##### 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 September 30, 2006
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 Commission File Number 0  30050
 PEOPLES FINANCIAL CORPORATION
 
  Mississippi
    
    64-0709834(State or other jurisdiction of
    
    (I.R.S. Employer Identification No.)incorporation or organization)
 Lameuse and Howard Avenues, Biloxi, Mississippi
    
    39533(Address of principal executive offices)
    
    (Zip Code)
  
  þ o
  o þ o
 o þ




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TABLE OF CONTENTS  PART IItem 2  Managements Discussion and Analysis of Financial Condition and Results of OperationsItem 4: Controls and ProceduresPART IIItem 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 Section 1350Certification of CFO Pursuant to 18 U.S.C. Section 1350    Table of Contents  
 
 (Unaudited)
    
    
    (Audited)
    
    
    (Unaudited)September 30, December 31, and September 30,
    
    2006
    
    
    2005
    
    
    2005AssetsCash and due from banks
    
    $
    64,824,795
    
    
    $
    52,277,524
    
    
    $
    58,454,381Federal funds sold
    
    
    6,442,000
    
    
    
    100,340,000
    
    
    
    97,000,000Held to maturity securities, market value of
$107,754,000 - September 30, 2006;
$134,008,000 - December 31, 2005;
$41,920,000 - September 30, 2005
    
    
    107,845,418
    
    
    
    134,046,959
    
    
    
    41,804,453Available for sale securities, at market value
    
    
    373,505,852
    
    
    
    178,393,652
    
    
    
    191,961,031Federal Home Loan Bank Stock, at cost
    
    
    1,115,100
    
    
    
    1,076,600
    
    
    
    1,432,800Loans
    
    
    403,182,940
    
    
    
    349,346,340
    
    
    
    347,081,539Less: Allowance for loan losses
    
    
    10,928,307
    
    
    
    10,966,022
    
    
    
    11,015,042Loans, net
    
    
    392,254,633
    
    
    
    338,380,318
    
    
    
    336,066,497Bank premises and equipment, net of
accumulated depreciation of
$19,203,000 -
September 30, 2006; $18,025,000 - December
31, 2005; and $18,304,000 - September 30,
2005
    
    
    18,148,828
    
    
    
    17,887,907
    
    
    
    17,749,847Other real estate
    
    
    56,317
    
    
    
    106,046
    
    
    
    120,956Accrued interest receivable
    
    
    7,449,079
    
    
    
    4,315,358
    
    
    
    3,982,223Other assets
    
    
    19,072,847
    
    
    
    18,500,668
    
    
    
    18,736,639Total assets
    
    $
    990,714,869
    
    
    $
    845,325,032
    
    
    $
    767,308,827
 Page 2




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##### Table of Contents



(Unaudited)
    
    
    (Audited)
    
    
    (Unaudited)September 30, December 31, and September 30,
    
    2006
    
    
    2005
    
    
    2005Liabilities & Shareholders EquityLiabilities:Deposits:Demand, non-interest bearing
    
    $
    173,023,256
    
    
    $
    176,627,048
    
    
    $
    147,796,135Savings and demand, interest bearing
    
    
    298,054,632
    
    
    
    301,052,887
    
    
    
    248,024,104Time, $100,000 or more
    
    
    131,172,939
    
    
    
    51,292,708
    
    
    
    49,598,212Other time deposits
    
    
    61,279,315
    
    
    
    63,244,699
    
    
    
    60,753,503Total deposits
    
    
    663,530,142
    
    
    
    592,217,342
    
    
    
    506,171,954Federal funds purchased and securities
sold under agreements to
repurchase
    
    
    212,157,926
    
    
    
    149,267,750
    
    
    
    159,090,166Borrowings from Federal Home Loan Bank
    
    
    10,609,371
    
    
    
    7,352,005
    
    
    
    7,359,080Other liabilities
    
    
    9,489,636
    
    
    
    8,984,804
    
    
    
    7,465,071Total liabilities
    
    
    895,787,075
    
    
    
    757,821,901
    
    
    
    680,086,271Shareholders Equity:Common Stock, $1 par value, 15,000,000
shares authorized, 5,548,199
shares issued and
outstanding at September 30, 2006,
5,549,128
shares issued and outstanding at December
31, 2005 and 5,549,128 shares
issued and
outstanding at September 30, 2005
    
    
    5,548,199
    
    
    
    5,549,128
    
    
    
    5,549,128Surplus
    
    
    65,780,254
    
    
    
    65,780,254
    
    
    
    65,780,254Undivided profits
    
    
    25,536,642
    
    
    
    18,942,855
    
    
    
    17,522,402Accumulated other comprehensive income
    
    
    (1,937,301
    )
    
    
    (2,769,106
    )
    
    
    (1,629,228
    )Total shareholders equity
    
    
    94,927,794
    
    
    
    87,503,131
    
    
    
    87,222,556Total liabilities and shareholders equity
    
    $
    990,714,869
    
    
    $
    845,325,032
    
    
    $
    767,308,827
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For The Quarter Ended September 30,
    
    
    For The Nine Months Ended September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Interest income:Interest and fees on loans
    
    $
    7,847,283
    
    
    $
    5,661,300
    
    
    $
    20,901,766
    
    
    $
    16,742,141Interest and dividends on securities:U. S. Treasury
    
    
    1,127,800
    
    
    
    702,176
    
    
    
    4,451,151
    
    
    
    1,755,843U. S. Government agencies and
corporations
    
    
    3,717,040
    
    
    
    1,170,691
    
    
    
    8,250,066
    
    
    
    3,266,360States and political subdivisions
    
    
    216,430
    
    
    
    214,543
    
    
    
    633,821
    
    
    
    624,012Other investments
    
    
    21,730
    
    
    
    16,061
    
    
    
    147,549
    
    
    
    151,344Interest on federal funds sold
    
    
    220,691
    
    
    
    220,318
    
    
    
    760,047
    
    
    
    393,254Total interest income
    
    
    13,150,974
    
    
    
    7,985,089
    
    
    
    35,144,400
    
    
    
    22,932,954Interest expense:Time deposits of $100,000 or more
    
    
    1,204,460
    
    
    
    370,665
    
    
    
    2,430,204
    
    
    
    879,204Other deposits
    
    
    1,934,321
    
    
    
    1,084,360
    
    
    
    5,546,505
    
    
    
    2,831,473Borrowing from Federal Home Loan
Bank
    
    
    120,014
    
    
    
    109,336
    
    
    
    362,405
    
    
    
    330,276Federal funds purchased and
securities sold under
agreements to repurchase
    
    
    2,285,413
    
    
    
    519,107
    
    
    
    4,186,418
    
    
    
    1,268,989Total interest expense
    
    
    5,544,208
    
    
    
    2,083,468
    
    
    
    12,525,532
    
    
    
    5,309,942Net interest income
    
    
    7,606,766
    
    
    
    5,901,621
    
    
    
    22,618,868
    
    
    
    17,623,012Provision for losses on loans
    
    
    48,000
    
    
    
    5,103,000
    
    
    
    125,000
    
    
    
    3,590,000Net interest income after provision
for losses on loans
    
    
    7,558,766
    
    
    
    798,621
    
    
    
    22,493,868
    
    
    
    14,033,012Other operating income:Trust department income and fees
    
    
    498,627
    
    
    
    343,613
    
    
    
    1,228,865
    
    
    
    1,057,904Service charges on deposit accounts
    
    
    1,391,013
    
    
    
    1,136,682
    
    
    
    3,696,281
    
    
    
    3,862,791Other service charges, commissions
and fees
    
    
    64,015
    
    
    
    55,263
    
    
    
    214,889
    
    
    
    219,630Loss on sale of securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (442,539
    )Other income
    
    
    354,212
    
    
    
    205,619
    
    
    
    986,323
    
    
    
    680,188Total other operating income
    
    $
    2,307,867
    
    
    $
    1,741,177
    
    
    $
    6,126,358
    
    
    $
    5,377,974
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For The Quarter Ended September 30,
    
    
    For The Nine Months Ended September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Other operating expense:Salaries and employee benefits
    
    $
    3,295,811
    
    
    $
    2,910,696
    
    
    $
    9,434,025
    
    
    $
    8,566,547Net occupancy
    
    
    370,838
    
    
    
    377,987
    
    
    
    1,476,070
    
    
    
    1,073,967Equipment rentals, depreciation
and maintenance
    
    
    726,905
    
    
    
    598,857
    
    
    
    2,077,174
    
    
    
    1,940,465Other expense
    
    
    1,358,319
    
    
    
    1,327,683
    
    
    
    3,718,326
    
    
    
    3,836,066Total other operating expense
    
    
    5,751,873
    
    
    
    5,215,223
    
    
    
    16,705,595
    
    
    
    15,417,045Income (loss) before income taxes
and extraordinary gain
    
    
    4,114,760
    
    
    
    (2,675,425
    )
    
    
    11,914,631
    
    
    
    3,993,941Income taxes (benefit)
    
    
    1,430,000
    
    
    
    (908,020
    )
    
    
    4,140,000
    
    
    
    1,180,000Income (loss) before extraordinary
gain
    
    
    2,684,760
    
    
    
    (1,767,405
    )
    
    
    7,774,631
    
    
    
    2,813,941Extraordinary gain, net of taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    538,000Net Income (Loss)
    
    $
    2,684,760
    
    
    $
    (1,767,405
    )
    
    $
    7,774,631
    
    
    $
    3,351,941Basic and diluted earnings per share
    
    $
    .48
    
    
    $
    (.32
    )
    
    $
    1.40
    
    
    $
    .60Basic and diluted earnings per
share before extraordinary gain
    
    $
    .48
    
    
    $
    (.32
    )
    
    $
    1.40
    
    
    $
    .51
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AccumulatedOther
    
    
    Compre-Common
    
    
    
    
    
    
    Undivided
    
    
    Comprehen-
    
    
    hensive# of Shares
    
    
    Stock
    
    
    Surplus
    
    
    Profits
    
    
    sive Income
    
    
    Income
    
    
    TotalBalance, January 1,
2005
    
    
    5,555,419
    
    
    $
    5,555,419
    
    
    $
    65,780,254
    
    
    $
    15,391,524
    
    
    $
    (925,764
    )
    
    
    
    
    
    $
    85,801,433Comprehensive
Income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,351,941
    
    
    
    
    
    
    $
    3,351,941
    
    
    
    3,351,941Net unrealized loss
on available for
sale securities,
net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (937,779
    )
    
    
    (937,779
    )
    
    
    (937,779
    )Reclassification
adjustment for
available for sale
securities sold in
current year, net
of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    234,315
    
    
    
    234,315
    
    
    
    234,315Total
comprehensive
income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    2,648,477Retirement of stock
    
    
    (6,291
    )
    
    
    (6,291
    )
    
    
    
    
    
    
    (111,636
    )
    
    
    
    
    
    
    
    
    
    
    (117,927
    )Effect of stock
retirement on
accrued dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    399
    
    
    
    
    
    
    
    
    
    
    
    399Cash dividends, ($
..17 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,109,826
    )
    
    
    
    
    
    
    
    
    
    
    (1,109,826
    )Balance, September
30, 2005
    
    
    5,549,128
    
    
    $
    5,549,128
    
    
    $
    65,780,254
    
    
    $
    17,522,402
    
    
    $
    (1,629,228
    )
    
    
    
    
    
    $
    87,222,556




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AccumulatedOther
    
    
    Compre-Common
    
    
    
    
    
    
    Undivided
    
    
    Comprehen-
    
    
    Hensive# of Shares
    
    
    Stock
    
    
    Surplus
    
    
    Profits
    
    
    sive Income
    
    
    Income
    
    
    TotalBalance, January 1,
2006
    
    
    5,549,128
    
    
    $
    5,549,128
    
    
    $
    65,780,254
    
    
    $
    18,942,855
    
    
    $
    (2,769,106
    )
    
    
    
    
    
    $
    87,503,131Comprehensive
Income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,774,631
    
    
    
    
    
    
    $
    7,774,631
    
    
    
    7,774,631Net unrealized gain
on available for
sale securities,
net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    831,805
    
    
    
    831,805
    
    
    
    831,805Total
comprehensive
income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    8,606,436Retirement of stock
    
    
    (929
    )
    
    
    (929
    )
    
    
    
    
    
    
    (15,722
    )
    
    
    
    
    
    
    
    
    
    
    (16,651
    )Cash dividends, ($
..21 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,165,122
    )
    
    
    
    
    
    
    
    
    
    
    (1,165,122
    )Balance, September
30, 2006
    
    
    5,548,199
    
    
    $
    5,548,199
    
    
    $
    65,780,254
    
    
    $
    25,536,642
    
    
    $
    (1,937,301
    )
    
    
    
    
    
    $
    94,927,794




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##### Table of Contents



For The Nine Months Ended September 30,
    
    2006
    
    
    2005Cash flows from operating activities:Net income
    
    $
    7,774,631
    
    
    $
    3,351,941Adjustments to reconcile net income to net cash
provided by operating activities:Depreciation and amortization
    
    
    1,177,000
    
    
    
    1,173,148Provision for losses on loans
    
    
    125,000
    
    
    
    3,590,000Provision for losses on other real estate
    
    
    3,129
    
    
    
    7,000Loss on sale of available for sale securities
    
    
    
    
    
    
    442,539Gain on sales of other real estate
    
    
    (150,000
    )
    
    
    (366,865
    )Gain on sale of bank premises
    
    
    (159,669
    )Changes in assets and liabilities:Accrued interest receivable
    
    
    (3,133,721
    )
    
    
    (1,236,988
    )Other assets
    
    
    (370,722
    )
    
    
    (1,340,944
    )Other liabilities
    
    
    1,393,290
    
    
    
    (1,033,093
    )Net cash provided by operating activities
    
    
    6,658,938
    
    
    
    4,586,738Cash flows from investing activities:Proceeds from maturities and calls of held to
maturity securities
    
    
    212,720,000
    
    
    
    4,435,000Investment in held to maturity securities
    
    
    (186,518,459
    )
    
    
    (39,652,078
    )Proceeds from maturities, sales and calls of
available for sale securities
    
    
    18,250,292
    
    
    
    129,641,255Investment in available for sale securities
    
    
    (212,094,319
    )
    
    
    (150,083,264
    )Investment in Federal Home Loan Bank stock
    
    
    (38,500
    )
    
    
    (30,900
    )Loans, net
    
    
    (54,040,715
    )
    
    
    (12,120,987
    )Proceeds from sale of bank premises
    
    
    317,120Acquisition of premises and equipment
    
    
    (1,595,372
    )
    
    
    (904,491
    )Proceeds from sales of other real estate
    
    
    238,000
    
    
    
    495,000Other assets
    
    
    (416,457
    )
    
    
    (357,524
    )Net cash used in investing activities
    
    $
    (223,178,410
    )
    
    $
    (68,577,989
    )




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##### Table of Contents



For The Nine Months Ended September 30,
    
    2006
    
    
    2005Cash flows from financing activities:Demand and savings deposits, net (decrease) increase
    
    $
    (6,602,047
    )
    
    $
    125,826,713Time deposits, net increase (decrease)
    
    
    77,914,847
    
    
    
    (8,846,289
    )Principal payments on notes
    
    
    
    
    
    
    (1,239
    )Cash dividends
    
    
    (2,274,948
    )
    
    
    (2,109,402
    )Retirement of stock
    
    
    (16,651
    )
    
    
    (117,927
    )Federal funds purchased and securities sold under
agreements to repurchase
    
    
    62,890,176
    
    
    
    71,813,041Repayments to Federal Home Loan Bank
    
    
    (13,983,361
    )
    
    
    (133,048
    )Borrowings from Federal Home Loan Bank
    
    
    17,240,727
    
    
    
    289,158Net cash provided by financing activities
    
    
    135,168,743
    
    
    
    186,721,007Net (decrease) increase in cash and cash equivalents
    
    
    (81,350,729
    )
    
    
    122,729,756Cash and cash equivalents, beginning of period
    
    
    152,617,524
    
    
    
    32,724,625Cash and cash equivalents, end of period
    
    $
    71,266,795
    
    
    $
    155,454,381




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Less Than TwelveMonths
    
    
    Over Twelve Months
    
    
    TotalGross
    
    
    
    
    
    
    Gross
    
    
    
    
    
    
    GrossUnreal-
    
    
    
    
    
    
    Unreal-
    
    
    
    
    
    
    Unreal-Fair Value
    
    
    ized Loss
    
    
    Fair Value
    
    
    ized Loss
    
    
    Fair Value
    
    
    ized LossU. S. Treasury
    
    $
    51,510
    
    
    $
    123
    
    
    $
    20,653
    
    
    $
    328
    
    
    $
    72,163
    
    
    $
    451U. S. Govt.
Agencies
    
    
    129,858
    
    
    
    201
    
    
    
    112,285
    
    
    
    2,188
    
    
    
    242,143
    
    
    
    2,389States and
political
subdivisions
    
    
    5,717
    
    
    
    44
    
    
    
    6,075
    
    
    
    181
    
    
    
    11,792
    
    
    
    225FHLMC preferred
stock
    
    
    
    
    
    
    
    
    
    
    2,421
    
    
    
    654
    
    
    
    2,421
    
    
    
    654Total
    
    $
    187,085
    
    
    $
    368
    
    
    $
    141,434
    
    
    $
    3,351
    
    
    $
    328,519
    
    
    $
    3,719




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##### Table of Contents



For the Nine
    
    
    For the Year
    
    
    For the NineMonths Ended
    
    
    Ended
    
    
    Months EndedSeptember 30,
    
    
    December 31,
    
    
    September 30,2006
    
    
    2005
    
    
    2005Balance, beginning of period
    
    $
    10,966,022
    
    
    $
    6,569,614
    
    
    $
    6,569,614Recoveries
    
    
    316,646
    
    
    
    1,344,408
    
    
    
    1,220,363Loans charged off
    
    
    (479,361
    )
    
    
    (562,000
    )
    
    
    (364,935
    )Provision for loan losses
    
    
    125,000
    
    
    
    3,614,000
    
    
    
    3,590,000Balance, end of period
    
    $
    10,928,307
    
    
    $
    10,966,022
    
    
    $
    11,015,042




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##### Table of Contents



Forward-Looking Information
  Overview




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##### Table of Contents



For the nine months ended September 30,
    
    2006
    
    
    2005Net income per share
    
    $
    1.40
    
    
    $
    .60Book value per share
    
    $
    17.11
    
    
    $
    15.72Return on average total assets
    
    
    1.12
    %
    
    
    .66
    %Return on average shareholders equity
    
    
    11.37
    %
    
    
    5.17
    %Allowance for loan losses as a % of
loans, net of unearned discount
    
    
    2.71
    %
    
    
    3.16
    %
 Financial Condition
 Held to Maturity Securities
   September 30,
    
    2006
    
    
    2005Amount
    
    
    %
    
    
    Amount
    
    
    %U. S. Treasury securities
    
    $
    43,499,182
    
    
    
    40
    %
    
    $
    35,654,125
    
    
    
    85
    %U. S. Government Agencies
    
    
    58,904,984
    
    
    
    55
    %States and political
subdivisions
    
    
    5,441,252
    
    
    
    5
    %
    
    
    6,150,328
    
    
    
    15
    %Totals
    
    $
    107,845,418
    
    
    
    100
    %
    
    $
    41,804,453
    
    
    
    100
    %




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##### Table of Contents



Available for Sale Securities
   September 30,
    
    2006
    
    
    2005Amount
    
    
    %
    
    
    Amount
    
    
    %U. S. Treasury securities
    
    $
    53,617,300
    
    
    
    14
    %
    
    $
    50,572,436
    
    
    
    26
    %U. S. Government agencies
    
    
    299,165,147
    
    
    
    80
    %
    
    
    124,059,226
    
    
    
    65
    %States and political
subdivisions
    
    
    16,786,495
    
    
    
    5
    %
    
    
    14,372,073
    
    
    
    7
    %Other securities
    
    
    3,936,910
    
    
    
    1
    %
    
    
    2,957,296
    
    
    
    2
    %Totals
    
    $
    373,505,852
    
    
    
    100
    %
    
    $
    191,961,031
    
    
    
    100
    %
 Loans
   Accrued Interest Receivable




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##### Table of Contents



Deposits
  Federal Funds Purchased and Securities Sold Under Agreements to Repurchase
  Shareholders Equity and Capital Adequacy
  RESULTS OF OPERATIONS
 Net Interest Income
  Nine Months Ended September 30, (In thousands, except percentages)
    
    2006
    
    
    2005Total interest income (1)
    
    $
    35,471
    
    
    $
    23,254Total interest expense
    
    
    12,526
    
    
    
    5,310Net interest earnings
    
    $
    22,945
    
    
    $
    17,944Net yield on interest earning assets (2)
    
    
    3.83
    %
    
    
    4.16
    %
 
 (1)
    
    All interest earned is reported on a taxable equivalent basis using a tax rate of
34% in 2006 and 2005.(2)
    
    Interest income in 2005 included $900,000 received in nonaccrual loan income from prior years
not previously recognized. Net yield would have been 3.95% without this interest.




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##### Table of Contents



For the
    
    
    For theNine
    
    
    NineMonths
    
    
    MonthsEnded
    
    
    Ended
    
    
    
    
    
    
    Attributable To:September
    
    
    September
    
    
    Increase
    
    
    
    
    
    
    
    
    
    
    Rate/30,2006
    
    
    30,2005
    
    
    (Decrease)
    
    
    Volume
    
    
    Rate
    
    
    VolumeINTEREST INCOME: (1)Loans (2)
    
    $
    20,902
    
    
    $
    16,742
    
    
    $
    4,160
    
    
    $
    1,735
    
    
    $
    2,197
    
    
    $
    228Federal funds sold
    
    
    760
    
    
    
    393
    
    
    
    367
    
    
    
    (25
    )
    
    
    419
    
    
    
    (27
    )Held to maturity:Taxable securities
    
    
    5,288
    
    
    
    198
    
    
    
    5,090
    
    
    
    3,460
    
    
    
    88
    
    
    
    1,542Non-taxable securities
    
    
    314
    
    
    
    317
    
    
    
    (3
    )
    
    
    (17
    )
    
    
    15
    
    
    
    (1
    )Available for sale:Taxable securities
    
    
    7,413
    
    
    
    4,824
    
    
    
    2,589
    
    
    
    1,148
    
    
    
    1,164
    
    
    
    277Non-taxable securities
    
    
    646
    
    
    
    629
    
    
    
    17
    
    
    
    29
    
    
    
    (11
    )
    
    
    (1
    )Other securities
    
    
    148
    
    
    
    151
    
    
    
    (3
    )
    
    
    14
    
    
    
    (15
    )
    
    
    (2
    )Total
    
    $
    35,471
    
    
    $
    23,254
    
    
    $
    12,217
    
    
    $
    6,344
    
    
    $
    3,857
    
    
    $
    2,016INTEREST EXPENSE:Savings and
negotiable interest
bearing deposits
    
    $
    4,040
    
    
    $
    1,646
    
    
    $
    2,394
    
    
    $
    836
    
    
    $
    1,033
    
    
    $
    525Time deposits
    
    
    3,938
    
    
    
    2,065
    
    
    
    1,873
    
    
    
    490
    
    
    
    1,118
    
    
    
    265Borrowings from FHLB
    
    
    362
    
    
    
    330
    
    
    
    32
    
    
    
    41
    
    
    
    (8
    )
    
    
    (1
    )Federal funds
purchased and
securities sold under
agreements to
repurchase
    
    
    4,186
    
    
    
    1,269
    
    
    
    2,917
    
    
    
    423
    
    
    
    1,871
    
    
    
    623Total
    
    $
    12,526
    
    
    $
    5,310
    
    
    $
    7,216
    
    
    $
    1,790
    
    
    $
    4,014
    
    
    $
    1,412
 
 (1)
    
    All interest earned is reported on a taxable equivalent basis using a tax rate of 34% in 2006 and 2005.(2)
    
    Loan fees are included in these figures. Includes nonaccrual loans.




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Provision for Loan Losses




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##### Table of Contents



Service Charges on Deposit Accounts
  Loss on Sale of Securities
  Other Income
  Salaries and Employee Benefits
  Net Occupancy
  Extraordinary Gain
  LIQUIDITY




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Item 4: Controls and Procedures
   
   
   
   Exhibit 31.1
    
    Certification of Chief Executive Officer Pursuant to Section
302 of the Sarbanes-Oxley Act of 2002Exhibit 31.2
    
    Certification 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:
    
    November 9, 2006By:
    
    /s/ Chevis C. SwetmanChevis C. SwetmanChairman, President and Chief Executive OfficerDate:
    
    November 9, 2006By:
    
    /s/ Lauri A. WoodLauri A. WoodChief Financial Officer and Controller(principal financial and accounting officer)