##### 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 ended
June 30, 2009
 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
 o o
   Large accelerated filer
o

    

  Accelerated filer
þ

    

    Non-accelerated filer o
(Do not check if a smaller reporting company)

  
    Smaller reporting company
o
 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 6  Exhibits and Reports on Form 8-KSIGNATURESEX-31.1EX-31.2EX-32.1EX-32.2    Table of Contents  
 Part 1  Financial Information
 
 Item 1: Financial Statements
 Peoples Financial Corporation and Subsidiaries
Consolidated Statements of Condition
 June 30, 2009
    
    December 31, 2008(Unaudited)
    
    (Audited)AssetsCash and due from banks
    
    $
    39,282,683
    
    
    $
    34,015,590Federal funds sold
    
    
    
    
    
    
    4,000Available for sale securities
    
    
    380,914,975
    
    
    
    340,462,072Held to maturity securities, fair value of
$3,291,335 at June 30, 2009;
$3,438,108 at December 31, 2008
    
    
    3,200,564
    
    
    
    3,394,212Other investments
    
    
    3,999,662
    
    
    
    3,889,324Federal Home Loan Bank Stock, at cost
    
    
    3,522,900
    
    
    
    2,070,700Loans
    
    
    467,165,116
    
    
    
    467,377,039Less: Allowance for loan losses
    
    
    9,797,881
    
    
    
    11,113,575Loans, net
    
    
    457,367,235
    
    
    
    456,263,464Bank premises and equipment, net
of accumulated depreciation
    
    
    32,649,301
    
    
    
    33,600,170Accrued interest receivable
    
    
    4,994,317
    
    
    
    5,444,767Cash surrender value of life insurance
    
    
    15,025,084
    
    
    
    14,688,160Other real estate
    
    
    2,451,468
    
    
    
    397,182Other assets
    
    
    2,915,901
    
    
    
    2,177,860Total assets
    
    $
    946,324,090
    
    
    $
    896,407,501
 2




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##### Table of Contents



Peoples Financial Corporation and Subsidiaries
Consolidated Statements of Condition (continued)
 June 30, 2009
    
    December 31, 2008(Unaudited)
    
    (Audited)Liabilities & Shareholders EquityLiabilities:Deposits:Demand, non-interest bearing
    
    $
    94,332,584
    
    
    $
    109,033,184Savings and demand, interest bearing
    
    
    214,036,852
    
    
    
    239,990,238Time, $100,000 or more
    
    
    155,291,859
    
    
    
    104,540,112Other time deposits
    
    
    54,632,268
    
    
    
    56,912,002Total deposits
    
    
    518,293,563
    
    
    
    510,475,536Federal funds purchased and securities sold under
agreements to repurchase
    
    
    236,970,971
    
    
    
    226,609,231Borrowings from Federal Home Loan Bank
    
    
    72,857,135
    
    
    
    36,937,686Other liabilities
    
    
    15,641,593
    
    
    
    15,384,934Total liabilities
    
    
    843,763,262
    
    
    
    789,407,387Shareholders Equity:Common stock, $1 par value, 15,000,000 shares
authorized, 5,151,697 and 5,279,268 shares
issued
and outstanding at June 30, 2009 and
December 31,
2008, respectively
    
    
    5,151,697
    
    
    
    5,279,268Surplus
    
    
    65,780,254
    
    
    
    65,780,254Undivided profits
    
    
    32,051,717
    
    
    
    33,412,596Accumulated other comprehensive income (loss),
net of tax
    
    
    (422,840
    )
    
    
    2,527,996Total shareholders equity
    
    
    102,560,828
    
    
    
    107,000,114Total liabilities & shareholders equity
    
    $
    946,324,090
    
    
    $
    896,407,501
  3




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Peoples Financial Corporation and Subsidiaries
Consolidated Statements of Income
(Unaudited)
 Three Months Ended June 30,
    
    
    Six Months Ended June 30,2009
    
    2008
    
    2009
    
    2008Interest income:Interest and fees on loans
    
    $
    5,086,063
    
    
    $
    6,675,902
    
    
    $
    10,204,455
    
    
    $
    14,108,247Interest and dividends on securities:U. S. Treasury
    
    
    322,981
    
    
    
    776,286
    
    
    
    776,319
    
    
    
    1,590,226U.S. Government agencies
    
    
    2,494,405
    
    
    
    2,700,844
    
    
    
    4,769,764
    
    
    
    5,714,331Mortgage-backed securities
    
    
    387,501
    
    
    
    435,554
    
    
    
    791,654
    
    
    
    896,926States and political subdivisions
    
    
    301,314
    
    
    
    249,196
    
    
    
    612,423
    
    
    
    509,246Other investments
    
    
    1,953
    
    
    
    38,063
    
    
    
    6,894
    
    
    
    100,980Interest on federal funds sold
    
    
    544
    
    
    
    25,258
    
    
    
    1,437
    
    
    
    62,070Total interest income
    
    
    8,594,761
    
    
    
    10,901,103
    
    
    
    17,162,946
    
    
    
    22,982,026Interest expense:Deposits
    
    
    1,396,989
    
    
    
    2,618,729
    
    
    
    2,953,687
    
    
    
    5,837,741Long-term borrowings
    
    
    110,985
    
    
    
    117,531
    
    
    
    271,777
    
    
    
    239,765Federal funds purchased and securities
sold under agreements to repurchase
    
    
    517,320
    
    
    
    1,081,298
    
    
    
    1,093,672
    
    
    
    2,619,692Total interest expense
    
    
    2,025,294
    
    
    
    3,817,558
    
    
    
    4,319,136
    
    
    
    8,697,198Net interest income
    
    
    6,569,467
    
    
    
    7,083,545
    
    
    
    12,843,810
    
    
    
    14,284,828Provision for allowance for losses
on loans
    
    
    1,502,000
    
    
    
    48,000
    
    
    
    1,850,000
    
    
    
    94,000Net interest income after provision
for allowance for losses on loans
    
    $
    5,067,467
    
    
    $
    7,035,545
    
    
    $
    10,993,810
    
    
    $
    14,190,828
 4




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Peoples Financial Corporation and Subsidiaries

Consolidated Statements of Income (continued)
(Unaudited)
 Three Months Ended June 30,
    
    
    Six Months Ended June 30,2009
    
    2008
    
    2009
    
    2008Non-interest income:Trust department income and fees
    
    $
    325,750
    
    
    $
    434,025
    
    
    $
    662,016
    
    
    $
    829,115Service charges on deposit accounts
    
    
    1,702,090
    
    
    
    1,729,375
    
    
    
    3,365,397
    
    
    
    3,421,835Gain on sales or calls of securites
    
    
    2
    
    
    
    27,629
    
    
    
    136,799
    
    
    
    115,277Other income
    
    
    138,534
    
    
    
    439,686
    
    
    
    624,585
    
    
    
    802,280Total non-interest income
    
    
    2,166,376
    
    
    
    2,630,715
    
    
    
    4,788,797
    
    
    
    5,168,507Non-interest expense:Salaries and employee benefits
    
    
    3,694,321
    
    
    
    3,611,848
    
    
    
    7,074,699
    
    
    
    7,077,246Net occupancy
    
    
    641,242
    
    
    
    467,333
    
    
    
    1,193,103
    
    
    
    1,007,158Rentals, depreciation and maintenance
    
    
    954,189
    
    
    
    872,248
    
    
    
    1,904,556
    
    
    
    1,794,301Other expense
    
    
    1,793,384
    
    
    
    1,452,833
    
    
    
    3,466,575
    
    
    
    3,090,232Total non-interest expense
    
    
    7,083,136
    
    
    
    6,404,262
    
    
    
    13,638,933
    
    
    
    12,968,937Income before income taxes
    
    
    150,707
    
    
    
    3,261,998
    
    
    
    2,143,674
    
    
    
    6,390,398Income taxes
    
    
    (50,000
    )
    
    
    1,084,000
    
    
    
    240,000
    
    
    
    2,123,000Net Income
    
    $
    200,707
    
    
    $
    2,177,998
    
    
    $
    1,903,674
    
    
    $
    4,267,398Basic and diluted earnings per share
    
    $
    .04
    
    
    $
    .41
    
    
    $
    .37
    
    
    $
    .79
  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, 2009
    
    
    5,279,268
    
    
    $
    5,279,268
    
    
    $
    65,780,254
    
    
    $
    33,412,596
    
    
    $
    2,527,996
    
    
    
    
    
    
    $
    107,000,114Comprehensive Income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,903,674
    
    
    
    
    
    
    $
    1,903,674
    
    
    
    1,903,674Net unrealized loss on
available for sale
securities, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,860,550
    )
    
    
    (2,860,550
    )
    
    
    (2,860,550
    )Reclassification
adjustment for available
for sale securities called
or sold in current year,
net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (90,286
    )
    
    
    (90,286
    )
    
    
    (90,286
    )Total comprehensive
loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (1,047,162
    )Effect of stock retirement
on accrued dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,774
    
    
    
    
    
    
    
    
    
    
    
    4,774Dividend declared,

($ .20 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,030,339
    )
    
    
    
    
    
    
    
    
    
    
    (1,030,339
    )Retirement of stock
    
    
    (127,571
    )
    
    
    (127,571
    )
    
    
    
    
    
    
    (2,238,988
    )
    
    
    
    
    
    
    
    
    
    
    (2,366,559
    )Balance, June 30, 2009
    
    
    5,151,697
    
    
    $
    5,151,697
    
    
    $
    65,780,254
    
    
    $
    32,051,717
    
    
    $
    (422,840
    )
    
    
    
    
    
    $
    102,560,828
   6




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Peoples Financial Corporation and Subsidiaries
Consolidated Statements of Cash Flows (Unaudited)
 Six Months Ended June 30,2009
    
    
    2008Cash flows from operating activities:Net income
    
    $
    1,903,674
    
    
    $
    4,267,398Adjustment to reconcile net income to net cash
provided by operating activities:Depreciation
    
    
    1,212,000
    
    
    
    1,097,500Provision for allowance for loan losses
    
    
    1,850,000
    
    
    
    94,000Gain on sale of bank premises
    
    
    
    
    
    
    (142,607
    )Gain on other investments
    
    
    (110,338
    )Gain on sales and calls of securities
    
    
    (136,799
    )
    
    
    (115,277
    )Loss on impairment of equity securities
    
    
    149,517Change in accrued interest receivable
    
    
    450,450
    
    
    
    959,555Change in other assets
    
    
    100,299
    
    
    
    776,622Change in other liabilities
    
    
    1,504,614
    
    
    
    776,346Net cash provided by operating activities
    
    
    6,923,417
    
    
    
    7,713,537Cash flows from investing activities:Proceeds from maturities, sales and calls of available for
sale securities
    
    
    145,473,727
    
    
    
    138,371,132Investment in available for sale securities
    
    
    (190,412,284
    )
    
    
    (82,129,694
    )Proceeds from maturities of held to maturity securities
    
    
    195,000
    
    
    
    1,240,000Investment in held to maturity securities
    
    
    (1,352
    )
    
    
    (2,889
    )Purchases of other investments
    
    
    
    
    
    
    (3,160,000
    )(Investment in) redemption of Federal Home Loan Bank Stock
    
    
    (1,452,200
    )
    
    
    8,100Proceeds from sales of other real estate
    
    
    326,076
    
    
    
    19,500Loans, net change
    
    
    (5,337,134
    )
    
    
    (22,264,844
    )Proceeds from sale of bank premises
    
    
    
    
    
    
    266,812Acquisition of premises and equipment
    
    
    (261,131
    )
    
    
    (1,672,367
    )Other assets
    
    
    (339,903
    )
    
    
    (814,423
    )Net cash provided by (used in) investing activities
    
    $
    (51,809,201
    )
    
    $
    29,861,327
 7




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Peoples Financial Corporation and Subsidiaries
Consolidated Statements of Cash Flows (continued)
(Unaudited)
 Six Months Ended June 30,2009
    
    
    2008Cash flows from financing activities:Demand and savings deposits, net change
    
    $
    (40,653,986
    )
    
    $
    40,578,887Time deposits, net change
    
    
    48,472,013
    
    
    
    (45,086,893
    )Cash dividends
    
    
    (1,583,780
    )
    
    
    (1,457,587
    )Retirement of common stock
    
    
    (2,366,559
    )
    
    
    (1,759,801
    )Borrowings from Federal Home Loan Bank
    
    
    136,000,000
    
    
    
    12,000,000Repayments to Federal Home Loan Bank
    
    
    (100,080,551
    )
    
    
    (12,082,063
    )Federal funds purchased and securities sold
under agreements to repurchase, net change
    
    
    10,361,740
    
    
    
    (25,868,988
    )Net cash provided by (used in) financing activities
    
    
    50,148,877
    
    
    
    (33,676,445
    )Net increase in cash and cash equivalents
    
    
    5,263,093
    
    
    
    3,898,419Cash and cash equivalents, beginning of year
    
    
    34,019,590
    
    
    
    34,935,370Cash and cash equivalents, end of year
    
    $
    39,282,683
    
    
    $
    38,833,789
  8




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Gross
    
    Grossunrealized
    
    unrealized
    
    EstimatedJune 30, 2009
    
    Amortized cost
    
    gains
    
    losses
    
    fair valueAvailable for sale securities:Debt securities:U.S. Treasury
    
    $
    40,974,676
    
    
    $
    1,064,114
    
    
    $
    
    
    
    $
    42,038,790U.S. Government agencies
    
    
    274,347,228
    
    
    
    1,773,051
    
    
    
    (2,399,289
    )
    
    
    273,720,990Mortgage-backed securities
    
    
    29,288,304
    
    
    
    828,801
    
    
    
    (54,746
    )
    
    
    30,062,359States and political subdivisions
    
    
    34,782,885
    
    
    
    592,009
    
    
    
    (932,041
    )
    
    
    34,442,853Total debt securities
    
    
    379,393,093
    
    
    
    4,257,975
    
    
    
    (3,386,076
    )
    
    
    380,264,992Equity securities
    
    
    649,983
    
    
    
    
    
    
    
    
    
    
    
    649,983Total available for sale securities
    
    $
    380,043,076
    
    
    $
    4,257,975
    
    
    $
    (3,386,076
    )
    
    $
    380,914,975Held to maturity securities:States and political subdivisions
    
    $
    3,200,564
    
    
    $
    94,064
    
    
    $
    (3,293
    )
    
    $
    3,291,335Total held to maturity securities
    
    $
    3,200,564
    
    
    $
    94,064
    
    
    $
    (3,293
    )
    
    $
    3,291,335
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Gross
    
    
    Grossunrealized
    
    
    unrealized
    
    
    EstimatedDecember 31, 2008
    
    Amortized cost
    
    
    gains
    
    
    losses
    
    
    fair valueAvailable for sale securities:Debt securities:U.S. Treasury
    
    $
    64,963,243
    
    
    $
    1,746,597
    
    
    $
    
    
    
    $
    66,709,840U.S. Government agencies
    
    
    208,917,636
    
    
    
    3,552,215
    
    
    
    (74,020
    )
    
    
    212,395,831Mortgage-backed securities
    
    
    28,992,858
    
    
    
    788,218
    
    
    
    
    
    
    
    29,781,076States and political subdivisions
    
    
    31,594,000
    
    
    
    316,874
    
    
    
    (985,049
    )
    
    
    30,925,825Total debt securities
    
    
    334,467,737
    
    
    
    6,403,904
    
    
    
    (1,059,069
    )
    
    
    339,812,572Equity securities
    
    
    649,500
    
    
    
    
    
    
    
    
    
    
    
    649,500Total available for sale securities
    
    $
    335,117,237
    
    
    $
    6,403,904
    
    
    $
    (1,059,069
    )
    
    $
    340,462,072Held to maturity securities:States and political subdivisions
    
    $
    3,394,212
    
    
    $
    52,382
    
    
    $
    (8,486
    )
    
    $
    3,438,108Total held to maturity securities
    
    $
    3,394,212
    
    
    $
    52,382
    
    
    $
    (8,486
    )
    
    $
    3,438,108
  Fair Value Measurement UsingTotal

    
    Level 1
    
    Level 2

    
    Level 3June 30, 2009
    
    $
    380,914,975
    
    
    
    
    $
    380,914,975December 31, 2008
    
    
    340,462,072
    
    
    
    
    
    340,462,072
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EstimatedAmortized cost
    
    
    fair valueAvailable for sale securities:Due in one year or less
    
    $
    26,829,470
    
    
    $
    27,177,257Due after one year through five years
    
    
    137,824,730
    
    
    
    139,544,662Due after five years through ten years
    
    
    64,318,384
    
    
    
    63,934,136Due after ten years
    
    
    121,132,205
    
    
    
    119,546,578Mortgage-backed securities
    
    
    29,288,304
    
    
    
    30,062,359Totals
    
    $
    379,393,093
    
    
    $
    380,264,992Held to maturity securities:Due in one year or less
    
    $
    255,000
    
    
    $
    258,372Due after one year through five years
    
    
    1,829,287
    
    
    
    1,888,618Due after five years through ten years
    
    
    1,116,277
    
    
    
    1,144,345Totals
    
    $
    3,200,564
    
    
    $
    3,291,335
  Less Than Twelve Months
    
    Over Twelve Months
    
    TotalGross
    
    
    
    
    
    Gross
    
    
    
    
    
    GrossUnrealized
    
    
    
    
    
    Unrealized
    
    
    
    
    
    UnrealizedJune 30, 2009:
    
    Fair Value
    
    Loss
    
    Fair Value
    
    Loss
    
    Fair Value
    
    LossU.S. Government
Agencies
    
    $
    133,931,111
    
    
    $
    2,399,289
    
    
    $
    
    
    
    $
    
    
    
    $
    133,931,111
    
    
    $
    2,399,289Mortgage-backed
securities
    
    
    4,949,764
    
    
    
    54,746
    
    
    
    
    
    
    
    
    
    
    
    4,949,764
    
    
    
    54,746States and political
subdivisions
    
    
    14,974,524
    
    
    
    703,940
    
    
    
    2,193,324
    
    
    
    231,394
    
    
    
    17,167,848
    
    
    
    935,334TOTAL
    
    $
    153,855,399
    
    
    $
    3,157,975
    
    
    $
    2,193,324
    
    
    $
    231,394
    
    
    $
    156,048,723
    
    
    $
    3,389,369
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Less Than Twelve Months
    
    Over Twelve Months
    
    TotalGross
    
    
    
    
    
    Gross
    
    
    
    
    
    GrossUnrealized
    
    
    
    
    
    Unrealized
    
    
    
    
    
    UnrealizedDecember 31, 2008:
    
    Fair Value
    
    Loss
    
    Fair Value
    
    Loss
    
    Fair Value
    
    LossU.S. Government
Agencies
    
    $
    10,780,995
    
    
    $
    74,020
    
    
    $
    
    
    
    $
    
    
    
    $
    10,780,995
    
    
    $
    74,020States and political
subdivisions
    
    
    16,545,087
    
    
    
    739,918
    
    
    
    2,825,811
    
    
    
    253,617
    
    
    
    19,370,898
    
    
    
    993,535TOTAL
    
    $
    27,326,082
    
    
    $
    813,938
    
    
    $
    2,825,811
    
    
    $
    253,617
    
    
    $
    30,151,893
    
    
    $
    1,067,555
       13




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Fair Value Measurement UsingTotal
    
    Level 1
    
    Level 2
    
    Level 3June 30, 2009
    
    $
    26,586,140
    
    
    
    
    $
    26,586,140December 31, 2008
    
    
    20,072,210
    
    
    
    
    
    20,072,210
    Fair Value Measurement UsingTotal
    
    Level 1
    
    Level 2
    
    Level 3June 30, 2009
    
    $
    2,451,468
    
    
    
    
    $
    2,451,468December 31, 2008
    
    
    397,182
    
    
    
    
    
    397,182
 14




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##### Table of Contents



Three Months Ended June 30,
    
    
    Six Months Ended June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Balance, beginning of period
    
    $
    11,372,866
    
    
    $
    9,404,270
    
    
    $
    11,113,575
    
    
    $
    9,378,137Recoveries
    
    
    224,212
    
    
    
    211,039
    
    
    
    329,634
    
    
    
    279,130Loans charged off
    
    
    (3,301,197
    )
    
    
    (335,529
    )
    
    
    (3,495,328
    )
    
    
    (423,487
    )Provision for allowance for loan losses
    
    
    1,502,000
    
    
    
    48,000
    
    
    
    1,850,000
    
    
    
    94,000Balance, end of period
    
    $
    9,797,881
    
    
    $
    9,327,780
    
    
    $
    9,797,881
    
    
    $
    9,327,780
           15




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##### Table of Contents



June 30, 2009
    
    December 31, 2008Carrying Amount
    
    Fair Value
    
    Carrying Amount
    
    Fair ValueFinancial Assets:Cash and due from banks
    
    $
    39,282,683
    
    
    $
    39,282,683
    
    
    $
    34,015,590
    
    
    $
    34,015,590Federal funds sold
    
    
    
    
    
    
    
    
    
    
    4,000
    
    
    
    4,000Available for sale securities
    
    
    380,914,975
    
    
    
    380,914,975
    
    
    
    340,462,072
    
    
    
    340,462,072Held to maturity securities
    
    
    3,200,564
    
    
    
    3,291,335
    
    
    
    3,394,212
    
    
    
    3,438,108Other investments
    
    
    3,999,662
    
    
    
    3,999,662
    
    
    
    3,889,324
    
    
    
    3,889,324Federal Home Loan Bank stock
    
    
    3,522,900
    
    
    
    3,522,900
    
    
    
    2,070,700
    
    
    
    2,070,700Loans, net
    
    
    457,367,235
    
    
    
    467,120,995
    
    
    
    456,263,464
    
    
    
    461,112,530Cash surrender value
    
    
    15,025,084
    
    
    
    15,025,084
    
    
    
    14,688,160
    
    
    
    14,688,160Financial Liabilities:Deposits:Non-interest bearing
    
    
    94,332,584
    
    
    
    94,332,584
    
    
    
    109,033,184
    
    
    
    109,033,184Interest bearing
    
    
    423,960,979
    
    
    
    426,638,670
    
    
    
    401,442,352
    
    
    
    402,361,440Total deposits
    
    
    518,293,563
    
    
    
    520,971,254
    
    
    
    510,475,536
    
    
    
    511,394,624Federal funds purchased and
securities sold 
under agreements
to repurchase
    
    
    236,970,971
    
    
    
    236,970,971
    
    
    
    226,609,231
    
    
    
    226,609,231Borrowings from Federal Home Loan
Bank
    
    
    72,857,135
    
    
    
    72,657,000
    
    
    
    36,937,686
    
    
    
    37,547,000
   16




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17




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##### Table of Contents



Item 2: Managements Discussion and Analysis of Financial Condition and Results of Operations
 GENERAL
   Forward-Looking Information
  Critical Accounting Policies
  18




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OVERVIEW
    RESULTS OF OPERATIONS
 Net Interest Income
   Quarter Ended June 30, 2009 as Compared with Quarter Ended June 30, 2008
  19




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##### Table of Contents



Six Months Ended June 30, 2009 as Compared with Six Months Ended June 30, 2008
      20




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##### Table of Contents



Three Months Ended June 30, 2009
    
    
    Three Months Ended June 30, 2008Average Balance
    
    
    Interest Earned/Paid
    
    
    Rate
    
    
    Average Balance
    
    
    Interest Earned/Paid
    
    
    RateLoans (2)(3)
    
    $
    473,432
    
    
    $
    5,086
    
    
    
    4.30
    %
    
    $
    463,561
    
    
    $
    6,676
    
    
    
    5.76
    %Federal Funds Sold
    
    
    934
    
    
    
    1
    
    
    
    0.42
    %
    
    
    5,067
    
    
    
    25
    
    
    
    1.97
    %HTM:Non taxable (1)
    
    
    3,264
    
    
    
    43
    
    
    
    5.27
    %
    
    
    3,653
    
    
    
    57
    
    
    
    6.24
    %AFS:Taxable
    
    
    328,065
    
    
    
    3,205
    
    
    
    3.91
    %
    
    
    306,118
    
    
    
    3,912
    
    
    
    5.11
    %Non taxable (1)
    
    
    33,692
    
    
    
    414
    
    
    
    4.92
    %
    
    
    22,609
    
    
    
    322
    
    
    
    5.70
    %Other
    
    
    2,393
    
    
    
    2
    
    
    
    0.33
    %
    
    
    7,816
    
    
    
    38
    
    
    
    1.94
    %Total
    
    $
    841,780
    
    
    $
    8,751
    
    
    
    4.16
    %
    
    $
    808,824
    
    
    $
    11,030
    
    
    
    5.45
    %Savings & interest-bearing DDA
    
    $
    238,775
    
    
    $
    541
    
    
    
    0.91
    %
    
    $
    260,870
    
    
    $
    1,059
    
    
    
    1.62
    %CDs
    
    
    217,051
    
    
    
    856
    
    
    
    1.58
    %
    
    
    190,627
    
    
    
    1,559
    
    
    
    3.27
    %Federal funds
purchased
    
    
    230,600
    
    
    
    517
    
    
    
    0.90
    %
    
    
    207,973
    
    
    
    1,082
    
    
    
    2.08
    %FHLB advances
    
    
    16,562
    
    
    
    111
    
    
    
    2.68
    %
    
    
    7,349
    
    
    
    118
    
    
    
    6.42
    %Total
    
    $
    702,988
    
    
    $
    2,025
    
    
    
    1.15
    %
    
    $
    666,819
    
    
    $
    3,818
    
    
    
    2.29
    %Net tax-equivalent
yield on earning assets
    
    
    
    
    
    
    
    
    
    
    3.20
    %
    
    
    
    
    
    
    
    
    
    
    3.57
    %
 
 (1)
    
    All interest earned is reported on a taxable equivalent basis using a tax rate of 34% in 2009
and 2008.(2)
    
    Loan fees of $135,074and $293,340 for 2009 and 2008, respectively, are included in these
figures.(3)
    
    Includes nonaccrual loans. 21




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##### Table of Contents



Six Months Ended June 30, 2009
    
    
    Six Months Ended June 30, 2008Average Balance
    
    
    Interest Earned/Paid
    
    
    Rate
    
    
    Average Balance
    
    
    Interest Earned/Paid
    
    
    RateLoans (2)(3)
    
    $
    471,986
    
    
    $
    10,204
    
    
    
    4.32
    %
    
    $
    456,822
    
    
    $
    14,108
    
    
    
    6.18
    %Federal Funds Sold
    
    
    1,136
    
    
    
    1
    
    
    
    0.18
    %
    
    
    4,825
    
    
    
    62
    
    
    
    2.57
    %HTM:Non taxable (1)
    
    
    3,329
    
    
    
    89
    
    
    
    5.35
    %
    
    
    3,992
    
    
    
    125
    
    
    
    6.26
    %AFS:Taxable
    
    
    317,464
    
    
    
    6,338
    
    
    
    3.99
    %
    
    
    321,601
    
    
    
    8,201
    
    
    
    5.10
    %Non taxable (1)
    
    
    33,033
    
    
    
    839
    
    
    
    5.08
    %
    
    
    22,636
    
    
    
    647
    
    
    
    5.72
    %Other
    
    
    2,636
    
    
    
    7
    
    
    
    0.53
    %
    
    
    7,986
    
    
    
    101
    
    
    
    2.53
    %Total
    
    $
    829,584
    
    
    $
    17,478
    
    
    
    4.21
    %
    
    $
    817,862
    
    
    $
    23,244
    
    
    
    5.68
    %Savings & interest-bearing DDA
    
    $
    241,524
    
    
    $
    1,236
    
    
    
    1.02
    %
    
    $
    253,387
    
    
    $
    2,060
    
    
    
    1.63
    %CDs
    
    
    196,453
    
    
    
    1,717
    
    
    
    1.75
    %
    
    
    210,255
    
    
    
    3,778
    
    
    
    3.59
    %Federal funds
purchased
    
    
    228,985
    
    
    
    1,094
    
    
    
    0.96
    %
    
    
    203,600
    
    
    
    2,620
    
    
    
    2.57
    %FHLB advances
    
    
    22,652
    
    
    
    272
    
    
    
    2.40
    %
    
    
    7,916
    
    
    
    240
    
    
    
    6.06
    %Total
    
    $
    689,614
    
    
    $
    4,319
    
    
    
    1.25
    %
    
    $
    675,158
    
    
    $
    8,698
    
    
    
    2.58
    %Net tax-equivalent
yield on earning assets
    
    
    
    
    
    
    
    
    
    
    3.17
    %
    
    
    
    
    
    
    
    
    
    
    3.56
    %
 
 (1)
    
    All interest earned is reported on a taxable equivalent basis using a tax rate of 34% in 2009
and 2008.(2)
    
    Loan fees of $287,216and $409,311 for 2009 and 2008, respectively, are included in these
figures.(3)
    
    Includes nonaccrual loans. 22




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Provision for Loan Losses
    Non-interest income
   23




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##### Table of Contents



Non-interest expense
   Income Taxes
  FINANCIAL CONDITION
  24




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##### Table of Contents



June 30, 2009
    
    
    December 31, 2008Real estate, construction
    
    $
    97,647,671
    
    
    $
    118,455,302Real estate, mortgage
    
    
    304,168,599
    
    
    
    290,458,002Loans to finance agricultural production
    
    
    1,553,640
    
    
    
    3,177,723Commercial and industrial loans
    
    
    51,112,078
    
    
    
    43,311,552Loans to individuals for household, family and other
consumer expenditures
    
    
    10,423,033
    
    
    
    10,201,518Obligations of states and political subdivisions
    
    
    2,260,095
    
    
    
    1,733,194All other loans
    
    
    
    
    
    
    39,748Total
    
    $
    467,165,116
    
    
    $
    467,377,039
      SHAREHOLDERS EQUITY AND CAPITAL ADEQUACY
  25




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LIQUIDITY
   
 Item 4: Controls and Procedures
   26




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##### Table of Contents



PART II  OTHER INFORMATION
 
 Item 1: Legal Proceedings
 
 
 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
   27




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##### Table of Contents



PEOPLES FINANCIAL CORPORATION
(Registrant)Date:
    
    August 7,
2009By:
    
    /s/ Chevis C. SwetmanChevis C. Swetman
Chairman, President and Chief Executive Officer(principal executive officer)Date:
    
    August 7,
2009By:
    
    /s/ Lauri A. WoodLauri A. Wood
Chief Financial Officer and Controller(principal financial and accounting officer)
 28