##### 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, 2009
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
 Commission File Number    001-12103
 PEOPLES FINANCIAL CORPORATION
  Mississippi
    
    64-0709834(State or other jurisdiction of incorporation or organization)
    
    (I.R.S. Employer Identification No.)
 Lameuse and Howard Avenues, Biloxi, Mississippi
    
    39533(Address of principal executive offices)
    
    (Zip Code)
  (Registrants telephone number, including area code)
 þ o
 o o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ




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TABLE OF CONTENTS  Part 1  Financial InformationItem 1: Financial StatementsItem 2: Managements Discussion and Analysis of Financial Condition and Results of OperationsItem 4: Controls and ProceduresPART II  OTHER INFORMATIONItem 1: Legal ProceedingsItem 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
 September 30, 2009
    
    
    December 31, 2008(Unaudited)
    
    
    (Audited)AssetsCash and due from banks
    
    $
    25,792,612
    
    
    $
    34,015,590Federal funds sold
    
    
    
    
    
    
    4,000Available for sale securities
    
    
    336,308,381
    
    
    
    340,462,072Held to maturity securities, fair value of
$3,348,512 at September 30, 2009;
$3,438,108 at December 31, 2008
    
    
    3,201,224
    
    
    
    3,394,212Other investments
    
    
    3,999,662
    
    
    
    3,889,324Federal Home Loan Bank Stock, at cost
    
    
    3,523,800
    
    
    
    2,070,700Loans
    
    
    466,022,263
    
    
    
    467,377,039Less: Allowance for loan losses
    
    
    8,106,588
    
    
    
    11,113,575Loans, net
    
    
    457,915,675
    
    
    
    456,263,464Bank premises and equipment, net
of accumulated depreciation
    
    
    31,890,315
    
    
    
    33,600,170Accrued interest receivable
    
    
    4,983,018
    
    
    
    5,444,767Cash surrender value of life insurance
    
    
    15,154,066
    
    
    
    14,688,160Other real estate
    
    
    2,745,468
    
    
    
    397,182Other assets
    
    
    2,967,593
    
    
    
    2,177,860Total assets
    
    $
    888,481,814
    
    
    $
    896,407,501
 2




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Peoples Financial Corporation and Subsidiaries
Consolidated Statements of Condition (continued)
 September 30, 2009
    
    
    December 31, 2008(Unaudited)
    
    
    (Audited)Liabilities & Shareholders EquityLiabilities:Deposits:Demand, non-interest bearing
    
    $
    103,784,343
    
    
    $
    109,033,184Savings and demand, interest bearing
    
    
    223,838,840
    
    
    
    239,990,238Time, $100,000 or more
    
    
    160,687,218
    
    
    
    104,540,112Other time deposits
    
    
    53,256,808
    
    
    
    56,912,002Total deposits
    
    
    541,567,209
    
    
    
    510,475,536Federal funds purchased and securities sold under
agreements to repurchase
    
    
    188,483,055
    
    
    
    226,609,231Borrowings from Federal Home Loan Bank
    
    
    36,872,633
    
    
    
    36,937,686Other liabilities
    
    
    15,904,593
    
    
    
    15,384,934Total liabilities
    
    
    782,827,490
    
    
    
    789,407,387Shareholders Equity:Common stock, $1 par value, 15,000,000 shares
authorized, 5,151,697 and 5,279,268 shares issued
and outstanding at September 30, 2009 and December 31,
2008, respectively
    
    
    5,151,697
    
    
    
    5,279,268Surplus
    
    
    65,780,254
    
    
    
    65,780,254Undivided profits
    
    
    33,025,827
    
    
    
    33,412,596Accumulated other comprehensive income, net of tax
    
    
    1,696,546
    
    
    
    2,527,996Total shareholders equity
    
    
    105,654,324
    
    
    
    107,000,114Total liabilities & shareholders equity
    
    $
    888,481,814
    
    
    $
    896,407,501
  3




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Peoples Financial Corporation and Subsidiaries
Consolidated Statements of Income
(Unaudited)
 Three Months Ended September 30,
    
    Nine Months Ended September 30,2009
    
    2008
    
    2009
    
    2008Interest income:Interest and fees on loans
    
    $
    5,028,179
    
    
    $
    6,603,096
    
    
    $
    15,232,634
    
    
    $
    20,711,343Interest and dividends on
securities:U.S. Treasury
    
    
    243,566
    
    
    
    748,056
    
    
    
    1,019,885
    
    
    
    2,338,282U.S. Government agencies
    
    
    2,704,828
    
    
    
    2,568,752
    
    
    
    7,474,592
    
    
    
    8,283,083Mortgage-backed securities
    
    
    388,091
    
    
    
    421,063
    
    
    
    1,179,745
    
    
    
    1,317,989States and political subdivisions
    
    
    291,065
    
    
    
    273,419
    
    
    
    903,488
    
    
    
    782,665Other investments
    
    
    9,673
    
    
    
    42,475
    
    
    
    16,567
    
    
    
    143,455Interest on federal funds sold
    
    
    5,194
    
    
    
    49,549
    
    
    
    6,631
    
    
    
    111,620Total interest income
    
    
    8,670,596
    
    
    
    10,706,410
    
    
    
    25,833,542
    
    
    
    33,688,437Interest expense:Deposits
    
    
    1,072,368
    
    
    
    2,273,965
    
    
    
    4,026,055
    
    
    
    8,111,706Long-term borrowings
    
    
    141,723
    
    
    
    103,726
    
    
    
    413,500
    
    
    
    343,491Federal funds purchased and securities
sold under agreements to
repurchase
    
    
    437,897
    
    
    
    1,111,474
    
    
    
    1,531,569
    
    
    
    3,731,166Total interest expense
    
    
    1,651,988
    
    
    
    3,489,165
    
    
    
    5,971,124
    
    
    
    12,186,363Net interest income
    
    
    7,018,608
    
    
    
    7,217,245
    
    
    
    19,862,418
    
    
    
    21,502,074Provision for allowance for losses
on loans
    
    
    1,875,000
    
    
    
    2,001,000
    
    
    
    3,725,000
    
    
    
    2,095,000Net interest income after provision
for allowance for losses on loans
    
    $
    5,143,608
    
    
    $
    5,216,245
    
    
    $
    16,137,418
    
    
    $
    19,407,074
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Peoples Financial Corporation and Subsidiaries
Consolidated Statements of Income (continued)
(Unaudited)
 Three Months Ended September 30,
    
    Nine Months Ended September 30,2009
    
    2008
    
    2009
    
    2008Non-interest income:Trust department income and fees
    
    $
    355,982
    
    
    $
    407,643
    
    
    $
    1,017,998
    
    
    $
    1,236,758Service charges on deposit
accounts
    
    
    1,692,387
    
    
    
    1,717,985
    
    
    
    5,057,784
    
    
    
    5,139,820Gain on sales, liquidation, or
calls of securities
    
    
    265,247
    
    
    
    249,000
    
    
    
    402,046
    
    
    
    364,277Other income
    
    
    281,810
    
    
    
    436,610
    
    
    
    906,395
    
    
    
    1,238,890Total non-interest income
    
    
    2,595,426
    
    
    
    2,811,238
    
    
    
    7,384,223
    
    
    
    7,979,745Non-interest expense:Salaries and employee benefits
    
    
    3,557,067
    
    
    
    3,564,471
    
    
    
    10,631,766
    
    
    
    10,641,717Net occupancy
    
    
    564,631
    
    
    
    538,799
    
    
    
    1,757,734
    
    
    
    1,545,957Rentals, depreciation and
maintenance
    
    
    939,523
    
    
    
    950,180
    
    
    
    2,844,079
    
    
    
    2,744,481Other expense
    
    
    1,608,703
    
    
    
    4,572,677
    
    
    
    5,075,278
    
    
    
    7,722,910Total non-interest expense
    
    
    6,669,924
    
    
    
    9,626,127
    
    
    
    20,308,857
    
    
    
    22,655,065Income before income taxes
    
    
    1,069,110
    
    
    
    (1,598,644
    )
    
    
    3,212,784
    
    
    
    4,731,754Income taxes
    
    
    95,000
    
    
    
    (545,000
    )
    
    
    335,000
    
    
    
    1,518,000Net Income
    
    $
    974,110
    
    
    $
    (1,053,644
    )
    
    $
    2,877,784
    
    
    $
    3,213,754Basic and diluted earnings per
share
    
    $
    .19
    
    
    $
    (.20
    )
    
    $
    .56
    
    
    $
    .60
  5




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Peoples Financial Corporation and Subsidiaries
Consolidated Statement of Shareholders Equity
 AccumulatedNumber of
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    OtherCommon
    
    
    Common
    
    
    
    
    
    
    Undivided
    
    
    Comprehensive
    
    
    ComprehensiveShares
    
    
    Stock
    
    
    Surplus
    
    
    Profits
    
    
    Income
    
    
    Income
    
    
    TotalBalance, January 1, 2009
    
    
    5,279,268
    
    
    $
    5,279,268
    
    
    $
    65,780,254
    
    
    $
    33,412,596
    
    
    $
    2,527,996
    
    
    
    
    
    
    $
    107,000,114Comprehensive Income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,877,784
    
    
    
    
    
    
    $
    2,877,784
    
    
    
    2,877,784Net unrealized loss on
available for sale
securities, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,096,800
    )
    
    
    (1,096,800
    )
    
    
    (1,096,800
    )Reclassification
adjustment for available
for sale securities
called
or sold in current year,
net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    265,350
    
    
    
    265,350
    
    
    
    265,350Total comprehensive
income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    2,046,334Effect of stock retirement
on accrued dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,774
    
    
    
    
    
    
    
    
    
    
    
    4,774Dividend declared,
($ .20 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,030,339
    )
    
    
    
    
    
    
    
    
    
    
    (1,030,339
    )Retirement of stock
    
    
    (127,571
    )
    
    
    (127,571
    )
    
    
    
    
    
    
    (2,238,988
    )
    
    
    
    
    
    
    
    
    
    
    (2,366,559
    )Balance, September 30, 2009
    
    
    5,151,697
    
    
    $
    5,151,697
    
    
    $
    65,780,254
    
    
    $
    33,025,827
    
    
    $
    1,696,546
    
    
    
    
    
    
    $
    105,654,324
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Peoples Financial Corporation and Subsidiaries
Consolidated Statements of Cash Flows (Unaudited)
 Nine Months Ended September 30,2009
    
    
    2008Cash flows from operating activities:Net income
    
    $
    2,877,784
    
    
    $
    3,213,754Adjustment to reconcile net income to net cash
provided by operating activities:Depreciation
    
    
    1,798,500
    
    
    
    1,777,500Provision for allowance for loan losses
    
    
    3,725,000
    
    
    
    2,095,000Loss on impairment of equity securities
    
    
    149,517
    
    
    
    2,964,000Gain on other investments
    
    
    (110,338
    )Gain on sale of bank premises
    
    
    
    
    
    
    (142,607
    )Gain on sale of other real estate
    
    
    3,000Gain on sales and calls of securities
    
    
    (402,046
    )
    
    
    (364,277
    )Change in accrued interest receivable
    
    
    461,749
    
    
    
    2,280,314Change in other assets
    
    
    (801,830
    )
    
    
    725,810Change in other liabilities
    
    
    2,540,113
    
    
    
    (1,009,809
    )Net cash provided by operating activities
    
    
    10,241,449
    
    
    
    11,539,685Cash flows from investing activities:Proceeds from maturities, sales, liquidation and calls of
available for sale securities
    
    
    218,568,260
    
    
    
    200,027,056Investment in available for sale securities
    
    
    (215,425,390
    )
    
    
    (110,080,676
    )Proceeds from maturities of held to maturity securities
    
    
    195,000
    
    
    
    1,240,000Investment in held to maturity securities
    
    
    (2,012
    )
    
    
    (3,514
    )Purchases of other investments
    
    
    
    
    
    
    (3,160,000
    )(Purchase) redemption of Federal Home Loan Bank Stock
    
    
    (1,453,100
    )
    
    
    200Proceeds from sales of other real estate
    
    
    326,076
    
    
    
    19,500Loans, net change
    
    
    (8,054,574
    )
    
    
    (12,424,936
    )Proceeds from sale of bank premises
    
    
    
    
    
    
    266,812Acquisition of premises and equipment
    
    
    (88,645
    )
    
    
    (1,727,877
    )Other assets
    
    
    (453,808
    )
    
    
    (990,201
    )Net cash provided by (used in) investing activities
    
    $
    (6,388,193
    )
    
    $
    73,166,364
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Peoples Financial Corporation and Subsidiaries
Consolidated Statements of Cash Flows (continued)
(Unaudited)
 Nine Months Ended September 30,2009
    
    
    2008Cash flows from financing activities:Demand and savings deposits, net change
    
    $
    (21,400,239
    )
    
    $
    36,197,357Time deposits, net change
    
    
    52,491,912
    
    
    
    (67,790,579
    )Cash dividends
    
    
    (2,614,119
    )
    
    
    (3,003,342
    )Retirement of common stock
    
    
    (2,366,559
    )
    
    
    (2,311,173
    )Borrowings from Federal Home Loan Bank
    
    
    219,906,300
    
    
    
    16,500,000Repayments to Federal Home Loan Bank
    
    
    (219,971,353
    )
    
    
    (16,622,103
    )Federal funds purchased and securities sold
under agreements to repurchase, net change
    
    
    (38,126,176
    )
    
    
    (18,916,423
    )Net cash used in financing activities
    
    
    (12,080,234
    )
    
    
    (55,946,263
    )Net increase (decrease) in cash and cash
equivalents
    
    
    (8,226,978
    )
    
    
    28,759,786Cash and cash equivalents, beginning of period
    
    
    34,019,590
    
    
    
    34,935,370Cash and cash equivalents, end of period
    
    $
    25,792,612
    
    
    $
    63,695,156
  8




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Gross
    
    
    Grossunrealized
    
    
    unrealized
    
    
    EstimatedSeptember 30, 2009
    
    Amortized cost
    
    
    gains
    
    
    losses
    
    
    fair valueAvailable for sale securities:Debt securities:U.S. Treasury
    
    $
    23,984,082
    
    
    $
    886,218
    
    
    $
    
    
    
    $
    24,870,300U.S. Government agencies
    
    
    245,396,069
    
    
    
    1,958,436
    
    
    
    (1,113,840
    )
    
    
    246,240,665Mortgage-backed securities
    
    
    26,869,670
    
    
    
    1,180,543
    
    
    
    
    
    
    
    28,050,213States and political subdivisions
    
    
    35,327,093
    
    
    
    1,375,902
    
    
    
    (205,775
    )
    
    
    36,497,220Total debt securities
    
    
    331,576,914
    
    
    
    5,401,099
    
    
    
    (1,319,615
    )
    
    
    335,658,398Equity securities
    
    
    649,983
    
    
    
    
    
    
    
    
    
    
    
    649,983Total available for sale securities
    
    $
    332,226,897
    
    
    $
    5,401,099
    
    
    $
    (1,319,615
    )
    
    $
    336,308,381Held to maturity securities:States and political subdivisions
    
    $
    3,201,224
    
    
    $
    147,288
    
    
    $
    
    
    
    $
    3,348,512Total held to maturity securities
    
    $
    3,201,224
    
    
    $
    147,288
    
    
    $
    
    
    
    $
    3,348,512
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Gross
    
    
    Grossunrealized
    
    
    unrealized
    
    
    EstimatedDecember 31, 2008
    
    Amortized cost
    
    
    gains
    
    
    losses
    
    
    fair valueAvailable for sale securities:Debt securities:U.S. Treasury
    
    $
    64,963,243
    
    
    $
    1,746,597
    
    
    $
    
    
    
    $
    66,709,840U.S. Government agencies
    
    
    208,917,636
    
    
    
    3,552,215
    
    
    
    (74,020
    )
    
    
    212,395,831Mortgage-backed securities
    
    
    28,992,858
    
    
    
    788,218
    
    
    
    
    
    
    
    29,781,076States and political
subdivisions
    
    
    31,594,000
    
    
    
    316,874
    
    
    
    (985,049
    )
    
    
    30,925,825Total debt securities
    
    
    334,467,737
    
    
    
    6,403,904
    
    
    
    (1,059,069
    )
    
    
    339,812,572Equity securities
    
    
    649,500
    
    
    
    
    
    
    
    
    
    
    
    649,500Total available for sale securities
    
    $
    335,117,237
    
    
    $
    6,403,904
    
    
    $
    (1,059,069
    )
    
    $
    340,462,072Held to maturity securities:States and political subdivisions
    
    $
    3,394,212
    
    
    $
    52,382
    
    
    $
    (8,486
    )
    
    $
    3,438,108Total held to maturity securities
    
    $
    3,394,212
    
    
    $
    52,382
    
    
    $
    (8,486
    )
    
    $
    3,438,108
  Fair Value Measurement UsingTotal
    
    
    Level 1
    
    
    Level 2
    
    
    Level 3September 30, 2009
    
    $
    336,308,381
    
    
    
    
    
    
    $
    336,308,381December 31, 2008
    
    
    340,462,072
    
    
    
    
    
    
    
    340,462,072
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EstimatedAmortized cost
    
    
    fair valueAvailable for sale securities:Due in one year or less
    
    $
    20,538,102
    
    
    $
    20,934,035Due after one year through five years
    
    
    88,857,795
    
    
    
    90,896,980Due after five years through ten years
    
    
    69,951,725
    
    
    
    70,484,280Due after ten years
    
    
    125,359,622
    
    
    
    125,292,890Mortgage-backed securities
    
    
    26,869,670
    
    
    
    28,050,213Totals
    
    $
    331,576,914
    
    
    $
    335,658,398Held to maturity securities:Due in one year or less
    
    $
    304,966
    
    
    $
    308,938Due after one year through five years
    
    
    1,779,362
    
    
    
    1,879,774Due after five years through ten years
    
    
    1,116,896
    
    
    
    1,159,800Totals
    
    $
    3,201,224
    
    
    $
    3,348,512
  Less Than Twelve Months
    
    
    Over Twelve Months
    
    
    TotalGross
    
    
    
    
    
    
    Gross
    
    
    
    
    
    
    GrossUnrealized
    
    
    
    
    
    
    Unrealized
    
    
    
    
    
    
    UnrealizedSeptember 30, 2009
    
    Fair Value
    
    
    Loss
    
    
    Fair Value
    
    
    Loss
    
    
    Fair Value
    
    
    LossU.S. GovernmentAgencies
    
    $
    82,893,991
    
    
    $
    1,113,840
    
    
    $
    
    
    
    $
    
    
    
    $
    82,893,991
    
    
    $
    1,113,840States and political
subdivisions
    
    
    6,112,320
    
    
    
    101,484
    
    
    
    2,533,876
    
    
    
    104,291
    
    
    
    8,646,196
    
    
    
    205,775TOTAL
    
    $
    89,006,311
    
    
    $
    1,215,324
    
    
    $
    2,533,876
    
    
    $
    104,291
    
    
    $
    91,540,187
    
    
    $
    1,319,615
 12




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Less Than Twelve Months
    
    
    Over Twelve Months
    
    
    TotalGross
    
    
    
    
    
    
    Gross
    
    
    
    
    
    
    GrossUnrealized
    
    
    
    
    
    
    Unrealized
    
    
    
    
    
    
    UnrealizedDecember 31, 2008:
    
    Fair Value
    
    
    Loss
    
    
    Fair Value
    
    
    Loss
    
    
    Fair Value
    
    
    LossU.S. GovernmentAgencies
    
    $
    10,780,995
    
    
    $
    74,020
    
    
    $
    
    
    
    $
    
    
    
    $
    10,780,995
    
    
    $
    74,020States and political
subdivisions
    
    
    16,545,087
    
    
    
    739,918
    
    
    
    2,825,811
    
    
    
    253,617
    
    
    
    19,370,898
    
    
    
    993,535TOTAL
    
    $
    27,326,082
    
    
    $
    813,938
    
    
    $
    2,825,811
    
    
    $
    253,617
    
    
    $
    30,151,893
    
    
    $
    1,067,555
       13




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Fair Value Measurement UsingTotal
    
    
    Level 1
    
    
    Level 2
    
    
    Level 3September 30, 2009
    
    $
    31,053,807
    
    
    
    
    
    
    $
    31,053,807December 31, 2008
    
    
    20,072,210
    
    
    
    
    
    
    
    20,072,210
    Fair Value Measurement UsingTotal
    
    
    Level 1
    
    
    Level 2
    
    
    Level 3September 30, 2009
    
    $
    2,745,468
    
    
    
    
    
    
    $
    2,745,468December 31, 2008
    
    
    397,182
    
    
    
    
    
    
    
    397,182
 14




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Three Months Ended September 30,
    
    Nine Months Ended September 30,2009
    
    2008
    
    2009
    
    2008Balance, beginning of period
    
    $
    9,797,881
    
    
    $
    9,327,780
    
    
    $
    11,113,575
    
    
    $
    9,378,137Recoveries
    
    
    5,140
    
    
    
    52,754
    
    
    
    334,774
    
    
    
    331,884Loans charged off
    
    
    (3,571,433
    )
    
    
    (398,954
    )
    
    
    (7,066,761
    )
    
    
    (822,441
    )Provision for allowance for loan losses
    
    
    1,875,000
    
    
    
    2,001,000
    
    
    
    3,725,000
    
    
    
    2,095,000Balance, end of period
    
    $
    8,106,588
    
    
    $
    10,982,580
    
    
    $
    8,106,588
    
    
    $
    10,982,580
          15




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##### Table of Contents



September 30, 2009
    
    December 31, 2008Carrying Amount
    
    Fair Value
    
    Carrying Amount
    
    Fair ValueFinancial Assets:Cash and due from banks
    
    $
    25,792,612
    
    
    $
    25,792,612
    
    
    $
    34,015,590
    
    
    $
    34,015,590Federal funds sold
    
    
    
    
    
    
    
    
    
    
    4,000
    
    
    
    4,000Available for sale securities
    
    
    336,308,381
    
    
    
    336,308,381
    
    
    
    340,462,072
    
    
    
    340,462,072Held to maturity securities
    
    
    3,201,224
    
    
    
    3,348,512
    
    
    
    3,394,212
    
    
    
    3,438,108Other investments
    
    
    3,999,662
    
    
    
    3,999,662
    
    
    
    3,889,324
    
    
    
    3,889,324Federal Home Loan Bank stock
    
    
    3,523,800
    
    
    
    3,523,800
    
    
    
    2,070,700
    
    
    
    2,070,700Loans, net
    
    
    457,915,675
    
    
    
    463,544,454
    
    
    
    456,263,464
    
    
    
    461,112,530Cash surrender value
    
    
    15,154,066
    
    
    
    15,154,066
    
    
    
    14,688,160
    
    
    
    14,688,160Financial Liabilities:Deposits:Non-interest bearing
    
    
    103,784,343
    
    
    
    103,784,343
    
    
    
    109,033,184
    
    
    
    109,033,184Interest bearing
    
    
    437,782,866
    
    
    
    438,448,036
    
    
    
    401,442,352
    
    
    
    402,361,440Total deposits
    
    
    541,567,209
    
    
    
    542,232,379
    
    
    
    510,475,536
    
    
    
    511,394,624Federal funds purchased and
securities sold under agreements
to repurchase
    
    
    188,483,055
    
    
    
    188,483,055
    
    
    
    226,609,231
    
    
    
    226,609,231Borrowings from Federal Home Loan
Bank
    
    
    36,872,633
    
    
    
    37,529,000
    
    
    
    36,937,686
    
    
    
    37,547,000
    16




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17




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18




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Item 2: Managements Discussion and Analysis of Financial Condition and Results of Operations
 GENERAL
   Forward-Looking Information
  Critical Accounting Policies
  19




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OVERVIEW
    RESULTS OF OPERATIONS
 Net Interest Income
   20




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Quarter Ended September 30, 2009 as Compared with Quarter Ended September 30, 2008
     Nine Months Ended September 30, 2009 as Compared with Nine Months Ended September 30, 2008
      21




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##### Table of Contents



Three Months Ended September 30, 2009
    
    
    Three Months Ended September 30, 2008Average
    
    
    Interest
    
    
    
    
    
    
    Average
    
    
    InterestBalance
    
    
    Earned/Paid
    
    
    Rate
    
    
    Balance
    
    
    Earned/Paid
    
    
    RateLoans (2)(3)
    
    $
    466,954
    
    
    $
    5,028
    
    
    
    4.30
    %
    
    $
    472,088
    
    
    $
    6,603
    
    
    
    5.59
    %Federal Funds Sold
    
    
    7,631
    
    
    
    5
    
    
    
    0.26
    %
    
    
    11,397
    
    
    
    50
    
    
    
    1.75
    %HTM:Non taxable (1)
    
    
    3,201
    
    
    
    39
    
    
    
    4.87
    %
    
    
    3,393
    
    
    
    52
    
    
    
    6.13
    %AFS:Taxable
    
    
    306,267
    
    
    
    3,336
    
    
    
    4.36
    %
    
    
    285,869
    
    
    
    3,738
    
    
    
    5.23
    %Non taxable (1)
    
    
    34,848
    
    
    
    402
    
    
    
    4.61
    %
    
    
    24,214
    
    
    
    362
    
    
    
    5.98
    %Other
    
    
    4,174
    
    
    
    10
    
    
    
    0.96
    %
    
    
    7,362
    
    
    
    42
    
    
    
    2.82
    %Total
    
    $
    823,075
    
    
    $
    8,820
    
    
    
    4.29
    %
    
    $
    804,323
    
    
    $
    10,847
    
    
    
    5.39
    %Savings & interest-
bearing DDA
    
    $
    225,233
    
    
    $
    303
    
    
    
    0.54
    %
    
    $
    254,513
    
    
    $
    972
    
    
    
    1.53
    %CDs
    
    
    203,479
    
    
    
    769
    
    
    
    1.51
    %
    
    
    184,393
    
    
    
    1,303
    
    
    
    2.83
    %Federal funds
purchased
    
    
    209,578
    
    
    
    437
    
    
    
    0.83
    %
    
    
    215,548
    
    
    
    1,111
    
    
    
    2.06
    %FHLB advances
    
    
    54,960
    
    
    
    142
    
    
    
    1.03
    %
    
    
    7,686
    
    
    
    103
    
    
    
    5.36
    %Total
    
    $
    693,250
    
    
    $
    1,651
    
    
    
    0.95
    %
    
    $
    662,140
    
    
    $
    3,489
    
    
    
    2.11
    %Net tax-equivalent
yield on earning assets
    
    
    
    
    
    
    
    
    
    
    3.48
    %
    
    
    
    
    
    
    
    
    
    
    3.66
    %
 
 (1)
    
    All interest earned is reported on a taxable equivalent basis using a tax rate of 34% in 2009 and 2008.(2)
    
    Loan fees of $107,898 and $183,079 for 2009 and 2008, respectively, are included in these figures.(3)
    
    Includes nonaccrual loans. 22




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Nine Months Ended September 30, 2009
    
    
    Nine Months Ended September 30, 2008Average
    
    
    Interest
    
    
    
    
    
    
    Average
    
    
    InterestBalance
    
    
    Earned/Paid
    
    
    Rate
    
    
    Balance
    
    
    Earned/Paid
    
    
    RateLoans (2)(3)
    
    $
    470,290
    
    
    $
    15,233
    
    
    
    4.32
    %
    
    $
    461,948
    
    
    $
    20,711
    
    
    
    5.98
    %Federal Funds Sold
    
    
    3,409
    
    
    
    7
    
    
    
    0.27
    %
    
    
    7,024
    
    
    
    112
    
    
    
    2.12
    %HTM:Non taxable (1)
    
    
    3,286
    
    
    
    129
    
    
    
    5.23
    %
    
    
    3,791
    
    
    
    178
    
    
    
    6.26
    %AFS:Taxable
    
    
    313,690
    
    
    
    9,674
    
    
    
    4.11
    %
    
    
    309,603
    
    
    
    11,939
    
    
    
    5.14
    %Non taxable (1)
    
    
    33,645
    
    
    
    1,239
    
    
    
    4.91
    %
    
    
    23,166
    
    
    
    1,008
    
    
    
    5.80
    %Other
    
    
    3,155
    
    
    
    17
    
    
    
    0.72
    %
    
    
    7,424
    
    
    
    143
    
    
    
    2.57
    %Total
    
    $
    827,475
    
    
    $
    26,299
    
    
    
    4.24
    %
    
    $
    812,956
    
    
    $
    34,091
    
    
    
    5.59
    %Savings & interest-
bearing DDA
    
    $
    235,388
    
    
    $
    1,540
    
    
    
    0.87
    %
    
    $
    253,197
    
    
    $
    3,032
    
    
    
    1.60
    %CDs
    
    
    198,821
    
    
    
    2,486
    
    
    
    1.67
    %
    
    
    201,571
    
    
    
    5,080
    
    
    
    3.36
    %Federal funds
purchased
    
    
    222,447
    
    
    
    1,532
    
    
    
    0.92
    %
    
    
    207,612
    
    
    
    3,731
    
    
    
    2.40
    %FHLB advances
    
    
    33,539
    
    
    
    413
    
    
    
    1.64
    %
    
    
    7,839
    
    
    
    343
    
    
    
    5.83
    %Total
    
    $
    690,195
    
    
    $
    5,971
    
    
    
    1.15
    %
    
    $
    670,219
    
    
    $
    12,186
    
    
    
    2.42
    %Net tax-equivalent
yield on earning assets
    
    
    
    
    
    
    
    
    
    
    3.28
    %
    
    
    
    
    
    
    
    
    
    
    3.59
    %
 
 (1)
    
    All interest earned is reported on a taxable equivalent basis using a tax rate of 34% in 2009 and 2008.(2)
    
    Loan fees of $395,114 and $592,391 for 2009 and 2008, respectively, are included in these figures.(3)
    
    Includes nonaccrual loans. 23




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Provision for Loan Losses
    Non-interest income
   24




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Non-interest expense
     Income Taxes
  FINANCIAL CONDITION
  25




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##### Table of Contents



September 30, 2009
    
    December 31, 2008Real estate, construction
    
    $
    99,936,020
    
    
    $
    118,455,302Real estate, mortgage
    
    
    300,622,822
    
    
    
    290,458,002Loans to finance agricultural production
    
    
    2,028,883
    
    
    
    3,177,723Commercial and industrial loans
    
    
    50,036,294
    
    
    
    43,311,552Loans to individuals for household, family and other
consumer expenditures
    
    
    9,979,166
    
    
    
    10,201,518Obligations of states and political subdivisions
    
    
    3,419,078
    
    
    
    1,733,194All other loans
    
    
    
    
    
    
    39,748Total
    
    $
    466,022,263
    
    
    $
    467,377,039
      SHAREHOLDERS EQUITY AND CAPITAL ADEQUACY
   26




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LIQUIDITY
   REGULATORY MATTERS
  
 Item 4: Controls and Procedures
  27




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PART II  OTHER INFORMATION
 
 Item 1: Legal Proceedings
  
 Item 6  Exhibits and Reports on Form 8-K
 (a)
    
    Exhibits
 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
 (b)
    
    Reports on Form 8-K
  28




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PEOPLES FINANCIAL CORPORATION
(Registrant)Date:     November 6, 2009By:
    /s/ Chevis C. SwetmanChevis C. SwetmanChairman, President and Chief Executive Officer(principal executive officer)Date:     November 6, 2009By:
    /s/ Lauri A. WoodLauri A. WoodChief Financial Officer and Controller(principal financial and accounting officer)
 29