##### Table of Contents



SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 or 15 (D) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period endedMarch 31, 2008
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
 Commission File Number 001-12103
 PEOPLES FINANCIAL CORPORATION
  Mississippi
    
    64-0709834(State or other jurisdiction of incorporation or organization)
    
    (I.R.S. Employer Identification No.)
 Lameuse and Howard Avenues, Biloxi, Mississippi
    
    39533(Address of principal executive offices)
    
    (Zip Code)
 
  þ o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ




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TABLE OF CONTENTS  Part 1  Financial InformationItem 1: Financial StatementsItem 2: Managements Discussion and Analysis of Financial Condition and Results of OperationsItem 4: Controls and ProceduresPART II  OTHER INFORMATIONItem 1: Legal ProceedingsItem 4: Submission of Matters to a Vote of Security HoldersItem 5: Other InformationItem 6  Exhibits and Reports on Form 8-KSIGNATURESCertification of CEO Pursuant to Section 302Certification of CFO Pursuant to Section 302Certification of CEO Pursuant to 18 U.S.C. ss. 1350Certification of CFO Pursuant to 18 U.S.C. ss. 1350    Table of Contents  
 Part 1  Financial Information
 
 Item 1: Financial Statements
 Peoples Financial Corporation and Subsidiaries
Consolidated Statements of Condition
 March 31, 2008
    
    
    December 31, 2007(Unaudited)
    
    
    (Audited)AssetsCash and due from banks
    
    $
    36,529,295
    
    
    $
    34,665,370Federal funds sold
    
    
    458,000
    
    
    
    270,000Available for sale securities
    
    
    347,058,328
    
    
    
    387,028,925Held to maturity securities, fair value of
$4,285,941 at March 31, 2008
$4,676,471 at December 31, 2007
    
    
    4,176,685
    
    
    
    4,629,992Other investments
    
    
    3,160,000Federal Home Loan Bank Stock, at cost
    
    
    917,500
    
    
    
    936,200Loans
    
    
    456,753,050
    
    
    
    450,992,074Less: Allowance for loan losses
    
    
    9,404,270
    
    
    
    9,378,137Loans, net
    
    
    447,348,780
    
    
    
    441,613,937Bank premises and equipment, net
of accumulated depreciation
    
    
    35,218,772
    
    
    
    34,410,789Accrued interest receivable
    
    
    5,948,571
    
    
    
    7,371,216Cash surrender value of life insurance
    
    
    13,729,390
    
    
    
    13,578,536Other assets
    
    
    2,858,229
    
    
    
    2,851,608Total assets
    
    $
    897,403,550
    
    
    $
    927,356,573
 2




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##### Table of Contents



Peoples Financial Corporation and Subsidiaries
Consolidated Statements of Condition (continued)
 March 31, 2008
    
    
    December 31, 2007(Unaudited)
    
    
    (Audited)Liabilities & Shareholders EquityLiabilities:Deposits:Demand, non-interest bearing
    
    $
    124,345,019
    
    
    $
    113,916,041Savings and demand, interest bearing
    
    
    246,042,045
    
    
    
    231,435,685Time, $100,000 or more
    
    
    142,906,408
    
    
    
    166,078,473Other time deposits
    
    
    56,338,197
    
    
    
    57,700,280Total deposits
    
    
    569,631,669
    
    
    
    569,130,479Federal funds purchased and securities sold under
agreements to repurchase
    
    
    196,156,057
    
    
    
    231,225,118Borrowings from Federal Home Loan Bank
    
    
    7,059,288
    
    
    
    7,100,305Other liabilities
    
    
    13,930,817
    
    
    
    13,359,047Total liabilities
    
    
    786,777,831
    
    
    
    820,814,949Shareholders Equity:Common stock, $1 par value, 15,000,000
shares authorized, 5,395,990 and 5,420,204
shares issued and outstanding at March 31,
2008 and December 31, respectively
    
    
    5,395,990
    
    
    
    5,420,204Surplus
    
    
    65,780,254
    
    
    
    65,780,254Undivided profits
    
    
    36,006,592
    
    
    
    34,458,291Accumulated other comprehensive income,
net of tax
    
    
    3,442,883
    
    
    
    882,875Total shareholders equity
    
    
    110,625,719
    
    
    
    106,541,624Total liabilities & shareholders equity
    
    $
    897,403,550
    
    
    $
    927,356,573
  3




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Peoples Financial Corporation and Subsidiaries
Consolidated Statements of Income
(Unaudited)
 Three Months Ended March 31,2008
    
    2007Interest income:Interest and fees on loans
    
    $
    7,432,345
    
    
    $
    7,789,889Interest and dividends on securities:U. S. Treasury
    
    
    813,940
    
    
    
    1,315,311U.S. Government agencies and corporations
    
    
    3,013,487
    
    
    
    4,271,533Mortgage-backed securities
    
    
    461,372
    
    
    
    80,064States and politicial subdivisions
    
    
    260,050
    
    
    
    223,162Other investments
    
    
    62,917
    
    
    
    63,484Interest on federal funds sold
    
    
    36,812
    
    
    
    51,109Total interest income
    
    
    12,080,923
    
    
    
    13,794,552Interest expense:Deposits
    
    
    3,219,012
    
    
    
    3,526,334Long-term borrowings
    
    
    122,234
    
    
    
    114,543Federal funds purchased and securities sold
agreements to repurchase
    
    
    1,538,394
    
    
    
    2,725,052Total interest expense
    
    
    4,879,640
    
    
    
    6,365,929Net interest income
    
    
    7,201,283
    
    
    
    7,428,623Provision for allowance for losses on loans
    
    
    46,000
    
    
    
    49,000Net interest income after provision for allowance
for losses on loans
    
    $
    7,155,283
    
    
    $
    7,379,623
 4




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##### Table of Contents



Peoples Financial Corporation and Subsidiaries
Consolidated Statements of Income (continued)
(Unaudited)
 Three Months Ended March 31,2008
    
    2007Non-interest income:Trust department income and fees
    
    $
    395,090
    
    
    $
    448,620Service charges on deposit accounts
    
    
    1,692,460
    
    
    
    1,671,861Other service charges, commissions and fees
    
    
    52,593
    
    
    
    57,530Other income
    
    
    397,649
    
    
    
    471,960Total non-interest income
    
    
    2,537,792
    
    
    
    2,649,971Non-interest expense:Salaries and employee benefits
    
    
    3,465,398
    
    
    
    3,387,175Net occupancy
    
    
    539,825
    
    
    
    377,705Equipment rentals, depreciation and maintenance
    
    
    922,053
    
    
    
    783,670Other expense
    
    
    1,637,399
    
    
    
    1,477,721Total non-interest expense
    
    
    6,564,675
    
    
    
    6,026,271Income before income taxes
    
    
    3,128,400
    
    
    
    4,003,323Income taxes
    
    
    1,039,000
    
    
    
    1,288,000Net Income
    
    $
    2,089,400
    
    
    $
    2,715,323Basic and diluted earnings per share
    
    $
    .39
    
    
    $
    .49
  5




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Peoples Financial Corporation and Subsidiaries
Consolidated Statement of Shareholders Equity
 AccumulatedNumber of
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    OtherCommon
    
    
    Common
    
    
    
    
    
    
    Undivided
    
    
    Comprehensive
    
    
    ComprehensiveShares
    
    
    Stock
    
    
    Surplus
    
    
    Profits
    
    
    Income
    
    
    Income
    
    
    TotalBalance, January 1, 2008
    
    
    5,420,204
    
    
    $
    5,420,204
    
    
    $
    65,780,254
    
    
    $
    34,458,291
    
    
    $
    882,875
    
    
    
    
    
    
    $
    106,541,624Comprehensive Income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,089,400
    
    
    
    
    
    
    $
    2,089,400
    
    
    
    2,089,400Net unrealized gain on
available for sale
securities, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,922,275
    
    
    
    1,922,275
    
    
    
    1,922,275Reclassification
adjustment for available
for sale securities called
or sold in current year,
net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (57,848
    )
    
    
    (57,848
    )
    
    
    (57,848
    )Gain from unfunded post-
retirement benefit
obligation, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    695,581
    
    
    
    695,581
    
    
    
    695,581Total comprehensive
income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    4,649,408Cumulative effect
adjustment from
adoption of EITF 06-4
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (56,732
    )
    
    
    
    
    
    
    
    
    
    
    (56,732
    )Effect of stock retirement
on accrued dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,868
    
    
    
    
    
    
    
    
    
    
    
    5,868Retirement of stock
    
    
    (24,214
    )
    
    
    (24,214
    )
    
    
    
    
    
    
    (490,235
    )
    
    
    
    
    
    
    
    
    
    
    (514,449
    )Balance, March 31, 2008
    
    
    5,395,990
    
    
    $
    5,395,990
    
    
    $
    65,780,254
    
    
    $
    36,006,592
    
    
    $
    3,442,883
    
    
    
    
    
    
    $
    110,625,719
  6




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Peoples Financial Corporation and Subsidiaries
Consolidated Statements of Cash Flows (Unaudited)
 Three Months Ended March 31,2008
    
    
    2007Cash flows from operating activities:Net income
    
    $
    2,089,400
    
    
    $
    2,715,323Adjustment to reconcile net income to net cash
provided by operating activities:Depreciation
    
    
    532,507
    
    
    
    435,000Provision for allowance for loan losses
    
    
    46,000
    
    
    
    49,000(Gain) loss on sales and calls of securities
    
    
    (87,648
    )
    
    
    15,993Change in accrued interest receivable
    
    
    1,422,645
    
    
    
    594,407Change in other assets
    
    
    (202,582
    )
    
    
    (319,586
    )Change in other liabilities
    
    
    1,235,176
    
    
    
    (400,414
    )Net cash provided by operating activities
    
    
    5,035,498
    
    
    
    3,089,723Cash flows from investing activities:Proceeds from maturities, sales and calls of
available for sale securities
    
    
    106,316,319
    
    
    
    43,077,975Investment in available for sale securities
    
    
    (65,801,648
    )
    
    
    (83,995,457
    )Proceeds from maturities of held to maturity securities
    
    
    455,000
    
    
    
    47,090,000Investment in held to maturity securities
    
    
    (1,693
    )
    
    
    (5,337,901
    )Investment in Federal Home Loan Bank Stock
    
    
    
    
    
    
    (14,700
    )Redemption of Federal Home Loan Bank Stock
    
    
    18,700Proceeds from sales of other real estate
    
    
    
    
    
    
    55,000Loans, net increase
    
    
    (5,780,843
    )
    
    
    (21,544,558
    )Acquisition of premises and equipment
    
    
    (1,340,490
    )
    
    
    (1,738,294
    )Other assets
    
    
    (267,994
    )
    
    
    (156,296
    )Net cash provided by (used in) investing activities
    
    $
    33,597,351
    
    
    $
    (22,564,231
    )
 7




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Peoples Financial Corporation and Subsidiaries
Consolidated Statements of Cash Flows (continued)
(Unaudited)
 Three Months Ended March 31,2008
    
    
    2007Cash flows from financing activities:Demand and savings deposits, net change
    
    $
    25,035,338
    
    
    $
    5,880,758Time deposits, net change
    
    
    (24,534,148
    )
    
    
    3,414,651Cash dividends
    
    
    (1,457,587
    )
    
    
    (1,276,086
    )Retirement of common stock
    
    
    (514,449
    )Borrowings from Federal Home Loan Bank
    
    
    10,000,000
    
    
    
    4,150,000Repayments to Federal Home Loan Bank
    
    
    (10,041,017
    )
    
    
    (4,192,803
    )Federal funds purchased and securities sold
under agreements to repurchase, net change
    
    
    (35,069,061
    )
    
    
    12,231,631Net cash provided by (used in) financing
activities
    
    
    (36,580,924
    )
    
    
    20,208,151Net increase in cash and cash equivalents
    
    
    2,051,925
    
    
    
    733,643Cash and cash equivalents, beginning of year
    
    
    34,935,370
    
    
    
    44,193,493Cash and cash equivalents, end of year
    
    $
    36,987,295
    
    
    $
    44,927,136
  8




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Less Than Twelve Months
    
    Over Twelve Months
    
    TotalFair Value
    
    Gross Unrealized Loss
    
    Fair Value
    
    Gross Unrealized Loss
    
    Fair Value
    
    Gross Unrealized LossU.S. Government
Agencies
    
    $
    12,145
    
    
    $
    53
    
    
    $
    
    
    
    $
    
    
    
    $
    12,145
    
    
    $
    53States and
political
subdivisions
    
    
    4,333
    
    
    
    82
    
    
    
    897
    
    
    
    19
    
    
    
    5,230
    
    
    
    101FHLMC
preferred stock
    
    
    
    
    
    
    
    
    
    
    1,574
    
    
    
    1,501
    
    
    
    1,574
    
    
    
    1,501TOTAL
    
    $
    16,478
    
    
    $
    135
    
    
    $
    2,471
    
    
    $
    1,520
    
    
    $
    18,949
    
    
    $
    1,655
     10




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Three Months Ended March 31,2008
    
    2007Balance, beginning of period
    
    $
    9,378,137
    
    
    $
    10,841,367Recoveries
    
    
    68,091
    
    
    
    64,159Loans charged off
    
    
    (87,958
    )
    
    
    (100,468
    )Provision for allowance for loan losses
    
    
    46,000
    
    
    
    49,000Balance, end of period
    
    $
    9,404,270
    
    
    $
    10,854,058
       11




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Fair Value Measurement UsingMarch 31, 2008
    
    
    Level 1
    
    
    Level 2
    
    
    Level 3Available for sale
securities
    
    $
    347,058,328
    
    
    
    
    
    
    $
    347,058,328
    Fair Value Measurement UsingMarch 31, 2008
    
    
    Level 1
    
    
    Level 2
    
    
    Level 3Impaired loans
    
    $
    4,922,993
    
    
    
    
    
    
    $
    4,922,993
   12




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Item 2: Managements Discussion and Analysis of Financial Condition and Results of Operations
 GENERAL
   Forward-Looking Information
  Critical Accounting Policies
  14




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OVERVIEW
   RESULTS OF OPERATIONS
 Net Interest Income
      15




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16




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Three Months Ended March 31, 2008
    
    Three Months Ended March 31, 2007Average Balance
    
    Interest Earned/Paid
    
    Rate
    
    Average Balance
    
    Interest Earned/Paid
    
    RateLoans (2)(3)
    
    $
    450,083
    
    
    $
    7,432
    
    
    
    6.61
    %
    
    $
    403,773
    
    
    $
    7,790
    
    
    
    7.72
    %Federal Funds Sold
    
    
    4,584
    
    
    
    37
    
    
    
    3.23
    %
    
    
    3,750
    
    
    
    51
    
    
    
    5.44
    %HTM:Taxable
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    54,407
    
    
    
    685
    
    
    
    5.04
    %Non
taxable (1)
    
    
    4,330
    
    
    
    68
    
    
    
    6.28
    %
    
    
    5,029
    
    
    
    80
    
    
    
    6.36
    %AFS:Taxable
    
    
    337,084
    
    
    
    4,289
    
    
    
    5.09
    %
    
    
    400,995
    
    
    
    4,981
    
    
    
    4.97
    %Non taxable (1)
    
    
    22,663
    
    
    
    325
    
    
    
    5.74
    %
    
    
    17,520
    
    
    
    258
    
    
    
    5.89
    %Other
    
    
    8,219
    
    
    
    63
    
    
    
    3.07
    %
    
    
    5,401
    
    
    
    64
    
    
    
    4.74
    %Total
    
    $
    826,963
    
    
    $
    12,214
    
    
    
    5.91
    %
    
    $
    890,875
    
    
    $
    13,909
    
    
    
    6.25
    %Savings & interest-
bearing DDA
    
    $
    245,841
    
    
    $
    1,001
    
    
    
    1.63
    %
    
    $
    287,874
    
    
    $
    1,438
    
    
    
    2.00
    %CDs
    
    
    229,883
    
    
    
    2,219
    
    
    
    3.86
    %
    
    
    195,716
    
    
    
    2,088
    
    
    
    4.27
    %Federal funds
purchased
    
    
    199,228
    
    
    
    1,538
    
    
    
    3.09
    %
    
    
    231,234
    
    
    
    2,725
    
    
    
    4.71
    %FHLB advances
    
    
    8,482
    
    
    
    122
    
    
    
    5.75
    %
    
    
    7,249
    
    
    
    115
    
    
    
    6.35
    %Total
    
    $
    683,434
    
    
    $
    4,880
    
    
    
    2.86
    %
    
    $
    722,073
    
    
    $
    6,366
    
    
    
    3.53
    %Net tax-equivalent
yield on earning assets
    
    
    
    
    
    
    
    
    
    
    3.55
    %
    
    
    
    
    
    
    
    
    
    
    3.39
    %
 
 (1)
    
    All interest earned is reported on a taxable equivalent basis using a tax rate of 34% in 2008
and 2007.(2)
    
    Loan fees of $161 and $158 for 2008 and 2007, respectively, are included in these figures.(3)
    
    Includes nonaccrual loans. 17




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Provision for Loan Losses
     Non-interest income
  18




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Non-interest expense
      19




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FINANCIAL CONDITION
  March 31, 2008
    
    
    December 31, 2007Available for sale securities:U.S. Treasury
    
    $
    68,336,000
    
    
    $
    73,306,340U.S. Government agencies and corp.
    
    
    219,540,130
    
    
    
    253,799,811Mortgage-backed securities
    
    
    32,487,541
    
    
    
    33,383,897States and political subdivisions
    
    
    22,904,647
    
    
    
    22,482,364Equity securities
    
    
    3,790,010
    
    
    
    4,056,513Total available for sale securities
    
    $
    347,058,328
    
    
    $
    387,028,925
   March 31, 2008
    
    
    December 31, 2007Real estate, construction
    
    $
    106,877,362
    
    
    $
    93,739,256Real estate, mortgage
    
    
    280,956,131
    
    
    
    265,463,768Loans to finance agricultural production and other
loans to farmers
    
    
    1,053,320
    
    
    
    2,545,169Commercial and industrial loans
    
    
    54,341,299
    
    
    
    76,267,162Loans to individuals for household, family and other
consumer expenditures
    
    
    11,729,533
    
    
    
    11,173,054Obligations of states and political subdivisions
    
    
    1,740,975
    
    
    
    1,747,293All other loans
    
    
    54,430
    
    
    
    56,372Total
    
    $
    456,753,050
    
    
    $
    450,992,074
  20




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SHAREHOLDERS EQUITY AND CAPITAL ADEQUACY
   LIQUIDITY
  21




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FINANCIAL HIGHLIGHTS (in thousands except per share data)
 EARNINGS SUMMARY
 Three Months Ended March 31,
    
    2008
    
    
    2007Net interest income
    
    $
    7,201
    
    
    $
    7,429Provision for loan losses
    
    
    46
    
    
    
    49Non-interest income
    
    
    2,538
    
    
    
    2,650Non-interest expense
    
    
    6,565
    
    
    
    6,026Income taxes
    
    
    1,039
    
    
    
    1,288Net income
    
    
    2,089
    
    
    
    2,715Earnings per share
    
    
    .39
    
    
    
    .49
 PERFORMANCE RATIOS
 March 31,
    
    2008
    
    
    2007Return on average assets
    
    
    .91
    %
    
    
    1.10
    %Return on average equity
    
    
    7.71
    %
    
    
    10.89
    %Net interest margin
    
    
    3.55
    %
    
    
    3.39
    %Efficiency ratio
    
    
    68
    %
    
    
    60
    %
 
 Item 4: Controls and Procedures
   22




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PART II  OTHER INFORMATION
 
 Item 1: Legal Proceedings
        23




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Item 4: Submission of Matters to a Vote of Security Holders
   Approve
    
    
    DisapproveDrew Allen
    
    
    4,711,659.796
    
    
    
    36,713.221Rex E. Kelly
    
    
    4,715,034.796
    
    
    
    33,338.221Dan Magruder
    
    
    4,727,514.796
    
    
    
    20,858.221Lyle M. Page
    
    
    4,707,915.054
    
    
    
    40,457.963Chevis C. Swetman
    
    
    4,595,875.054
    
    
    
    152,497.963
  24




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Item 5: Other Information
  President and CEO
    
    Chevis C. SwetmanExecutive Vice President
    
    A. Wes FulmerFirst Vice President
    
    Thomas J. SlimanSecond Vice President
    
    Jeannette E. RomeroVice President
    
    Robert M. TuceiVice President and Secretary
    
    Ann F. GuiceChief Financial Officer
    
    Lauri A. Wood
 
 Item 6  Exhibits and Reports on Form 8-K
  Exhibit 31.1: Certification of Chief Executive Officer Pursuant to
Section 302 of the Sarbanes  Oxley Act of 2002Exhibit 31.2: Certification of Chief Financial Officer Pursuant
to Section 302 of the Sarbanes  Oxley Act of 2002Exhibit 32.1: Certification of Chief Executive Officer Pursuant
to 18 U.S.C. ss. 1350Exhibit 32.2: Certification of Chief Financial Officer Pursuant
to 18 U.S.C. ss. 1350
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##### Table of Contents



PEOPLES FINANCIAL CORPORATION(Registrant)Date: May 9, 2008By:
    /s/ Chevis C. SwetmanChevis C. SwetmanChairman, President and Chief Executive OfficerDate: May 9, 2008By:
    /s/ Lauri A. WoodLauri A. Wood
Chief Financial Officer and Controller
(principal financial and accounting officer) 26