<PAGE>

                    U.S. SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                  FORM 10-QSB

(Mark One)

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

          For the quarterly period ended March 31, 1998
                                        ---------------

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

          For the transition period from _____________ to ______________

          Commisson 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)

     (412) 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 [X] 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: May 1, 1998
                                                  -------------

     As of May 1, 1998,  there were 882,168  shares of the  Registrant's  common
stock, $0.30 par value, outstanding.

     Transitional Small Business disclosure Format (check one): Yes [  ]  No [X]

<PAGE>

PEOPLES FINANCIAL CORP., INC. AND SUBSIDIARY

INDEX                                                                    PAGE

PART 1.   FINANCIAL STATEMENTS

     ITEM 1.  Consolidated  Balance  Sheets - March  31,  1998
              (unaudited)  and December 31, 1997                           1

              Consolidated Statements of Income -
              Three months ended March 31, 1998 and 1997 (unaudited)       2

              Consolidated Statements of Cash Flows -
              Three months ended March 31, 1998 and 1997 (unaudited)       3

              Notes to Consolidated Financial Statements                   4

     ITEM 2.  Management's Discussion and Analysis of Financial
              Conditions and Results of Operation                          5

PART II.  OTHER INFORMATION

     ITEM 1.   Legal Proceedings                                           9

     ITEM 2.   Changes in Securities                                       9

     ITEM 3.   Defaults Upon Senior Securities                             9

     ITEM 4.   Submission of Matters to a Vote of Security Holders         9

     ITEM 5.   Other Information                                           9

     ITEM 6.   Exhibits and Reports on Form 8-K                            9

     SIGNATURES                                                           11

<PAGE>

PART I.   FINANCIAL INFORMATION
ITEM 1.   CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
PEOPLES FINANCIAL CORP., INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
(See Accountant's Compilation Report)

<CAPTION>
                                             March 31,
                                             1998                December 31,
ASSET                                        (Unaudited)              1997
                                             ----------          ------------
<S>                                          <C>                 <C>
     Cash and due from banks                 $  8,632,609        $  7,003,534
     Federal funds sold                         9,000,000           4,075,000
     Available-for-sale Securities             40,704,837          38,069,171
     Held-to-maturity Securities               31,994,078          32,378,224
     Federal Home Loan Bank Stock                 740,200             740,200
     Loans receivable, net                    156,573,712         152,395,769
     Premises and equipment, net                3,354,743           3,459,173
     Other assets                               2,698,525           2,149,627
                                             ------------        ------------
          Total Assets                       $253,698,704        $240,270,698
                                             ============        ============

LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES
     Deposits
          Non-interest bearing               $ 23,321,361        $ 23,343,039
          Interest bearing                    176,863,984         167,229,668
                                             ------------        ------------
          Total Deposits                      200,185,345         190,572,707

     Accrued interest and other liabilities    13,801,450          12,285,041
                                             ------------        ------------
          Total Liabilities                   213,986,795         202,857,748

STOCKHOLERS' EQUITY
     Common stock, par value                      264,650             264,650
     Additional paid-in capital                 3,932,656           3,932,656
     Retained earnings                         15,846,752          15,298,374
     Unrealized holding gains on
       securities available for sale           19,667,851          17,917,270
                                             ------------        ------------
          Total stockholders' equity           39,711,909          37,412,950
                                             ------------        ------------
                
   Total Liabilities and Stockholders equity $253,698,704        $240,270,698
                                             ============        ============

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

</TABLE>
                                     Page 1
<PAGE>
<TABLE>
PEOPLES FINANCIAL CORP., INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

<CAPTION>
                                             Three Months Ended March 31,
Interest Income                                   1998           1997 
                                             -------------    -----------
     <S>                                     <C>               <C>
     Loans                                   $  3,345,024      $  2,893,478
     Investment securities                        715,665           645,079
     Interest-bearing deposits                     32,665               465
     Federal funds sold                            72,526           110,688
                                             ------------      ------------
          Total interest income                 4,165,880         3,649,710

Interest Expense
     Deposits                                   2,006,908         1,766,695
                                            -------------      ------------

Net Interest Income                             2,158,972         1,883,015

Provision for Loan Losses                          30,000            20,000
                                            -------------      ------------

Net Interest Income after Provision for
  Loan Losses                                   2,128,972         1,863,015

Other Income
     Service fees                                 160,210           187,950
     Net investment gains                         236,212           199,696
     Other                                          7,609           227,767
                                            -------------      ------------
                                                  404,031           615,413

Other Expenses
     Salaries                                     525,274           536,884
     Pension and other employee benefits          209,348           139,863
     Occupancy expense                            269,842           255,590
     Legal & professional                          56,173            39,242
     Regulatory Fees                               13,745            13,308
     Data Processing                               43,557            57,741
     Other                                        379,819           452,468
                                           --------------      ------------
                                                1,497,758         1,495,096

Income Before Income Taxes                      1,035,245           983,332

Provision for Income Taxes                        266,325           198,418
                                          ---------------      ------------
Net Income                                 $      768,920   $       784,914
                                          ===============   ===============
Net Income per Share of Common Stock       $         0.87   $          0.89
                                          ===============   ===============
Net Income per Share of Common Stock       $         0.87   $          0.89
  (fully diluted)                         ===============   ===============
Shares Used in Computing Net Income
  per Share of Common Stock   $  0.89      $      882,168   $       879,990  
                             ========     ===============   ===============

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

</TABLE>

                                     Page 2
<PAGE>
     
<TABLE>
PEOPLES FINANCIAL CORP., INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

<CAPTION>
                                             Three Months Ended March 31,
CASH FLOWS FROM OPERATING ACTIVITIES             1998             1997
                                             -------------      --------
<S>                                          <C>               <C>
Net Income                                   $   768,920       $   784,914
Adjustments to reconcile net cash from
 operating activities:
Depreciation and amortization                    129,373           158,932
Net accretion/amortization of premiums
 and discounts                                    (4,510)           (1,888)
Gain on sale of investments                     (236,211)         (199,696)
Provision for loan losses                         30,000            20,000
Loss on sale/disposal of assets                   (1,095)            6,688
Reinvestment stock dividends                     (12,811)          (19,465)
Increase (decrease) in cash due to changes in
 assets and liabilities:
     Other assets                               (315,877)          (27,366)
     Accrued interest and other liabilities      383,048           481,497
                                             ------------     -------------
  Net Cash from Operating Activities             740,837         1,203,616

CASH FLOWS FROM INVESTING ACTIVITIES
 Proceeds from sales of securities available
     for sale                                    253,041           344,875
 Proceeds from maturities held to maturity     7,995,262         1,445,000
 Purchase of securities held to maturity      (7,577,905)       (3,964,375)
 Purchase of securities available for sale             0                 0
 Net purchases of FHLB Stock                           0          (170,700)
 Net loans made to customers                  (4,220,400)         (724,285)
 Premises and equipment expenditures             (36,104)          (80,923)
                                             ------------      ------------
     Net Cash Used by Investing Activities    (3,586,106)       (3,150,408)

CASH FLOWS FROM FINANCING ACTIVITIES
 Net increase in deposits                      9,619,886         5,283,138
 Proceeds from issuance of common stock                0                 0
 Dividends paid                                 (220,542)         (211,198)
                                             ------------      ------------
Net Cash from Financing Activities             9,399,344         5,071,940
                                             ------------      ------------
Net Cash in Cash and Cash Equivalents          6,554,075         3,125,148

Cash and Cash Equivalents at Beginning of
 Period                                       11,078,534        16,269,707
                                            ------------       -----------
Cash and Cash Equivalents at End of Period   $17,632,609       $19,394,855
                                            ============       ===========

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

</TABLE>

                                     Page 3
<PAGE>
PEOPLES FINANCIAL CORP., INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE A - BASIS OF PRESENTATION The accompanying unaudited consolidated financial
statements  include Peoples  Financial  Corp.,  Inc., (the  Corporation) and its
wholly owned  subsidiary,  PFC Bank,  and have been prepared in accordance  with
generally accepted accounting  principles for interim financial  information and
the  instructions to Form 10-QSB and Article 10 of Regulation S-B.  Accordingly,
they do not include all of the information  and footnotes  required by generally
accepted accounting principles for complete financial statements. In the opinion
of  management,  all  adjustments  (consisting  primarily  of  normal  recurring
accruals) considered necessary for a fair presentation have been included.

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  with  the  current  period's  classifications.  These
reclassifications   have  no  effect  on  total   assets,   total   liabilities,
stockholders' equity, and net income.

                                     Page 4
<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 three  months  ended March 31,  1998,  the  Corporation's  total  assets
increased over December 31, 1997 by more than $13.4 million resulting  primarily
from increases of approximately $4.9 million in Federal Funds Sold, $4.2 million
in net loans, and $2.6 million in available-for-sale securities.

The increase in total  liabilities of approximately  $11.1 million from December
31, 1997 to March 31, 1998 is primarily attributable to increases in deposits of
over $9.6 million in the three-month period ended March 31, 1998.

As of March 31, 1998, PFC Bank, the Corporation's wholly owned subsidiary, had a
ratio of non-  performing  loans to total assets of 0.34% as compared to a ratio
of 0.40% as of the end of December  31,  1997.  Included  in the first  quarter,
non-performing  loan totals were loans  totaling  $858,000 that were  delinquent
more  than 90 days and  held on  non-accrual  status.  At March  31,  1998,  the
allowance for possible loan losses was $1,244,000,  which  represented  0.79% of
net  loans  as  compared  to  0.81% at the end of the  previous  calendar  year.
Non-performing  loans totaled  15.85% of the allowance for possible loan losses,
as compared to 17.37% at December 31, 1997.

In  management's  opinion,  the  allowance for possible loan losses at March 31,
1998 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.

RESULTS OF OPERATIONS

Net Income

For the three-month period ended March 31, 1998, the Corporation  recognized net
income of  $769,000,  a decrease  of $16,000  over the same  period of the prior
year.

The operating  results of the  Corporation  are largely  dependent  upon the net
income generated by its subsidiary, PFC Bank. PFC Bank also 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  three-month  period  ended  March  31,  1998 was $4.2
million,  an increase of $516,000  from the  three-month  period ended March 31,
1997. This increase is attributed to a $452,000 increase in interest on the loan
portfolio.  Interest expense for the three-month period ended March 31, 1998 was
approximately  $2.0 million,  a $0.2 increase over the same  three-month  period
ended March 31, 1997.  Management attributes this increase primarily to the $9.6
million increase in interest bearing deposits since December 31, 1997.

                                     Page 5
<PAGE>

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 provision  resulting in adjustment 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  three-month  period ended March 31,
1998, PFC Bank provided  $30,000 to the provision for loan losses as compared to
$20,000  for the same  period in the  previous  year.  Net  charge-offs  for the
three-month  period  ended  March 31,  1998  amounted  to $34,000 as compared to
$8,000 for the three month period ended March 31, 1997.

Other Income

Other income for the three-month  period ended March 31, 1998 was  approximately
$404,000, a decrease of approximately $211,000 over the three-month period ended
March 31,  1997.  This  decrease is  directly  attributable  to flood  insurance
proceeds of $206,000 received in the three month period ended March 31, 1997.

Net investment  gains were $236,000 for the  three-month  period ended March 31,
1998 as compared to $200,000 for the same three-month  period the previous year.
These net gains were primarily the result of the liquidation of a portion of PFC
Bank's available-for-sale investment portfolio.

Other Expenses

Total other expenses remained virtually unchanged,  increasing by $3,000 for the
three-month  period ended March 31, 1998 when compared to the same period in the
prior year.  This  increase  was  primarily  the result of  increases in pension
expense of $69,000 and occupancy expense of $14,000. These increases were offset
by decreases in payroll expense of $12,000 and miscellaneous  operating expenses
of $73,000.  The major  components of other expenses  represent normal recurring
costs of operations  including  compensation  and employee  benefits,  occupancy
expense, and data processing.

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

Provision for Income Taxes

The  Corporation  incurred a  provision  for income  taxes of  $266,000  for the
three-month  period ended March 31,  1998,  as compared to $198,000 for the same
period  ended March 31, 1997.  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.

                                     Page 6
<PAGE>

Regulatory Activity

Recently,   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 is currently  evaluating its options  regarding the sale of
insurance.

Congress is currently considering 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, in the amount of $23,200
in the year ended December 31, 1998. 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  predicts  that 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 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.

                                     Page 7

<PAGE>


Year 2000 Compliance

The  Corporation  is in  the  process  of  assessing  the  cost  and  extent  of
vulnerability  of the  Company's  computer  systems to the "Year 2000  problem."
Modification or replacements of computer  systems to attain Year 2000 compliance
have  begun,  and the  Corporation  expects to attain Year 2000  compliance  and
institute  appropriate  testing of its  modifications  and  replacements  before
December 31, 1998. The Corporation believes that, with modifications to existing
software and conversions to new software,  the Year 2000 problem will not pose a
significant  operational  problem for the  Corporation.  However,  because  most
computer systems are, by their very nature, interdependent,  it is possible that
non- compliant third party computers could "reinfect" the Corporation's computer
systems. The Corporation could be adversely affected by the Year 2000 problem if
it  or  unrelated  parties  fail  to  successfully   address  the  problem.  The
Corporation has taken steps to communicate with the unrelated  parties with whom
it deals to coordinate Year 2000 compliance.

The financial impact to the Corporation of Year 2000 compliance has not been and
is not  anticipated to be material to the  Corporation's  financial  position or
results of operations.


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.

                                     Page 8

<PAGE>


PEOPLES FINANCIAL CORP., INC. AND SUBSIDIARY

PART II. OTHER INFORMATION

ITEM 1.   Legal Proceedings
          Not applicable

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
          On March 23,  1998,  Peoples  Financial  Corp.,  Inc.  held its Annual
          Shareholder's Meeting. During the meeting the following directors were
          elected: Frank T. Baker, Marlin F. Foreman, Brian Henry, Darl Hetrick,
          Francis E. Kane, Timothy Reddinger,  Raliegh B. Robertson,  Raliegh B.
          Robertson, Jr., J. Jack Sherman, Howard H. Schreckengost,  and William
          H. Toy.

ITEM 5.  Other Information

         Not applicable.

ITEM 6.  Exhibits and Reports on Form 8-K

(a)      Exhibits
 
         3(i)  Registrant's Articles of Incorporation.
               (Incorporated  by  reference  in  Registrant's  January 27, 1995,
               filing of Form S-4).
 
         3(ii) Registrant's   By-Laws.
               (Incorporated  by  reference  in  Registrant's  January 27, 1995,
               filing of Form S-4).

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

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

                                     Page 9
<PAGE>

PEOPLES FINANCIAL CORP., INC. AND SUBSIDIARY

PART II.  OTHER INFORMATION (cont.)

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

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

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

         27   Financial Data Schedule
 

  (b)    Reports on Form 8-K

          The registrant filed the following  current reports on Form 8-K during
          the quarter ended March 31, 1998:

          No 8-K reports filed in the quarter ended March 31, 1998.

                                     Page 10
<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:   May 1, 1998



                                             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