##### 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 endedSeptember 30, 2007
 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 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 1  Legal ProceedingsItem 4  Submission of Matters to a Vote of Security HoldersItem 5  Other InformationItem 6  Exhibits and Reports on Form 8-KSIGNATURESDeferred Compensation PlanExecutive Supplemental Income Plan Agreement - Chevis C. SwetmanExecutive Supplemental Income Plan Agreement - A. Wes FulmerExecutive Supplemental Income Plan Agreement - Lauri A. Wood, Thomas J. Sliman and Robert M. TuceiCertification of CEO Pursuant to Section 302Certification of CFO Pursuant to Section 302Certification of CEO Pursuant to Section 1350Certification of CFO Pursuant to Section 1350    Table of Contents  
     (Unaudited)
    
    
    (Audited)
    
    
    (Unaudited)September 30, December 31, and September 30,
    
    2007
    
    
    2006
    
    
    2006AssetsCash and due from banks
    
    $
    35,630,906
    
    
    $
    37,793,493
    
    
    $
    64,824,795Federal funds sold
    
    
    6,454,000
    
    
    
    6,400,000
    
    
    
    6,442,000Held to maturity securities, market value of
$8,640,000 - September 30, 2007;
$85,519,000 - December 31, 2006;
$107,754,000 - September 30, 2006
    
    
    8,628,186
    
    
    
    85,574,260
    
    
    
    107,845,418Available for sale securities, at market value
    
    
    394,940,089
    
    
    
    397,207,489
    
    
    
    373,505,852Federal Home Loan Bank stock, at cost
    
    
    921,100
    
    
    
    1,128,500
    
    
    
    1,115,100Loans
    
    
    449,998,171
    
    
    
    401,194,010
    
    
    
    403,182,940Less: Allowance for loan losses
    
    
    9,459,090
    
    
    
    10,841,367
    
    
    
    10,928,307Loans, net
    
    
    440,539,081
    
    
    
    390,352,643
    
    
    
    392,254,633Bank premises and equipment, net of
accumulated depreciation
    
    
    27,429,772
    
    
    
    19,658,585
    
    
    
    18,148,828Accrued interest receivable
    
    
    6,835,859
    
    
    
    8,142,230
    
    
    
    7,449,079Other assets
    
    
    19,325,221
    
    
    
    17,765,868
    
    
    
    19,129,164Total assets
    
    $
    940,704,214
    
    
    $
    964,023,068
    
    
    $
    990,714,869
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##### Table of Contents



(Unaudited)
    
    
    (Audited)
    
    
    (Unaudited)September 30, December 31, and September 30,
    
    2007
    
    
    2006
    
    
    2006Liabilities & Shareholders EquityLiabilities:Deposits:Demand, non-interest bearing
    
    $
    137,663,897
    
    
    $
    148,455,754
    
    
    $
    173,023,256Savings and demand, interest bearing
    
    
    242,180,702
    
    
    
    271,331,272
    
    
    
    298,054,632Time, $100,000 or more
    
    
    171,903,684
    
    
    
    132,846,509
    
    
    
    131,172,939Other time deposits
    
    
    58,002,480
    
    
    
    60,536,259
    
    
    
    61,279,315Total deposits
    
    
    609,750,763
    
    
    
    613,169,794
    
    
    
    663,530,142Federal funds purchased and securities
sold under agreements to repurchase
    
    
    207,974,079
    
    
    
    226,032,370
    
    
    
    212,157,926Borrowings from Federal Home Loan Bank
    
    
    7,141,740
    
    
    
    7,267,349
    
    
    
    10,609,371Other liabilities
    
    
    12,821,013
    
    
    
    19,320,860
    
    
    
    9,489,636Total liabilities
    
    
    837,687,595
    
    
    
    865,790,373
    
    
    
    895,787,075Shareholders Equity:Common Stock, $1 par value, 15,000,000
shares authorized, 5,433,808,
5,548,199 and 5,548,199
shares issued and outstanding at
September 30, 2007, December 31,
2006 and September 30,
2006, respectively
    
    
    5,433,808
    
    
    
    5,548,199
    
    
    
    5,548,199Surplus
    
    
    65,780,254
    
    
    
    65,780,254
    
    
    
    65,780,254Undivided profits
    
    
    33,267,571
    
    
    
    29,253,825
    
    
    
    25,536,642Accumulated other comprehensive loss, net
of tax
    
    
    (1,465,014
    )
    
    
    (2,349,583
    )
    
    
    (1,937,301
    )Total shareholders equity
    
    
    103,016,619
    
    
    
    98,232,695
    
    
    
    94,927,794Total liabilities and shareholders equity
    
    $
    940,704,214
    
    
    $
    964,023,068
    
    
    $
    990,714,869
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For the Quarters Ended
    
    
    For the Nine Months EndedSeptember 30,
    
    
    September 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Interest income:Interest and fees on loans
    
    $
    8,919,024
    
    
    $
    7,847,283
    
    
    $
    25,131,638
    
    
    $
    20,901,766Interest and dividends on investments:U. S. Treasury
    
    
    965,272
    
    
    
    1,127,800
    
    
    
    3,432,861
    
    
    
    4,451,151U. S. Government agencies and corporations
    
    
    3,723,883
    
    
    
    3,717,040
    
    
    
    12,140,300
    
    
    
    8,250,066States and political subdivisions
    
    
    229,574
    
    
    
    216,430
    
    
    
    686,689
    
    
    
    633,821Other investments
    
    
    390,273
    
    
    
    21,730
    
    
    
    830,041
    
    
    
    147,549Interest on federal funds sold
    
    
    107,931
    
    
    
    220,691
    
    
    
    189,642
    
    
    
    760,047Total interest income
    
    
    14,335,957
    
    
    
    13,150,974
    
    
    
    42,411,171
    
    
    
    35,144,400Interest expense:Deposits
    
    
    3,862,267
    
    
    
    3,138,781
    
    
    
    11,093,430
    
    
    
    7,976,709Borrowings from Federal Home Loan Bank
    
    
    138,604
    
    
    
    120,014
    
    
    
    418,451
    
    
    
    362,405Federal funds purchased and securities sold
under agreements to repurchase
    
    
    2,474,717
    
    
    
    2,285,413
    
    
    
    8,044,886
    
    
    
    4,186,418Total interest expense
    
    
    6,475,588
    
    
    
    5,544,208
    
    
    
    19,556,767
    
    
    
    12,525,532Net interest income
    
    
    7,860,369
    
    
    
    7,606,766
    
    
    
    22,854,404
    
    
    
    22,618,868Provision for allowance for losses on loans
    
    
    (1,197,000
    )
    
    
    48,000
    
    
    
    (1,097,000
    )
    
    
    125,000Net interest income after provision for
allowance for
losses on loans
    
    $
    9,057,369
    
    
    $
    7,558,766
    
    
    $
    23,951,404
    
    
    $
    22,493,868
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For the Quarters Ended
    
    
    For the Nine Months EndedSeptember 30,
    
    
    September 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Other operating income:Trust department income and fees
    
    $
    495,172
    
    
    $
    498,627
    
    
    $
    1,393,417
    
    
    $
    1,228,865Service charges on deposit accounts
    
    
    1,710,913
    
    
    
    1,391,013
    
    
    
    5,014,671
    
    
    
    3,696,281Gain (loss) on sale of securities
    
    
    4,688
    
    
    
    
    
    
    
    (614,327
    )Other income
    
    
    293,266
    
    
    
    418,227
    
    
    
    1,321,953
    
    
    
    1,201,212Total other operating income
    
    
    2,504,039
    
    
    
    2,307,867
    
    
    
    7,115,714
    
    
    
    6,126,358Other operating expenses:Salaries and employee benefits
    
    
    3,743,041
    
    
    
    3,295,811
    
    
    
    10,608,272
    
    
    
    9,434,025Net occupancy
    
    
    524,162
    
    
    
    370,838
    
    
    
    1,443,656
    
    
    
    1,476,070Equipment rentals, depreciation and maintenance
    
    
    810,879
    
    
    
    726,905
    
    
    
    2,429,454
    
    
    
    2,077,174Other expense
    
    
    1,508,815
    
    
    
    1,358,319
    
    
    
    4,411,652
    
    
    
    3,718,326Total other operating expenses
    
    
    6,586,897
    
    
    
    5,751,873
    
    
    
    18,893,034
    
    
    
    16,705,595Income before income taxes
    
    
    4,974,511
    
    
    
    4,114,760
    
    
    
    12,174,084
    
    
    
    11,914,631Income taxes
    
    
    1,580,000
    
    
    
    1,430,000
    
    
    
    4,078,000
    
    
    
    4,140,000Net income
    
    $
    3,394,511
    
    
    $
    2,684,760
    
    
    $
    8,096,084
    
    
    $
    7,774,631Basic and diluted earnings per share
    
    $
    .62
    
    
    $
    .48
    
    
    $
    1.47
    
    
    $
    1.40
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AccumulatedOtherCompre-# of Common
    
    
    Common
    
    
    
    
    
    
    Undivided
    
    
    hensive
    
    
    Comprehen-Shares
    
    
    Stock
    
    
    Surplus
    
    
    Profits
    
    
    Income
    
    
    sive 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 common stock
    
    
    (929
    )
    
    
    (929
    )
    
    
    
    
    
    
    (15,722
    )
    
    
    
    
    
    
    
    
    
    
    (16,651
    )Dividend
declared
($ .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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AccumulatedOtherCompre-# of Common
    
    
    Common
    
    
    
    
    
    
    Undivided
    
    
    hensive
    
    
    Comprehen-Shares
    
    
    Stock
    
    
    Surplus
    
    
    Profits
    
    
    Income
    
    
    sive Income
    
    
    TotalBalance, January 1,
2007
    
    
    5,548,199
    
    
    $
    5,548,199
    
    
    $
    65,780,254
    
    
    $
    29,253,825
    
    
    $
    (2,349,583
    )
    
    
    
    
    
    $
    98,232,695Comprehensive
Income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,096,084
    
    
    
    
    
    
    $
    8,096,084
    
    
    
    8,096,084Net unrealized gain
on available for
sale securities,
net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    787,694
    
    
    
    787,694
    
    
    
    787,694Reclassification adjustment for
available for sale
securities called
or sold in the
current year, net
of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    96,875
    
    
    
    96,875
    
    
    
    96,875Total
comprehensive
income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    8,980,653Retirement of
common stock
    
    
    (114,391
    )
    
    
    (114,391
    )
    
    
    
    
    
    
    (2,703,393
    )
    
    
    
    
    
    
    
    
    
    
    (2,817,784
    )Dividend declared
($ .25 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,378,945
    )
    
    
    
    
    
    
    
    
    
    
    (1,378,945
    )Balance, September
30, 2007
    
    
    5,433,808
    
    
    $
    5,433,808
    
    
    $
    65,780,254
    
    
    $
    33,267,571
    
    
    $
    (1,465,014
    )
    
    
    
    
    
    $
    103,016,619
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For the Nine Months Ended September 30,
    
    2007
    
    
    2006Cash flows from operating activities:Net income
    
    $
    8,096,084
    
    
    $
    7,774,631Adjustments to reconcile net income to net cash provided
by (used in) operating activities:Depreciation
    
    
    1,385,000
    
    
    
    1,177,000Provision for allowance for losses on loans
    
    
    (1,097,000
    )
    
    
    125,000Provision for losses on other real estate
    
    
    
    
    
    
    3,129Gain on sale of bank premises
    
    
    (192,200
    )
    
    
    (159,669
    )Gain on sales of other real estate
    
    
    (10,470
    )
    
    
    (150,000
    )Loss on sales of securities
    
    
    614,327Changes in assets and liabilities:Accrued interest receivable
    
    
    1,306,371
    
    
    
    (3,133,721
    )Other assets
    
    
    (764,856
    )
    
    
    (370,722
    )Other liabilities
    
    
    (5,928,288
    )
    
    
    1,393,290Net cash provided by operating activities
    
    
    3,408,968
    
    
    
    6,658,938Cash flows from investing activities:Proceeds from maturities and calls of held to maturity
securities
    
    
    82,460,000
    
    
    
    212,720,000Proceeds from maturities, sales and calls of available
for sale securities
    
    
    137,413,444
    
    
    
    18,250,292Purchases of investments in held to maturity securities
    
    
    (5,513,926
    )
    
    
    (186,518,459
    )Purchases of investments in available for sale securities
    
    
    (134,426,587
    )
    
    
    (212,094,319
    )Purchases (sales) of investments in Federal Home Loan
Bank
    
    
    207,400
    
    
    
    (38,500
    )Loans, net increase
    
    
    (49,108,938
    )
    
    
    (54,040,715
    )Acquisition of premises and equipment
    
    
    (9,213,987
    )
    
    
    (1,595,372
    )Proceeds from sale of bank premises
    
    
    250,000
    
    
    
    317,120Proceeds from sales of other real estate
    
    
    55,000
    
    
    
    238,000Other assets
    
    
    (564,215
    )
    
    
    (416,457
    )Net cash
provided by (used in) investing activities
    
    
    21,558,191
    
    
    
    (223,178,410
    )
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For the Nine Months Ended September 30,
    
    2007
    
    
    2006Cash flows from financing activities:Demand and savings deposits, net decrease
    
    $
    (39,942,427
    )
    
    $
    (6,602,047
    )Time deposits, net increase
    
    
    36,523,396
    
    
    
    77,914,847Borrowings from Federal Home Loan Bank
    
    
    45,800,375
    
    
    
    17,240,727Repayments to Federal Home Loan Bank
    
    
    (45,925,984
    )
    
    
    (13,983,361
    )Retirement of common stock
    
    
    (2,817,784
    )
    
    
    (16,651
    )Cash dividends
    
    
    (2,655,031
    )
    
    
    (2,274,948
    )Federal funds purchased and securities sold under
agreements to repurchase,
net increase (decrease)
    
    
    (18,058,291
    )
    
    
    62,890,176Net cash provided by (used in) financing activities
    
    
    (27,075,746
    )
    
    
    135,168,743Net decrease in cash and cash equivalents
    
    
    (2,108,587
    )
    
    
    (81,350,729
    )Cash and cash equivalents, beginning of period
    
    
    44,193,493
    
    
    
    152,617,524Cash and cash equivalents, end of period
    
    $
    42,084,906
    
    
    $
    71,266,795
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Less Than TwelveMonths
    
    
    Over Twelve Months
    
    
    TotalGross
    
    
    
    
    
    
    Gross
    
    
    
    
    
    
    GrossUnreal-
    
    
    
    
    
    
    Unreal-
    
    
    Fair
    
    
    Unreal-Fair Value
    
    
    ized Loss
    
    
    Fair Value
    
    
    ized Loss
    
    
    Value
    
    
    ized LossU. S. Treasury
    
    $
    
    
    
    $
    
    
    
    $
    8,950
    
    
    $
    45
    
    
    $
    8,950
    
    
    $
    45U. S. Govt. Agencies
    
    
    50,676
    
    
    
    437
    
    
    
    60,002
    
    
    
    488
    
    
    
    110,678
    
    
    
    925States and
political
subdivisions
    
    
    7,146
    
    
    
    168
    
    
    
    8,460
    
    
    
    200
    
    
    
    15,606
    
    
    
    368Mortgage backed
securities
    
    
    25,516
    
    
    
    422
    
    
    
    
    
    
    
    
    
    
    
    25,516
    
    
    
    422FHLMC preferred
stock
    
    
    
    
    
    
    
    
    
    
    2,489
    
    
    
    586
    
    
    
    2,489
    
    
    
    586Total
    
    $
    83,338
    
    
    $
    1,027
    
    
    $
    79,901
    
    
    $
    1,319
    
    
    $
    163,239
    
    
    $
    2,346
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For the Nine
    
    
    
    
    
    
    For the NineMonths Ended
    
    
    For the Year
    
    
    Months EndedSeptember 30,
    
    
    Ended December
    
    
    September 30,2007
    
    
    31, 2006
    
    
    2006Balance, beginning of
period
    
    $
    10,841,367
    
    
    $
    10,966,022
    
    
    $
    10,966,022Provision for loan losses
    
    
    (1,097,000
    )
    
    
    141,000
    
    
    
    125,000Recoveries
    
    
    211,395
    
    
    
    463,345
    
    
    
    316,646Loans charged off
    
    
    (496,672
    )
    
    
    (729,000
    )
    
    
    (479,361
    )Balance, end of period
    
    $
    9,459,090
    
    
    $
    10,841,367
    
    
    $
    10,928,307
       12




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13




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Forward-Looking Information
  Overview
    14




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For the nine months ended September 30,
    
    2007
    
    
    2006Net income per share
    
    $
    1.47
    
    
    $
    1.40Book value per share
    
    $
    18.96
    
    
    $
    17.11Return on average total assets
    
    
    1.12
    %
    
    
    1.12
    %Allowance for loan losses as a % of loans,
net of unearned discount
    
    
    2.10
    %
    
    
    2.71
    %
 Financial Condition
 Held to Maturity Securities
   September 30,
    
    2007
    
    
    2006Amount
    
    
    %
    
    
    Amount
    
    
    %U.S. Treasury
    
    $
    3,999,145
    
    
    
    46
    %
    
    $
    43,499,182
    
    
    
    40
    %U.S. Government agencies
    
    
    
    
    
    
    
    
    
    
    58,904,984
    
    
    
    55
    %States & political subdivisions
    
    
    4,629,041
    
    
    
    54
    %
    
    
    5,441,252
    
    
    
    5
    %Totals
    
    $
    8,628,186
    
    
    
    100
    %
    
    $
    107,845,418
    
    
    
    100
    %
 15




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##### Table of Contents



Available for Sale Securities
   September 30,
    
    2007
    
    
    2006Amount
    
    
    %
    
    
    Amount
    
    
    %U.S. Treasury
    
    $
    76,466,040
    
    
    
    19
    %
    
    $
    53,617,300
    
    
    
    14
    %U.S. Government agencies
    
    
    269,818,394
    
    
    
    69
    %
    
    
    299,165,147
    
    
    
    80
    %Mortgage-backed securities
    
    
    25,516,408
    
    
    
    6
    %States and political subdivisions
    
    
    18,834,535
    
    
    
    5
    %
    
    
    16,786,495
    
    
    
    5
    %Other securities
    
    
    4,304,712
    
    
    
    1
    %
    
    
    3,936,910
    
    
    
    1
    %Totals
    
    $
    394,940,089
    
    
    
    100
    %
    
    $
    373,505,852
    
    
    
    100
    %
 Loans
  Bank Premises and Equipment
  Accrued Interest Receivable
  16




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##### Table of Contents



Deposits
    Federal Funds Purchased and Securities Sold Under Agreements to Repurchase
  Borrowings from Federal Home Loan Bank
  Other Liabilities
  Shareholders Equity and Capital Adequacy
  17




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##### Table of Contents



RESULTS OF OPERATIONS
 Net Interest Income
     18




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##### Table of Contents



For the Nine Months Ended
    
    
    For the Nine Months EndedSeptember 30, 2007
    
    
    September 30, 2006Interest
    
    
    
    
    
    
    
    
    
    
    InterestAverage
    
    
    Earned/
    
    
    
    
    
    
    Average
    
    
    Earned/Balance
    
    
    Paid
    
    
    Yield
    
    
    Balance
    
    
    Paid
    
    
    YieldINTEREST INCOME:Loans (2)(3)
    
    $
    421,795
    
    
    $
    25,132
    
    
    
    7.94
    %
    
    $
    371,693
    
    
    $
    20,902
    
    
    
    7.50
    %Federal funds sold
    
    
    4,839
    
    
    
    189
    
    
    
    5.21
    %
    
    
    18,138
    
    
    
    760
    
    
    
    5.59
    %Held to maturity:Taxable
    
    
    28,085
    
    
    
    1,060
    
    
    
    5.03
    %
    
    
    153,559
    
    
    
    5,288
    
    
    
    4.59
    %Non-taxable (1)
    
    
    4,830
    
    
    
    229
    
    
    
    6.32
    %
    
    
    5,949
    
    
    
    314
    
    
    
    7.04
    %Available for sale:Taxable
    
    
    397,409
    
    
    
    15,161
    
    
    
    5.09
    %
    
    
    230,558
    
    
    
    7,413
    
    
    
    4.29
    %Non-taxable (1)
    
    
    18,382
    
    
    
    811
    
    
    
    5.89
    %
    
    
    14,650
    
    
    
    646
    
    
    
    5.88
    %Other
    
    
    5,371
    
    
    
    183
    
    
    
    4.54
    %
    
    
    4,898
    
    
    
    148
    
    
    
    4.03
    %Total
    
    $
    880,711
    
    
    $
    42,765
    
    
    
    6.47
    %
    
    $
    799,445
    
    
    $
    35,471
    
    
    
    5.92
    %INTEREST EXPENSE:Savings and
demand,
interest
bearing
    
    $
    276,246
    
    
    $
    4,225
    
    
    
    2.04
    %
    
    $
    309,084
    
    
    $
    4,040
    
    
    
    1.74
    %Time deposits
    
    
    206,536
    
    
    
    6,869
    
    
    
    4.43
    %
    
    
    143,819
    
    
    
    3,938
    
    
    
    3.65
    %Federal funds
purchased and
securities sold
under agreements to
repurchase
    
    
    228,248
    
    
    
    8,045
    
    
    
    4.70
    %
    
    
    161,824
    
    
    
    4,186
    
    
    
    3.45
    %Borrowings from FHLB
    
    
    9,303
    
    
    
    418
    
    
    
    5.99
    %
    
    
    8,188
    
    
    
    362
    
    
    
    5.89
    %Total
    
    $
    720,333
    
    
    $
    19,557
    
    
    
    3.62
    %
    
    $
    622,915
    
    
    $
    12,526
    
    
    
    2.68
    %Net tax-equivalent
yield on earning
assets
    
    
    
    
    
    
    
    
    
    
    3.51
    %
    
    
    
    
    
    
    
    
    
    
    3.83
    %
 
 (1)
    
    All interest earned is reported on a taxable equivalent basis using a tax rate of 34% in 2007
and 2006.(2)
    
    Loan fees of $683 and $425 for 2007 and 2006, respectively, are included in these figures.(3)
    
    Includes nonaccrual loans. 19




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##### Table of Contents



Provision for Loan Losses
        20




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##### Table of Contents



Trust Department Income and Fees
  Service Charges on Deposit Accounts
  Loss on Sale of Securities
  Other Income
  Salaries and Employee Benefits
  Equipment Rentals, Depreciation and Maintenance
  Other Expense
  LIQUIDITY
  21




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##### Table of Contents



Item 4: Controls and Procedures
   
 
 
      22




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##### Table of Contents



23




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##### Table of Contents



Exhibit 10.1:
    
    Deferred Compensation PlanExhibit 10.2:
    
    Executive Supplemental Income Plan Agreement  Chevis C. SwetmanExhibit 10.3:
    
    Executive Supplemental Income Plan Agreement  A. Wes FulmerExhibit 10.4:
    
    Executive Supplemental Income Plan Agreement  Lauri A. WoodExhibit 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
   24




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##### Table of Contents



PEOPLES FINANCIAL CORPORATION(Registrant)Date:
    

November 9, 2007By:
    
    /s/ Chevis C. Swetman

Chevis C. SwetmanChairman, President and Chief Executive OfficerDate:
    
    November 9, 2007By:
    
    /s/ Lauri A. WoodLauri A. WoodChief Financial Officer and Controller(principal financial and accounting officer)
 25