<PAGE>

                     U.S. SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                    Form 10-Q
(Mark one)
   [X]        QUARTERLY REPORT PURSUANT SECTION 13 OR 15(d) OF THE
              SECURITIES EXCHANGE ACT OF 1934

              For the quarterly period ended      June  30, 2001
                                            ------------------------------------

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

              For the transition period from                to
                                            ------------------------------------

              Commission file number          33-88802
                                    --------------------------------------------

                          PEOPLES FINANCIAL CORP., INC.
       -------------------------------------------------------------------------
          (Exact name of small business issuer as specified in its charter)

                Pennsylvania                              25-1469914
       -------------------------------------------------------------------------
       (State or other jurisdiction of         (IRS Employer Identification No.)
        incorporation or organization)

                Ford Street and Fourth Avenue, Ford City, PA 16226
       -------------------------------------------------------------------------
                     (Address of principal executive offices)

                                 (724) 763-1221
       -------------------------------------------------------------------------
                           (Issuer's telephone number)


       -------------------------------------------------------------------------
              (Former name, former address and former fiscal year,
                          if changed since last report)

         Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes XX  No
                                                                       ---   ---

                      APPLICABLE ONLY TO CORPORATE ISSUERS

         State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable dates:   August 1, 2001
                                                      --------------------------

         As of August 1, 2001, there were 1,665,412 shares of the Registrant's
common stock, $0.30 par value, outstanding.

<PAGE>


PEOPLES FINANCIAL CORP., INC. AND SUBSIDIARY

<TABLE>
<CAPTION>
<S>          <C>                                                                                           <C>
INDEX                                                                                                      PAGE
PART I.       FINANCIAL INFORMATION

ITEM 1.       Financial Statements

              Consolidated Balance Sheets -
              June 30, 2001 (unaudited), December 31, 2000 and June 30, 2000 (unaudited).................     1

              Consolidated Statements of Income -
              Six months ended June 30, 2001 and 2000 (unaudited)........................................     2

              Consolidated Statements of Income -
              Three months ended June 30, 2001 and 2000 (unaudited)......................................     3

              Consolidated Statements of Cash Flows -
              Six months ended June 30, 2001 and 2000 (unaudited)........................................     4

              Notes to Consolidated Financial Statements.................................................     5

ITEM 2.       Management's Discussion and Analysis of
              Financial Condition and Results of Operation...............................................     7

ITEM 3.       Quantitative and Qualitative Disclosure about Market Risk..................................    12

PART II.      OTHER INFORMATION

ITEM 1.       Legal Proceedings..........................................................................    13

ITEM 2.       Changes in Securities......................................................................    13

ITEM 3.       Defaults Upon Senior Securities............................................................    13

ITEM 4.       Submission of Matters to a Vote of Security Holders........................................    13

ITEM 5.       Other Information..........................................................................    13

ITEM 6.       Exhibits and Reports on Form 8-K...........................................................    13

SIGNATURES...............................................................................................    15

</TABLE>

<PAGE>



PART I.  FINANCIAL INFORMATION
ITEM 1.  FINANCIAL STATEMENTS

PEOPLES FINANCIAL CORP., INC.  AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>

                                                                      June 30,                                  June 30,
                                                                        2001              December 31             2000
                                                                     (Unaudited)             2000              (Unaudited)
                                                                    -------------        --------------       -------------
<S>                                                                  <C>                      <C>               <C>
ASSETS
     Cash and due from banks                                          $ 26,744,840         $ 14,512,019        $  12,330,115
     Federal funds sold                                                  1,975,000            2,250,000            3,900,000
     Available-for-sale securities                                      29,200,791           25,418,773           23,761,720
     Held-to-maturity securities                                        36,486,873           37,463,536           39,478,619
     Federal Home Loan Bank stock, at cost                               1,446,700            1,408,400            1,408,400
     Loans receivable, net                                             217,182,711          213,446,066          206,877,349
     Premises and equipment, net                                         2,880,267            2,879,633            2,955,790
     Other assets                                                        2,470,871            4,100,356            2,545,424
                                                                      ------------         ------------         ------------

          Total Assets                                                $318,388,053         $301,478,783         $293,257,417
                                                                      ============         ============         ============

LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES
     Deposits
          Non-interest bearing                                        $ 31,995,317         $ 29,726,219        $  32,386,091
          Interest bearing                                             232,031,171          222,287,942          216,429,399
                                                                      ------------         ------------         ------------
          Total deposits                                               264,026,488          252,014,161          248,815,490

     FHLB Borrowings                                                     5,000,000            5,000,000                    0
     Accrued interest and other liabilities                              9,432,580            8,289,607            7,276,779
                                                                      ------------         ------------         ------------

          Total Liabilities                                            278,459,068          265,303,768          256,092,269

STOCKHOLDERS' EQUITY
     Common stock, par value                                               531,916              531,916              531,916
     Surplus                                                             3,832,083            3,832,083            3,832,083
     Retained earnings                                                  26,597,415           25,041,232           23,670,383
     Accumulated other comprehensive income                             12,916,517           10,718,730            9,130,766
     Treasury stock                                                    (3,948,946)          (3,948,946)                    0
                                                                      ------------         ------------         ------------
          Total stockholders' equity                                    39,928,985           36,175,015           37,165,148
                                                                      ------------         ------------         ------------

          Total Liabilities and Stockholders Equity                  $ 318,388,053        $ 301,478,783        $ 293,257,417
                                                                     =============        =============        =============
</TABLE>

              The accompanying notes are an integral part of these
                       consolidated financial statements.

<PAGE>

PEOPLES FINANCIAL CORP., INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
<TABLE>
<CAPTION>

                                                                                           Six Months Ended June 30,
                                                                                          2001                  2000
                                                                                      -----------           ------------
<S>                                                                                  <C>                       <C>
Interest income
  Loans                                                                              $  8,768,383            $ 8,180,751
  Investment securities                                                                 1,640,657              1,660,648
  Interest-bearing deposits                                                               247,789                303,879
  Federal funds sold                                                                      221,960                265,196
                                                                                     ------------            -----------
          Total interest income                                                        10,878,789             10,410,474

Interest Expense
  Deposits                                                                              5,818,595              5,387,254
  FHLB borrowings                                                                         166,293                 21,836
                                                                                     ------------            -----------
          Total interest expense                                                        5,984,888              5,409,090
                                                                                     ------------            -----------
Net Interest Income                                                                     4,893,901              5,001,384
Provision for Loan Losses                                                                  30,000                 30,000
                                                                                     ------------            -----------
Net Interest Income after Provision for Loan Losses                                     4,863,901              4,971,384

Other Income
  Service fees                                                                            237,348                253,569
  Net investment gains                                                                  1,077,546                  8,301
  Other                                                                                    55,919                 42,201
                                                                                     ------------            -----------
      Total other income                                                                1,370,813                304,071

Other Expenses
  Salaries                                                                              1,002,148              1,008,116
  Pension and other employee benefits                                                     471,033                453,369
  Occupancy expense                                                                       506,845                550,227
  Legal and professional                                                                   90,526                 65,965
  Regulatory fees                                                                          41,685                 42,889
  Data processing                                                                         117,219                103,267
  Other                                                                                   941,962                774,532
                                                                                     ------------            -----------
      Total other expenses                                                              3,171,418              2,998,365

Income Before Income Taxes                                                              3,063,296              2,277,090

Provision for Income Taxes                                                                924,218                627,427
                                                                                     ------------            -----------
Net Income                                                                           $  2,139,078            $ 1,649,663
                                                                                     ============            ===========
Net Income per Share of Common Stock                                                   $     1.28              $     .93
                                                                                     ============            ===========
Net Income per Share of Common Stock (fully diluted)                                   $     1.28              $     .93
                                                                                     ============            ===========
Weighted Average Shares Used in Computing Net Income
  per Share of Common Stock                                                             1,665,412              1,773,052
                                                                                     ============            ===========
</TABLE>

              The accompanying notes are an integral part of these
                       consolidated financial statements.
<PAGE>

PEOPLES FINANCIAL CORP., INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
<TABLE>
<CAPTION>

                                                                                         Three months Ended June 30,
                                                                                          2001                   2000
                                                                                      ------------           ------------
<S>                                                                                  <C>                     <C>
Interest Income
  Loans                                                                              $  4,429,636            $ 4,166,662
  Investment securities                                                                   808,368                886,067
  Interest-bearing deposits                                                               150,296                110,861
  Federal funds sold                                                                      103,703                131,200
                                                                                     ------------            -----------
          Total interest income                                                         5,492,003              5,294,790

Interest Expense
  Deposits                                                                              2,892,909              2,703,941
  FHLB borrowings                                                                          83,146                      0
                                                                                     ------------            -----------
          Total interest expense                                                        2,976,055              2,703,941
                                                                                     ------------            -----------
Net Interest Income                                                                     2,515,948              2,590,849
Provision for Loan Losses                                                                  15,000                 15,000
                                                                                     ------------            -----------
Net Interest Income after Provision for Loan Losses                                     2,500,948              2,575,849

Other Income
  Service fees                                                                            128,787                129,140
  Net investment gains                                                                    221,671                      0
  Other                                                                                    26,967                 19,457
                                                                                     ------------            -----------
                                                                                          377,425                148,597
Other Expenses
  Salaries                                                                                537,947                543,704
  Pension and other employee benefits                                                     274,156                219,233
  Occupancy expense                                                                       257,015                286,912
  Legal and professional                                                                   55,432                 51,493
  Regulatory fees                                                                          20,996                 21,414
  Data processing                                                                          55,134                 62,499
  Other                                                                                   488,650                386,758
                                                                                     ------------            -----------
                                                                                        1,689,330              1,572,013

Income Before Income Taxes                                                              1,189,043              1,152,433

Provision for Income Taxes                                                                360,011                303,690
                                                                                     ------------            -----------
Net Income                                                                           $    829,032            $   848,743
                                                                                     ============            ===========
Net Income per Share of Common Stock                                                 $       0.50            $      0.48
                                                                                     ============            ===========
Net Income per Share of Common Stock (fully diluted)                                 $       0.50            $      0.48
                                                                                     ============            ===========
Weighted Average Shares Used in Computing Net Income
  per Share of Common Stock                                                             1,665,412              1,773,052
                                                                                     ============            ===========
</TABLE>


              The accompanying notes are an integral part of these
                       consolidated financial statements.

<PAGE>


PEOPLES FINANCIAL CORP., INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>

                                                                                       Six Months Ended June 30,
                                                                                       2001                   2000
                                                                                  --------------          ------------
<S>                                                                                <C>                    <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income                                                                          $2,139,078            $ 1,649,663
Adjustments to reconcile net cash from operating activities:
Depreciation and amortization                                                          268,172                274,993
Net investment security gains                                                       (1,077,546)                (8,301)
Net accretion/amortization of
 premiums and discounts                                                                (24,068)                (9,505)
Provision for loan losses                                                               30,000                 30,000
(Gain)/loss on sale/disposal of assets                                                  57,359                 20,331
Deferred taxes                                                                         (25,694)                     0
Increase (decrease) in cash due to changes in assets and liabilities:
         Other assets                                                                1,623,816                (31,139)
         Accrued interest and other liabilities                                         36,474               (595,964)
                                                                                   -----------            -----------

     Net Cash From Operating Activities                                              3,027,591              1,330,078

CASH FLOWS FROM INVESTING ACTIVITIES
  Proceeds from sales of securities available for sale                               1,534,373                 29,760
  Proceeds from maturities of securities held to maturity                            6,000,000              7,895,000
  Purchase of available-for-sale securities                                           (908,865)                     0
  Purchase of securities held to maturity                                           (4,999,270)           (15,310,071)
  Purchase of FHLB stock                                                               (38,300)                     0
  Net loans made to customers                                                       (3,774,754)           (10,375,261)
  Purchases of premises and equipment                                                 (263,145)              (243,996)
  Proceed from disposal of premises and equipment                                      (57,359)                     0
                                                                                   -----------            -----------

   Net Cash Used By Investing Activities                                            (2,507,320)           (18,004,568)

CASH FLOWS FROM FINANCING ACTIVITIES
  (Proceeds from)/repayments of FHLB Borrowings                                              0             (8,000,000)
  Net increase in deposits                                                          12,020,444              2,756,787
  Dividends paid                                                                      (582,894)              (531,916)
                                                                                   -----------            -----------
Net Cash From Financing Activities                                                  11,437,550             (5,775,129)
                                                                                   -----------            -----------

Net Change in Cash and Cash Equivalents                                             11,957,821            (22,449,619)

Cash and Cash Equivalents at Beginning of Period                                    16,762,019             38,679,734
                                                                                   -----------            -----------

Cash and Cash Equivalents at End of Period                                         $28,719,840            $16,230,115
                                                                                   ===========            ===========

</TABLE>

              The accompanying notes are an integral part of these
                       consolidated financial statements.

<PAGE>



PEOPLES FINANCIAL CORP., INC.  AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE A - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements include Peoples
Financial Corp., Inc., (the company or the corporation) and its wholly owned
subsidiary, PFC Bank (the bank), and have been prepared in accordance with
generally accepted accounting principles for interim financial information and
the instructions to Form 10-Q. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements and should be read in conjunction with the
corporation's consolidated year-end financial statements, including notes
thereto, which are included in the corporation's 2000 Annual Report on Form
10-K. In the opinion of the corporation, the unaudited consolidated interim
financial statements contain all significant adjustments necessary to present
fairly the financial position as of June 30, 2001 and 2000, the results of
operation for the three and six months ended June 30, 2001 and 2000 and cash
flows for the six months ended June 30, 2001 and 2000.

NOTE B - EARNINGS PER SHARE
Shares used in the earnings per share computation are the weighted average
number of shares outstanding during the periods in question.

NOTE C - RECLASSIFICATIONS
Certain previously reported items have been reclassified to conform to the
current year's classifications. The reclassifications have no effect on total
assets, total liabilities and stockholders' equity, or net income.

NOTE D - COMPREHENSIVE INCOME
Total comprehensive income for the six months ended June 30, 2001 and 2000 was
$4,336,865 and $(979,184), respectively.

NOTE E - INVESTMENT SECURITIES

Available-for-sale securities consist of the following:

<TABLE>
<CAPTION>

                                                                             June 30, 2001
                                         --------------------------------------------------------------------------------
                                                Amortized           Unrealized         Unrealized            Market
                                                  Cost                 Gains             Losses               Value
                                         --------------------  ------------------ ------------------ --------------------
     <S>                                      <C>                  <C>                 <C>                 <C>
     Equity securities                         $ 9,630,310         $ 19,597,183        $  (26,702)         $ 29,200,791

                                                                          December 31, 2000
                                         --------------------------------------------------------------------------------
                                                  Amortized           Unrealized        Unrealized             Market
                                                    Cost                Gains              Losses              Value
                                         --------------------  ------------------ ------------------ --------------------
     Equity securities                         $ 9,178,273         $ 16,270,108        $  (29,608)         $ 25,418,773

                                                                              June 30, 2000
                                         --------------------------------------------------------------------------------
                                                  Amortized           Unrealized        Unrealized             Market
                                                    Cost                Gains              Losses               Value
                                         --------------------  ------------------ ------------------ --------------------
     Equity securities                         $ 9,927,227         $ 13,882,215        $  (47,722)         $ 23,761,720

</TABLE>

<PAGE>

NOTE E - INVESTMENT SECURITIES - Continued

Held-to-maturity securities consist of the following:
<TABLE>
<CAPTION>


                                                                               June 30, 2001
                                         --------------------------------------------------------------------------------
                                                 Amortized           Unrealized         Unrealized              Market
                                                   Cost                 Gains             Losses                Value
                                         --------------------  ------------------ ------------------ --------------------
    <S>                                       <C>                    <C>                <C>                 <C>
     U.S. Treasury securities                   $ 18,921,504         $   416,260         $  (5,178)         $ 19,332,586
     U.S. government agencies                     17,445,526             507,220            (4,920)           17,947,826
     State and political subdivisions                119,843               1,407                 0               121,250
                                         --------------------------------------------------------------------------------
                                                $ 36,486,873          $  924,887         $ (10,098)         $ 37,401,662
                                         ================================================================================


                                                                           December 31, 2000
                                         --------------------------------------------------------------------------------
                                                 Amortized            Unrealized        Unrealized              Market
                                                    Cost                Gains              Losses               Value
                                         --------------------  ------------------ ------------------ --------------------

     U.S. Treasury securities                   $ 19,453,858         $   282,739         $  (6,742)         $ 19,729,855
     U.S. government agencies                     17,889,845             324,491           (24,387)           18,189,949
     State and political subdivisions                119,833                 375               (83)              120,125
                                         --------------------------------------------------------------------------------
                                                $ 37,463,536         $   607,605         $ (31,212)         $ 38,039,929
                                         ================================================================================


                                                                              June 30, 2000
                                         --------------------------------------------------------------------------------
                                                 Amortized            Unrealized        Unrealized              Market
                                                    Cost                Gains             Losses                Value
                                         --------------------  ------------------ ------------------ --------------------

     U.S. Treasury securities                   $ 20,952,581          $   62,906        $  (96,573)         $ 20,918,914
     U.S. government agencies                     18,361,215               5,485          (124,662)           18,242,038
     State and political subdivisions                164,823                   0            (3,254)              161,569
                                         --------------------------------------------------------------------------------
                                                $ 39,478,619          $   68,391        $ (224,489)         $ 39,322,521
                                         ================================================================================


</TABLE>

<PAGE>

PEOPLES FINANCIAL CORP., INC. AND SUBSIDIARY

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

FINANCIAL CONDITION

For the six months ended June 30, 2001, the corporation's total assets increased
from December 31, 2000 by $16.9 million resulting primarily from increases of
approximately $12.0 million in liquid assets such as cash and due from banks and
federal funds sold in addition to increases of $3.7 million in net loans and
$3.8 million in available-for-sale securities. These increases are offset
slightly by decreases in other assets of $1.6 million and held-to-maturity
securities of $1.0 million. The corporation's total assets increased over June
30, 2000 by $25.1 million resulting from increases of $10.3 million in net
loans, $12.5 million in cash and due from banks and federal funds, investment
securities of $2.5 million offset by decreases in fixed assets and other assets
of $0.1 million.

The increase in total liabilities of approximately $13.2 million from December
31, 2000 to June 30, 2001 is attributable to increases in deposits of $12.0
million, other liabilities of $1.0 million and deferred taxes of $0.1 million.
The increase in total liabilities of $22.4 million from June 30, 2000 to June
30, 2001 is primarily attributable to increases in deposits of $15.2 million,
Federal Home Loan Bank borrowings of $5.0 million, deferred taxes of $2.0
million and other liabilities of $0.2 million.

As of June 30, 2001, PFC Bank, the corporation's wholly owned subsidiary, had a
ratio of non-performing and greater than 90 day delinquent loans to total loans
of 0.10% as compared to a ratio of 0.17% as of December 31, 2000 and 0.16% at
June 30, 2000. Non-performing loan totals at June 30, 2001 were $224,000 that
were delinquent more than 90 days or held on non-accrual status as compared to
$369,000 and $334,000 at December 31, 2000 and June 30, 2000, respectively. At
June 30, 2001, the allowance for possible loan losses was $1,422,000, which
represented 0.65% of total loans as compared to 0.66% at December 31, 2000 and
0.67% at June 30, 2000. Non-performing loans totaled 5.31% of the allowance for
possible loan losses, as compared to 6.79% at December 31, 2000 and 3.67% at
June 30, 2000.

In management's opinion, the allowance for possible loan losses at June 30, 2001
is adequate to absorb future loan losses based on information presently known.
Management cannot assure, however, that additions to the allowance will not be
required in the future to cover losses that are presently unforeseen.


<PAGE>


RESULTS OF OPERATIONS

Net Income

For the six-month period ended June 30, 2001, the corporation recognized net
income of $2.1 million, an increase of $0.5 million over the same period in the
prior year. This increase is attributable to an increase of $1.1 million in
capital gains taken from the sale of available-for-sale securities offset by
increases in provisions for federal income tax of $0.3 million and other
operating expenses of $0.2 million and a decrease in net interest income of $0.1
million. Net income for the three-month period ended June 30, 2001 totaled $0.8
million, a decrease of $20,000 compared with the three months ended June 30,
2000.

The operating results of the corporation are largely dependent upon the net
income generated by its subsidiary, PFC Bank. PFC Bank has the benefit of a
substantially appreciated available-for-sale investment portfolio, the strategic
liquidation of portions of which enable the corporation to absorb the negative
effects of interest rate fluctuation and still maintain profitable operations.

Net Interest Income

Interest income for the six-month period ended June 30, 2001 was $10.9 million,
an increase of nearly $0.5 million from the six-month period ended June 30,
2000. This increase is primarily attributed to a $0.6 million increase in
interest on the loan portfolio slightly offset by a decrease of $0.1 million
from interest-bearing deposits with other banks. Interest expense for the
six-month period ended June 30, 2001 was approximately $6.0 million, a $0.6
million increase over the same six-month period ended June 30, 2000. Management
attributes this increase to the increase in total interest-bearing deposits in
addition to an increase in short-term borrowed funds.

For the three-month period ended June 30, 2001, interest income was $5.5
million, a $0.2 million increase as compared to the three-month period ended
June 30, 2000. This increase is due to increases in interest on loans of $0.3
million offset slightly by a decrease in interest received from investment
securities of $0.1 million. Interest expense for the three-months ended June 30,
2001 of $3.0 million is an increase over the same period in 2000 of $0.3 million
due to increases in interest on interest-bearing deposits and short-term
borrowings.

Provision for Loan Losses

The provision for loan losses is based upon management's ongoing assessment of
the inherent risk of loss in the outstanding loan portfolio. Management's risk
assessment is based on the evaluation of individual loans, past loss experience,
current economic conditions, and other relevant factors. While management uses
the best information available to make such evaluations, future adjustments to
the allowance for possible loan losses may be necessary. PFC Bank continues to
monitor its loan portfolio on a regular basis and will make additions to its
allowance based on its determination of the necessary level of the allowance.
For the six-month period ended June 30, 2001, PFC Bank recorded $30,000 to the

<PAGE>


provision for loan losses as compared to $30,000 for the same period in the
previous year. Net charge-offs for the six-month period ended June 30, 2001
amounted to $20,000 as compared to $15,000 for the six-month period ended June
30, 2000. For the three-month period ended June 30, 2001, PFC Bank recorded
$15,000 to the provision for loan losses as compared to $15,000 for the same
period in the previous year. Net charge-offs for the three-month period ended
June 30, 2001 amounted to $10,000 as compared to $5,000 for the three-month
period ended June 30, 2000.

Activity in the allowance for loan losses was as follows:

                                  Six-Months Ended             Year Ended
                                    June 30, 2001          December 31, 2000
                                --------------------     ---------------------

Balance, beginning of period            $1,412                   $1,378
Provision                                   30                       60
Charge-offs                                (30)                     (45)
Recoveries                                  10                       19
                                        ------                   ------
Balance, end of period                  $1,422                   $1,412
                                        ======                   ======


Other Income

Other income for the six-month period ended June 30, 2001 was approximately $1.4
million, an increase of $1.1 million over the six-month period ended June 30,
2000. This increase is primarily attributable to capital gains from the sale of
available-for-sale securities of $1.1 million for the six-month period ended
June 30, 2001 as compared with capital gains of $8,000 for the same period of
2000. These net gains were primarily the result of the liquidation of a portion
of PFC Service Corporation's stock portfolio. Other income for the three-month
period ended June 30, 2001 was $0.4 million, an increase of $0.2 million as
compared to the same period in 2000. This increase is due to an increase of $0.2
million in capital gains from the sale of available-for-sale securities.

Other Expenses

Total other expenses increased $173,000 for the six-month period ended June 30,
2001 when compared to the same period in the prior year. This increase was the
result of increases in data processing expenses of $14,000, salary and employee
benefits of $12,000 and various other operating expenses of $190,000, offset
slightly by a decrease in occupancy expenses of $43,000. Other expenses for the
three-months ended June 30, 2001 of $1.7 million increased $117,000 over the
three-month period ended June 30, 2000. This increase was the result of
increases in salaries and employee benefits of $49,000 and $105,000 in various
other expenses slightly offset by decreases in occupancy expense of $30,000 and
data processing fees of $7,000.

Maintaining a focus on operating cost control has become increasingly important
and the corporation has succeeded in maintaining a relatively stable overhead
burden.

<PAGE>


Provision for Income Taxes

The corporation's provision for income taxes was $924,000 for the six-month
period ended June 30, 2001, as compared to $627,000 for the same period ended
June 30, 2000. During the three-month period ended June 30, 2001, the
corporation incurred a provision for income taxes of $360,000 as compared to
$304,000 for the same period the previous year. State tax liabilities are
incurred both by PFC Bank, in the form of Pennsylvania Bank Shares tax, and by
the corporation, as a separate entity.

Liquidity

Liquidity is the availability of funds to meet the daily requirements of the
business. For financial institutions, demand for funds comes principally from
extensions of credit and withdrawal of deposits. Liquidity is provided by asset
maturities, sales of investment securities, deposit growth or short-term
borrowings. Liquidity measures are formally reviewed by management monthly, and
they continue to show adequate liquidity in all areas of the organization.

Capital Adequacy

PFC Bank is subject to various regulatory capital requirements administered by
federal banking agencies. Quantitative measures established by regulation to
ensure capital adequacy require the bank to maintain a minimum leverage ratio
and ratios of total capital and Tier I capital to risk-weighted assets. Equity
and risk-based capital ratios for the bank exceed these minimums ratios and are
as follows:

                                June 30         December 31        June 30
                                  2001             2000              2000
                                --------        -----------        --------

Leverage Ratio                    8.82%            8.69%             10.02%

Risk-Based Capital               20.74%           17.72%             19.34%

Tier I Capital                   14.97%           13.11%             15.18%


<PAGE>


Regulatory Activity

In recent years, Pennsylvania enacted a law to permit state chartered banking
institutions to sell insurance. This follows a U.S. Supreme Court decision in
favor of nationwide insurance sales by banks. The decision also bars states from
blocking insurance sales by national banks in towns with populations of no more
than 5,000. PFC Bank does not currently have plans to enter the insurance field
but continues to review this option.

Congress recently enacted legislative reforms to modernize the financial
services industry, including repealing the Glass Steagall Act, which prohibits
commercial banks from engaging in the securities industry. Consequently, equity
underwriting activities of banks may increase in the near future. However, the
corporation does not currently anticipate entering into these activities.

Management estimates that changes in PFC Bank's FDIC assessment rate, resulting
from the enactment of the Deposit Insurance Funds Act of 1996, will adversely
impact the results of operations net of income taxes. Prior to this enactment,
PFC Bank was not required to pay any FDIC assessment. Although the bank is in
the minimum assessment bracket, income will be impacted in the amount of $50,000
for the year ended December 31, 2001. The act also provides regulatory relief to
the financial services industry relative to environmental risks, frequency of
examinations, and simplification of forms and disclosures.

From time to time, various types of federal and state legislation have been
proposed that could result in additional regulation of, and restrictions on, the
business of the corporation and of PFC Bank. Management cannot predict whether
such legislation will be adopted or, if adopted, how such legislation would
affect the business of the corporation and PFC Bank. As a consequence of the
extensive regulation of commercial banking activities in the United States, the
corporation's and PFC Bank's business is particularly susceptible to federal
legislation and regulations that may increase the costs of doing business.
Except as specifically described above, management believes that the affect of
the provisions of the aforementioned legislation on liquidity, capital
resources, and results of operation of the corporation will be immaterial.
Management is not aware of any other current specific recommendations by
regulatory authorities or proposed legislation, which, if they were implemented,
would have a material adverse effect upon liquidity, capital resources, or
results of operation, although the general cost of compliance with the numerous
and multiple federal and state laws and regulations does have, and in the future
may have, a negative impact on the corporation's results of operations.

Further, the business of the corporation is also affected by the state of the
financial services industry in general. As a result of legal and industry
changes, management expects the industry will continue to experience an increase
in consolidations and mergers as the financial services industry strives for
greater cost efficiencies and market share. Management also expects increased

<PAGE>


diversification of financial products and services offered by the bank and its
competitors. Management believes that such consolidations and mergers, and
diversification of products and services may enhance PFC Bank's competitive
position as a community bank.


Forward-Looking Statements

From time to time, the corporation may publish forward-looking statements
relating to such matters as anticipated financial performance, business
prospects, technological developments, new products, research and development
activities and similar matters. The Private Securities Litigation Reform Act of
1995 provides a safe harbor for forward-looking statements. In order to comply
with the terms of the safe harbor, the corporation notes that a variety of
factors could cause the corporation's actual results and experience to differ
materially from the anticipated results or other expectations expressed in the
corporation's forward-looking statements. The risks and uncertainties that may
affect the operations, performance, development and results of the corporation's
business include the following: general economic conditions, including their
impact on capital expenditures; business conditions in the banking industry; the
regulatory environment; rapidly changing technology and evolving banking
industry standards; competitive factors, including increased competition with
community, regional and national financial institutions; new service and product
offerings by competitors and price pressures; and similar items.


Gramm-Leach-Bliley Act

On November 12, 1999, the Gramm-Leach-Bliley Financial Modernization Act was
signed into law. The Act has a profound impact on the financial services
industry.

o    The Act repeals prior legislation to permit commercial banks to affiliate
     with securities firms and insurance companies. More importantly, the Act
     significantly expands the authority of each of these financial industries
     to engage in a full array of financial services. Thus, each industry may
     now engage in activities previously reserved to one or the other.

o    The Act authorizes bank holding companies meeting defined standards to
     engage in a substantially broader range of non-banking activities than was
     permissible before the legislation passed.

o    A new hierarchy of existing state and federal regulators will monitor both
     the bank and the corporation. The Act coordinates the efforts of these
     regulators. The goal is to lessen regulatory burden and prevent duplication
     of examination efforts.

Also, all financial institutions are required to take reasonable precautions to
protect the security and confidentiality of personal customer information. The
bank or corporation may only share customer information with its affiliates
under certain circumstances.

<PAGE>


ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no material changes in the corporation's interest rate risk
position since December 31, 2000. Other types of market risk, such as foreign
currency exchange rate risk and commodity price risk, do not arise in the normal
course of the corporation's business activities.



PEOPLES FINANCIAL CORP., INC. AND SUBSIDIARY

PART II. OTHER INFORMATION


ITEM 1.  Legal Proceedings
Details concerning the civil action filed in the Court of Common Pleas of
Armstrong County, Pennsylvania on November 29, 2000 are set forth in the annual
report of 10K for December 31, 2000. There have been no material developments in
the second quarter of 2001.

ITEM 2.  Changes in Securities
Not applicable.

ITEM 3.  Defaults Upon Senior Securities
Not applicable.

ITEM 4.  Submission of Matters to a Vote of Security Holders
There was no submission of matters brought to a vote of security holders in the
second quarter of 2001.

ITEM 5.  Other Information
Not applicable.

ITEM 6.  Exhibits and Reports on Form 8-K

(a)      Exhibits

         3.1      Registrant's Articles of Incorporation.
                  (Incorporated by reference in Registrant's January 27, 1995,
                  filing on Form S-4).

         3.2      Registrant's By-Laws.
                  (Incorporated by reference in Registrant's January 27, 1995,
                  filing on Form S-4).

         10.1     Agreement between R.B. Robertson and Bank.
                  (Incorporated by Reference in the Registrant's September 30,
                  1997 filing on Form 10-QSB).

         10.2     Settlement Agreement.
                  (Incorporated by Reference in the Registrant's December 31,
                  1996 filing on Form 10-KSB).

         10.3     General Release
                  (Incorporated by Reference in the Registrant's December 31,
                  1996 filing on Form 10-KSB).

<PAGE>


PEOPLES FINANCIAL CORP., INC. AND SUBSIDIARY

PART II  OTHER INFORMATION (cont.)

ITEM 6.  Exhibits and Reports on Form 8-K (cont.)

         10.4     Amendment to Executive Employment Agreement dated October 20,
                  1999, between R.B. Robertson and Bank.
                  (Incorporated by Reference to Registrant's September 30, 1999
                  filing of Form 10Q).

         10.5     Amendment to Executive Employment Agreement dated November
                  17, 1999 between R.B. Robertson, PFC Bank and Peoples
                  Financial Corp., Inc.
                  (Incorporated by Reference to the Registrant's December 31,
                  1999 filing of Form 10-K).

         11       Statement re: Computation of Earnings Per Share.
                  (included herein at Part I, Item 1, Page 2 of this Form 10-Q).

  (b)    Reports on Form 8-K

                  The Registrant did not file any current reports on Form 8-K
                  during the quarter ended June 30, 2001.

<PAGE>


                                   SIGNATURES

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

Dated:     August  3, 2001
      -----------------------------------


                                              PEOPLES FINANCIAL CORP., INC.
                                                               (Registrant)



S/R.B. Robertson
-----------------------------------------
R.B. Robertson
President & Chief Executive Officer


S/James L. Kifer
------------------------------------------
James L. Kifer
Executive Vice President & Asst. Secretary



<PAGE>


                                  EXHIBIT INDEX

                                                                        PAGE NO.
                                                                     IN MANUALLY
                                                                          SIGNED
                                                                     EXHIBIT NO.
                                                                        ORIGINAL

(a)      The following Exhibits are files herewith or incorporated by reference
         as a part of this Annual Report.

         3.1      Registrant's Articles of Incorporation.
                  (Incorporated by reference in Registrant's January 27, 1995
                  filing of Form S-4).

         3.2      Registrant's By-Laws.
                  (Incorporated by reference in Registrant's January 27, 1995
                  filing of Form S-4).

         10.1     Agreement between R.B. Robertson and Bank.
                  (Incorporated by Reference in the Registrant's September 30,
                  1997 filing of Form 10-QSB).

         10.2     Settlement Agreement.
                  (Incorporated by Reference in the Registrant's December 31,
                  1996 filing of Form 10-KSB).

         10.3     General Release
                  (Incorporated by Reference in the Registrant's December 31,
                  1996 filing of Form 10-KSB).

         10.4     Amendment to Executive Employment Agreement dated October 20,
                  1999, between R.B. Robertson and Bank
                  (Incorporated by Reference to Registrant's September 30, 1999
                  filing of Form 10-Q).

         10.5     Amendment to Executive Employment Agreement dated November 17,
                  1999 between R.B. Robertson, PFC Bank and Peoples Financial
                  Corp., Inc.
                  (Incorporated by Reference to the Registrant's December 31,
                  1999 filing of Form 10-K).

         11       Statement re: Computation of Earnings Per Share.
                  (included herein at Part I, Item 1, Page 2 of this Form 10-Q).