PEOPLES FI NANCIAL CORP ORATIO N
AND SUBSIDIARIES
To Our Shareholders,
We are pleased with our financial results for 2018, this is our third consecutive year of profitability.
During 2018, the company continued to expand initiatives designed to enhance service to our
customers and further increase operational efficiencies. In addition to our semi-annual dividend,
the bank stock repurchase of 180,000 shares was completed and was deemed a huge success.
In 2018, the board of directors of Peoples Financial Corporation appointed three new directors to
the board of The Peoples Bank; Mr. Padrick Dennis has served as Vice President of Construction
and Operations for Specialty Contractors and Associates, Inc., since 2010. Mr. Dennis
earned a
Juris Doctor from the University of Mississippi School of Law, graduating Summa Cum Laude and also
holds a Bachelor of Arts degree (Politics) and Bachelor of Science degree (Accounting and Business
Also appointed to the bank board was Mr. George Sliman, a Director and President of SunStates
Administration) from Washington & Lee University, graduating Summa Cum Laude.
Holdings, Inc., a privately-held real estate investment company. Mr. Sliman’s responsibilities
include financial reporting, risk management, information technology and special projects. In
addition, Mr. Sliman is a general partner and managing member of several privately-held
investment entities. A retired Certified Public Accountant, Mr. Sliman graduated from Springhill
College, Magna Cum Laude and earned a Masters of Business Administration from the Wharton
School of Business at the University of Pennsylvania.
Likewise joining the bank board was Mr. Tanner Swetman, who joined the bank in 2005 and
currently serves as Vice President of Corporate Affairs. Mr. Swetman has oversight responsibility
for the Business Development, Investment, Branch Administration and Property Departments. Mr.
Swetman also serves as Chairman of the Asset Liability Committee and is a member of the
Investment and Trust committees. Mr. Swetman holds a Bachelor of Science in Business
Administration with an emphasis in Management from the University of Southern Mississippi. Mr.
Swetman also completed the Mississippi School of Banking at the University of Mississippi, the
Graduate School of Banking at Louisiana State University and the University of Chicago Booth
School of Business Executive Development Program
For over 122 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, 2018, 2017 and 2016. 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 2018, which have been disclosed
in Note A to the Consolidated Financial Statements. The Company does not expect that these updates discussed in the Notes
will have a material impact on its financial position, results of operations or cash flows. The Company adopted Accounting
Standards Update 2014-09, Revenue from Contracts with Customers (Topic 606) and Accounting Standards Update 2018-03,
Technical Corrections and Improvements to Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement
of Financial Assets and Financial Liabilities, that Clarifies the Guidance in ASU No. 2016-01, Financial Instruments - Overall
(Subtopic 825-10), effective January 1, 2018, neither of which had a material effect on its financial position, results of operations
or cash flows. The Company is currently working on the implementation of Accounting Standards Update 2016-13, Financial
Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. Further disclosure relating to
these efforts in included in Note A.
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,
1
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.
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 income.
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, 2018, 2017 and 2016 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)
$ 19,999
(249)
$ 19,750
$ 17,341
(249)
$ 17,092
2018
$ 19,048
(545)
$ 18,503
$ 17,625
(545)
$ 17,080
$ 19,121
(628)
$ 18,493
$ 18,096
(628)
$ 17,468
2017
2016
2
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 $629,000 for 2018 compared with net income of $2,758,000 and $167,000 for 2017 and
2016, respectively. Results in 2018 included a significant loss from other investments and increased expenses related to other
real estate as compared with 2017. 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 as compared with 2016.
Managing the net interest margin in the Company’s highly competitive market continues to be very challenging. In 2018,
interest income increased as interest and fees on loans increased $295,000 and interest on mortgage-backed securities improved
$1,313,000 as compared with 2017. This increase however was almost entirely offset by the increase in interest expense in the
current year. 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.
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 $8,250,000 and $13,810,000 at December 31, 2018 and 2017, 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 $122,000, $116,000 and $568,000 for 2018, 2017 and
2016, respectively.
Non-interest income decreased $862,000 for 2018 as compared with 2017 and increased $416,000 for 2017 as compared with
2016. Results for 2018 included a $274,000 loss from other investments. Results for 2017 included a non-recurring gain of
$429,000 from the redemption of death benefits on bank owned life insurance.
Non-interest expense increased $229,000 for 2018 as compared with 2017 and decreased $953,000 for 2017 as compared with
2016. The increase in 2018 was primarily the result of increased writedowns of other real estate of $304,000. 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.
In 2018 and 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.
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.
2018 as compared with 2017
The Company’s average interest-earning assets decreased approximately $30,425,000, or 5%, from approximately $600,369,000
for 2017 to approximately $569,944,000 for 2018. Average loans decreased approximately $16,605,000 due to principal
payments, maturities, charge-offs and foreclosures on existing loans significantly exceeding new loans. Average balances due
from depository institutions decreased approximately $18,321,000 based on the liquidity needs of the bank subsidiary. The
average yield on interest-earning assets was 3.17% for 2017 compared with 3.51% for 2018. The yield on average loans
increased from 4.47% for 2017 to 4.85% for 2018 as a result of the increase in prime rate during 2017 and 2018. The yield on
taxable available for sale securities increased from 1.52% for 2017 to 1.98% for 2018 as the Company changed its investment
strategy to improve yield while not compromising duration and credit risk.
Average interest-bearing liabilities decreased approximately $22,849,000, or 5%, from approximately $437,627,000 for
2017 to approximately $414,778,000 for 2018. Average savings and interest-bearing DDA balances decreased approximately
$36,155,000 primarily as several large commercial customers relocated their funds to other institutions in the current year.
Average borrowings from the Federal Home Loan Bank (“FHLB”) increased approximately $11,161,000 due to the liquidity
3
needs of the bank subsidiary. The average rate paid on interest-bearing liabilities increased 31 basis points, from .33% for 2017
to .64% for 2018. This increase was the result of increased rates.
The Company’s net interest margin on a tax-equivalent basis, which is net interest income as a percentage of average earning
assets, was 2.94% for 2017 as compared with 3.04% for 2018.
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. This 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.
The tables below analyze the changes in tax-equivalent net interest income for the years ended December 31, 2018, 2017 and
2016.
ANALYSIS OF AVERAGE BALANCES, INTEREST EARNED/PAID AND YIELD (IN THOUSANDS)
2018
2017
2016
Average
Balance Earned/Paid Rate
Interest
Average
Balance Earned/Paid Rate
Interest
Average
Balance Earned/Paid Rate
Interest
$ 273,724
$ 13,265
4.85%
$ 290,329
$ 12,970
4.47%
$ 327,819
$ 14,232
4.34%
9,498
205
2.16%
27,819
420
1.51%
31,559
277
0.88%
33,864
18,208
970
580
2.86%
3.19%
220,076
13,055
1,519
4,349
608
22
1.98%
4.66%
1.45%
29,389
19,082
217,059
15,677
1,014
753
717
2.56%
3.76%
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%
Loans (1) (2)
Balances due from
depository institutions
Held to maturity:
Taxable
Non taxable (3)
Available for sale:
Taxable
Non taxable (3)
Other
Total
$ 569,944
$ 19,999
3.51%
$ 600,369
$ 19,048
3.17%
$ 598,682
$ 19,121
3.19%
Savings and
interest-bearing DDA
Time deposits
Federal funds purchased
and securities sold under
agreements to repurchase
Borrowings from FHLB
$ 317,197
84,168
$ 1,468
886
0.46%
1.05%
$ 353,352
82,038
$ 736
637
0.21%
0.78%
$ 359,801
77,644
$ 437
457
0.12%
0.59%
369
13,044
10
294
2.71%
2.25%
354
1,883
3
47
0.85%
2.50%
8,240
131
1.59%
Total
$ 414,778
$ 2,658
0.64%
$ 437,627
$ 1,423
0.33%
$ 445,685
$ 1,025
0.23%
Net tax-equivalent spread
Net tax-equivalent margin
on earning assets
2.87%
3.04%
2.84%
2.94%
2.97%
3.02%
(1) Loan fees of $310, $338 and $389 for 2018, 2017 and 2016, 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 21% in 2018 and 34% in 2017 and 2016. 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
Federal funds purchased
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, 2018 Compared With December 31, 2017
Rate
Rate/Volume
Total
$ 1,100
180
89
(109)
991
(134)
(11)
$ 2,106
$ 899
227
6
(5)
$ 1,127
$ (63)
(118)
13
5
14
23
(6)
$ (132)
$ (92)
5
(27)
$ (114)
$ 295
(215)
217
(137)
1,051
(256)
(4)
$ 951
$ 732
249
7
247
$ 1,235
For the Year Ended
December 31, 2017 Compared With December 31, 2016
Rate
$ 413
199
35
11
306
29
23
Rate/Volume
Total
$ (47)
(23)
$ (1,262)
143
86
47
(7)
(9)
569
(8)
740
(259)
4
Volume
$ (742)
(277)
115
(33)
46
(145)
13
$ (1,023)
$ (75)
17
1
279
$ 222
Volume
$ (1,628)
(33)
448
(19)
387
(281)
(10)
Total
$ (1,136)
$ 1,016
$ 47
$ (73)
Interest paid on:
Savings and interest-bearing DDA
Time deposits
Federal funds purchased
Borrowings from FHLB
Total
$ (8)
26
3
(95)
$ (74)
$ 312
146
42
$ 500
$ (5)
8
(31)
$ (28)
$ 299
180
3
(84)
$ 398
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
5
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, credit quality 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
$8,250,000 and $13,810,000 with specific reserves on these loans of $315,000 and $1,125,000 as of December 31, 2018 and 2017,
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 $122,000, $116,000 and $568,000 in 2018, 2017 and 2016, respectively. As a result of receiving new information and
updated appraisals on several collateral-dependent loans, the Company increased the specific 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. 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. The allowance for loan losses as a percentage of loans was 1.95%, 2.19% and 1.73% at December 31, 2018, 2017
and 2016, respectively. The Company believes that its allowance for loan losses is appropriate as of December 31, 2018.
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
2018 as compared with 2017
Total non-interest income decreased $862,000 in 2018 as compared with 2017. Gains on liquidation, sales and calls of securities
decreased $134,000 as the Company had opportunities to sell securities which generated gains in 2017. Income from other
investments decreased $316,000 in 2018 as compared with 2017 as operations of an investment in a low-income housing partnership
declined as a result of decreased occupancy. Prior year’s results included a gain of $429,000 from the redemption of death benefits
on bank owned life insurance.
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 the sale of bank premises.
Non-interest Expense
2018 as compared with 2017
Total non-interest expense increased $229,000 in 2018 as compared with 2017. Net occupancy costs decreased $117,000 as liability
insurance premiums decreased $71,000 as the Company reduced some of its coverage and telecommunications costs decreased
$88,000 as the Company eliminated some redundant resources. Equipment rentals, depreciation and maintenance increased
$128,000 primarily as a result of purchases of depreciable assets, primarily technology-related, and an increase in maintenance
contracts related to technology services. Other expense increased $276,000 as a result of the decrease in non-recurring consulting
fees of $164,000, the decrease in FDIC and state banking assessments of $176,000 as a result of reduced assessment rates and the
increase in other real estate expenses of $514,000, largely due to writedowns of ORE to new appraised values.
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 $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.
Income Taxes
The Company recognized an income tax benefit of $36,000 and $1,080,000 in 2018 and 2017, 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
6
$8,140,000. As of December 31, 2018, the valuation allowance is still in place. The 2018 and 2017 benefits were the result of the
impact of the elimination of the alternative minimum tax credit carryforwards from new tax legislation and the correction of refunds
for prior years. 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 $8,090,000 at December 31, 2018 compared with December 31, 2017 due to the bank
subsidiary’s liquidity position.
Available for sale securities decreased $23,096,000 at December 31, 2018 compared with December 31, 2017 as the maturities and
unrealized losses exceeded investment purchases.
Loans decreased $7,103,000 at December 31, 2018 compared with December 31, 2017, as principal payments, maturities, charge-
offs and foreclosures on existing loans exceeded new loans.
Total deposits decreased $56,064,000 at December 31, 2018, as compared with December 31, 2017. 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 $39,506,000 as of December 31, 2018 as compared to December 31,
2017 as one public customer transferred a large balance to another financial institution.
Borrowings from the FHLB increased $24,944,000 as of December 31, 2018 as compared with December 31, 2017 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 2018 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 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 2019.
7
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 $53,459 - 2018;
$50,538 - 2017
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, 4,943,186 shares issued and outstanding at
December 31, 2018 and 5,083,186 shares issued and
outstanding at December 31, 2017
Surplus
Undivided profits
Accumulated other comprehensive loss
Total shareholders’ equity
Total liabilities and shareholders’ equity
See Notes to Consolidated Financial Statements.
9
2018
2017
$ 17,191
222,110
$ 25,281
245,206
54,598
2,811
2,069
273,346
5,340
268,006
18,879
8,943
1,956
18,841
1,382
51,163
3,193
1,370
280,449
6,153
274,296
20,153
8,232
1,904
18,301
1,325
$ 616,786
$ 650,424
$ 114,512
278,772
52,787
27,435
473,506
36,142
18,415
1,789
529,852
4,943
65,780
20,324
(4,113)
86,934
$ 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
$ 616,786
$ 650,424
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 I N C O M E
2018
2017
2016
$ 13,265
$ 12,970
$ 14,232
(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
Federal funds purchased and securities sold
under agreements to repurchase
Borrowings from Federal Home Loan Bank
Total interest expense
Net interest income
Provision for allowance for loan losses
1,410
471
2,633
1,744
22
205
19,750
2,354
10
294
2,658
17,092
122
Net interest income after provision for allowance for loan losses
16,970
Non-interest income:
Trust department income and fees
Service charges on deposit accounts
Gain on liquidation, sales and calls of securities
Gain on sale of other investments
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
Other expense
Total non-interest expense
Income before income taxes
Income tax (benefit) expense
Net income
Basic and diluted earnings per share
Dividends declared per share
See Notes to Consolidated Financial Statements.
1,708
3,737
17
(274)
455
460
6,103
10,891
2,004
3,134
6,451
22,480
593
(36)
$ 629
$ .13
$ .02
10
1,602
531
1,320
1,634
26
420
18,503
1,373
3
47
1,423
17,080
116
16,964
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
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
$ 167
$ .03
$
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,
2018
2017
Net income
$ 629
$ 2,758
Other comprehensive income (loss):
Net unrealized gain (loss) on available for sale securities
(1,645)
Reclassification adjustment for realized gains on available
for sale securities called or sold in current year
Gain (loss) from unfunded post-retirement benefit
obligation
Total other comprehensive loss
459
(1,186)
127
(134)
(1,160)
(1,167)
2016
$ 167
(3,345)
(158)
(42)
(3,545)
Total comprehensive income (loss)
$ (557)
$ 1,591
$ (3,378)
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
Surplus
Accumulated
Other
Undivided Comprehensive
Loss
Profits
Total
Balance, January 1, 2017
5,123,186
$ 5,123
$ 65,780
$ 19,318
$ (1,760)
$ 88,461
Net income
Retirement of stock
Cash dividend ($.01 per share)
Other comprehensive loss
(40,000)
(40)
2,758
(462)
(51)
2,758
(502)
(51)
(1,167)
(1,167)
Balance, December 31, 2017
5,083,186
5,083
65,780
21,563
(2,927)
89,499
Net income
Retirement of stock
Cash dividend ($.02 per share)
Other comprehensive loss
(140,000)
(140)
629
(1,767)
(101)
629
(1,907)
(101)
(1,186)
(1,186)
Balance, December 31, 2018
4,943,186
$ 4,943
$ 65,780
$ 20,324
$ (4,113)
$ 86,934
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
Adjustments to reconcile net income 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
(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
Gain on sales of other investments
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 investments
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.
2018
2017
2016
$
629
$
2,758
$
167
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
$
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
$
1,964
122
764
21
274
315
260
(17)
(455)
(52)
(57)
506
4,274
60,222
(39,086)
760
(4,455)
(699)
125
3,211
1,461
(690)
(85)
20,764
(52,268)
(3,796)
(101)
(1,907)
1,428,700
(1,403,756)
(33,128)
(8,090)
25,281
$ 17,191
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.
Revenue Recognition
As of January 1, 2018, the Company adopted Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers
(Topic 606), using the modified retrospective method. Disclosures of revenue from contracts with customers for periods beginning after
January 1, 2018 are presented under ASC Topic 606 and have not materially changed from the prior year amounts. This update 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 excludes revenue streams
relating to loans and investment securities, which are the major source of revenue for the Company, from its scope. As a result, the adoption
of the guidance had no material impact on the measurement or recognition of revenue. Consistent with this guidance, the Company recognizes
noninterest income within the scope of this guidance as services are transferred to its customers in an amount that reflects the consideration it
expects to be entitled to in exchange for those services. Other types of revenue contracts, the income from which is included in non-interest
income, that are within the scope of ASU 2014-09 are:
Trust department income and fees: A contract for fiduciary and/or investment administration services on personal trust accounts and corporate
trust services. Personal trust fee income is determined as a percentage of assets under management and is recognized over the period the
underlying trust is serviced. Corporate trust fee income is recognized over the period the Company provides service to the entity.
Service charges on deposit accounts: The deposit contract obligates the Company to serve as a custodian of the customer’s deposited funds
and is generally terminable at will by either party. The contract permits the customer to access the funds on deposit and request additional
services for which the Company earns a fee, including NSF and analysis charges, related to the deposit account. Income for deposit accounts
is recognized over the statement cycle period (typically on a monthly basis) or at the time the service is provided, if additional services are
requested.
ATM fee income: A contract between the Company, as a card-issuing bank, and its customers whereby the Company receives a transaction fee
from the merchant’s bank whenever a customer uses a debit or credit card to make a purchase. These fees are earned as the service is provided
(i.e., when the customer uses a debit or ATM card).
Other non-interest income: Other non-interest income includes several items, such as wire transfer income, check cashing fees, the increase
in cash surrender value of life insurance, rental income from bank properties and safe deposit box rental fees. This income is generally
recognized at the time the service is provided and/or the income is earned.
New Accounting Pronouncements
In February 2018, the Financial Accounting Standards Board (the “FASB”) issued ASU 2018-03, Technical Corrections and Improvements
to Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities, that
Clarifies the Guidance in ASU No. 2016-01, Financial Instruments – Overall (Subtopic 825-10). ASU 2018-03 clarifies guidance in ASU No.
2016-01 relating to equity securities without a readily determinable fair value, forward contracts and purchased options and fair value option
liabilities. This update is effective for fiscal years, and interim periods within those fiscal years, beginning after June 15, 2018. The Company
adopted the amendments in this ASU effective January 1, 2018. The adoption of this ASU did not have a material effect on the Company’s
financial position, result of operations or cash flows.
14
In March 2018, the FASB issued ASU 2018-05, Income Taxes (Topic 740): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting
Bulletin No. 118. ASU 2018-05 adds SEC guidance to the accounting standards codification regarding the Tax Cuts and Jobs Act. This
update became effective upon addition to the FASB Codification. The adoption of this ASU is not expected to have a material effect on the
Company’s financial position, result of operations or cash flows.
In May 2018, the FASB issued ASU 2018-06, Codification Improvements to Topic 942, Financial Services – Depository and Lending. ASU
2018-06 removes outdated guidance related to Circular 202 because that guidance has been rescinded by the Office of the Comptroller of
the Currency. The amendments in this update are effective upon issuance. The adoption of this ASU did not have a material effect on the
Company’s financial position, result of operations or cash flows.
In July 2018, the FASB issued ASU 2018-09, Codification Improvements. ASU 2018-09 amends topics that clarify, correct errors in or make
minor improvements to the Codification. Topics affected include reporting comprehensive income, debt modifications and extinguishments,
distinguishing liabilities from equity, income taxes on stock compensation, income taxes relating to business combinations, derivatives and
hedging, fair value measurement, financial services and defined contribution plan accounting. The transition and effective date guidance is
based on the facts and circumstances of each amendment. The adoption of this ASU did not have a material effect on the Company’s financial
position, result of operations or cash flows.
In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure
Requirements for Fair Value Measurement. ASU 2018-13 changes the fair value measurement disclosure requirements. This update is
effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The adoption of this ASU is not
expected to have a material effect on the Company’s financial position, result of operations or cash flows.
In November 2018, the FASB issued ASU 2018-19, Codification Improvements to Topic 326, Financial Instruments – Credit Losses. ASU
2018-19 amends existing guidance to align the implementation date for nonpublic entities and clarifies that receivables arising from operating
leases are not within the scope of Subtopic 326-20. The effective date and transition requirements of these amendments are the same as
those in the credit losses standard, as amended by the new ASU. The adoption of this ASU is not expected to have a material effect on the
Company’s financial position, result of operations or cash flows.
ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, is intended to
provide financial statement users with more decision-useful information related to expected credit losses on financial instruments and other
commitments to extend credit by replacing the current incurred loss impairment methodology with a methodology that reflects expected
credit losses and requires consideration of a broader range of reasonable and supportable information to determine credit loss estimates. ASU
2016-13 does not specify the method for measuring expected credit losses, and an entity is allowed to apply methods that reasonably reflect
its expectations of the credit loss estimate. Additionally, the amendments of ASU 2016-13 require that credit losses on available for sale debt
securities be presented as an allowance rather than as a write-down. ASU 2016-13is effective for the Company for interim and annual periods
beginning after December 15, 2019 and the Company intends to adopt ASU 2016-13 during the first quarter of 2020. The Company has
established a Current Expected Credit Loss (CECL) Committee which include the appropriate members of management, credit administration
and accounting to evaluate the impact this ASU will have on the Company’s financial position, results of operations and financial statement
disclosures and determine the most appropriate method of implementing this ASU. The Company selected a third-party vendor to provide
allowance for loan loss software as well as advisory services in developing a new methodology that would be compliant with ASU 2016-
13, and is working with the approved third-party vendor to develop the CECL model and evaluate its impact. Management will continue to
evaluate the impact this ASU will have on the Company’s consolidated financial statements through its effective date.
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 $527,000 and $564,000 for the years ending December 31, 2018 and 2017, 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.
15
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.
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, 2018.
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.
16
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 $500,000. Loans secured by real estate in an amount of $500,000 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
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 write downs 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 the underlying trust is serviced.
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.
17
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 5,031,778
for 2018, 5,123,076 for 2017 and 5,123,186 for 2016.
Accumulated Other Comprehensive Income (Loss)
At December 31, 2018, 2017 and 2016, accumulated other comprehensive 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 $2,657,616, $1,420,399 and
$1,020,177 in 2018, 2017 and 2016, respectively, for interest on deposits and borrowings. Income tax payments totaled $78,435 in 2016.
Loans transferred to other real estate amounted to $4,706,732, $1,946,045 and $1,903,427 in 2018, 2017 and 2016, 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.
Reclassifications
Certain reclassifications have been made to the prior year statements to conform to current year presentation. The reclassifications had no
effect on prior year net income.
18
NOTE B – SECURITIES :
The amortized cost and fair value of securities at December 31, 2018 and 2017, respectively, are as follows (in thousands):
Amortized Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
December 31, 2018:
Available for sale securities:
U.S. Treasuries
U.S. Government agencies
Mortgage-backed securities
States and political subdivisions
Total available for sale securities
Held to maturity securities:
U.S. Government agencies
States and political subdivisions
Total held to maturity securities
December 31, 2017:
Available for sale securities:
U.S. Treasuries
U.S. Government agencies
Mortgage-backed securities
States and political subdivisions
Total available for sale securities
Held to maturity securities:
U.S. Government agencies
States and political subdivisions
Total held to maturity securities
$ 85,866
17,492
112,391
10,994
$ 226,743
$ 8,185
46,413
$ 54,598
$ 124,820
19,989
89,207
14,178
$ 248,194
$ 8,185
42,978
$ 51,163
$ 0
14
231
102
$ 347
$ 0
89
$ 89
$ 39
96
292
$ 388
$ 0
227
$ 227
$ (2,443)
(259)
(2,278)
$ (4,980)
$ (371)
(857)
$ (1,228)
$ (2,176)
(158)
(1,042)
$ (3,376)
$ (302)
(550)
$ (852)
Fair Value
$ 83,423
17,247
110,344
11,096
$ 222,110
$ 7,814
45,645
$ 53,459
$ 122,644
19,831
88,261
14,470
$ 245,206
$ 7,883
42,655
$ 50,538
The amortized cost and fair value of debt securities at December 31, 2018, (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
$ 28,177
77,778
5,563
2,834
112,391
$ 226,743
$ 2,523
19,769
18,316
13,990
$ 54,598
Fair Value
$ 27,975
75,719
5,213
2,859
110,344
$ 222,110
$ 2,522
19,569
17,895
13,473
$ 53,459
19
Available for sale and held to maturity securities with gross unrealized losses at December 31, 2018 and 2017, 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, 2018:
U.S. Treasuries
U.S. Government agencies
Mortgage-backed securities
States and political subdivisions
Total
December 31, 2017:
U.S. Treasuries
U.S. Government agencies
Mortgage-backed securities
States and political subdivisions
Total
Fair Value
$ 999
4,939
24,834
8,470
$ 39,242
$ 49,586
8,145
60,230
11,552
$ 129,513
Gross
Unrealized
Losses
$ 1
61
293
122
$ 477
$ 364
37
415
168
$ 984
Fair Value
$ 82,4240
17,608
55,649
19,678
$ 175,359
$ 73,0580
14,5670
13,4920
7,010
$ 108,127
Gross
Unrealized
Losses
$ 2,442
569
1,985
735
$ 5,731
$ 1,812
423
627
382
$ 3,244
Fair Value
$ 83,423
22,547
80,483
28,148
$ 214,601
$ 122,644
22,712
73,722
18,562
$ 237,640
Gross
Unrealized
Losses
$ 2,443
630
2,278
857
$ 6,208
$ 2,176
460
1,042
550
$ 4,228
At December 31, 2018, 18 of the 18 securities issued by the U.S. Treasury, 5 of the 6 securities issued by U.S. Government agencies, 35 of the 45
mortgage-backed securities and 61 of the 146 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.
Proceeds from sales of available for sale debt securities were $30,748,797 and $29,641,206 during 2017 and 2016, respectively. Available for sale
debt securities were sold and called for realized gains of $133,986 and $157,925 during 2017 and 2016, respectively. There were no sales or calls of
available for sale securities in 2018. Proceeds from sales of other investments were $125,145 for a realized gain of $16,995 during 2018.
Securities with a fair value of $206,017,056 and $196,702,218 at December 31, 2018 and 2017, 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, 2018 and 2017 is as follows (in thousands):
December 31,
Gaming
Residential and land development
Real estate, construction
Real estate, mortgage
Commercial and industrial
Other
Total
2018
$ 25,767
298
33,931
178,917
27,505
6,928
$ 273,346
2017
$ 26,142
263
31,947
189,201
26,360
6,536
$ 280,449
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 collectability
and do not include other unfavorable features. An analysis of the activity with respect to such loans to related parties is as follows (in thousands):
Balance, January 1
January 1 balances, loans of directors appointed during the year
New loans and advances
Repayments
Balance, December 31
2018
$ 6,543
2,142
2,272
(1,800)
$ 9,157
2017
00$ 6,658
907
00(1,022)
$ 6,543
20
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
2018
$ 25,767
44,112
15,244
2017
$ 26,142
34,882
14,597
The age analysis of the loan portfolio, segregated by class of loans, as of December 31, 2018 and 2017 is as follows (in thousands):
December 31, 2018:
Gaming
Residential and land development
Real estate, construction
Real estate, mortgage
Commercial and industrial
Other
Total
December 31, 2017:
Gaming
Residential and land development
Real estate, construction
Real estate, mortgage
Commercial and industrial
Other
Total
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
1,987
2,866
9
107
$ 4,969
340
7,129
110
3
$ 7,582
860
1,730
1,661
$ 4,251
3,187
11,725
1,780
110
$ 16,802
$ 0
$ 0
$ 0
$ 0
747
5,321
375
26
$ 6,469
121
790
2
3
$ 916
522
4,884
2,344
$ 7,750
1,390
10,995
2,721
29
$ 15,135
$ 25,767
298
30,744
167,192
25,725
6,818
$ 256,544
$ 26,142
263
30,557
178,206
23,639
6,507
$ 265,314
$ 25,767
298
33,931
178,917
27,505
6,928
$ 273,346
$ 26,142
263
31,947
189,201
26,360
6,536
$ 280,449
$ 0
51
4
$ 55)
$ 0
$ )
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.
21
An analysis of the loan portfolio by loan grade, segregated by class of loans, as of December 31, 2018 and 2017 is as follows (in thousands):
A, B or C
S
D
E
F
Total
Loans With A Grade Of:
December 31, 2018:
Gaming
Residential and land development
Real estate, construction
Real estate, mortgage
Commercial and industrial
Other
Total
December 31, 2017:
Gaming
Residential and land development
Real estate, construction
Real estate, mortgage
Commercial and industrial
Other
Total
$ 21,080
65
32,497
150,365
25,335
6,904
$ 236,246
$
$ 4,687
$
10,430
$ 10,430
217
12,992
218
20
$ 18,134
$ 26,142
$
$
30,412
148,284
23,133
6,516
$ 234,487
11,550
$ 11,550
358
19,606
265
16
$ 20,245
233
1,217
5,130
1,952
4
$ 8,536
$
263
1,177
9,761
2,962
4
$ 14,167
$
$
$
$
$ 25,767
298
33,931
178,917
27,505
6,928
$ 273,346
$ 26,142
263
31,947
189,201
26,360
6,536
$ 280,449
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, 2018 and 2017 are as follows (in thousands):
December 31,
Residential and land development
Real estate, construction
Real estate, mortgage
Commercial and industrial
Other
Total
2018
$ 233
1,206
4,954
1,855
2
$ 8,250
2017
$ 263
1,177
9,548
2,818
4
$ 13,810
Prior to 2017, certain loans were modified by granting interest rate concessions to these customers with such loans being classified as troubled
debt restructurings. During 2018 and 2017, the Company did not restructure any additional loans. Specific reserves of $69,000 and $86,000
have been allocated to troubled debt restructurings as of December 31, 2018 and 2017, respectively. The Bank had no commitments to lend
additional amounts to customers with outstanding loans classified as troubled debt restructurings as of December 31, 2018 and 2017.
22
Impaired loans, which include loans classified as nonaccrual and troubled debt restructurings, segregated by class of loans, as of December
31, 2018 and 2017 were as follows (in thousands):
Unpaid
Principal Balance
Recorded
Investment
Related
Allowance
Average
Recorded
Investment
Interest
Income
Recognized
December 31, 2018:
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
Total
Total by class of loans:
Residential and land development
Real estate, construction
Real estate, mortgage
Commercial and industrial
Other
Total
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
$
784
5,474
1,855
2
8,115
233
422
574
1,229
233
1,206
6,048
1,855
2
$ 9,344
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
$
20
263
101
384
20
263
101
$
384
$
40
105
725
342
1,212
40
105
725
342
$ 1,212
$
785
5,826
2,204
3
8,818
246
387
589
1,222
246
1,172
6,415
2,204
3
$ 10,040
$ 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
$
29
29
25
25
54
$
54
$
31
31
28
28
59
$
59
$ 1,171
5,508
2,083
2
8,764
233
509
574
1,316
233
1,680
6,082
2,083
2
$ 10,080
$ 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
23
Transactions in the allowance for loan losses for the years ended December 31, 2018, 2017 and 2016, and the balances of loans, individually
and collectively evaluated for impairment, as of December 31, 2018, 2017 and 2016 are as follows (in thousands):
Residential
and Land
Development
Real Estate, Real Estate,
Mortgage
Construction
Commercial
and
Industrial
Gaming
Other
Total
December 31, 2018:
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, 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
263
$
322
$
120
$
3
$
728
132
$
3,564
$
356
$
130
$
4,612
$
536
$
40
$
202
$
4,305
(715)
188
108
3,886
$
$
892
(372)
112
(156)
476
$
$
178
(323)
158
120
133
$ 6,153
(1,410)
475
122
5,340
$
17
176
395
$
(120)
416
$
$
(6)
34
$
$
20
$
416
$
14
$
$
$
(9)
$
536
$
686
(712)
40
$
$
40
$
536
$
$
$
$
$ 4,687
$
233
$
1,434
$ 18,122
$ 2,170
$
24
$ 26,670
$ 21,080
$
65
$ 32,497
$ 160,795
$ 25,335
$
6,904
$ 246,676
$
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
$
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
141
$
424
58
$
3,376
$ 1,075
$
(509)
62
23
651
214
437
$
$
$
$
$
$
253
(254)
110
96
205
$
8,070
(3,522)
350
568
$ 5,466
15
$
860
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
24
NOTE D – BANK PR EMISES A N D E QU IP M E N T:
Bank premises and equipment are shown as follows (in thousands):
December 31,
Land
Building
Furniture, fixtures and equipment
Totals, at cost
Less: Accumulated depreciation
Totals
Estimated Useful Lives
5 – 40 years
3 – 10 years
2018
5,783
$
30,681
17,430
53,894
35,015
$ 18,879
$
2017
5,783
30,681
16,758
53,222
33,069
$ 20,153
$
NOTE E – OTHE R REAL ESTAT E :
The Company’s other real estate consisted of the following as of December 31, 2018 and 2017, respectively (in thousands except number of
properties):
Construction, land development and other land
1-4 family residential properties
Nonfarm nonresidential
Other
Total
NOTE F – DEPOSITS:
2018
2017
Number of
Properties
12
3
5
1
21
Balance
$ 6,007
859
1,725
352
$ 8,943
Number of
Properties
14
Balance
$ 6,670
5
1,562
19
$ 8,232
At December 31, 2018, the scheduled maturities of time deposits are as follows (in thousands):
2019
2020
2021
2022
2023
Total
$
$
54,902
19,108
1,607
2,763
1,842
80,222
Time deposits of $250,000 or more totaled approximately $32,137,000 and $30,457,000 at December 31, 2018 and 2017, respectively.
Deposits held for related parties amounted to $3,676,971 and $9,279,315 at December 31, 2018 and 2017, respectively.
Overdrafts totaling $1,044,409 and $466,812 were reclassified as loans at December 31, 2018 and 2017, respectively.
NOTE G – FEDER AL F UNDS P U R C HA SE D :
At December 31, 2018, 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, 2018, the Company was able to borrow up to $17,638,095 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 the primary credit rate, which is established periodically by the Federal Reserve Board, and have a maturity of one
day. The primary credit rate was 3.00% at December 31, 2018. There was no outstanding balance at December 31, 2018.
At December 31, 2018, the Company had $36,141,790 outstanding in advances under a $72,623,426 line of credit with the FHLB. One
advance in the amount of $35,000,000 bears interest at 2.65% at December 31, 2018 and matures in 2019. 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.
At December 31, 2018, the Company had a $500,000 unsecured revolving line of credit with First National Bankers Bank. The line has a term
of one year and bears interest at Wall Street prime rate with interest due monthly. There was no outstanding balance at December 31, 2018.
25
NOTE I – INCOME TAXE S:
Deferred taxes (or deferred charges) as of December 31, 2018 and 2017, included in other assets, were as follows (in thousands):
December 31,
2018
2017
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:
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
$
$
1,121
3,117
973
356
1,048
1,750
2,118
943
(8,642)
2,784
298
2,235
251
2,784
$
$
$
2018
(36)
(425)
425
2017
$
(1,080)
$
4,023
(4,023)
1,292
3,048
627
356
1,012
1,489
1,891
992
(7,934)
2,773
202
2,359
212
2,773
2016
78
(247)
247
$
(36)
$
(1,080)
$
78
26
Income taxes amounted to less than the amounts computed by applying the U.S. Federal income tax rate of 21.0% for 2018 and 34.0% for
2017 and 2016 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
2018
Tax
125
Rate
21
2017
Tax
571
Rate
34
$
2016
Tax
83
Rate
34
$
(206)
(96)
(298)
50
(35)
(16)
(50)
8
(362)
(302)
(298)
(656)
3,990
(22)
(18)
(18)
(39)
238
(417)
(144)
(298)
607
(170)
(59)
(121)
247
(36)
425
(36)
(6)
72
(6)
(3,990)
(742)
709
(1,080)
(238)
(44)
42
(65)
$
247
78
101
32
$
$
$
During 2018 and 2017, the Company recorded an income tax benefit of $36,000 and $1,080,000, respectively. 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, during
2018 and 2017, the Company has reclassified the AMT credit carryforward to a tax receivable which resulted in a deferred tax benefit of
$36,000 and $742,000. The Company also recorded in 2017 a current tax benefit of $338,000 to account for the carryback of general business
tax credits to open tax years.
In 2017 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.
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 $10,084,000 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.
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, 2018, $12,463,086 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, 110,000 shares have been repurchased for approximately $1,477,000 and retired through December 31, 2018.
On September 26, 2018, the Board approved the repurchase of up to 70,000 of the outstanding shares of the Company’s common stock. As
a result of this repurchase plan, 70,000 shares have been repurchased for approximately $933,000 and retired through December 31, 2018.
On April 25, 2018, the Board declared a dividend of $.01 per share payable May 10, 2018 to shareholders of record as of May 7, 2018. On
27
September 26, 2018, the Board declared a dividend of $.01 per share payable on October 15, 2018 to shareholders of record as of October
9, 2018.
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, 2018, 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 1.875% for 2018. The buffer
will increase annually until it is fully phased-in to 2.50% at January 1, 2019. There are no conditions or events since that notification that
Management believes have changed the bank subsidiary’s category.
The Company’s actual capital amounts and ratios and required minimum capital amounts and ratios for 2018 and 2017, are as follows (in
thousands):
December 31, 2018:
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, 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)
$
$
Amount
95,627
90,894
90,894
90,894
97,122
92,273
92,273
92,273
Actual
Ratio
25.30%
24.05%
24.05%
14.35%
25.12%
23.87%
23.87%
13.79%
For Capital Adequacy Purposes
Ratio
Amount
$
$
30,240
17,010
22,680
25,344
30,930
17,398
23,197
26,769
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 2018 and 2017, are as follows (in thousands):
Actual
Amount
Ratio
For Capital Adequacy Purposes To Be Well Capitalized
Ratio
Amount
Amount
Ratio
December 31, 2018:
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, 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)
$ 92,485
24.61%
$
30,062
8.00%
$ 37,577
10.00%
87,780
87,780
87,780
23.36%
23.36%
14.11%
16,910
22,546
24,884
4.50%
6.00%
4.00%
24,425
30,062
31,105
6.50%
8.00%
5.00%
$ 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%
28
NOTE K – OTH ER INC OME A N D EX P E N S E 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
2018
93
246
121
460
2018
557
1,355
248
449
1,254
585
304
1,699
6,451
$
$
$
$
2017
99
298
84
481
2017
538
1,289
424
422
740
582
307
1,873
6,175
$
$
$
$
2016
116
320
223
659
2016
544
1,346
901
566
868
555
370
1,689
6,839
$
$
$
$
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, 2018 and 2017, the Company had outstanding irrevocable letters of credit aggregating $235,141 and $154,308, respectively.
At December 31, 2018 and 2017, the Company had outstanding unused loan commitments aggregating $31,885,422 and $41,286,000,
respectively. Approximately $15,539,762 and $19,691,000 of outstanding commitments were at fixed rates and the remainder were at variable
rates at December 31, 2018 and 2017, respectively.
NOTE M – CONTINGE NC IES:
The Bank is involved in various legal matters and claims which are being defended and handled in the ordinary course of business. None of
these matters are expected, in the opinion of Management, to have a material adverse effect upon the financial position or results of operations
of the Company.
29
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
Liabilities and Shareholders’ Equity:
Other liabilities
Total liabilities
Shareholders’ equity
Total liabilities and shareholders’ equity
2018
CONDENSED STATEMENTS OF INCOME ( IN T HOUSA N DS):
Years Ended December 31,
Income
Distributed income of bank subsidiary
Undistributed income of bank subsidiary
Other income (loss)
Total income
Expenses
Other
Total expenses
Income before income taxes
Income tax benefit
Net income
901
112
(252)
761
132
132
629
629
$
$
$
629
2018
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
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Income (loss) from other investments
Undistributed (income) loss of subsidiaries
Gain from sale of securities
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
(1,907)
(101)
(2,008)
(1,109)
1,392
283
274
(112)
(17)
125
125
774
$
$
$
$
$
$
2018
83,820
1
283
2,830
86,934
86,934
86,934
2017
1,900
942
47
2,889
131
131
2,758
$
$
$
$
$
2017
84,893
1
1,392
3,213
89,499
89,499
89,499
2016
75
247
(32)
290
123
123
167
$
2,758
$
167
2017
2016
$
2,758
$
167
(42)
(942)
(20)
1,754
(502)
(51)
(553)
1,201
191
1,392
$
51
(247)
(8)
(37)
200
200
163
28
191
$
NOTE O – EMPLOYE E AND DIR E C TOR B E N E F IT PL A N S :
The Company sponsors the Peoples Financial Corporation Employee Stock Ownership Plan (“ESOP”). Employees who are in a position requiring
at least 1,000 hours of service during a plan year and who are 21 years of age are eligible to participate in the ESOP. The Plan included 401(k)
provisions and the former Gulf National Bank Profit Sharing Plan. Effective January 1, 2001, the ESOP was amended to separate the 401(k)
30
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, $260,000 and $276,000 in 2018, 2017 and 2016, respectively.
Compensation expense of $7,285,390, $7,106,959 and $7,804,295 was the basis for determining the ESOP contribution allocation to participants
for 2018, 2017 and 2016, respectively. The ESOP held 247,627, 270,455 and 276,628 allocated shares at December 31, 2018, 2017 and 2016,
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 $16,620,943 and $16,222,847 at December 31, 2018
and 2017, respectively. The present value of accumulated benefits under these plans, using an interest rate of 4.00% and the interest ramp-up
method has been accrued. The accrual amounted to $12,919,127 and $12,628,641 at December 31, 2018 and 2017, 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 $1,729,904 and $1,605,421 at December 31, 2018 and 2017, respectively. The
present value of accumulated benefits under these plans using an interest rate of 4.00% and the projected unit cost method has been accrued. The
accrual amounted to $1,613,326 and $1,573,004 at December 31, 2018 and 2017, 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 $306,146 and $299,242 at
December 31, 2018 and 2017, respectively. The present value of accumulated benefits under these plans using an interest rate of 4.00% and the
projected unit cost method has been accrued. The accrual amounted to $97,587 and $96,547 at December 31, 2018 and 2017, 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 $184,070 and $173,892 at December 31, 2018 and 2017, respectively. The present value of
accumulated benefits under these plans using an interest rate of 4.00% and the projected unit cost method has been accrued. The accrual amounted
to $213,661 and $214,968 at December 31, 2018 and 2017, respectively, and is included in Employee and director benefit plans liabilities.
The Company provides post-retirement health insurance to certain of its retired employees. Employees are eligible to participate in the retiree
health plan if they retire from active service no earlier than 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
2018
171
136
(81)
226
$
$
2017
153
135
(81)
207
$
$
2016
93
101
(73)
(81)
40
$
$
The discount rate used in determining the accumulated post-retirement benefit obligation was 4.30% in 2018, 3.60% in 2017 and 4.00% in
2016. The assumed health care cost trend rate used in measuring the accumulated post-retirement benefit obligation was 6.00% in 2018. 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, 2018, would be increased by 18.73%, 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 23.45%. If the health care cost trend rate assumptions were decreased 1.00%, the accumulated post-retirement benefit obligation
as of December 31, 2018, would be decreased by 14.93%, 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 17.91%.
31
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):
2019
2020
2021
2022
2023
2024-2028
$ 49
68
95
106
136
1,103
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, 2017
Service cost
Interest cost
Actuarial gain
Benefits paid
Accumulated post-retirement benefit obligation as of December 31, 2018
$ 3,832
171
136
(540)
(28)
$ 3,571
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
2018
28
(28)
$
$
2017
48
(48)
$
$
Amounts recognized in the Accumulated Other Comprehensive Income (Loss), net of tax, were (in thousands):
For the year ended December 31,
Net gain
Prior service charge
Total accumulated other comprehensive income
2018
440
680
1,120
$
$
2017
11
622
633
$
$
2016
75
(75)
2016
723
676
1,399
$
$
$
$
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
2018
543
73
616
$
$
The prior service credit and amortization of net gain that will be recognized in accumulated other comprehensive income during 2019 is
$81,381 and $21,629, respectively.
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.
32
Level 3 - Valuation is generated from model-based techniques that use at least one significant assumption not observable in the market. These
unobservable assumptions reflect estimates of assumptions that market participants would use in pricing the asset or liability. Valuation techniques
include the use of option pricing models, discounted cash flow models and similar techniques.
Following is a description of valuation methodologies used to determine the fair value of financial assets and liabilities.
Cash and Due from Banks
The carrying amount shown as cash and due from banks approximates fair value.
Available for Sale Securities
The fair value of available for sale securities is based on quoted market prices. The Company’s available for sale securities are reported at their
estimated fair value, which is determined utilizing several sources. The primary source is Interactive Data Corporation, which utilizes pricing
models that vary based by asset class and include available trade, bid and other market information and whose methodology includes broker
quotes, proprietary models and vast descriptive databases. Another source for determining fair value is matrix pricing, which is a mathematical
technique used widely in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather
by relying on the securities’ relationship to other benchmark securities. The Company’s available for sale securities for which fair value is
determined through the use of such pricing models and matrix pricing are classified as Level 2 assets. If the fair value of available for sale
securities is generated through model-based techniques including the discounting of estimated cash flows, such securities are classified as Level
3 assets.
Held to Maturity Securities
The fair value of held to maturity securities is based on quoted market prices.
Other Investments
The carrying amount shown as other investments approximates fair value.
Federal Home Loan Bank Stock
The carrying amount shown as Federal Home Loan Bank Stock approximates fair value.
Loans
The fair value of fixed rate loans is estimated by discounting the future cash flows using the current rates at which similar loans would be made
to borrowers with similar credit ratings for the remaining maturities. The cash flows considered in computing the fair value of such loans are
segmented into categories relating to the nature of the contract and collateral based on contractual principal maturities. Appropriate adjustments
are made to reflect probable credit losses. Cash flows have not been adjusted for such factors as prepayment risk or the effect of the maturity of
balloon notes. The fair value of floating rate loans is estimated to be its carrying value. At each reporting period, the Company determines which
loans are impaired. Accordingly, the Company’s impaired loans are reported at their estimated fair value on a non-recurring basis. An allowance
for each impaired loan, which are generally collateral-dependent, is calculated based on the fair value of its collateral. The fair value of the
collateral is based on appraisals performed by third party valuation specialists. Factors including the assumptions and techniques utilized by the
appraiser are considered by Management. If the recorded investment in the impaired loan exceeds the measure of fair value of the collateral, a
valuation allowance is recorded as a component of the allowance for loan losses. Impaired loans are non-recurring Level 3 assets.
Other Real Estate
In the course of lending operations, Management may determine that it is necessary to foreclose on the related collateral. Other real estate
acquired through foreclosure is carried at fair value, less estimated costs to sell. The fair value of the collateral is based on appraisals performed
by third party valuation specialists. Factors including the assumptions and techniques utilized by the appraiser are considered by Management.
If the current appraisal is more than one year old and/or the loan balance is more than $200,000, a new appraisal is obtained. Otherwise, the
Bank’s in house property evaluator and Management will determine the fair value of the collateral, based on comparable sales, market conditions,
Management’s plans for disposition and other estimates of fair value obtained from principally independent sources, adjusted for estimated
selling costs. Other real estate is a non-recurring Level 3 asset.
Cash Surrender Value of Life Insurance
The carrying amount of cash surrender value of bank-owned life insurance approximates fair value.
Deposits
The fair value of non-interest bearing demand and interest bearing savings and demand deposits is the amount reported in the financial statements.
The fair value of time deposits is estimated by discounting the cash flows using current rates for time deposits with similar 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, 2018 and 2017, were as follows (in thousands):
December 31, 2018:
U.S. Treasuries
U.S. Government agencies
Mortgage-backed securities
States and political subdivisions
Total
Total
$
83,423
17,247
110,344
11,096
$ 222,110
33
Level 1
Fair Value Measurements Using
Level 2
Level 3
$
$
$ 83,423
17,247
110,344
11,096
$ 222,110
$
$
December 31, 2017:
U.S. Treasuries
U.S. Government agencies
Mortgage-backed securities
States and political subdivisions
Total
Total
$ 122,644
19,831
88,261
14,470
$ 245,206
Level 1
$
$
Level 3
$
Fair Value Measurements Using
Level 2
$ 122,644
19,831
88,261
14,470
$ 245,206
$
Impaired loans, which are measured at fair value on a non-recurring basis, by level within the fair value hierarchy as of December 31, 2018
and 2017 were as follows (in thousands):
December 31:
2018
2017
$
Total
3,311
6,511
Level 1
$
Fair Value Measurements Using
Level 2
$
Level 3
3,311
$
6,511
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, 2018
and 2017 are as follows (in thousands):
December 31:
2018
2017
$
Total
8,943
8,232
Fair Value Measurements Using
Level 2
Level 1
$
$
Level 3
8,943
$
8,232
The following table presents a summary of changes in the fair value of other real estate which is measured using Level 3 inputs (in thousands):
Balance, beginning of year
Loans transferred to ORE
Sales
Writedowns
Balance, end of year
2018
8,232
4,707
(3,232)
(764)
8,943
$
$
2017
8,513
1,946
(1,767)
(460)
8,232
$
$
34
The carrying value and estimated fair value of financial instruments, by level within the fair value hierarchy, at December 31, 2018 and 2017,
are as follows (in thousands):
Carrying Amount
Level 1
Level 2
Level 3
Total
Fair Value Measurements Using
December 31, 2018:
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, 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
$ 17,191
2,811
114,512
$ 25,281
3,193
127,274
$ 17,191
222,110
54,598
2,811
2,069
268,006
8,943
18,841
114,512
358,994
36,142
$ 25,281
245,206
51,163
3,193
1,370
274,296
8,232
18,301
127,274
402,296
11,198
$
260,560
8,943
359,386
$
270,924
8,232
402,610
$
222,110
53,459
2,069
18,841
36,211
$
245,206
50,538
1,370
18,301
11,389
$ 17,191
222,110
53,459
2,811
2,069
260,560
8,943
18,841
114,512
359,386
36,211
$ 25,281
245,206
50,538
3,193
1,370
270,924
8,232
18,301
127,274
402,610
11,389
35
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Directors
To the Shareholders and Board of Directors
To the Shareholders and Board of Directors
Peoples Financial Corporation
Peoples Financial Corporation
Peoples Financial Corporation
Biloxi, Mississippi
Biloxi, Mississippi
Biloxi, Mississippi
Opinion on the Financial Statements
Opinion on the Financial Statements
Opinion on the Financial Statements
We have audited the accompanying consolidated statements of condition of Peoples Financial Corporation and
We have audited the accompanying consolidated statements of condition of Peoples Financial Corporation and
We have audited the accompanying consolidated statements of condition of Peoples Financial Corporation and
subsidiaries (the Company) as of December 31, 2018 and 2017, the related consolidated statements of income,
subsidiaries (the Company) as of December 31, 2018 and 2017, the related consolidated statements of income,
subsidiaries (the Company) as of December 31, 2018 and 2017, the related consolidated statements of income,
comprehensive income (loss), and cash flows for each of the three years in the period ended December 31,
comprehensive income (loss), and cash flows for each of the three years in the period ended December 31,
comprehensive income (loss), and cash flows for each of the three years in the period ended December 31,
2018, and changes in shareholder’s equity for each of the two years in the period ended December 31, 2018,
2018, and changes in shareholder’s equity for each of the two years in the period ended December 31, 2018,
2018, and changes in shareholder’s equity for each of the two years in the period ended December 31, 2018,
and the related notes to the financial statements (collectively, the financial statements). In our opinion, the
and the related notes to the financial statements (collectively, the financial statements). In our opinion, the
and the related notes to the financial statements (collectively, the financial statements). In our opinion, the
financial statements present fairly, in all material respects, the financial position of the Company as of December
financial statements present fairly, in all material respects, the financial position of the Company as of December
financial statements present fairly, in all material respects, the financial position of the Company as of December
31, 2018 and 2017, and the results of its operations and its cash flows for each of the three years in the period
31, 2018 and 2017, and the results of its operations and its cash flows for each of the three years in the period
31, 2018 and 2017, and the results of its operations and its cash flows for each of the three years in the period
ended December 31, 2018, in conformity with accounting principles generally accepted in the United States of
ended December 31, 2018, in conformity with accounting principles generally accepted in the United States of
ended December 31, 2018, in conformity with accounting principles generally accepted in the United States of
America.
America.
America.
Basis for Opinion
Basis for Opinion
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express
These financial statements are the responsibility of the Company’s management. Our responsibility is to express
These financial statements are the responsibility of the Company’s management. Our responsibility is to express
an opinion on the Company’s financial statements based on our audits. We are a public accounting firm
an opinion on the Company’s financial statements based on our audits. We are a public accounting firm
an opinion on the Company’s financial statements based on our audits. We are a public accounting firm
registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to
registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to
registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to
be independent with respect to the Company in accordance with the U.S. federal securities laws and the
be independent with respect to the Company in accordance with the U.S. federal securities laws and the
be independent with respect to the Company in accordance with the U.S. federal securities laws and the
applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the financial statements are free of
and perform the audits to obtain reasonable assurance about whether the financial statements are free of
and perform the audits to obtain reasonable assurance about whether the financial statements are free of
material misstatement, whether due to error or fraud. The Company is not required to have, nor were we
material misstatement, whether due to error or fraud. The Company is not required to have, nor were we
material misstatement, whether due to error or fraud. The Company is not required to have, nor were we
engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required
engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required
engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required
to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an
to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an
to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an
opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express
opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express
opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express
no such opinion.
no such opinion.
no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial
Our audits included performing procedures to assess the risks of material misstatement of the financial
Our audits included performing procedures to assess the risks of material misstatement of the financial
statements, whether due to error or fraud, and performing procedures that respond to those risks. Such
statements, whether due to error or fraud, and performing procedures that respond to those risks. Such
statements, whether due to error or fraud, and performing procedures that respond to those risks. Such
procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial
procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial
procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial
statements. Our audits also included evaluating the accounting principles used and significant estimates made
statements. Our audits also included evaluating the accounting principles used and significant estimates made
statements. Our audits also included evaluating the accounting principles used and significant estimates made
by management, as well as evaluating the overall presentation of the financial statements. We believe that our
by management, as well as evaluating the overall presentation of the financial statements. We believe that our
by management, as well as evaluating the overall presentation of the financial statements. We believe that our
audits provide a reasonable basis for our opinion.
audits provide a reasonable basis for our opinion.
audits provide a reasonable basis for our opinion.
We have served as the Company’s auditor since 2006.
We have served as the Company’s auditor since 2006.
We have served as the Company’s auditor since 2006.
Atlanta, Georgia
Atlanta, Georgia
Atlanta, Georgia
March 13, 2019
March 13, 2019
March 13, 2019
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
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)
2018
2017
2016
2015
2014
$ 616,786
$ 650,424
$ 688,014
$ 641,004
$ 668,895
222,110
54,598
273,346
473,506
36,142
86,934
245,206
51,163
280,449
529,570
11,198
89,499
233,578
48,150
315,355
575,016
6,257
88,461
202,807
19,025
337,557
512,707
18,409
91,839
215,122
17,784
362,407
516,920
38,708
94,951
$ 19,750
$
18,503
$
18,493
$
19,311
$ 22,156
2,658
17,092
122
16,970
6,103
22,480
593
(36)
629
$
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
$
(4,592)
$ (10,004)
Per Share Data
Basic and diluted earnings (loss) per share
$
Dividends per share
Book value
.13
.02
17.59
$
.54
.01
17.84
$
.03
$
(.90)
$
(1.95)
17.27
17.93
.10
18.53
Weighted average number of shares
5,031,778
5,123,076
5,123,186
5,123,186
5,123,186
Selected Ratios
Return on average assets
Return on average equity
0.10%
0.71%
0.41%
3.08%
0.02%
0.19%
Primary capital to average assets
14.43%
14.34%
13.99%
(.69%)
(4.92%)
15.06%
(1.38%)
(10.31%)
14.38%
Risk-based capital ratios:
Tier 1
Total
24.05%
25.30%
23.87%
25.12%
21.69%
22.94%
20.58%
21.83%
20.70%
21.95%
37
P E O P L E S F I N A N C I A L C O R P O R A T I O N A N D S U B S I D I A R I E S
C O R P O R AT E I N F O R M AT I O N A N D M A R K E T I N F O R M AT I O N
Corporate Information:
Mailing Address
P. O. Box 529
Biloxi, MS 39533-0529
Website
www.thepeoples.com
Physical Address
152 Lameuse Street
Biloxi, MS 39530
(228) 435-8205
Corporate Stock
The common stock of Peoples Financial Corporation is traded on
the OTCQX Best Market under the symbol: PFBX.
S.E.C. Form 10-K Requests
A copy of the Annual Report on Form 10-K, as filed with the Secu-
rities 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
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
P.O. Box 1416, Biloxi, MS 39533-1416
(228) 435-8208
e-mail: investorrelations@thepeoples.com
Independent Registered Public Accounting Firm
Porter Keadle Moore, LLC
Atlanta, Georgia
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, 2019, 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 4,943,186 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 2017 and by OCTQX for the fourth quarter of 2017 and for all quarters of 2018. The quotations reflect inter-dealer prices,
without retail mark-up, mark-down or commission and may not necessarily represent actual transactions.
Year
2018
2017
Quarter
1st
2nd
3rd
4th
1st
2nd
3rd
4th - NASDAQ
4th - QTCQX
$
$
High
14.70
14.25
14.08
13.50
16.35
15.27
14.95
15.30
13.25
Dividend per share
$
.01
.01
.01
$
$
$
Low
12.60
13.65
12.95
11.20
13.80
12.60
12.85
12.05
12.21
38
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
1740 Popps Ferry Road, Biloxi, Mississippi 39532
10491 Lemoyne Boulevard, D’Iberville, Mississippi 39540
(228) 435-8202
D’Iberville - St. Martin
(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
39
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
BOAR D OF DI RE CTORS
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
Padrick D. Dennis, Vice President, Specialty Contractors & Associates, Inc.
A. Wes Fulmer, Executive Vice-President, Peoples Financial Corporation
and The Peoples Bank, Biloxi, Mississippi
Rex E. Kelly, Principal, Strategic Communications
Dan Magruder, Retired Business Executive
Jeffrey H. O’Keefe, Chairman, Bradford-O’Keefe Funeral Homes, Inc.
Paige Reed Riley, Owner, Hillyer House
George J. Sliman, III, President, SunStates Holdings, Inc.
A. Tanner Swetman, Vice President, The Peoples Bank, Biloxi, Mississippi
SEN IOR MANAGEMENT
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
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