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       March 31, 1999
                                             ------------------------

     [ ]     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:    May 1, 1999
                                                    ----------------

     As of May 1, 1999, there were 1,768,694 shares of the Registrant's common
stock, $0.30 par value, outstanding.


<PAGE>

PEOPLES FINANCIAL CORP., INC. AND SUBSIDIARY


INDEX                                                                       PAGE

PART I.  FINANCIAL INFORMATION

ITEM 1.  Financial Statements

         Consolidated Balance Sheets -
         March 31, 1999 (unaudited) and December 31, 1998 . . . . . . . . .  1

         Consolidated Statements of Income -
         Three months ended March 31, 1999 and 1998 (unaudited). . . .  . .  2

         Consolidated Statements of Cash Flows -
         Three months ended March 31, 1999 and 1998 (unaudited) . . . . . .  3

         Notes to Consolidated Financial Statements  . . . . . . . . . . . . 4

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

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

<PAGE>



PART I.  FINANCIAL INFORMATION
ITEM 1.  FINANCIAL STATEMENTS

PEOPLES FINANCIAL CORP., INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                           March 31,
                                                             1999           December 31
                                                          (Unaudited)           1998
                                                         ------------      ------------
<S>                                                      <C>               <C>
ASSETS
     Cash and due from banks                             $ 11,523,898      $ 13,010,077
     Federal funds sold                                     9,225,000         1,900,000         
     Available-for-sale securities                         32,920,633        37,361,888
     Held-to-maturity securities                           32,527,388        32,628,821
     Federal Home Loan Bank stock, at cost                    841,500           841,500
     Loans receivable, net                                178,263,079       174,704,201
     Premises and equipment, net                            3,245,395         2,331,643
     Other assets                                           4,109,639         2,224,143
                                                         ------------      ------------

          Total Assets                                   $272,656,532      $266,002,273
                                                         ============      ============

LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES
     Deposits
          Non-interest bearing                           $ 25,273,045      $ 26,205,654
          Interest bearing                                196,446,758       187,153,692
                                                         ------------      ------------
          Total deposits                                  221,719,803       213,359,346

     Accrued interest and other liabilities                11,706,679        12,068,806
                                                         ------------      ------------

          Total Liabilities                               233,426,482       225,428,152

STOCKHOLDERS' EQUITY
     Common stock, par value                                  530,608           530,608
     Surplus                                                3,750,044         3,750,044
     Retained earnings                                     20,261,342        18,808,764
     Accumulated other comprehensive income                14,688,056        17,484,705
                                                         ------------      ------------
          Total stockholders' equity                       39,230,050        40,574,121
                                                         ------------      ------------

          Total Liabilities and Stockholders Equity      $272,656,532      $266,002,273
                                                         ============      ============
</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 March 31,
                                                             1999            1998
                                                          ----------      ----------
<S>                                                       <C>             <C>       
Interest Income
  Loans                                                   $3,574,582      $3,345,024
  Investment securities                                      757,082         715,664
  Interest-bearing deposits                                   28,076          32,665
  Federal funds sold                                          92,281          72,526
                                                          ----------      ----------
          Total interest income                            4,452,021       4,165,879

Interest Expense
  Deposits                                                 2,240,862       2,006,908
                                                          ----------      ----------
Net Interest Income                                        2,211,159       2,158,971
Provision for Loan Losses                                     60,000          30,000
                                                          ----------      ----------
Net Interest Income after Provision for Loan Losses        2,151,159       2,128,971

Other Income
  Service fees                                               129,882         160,210
  Net investment gains                                     1,615,207         236,212
  Other                                                        6,188           7,609
                                                          ----------      ----------
                                                           1,761,277         404,031
Other Expenses
  Salaries                                                   460,918         525,274
  Pension and other employee benefits                        227,511         209,348
  Occupancy expense                                          271,938         269,841
  Legal and professional                                      41,105          56,173
  Regulatory fees                                             14,538          13,745
  Data processing                                             48,053          43,557
  Other                                                      395,223         379,819
                                                          ----------      ----------
                                                           1,459,286       1,497,757
Income Before Income Taxes                                 2,453,150       1,035,245
Provision for Income Taxes                                   770,642         266,325
                                                          ----------      ----------
Net Income                                                $1,682,508      $  768,920
                                                          ==========      ==========
Net Income per Share of Common Stock                      $     0.95      $     0.44
                                                          ==========      ==========
Net Income per Share of Common Stock (fully diluted)      $     0.95      $     0.44
                                                          ==========      ==========
Weighted Average Shares Used in Computing Net Income
  per Share of Common Stock (1)                            1,768,694       1,764,336
                                                          ==========      ==========
</TABLE>

(1)  Adjusted to reflect retroactive treatment of 100% stock dividend in the
     form of a stock split.

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>
                                                                             Three Months Ended March 31,
                                                                               1999               1998
                                                                           ------------       ------------
<S>                                                                        <C>                <C>         
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income                                                                 $  1,682,508       $    768,920
Adjustments to reconcile net cash from operating activities:
Depreciation and amortization                                                   238,993            129,449
Net accretion/amortization of
 premiums and discounts                                                           2,215             (4,510)
Provision for loan losses                                                        60,000             30,000
Loss on sale / disposal of assets                                                37,824             (1,095)
Reinvestment of stock dividends                                                 (26,341)           (12,811)
Increase (decrease) in cash due to changes in assets and liabilities:
         Other assets                                                        (1,681,173)          (315,954)
         Accrued interest and other liabilities                                 871,413            383,048
                                                                           ------------       ------------
     Net Cash From Operating Activities                                       1,185,439            977,047

CASH FLOWS FROM INVESTING ACTIVITIES
  Proceeds from sales of securities available for sale                          132,632             16,830
  Proceeds from maturities of securities held to maturity                     3,930,000          7,995,262
  Purchase of securities held to maturity                                    (3,827,906)        (7,577,904)
  Net loans made to customers                                                (3,627,507)        (4,220,401)
  Purchases of Premises and equipment                                           (86,708)           (36,104)
                                                                           ------------       ------------
   Net Cash Used By Investing Activities                                     (3,479,489)        (3,822,317)

CASH FLOWS FROM FINANCING ACTIVITIES
  Net increase in deposits                                                    8,362,801          9,619,886
  Dividends paid                                                               (229,930)          (220,542)
                                                                           ------------       ------------
Net Cash From Financing Activities                                            8,132,871          9,399,344
                                                                           ------------       ------------

Net Change in Cash and Cash Equivalents                                       5,838,821          6,554,074

Cash and Cash Equivalents at Beginning of Period                             14,910,077         11,078,535
                                                                           ------------       ------------

Cash and Cash Equivalents at End of Period                                 $ 20,748,898       $ 17,632,609
                                                                           ============       ============
</TABLE>

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

<PAGE>

PEOPLES FINANCIAL CORP., INC.  AND SUBSIDIARY PRIVATE
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 (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 Corporations consolidated
year-end financial statements, including notes thereto, which are included in
the Corporations 1998 Annual Report on Form 10-K. 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. All share and per
share data has been adjusted for the 100% stock dividend in the form of a
two-for-one stock split approved by the Board of Directors for all shareholders
of record January 20, 1999, paid February 10, 1999.

NOTE C - RECLASSIFICATIONS

Certain previously reported items have been reclassified to conform to the
current year's classifications. Specifically, the Company discloses certain
non-income statement changes to equity balances under the classification of
"Accumulated Other Comprehensive Income" in accordance with Statement of
Financial Accounting Standards (SFAS) No. 130, Reporting Comprehensive Income.
The reclassifications have no effect on total assets, total liabilities and
stockholders' equity, or net income.

<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, 1999, the Corporation's total assets
increased over December 31, 1998 by $6.7 million resulting primarily from
increases of approximately $5.8 million in liquid assets such as cash and due
from banks and federal funds sold, $3.6 million in net loans and $1.9 million in
other assets. These increases are offset by a decrease in investments of $4.5
million.

The increase in total liabilities of approximately $8.0 million from December
31, 1998 to March 31, 1999 is attributable to an increase in deposits of $8.4
million offset slightly by a decrease in other liabilities of $0.4 million.

As of March 31, 1999, PFC Bank, the Corporation's wholly owned subsidiary, had a
ratio of non-performing loans to total loans of 0.23% as compared to a ratio of
0.30% as of the end of December 31, 1998. Included in the first quarter,
non-performing loan totals were loans totaling $420,000 that were delinquent
more than 90 days or held on non-accrual status. At March 31, 1999, the
allowance for possible loan losses was $1,294,000, which represented 0.72% of
net loans as compared to 0.70% at the end of the previous calendar year.
Non-performing loans totaled 7.65% of the allowance for possible loan losses, as
compared to 7.51% at December 31, 1998.

In management's opinion, the allowance for possible loan losses at March 31,
1999 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, 1999, the Corporation recognized net
income of $1,683,000, an increase of $914,000 over the same period in the prior
year. Much of this increase is attributable to capital gains taken from the sale
of available-for-sale securities. Operating income before capital gains and
taxes increased by $39,000, or 4.5%

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.

<PAGE>

Net Interest Income

Interest income for the three-month period ended March 31, 1999 was $4.5
million, an increase of $286,000 from the three-month period ended March 31,
1998. This increase is primarily attributed to a $230,000 increase in interest
on the loan portfolio in addition to an increase of $41,000 in interest on
investment securities. Interest expense for the three-month period ended March
31, 1999 was approximately $2.2 million, a $234,000 increase over the same
three-month period ended March 31, 1998. Management attributes this increase
primarily to the $9.3 million increase in interest bearing deposits since
December 31, 1998.

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 three-month period ended March 31, 1999, PFC Bank recorded $60,000 to
the provision for loan losses as compared to $30,000 for the same period in the
previous year. Net charge-offs for the three-month period ended March 31, 1999
amounted to $4,600 as compared to $34,000 for the three-month period ended March
31, 1998.

Activity in the allowance for loan losses was as follows:

                                    Three-Months Ended           Year Ended
                                      March 31, 1999         December 31, 1998
                                    -------------------      -----------------

Balance, beginning of period              $ 1,238                 $ 1,249
Provision                                      60                     200
Charge-offs                                   (18)                   (246)
Recoveries                                     14                      35
                                          -------                 -------
Balance, end of period                    $ 1,294                 $ 1,238
                                          =======                 =======

Other Income

Other income for the three-month period ended March 31, 1999 was approximately
$1.8 million, an increase of nearly $1.4 million over the three-month period
ended March 31, 1998. This increase is primarily attributable to capital gains
from the sale of available-for-sale securities of $1.6 million for the
three-month period ended March 31, 1999 as compared with capital gains of
$236,000 for the same period of 1998. These net gains were primarily the result
of the liquidation of a portion of PFC Bank's stock portfolio. The gains were
offset by a decrease of $30,000, attributable to a decrease in fees and
commissions.

<PAGE>

Other Expenses

Total other expenses decreased by $38,000 for the three-month period ended March
31, 1999 when compared to the same period in the prior year. This decrease was
the result of decreases in miscellaneous expenses such as salaries and employees
benefits ($46,000), attorney fees ($20,000) and advertising ($8,000) partially
offset by increases in other real estate expenses ($10,000), telephone expenses
($6,000) and other various expenses ($22,000).

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 $771,000 for the
three-month period ended March 31, 1999, as compared to $266,000 for the same
period ended March 31, 1998. 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 minimum amounts and ratios
(set forth in the table below) of Total capital and Tier I capital to
risk-weighted assets and leverage ratio. Equity and risk-based capital ratios
for the Bank are as follows:

                           March 31,        December 31,         December 31,
                             1999              1998                 1997

Leverage Ratio                9.69%            9.48%                8.33%

Risk-Based Capital           21.49%           20.91%               13.10%

Tier I Capital               14.42%           13.18%               12.30%

<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 continue to review this option.

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. 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 $24,500
for the year ended December 31, 1999. 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
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>

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; the inability of the Corporation
to accurately estimate the cost of systems preparation for Year 2000 compliance;
and similar items.

Year 2000 Issues

The following section contains forward-looking statements which involve risks
and uncertainties. The actual impact on the Corporation of the Year 2000 issue
could materially differ from that which is anticipated in the forward-looking
statements as a result of certain factors identified below.

The "Year 2000 Problem" (Y2K) arose because many existing computer programs use
only the last two digits to refer to a year. Therefore, these computer programs
do not properly recognize a year that begins with "20" instead of the familiar
"19". If not corrected, many computer applications could fail or create
erroneous results by or at the year 2000. This could cause entire system
failures, miscalculations, and disruptions of normal business operations
including, among other things, a temporary inability to process transactions,
send statements, or engage in similar day to day business activities. The extent
of the potential impact of the Year 2000 Problem is not yet known, and if not
timely corrected, it could affect the global economy.

The Bank is subject to the regulation and oversight of various banking
regulators, whose oversight includes the provision of specific timetables,
programs and guidance regarding Year 2000 issues. Regulatory examination of the
Bank's Year 2000 programs are conducted periodically and reports are submitted
by the Bank to the banking regulators on request. In addition, reports are
currently submitted on a monthly basis to the Corporation's Board of Directors.


<PAGE>

Corporation's State of  Year 2000 Readiness

The Board of Directors is committed to ensuring that the Corporation's daily
operations suffer little or no impact from the century date change. The
Corporation has applied due diligence throughout the Y2K process, following the
guidelines contained in the series of Federal Financial Institutions
Examinations Council's Interagency Guidelines. The guidelines identify the
following phases: awareness, assessment, renovation or remediation, testing or
validation and implementation.

Based on an ongoing assessment, the Corporation has determined that it will be
required to modify or replace portions of its software so that its computer
systems will properly use dates beyond December 31, 1999. The Corporation
presently believes that as a result of modifications to existing software and
hardware and conversions to new software, the Year 2000 Problem can be
mitigated. However, if such modifications and conversions are not made, or are
not completed on a timely basis, the Year 2000 could have a material adverse
impact on the operations of the Corporation.

Management has initiated an enterprise-wide program to prepare the Corporation's
computer systems and applications for the Year 2000. The Corporation has
developed a comprehensive inventory of all mainframe and PC based applications,
third-party relationships, environmental systems, proprietary programs and
non-computer related systems (such as postage meters and fax machines). This
assessment identified 60 systems, processes or proprietary programs, which could
be impacted by the century date change. As of March 31, 1999, the Corporation
has remedied 58 or 97% of the programs, with all systems expected to be
ready/compliant by May 31, 1999.

The Corporation has acquired its mission-critical system which supports the
Corporation's core business processes from a highly regarded third-party vendor.
Thus, even though the Corporation does not have direct control over the
renovation process, it is monitoring the progress of its third-party vendors to
assess the status of their Y2K readiness efforts. The Corporation tested these
systems in May 1998 and plans a second test in May 1999. However, because most
computer systems are, by their very nature, interdependent, it is possible that
noncompliant third-party computers could impact the Corporation's computer
systems. The Corporation could be adversely affected by the Y2K 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. Additionally, the Corporation is dependent on
external suppliers, such as, wire transfer systems, telephone systems, electric
companies, and other utility companies for continuation of service. The
Corporation is also assessing the impact, if any, the century date change may
have on its credit risk.


<PAGE>

The Corporation has initiated communications with all of its significant
vendors, suppliers and large commercial customers to determine the extent to
which the Corporation is vulnerable to those third-parties' failure to remedy
their own Year 2000 Problems. In the event that any of the Corporation's
significant vendors, suppliers and large commercial customers do not
successfully achieve Year 2000 compliance in a timely manner, the Corporation's
business or operations could be adversely affected. For significant vendors, the
Corporation will validate that they are Year 2000 compliant by May 31, 1999, or
make plans to switch to a new vendor or system that is compliant. For
insignificant vendors, the Corporation will not necessarily validate that they
are Year 2000 compliant. However, for any insignificant vendor who responds that
they will not be compliant by May 31, 1999, the Corporation will seek a new
vendor or system that is compliant.

The Year 2000 Issue also affects certain of the Bank's customers, particularly
in the areas of access to funds and additional expenditures to achieve
compliance. The Bank has engaged in a program of contacting its commercial
customers regarding the customers' awareness of the Year 2000 Issue. The
Corporation cannot guarantee that the inability of loan customers to adequately
correct the Year 2000 Issue will not have an adverse effect on the Corporation.
For large commercial loan customers, the Bank will take appropriate action based
upon their level of readiness for Year 2000. Nevertheless, the Company does not
believe that the cost of addressing the Y2K issues will be a material event or
uncertainty that would cause reported financial information not to be
necessarily indicative of future operating results or financial conditions, nor
does it believe that the costs or the consequences of incomplete or untimely
resolution of its Year 2000 issues represent a known material event or
uncertainty that is reasonably likely to affect its future financial results, or
cause its reported financial information not to be necessarily indicative of
future operating results or future financial condition.

Costs of Year 2000 Solutions

The Corporation will use both internal and external resources to reprogram, or
replace, and test its software and hardware for Year 2000 modifications.
Concurrent with the Year 2000 project, the Corporation will also be converting
all its major date processing systems, both hardware and software, to current
technology. The Corporation plans to complete both the Year 2000 and systems
conversion projects within 1-2 months or no later than May 31, 1999, for all
critical systems.

As of March 31, 1999, $32,000 has been expended as Year 2000 costs. Management
expects to spend a total of $135,000 for the entire project. Of the total
projects' cost, approximately $88,000 is attributable to the purchase of new
software which will be capitalized. The remaining $15,000 will be expensed as
incurred over the next nine months. The estimated Year 2000 project costs
include the costs and time associated with the impact of third-parties' Year
2000 issues, and are based on presently available information. The total cost of
the project is being funded through operating cash flows. The Corporation
continues to evaluate appropriate courses of corrective action, including
replacement of certain systems whose associated costs would be recorded as
assets and amortized. Accordingly, the Corporation does not expect the amount
required to be expensed over the next nine months to have a material effect on
the financial position or results of operations. However, if compliance is not
achieved in a timely manner by the Corporation or any of its



<PAGE>

significant related third-parties, be it a supplier of services or customer,
the Y2K issue could possibly have a material effect on the Corporation's
operations and financial position.


The cost of the projects and the date on which the Corporation plans to complete
both Year 2000 modifications and systems conversions are based on management's
best estimates, which were derived utilizing numerous assumptions of future
events including the continued availability of certain resources, third-party
modification plans and other factors. However, there can be no guarantee that
these estimates will be achieved and actual results could differ materially from
those plans. Specific factors that might cause such material differences
include, but are not limited to, the availability and cost of personnel trained
in this area, the ability to locate and correct all relevant computer codes, and
similar uncertainties.

Risks of Year 2000 Issues

At present, management believes it's progress in remedying the Corporation's
systems, programs and applications and installing Y2K compliant upgrades is on
target. The Y2K computer problem creates risk for the Corporation from
unforeseen problems in its own computer systems and from third-party vendors who
provide the majority of mainframe and PC based computer applications. Failure of
third-party systems relative to the Y2K issue could have a material impact on
the Corporation's ability to conduct business.

Year 2000 Contingency Plans

The Corporation is in the process of working up contingency plans and assessing
the potential adverse risks to the Corporation. The Corporation's contingency
plans involve the use of manual labor to compensate for the loss of certain
automated computer systems and inconveniences caused by disruption in command
systems.

A business resumption contingency plan was developed for mission-critical and
required mainframe and PC based applications, third-party relationships,
proprietary programs and non-computer related systems. This contingency plan
identifies scheduled completion dates, test dates and "trigger" dates. A trigger
date is the date the Corporation would implement the contingency plan. The plan
was ratified by the Board of Directors on October 21, 1998.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no material changes in the Company's interest rate risk position
since December 31, 1998. 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 Company's business activities.


<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 31, 1999, Peoples Financial Corp., Inc. held its Annual Shareholder's
meeting. During the meeting the following Directors were elected: Frank T.
Baker, Darl Hetrick, Francis Kane, Timothy P. Reddinger, R.B. Robertson, R.B.
Robertson, Jr., J. Jack Sherman, Howard Schreckengost and William H. Toy. In
addition, the shareholders ratified the selection of Edwards, Leap and Sauer, as
the independent accountants for the Corporation for 1999.

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.

<PAGE>

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






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 10-KSB).

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

         12        Statement re:  Computation of Ratios.
                   (included herein at Part 1, Item 1, Page 9 of this
                   Form 10-Q).

         27        Financial Data Schedule


  (b)    Reports on Form 8-K

                   The Registrant did not file any current reports on Form 8-K
                   during the quarter ended March 31, 1999.



<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 7, 1999                      
        ------------------------------  


                                                  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 referenc
         as a part of this Annual Report.


         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, 996 filing of Form 10-KSB).

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

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

         12       Statement re:  Computation of Ratios.
                  (included herein at Part 1, Item 1, Page 9 of
                  this Form 10-Q).

         27       Financial Data Schedule                                19