##### Table of Contents



SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 þ QUARTERLY REPORT PURSUANT TO SECTION 13 or 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended   June 30, 2005
 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 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
    Page 1




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TABLE OF CONTENTS  PART I FINANCIAL INFORMATIONItem 2  Managements Discussion and Analysis of Financial Condition and Results of OperationsItem 4: Controls and ProceduresPART II OTHER INFORMATIONItem 4  Submission of Matters to a Vote of Security HoldersItem 5  Other InformationItem 6  Exhibits and Reports on Form 8-KSIGNATURESConsent of Independent Registered Public Accounting FirmCertification 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  
      June 30, December 31, and June 30,
    
    2005
    
    2004
    
    2004AssetsCash and due from banks
    
    $
    49,054,842
    
    
    $
    32,724,625
    
    
    $
    37,883,278Held to maturity securities, market value of
$16,168,000 - June 30, 2005;
$6,698,000 - December 31, 2004;
$3,041,000 - June 30, 2004
    
    
    16,040,105
    
    
    
    6,587,375
    
    
    
    2,945,427Available for sale securities, at market value
    
    
    219,299,017
    
    
    
    173,030,808
    
    
    
    191,660,051Federal Home Loan Bank stock, at cost
    
    
    1,420,700
    
    
    
    1,401,900
    
    
    
    1,389,700Loans
    
    
    347,500,920
    
    
    
    334,193,124
    
    
    
    318,216,752Less: Allowance for loan losses
    
    
    5,935,578
    
    
    
    6,569,614
    
    
    
    6,644,725Loans, net
    
    
    341,565,342
    
    
    
    327,623,510
    
    
    
    311,572,027Bank premises and equipment, net of
accumulated depreciation of
$17,958,000 - June 30, 2005;
$17,174,000 - December 31,
2004; and $16,525,000 - June 30, 2004
    
    
    17,815,976
    
    
    
    18,018,504
    
    
    
    16,241,484Other real estate
    
    
    32,957
    
    
    
    168,091
    
    
    
    484,701Accrued interest receivable
    
    
    3,282,548
    
    
    
    2,745,235
    
    
    
    2,657,775Other assets
    
    
    16,444,086
    
    
    
    15,141,101
    
    
    
    18,371,429Total assets
    
    $
    664,955,573
    
    
    $
    577,441,149
    
    
    $
    583,205,872
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##### Table of Contents



June 30, December 31, and June 30,
    
    2005
    
    
    2004
    
    
    2004Liabilities & Shareholders EquityLiabilities:Deposits:Demand, non-interest bearing
    
    $
    109,450,024
    
    
    $
    89,529,270
    
    
    $
    93,123,823Savings and demand, interest bearing
    
    
    198,019,041
    
    
    
    180,464,256
    
    
    
    173,667,579Time, $100,000 or more
    
    
    58,050,425
    
    
    
    51,948,077
    
    
    
    67,003,724Other time deposits
    
    
    63,470,625
    
    
    
    67,249,927
    
    
    
    63,719,899Total deposits
    
    
    428,990,115
    
    
    
    389,191,530
    
    
    
    397,515,025Federal funds purchased and securities
sold under agreements to
repurchase
    
    
    130,999,465
    
    
    
    87,277,125
    
    
    
    88,406,754Borrowings from Federal Home Loan Bank
    
    
    7,305,600
    
    
    
    7,202,970
    
    
    
    7,081,466Notes payable
    
    
    
    
    
    
    1,239
    
    
    
    7,901Other liabilities
    
    
    8,281,500
    
    
    
    7,966,852
    
    
    
    7,673,418Total liabilities
    
    
    575,576,680
    
    
    
    491,639,716

    
    
    
    500,684,564Shareholders Equity:Common Stock, $1 par value, 15,000,000
shares authorized, 5,549,688,
5,555,419 and 5,556,419 shares
issued and outstanding at June 30,
2005, December 31, 2004 and
June 30, 2004, respectively
    
    
    5,549,688
    
    
    
    5,555,419
    
    
    
    5,556,419Surplus
    
    
    65,780,254
    
    
    
    65,780,254
    
    
    
    65,780,254Undivided profits
    
    
    19,299,490
    
    
    
    15,391,524
    
    
    
    13,670,745Accumulated other comprehensive income
    
    
    (1,250,539
    )
    
    
    (925,764
    )
    
    
    (2,486,110
    )Total shareholders equity
    
    
    89,378,893
    
    
    
    85,801,433
    
    
    
    82,521,308Total liabilities and shareholders equity
    
    $
    664,955,573
    
    
    $
    577,441,149
    
    
    $
    583,205,872
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##### Table of Contents



For the Quarters Ended June 30,
    
    For the Six Months Ended June 30,2005
    
    2004
    
    2005
    
    2004Interest income:Interest and fees on loans
    
    $
    6,069,161
    
    
    $
    4,109,323
    
    
    $
    11,080,841
    
    
    $
    8,163,696Interest and dividends on investments:U. S. Treasury
    
    
    638,668
    
    
    
    326,392
    
    
    
    1,053,667
    
    
    
    621,649U. S. Government agencies and corporations
    
    
    1,149,619
    
    
    
    1,206,280
    
    
    
    2,095,669
    
    
    
    2,581,235States and political subdivisions
    
    
    211,229
    
    
    
    110,311
    
    
    
    409,469
    
    
    
    215,950Other investments
    
    
    64,441
    
    
    
    51,592
    
    
    
    135,283
    
    
    
    123,615Interest on federal funds sold
    
    
    86,448
    
    
    
    6,764
    
    
    
    172,936
    
    
    
    20,927Total interest income
    
    
    8,219,566
    
    
    
    5,810,662
    
    
    
    14,947,865
    
    
    
    11,727,072Interest expense:Time deposits of $100,000 or more
    
    
    270,872
    
    
    
    195,349
    
    
    
    508,539
    
    
    
    362,959Other deposits
    
    
    929,243
    
    
    
    643,154
    
    
    
    1,747,113
    
    
    
    1,303,289Borrowings from Federal Home Loan Bank
    
    
    117,546
    
    
    
    110,704
    
    
    
    220,940
    
    
    
    226,387Federal funds purchased and securities
sold under
agreements to repurchase
    
    
    433,747
    
    
    
    246,464
    
    
    
    749,882
    
    
    
    481,645Total interest expense
    
    
    1,751,408
    
    
    
    1,195,671
    
    
    
    3,226,474
    
    
    
    2,374,280Net interest income
    
    
    6,468,158
    
    
    
    4,614,991
    
    
    
    11,721,391
    
    
    
    9,352,792Provision for losses on loans
    
    
    (834,025
    )
    
    
    183,000
    
    
    
    (1,513,000
    )
    
    
    363,000Net interest income after provision for
losses on loans
    
    $
    7,302,183
    
    
    $
    4,431,991
    
    
    $
    13,234,391
    
    
    $
    8,989,792
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##### Table of Contents



For the Quarters Ended June 30,
    
    For the Six Months Ended June 30,2005
    
    2004
    
    2005
    
    2004Other operating income:Trust department income and fees
    
    $
    370,766
    
    
    $
    394,078
    
    
    $
    714,291
    
    
    $
    750,180Service charges on deposit accounts
    
    
    1,449,698
    
    
    
    1,406,063
    
    
    
    2,726,109
    
    
    
    3,004,543Other service charges, commissions and fees
    
    
    90,983
    
    
    
    78,323
    
    
    
    164,367
    
    
    
    145,277Gain on sale of bank premises
    
    
    
    
    
    
    1,270,697
    
    
    
    
    
    
    
    1,270,697Loss on sale of securities
    
    
    (442,539
    )
    
    
    
    
    
    
    (442,539
    )Other income
    
    
    231,341
    
    
    
    232,077
    
    
    
    474,569
    
    
    
    558,574Total other operating income
    
    
    1,700,249
    
    
    
    3,381,238
    
    
    
    3,636,797
    
    
    
    5,729,271Other operating expense:Salaries and employee benefits
    
    
    2,817,894
    
    
    
    2,836,006
    
    
    
    5,655,851
    
    
    
    5,605,909Net occupancy
    
    
    349,461
    
    
    
    363,811
    
    
    
    695,980
    
    
    
    682,184Equipment rentals, depreciation and maintenance
    
    
    677,114
    
    
    
    581,781
    
    
    
    1,341,608
    
    
    
    1,253,095Other expense
    
    
    1,193,539
    
    
    
    1,207,572
    
    
    
    2,508,403
    
    
    
    2,824,692Total other operating expense
    
    
    5,038,008
    
    
    
    4,989,170
    
    
    
    10,201,842
    
    
    
    10,365,880Income before income taxes and extraordinary gain
    
    
    3,964,424
    
    
    
    2,824,059
    
    
    
    6,669,346
    
    
    
    4,353,183Income taxes
    
    
    1,316,520
    
    
    
    837,508
    
    
    
    2,088,000
    
    
    
    1,295,000Income before extraordinary gain
    
    
    2,647,904
    
    
    
    1,986,551
    
    
    
    4,581,346
    
    
    
    3,058,183Extraordinary gain, net of income taxes
    
    
    79,000
    
    
    
    
    
    
    
    538,000Net income
    
    $
    2,726,904
    
    
    $
    1,986,551
    
    
    $
    5,119,346
    
    
    $
    3,058,183
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Accumu-lated Other# of
    
    
    
    
    
    
    
    
    
    
    
    
    
    Unearned
    
    Compre-Common
    
    Common
    
    
    
    
    
    Undivided
    
    Compen-
    
    hensive
    
    Comprehen-Shares
    
    Stock
    
    Surplus
    
    Profits
    
    sation
    
    Income
    
    sive Income
    
    TotalBalance, January 1,
2004
    
    
    5,557,379
    
    
    $
    5,557,379
    
    
    $
    65,780,254
    
    
    $
    11,574,074
    
    
    $
    (94,899
    )
    
    $
    687,141
    
    
    
    
    
    
    $
    83,503,949Comprehensive Loss:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,058,183
    
    
    
    
    
    
    
    
    
    
    $
    3,058,183
    
    
    
    3,058,183Net unrealized
loss on available
for sale
securities, net of
tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,272,335
    )
    
    
    (3,272,335
    )
    
    
    (3,272,335
    )Reclassification
adjustment for
available for sale
securities called
or sold in the
current year, net
of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    99,084
    
    
    
    99,084
    
    
    
    99,084Total
comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (115,068
    )Allocation of ESOP
shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    94,899
    
    
    
    
    
    
    
    
    
    
    
    94,899Retirement of
common stock
    
    
    (960
    )
    
    
    (960
    )
    
    
    
    
    
    
    (16,921
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (17,881
    )Dividend declared
($ .17 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (944,591
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (944,591
    )Balance, June 30,
2004
    
    
    5,556,419
    
    
    $
    5,556,419
    
    
    $
    65,780,254
    
    
    $
    13,670,745
    
    
    $
    
    
    
    $
    (2,486,110
    )
    
    
    
    
    
    $
    82,521,308
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Accumu-lated Other# of
    
    
    
    
    
    
    
    
    
    
    
    
    
    Unearned
    
    Compre-Common
    
    Common
    
    
    
    
    
    Undivided
    
    Compen-
    
    hensive
    
    Comprehen-Shares
    
    Stock
    
    Surplus
    
    Profits
    
    sation
    
    Income
    
    sive 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
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,119,346
    
    
    
    
    
    
    
    
    
    
    $
    5,119,346
    
    
    
    5,119,346Net unrealized loss
on available for
sale securities,
net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (559,090
    )
    
    
    (559,090
    )
    
    
    (559,090
    )Reclassification
adjustment for
available for sale
securities called
or sold in current
year, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    234,315
    
    
    
    234,315
    
    
    
    234,315Total
comprehensive
income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    4,794,571Retirement of
common stock
    
    
    (5,731
    )
    
    
    (5,731
    )
    
    
    
    
    
    
    (101,841
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (107,572
    )Effect of stock
retirement on
accrued dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    399
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    399Dividend declared
($ .20 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,109,938
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,109,938
    )Balance, June 30,
2005
    
    
    5,549,688
    
    
    $
    5,549,688
    
    
    $
    65,780,254
    
    
    $
    19,299,490
    
    
    $
    
    
    
    $
    (1,250,539
    )
    
    
    
    
    
    $
    89,378,893
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For the Six Months Ended June 30,
    
    2005
    
    2004Cash flows from operating activities:Net income
    
    $
    5,119,346
    
    
    $
    3,058,183Adjustments to reconcile net income to net
cash provided by operating
activities:Gain on sale of bank premises
    
    
    
    
    
    
    (1,270,697
    )Loss on sales of securities
    
    
    442,539Gain on sales of other real estate
    
    
    (246,866
    )
    
    
    (99,000
    )Depreciation
    
    
    828,760
    
    
    
    761,000Provision for losses on loans
    
    
    (1,513,000
    )
    
    
    363,000Provision for losses on other real estate
    
    
    7,000
    
    
    
    175,000Changes in assets and liabilities:Accrued interest receivable
    
    
    (537,313
    )
    
    
    438,227Other assets
    
    
    (424,431
    )
    
    
    (2,911,468
    )Other liabilities
    
    
    (229,337
    )
    
    
    616,871Net cash provided by operating activities
    
    
    3,446,698
    
    
    
    1,131,116Cash flows from investing activities:Proceeds from maturities and calls of held
to maturity securities
    
    
    435,000
    
    
    
    1,407,427Proceeds from maturities, sales and calls
of available for sale securities
    
    
    88,641,255
    
    
    
    84,040,393Investment in held to maturity securities
    
    
    (9,887,530
    )Investment in available for sale securities
    
    
    (135,845,156
    )
    
    
    (73,005,823
    )Investment in Federal Home Loan Bank
    
    
    (18,800
    )
    
    
    (16,500
    )Redemption of Federal Home Loan Bank stock
    
    
    
    
    
    
    601,000Proceeds from sales of other real estate
    
    
    375,000
    
    
    
    935,000Loans, net increase
    
    
    (12,428,832
    )
    
    
    (16,290,696
    )Acquisition of premises and equipment
    
    
    (626,232
    )
    
    
    (616,783
    )Proceeds from sale of bank premises
    
    
    
    
    
    
    2,837,500Other assets
    
    
    (276,354
    )
    
    
    (246,604
    )Net cash used in investing activities
    
    
    (69,631,649
    )
    
    
    (355,086
    )
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For the Six Months Ended June 30,
    
    2005
    
    2004Cash flows from financing activities:Demand and savings deposits, net increase
    
    $
    37,475,539
    
    
    $
    12,222,114Time deposits, net increase
    
    
    2,323,046
    
    
    
    8,503,917Principal payments on notes
    
    
    (1,239
    )
    
    
    (7,435
    )Borrowings from Federal Home Loan Bank
    
    
    177,769
    
    
    
    20,101,113Repayments to Federal Home Loan Bank
    
    
    (75,139
    )
    
    
    (30,089,495
    )Retirement of common stock
    
    
    (107,572
    )
    
    
    (17,881
    )Cash dividends
    
    
    (999,576
    )
    
    
    (833,607
    )Federal funds purchased and securities sold
under agreements to
repurchase, net increase (decrease)
    
    
    43,722,340
    
    
    
    (6,632,507
    )Net cash provided by financing activities
    
    
    82,515,168
    
    
    
    3,246,219Net increase in cash and cash equivalents
    
    
    16,330,217
    
    
    
    4,022,249Cash and cash equivalents, beginning of period
    
    
    32,724,625
    
    
    
    33,861,029Cash and cash equivalents, end of period
    
    $
    49,054,842
    
    
    $
    37,883,278
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For the Six
    
    
    For the Year
    
    
    For the SixMonths Ended
    
    
    Ended December
    
    
    Months EndedJune 30, 2005
    
    
    31, 2004
    
    
    June 30, 2004Balance, beginning of
period
    
    $
    6,569,614
    
    
    $
    6,398,694
    
    
    $
    6,398,694Provision for loan losses
    
    
    (1,513,000
    )
    
    
    448,000
    
    
    
    363,000Recoveries
    
    
    1,117,406
    
    
    
    493,920
    
    
    
    368,489Loans charged off
    
    
    (238,442
    )
    
    
    (771,000
    )
    
    
    (485,458
    )Balance, end of period
    
    $
    5,935,578
    
    
    $
    6,569,614
    
    
    $
    6,644,725
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##### Table of Contents



Less Than Twelve Months
    
    Over Twelve Months
    
    TotalGross
    
    
    
    
    
    Gross
    
    
    
    
    
    GrossUnreal-
    
    
    
    
    
    Unreal-
    
    
    
    
    
    Unreal-Fair Value
    
    ized Loss
    
    Fair Value
    
    ized Loss
    
    Fair Value
    
    ized lossU. S. Treasury
    
    $
    76,348
    
    
    $
    (249
    )
    
    $
    7,941
    
    
    $
    (57
    )
    
    $
    84,289
    
    
    $
    (306
    )U. S. Govt. Agencies
    
    
    74,940
    
    
    
    (514
    )
    
    
    17,599
    
    
    
    (394
    )
    
    
    92,539
    
    
    
    (908
    )States and
political
subdivisions
    
    
    2,981
    
    
    
    (27
    )
    
    
    3,301
    
    
    
    (86
    )
    
    
    6,282
    
    
    
    (113
    )FHLMC preferred
stock
    
    
    
    
    
    
    
    
    
    
    2,141
    
    
    
    (934
    )
    
    
    2,141
    
    
    
    (934
    )Total
    
    $
    154,269
    
    
    $
    (790
    )
    
    $
    30,982
    
    
    $
    (1,471
    )
    
    $
    185,251
    
    
    $
    (2,261
    )
  Page 11




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Page 13




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Forward-Looking Information
  Overview
   For the six months ended June 30,
    
    2005
    
    
    2004Net income per share
    
    $
    0.92
    
    
    $
    0.55Book value per share
    
    $
    16.11
    
    
    $
    14.85Return on average total assets
    
    
    1.63
    %
    
    
    1.04
    %Return on average shareholders equity
    
    
    11.69
    %
    
    
    7.37
    %Allowance for loan losses as a % of loans,
net of unearned discount
    
    
    1.71
    %
    
    
    2.09
    %
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Financial Condition
 Held to Maturity Securities
  June 30,
    
    2005
    
    
    2004Amount
    
    
    %
    
    
    Amount
    
    
    %U. S. Treasury
    
    $
    9,889,402
    
    
    
    62
    %
    
    $States and political
subdivisions
    
    
    6,150,703
    
    
    
    38
    %
    
    
    2,945,427
    
    
    
    100
    %Totals
    
    $
    16,040,105
    
    
    
    100
    %
    
    $
    2,945,427
    
    
    
    100
    %
 Available for Sale Securities
  June 30,
    
    2005
    
    
    2004Amount
    
    
    %
    
    
    Amount
    
    
    %U. S. Treasury
    
    $
    82,372,974
    
    
    
    38
    %
    
    $
    61,754,516
    
    
    
    32
    %U. S. Government
agencies
    
    
    119,583,966
    
    
    
    54
    %
    
    
    117,584,871
    
    
    
    62
    %States and political
subdivisions
    
    
    14,384,780
    
    
    
    7
    %
    
    
    8,372,305
    
    
    
    4
    %Other securities
    
    
    2,957,297
    
    
    
    1
    %
    
    
    3,948,359
    
    
    
    2
    %Totals
    
    $
    219,299,017
    
    
    
    100
    %
    
    $
    191,660,051
    
    
    
    100
    %
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Loans
  Other Real Estate
  Bank Premises and Equipment
  Accrued Interest Receivable
  Other Assets
  Deposits
  Federal Funds Purchased and Securities Sold Under Agreements to Repurchase
  Notes Payable
  Other Liabilities
  Page 16




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Shareholders Equity and Capital Adequacy
  RESULTS OF OPERATIONS
 Net Interest Income
   Six Months Ended June 30, (Inthousands, except percentages)
    
    2005
    
    
    2004Total interest income (1)
    
    $
    15,158
    
    
    $
    11,839Total interest expense
    
    
    3,226
    
    
    
    2,374Net interest earnings
    
    $
    11,932
    
    
    $
    9,465Net yield on interest earning assets (2)
    
    
    4.28
    %
    
    
    3.68
    %
 (1)
    
    All interest earned is reported on a taxable equivalent basis using a tax rate of 34% in
2005 and 2004.(2)
    
    Interest income in 2005 includes $900,000 received in 2005 for prior years. See Note 7. Net
yield would have been 3.96 % without this interest.
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Attributable To:For the Six
    
    
    For the SixMonths
    
    
    MonthsEnded
    
    
    EndedJune 30,
    
    
    June 30,
    
    
    Increase
    
    
    
    
    
    
    
    
    
    
    Rate/2005
    
    
    2004
    
    
    (Decrease)
    
    
    Volume
    
    
    Rate
    
    
    VolumeINTEREST INCOME: (1)Loans (2) (3)
    
    $
    11,081
    
    
    $
    8,164
    
    
    $
    2,917
    
    
    $
    723
    
    
    $
    2,016
    
    
    $
    178Federal funds sold
    
    
    173
    
    
    
    21
    
    
    
    152
    
    
    
    284
    
    
    
    (10
    )
    
    
    (122
    )Held to maturity:Taxable
    
    
    14
    
    
    
    19
    
    
    
    (5
    )
    
    
    6
    
    
    
    (9
    )
    
    
    (2
    )Non-taxable
    
    
    228
    
    
    
    122
    
    
    
    106
    
    
    
    126
    
    
    
    (10
    )
    
    
    (10
    )Available for sale:Taxable
    
    
    3,135
    
    
    
    3,184
    
    
    
    (49
    )
    
    
    (73
    )
    
    
    25
    
    
    
    (1
    )Non-taxable
    
    
    392
    
    
    
    205
    
    
    
    187
    
    
    
    151
    
    
    
    21
    
    
    
    15Other
    
    
    135
    
    
    
    124
    
    
    
    11
    
    
    
    (30
    )
    
    
    54
    
    
    
    (13
    )Total
    
    $
    15,158
    
    
    $
    11,839
    
    
    $
    3,319
    
    
    $
    1,187
    
    
    $
    2,087
    
    
    $
    45INTEREST EXPENSE:Savings and
demand,
interest
bearing
    
    $
    982
    
    
    $
    663
    
    
    $
    319
    
    
    $
    (51
    )
    
    $
    400
    
    
    $
    (30
    )Time deposits
    
    
    1,273
    
    
    
    1,003
    
    
    
    270
    
    
    
    (90
    )
    
    
    395
    
    
    
    (35
    )Federal funds
purchased and
securities sold
under agreements to
repurchase
    
    
    750
    
    
    
    482
    
    
    
    268
    
    
    
    107
    
    
    
    132
    
    
    
    29Borrowings from FHLB
    
    
    221
    
    
    
    226
    
    
    
    (5
    )
    
    
    (42
    )
    
    
    45
    
    
    
    (8
    )Total
    
    $
    3,226
    
    
    $
    2,374
    
    
    $
    852
    
    
    $
    (76
    )
    
    $
    972
    
    
    $
    (44
    )
 (1)
    
    All interest earned is reported on a taxable equivalent basis using a tax rate of 34% in 2005
and 2004.(2)
    
    Loan fees are included in these figures.(3)
    
    Includes nonaccrual loans.
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Provision for Loan Losses
 .
 Service Charges on Deposit Accounts
  Gain on Sale of Bank Premises
  Loss on Sale of Securities
  Other Expense
  Extraordinary Gain
  LIQUIDITY
  Page 19




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Item 4: Controls and Procedures
   
 
 
   
   Page 20




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Exhibit 23:
    
    Consent of Independent Registered Public Accounting FirmExhibit 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
   Page 21




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Date: August 10, 2005By:
    
    /s/ Chevis C. SwetmanChevis C. SwetmanChairman, President and Chief Executive OfficerDate: August 10, 2005By:
    
    /s/ Lauri A. WoodLauri A. WoodChief Financial Officer and Controller(principal financial and accounting officer)
 Page 22