<PAGE>

                                  March 2, 2001






Dear Shareholders:

         On behalf of the Board of Directors, I am pleased to invite you to
attend our Annual Meeting of Shareholders to be held on Wednesday, March 28,
2001, at 10:00 a.m., Eastern Time, at the Holiday Inn, Route 68 and I-80,
Clarion, Pennsylvania 16214. At the annual meeting you will have the opportunity
to ask questions and to make comments. We enclose your proxy and the
corporation's 2000 Annual Report to Shareholders with this proxy statement.

         The principal business of the meeting is to elect 9 directors to serve
a term of 1 year, to ratify the selection of Edwards, Sauer & Owens of
Pittsburgh, Pennsylvania, Certified Public Accountants, as the auditors of the
corporation for 2001, and to transact any other business that is properly
presented at the annual meeting. The notice of the meeting and proxy statement
accompanying this letter describe the specific business to be acted upon in more
detail.

         I am delighted you have chosen to invest in the corporation, and I hope
that, whether or not you plan to attend the annual meeting, you will vote as
soon as possible by completing, signing and returning the enclosed proxy in the
envelope provided. The prompt return of your proxy will save the corporation
expenses involved in further communications. Your vote is important. Voting by
written proxy will ensure your representation at the annual meeting if you do
not attend in person.

         I look forward to seeing you on March 28, 2001, at corporation's annual
meeting.

                                             Sincerely,



                                             Raleigh B. Robertson, President and
                                              Chief Executive Officer












<PAGE>



                    NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
                        OF PEOPLES FINANCIAL CORP., INC.
                          TO BE HELD ON MARCH 28, 2001

TO THE SHAREHOLDERS:

         NOTICE IS HEREBY GIVEN that Peoples Financial Corp., Inc. will hold its
Annual Meeting of Shareholders on Wednesday, March 28, 2001, at 10:00 a.m., at
the Holiday Inn, Route 68 at 1-80, Clarion, Pennsylvania 16214, to consider and
vote upon the following proposals:

1.       Election of 9 directors: Frank T. Baker, Darl Hetrick, Francis E. Kane,
         Raleigh B. Robertson, Raleigh B. Robertson, Jr., Timothy P. Reddinger,
         J. Jack Sherman, Howard H. Shreckengost, and William H. Toy, each for a
         term of 1 year;

2.       Ratification of the selection of Edwards, Sauer & Owens, Certified
         Public Accountants, of Pittsburgh, Pennsylvania, as independent
         accountants for the corporation for 2001; and

3.       Transaction of any other business properly brought before the Annual
         Meeting.

         Shareholders, as of February 15, 2001, may vote at the annual meeting,
either in person or by proxy. If you plan to attend the annual meeting, please
mark the appropriate area when you vote on your proxy.

         Management welcomes your attendance at the annual meeting. Whether or
not you expect to attend the annual meeting in person, we ask you to complete,
sign, date and promptly return the enclosed proxy in the accompanying
postage-paid envelope. Prompt return of your proxy saves the expense involved in
further communications. Even if you return a proxy, you may vote in person if
you give written notice to the Secretary of the corporation and attend the
annual meeting. We urge you to mark, sign, date and promptly return your proxy
in the enclosed envelope so that proxy holders may vote your shares in
accordance with your wishes and so that we may assure the presence of a quorum.

         The corporation's Board of Directors distributes this proxy statement,
form of proxy and Peoples Financial Corp., Inc.'s 2000 Annual Report on or about
March 2, 2001.

                                             By Order of the Board of Directors,



                                             Raleigh B. Robertson, President and
                                             Chief Executive Officer
Ford City, Pennsylvania
March 2, 2001

                            YOUR VOTE IS IMPORTANT.
TO VOTE YOUR SHARES, PLEASE SIGN, DATE AND COMPLETE THE ENCLOSED PROXY AND MAIL
IT PROMPTLY IN THE ENCLOSED, POSTAGE-PAID RETURN ENVELOPE.







<PAGE>



                          PEOPLES FINANCIAL CORP. INC.
                              FOURTH & FORD STREETS
                               FORD CITY, PA 16226



                              Trading Symbol: PPFN







                                 PROXY STATEMENT

                       2001 ANNUAL MEETING OF SHAREHOLDERS

                          To be held on March 28, 2001














                Mailed to Shareholders on or about March 2, 2001


<PAGE>



                                Table of Contents
                                -----------------
                                                                           Page
FREQUENTLY ASKED QUESTIONS AND ANSWERS                                     ---

Proxy Statement

GENERAL INFORMATION...........................................................1
     Date, Time and Place of Annual Meeting...................................1
     Description of the Corporation...........................................1

VOTING PROCEDURES.............................................................2
     Solicitation and Voting of Proxies.......................................2
     Quorum and Vote Required For Approval....................................2
     Revocability of Proxy....................................................3
     Methods of Voting........................................................3

BOARD OF DIRECTORS AND EXECUTIVE OFFICERS.....................................4
     Executive Officers of the Corporation....................................4
     Executive Officers of the Bank...........................................4
     Committees and Meetings of the Corporation's Board of Directors..........5
     Qualification and Nomination of Directors................................5
     Directors Meetings.......................................................7
     Compensation of Officers and Directors...................................7

EXECUTIVE COMPENSATION........................................................7
           Summary Compensation Table.........................................8
           Options/SAR Grants in Last Fiscal Year.............................8
     EMPLOYMENT AGREEMENT.....................................................8

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS................................9

BENEFICIAL OWNERSHIP OF THE CORPORATION'S STOCK OWNED BY
     PRINCIPAL OWNERS AND MANAGEMENT.........................................10
     Principal Shareholders..................................................10
     Share Ownership by the Directors, Officers and Nominees.................11

PROPOSALS....................................................................12
     ELECTION OF DIRECTORS...................................................12
     RATIFICATION OF EDWARDS, SAUER & OWENS, CERTIFIED PUBLIC
           ACCOUNTANTS, AS INDEPENDENT AUDITORS..............................13

SHAREHOLDERS PROPOSALS FOR 2002 ANNUAL MEETING...............................13

OTHER MATTERS THAT MAY COME BEFORE THE ANNUAL MEETING........................14



<PAGE>


                     FREQUENTLY ASKED QUESTIONS AND ANSWERS

Q:       WHO IS ENTITLED TO VOTE?

A:       Shareholders as of the close of business on the record date, February
         15, 2001, may vote at the meeting. Each share of common stock entitles
         a shareholder to one vote.

Q:       HOW DO I VOTE?

A:       There are two methods. You may vote by completing and mailing your
         proxy or by attending the annual meeting and voting in person. More
         details are on page 3 of this proxy statement.

Q:       HOW DOES DISCRETIONARY AUTHORITY APPLY?

A:       If you sign your proxy but do not make any selections, you give
         authority to Raleigh B. Robertson and Timothy P. Reddinger, as proxy
         holders, to vote on the two proposals and on any other matter that may
         arise at the meeting.

Q.       IS MY VOTE CONFIDENTIAL?

A:       Yes. Only the Judge of Elections and the proxy holders will have access
         to your proxy. All comments will remain confidential unless you ask
         that your name be disclosed.

Q:       WHO WILL COUNT THE VOTES?

A:       William Strong, Esquire will tabulate the votes and act as the Judge of
         Election.

Q:       WHAT DOES IT MEAN IF I GET MORE THAN ONE PROXY?

A:       Your shares are probably registered differently or are in more than one
         account. Sign and return all proxies to ensure that all your shares are
         voted. Please have all of your accounts registered in the same name and
         address. You may do this by contacting Timothy Reddinger, Secretary of
         the Corporation at (814) 275-3133.

Q.       WHAT CONSTITUTES A QUORUM?

A:       As of February 15, 2001, 1,773,052 and 1,665,412 shares of common stock
         were issued and outstanding, respectively. A majority of the
         outstanding shares, present or represented by proxy, constitutes a
         quorum. If you vote by proxy or in person, we will consider your shares
         as part of the quorum.

Q.       WHAT PERCENTAGE OF STOCK DO THE DIRECTORS AND OFFICERS OWN?

A:       Approximately 42.07% of our common stock as of February 15, 2001. More
         details are on page 11 of this proxy statement.




<PAGE>






                                 PROXY STATEMENT
                    FOR THE ANNUAL MEETING OF SHAREHOLDERS OF
                          PEOPLES FINANCIAL CORP., INC.
                          TO BE HELD ON MARCH 28, 2001


                               GENERAL INFORMATION


Date, Time and Place of Annual Meeting

         Peoples Financial Corp., Inc., a Pennsylvania business corporation and
registered bank holding company, is furnishing this proxy statement in
connection with the solicitation by the Board of Directors of proxies to be
voted at the Annual Meeting of Shareholders of the corporation. The annual
meeting will be held at Holiday Inn, Route 68 and 1-80, Clarion, Pennsylvania
16214, on Wednesday, March 28, 2001, at 10:00 a.m., Eastern Standard Time. The
principal executive office of the corporation is located at Ford Street and
Fourth Avenue, Ford City, Pennsylvania 16226. The telephone number for the
corporation is (724) 763-1221. All inquiries should be directed to James L.
Kifer, Executive Vice President of the corporation at (814) 275-3133.

Description of the Corporation

         PFC Bank incorporated Peoples Financial Corp., Inc. in 1984 to act as a
holding company under the laws of Pennsylvania. The bank is a wholly-owned
subsidiary of the corporation.

         The corporation is mailing a copy of the Annual Report for the fiscal
year ended December 31, 2000 with this proxy statement. You may obtain a copy of
the corporation's Annual Report for the 1999 fiscal year at no cost by
contacting Timothy Reddinger, Corporate Secretary, Peoples Financial Corp.,
Inc., 363 Broad Street, New Bethlehem, Pennsylvania 16242, telephone (814)
275-3133.

         We have not authorized anyone to provide you with information,
therefore, you should rely only on the information contained in this proxy
statement or referred to in this proxy statement. Although we believe we have
provided you with all the information you need to vote, events may occur at
Peoples Financial Corp., Inc. subsequent to printing this proxy statement that
might affect your decision or the value of your stock.





<PAGE>



                                VOTING PROCEDURES

Solicitation and Voting of Proxies

         The Board of Directors solicits this proxy for use at the 2001 Annual
Meeting of Shareholders. The directors, officers and other employees of the
corporation or bank may solicit proxies in person or by telephone, telecopy,
telegraph or mail, but only for use at the annual meeting. The corporation will
pay the cost of preparing, assembling, printing, mailing and soliciting proxies
and any additional material that the corporation sends to shareholders. The
corporation will make arrangements with brokerage houses and other custodians,
nominees and fiduciaries to forward proxy solicitation materials to the owners
of stock held by these persons. The corporation will reimburse these persons for
their reasonable forwarding expenses.

         Only shareholders of record as of the close of business on Thursday,
February 15, 2001, may vote at the annual meeting. The corporation's records
show that, as of February 15, 2001, 1,665,412 shares of the corporation's common
stock were outstanding. On all matters to come before the annual meeting,
shareholders may cast one vote for each share held. Cumulative voting rights do
not exist with respect to the election of directors. See "Principal
Shareholders" on page 10 for a list of the persons known by the corporation to
be the beneficial owner of five percent (5%) or more of the corporation's common
stock.

         By properly completing a proxy, you appoint Raleigh B. Robertson and
Timothy P. Reddinger as proxy holders to vote your shares as specified on the
proxy. Any proxy not specifying to the contrary will be voted as follows:

         FOR the election of Frank T. Baker, Darl Hetrick, Francis E. Kane,
         Raleigh B. Robertson, Raleigh B. Robertson, Jr., Timothy P. Reddinger,
         J. Jack Sherman, Howard H. Shreckengost, and William H. Toy, each for a
         term of 1 year; and

         FOR the ratification of the selection of Edwards, Sauer & Owens, as the
         independent accountants of the corporation for 2001.

Quorum and Vote Required For Approval

         In order to hold the annual meeting, there must be a "quorum" of
shareholders present. Under Pennsylvania law and the Bylaws of the corporation,
the presence, in person or by proxy, of the holders of a majority of the shares
entitled to vote is necessary to constitute a quorum for the transaction of
business at the meeting. We count votes withheld and abstentions in determining
the presence of a quorum for the particular matter. Broker non-votes are not
counted in determining the presence of a quorum for the particular matter as to
which the broker withheld authority.

         Assuming the presence of a quorum, the 9 nominees for director
receiving the highest number of votes cast by shareholders entitled to vote for
the election of directors will be elected. Votes withheld from a nominee and
broker non-votes will not be cast for the nominee.




<PAGE>



         Assuming the presence of a quorum, ratification of the selection of
independent auditors requires the affirmative vote of a majority of all votes
cast by shareholders. Abstentions and broker non-votes are not deemed to
constitute "votes cast" and, therefore, do not count either for or against
ratification. Abstentions and broker non-votes, however, have the practical
effect of reducing the number of affirmative votes required to achieve a
majority for the matter by reducing the total number of shares voted from which
the required majority is calculated.

Revocability of Proxy

         Shareholders who sign proxies may revoke them at any time before they
are voted by:

         o        delivering written notice of the revocation to Timothy
                  Reddinger, Secretary of the Corporation, at 363 Broad Street,
                  New Bethlehem, Pennsylvania 16242;

         o        delivering a properly executed proxy bearing a later date to
                  Timothy Reddinger, Secretary of the Corporation, at 363 Broad
                  Street, New Bethlehem, Pennsylvania 16242; or

         o        attending the meeting and voting in person after giving
                  written notice to the Secretary of the Corporation.

         You have the right to vote and, if desired, to revoke your proxy any
time before the annual meeting. Should you have any questions, please call
Timothy Reddinger, Secretary of the Corporation, at (814) 275-3133.

Methods of Voting

         Proxy Voting
         ------------

         o       Mark your selections.

         o       Date your proxy and sign your name exactly as it appears on
                 your proxy.

         o       Mail to Peoples Financial Corp., Inc. in the enclosed,
                 postage-paid envelope.


         Voting in Person
         ----------------

         o       Attend the annual meeting and show proof of eligibility to
                 vote.

         o       Obtain a proxy.

         o       Mark your selections.

         o       Date your proxy and sign your name exactly as it appears in the
                 transfer books of the corporation.




<PAGE>



                    BOARD OF DIRECTORS AND EXECUTIVE OFFICERS


Executive Officers of the Corporation

         The following table sets forth selected information about the principal
officers of the corporation, each of whom is elected by the Board of Directors
and each of whom holds office at the discretion of the Board of Directors:
<TABLE>
<CAPTION>
                                                     Position Held          Employee             Age as of
Name                             Position                Since               Since           February 15, 2001
----                             --------                -----               -----           -----------------
<S>                              <C>                 <C>                   <C>               <C>
Raleigh B. Robertson         President/CEO                1996              1996(1)                  72
Timothy P. Reddinger         Secretary                    1998                (2)                    41
Frank T. Baker               Chairman of                  1997                (2)                    65
                             the Board
James L. Kifer               Executive Vice               1997              1995(3)                  39
                             President
</TABLE>
------------------------
(1) Was an employee of New Bethlehem Bank from 1987 until December 31, 1994, and
    was a consultant to the bank until he was appointed Chairman and CEO on
    April 17, 1996, then President and CEO on April 8, 1997.
(2) Not an employee of the bank.
(3) Was employee of New Bethlehem Bank from 1984 until the merger (effective
    4/1/95) of New Bethlehem Bank with and into the bank.

Executive Officers of the Bank

         The following table sets forth selected information about the principal
officers of the bank, each of whom is elected by the Board of Directors and each
of whom holds office at the discretion of the Board of Directors:
<TABLE>
<CAPTION>
                                                     Position Held          Employee             Age as of
Name                             Position                Since               Since           February 15, 2001
----                             --------                -----               -----           -----------------
<S>                         <C>                      <C>                    <C>              <C>
Frank T. Baker               Chairman of                 1997                (2)                    65
                             the Board
Raleigh B. Robertson         President/CEO               1996              1996(1)                  72
Timothy P. Reddinger         Secretary                   1998                (2)                    41
James L. Kifer               Executive Vice              1997              1995(3)                  39
                             President
</TABLE>
-----------------------
(1) Was an employee of New Bethlehem Bank from 1987 until December 31, 1994 and
    was a consultant to the bank until he was appointed Chairman and CEO on
    April 17, 1996, then President and CEO on April 8, 1997.
(2) Not an employee of the bank.
(3) Was employee of New Bethlehem Bank from 1984 until the merger (effective
    4/1/95) of New Bethlehem Bank with and into the bank.





<PAGE>

Committees and Meetings of the Corporation's Board of Directors

         The corporation's Board of Directors does not have committees. The
entire Board meets to discuss the corporation's business.

Qualification and Nomination of Directors

         The Board of Directors nominated the 9 persons named below to serve as
directors until the 2002 annual meeting of shareholders. All of the nominees are
presently members of the Board of Directors and all have consented to serve
another term as a director if re-elected. If any of the nominees should be
unavailable to serve for any reason, a majority of the Board of Directors then
in office may fill the vacancy until the expiration of the term of the class of
directors to which he or she was appointed.

         The proxy holders intend to vote your proxy for the election of each of
the 9 nominees named below, unless you indicate that your vote should be
withheld from either or all of them. Each nominee elected as a director will
continue in office until his successor has been duly elected and qualified, or
until his death, resignation or retirement.

         The Board of Directors is proposing the following nominees for election
as Directors at the annual meeting:

         o      Frank T. Baker
         o      Darl Hetrick
         o      Frances E. Kane
         o      Timothy P. Reddinger
         o      Raleigh B. Robertson
         o      Raleigh B. Robertson, Jr.
         o      J. Jack Sherman
         o      Howard H. Shreckengost
         o      William H. Toy

         The Board of Directors recommends a vote FOR the election of the
above-named nominees for election as directors.

         We set forth below the principal occupation and certain other
information about the nominees and other directors whose terms of office will
continue after the annual meeting. You can find information about the share
ownership of the nominees and other directors on page 11.






<PAGE>



Current Directors (to serve until 2001)
         and
Nominees for Directors (to serve until 2002)

Frank T. Baker -- Director since 1973

         Dr. Baker serves as the Chairman of the Board of the corporation and of
the bank. Dr. Baker is a former professor at Indiana University of Pennsylvania.
He is currently retired. Dr. Baker has been a director of the corporation since
1984 and of the bank since 1973 and serves as Chairman of the Board of the bank.

Raleigh B. Robertson -- Director since 1993

         Mr. Robertson is the President and Chief Executive Officer of the
corporation and the President and Chief Executive Officer of the bank. He was
elected to the Board of Directors in connection with the merger of New Bethlehem
Bank, where he was a director since 1985. He has been a member of the bank's
Board of Directors since 1993.

Darl Hetrick - Director since 1993.

         Mr. Hetrick has been a director of the corporation and a director of
the bank since 1993. He was elected to the Board of Directors in connection with
the merger of New Bethlehem Bank, where he was a director since 1983. He is the
owner of Hetrick's Farm Supply (a farm machinery distributor, located in New
Bethlehem, Pennsylvania.)

Francis E. Kane -- Director since 1955.

         Mr. Kane has been a director of the corporation since 1984 and a
director of the bank since 1955. He is currently retired.

Timothy P. Reddinger - Director since 1998.

         Mr. Reddinger has been a director of the corporation and a director of
the bank since 1998. He is the Secretary of the Corporation.

Raleigh B. Robertson, Jr.-- Director since 1995.

         Mr. Robertson has been a director of the corporation and a director of
the bank since 1995. He was elected to the Board of Directors in connection with
the merger of New Bethlehem Bank, where he was a director since 1994. He is a
partner in R. B. Robertson & Son, (an oil and gas business located in New
Bethlehem, Pennsylvania.)




<PAGE>



J Jack Sherman -- Director since 1995.

         Mr. Sherman has been a director of the corporation and a director of
the bank since 1995. He was elected to the Board of Directors in connection with
the merger of New Bethlehem Bank, where he was a director since 1994. He is
President of Allegheny Valley Development, located in Tionesta, Pennsylvania.

Howard H Shreckengost - Director since 1995.

         Mr. Shreckengost has been a director of the corporation and a director
of the bank since 1995. He was elected to the Board of Directors in connection
with the merger of New Bethlehem Bank, where he was a director since 1994. He is
Manager of Char-Val Candy Company (a candy manufacturer, located in New
Bethlehem, Pennsylvania.)

William H Toy -- Director since 1992.

         Mr. Toy has been a director of the corporation and a director of the
bank since 1992. He is the owner of Spic & Span Cleaners and Sail Care (dry
cleaning and sail maintenance businesses, located in Ford City, Pennsylvania.)

Directors Meetings

         In 2000 each of the directors attended at least 75% of the total number
of Board of Directors meetings for the corporation and the bank.

Compensation of Officers and Directors

         We set forth in the Summary Compensation Table all cash compensation
for services in all capacities paid by the corporation and the bank during the
years1998-2000 to the Chief Executive Officer and up to four of the most highly
compensated executive officers of the corporation and the bank to the extent
that these officer's aggregate cash compensation exceeds $100,000.


                             EXECUTIVE COMPENSATION

         The Board of Directors of Peoples Financial Corp., Inc. governs the
corporation and its subsidiary, PFC Bank. In fulfilling its fiduciary duties,
the Board of Directors acts in the best interests of the corporation's
shareholders, customers and the communities served by the corporation and its
subsidiary. To accomplish the strategic goals and objectives of the corporation,
the Board of Directors engages competent persons who undertake to accomplish
these objectives with integrity and in a cost-effective manner. The compensation
of these individuals is part of the Board of Directors' fulfillment of its
duties to accomplish the corporation's strategic mission. Officers of the
corporation are not compensated. The bank provides compensation to the employees
of the bank.



<PAGE>


         General labor market conditions, the specific responsibilities of the
individual, and the individual's contributions to the bank's success influence
total compensation opportunities available to the employees of the bank.
Individuals are reviewed annually on a calendar year basis. The bank strives to
offer compensation that is competitive with that offered by employers of
comparable size in our industry. Through these compensation policies, the bank
strives to meet its strategic goals and objectives to its constituencies and to
provide compensation that is fair and meaningful to its employees.

                           Summary Compensation Table
                          Annual Compensation 1998-2000


                                                                   Other Annual
Name and Principal Position        Year    Salary($)   Bonus($)  Compensation($)
---------------------------        ----    ---------   --------  ---------------
Raleigh B. Robertson,              2000   145,924.48   110,000     83,333.33(1)
President/CEO                      1999   142,652.70    72,000     83,344.74(1)
                                   1998   144,235.08    72,000     83,358.16(1)

--------
(1) Contingent compensation paid in 1998, 1999 and 2000.


                     OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
                                Individual Grants

         The corporation did not grant stock options or stock appreciation
rights in 2000.


                              EMPLOYMENT AGREEMENT

         In 1997, Peoples Financial Corp., Inc. and PFC Bank entered into a
three-year employment agreement with R. B. Robertson, engaging Mr. Robertson as
the President and Chief Executive Officer of the bank and of the corporation and
as a member of the Board of Directors of the bank and the corporation. The
employment agreement may be terminated by the corporation or the bank for cause,
as defined in the agreement. If Mr. Robertson is terminated for cause or the
agreement is not renewed, the bank and/or the corporation will pay him his
salary through the date of termination and will have no further obligations
under the agreement.

         If the bank and/or the corporation terminate Mr. Robertson's employment
(other than for his death, disability, for cause or as a result of nonrenewal of
the agreement, or if Mr. Robertson terminates his employment for "good reason"),
Mr. Robertson receives his salary through the last day of the term of the
agreement and, then, the bank and corporation have no further obligations to Mr.
Robertson.

         Upon expiration of the agreement, Mr. Robertson will receive $1,666.67
a month to serve as a consultant to the bank and the corporation. Mr.
Robertson's services as a consultant may be terminated upon 30 days written
notice by either party and automatically terminate after 36 months. The
employment agreement also contains a nondisclosure clause and a restrictive
covenant, barring Mr. Robertson's direct or indirect competition with the bank
or corporation for a period of one year from the date of termination of his
employment.



<PAGE>

         In addition to his annual salary, the Board of Directors may, in its
sole discretion, provide for a bonus to the executive as it may deem appropriate
to provide incentive to Mr. Robertson and reward Mr. Robertson for his
performance.

         Mr. Robertson also received 6,536 shares of the corporation's common
stock pursuant to the terms of a Stock Option Agreement. The options vested over
a three-year period, according to the following schedule:

         o     2,178 shares on the date of grant;
         o     2,179 shares on September 2, 1998; and
         o     2,179 shares on September 2, 1999.

         The agreement also provided for contingent consideration to Mr.
Robertson of $83,333.33 to be paid on September 2, 1997, September 2, 1998 and
September 2, 1999.

         The corporation and the bank amended R. B. Robertson's executive
employment agreement in 1999 to provide for an additional 3 years to August 31,
2003. The amended agreement also provides a disability or retirement joint and
survivor benefit in a monthly sum of $1,200, to commence on the earlier of Mr.
Robertson's disability or retirement and continuing until the later of his or
his wife's death.


                 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         The corporation and the bank have not entered into any material
transactions, proposed or consummated, with any director or executive officer of
the corporation and the bank, or any associate of the foregoing persons. The
corporation and the bank have engaged in and intend to continue to engage in
banking and financial transactions in the ordinary course of business with
directors and officers of the corporation and the bank and their associates on
comparable terms with similar interest rates as those prevailing from time to
time for other customers of the corporation and the bank.

         Total loans outstanding from the corporation and the bank at December
31, 2000, to the corporation's and the bank's officers and directors as a group,
members of their immediate families and companies in which they had an ownership
interest of 10% or more amounted to $239,300, or approximately .066% of the
total equity capital of the bank. The bank made these loans in the ordinary
course of business, were made on substantially the same terms, including
interest rates and collateral, as those prevailing at the time for comparable
transactions with other persons, and did not involve more than the normal risk
of collection or present other unfavorable features.



<PAGE>




                           BENEFICIAL OWNERSHIP OF THE
                          CORPORATION'S STOCK OWNED BY
                         PRINCIPAL OWNERS AND MANAGEMENT

Principal Shareholders

         We set forth in the following table, as of February 15, 2001, the name
and address of each person who owns of record or who is known by the Board of
Directors to be the beneficial owner of more than 5% of the corporation's
outstanding common stock, the number of shares beneficially owned by the person
and the percentage of the corporation's outstanding common stock so owned.

--------------------------------------------------------------------------------
                                                                Percent of
                                                               Outstanding
                                        Shares                 Common Stock
Name and Address                Beneficially Owned(1)       Beneficially Owned
----------------                ------------------          ------------------
--------------------------------------------------------------------------------
J. Jack Sherman                       212,820(2)                  12.70%
P. O. Box 324
Tionesta, PA  16353
--------------------------------------------------------------------------------
Howard H. Shreckengost                131,747(3)                  7.91%
406 Vine Street
New Bethlehem, PA  16242
--------------------------------------------------------------------------------
CEDE & CO                              122,663                    7.37%
c/o The Depository Trust
P. O. Box 222
Bowling Green Station
New York, NY  10274
--------------------------------------------------------------------------------
William H. Toy                        91,623(4)                   5.50%
RR #7
Kittanning, PA 16201
--------------------------------------------------------------------------------
Darl Hetrick                          84,633(5)                   5.08%
RR#3, Box 173
New Bethlehem, PA 16242
--------------------------------------------------------------------------------
-------------------
(1) For the definition of "beneficial ownership"see footnote 1 below under the
    caption entitled "Share Ownership by the Directors, Officers and Nominees.
(2) Mr. Sherman holds 211,434 individually and his spouse holds 1,386 shares
    individually.
(3) Mr. Shreckengost holds the shares jointly with his spouse.
(4) Mr. Toy holds the shares jointly with his spouse.
(5) Mr. Hetrick holds 67,497 shares jointly with his spouse, 10,479 shares
    jointly with his son, his spouse and son hold 5,925 shares and his spouse
    holds 732 shares individually.



<PAGE>



Share Ownership by the Directors, Officers and Nominees

         We set forth in the following table, as of February 15, 2001, and from
information received from the respective individuals, the amount and percentage
of the common stock beneficially owned by each director, each nominee and all
officers, directors and nominees of the corporation as a group.


Name of Individual or                       Amount and Nature of      Percent of
Identity of Group                         Beneficial Ownership (1)      Class
-----------------                         --------------------          -----
Frank T. Baker                                   75,934(3)               4.56%
Darl Hetrick                                     84,633(4)               5.08%
Francis E. Kane                                  12,691(5)                .76%
Timothy Reddinger                                16,419(6)                .99%
Raleigh B. Robertson                             37,175(7)               2.23%
Raleigh B. Robertson, Jr.                        49,020(8)               2.94%
J. Jack Sherman                                 212,820                 12.78%
Howard H. Shreckengost                          131,747(2)               7.91%
William H. Toy                                   91,623(9)               5.50%
(All officers and directors as a Group,         700,654                 42.07%
10 persons total)

-----------------------
(1) Beneficial ownership by an individual is determined in accordance with the
    definitions of 'beneficial ownership" set forth in the General Rules and
    Regulations of the Securities and Exchange Commission and may include
    securities owned by or for the individual's spouse and minor children and
    any other relative who has the same home, as well as securities to which the
    individual has or shares voting or investment power or has the right to
    acquire beneficial ownership within 60 days after February __, 2001.
    Beneficial ownership may be disclaimed as to certain of the securities.

(2) See footnote 3 above under the caption "Principal Beneficial Owners of the
    Corporation's Stock."

(3) Mr. Baker holds 11,167 shares jointly with his spouse, 33,543 individually
    and his spouse holds 31,224 individually.

(4) See footnote 5 above, under the caption "Principal Beneficial Owners of the
    Corporation's Stock.

(5) Mr. Kane holds 12,691 shares jointly with his spouse.

(6) Mr. Reddinger holds 2,301 shares jointly with his spouse and 14,118
    individually.



<PAGE>



(7) Mr. Raleigh B. Robertson holds 100 shares individually; 16,566 shares
    jointly with his spouse; 12,108 shares jointly with his son, Raleigh B.
    Robertson, Jr.; 6,150 shares jointly with his son, Richard W. Robertson; his
    spouse holds 888 shares individually; and 340, 341, 341 and 341 shares
    jointly with her daughter Vicki Brill, her son Gregory Holmes, her
    granddaughter Michelle D. Robertson, and her grandson Robert Robertson,
    respectively.

(8) Mr. Raleigh B. Robertson, Jr. holds 22,720 shares jointly with his spouse,
    6,484 shares jointly with his son, 6,482 shares jointly with his daughter,
    12,108 shares jointly with his father, Raleigh B. Robertson, and his son and
    daughter own 1,226 shares jointly.

(9) See footnote 4 above, under the caption "Principal Beneficial Owners of the
    Corporation's Stock.


                                    PROPOSALS

1.  ELECTION OF DIRECTORS.

    Nominees for election this year are:

    o     Frank T. Baker (director since 1984)
    o     Darl Hetrick (director since 1993)
    o     Francis E. Kane (director since 1984)
    o     Timothy P. Reddinger (director since 1998)
    o     Raleigh B. Robertson (director since 1993)
    o     Raleigh B. Robertson, Jr. (director since 1995)
    o     J. Jack Sherman (director since 1995)
    o     Howard H. Shreckengost (director since 1995)
    o     William H. Toy (director since 1992)

    Each has consented to serve a one-year term. (See pages 6 and 7 for more
information.)

    If any director is unable to stand for re-election, the Board may designate
a substitute. Proxy holders will vote in favor of a substitute nominee. The
Board of Directors has no reason to believe the 9 nominees will be unable to
serve if elected.

    Cumulative voting rights do not exist with respect to the election of
directors. The affirmative vote of the majority of shares present (in person or
by proxy and entitled to vote at the annual meeting) is needed to elect a
director.


<PAGE>




         The Board of Directors recommends a vote FOR the election of the
nominees as Directors.

2.       RATIFICATION OF EDWARDS, SAUER & OWENS, CERTIFIED PUBLIC
         ACCOUNTANTS, AS INDEPENDENT AUDITORS.

         The bank's Audit Committee and the Board of Directors of the
corporation and the bank believe that Edwards, Sauer & Owens's knowledge of the
corporation and the bank is invaluable. Edwards, Sauer & Owens, advised the
corporation that none of its members has any financial interest in the
corporation. Edwards, Sauer & Owens, served as the corporation's independent
auditors for the 2000 fiscal year. They assisted the corporation and the bank
with the preparation of their federal and state tax returns and provided
assistance in connection with regulatory matters, charging the bank for such
services at its customary hourly billing rates. The corporation's and the bank's
Board of Directors approved these non-audit services after due consideration of
the accountants' objectivity and after finding them to be wholly independent.

         In the event that the shareholders do not ratify the selection of
Edwards, Sauer & Owens, as the corporation's independent auditors for the 2001
fiscal year, the Board of Directors may choose another accounting firm to
provide independent public accountant audit services for the 2001 fiscal year.
Representatives of Edwards, Sauer & Owens, will attend the annual meeting to
answer questions.

         The affirmative vote of the majority of shares present (in person or by
proxy and entitled to vote at the annual meeting) is needed to ratify Edwards,
Sauer & Owens, as independent auditors for 2001.

         The Board of Directors recommends a vote FOR the ratification of
Edwards, Sauer & Owens, Certified Public Accountants, as independent auditors.


                 SHAREHOLDERS PROPOSALS FOR 2002 ANNUAL MEETING

         Any shareholder who, in accordance with the corporation's Bylaws,
wishes to submit a proposal for inclusion in the corporation's proxy statement
for its 2002 Annual Meeting of Shareholders must deliver such proposal in
writing to the Secretary of Peoples Financial Corp., Inc. at its principal
executive office, 363 Broad Street, New Bethlehem, Pennsylvania 16242, not later
than November 2, 2001.


              OTHER MATTERS THAT MAY COME BEFORE THE ANNUAL MEETING

         The Board of Directors knows of no matters other than those referred to
in the accompanying Notice of Annual Meeting of Shareholders that properly may
come before the annual meeting. However, if any other matter should be properly
presented for consideration and voting at the annual meeting or any adjournments
of the meeting, the persons named as proxy holders will vote the proxies in what
they determine to be the best interest of the corporation.





<PAGE>



                          PEOPLES FINANCIAL CORP., INC.
                                      PROXY

           ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON MARCH 28, 2001
           THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

         The undersigned hereby constitutes and appoints Raleigh B. Robertson
and Timothy P. Reddinger and each or any of them, proxies of the undersigned,
with full power of substitution to vote all of the shares of Peoples Financial
Corp., Inc. that the undersigned may be entitled to vote at the Annual Meeting
of Shareholders to be held at the Holiday Inn, Route 68 and I-80, Clarion,
Pennsylvania 16214, on Wednesday, March 28, 2001 at 10:00 a.m., prevailing time,
and at any adjournment or postponement thereof as follows:

1.       ELECTION OF DIRECTORS TO SERVE FOR A ONE-YEAR TERM.

              Frank T. Baker                           Raleigh B. Robertson, Jr.
              Darl Hetrick                             J. Jack Sherman
              Francis E. Kane                          Howard H. Shreckengost
              Timothy P. Reddinger                     William H. Toy
              Raleigh B. Robertson

         [ ]  FOR all nominees                     [ ] WITHHOLD AUTHORITY
              listed above (except                     to vote for all nominees
              as marked to the contrary below)         listed above

         The Board of Directors recommends a vote FOR these nominees.

         (INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL
         NOMINEE, WRITE THAT NOMINEE'S NAME ON THE SPACE PROVIDED
         BELOW.)


--------------------------------------------------------------------------------

2.       RATIFICATION OF THE SELECTION OF EDWARDS, SAUER & OWENS,
         CERTIFIED PUBLIC ACCOUNTANTS, OF PITTSBURGH, PENNSYLVANIA, AS
         THE INDEPENDENT AUDITORS FOR THE YEAR ENDING DECEMBER 31, 2001.

              [ ] FOR             [ ] AGAINST            [ ] ABSTAIN

         The Board of Directors recommends a vote FOR this proposal.
--------------------------------------------------------------------------------





<PAGE>


3.       In their discretion, the proxy holders are authorized to vote upon such
         other business as may properly come before the meeting and any
         adjournment or postponement thereof.

THIS PROXY, WHEN PROPERLY SIGNED AND DATED, WILL BE VOTED IN THE MANNER DIRECTED
BY THE UNDERSIGNED SHAREHOLDERS. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR ALL NOMINEES LISTED ABOVE AND FOR PROPOSAL 2.

Dated: ______________________, 2001                   __________________________
                                                      Signature

                                                      __________________________
                                                      Signature
Number of Shares Held of Record
on February 15, 2001


______________

THIS PROXY MUST BE DATED, SIGNED BY THE SHAREHOLDER AND RETURNED
PROMPTLY TO THE CORPORATION IN THE ENCLOSED ENVELOPE.  WHEN SIGNING
AS ATTORNEY, EXECUTOR, ADMINISTRATOR, TRUSTEE OR GUARDIAN, PLEASE
GIVE FULL TITLE.  IF MORE THAN ONE TRUSTEE, ALL SHOULD SIGN.  IF STOCK IS
HELD JOINTLY, EACH OWNER SHOULD SIGN.