##### 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 March 31, 2011
 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 oAccelerated filer oNon-accelerated filer o(Do not check if a smaller reporting company)
Smaller reporting company þ 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 5: Other InformationItem 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
 March 31, 2011
    
    
    December 31, 2010(Unaudited)
    
    
    (Audited)AssetsCash and due from banks
    
    $
    42,450,301
    
    
    $
    24,146,939Available for sale securities
    
    
    319,373,586
    
    
    
    287,078,463Held to maturity securities, fair value of
$2,009,673 at March 31, 2011;
$2,010,430 at December 31, 2010
    
    
    1,915,578
    
    
    
    1,914,879Other investments
    
    
    3,916,217
    
    
    
    3,926,371Federal Home Loan Bank Stock, at cost
    
    
    2,584,700
    
    
    
    2,281,200Loans
    
    
    406,780,872
    
    
    
    409,898,757Less: Allowance for loan losses
    
    
    7,105,564
    
    
    
    6,650,258Loans, net
    
    
    399,675,308
    
    
    
    403,248,499Bank premises and equipment, net
of accumulated depreciation
    
    
    29,299,029
    
    
    
    29,756,239Other real estate
    
    
    6,937,128
    
    
    
    5,744,150Accrued interest receivable
    
    
    3,738,821
    
    
    
    3,292,430Cash surrender value of life insurance
    
    
    16,113,383
    
    
    
    15,951,117Prepaid FDIC assessments
    
    
    3,300,440
    
    
    
    3,652,972Other assets
    
    
    3,243,038
    
    
    
    5,552,225Total assets
    
    $
    832,547,529
    
    
    $
    786,545,484
 2




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##### Table of Contents



Peoples Financial Corporation and Subsidiaries
Consolidated Statements of Condition (continued)
 March 31, 2011
    
    
    December 31, 2010(Unaudited)
    
    
    (Audited)Liabilities & Shareholders EquityLiabilities:Deposits:Demand, non-interest bearing
    
    $
    117,803,473
    
    
    $
    108,277,985Savings and demand, interest bearing
    
    
    246,826,821
    
    
    
    193,631,209Time, $100,000 or more
    
    
    124,092,337
    
    
    
    134,667,660Other time deposits
    
    
    46,723,419
    
    
    
    47,562,661Total deposits
    
    
    535,446,050
    
    
    
    484,139,515Federal funds purchased and securities sold under
agreements to repurchase
    
    
    145,060,933
    
    
    
    140,102,019Borrowings from Federal Home Loan Bank
    
    
    31,975,108
    
    
    
    42,957,016Other liabilities
    
    
    17,546,679
    
    
    
    17,990,072Total liabilities
    
    
    730,028,770
    
    
    
    685,188,622Shareholders Equity:Common stock, $1 par value, 15,000,000 shares
authorized, 5,136,918 and 5,151,139 shares
issued and
outstanding at March 31, 2011 and December 31,
2010
    
    
    5,136,918
    
    
    
    5,151,139Surplus
    
    
    65,780,254
    
    
    
    65,780,254Undivided profits
    
    
    33,561,586
    
    
    
    33,302,381Accumulated other comprehensive loss, net of tax
    
    
    (1,959,999
    )
    
    
    (2,876,912
    )Total shareholders equity
    
    
    102,518,759
    
    
    
    101,356,862Total liabilities & shareholders equity
    
    $
    832,547,529
    
    
    $
    786,545,484
  3




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Peoples Financial Corporation and Subsidiaries
Consolidated Statements of Income
(Unaudited)
 Three Months Ended March 31,2011
    
    2010Interest income:Interest and fees on loans
    
    $
    4,906,762
    
    
    $
    4,987,126Interest and dividends on securities:U.S. Treasuries
    
    
    63,863
    
    
    
    194,262U.S. Government agencies
    
    
    1,439,362
    
    
    
    2,299,703Mortgage-backed securities
    
    
    
    
    
    
    386,876States and political subdivisions
    
    
    369,101
    
    
    
    356,929Other securities
    
    
    6,218
    
    
    
    4,451Interest on federal funds sold
    
    
    1,352
    
    
    
    3,779Total interest income
    
    
    6,786,658
    
    
    
    8,233,126Interest expense:Deposits
    
    
    702,711
    
    
    
    817,489Borrowings from FHLB
    
    
    50,065
    
    
    
    136,645Federal funds purchased and securities
sold under agreements to repurchase
    
    
    172,023
    
    
    
    286,390Total interest expense
    
    
    924,799
    
    
    
    1,240,524Net interest income
    
    
    5,861,859
    
    
    
    6,992,602Provision for allowance for loan losses
    
    
    641,000
    
    
    
    1,150,000Net interest income after provision for
allowance for loan losses
    
    $
    5,220,859
    
    
    $
    5,842,602
 4




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Peoples Financial Corporation and Subsidiaries

Consolidated Statements of Income (continued)
(Unaudited)
 Three Months Ended March 31,2011
    
    2010Non-interest income:Trust department income and fees
    
    $
    346,455
    
    
    $
    307,296Service charges on deposit accounts
    
    
    1,419,028
    
    
    
    1,572,503Increase in cash surrender value of life insurance
    
    
    132,300
    
    
    
    129,600Other income
    
    
    125,127
    
    
    
    123,734Total non-interest income
    
    
    2,022,910
    
    
    
    2,133,133Non-interest expense:Salaries and employee benefits
    
    
    3,376,297
    
    
    
    3,412,275Net occupancy
    
    
    613,934
    
    
    
    524,777Equipment rentals, depreciation and maintenance
    
    
    870,400
    
    
    
    935,453FDIC assessments
    
    
    405,826
    
    
    
    350,387Other expense
    
    
    1,689,768
    
    
    
    1,706,388Total non-interest expense
    
    
    6,956,225
    
    
    
    6,929,280Income before income taxes
    
    
    287,544
    
    
    
    1,046,455Income taxes (benefit)
    
    
    (150,000
    )
    
    
    175,000Net income
    
    $
    437,544
    
    
    $
    871,455Basic and diluted earnings per share
    
    $
    .09
    
    
    $
    .17
  5




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Peoples Financial Corporation and Subsidiaries
Consolidated Statement of Changes in Shareholders Equity and Comprehensive Income
 AccumulatedNumber of
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    OtherCommon
    
    
    Common
    
    
    
    
    
    
    Undivided
    
    
    Comprehensive
    
    
    ComprehensiveShares
    
    
    Stock
    
    
    Surplus
    
    
    Profits
    
    
    Loss
    
    
    Income
    
    
    TotalBalance, January 1,
2011
    
    
    5,151,139
    
    
    $
    5,151,139
    
    
    $
    65,780,254
    
    
    $
    33,302,381
    
    
    $
    (2,876,912
    )
    
    
    
    
    
    $
    101,356,862Comprehensive
income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    437,544
    
    
    
    
    
    
    $
    437,544
    
    
    
    437,544Net unrealized gain
on available for
sale securities,
net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    916,913
    
    
    
    916,913
    
    
    
    916,913Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    1,354,457Retirement of
stock
    
    
    (14,221
    )
    
    
    (14,221
    )
    
    
    
    
    
    
    (178,339
    )
    
    
    
    
    
    
    
    
    
    
    (192,560
    )Balance,
March 31, 2011
    
    
    5,136,918
    
    
    $
    5,136,918
    
    
    $
    65,780,254
    
    
    $
    33,561,586
    
    
    $
    (1,959,999
    )
    
    
    
    
    
    $
    102,518,759
   6




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Peoples Financial Corporation and Subsidiaries
Consolidated Statements of Cash Flows (Unaudited)
 Three Months Ended March 31,2011
    
    
    2010Cash flows from operating activities:Net income
    
    $
    437,544
    
    
    $
    871,455Adjustment to reconcile net income to net cash
provided by operating activities:Depreciation
    
    
    567,000
    
    
    
    609,000Provision for allowance for loan losses
    
    
    641,000
    
    
    
    1,150,000Loss on writedown of other real estate
    
    
    124,606
    
    
    
    77,350Loss on sales of other real estate
    
    
    5,000
    
    
    
    13,000Loss on other investments
    
    
    10,154
    
    
    
    15,550Gain on sales and calls of securities
    
    
    
    
    
    
    (4,045
    )Accretion of held to maturity securities
    
    
    (699
    )
    
    
    (676
    )Change in accrued interest receivable
    
    
    (446,391
    )
    
    
    (418,653
    )Change in other assets
    
    
    2,639,963
    
    
    
    228,188Change in other liabilities
    
    
    (429,993
    )
    
    
    261,581Net cash provided by operating activities
    
    
    3,548,184
    
    
    
    2,802,750Cash flows from investing activities:Proceeds from maturities, sales and calls of
available for sale securities
    
    
    25,430,000
    
    
    
    45,824,384Investment in available for sale securities
    
    
    (56,337,531
    )
    
    
    (57,083,465
    )Investment in Federal Home Loan Bank Stock
    
    
    (303,500
    )
    
    
    (1,400
    )Proceeds from sales of other real estate
    
    
    30,000
    
    
    
    310,000Loans, net change
    
    
    1,579,607
    
    
    
    14,773,369Acquisition of premises and equipment
    
    
    (109,790
    )
    
    
    (64,947
    )Investment in other assets
    
    
    (162,266
    )
    
    
    (171,757
    )Net cash provided by (used in) investing
activities
    
    $
    (29,873,480
    )
    
    $
    3,586,184
 7




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Peoples Financial Corporation and Subsidiaries
Consolidated Statements of Cash Flows (continued)
(Unaudited)
 Three Months Ended March 31,2011
    
    
    2010Cash flows from financing activities:Demand and savings deposits, net change
    
    $
    62,721,100
    
    
    $
    27,581,497Time deposits, net change
    
    
    (11,414,565
    )
    
    
    28,684,535Cash dividends
    
    
    (462,323
    )
    
    
    (515,170
    )Retirement of common stock
    
    
    (192,560
    )Borrowings from Federal Home Loan Bank
    
    
    201,467,835
    
    
    
    268,571,965Repayments to Federal Home Loan Bank
    
    
    (212,449,743
    )
    
    
    (310,043,716
    )Federal funds purchased and securities sold
under agreements to repurchase, net change
    
    
    4,958,914
    
    
    
    (20,039,227
    )Net cash provided by (used in) financing
activities
    
    
    44,628,658
    
    
    
    (5,760,116
    )Net increase in cash and cash equivalents
    
    
    18,303,362
    
    
    
    628,818Cash and cash equivalents, beginning of period
    
    
    24,146,939
    
    
    
    29,155,294Cash and cash equivalents, end of period
    
    $
    42,450,301
    
    
    $
    29,784,112
  8




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9




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Gross
    
    GrossUnrealized
    
    UnrealizedMarch 31, 2011
    
    Amortized Cost
    
    Gains
    
    Losses
    
    Fair ValueAvailable for sale securities:Debt securities:U.S. Treasuries
    
    $
    16,959,686
    
    
    $
    42,767
    
    
    $
    (435,163
    )
    
    $
    16,567,290U.S. Government agencies
    
    
    262,622,107
    
    
    
    1,076,711
    
    
    
    (3,457,059
    )
    
    
    260,241,759States and political subdivisions
    
    
    40,501,374
    
    
    
    1,602,290
    
    
    
    (189,110
    )
    
    
    41,914,554Total debt securities
    
    
    320,083,167
    
    
    
    2,721,768
    
    
    
    (4,081,332
    )
    
    
    318,723,603Equity securities
    
    
    649,983
    
    
    
    
    
    
    
    
    
    
    
    649,983Total available for sale securities
    
    $
    320,733,150
    
    
    $
    2,721,768
    
    
    $
    (4,081,332
    )
    
    $
    319,373,586Held to maturity securities:States and political subdivisions
    
    $
    1,915,578
    
    
    $
    94,095
    
    
    $
    
    
    
    $
    2,009,673Total held to maturity securities
    
    $
    1,915,578
    
    
    $
    94,095
    
    
    $
    
    
    
    $
    2,009,673
 10




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Gross
    
    GrossUnrealized
    
    UnrealizedDecember 31, 2010
    
    Amortized Cost
    
    Gains
    
    Losses
    
    Fair ValueAvailable for sale securities:Debt securities:U.S. Treasuries
    
    $
    26,957,061
    
    
    $
    51,729
    
    
    $
    (499,819
    )
    
    $
    26,508,971U.S. Government agencies
    
    
    221,639,699
    
    
    
    1,055,500
    
    
    
    (4,099,256
    )
    
    
    218,595,943States and political subdivisions
    
    
    40,578,877
    
    
    
    1,114,322
    
    
    
    (369,633
    )
    
    
    41,323,566Total debt securities
    
    
    289,175,637
    
    
    
    2,221,551
    
    
    
    (4,968,708
    )
    
    
    286,428,480Equity securities
    
    
    649,983
    
    
    
    
    
    
    
    
    
    
    
    649,983Total available for sale securities
    
    $
    289,825,620
    
    
    $
    2,221,551
    
    
    $
    (4,968,708
    )
    
    $
    287,078,463Held to maturity securities:States and political subdivisions
    
    $
    1,914,879
    
    
    $
    95,551
    
    
    $
    
    
    
    $
    2,010,430Total held to maturity securities
    
    $
    1,914,879
    
    
    $
    95,551
    
    
    $
    
    
    
    $
    2,010,430
  Amortized Cost
    
    Fair ValueAvailable for sale securities:Due in one year or less
    
    $
    2,295,956
    
    
    $
    2,351,453Due after one year through five years
    
    
    100,103,722
    
    
    
    100,561,835Due after five years through ten years
    
    
    128,834,181
    
    
    
    128,067,264Due after ten years
    
    
    88,849,308
    
    
    
    87,743,051Totals
    
    $
    320,083,167
    
    
    $
    318,723,603Held to maturity securities:Due after one year through five years
    
    $
    1,451,182
    
    
    $
    1,525,949Due after five years through ten years
    
    
    464,396
    
    
    
    483,724Totals
    
    $
    1,915,578
    
    
    $
    2,009,673
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Less Than Twelve Months
    
    Over Twelve Months
    
    TotalGross
    
    
    
    
    
    Gross
    
    
    
    
    
    GrossUnrealized
    
    
    
    
    
    Unrealized
    
    
    
    
    
    UnrealizedFair Value
    
    Losses
    
    Fair Value
    
    Losses
    
    Fair Value
    
    LossesMarch 31, 2011:U.S. Treasuries
    
    $
    15,524,830
    
    
    $
    435,163
    
    
    $
    
    
    
    $
    
    
    
    $
    15,524,830
    
    
    $
    435,163U.S. Government
agencies
    
    
    161,217,706
    
    
    
    3,457,059
    
    
    
    
    
    
    
    
    
    
    
    161,217,706
    
    
    
    3,457,059States and political
subdivisions
    
    
    1,921,235
    
    
    
    64,408
    
    
    
    2,101,268
    
    
    
    124,702
    
    
    
    4,022,503
    
    
    
    189,110TOTAL
    
    $
    178,663,771
    
    
    $
    3,956,630
    
    
    $
    2,101,268
    
    
    $
    124,702
    
    
    $
    180,765,039
    
    
    $
    4,081,332December 31, 2010:U.S. Treasuries
    
    $
    15,457,980
    
    
    $
    499,819
    
    
    $
    
    
    
    $
    
    
    
    $
    15,457,980
    
    
    $
    499,819U.S. Government
agencies
    
    
    138,075,993
    
    
    
    4,099,256
    
    
    
    
    
    
    
    
    
    
    
    138,075,993
    
    
    
    4,099,256States and political
subdivisions
    
    
    5,295,359
    
    
    
    172,435
    
    
    
    2,028,616
    
    
    
    197,198
    
    
    
    7,323,975
    
    
    
    369,633TOTAL
    
    $
    158,829,332
    
    
    $
    4,771,510
    
    
    $
    2,028,616
    
    
    $
    197,198
    
    
    $
    160,857,948
    
    
    $
    4,968,708
  12




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March 31, 2011
    
    December 31, 2010Gaming
    
    $
    41,226,784
    
    
    $
    44,342,798Residential development
    
    
    29,561,634
    
    
    
    30,063,593Real estate, construction
    
    
    60,975,452
    
    
    
    60,982,989Real estate, mortgage
    
    
    221,417,578
    
    
    
    222,578,080Commercial and industrial
    
    
    39,629,243
    
    
    
    36,463,500Other
    
    
    13,970,181
    
    
    
    15,467,797Total
    
    $
    406,780,872
    
    
    $
    409,898,757
  Loans PastNumber of Days Past Due
    
    
    
    
    
    
    
    
    
    
    
    
    
    Due GreaterGreater
    
    Total
    
    
    
    
    
    Total
    
    Than 90 Days30 - 59
    
    60 - 89
    
    Than 90
    
    Past Due
    
    Current
    
    Loans
    
    & Still AccruingMarch 31, 2011:Gaming
    
    $
    
    
    
    $
    
    
    
    $
    3,093,409
    
    
    $
    3,093,409
    
    
    $
    38,133,375
    
    
    $
    41,226,784
    
    
    $Residential development
    
    
    15,187,500
    
    
    
    937,706
    
    
    
    1,221,148
    
    
    
    17,346,354
    
    
    
    12,215,280
    
    
    
    29,561,634Real estate, construction
    
    
    2,973,416
    
    
    
    1,678,632
    
    
    
    4,517,620
    
    
    
    9,169,668
    
    
    
    51,805,784
    
    
    
    60,975,452
    
    
    
    1,038,694Real estate, mortgage
    
    
    8,911,987
    
    
    
    12,846,325
    
    
    
    4,207,288
    
    
    
    25,965,600
    
    
    
    195,451,978
    
    
    
    221,417,578
    
    
    
    1,361,833Commercial and industrial
    
    
    1,652,815
    
    
    
    21,073
    
    
    
    475,287
    
    
    
    2,149,175
    
    
    
    37,480,068
    
    
    
    39,629,243
    
    
    
    462,615Other
    
    
    112,857
    
    
    
    5,499
    
    
    
    63,486
    
    
    
    181,842
    
    
    
    13,788,339
    
    
    
    13,970,181
    
    
    
    536Total
    
    $
    28,838,575
    
    
    $
    15,489,235
    
    
    $
    13,578,238
    
    
    $
    57,906,048
    
    
    $
    348,874,824
    
    
    $
    406,780,872
    
    
    $
    2,863,678December 31, 2010:Gaming
    
    $
    
    
    
    $
    
    
    
    $
    2,808,409
    
    
    $
    2,808,409
    
    
    $
    41,534,389
    
    
    $
    44,342,798
    
    
    $Residential development
    
    
    2,281,675
    
    
    
    
    
    
    
    2,317,327
    
    
    
    4,599,002
    
    
    
    25,464,591
    
    
    
    30,063,593Real estate, construction
    
    
    8,041,900
    
    
    
    4,433,125
    
    
    
    4,373,103
    
    
    
    16,848,128
    
    
    
    44,134,861
    
    
    
    60,982,989
    
    
    
    1,990,772Real estate, mortgage
    
    
    18,479,501
    
    
    
    4,639,802
    
    
    
    5,139,974
    
    
    
    28,259,277
    
    
    
    194,318,803
    
    
    
    222,578,080
    
    
    
    955,715Commercial and industrial
    
    
    1,558,356
    
    
    
    98,328
    
    
    
    41,181
    
    
    
    1,697,865
    
    
    
    34,765,635
    
    
    
    36,463,500
    
    
    
    14,099Other
    
    
    273,940
    
    
    
    33,544
    
    
    
    969
    
    
    
    308,453
    
    
    
    15,159,344
    
    
    
    15,467,797
    
    
    
    969Total
    
    $
    30,635,372
    
    
    $
    9,204,799
    
    
    $
    14,680,963
    
    
    $
    54,521,134
    
    
    $
    355,377,623
    
    
    $
    409,898,757
    
    
    $
    2,961,555
 13




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##### Table of Contents



14




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##### Table of Contents



Loans With A Grade Of:A or B
    
    C
    
    D
    
    E
    
    TotalMarch 31, 2011:Gaming
    
    $
    24,065,050
    
    
    $
    
    
    
    $
    6,723,161
    
    
    $
    10,438,573
    
    
    $
    41,226,784Residential development
    
    
    5,260,909
    
    
    
    19,407,500
    
    
    
    4,221,725
    
    
    
    671,500
    
    
    
    29,561,634Real estate, construction
    
    
    50,434,117
    
    
    
    1,255,577
    
    
    
    8,942,030
    
    
    
    343,728
    
    
    
    60,975,452Real estate, mortgage
    
    
    183,866,199
    
    
    
    7,477,762
    
    
    
    25,863,446
    
    
    
    4,210,171
    
    
    
    221,417,578Commercial and industrial
    
    
    37,277,674
    
    
    
    9,231
    
    
    
    1,936,305
    
    
    
    406,033
    
    
    
    39,629,243Other
    
    
    13,702,220
    
    
    
    46,221
    
    
    
    221,740
    
    
    
    
    
    
    
    13,970,181Total
    
    $
    314,606,169
    
    
    $
    28,196,291
    
    
    $
    47,908,407
    
    
    $
    16,070,005
    
    
    $
    406,780,872December 31, 2010:Gaming
    
    $
    27,397,218
    
    
    $
    
    
    
    $
    6,413,068
    
    
    $
    10,532,512
    
    
    $
    44,342,798Residential development
    
    
    25,664,590
    
    
    
    864,342
    
    
    
    3,102,340
    
    
    
    432,321
    
    
    
    30,063,593Real estate, construction
    
    
    52,417,942
    
    
    
    314,806
    
    
    
    7,715,653
    
    
    
    534,588
    
    
    
    60,982,989Real estate, mortgage
    
    
    184,963,841
    
    
    
    8,247,627
    
    
    
    25,669,185
    
    
    
    3,697,427
    
    
    
    222,578,080Commercial and industrial
    
    
    33,702,021
    
    
    
    289,222
    
    
    
    2,323,291
    
    
    
    148,966
    
    
    
    36,463,500Other
    
    
    15,232,311
    
    
    
    39,865
    
    
    
    195,621
    
    
    
    
    
    
    
    15,467,797Total
    
    $
    339,377,923
    
    
    $
    9,755,862
    
    
    $
    45,419,158
    
    
    $
    15,345,814
    
    
    $
    409,898,757
 15




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##### Table of Contents



March 31, 2011
    
    December 31, 2010Gaming
    
    $
    10,127,723
    
    
    $
    10,221,662Residential development
    
    
    632,321
    
    
    
    632,321Real estate, construction
    
    
    386,975
    
    
    
    386,557Real estate, mortgage
    
    
    1,983,041
    
    
    
    3,268,778Commercial and industrial
    
    
    297,672
    
    
    
    27,081Other
    
    
    62,950
    
    
    
    698Total
    
    $
    13,490,682
    
    
    $
    14,537,097
   Unpaid
    
    
    
    
    
    
    
    
    
    AveragePrincipal
    
    Recorded
    
    Related
    
    RecordedBalance
    
    Investment
    
    Allowance
    
    InvestmentMarch 31, 2011:Gaming
    
    $
    10,438,573
    
    
    $
    10,127,723
    
    
    $
    
    
    
    $
    10,145,145Residential development
    
    
    4,313,099
    
    
    
    632,321
    
    
    
    
    
    
    
    632,321Real estate, construction
    
    
    572,541
    
    
    
    572,541
    
    
    
    319,000
    
    
    
    572,952Real estate, mortgage
    
    
    3,425,245
    
    
    
    2,495,245
    
    
    
    855,618
    
    
    
    2,463,415Commercial and industrial
    
    
    297,672
    
    
    
    297,672
    
    
    
    155,500
    
    
    
    10,691Other
    
    
    62,950
    
    
    
    62,950
    
    
    
    9,000
    
    
    
    20,983Total
    
    $
    19,110,080
    
    
    $
    14,188,452
    
    
    $
    1,339,118
    
    
    $
    13,845,507December 31, 2010:Gaming
    
    $
    10,532,512
    
    
    $
    10,221,662
    
    
    $
    107,328
    
    
    $
    9,363,015Residential development
    
    
    4,313,098
    
    
    
    632,321
    
    
    
    8,220
    
    
    
    2,692,751Real estate, construction
    
    
    573,388
    
    
    
    573,388
    
    
    
    179,000
    
    
    
    199,531Real estate, mortgage
    
    
    4,762,356
    
    
    
    3,784,441
    
    
    
    649,392
    
    
    
    2,366,888Commercial and industrial
    
    
    27,081
    
    
    
    27,081
    
    
    
    195
    
    
    
    8,065Other
    
    
    698
    
    
    
    698
    
    
    
    698
    
    
    
    590Total
    
    $
    20,209,133
    
    
    $
    15,239,591
    
    
    $
    944,833
    
    
    $
    14,630,840
 16




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##### Table of Contents



Residential
    
    Real Estate,
    
    Real Estate,
    
    CommercialGaming
    
    Development
    
    Construction
    
    Mortgage
    
    and Industrial
    
    Other
    
    TotalMarch 31, 2011:Allowance for Loan Losses:Beginning Balance
    
    $
    465
    
    
    $
    1,070
    
    
    $
    1,020
    
    
    $
    3,413
    
    
    $
    480
    
    
    $
    202
    
    
    $
    6,650Charge-offs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (248
    )
    
    
    (22
    )
    
    
    (30
    )
    
    
    (300
    )Recoveries
    
    
    
    
    
    
    32
    
    
    
    
    
    
    
    46
    
    
    
    14
    
    
    
    22
    
    
    
    114Provision
    
    
    (232
    )
    
    
    (489
    )
    
    
    240
    
    
    
    1,006
    
    
    
    220
    
    
    
    (104
    )
    
    
    641Ending Balance
    
    $
    233
    
    
    $
    613
    
    
    $
    1,260
    
    
    $
    4,217
    
    
    $
    692
    
    
    $
    90
    
    
    $
    7,105Allowance for loan losses:Ending
balance:
individually
evaluated for impairment
    
    $
    
    
    
    $
    
    
    
    $
    527
    
    
    $
    2,013
    
    
    $
    361
    
    
    $
    18
    
    
    $
    2,919Ending
balance:
collectively
evaluated for impairment
    
    $
    233
    
    
    $
    613
    
    
    $
    733
    
    
    $
    2,204
    
    
    $
    331
    
    
    $
    72
    
    
    $
    4,186Total Loans:Ending
Balance:
Individually evaluated
for impairment
    
    $
    17,633
    
    
    $
    23,563
    
    
    $
    23,747
    
    
    $
    17,202
    
    
    $
    1,788
    
    
    $
    222
    
    
    $
    84,155Ending
balance:
collectively
evaluated for impairment
    
    $
    23,594
    
    
    $
    5,999
    
    
    $
    37,228
    
    
    $
    204,216
    
    
    $
    37,841
    
    
    $
    13,748
    
    
    $
    322,626
 17




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##### Table of Contents



Residential
    
    Real Estate,
    
    Real Estate,
    
    CommercialGaming
    
    Development
    
    Construction
    
    Mortgage
    
    and Industrial
    
    Other
    
    TotalMarch 31, 2010:Allowance for Loan Losses:Beginning Balance
    
    $
    699
    
    
    $
    1,198
    
    
    $
    1,019
    
    
    $
    3,549
    
    
    $
    1,293
    
    
    $
    70
    
    
    $
    7,828Charge-offs
    
    
    
    
    
    
    
    
    
    
    (550
    )
    
    
    (122
    )
    
    
    
    
    
    
    (83
    )
    
    
    (755
    )Recoveries
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11
    
    
    
    45
    
    
    
    56Provision
    
    
    202
    
    
    
    646
    
    
    
    56
    
    
    
    781
    
    
    
    (719
    )
    
    
    184
    
    
    
    1,150Ending Balance
    
    $
    901
    
    
    $
    1,844
    
    
    $
    525
    
    
    $
    4,208
    
    
    $
    585
    
    
    $
    216
    
    
    $
    8,279Allowance for Loan Losses:Ending
balance:
individually
evaluated for impairment
    
    $
    225
    
    
    $
    809
    
    
    $
    420
    
    
    $
    1,537
    
    
    $
    271
    
    
    $
    9
    
    
    $
    3,271Ending
balance:
collectively
evaluated for impairment
    
    $
    676
    
    
    $
    1,035
    
    
    $
    105
    
    
    $
    2,671
    
    
    $
    314
    
    
    $
    207
    
    
    $
    5,008Total Loans:Ending
balance:
individually evaluated
for impairment
    
    $
    900
    
    
    $
    2,723
    
    
    $
    2,317
    
    
    $
    8,876
    
    
    $
    582
    
    
    $
    20
    
    
    $
    15,418Ending
balance:
collectively
evaluated for impairment
    
    $
    63,515
    
    
    $
    32,388
    
    
    $
    53,580
    
    
    $
    223,260
    
    
    $
    46,921
    
    
    $
    13,792
    
    
    $
    433,456
        18




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##### Table of Contents



19




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##### Table of Contents



20




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##### Table of Contents



Fair Value Measurement UsingTotal
    
    Level 1
    
    Level 2
    
    Level 3March 31, 2011:U.S. Treasuries
    
    $
    16,567,290
    
    
    $
    
    
    
    $
    16,567,290
    
    
    $U.S. Government agencies
    
    
    260,241,759
    
    
    
    
    
    
    
    260,241,759States and political
subdivisions
    
    
    41,914,554
    
    
    
    
    
    
    
    41,914,554Equity securities
    
    
    649,983
    
    
    
    
    
    
    
    649,983Total
    
    $
    319,373,586
    
    
    $
    
    
    
    $
    319,373,586
    
    
    $Fair Value Measurement UsingTotal
    
    Level 1
    
    Level 2
    
    Level 3December 31, 2010:U.S. Treasuries
    
    $
    26,508,971
    
    
    $
    
    
    
    $
    26,508,971
    
    
    $U.S. Government agencies
    
    
    218,595,943
    
    
    
    
    
    
    
    218,595,943States and political
subdivisions
    
    
    41,323,566
    
    
    
    
    
    
    
    41,323,566Equity securities
    
    
    649,983
    
    
    
    
    
    
    
    649,983Total
    
    $
    287,078,463
    
    
    $
    
    
    
    $
    287,078,463
    
    
    $Impaired loans, which are measured at fair value on a non-recurring basis, by level within the
fair value hierarchy as of March 31, 2011 and December 31, 2010 are as follows:Fair Value Measurement UsingTotal
    
    Level 1
    
    Level 2
    
    Level 3March 31, 2011
    
    $
    12,849,332
    
    
    $
    
    
    
    $
    
    
    
    $
    12,849,332December 31, 2010
    
    
    14,294,758
    
    
    
    
    
    
    
    
    
    
    
    14,294,758
 21




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##### Table of Contents



For the Quarter
    
    For the YearEnded
    
    EndedMarch 31, 2011
    
    December 31, 2010Balance, beginning of
period
    
    $
    14,294,758
    
    
    $
    20,110,330Purchases
    
    
    868,291
    
    
    
    5,519,905Sales
    
    
    (1,919,431
    )
    
    
    (12,286,060
    )Unrealized gain (loss)
    
    
    (394,286
    )
    
    
    950,583Balance, end of period
    
    $
    12,849,332
    
    
    $
    14,294,758
  Fair Value Measurement UsingTotal
    
    Level 1
    
    Level 2
    
    Level 3March 31, 2011
    
    $
    6,937,128
    
    
    $
    
    
    
    $
    1,276,816
    
    
    $
    5,660,312December 31, 2010
    
    
    5,744,150
    
    
    
    
    
    
    
    1,248,816
    
    
    
    4,495,334
  For the Quarter
    
    For the YearEnded
    
    EndedMarch 31, 2011
    
    December 31, 2010Balance, beginning of
period
    
    $
    4,495,334
    
    
    $
    1,521,313Purchases
    
    
    1,324,584
    
    
    
    4,466,221Sales
    
    
    (35,000
    )
    
    
    (1,414,850
    )Unrealized loss
    
    
    (124,606
    )
    
    
    (77,350
    )Balance, end of period
    
    $
    5,660,312
    
    
    $
    4,495,334
  22




---



##### Table of Contents



March 31, 2011
    
    December 31, 2010Carrying Amount
    
    Fair Value
    
    Carrying Amount
    
    Fair ValueFinancial Assets:Cash and due from banks
    
    $
    42,450,301
    
    
    $
    42,450,301
    
    
    $
    24,146,939
    
    
    $
    24,146,939Available for sale securities
    
    
    319,373,586
    
    
    
    319,373,586
    
    
    
    287,078,463
    
    
    
    287,078,463Held to maturity securities
    
    
    1,915,578
    
    
    
    2,009,673
    
    
    
    1,914,879
    
    
    
    2,010,430Other investments
    
    
    3,916,217
    
    
    
    3,916,217
    
    
    
    3,926,371
    
    
    
    3,926,371Federal Home Loan Bank stock
    
    
    2,584,700
    
    
    
    2,584,700
    
    
    
    2,281,200
    
    
    
    2,281,200Loans, net
    
    
    399,675,308
    
    
    
    403,840,715
    
    
    
    403,248,499
    
    
    
    407,363,159Cash surrender value
    
    
    16,113,383
    
    
    
    16,113,383
    
    
    
    15,951,117
    
    
    
    15,951,117Financial Liabilities:Deposits:Non-interest bearing
    
    
    117,803,473
    
    
    
    117,803,473
    
    
    
    108,277,985
    
    
    
    108,277,985Interest bearing
    
    
    417,642,577
    
    
    
    418,602,526
    
    
    
    375,861,530
    
    
    
    376,715,446Total deposits
    
    
    535,446,050
    
    
    
    536,405,999
    
    
    
    484,139,515
    
    
    
    484,993,431Federal funds purchased and
securities sold under
agreements
to repurchase
    
    
    145,060,933
    
    
    
    145,060,933
    
    
    
    140,102,019
    
    
    
    140,102,019Borrowings from Federal Home
Loan
Bank
    
    
    31,975,108
    
    
    
    33,054,608
    
    
    
    42,957,016
    
    
    
    43,990,270
      23




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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
  New Accounting Pronouncements
  Critical Accounting Policies
  24




---



##### Table of Contents



OVERVIEW
  25




---



##### Table of Contents



RESULTS OF OPERATIONS
 Net Interest Income
   26




---



##### Table of Contents



27




---



##### Table of Contents



Three Months Ended March 31, 2011
    
    Three Months Ended March 31, 2010Average Balance
    
    Interest Earned/Paid
    
    Rate
    
    Average Balance
    
    Interest Earned/Paid
    
    RateLoans (2)(3)
    
    $
    407,738
    
    
    $
    4,907
    
    
    
    4.81
    %
    
    $
    455,880
    
    
    $
    4,987
    
    
    
    4.38
    %Federal Funds Sold
    
    
    2,318
    
    
    
    1
    
    
    
    0.17
    %
    
    
    5,553
    
    
    
    3
    
    
    
    0.22
    %HTM:Non taxable (1)
    
    
    1,915
    
    
    
    25
    
    
    
    5.22
    %
    
    
    3,202
    
    
    
    43
    
    
    
    5.37
    %AFS:Taxable
    
    
    247,175
    
    
    
    1,503
    
    
    
    2.43
    %
    
    
    267,597
    
    
    
    2,881
    
    
    
    4.31
    %Non taxable (1)
    
    
    41,623
    
    
    
    534
    
    
    
    5.13
    %
    
    
    40,367
    
    
    
    497
    
    
    
    4.92
    %Other
    
    
    3,063
    
    
    
    6
    
    
    
    0.78
    %
    
    
    5,667
    
    
    
    4
    
    
    
    0.28
    %Total
    
    $
    703,832
    
    
    $
    6,976
    
    
    
    3.96
    %
    
    $
    778,266
    
    
    $
    8,415
    
    
    
    4.32
    %Savings & interest-bearing DDA
    
    $
    217,461
    
    
    $
    260
    
    
    
    0.48
    %
    
    $
    223,524
    
    
    $
    286
    
    
    
    0.51
    %CDs
    
    
    180,769
    
    
    
    443
    
    
    
    0.98
    %
    
    
    176,960
    
    
    
    532
    
    
    
    1.20
    %Federal funds
purchased
    
    
    135,573
    
    
    
    172
    
    
    
    0.51
    %
    
    
    170,810
    
    
    
    286
    
    
    
    0.67
    %FHLB advances
    
    
    41,179
    
    
    
    50
    
    
    
    0.49
    %
    
    
    75,909
    
    
    
    136
    
    
    
    0.72
    %Total
    
    $
    574,982
    
    
    $
    925
    
    
    
    0.64
    %
    
    $
    647,203
    
    
    $
    1,240
    
    
    
    0.77
    %Net tax-equivalent
yield on earning assets
    
    
    
    
    
    
    
    
    
    
    3.44
    %
    
    
    
    
    
    
    
    
    
    
    3.69
    %
 
 (1)
    
    All interest earned is reported on a taxable equivalent basis using a tax rate of 34% in
2011 and 2010.(2)
    
    Loan fees of $166 and $201 for 2011 and 2010, respectively, are included in these figures.(3)
    
    Includes nonaccrual loans. 28




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##### Table of Contents



Provision for Loan Losses
     Non-interest income
   29




---



##### Table of Contents



Non-interest expense
   Income Taxes
  Quarter Ended March 31,2011
    
    2010Tax
    
    Rate
    
    Tax
    
    RateTaxes at statutory rate
    
    $
    97,765
    
    
    
    34
    
    
    $
    355,795
    
    
    
    34Increase (decrease) resulting from:Tax-exempt interest income
    
    
    (125,494
    )
    
    
    (43
    )
    
    
    (121,356
    )
    
    
    (12
    )Income from BOLI
    
    
    (44,982
    )
    
    
    (16
    )
    
    
    (44,064
    )
    
    
    (4
    )Federal tax credits
    
    
    (91,410
    )
    
    
    (32
    )
    
    
    (32,160
    )
    
    
    (3
    )Other
    
    
    14,121
    
    
    
    5
    
    
    
    16,785
    
    
    
    2Total income taxes (benefit)
    
    $
    (150,000
    )
    
    
    (52
    )
    
    $
    175,000
    
    
    
    17
 FINANCIAL CONDITION
   30




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##### Table of Contents



SHAREHOLDERS EQUITY AND CAPITAL ADEQUACY
     31




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##### Table of Contents



Actual
    
    For Capital Adequacy PurposesAmount
    
    Ratio
    
    Amount
    
    RatioMarch 31, 2011:Total Capital (to Risk Weighted Assets)
    
    $
    109,790
    
    
    
    20.99
    %
    
    $
    41,854
    
    
    
    8.00
    %Tier 1 Capital (to Risk Weighted Assets)
    
    
    103,254
    
    
    
    19.74
    %
    
    
    20,927
    
    
    
    4.00
    %Tier 1 Capital (to Average Assets)
    
    
    103,254
    
    
    
    12.76
    %
    
    
    32,376
    
    
    
    4.00
    %December 31, 2010:Total Capital (to Risk Weighted Assets)
    
    $
    110,435
    
    
    
    22.26
    %
    
    $
    39,691
    
    
    
    8.00
    %Tier 1 Capital (to Risk Weighted Assets)
    
    
    104,233
    
    
    
    21.01
    %
    
    
    19,846
    
    
    
    4.00
    %Tier 1 Capital (to Average Assets)
    
    
    104,233
    
    
    
    12.40
    %
    
    
    33,616
    
    
    
    4.00
    %
  Actual
    
    For Capital Adequacy PurposesAmount
    
    Ratio
    
    Amount
    
    RatioMarch 31, 2011:Total Capital (to Risk Weighted Assets)
    
    $
    104,465
    
    
    
    20.00
    %
    
    $
    41,786
    
    
    
    8.00
    %Tier 1 Capital (to Risk Weighted Assets)
    
    
    97,929
    
    
    
    18.75
    %
    
    
    20,893
    
    
    
    4.00
    %Tier 1 Capital (to Average Assets)
    
    
    97,929
    
    
    
    12.39
    %
    
    
    31,616
    
    
    
    4.00
    %December 31, 2010:Total Capital (to Risk Weighted Assets)
    
    $
    105,255
    
    
    
    21.41
    %
    
    $
    39,320
    
    
    
    8.00
    %Tier 1 Capital (to Risk Weighted Assets)
    
    
    99,111
    
    
    
    20.16
    %
    
    
    19,660
    
    
    
    4.00
    %Tier 1 Capital (to Average Assets)
    
    
    99,111
    
    
    
    11.86
    %
    
    
    33,431
    
    
    
    4.00
    %
  LIQUIDITY
  32




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##### Table of Contents



REGULATORY MATTERS
  
 Item 4: Controls and Procedures
   
 PART II  OTHER INFORMATION
 
 Item 1: Legal Proceedings
  33




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##### Table of Contents



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. WoodVice President
    
    J. Patrick Wild
 
 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
   34




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##### Table of Contents



PEOPLES FINANCIAL CORPORATION
(Registrant)

Date: May 11, 2011By:
    /s/ Chevis C. SwetmanChevis C. SwetmanChairman, President and Chief Executive Officer
(principal executive officer)Date:      May 11, 2011
    By:
    /s/ Lauri A. Wood
    
Lauri A. WoodChief Financial Officer and Controller
(principal financial and accounting officer) 35