighted average number of shares
5,123,076
5,123,186
5,123,186
5,123,186
5,128,889
Selected Ratios
Return on average assets
Return on average equity
0.41%
3.08%
.02%
.19%
(.69%)
(4.92%)
(1.38%)
(10.31%)
(.07%)
(.51%)
Primary capital to average assets
14.34%
13.99%
15.06%
14.38%
13.64%
Risk-based capital ratios:
Tier 1
Total
23.87%
25.12%
21.69%
22.94%
20.58%
21.83%
20.70%
21.95%
21.54%
22.79%
35
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
SUMMARY OF QUARTERLY RESULTS OF OPERATIONS AND MARKET INFORMATION
Summary of Quarterly Results of Operations (In thousands except per share data)
Quarter Ended, 2017
March 31
June 30
September 30
December 31
Interest income
Net interest income
Provision for loan losses
Income before income taxes
Net income
Basic and diluted earnings per share
Quarter Ended, 2016
Interest income
Net interest income
Provision for loan losses
Income (loss) before income taxes
Net income (loss)
Basic and diluted earnings (loss) per share
$
4,601
4,322
26
74
74
.01
$
March 31
4,780
4,538
113
76
76
.01
$
$
4,598
4,253
30
815
1,153
.23
June 30
4,550
4,283
24
139
61
.01
$
4,623
4,234
29
236
236
.05
September 30
4,593
4,326
$
406
406
.08
$
4,681
4,271
31
553
1,295
.25
$
December 31
4,570
4,321
431
(376)
(376)
(.07)
Market Information
The Company’s stock is traded under the symbol PFBX. Until December 15, 2017, the stock was traded on the NASDAQ Capital Market
(“NASDAQ”). To reduce costs, the Company delisted from NASDAQ and began trading on the OTCQX Best Market (“OTCQX”) on
December 18, 2017. As of January 31, 2018, there were approximately 445 holders of the Company’s common stock, which does not reflect
persons or entities that hold our common stock in nominee or “street’’ name through various brokerage firms. At that date, the Company had
5,083,186 shares of common stock issued and outstanding.
The following is a summary of the high and low bid prices of our common stock for the periods indicated as reported by NASDAQ for all
quarters in 2016 and 2017 and by OCTQX for the fourth quarter of 2017. The quotations reflect inter-dealer prices, without retail mark-up,
mark-down or commission and may not necessarily represent actual transactions.
Year
2017
2016
Quarter
1st
2nd
3rd
4th - NASDAQ
4th - OTCQX
1st
2nd
3rd
4th
$
$
High
16.35
15.27
14.95
15.30
13.25
9.50
11.26
11.41
16.40
Dividend per share
$
.01
$
$
$
Low
13.80
12.60
12.85
12.05
12.21
8.53
8.90
10.23
10.50
36
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
152 Lameuse Street
Biloxi, MS 39530
(228) 435-8205
Website
www.thepeoples.com
Corporate Stock
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
(228) 435-8761
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 Peoples Bank, Biloxi, Mississippi
The common stock of Peoples Financial Corporation is trad-
P.O. Box 1416, Biloxi, MS 39533-1416
ed on the OTCQX Best Market under the symbol: PFBX.
(228) 435-8208
e-mail: investorrelations@thepeoples.com
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
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
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; President and Chief Executive Officer, Peoples
Financial Corporation and The Peoples Bank, Biloxi, Mississippi
Dan Magruder, Vice-Chairman; Retired Business Executive
Drew Allen, President, Allen Beverages, Inc.
Rex E. Kelly, Principal, Strategic Communications
Jeffrey H. O’Keefe, Chairman, 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; President and Chief Executive Officer, Peoples
Financial Corporation and The Peoples Bank, Biloxi, Mississippi
Liz Corso Joachim, Vice-Chairperson; President, Frank P. Corso, Inc.
Drew Allen, President, Allen Beverages, Inc.
Ron Barnes, President and CEO, Coast Electric Power Association
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, Chairman, Bradford-O’Keefe Funeral Homes, Inc.
Paige Reed Riley, Owner, Hillyer House
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
39