EDGAR 10-K Filing

Company CIK: 770460
Filing Year: 2022
Filename: 770460_10-K_2022_0001437749-22-007177.json

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ITEM 1. BUSINESS
ITEM 1 - DESCRIPTION OF BUSINESS
BACKGROUND AND CURRENT OPERATIONS
General
Peoples Financial Corporation (the "Company") is a corporation that was organized as a one bank holding company in 1985. The Company is headquartered in Biloxi, Mississippi. At December 31, 2021, the Company operated in the state of Mississippi through its wholly owned subsidiary, The Peoples Bank, Biloxi, Mississippi (the “Bank”). The Company is engaged, through this subsidiary, in the banking business. The Bank is the Company's principal asset and primary source of revenue.
The main office, operations center and asset management and trust services of the Bank are located in downtown Biloxi, MS. At December 31, 2021, the Bank also had 17 branches located throughout Harrison, Hancock, Jackson and Stone Counties. The Bank has automated teller machines ("ATM") at its main office, all branch locations and at numerous non-proprietary locations.
The Bank Subsidiary
The Company’s wholly-owned bank subsidiary was originally chartered in 1896 in Biloxi, Mississippi, as The Peoples Bank of Biloxi. The Bank is a state chartered bank whose deposits are insured under the Federal Deposit Insurance Act. The Bank is not a member of the Federal Reserve System. The legal name of the Bank was changed to The Peoples Bank, Biloxi, Mississippi, during 1991.
Most of the Bank's business originates from Harrison, Hancock, Stone and Jackson Counties in Mississippi; however, some business is obtained from other counties in southern Mississippi, southern Louisiana and southern Alabama.
Nonbank Subsidiary
In 1985, PFC Service Corp. ("PFC") was chartered and began operations as the second wholly-owned subsidiary of Peoples Financial Corporation. The purpose of PFC was principally the leasing of automobiles and equipment. PFC is inactive at this time.
Products And Services
The Bank currently offers a variety of services to individuals and small to middle market businesses within its trade area. The Company’s trade area is defined as those portions of Mississippi, Louisiana and Alabama which are within a fifty mile radius of the Waveland, Wiggins and Gautier branches, the Bank’s three most outlying locations.
The Bank’s primary lending focus is to offer business, commercial, real estate, construction, personal and installment loans, with an emphasis on commercial lending. The Bank’s exposure for out of area, residential and land development, construction and commercial real estate loans as well as concentrations in the hotel/motel and gaming industries, are monitored by the Company. Each loan officer has board approved lending limits on the principal amount of secured and unsecured loans that can be approved for a single borrower without prior approval of the senior credit committee. All loans, however, must meet the credit underwriting standards and loan policies of the Bank.
Deposit services include interest bearing and non-interest bearing checking accounts, savings accounts, certificates of deposit, and IRA accounts. The Bank generally provides depository accounts to individuals; small and middle market businesses; and state, county and local government entities in its trade area at interest rates consistent with market conditions.
The Bank's Asset Management and Trust Services Department (“Trust Department”) offers personal trust, agencies and estate services, including living and testamentary trusts, executorships, guardianships, and conservatorships. Benefit accounts maintained by the Trust Department primarily include self-directed individual retirement accounts. Escrow management, stock transfer and bond paying agency accounts are available to corporate customers.
The Bank also offers a variety of other services including safe deposit box rental, wire transfer services, night drop facilities, collection services, cash management and internet banking. The Bank has 28 ATMs at its branch locations and other off-site, non-proprietary locations, providing bank customers access to their depository accounts. The Bank is a member of the PULSE network.
Customers
The Bank has a large number of customers acquired over a period of many years and is not dependent upon a single customer or upon a few customers. The Bank also provides services to customers representing a wide variety of industries including seafood, retail, hospitality, hotel/motel, gaming and construction. While the Company has pursued external growth strategies on a limited basis, its primary focus has been on internal growth by the Bank through the establishment of new branch locations and an emphasis on strong customer relationships.
Employees
At December 31, 2021, the Bank employed 134 total employees, with 130 full-time employees and 4 part-time employees. The Company has no employees who are not employees of the Bank. Through the Bank, employees receive salaries and benefits, which include 401(k) and ESOP plans, a cafeteria plan, and life, health and disability insurance. The Company considers its relationship with its employees to be good.
Competition
The Bank is in direct competition with numerous local and regional commercial banks as well as other non-bank institutions. Interest rates paid and charged on deposits and loans are the primary competitive factors within the Bank’s trade area. The Bank also competes for deposits and loans with insurance companies, finance companies, brokerage houses and credit unions. The principal competitive factors in the markets for deposits and loans are interest rates paid and charged. The Bank also competes through efficiency, quality of customer service, the range of services and products it provides, the convenience of its branch and ATM locations and the accessibility of its staff. The Bank intends to continue its strategy of being a local, community bank offering traditional bank services and providing quality service in its local trade area.
Miscellaneous
The Bank holds no patents, licenses (other than licenses required to be obtained from appropriate bank regulatory agencies), franchises or concessions.
The Bank has not engaged in any research activities relating to the development of new services or the improvement of existing services except in the normal course of its business activities. The Bank presently has no plans for any new line of business requiring the investment of a material amount of total assets.
Available Information
The Company maintains an internet website at www.thepeoples.com. The Company’s Annual Report to Shareholders is available on the Company’s website. Also available through the website is a link to the Company’s filings with the Securities and Exchange Commission (“SEC”). Information on the Company’s website is not incorporated into this Annual Report on Form 10-K or the Company’s other securities filings and is not part of them.
REGULATION AND SUPERVISION
General
As a bank holding company under the Bank Holding Company Act of 1956, the Company is subject to regulation, supervision and examination by the Board of Governors of the Federal Reserve System and the Federal Reserve Bank of Atlanta (the “Federal Reserve”). The Company is required to file semi-annual reports with the Federal Reserve and such other information as the Federal Reserve may require. The Company is also required to file certain reports with, and otherwise comply with the rules and regulations of, the SEC under the federal securities laws.
The Bank is incorporated under the laws of the State of Mississippi and is subject to the applicable provisions of Mississippi banking laws and the laws of the various states in which it operates, as well as federal law. The Bank is subject to the supervision of the Mississippi Department of Banking and Consumer Finance (the “MDBCF”) and to regular examinations by that department. Deposits in the Bank are insured by the Federal Deposit Insurance Corporation (the “FDIC”), and the Bank is thus subject to the provisions of the Federal Deposit Insurance Act and to supervision and examination by the FDIC. State and federal laws also govern the activities in which the Bank engages, the investments that it makes and the aggregate amount of loans that may be granted to one borrower. The MDBCF and the FDIC also regulate the branching authority of the Bank. In addition, various consumer and compliance laws and regulations affect the Bank’s operations.
The earnings of the Company’s subsidiaries, and therefore the earnings of the Company, are affected by general economic conditions, management policies, changes in state and federal legislation and actions of various regulatory authorities, including those referred to above. The following discussion summarizes some of the significant federal and state laws to which the Company and the Bank are subject. This discussion is a brief summary of the regulatory environment in which the Company and its subsidiaries operate and is not intended as a complete discussion of all statutes and regulations affecting such operations. Regulation of financial institutions is intended primarily for the protection of depositors, the deposit insurance fund and the banking system, and generally is not intended for the protection of shareholders.
The statutes, regulations and policies that govern the operations of the Company and the Bank are under continuous review and are subject to amendment from time to time by Congress, the Mississippi State Legislature and federal and state regulatory agencies. Any such future statutory or regulatory changes could adversely affect the Company’s operations and financial condition.
Regulation of the Bank
The Bank is subject to regulation and supervision by the MDBCF and by the FDIC, which regulation and supervision extends to all aspects of its operations, including but not limited to requirements concerning an allowance for loan losses, lending and mortgage operations, interest rates received on loans and paid on deposits, the payment of dividends to the Company, loans to officers and directors, mergers and acquisitions, capital adequacy, and the opening and closing of branches.
The Bank is subject to periodic examinations by the MDBCF and by the FDIC. In these examinations, the examiners assess compliance with state and federal banking regulations and the safety and soundness standards in such matters as loan underwriting and documentation, asset quality, earnings standards, internal controls and audit systems, interest rate risk exposure, and employee compensation and benefits.
The MDBCF and the FDIC have enforcement responsibility over the Bank and the authority to bring actions against the Bank and certain institution-affiliated parties, including officers, directors, and employees, for violations of laws or regulations and for engaging in unsafe and unsound practices. Formal enforcement actions include the issuance of a capital directive or cease and desist order, civil money penalties, removal of officers and/or directors, and receivership or conservatorship of the institution.
Insurance of Deposit Accounts
The FDIC insures deposits at federally insured depository institutions like the Bank. Deposit accounts in the Bank are insured by the FDIC’s Deposit Insurance Fund generally up to a maximum of $250,000 per separately insured depositor and up to a maximum of $250,000 for self-directed retirement accounts. The FDIC charges banks deposit insurance assessments to maintain the Deposit Insurance Fund. Under the FDIC’s risk-based assessment system, banks that are deemed to be less risky pay lower assessments. Assessments for institutions with assets of less than $10 billion of assets, such as the Bank, are based on financial measures and supervisory ratings derived from statistical modeling estimating the probability of failure of an institution’s failure within three years.
The FDIC’s currently effective deposit insurance assessment range for most insured depository institutions is 1.5 basis points to 30 basis points of total assets less tangible equity. The FDIC has the authority to increase insurance assessments and to impose special assessments. Any significant increases or special assessments could have an adverse effect on the results of operations of the Bank. We cannot predict what the FDIC’s deposit insurance assessment rates will be in the future.
Insurance of deposits may be terminated by the FDIC upon a finding that an institution has engaged in unsafe or unsound practices, is in an unsafe or unsound condition to continue operations, or has violated any applicable law, regulation, rule, order or condition imposed by the FDIC. We do not know of any practice, condition or violation that may lead to termination of the Bank’s deposit insurance.
Regulatory Capital Requirements
The FDIC has implemented capital adequacy requirements for state-chartered banks that are not members of the Federal Reserve System. Effective January 1, 2015, the federal banking agencies’ capital rules were substantially revised to conform to the international regulatory standards agreed to by the Basel Committee on Banking Supervision in the accord often referred to as “Basel III.” The revised regulatory capital rules apply to all depository institutions as well as to all top-tier bank holding companies that are not subject to the Federal Reserve’s Small Bank Holding Company Policy Statement, which the Company is not. The capital requirements are quantitative measures established by regulation that require the Bank to maintain minimum amounts and ratios of capital. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by bank regulators that, if undertaken, could have a direct material effect on the Company’s financial statements.
The currently effective capital rule requires the maintenance of “common equity Tier 1” capital, Tier 1 capital and Total capital to risk-weighted assets of at least 4.5%, 6% and 8%, respectively. The rule also establishes a minimum leverage ratio of at least 4% Tier 1 capital to average consolidated assets. In addition to the above minimum requirements, the capital rule limits capital distributions and certain discretionary bonus payments if a banking organization does not hold a “capital conservation buffer” consisting of 2.5% of common equity Tier 1 capital to risk-weighted assets above the amount necessary to meet its minimum risk-based capital requirements. The capital conservation buffer requirement effectively increases the minimum required risk-based capital ratios to 7% for common equity Tier 1 capital, 8.5% for Tier 1 capital and 10.5% for Total capital.
In determining the amount of risk-weighted assets for purposes of calculating risk-based capital ratios, a bank’s assets, including certain off-balance sheet assets (e.g., recourse obligations, direct credit substitutes and residual interests), are multiplied by a risk weight factor assigned by the capital regulations based on the risk deemed inherent in the type of asset. Higher levels of capital are required for asset categories believed to present greater risk. For example, a risk weight of 0% is assigned to cash and U.S. government securities, a risk weight of 50% is generally assigned to prudently underwritten first lien one- to four-family residential mortgages, a risk weight of 100% is assigned to commercial and consumer loans, a risk weight of 150% is assigned to non-residential mortgage loans that are 90 days past due or otherwise on non-accrual status, and a risk weight of between 0% to 600% is assigned to permissible equity interests, depending on certain specified factors.
Under federal statute, the federal bank regulatory agencies are required to take “prompt corrective action” with respect to institutions that do not meet specified minimum capital requirements. For these purposes, the statute establishes five capital categories: well-capitalized, adequately capitalized, undercapitalized, significantly undercapitalized and critically undercapitalized. Under the prompt corrective action regulations, in order to be considered well-capitalized, a bank must have a ratio of common equity Tier 1 capital to risk-weighted assets of 6.5%, a ratio of Tier 1 capital to risk-weighted assets of 8%, a ratio of total capital to risk-weighted assets of 10%, and a leverage ratio of 5%. In order to be considered adequately capitalized, a bank must have the minimum capital ratios required by the regulatory capital rule described above. Institutions with lower capital ratios are assigned to lower capital categories. Based on safety and soundness concerns, a bank may be assigned to a lower capital category than would otherwise apply based on its capital ratios. A bank that is not well-capitalized is subject to certain restrictions on brokered deposits and interest rates on deposits. A bank that is not at least adequately capitalized is subject to numerous additional restrictions, and a guaranty by its holding company is required. A bank with a ratio of tangible equity to total assets of 2.0% or less is subject to the appointment of the FDIC as receiver if its capital level does not improve within 90 days.
As of December 31, 2021, the Bank was in compliance with all regulatory capital requirements and qualified as “well-capitalized” under the prompt corrective action regulations.
The Economic Growth, Regulatory Relief and Consumer Protection Act, enacted in 2018, introduced an optional simplified measure of capital adequacy for qualifying community banking organizations with total consolidated assets of less than $10 billion by instructing the federal banking regulators to establish a single “Community Bank Leverage Ratio” (“CBLR”) of tangible equity capital divided by average consolidated assets of between 8 and 10 percent in satisfaction of any other leverage or capital requirements to which such organizations are subject.
The federal banking regulators jointly issued a final rule, effective January 1, 2020, which provided that a community banking organization with less than $10 billion in assets may elect to use the CBLR capital framework so long as the bank has a Tier 1 leverage ratio of greater than 9% and limited amounts of off-balance-sheet exposures and trading assets and liabilities. A qualifying banking organization that elects to use the CBLR will be deemed to satisfy the generally applicable leverage and risk-based regulatory capital requirements, will be considered to have met the well-capitalized ratio requirements under the prompt corrective action regulations, and will not be required to report or calculate risk-based capital. As of December 31, 2021, the Bank qualified to use the CBLR; however, it has elected not to opt into the CBLR framework.
Transactions with Related Parties
The Bank is subject to the Federal Reserve’s Regulation W, which implements the restrictions of Sections 23A and 23B of the Federal Reserve Act on transactions between a bank and its “affiliates.” The “affiliates” of the Bank, as defined in Regulation W, are the Company and its non-bank subsidiary. Section 23A and the implementing provisions of Regulation W generally place limits on the amount of a bank’s loans or extensions of credit to, investments in, or certain other transactions with its affiliates, and on the amount of advances to third parties collateralized by the securities or obligations of affiliates. Section 23B and Regulation W generally require a bank’s transactions with affiliates to be on terms substantially the same, or at least as favorable to the bank, as those prevailing at the time for comparable transactions with non-affiliated companies.
The Bank is also subject to certain restrictions on extensions of credit to executive officers, directors, principal shareholders and the related interests of those persons. Such extensions of credit must be made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with third parties and must not involve more than the normal risk of repayment or present other unfavorable features.
Community Reinvestment Act and Fair Lending Laws
All insured depository institutions have a responsibility under the Community Reinvestment Act of 1977 (the “CRA”) and the federal regulations thereunder to help meet the credit needs of their communities, including low- and moderate-income neighborhoods. In connection with its examination of the Bank, the FDIC is required to assess the Bank’s record of meeting the credit needs of its entire community. The CRA requires the Bank’s record of compliance with the CRA to be taken into account in the evaluation of applications by the Bank or the Company for approval of an expansionary proposal, such as a merger or other acquisition of another bank or the opening of a new branch office. The Bank received a “satisfactory” rating in its most recent CRA assessment by the FDIC.
In addition, the Equal Credit Opportunity Act and the Fair Housing Act prohibit lenders from discriminating in their lending practices on the basis of characteristics specified in those statutes. A failure to comply with the Equal Credit Opportunity Act or the Fair Housing Act, or the regulations thereunder, could result in enforcement actions by the FDIC or the Department of Justice.
Consumer Privacy and Other Consumer Protection Laws
The Bank is required under federal privacy statutes and regulations to maintain the privacy of its customers’ non-public, personal information. Such privacy requirements direct financial institutions to:
• provide notice to customers regarding privacy policies and practices;
• inform customers regarding the conditions under which their non-public personal information may be disclosed to non-affiliated third parties; and
• give customers an option to prevent disclosure of such information to non-affiliated third parties.
Under the Fair and Accurate Credit Transactions Act of 2003, the Bank’s customers may also opt out of information sharing between and among the Bank and its affiliates.
The Bank’s lending and deposit-taking operations are subject to numerous other federal and state laws designed to protect consumers. The Consumer Financial Protection Bureau (“CFPB”) issues regulations and standards under the federal consumer protection laws, which include, among others, the Home Mortgage Disclosure Act, the Real Estate Settlement Procedures Act, the Truth in Lending Act, the Electronic Fund Transfer Act, the Truth in Savings Act, the Fair Credit Reporting Act, the National Flood Insurance Act, the Flood Protection Act, and the Dodd-Frank Wall Street Reform and Consumer Protection Act’s prohibition on unfair, deceptive or abusive acts or practices. The Bank’s consumer financial products and services are subject to examination by the FDIC for compliance with these and other CFPB regulations and standards.
Bank Secrecy Act / Anti-Money Laundering Laws
The Bank is subject to the Bank Secrecy Act and other anti-money laundering laws and regulations, including the USA PATRIOT Act of 2001. These laws and regulations require each financial institution to implement policies, procedures, and controls to detect, prevent, and report money laundering and terrorist financing and to verify the identity of their customers. Violations of these requirements can result in substantial civil and criminal sanctions. In addition, federal banking regulators are required, when reviewing bank holding company acquisition and bank merger applications, to take into account the effectiveness of the anti-money laundering activities of the applicants.
Incentive Compensation
The federal banking agencies have issued guidance on incentive compensation policies intended to ensure that the incentive compensation policies of banking organizations do not undermine the safety and soundness of such organizations by encouraging excessive risk-taking. The guidance, which covers all employees that have the ability to materially affect the risk profile of an organization, either individually or as part of a group, is based upon the key principles that a banking organization’s incentive compensation arrangements should (i) provide incentives that do not encourage risk-taking beyond the organization’s ability to effectively identify and manage risks, (ii) be compatible with effective internal controls and risk management, and (iii) be supported by strong corporate governance, including active and effective oversight by the organization’s board of directors.
The federal banking agencies will review, as part of their examination process, the incentive compensation arrangements of depository institutions and their holding companies. The findings of the supervisory review will be included in reports of examination. Any deficiencies in compensation practices that are identified may be incorporated into the organization’s supervisory ratings, which can affect its ability to make acquisitions or perform other actions. The guidance also provides that enforcement actions may be taken against a banking organization if its incentive compensation arrangements or related risk-management control or governance processes pose a risk to the organization’s safety and soundness and the organization is not taking prompt and effective measures to correct the deficiencies.
The scope and content of the banking regulators’ policies on executive compensation are continuing to develop and are likely to continue evolving in the near future. It cannot be determined at this time whether compliance with such policies will adversely affect the ability of the Bank and the Company to hire, retain and motivate their key employees.
Regulation of the Company
As a bank holding company under the Bank Holding Company Act, the Company is subject to regulation, supervision, and examination by the Federal Reserve. The Company is required to file semi-annual reports with the Federal Reserve and provide such additional information as the Federal Reserve may require. The Federal Reserve has extensive enforcement authority over bank holding companies, including, among other things, the ability to assess civil money penalties, to issue cease and desist or removal orders and to require that a holding company divest subsidiaries (including its bank subsidiaries). In general, enforcement actions may be initiated for violations of law and regulations and unsafe or unsound practices.
Regulatory Capital Requirements
The federal regulatory capital rules apply to all depository institutions as well as to bank holding companies with consolidated assets of $3 billion or more. The regulatory capital requirements generally do not apply on a consolidated basis to a bank holding company that is a small bank holding company, which is a holding company with total consolidated assets of less than $3 billion, unless it: (1) is engaged in significant nonbanking activities either directly or through a nonbank subsidiary; (2) conducts significant off-balance sheet activities (including securitization and asset management or administration) either directly or through a nonbank subsidiary; or (3) has a material amount of debt or equity securities outstanding (other than trust preferred securities) that are registered with the SEC. Since the Company’s common stock is registered with the SEC, it is not a small bank holding company, and the federal regulatory capital rules apply to the Company. The Federal Reserve may apply the regulatory capital standards at its discretion to any bank holding company, regardless of asset size, if such action is warranted for supervisory purposes.
Acquisitions
Under the Bank Holding Company Act, the Company is required to obtain the prior approval of the Federal Reserve to acquire ownership or control of more than 5% of the voting shares or substantially all of the assets of any bank holding company or bank or to merge or consolidate with another bank holding company. Federal law authorizes bank holding companies to make interstate acquisitions of banks without geographic limitation.
Permissible Activities
In general, the Bank Holding Company Act limits the activities of a bank holding company to those of banking, managing or controlling banks, or any other activity that the Federal Reserve has determined to be so closely related to banking or to managing or controlling banks that an exception is allowed for those activities. Bank holding companies that qualify and elect to be treated as “financial holding companies” may engage in a broad range of additional activities that are (i) financial in nature or incidental to such financial activities or (ii) complementary to a financial activity and do not pose a substantial risk to the safety and soundness of depository institutions or the financial system generally. These activities include securities underwriting and dealing, insurance agency and underwriting, and making merchant banking investments. The Company has not made an election to be treated as a financial holding company.
Source of Strength. Under the Bank Holding Company Act, a bank holding company is required to act as a source of financial and managerial strength for each of its subsidiary banks and to commit resources to support each subsidiary bank. Under this source of strength doctrine, the Federal Reserve may require a bank holding company to make capital injections into a troubled subsidiary bank. The Federal Reserve may charge the bank holding company with engaging in unsafe and unsound practices if it fails to commit resources to such a subsidiary bank or if it undertakes actions that the Federal Reserve believes might jeopardize its ability to commit resources to such subsidiary bank. A capital injection may be required at times when the holding company does not have the resources to provide it.
In addition, any loans by a bank holding company to a subsidiary bank are subordinate in right of payment to deposits and to certain other indebtedness of such subsidiary bank. In the event of a bank holding company’s bankruptcy, the bankruptcy trustee will assume any commitment by the holding company to a federal bank regulatory agency to maintain the capital of a subsidiary bank. Moreover, the bankruptcy law provides that claims based on any such commitment will be entitled to a priority of payment over the claims of the institution’s general unsecured creditors, including the holders of its note obligations.
Dividends
The Company is a legal entity that is separate and distinct from its subsidiaries. The primary source of funds for dividends paid to the Company’s shareholders is dividends paid to the Company by the Bank.
Various federal and state laws limit the amount of dividends that the Bank may pay to the Company without regulatory approval. Under Mississippi law, the Bank must obtain the non-objection of the Commissioner of the MDBCF prior to paying any dividend on the Bank’s common stock. In addition, the Bank may not pay any dividends if, after paying the dividend, it would be undercapitalized under applicable capital requirements. Furthermore, if the Bank does not maintain the capital conservation buffer required by applicable regulatory capital rules, its ability to pay dividends to the Company would be limited. The FDIC also has the authority to prohibit the Bank from engaging in business practices that the FDIC considers to be unsafe or unsound, which, depending on the financial condition of the Bank, could include the payment of dividends.
The Company is subject to various restrictions relating to the payment of dividends. The Federal Reserve has issued guidance indicating that bank holding companies should generally pay dividends only if the company’s net income available to common shareholders over the preceding year has been sufficient to fully fund the dividends, and the prospective rate of earnings retention appears consistent with the company’s capital needs, asset quality and overall financial condition. The Federal Reserve’s guidance also states that a bank holding company should inform and consult with its regional Federal Reserve Bank in advance of declaring or paying a dividend that exceeds earnings for the period for which the dividend is being paid or that could result in a material adverse change to the organization’s capital structure. The Federal Reserve has indicated that, in some instances, it may be appropriate for a bank holding company to eliminate its dividends.
Federal Securities Law
The Company’s common stock is registered under Section 12(g) of the Securities Exchange Act of 1934, as amended (“Exchange Act”), and the Company is subject to the periodic reporting and other requirements of the SEC under Section 12(g) of the Exchange Act and SEC regulations. The common stock of the Company is listed on the OTCQX Best Market, such listing subjecting the Company to compliance with the market’s requirements with respect to reporting and other rules and regulations.
SUPPLEMENTAL STATISTICAL INFORMATION
The following pages present certain statistical information regarding the Company. This information is not audited and should be read in conjunction with the Company's Consolidated Financial Statements and Notes to Consolidated Financial Statements found in Item 8 of this Annual Report on Form 10-K.
Distribution of Assets, Liabilities and Shareholders' Equity and Interest Rates and Differentials
Net Interest Income, the difference between Interest Income and Interest Expense, is the most significant component of the Company's earnings. For interest analytical purposes, Management adjusts Net Interest Income to a "taxable equivalent" basis using a Federal Income Tax rate of 21% in 2021, 2020 and 2019 on tax-exempt items (primarily interest on municipal securities).
Another significant statistic in the analysis of Net Interest Income is the net yield on earning assets. The net yield is the difference between the rate of interest earned on earning assets and the effective rate paid for all funds, non-interest bearing as well as interest bearing. Since a portion of the Bank's deposits do not bear interest, such as demand deposits, the rate paid for all funds is lower than the rate on interest bearing liabilities alone.
Recognizing the importance of interest differential to total earnings, management places great emphasis on managing interest rate spreads. Although interest differential is affected by national, regional and local economic conditions, including the level of credit demand and interest rates, there are significant opportunities to influence interest differential through appropriate loan and investment policies which are designed to maximize the differential while maintaining sufficient liquidity and availability of incremental funds for purposes of meeting existing commitments and investment in lending and investment opportunities that may arise.
The information included on pages 21 and 22 presents the change in interest income and interest expense along with the reason(s) for these changes. The change attributable to volume is computed as the change in volume times the old rate. The change attributable to rate is computed as the change in rate times the old volume. The change in rate/volume is computed as the change in rate times the change in volume.
Credit Risk Management and Loan Loss Experience
In the normal course of business, the Bank assumes risks in extending credit. The Bank manages these risks through its lending policies, credit underwriting analysis, appraisal requirements, concentration and exposure limits, loan review procedures and the diversification of its loan portfolio. Although it is not possible to predict loan losses with complete accuracy, Management constantly reviews the characteristics of the loan portfolio to determine its overall risk profile and quality.
Constant attention to the quality of the loan portfolio is achieved by the loan review process. Throughout this ongoing process, Management is advised of the condition of individual loans and of the quality profile of the entire loan portfolio. Any loan or portion thereof which is classified "loss" by regulatory examiners or which is determined by Management to be uncollectible because of such factors as the borrower's failure to pay interest or principal, the borrower's financial condition, economic conditions in the borrower's industry or the inadequacy of underlying collateral, is charged-off.
Provisions are charged to operating expense based upon historical loss experience, and additional amounts are provided when, in the opinion of Management, such provisions are not adequate based upon the current factors affecting loan collectability.
The allocation of the allowance for loan losses by loan category is based on the factors mentioned in the preceding paragraphs. Accordingly, since all of these factors are subject to change, the allocation is not necessarily indicative of the breakdown of future losses. In June 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-03, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which replaces the current incurred loss impairment methodology with a methodology that reflects all current expected credit losses (“CECL”) and requires consideration of a broader range of reasonable and supportable information to determine credit loss estimates. ASU 2016-13 was originally to become effective for the Company for interim and annual periods beginning after December 15, 2019. In November 2019, the FASB issued ASU 2019-10, Financial Instruments - Credit Losses (Topic 326), Derivatives and Hedging (Topic 815) and Leases (Topic 842): Effective Dates. ASU 2019-10 amends the effective date for certain entities, including the Company, for ASU 2016-13, which is now effective for the Company in fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Adoption of this ASU could materially affect its allowance for loan loss methodology, including the calculation of its provision for loan losses. For additional details regarding the pending adoption of this accounting pronouncement, see Note A - Business and Summary of Significant Accounting Policies included in Part II. Item 8. - Financial Statements and Supplementary Data of this report.
Further information concerning the provision for loan losses and the allowance for loan losses is presented in "Management's Discussion and Analysis" in Item 7 of this Annual Report on Form 10-K and in “Note A - Business and Summary of Significant Accounting Policies” to the 2021 Consolidated Financial Statements in Item 8 of this Annual Report on Form 10-K.
Return on Equity and Assets
The Company’s results and key ratios for 2017 - 2021 are summarized in the "Selected Financial Data" in Item 6 and "Management's Discussion and Analysis" in Item 7 of this Annual Report on Form 10-K.
Dividends
The Company paid a cash dividend of $0.16, $.02 and $.03 per share for the years ended December 31, 2021, 2020 and 2019, respectively.
Distribution of Average Assets, Liabilities and Shareholders’ Equity (1) (In thousands)
For the Years Ended December 31,
ASSETS:
Cash and due from banks
$ 28,763
$ 26,975
$ 21,571
Available for sale securities:
Taxable securities
285,479
193,627
206,231
Non-taxable securities
5,802
6,426
8,953
Other securities
2,151
2,153
2,096
Held to maturity securities:
Taxable securities
66,216
42,648
37,987
Non-taxable securities
32,616
15,985
16,460
Other investments
2,404
2,593
2,644
Net loans (2)
259,071
276,865
262,259
Balances due from depository institutions
64,415
56,103
15,404
Other assets
41,471
45,004
49,314
TOTAL ASSETS
$ 788,388
$ 668,379
$ 622,919
LIABILITIES AND SHAREHOLDERS' EQUITY:
Non-interest bearing deposits
$ 192,071
$ 151,729
$ 121,829
Interest bearing deposits
480,549
397,071
378,758
Total deposits
672,620
548,800
500,587
Other liabilities
23,208
22,545
30,778
Total liabilities
695,828
571,345
531,365
Shareholders' equity
92,560
97,034
91,554
TOTAL LIABILITIES AND SHARE-
HOLDERS' EQUITY
$ 788,388
$ 668,379
$ 622,919
(1) All averages are computed on a daily basis.
(2) Gross loans and discounts, net of unearned income and allowance for loan losses.
Average (1) Amount Outstanding for Major Categories of Interest Earning Assets
And Interest Bearing Liabilities (In thousands)
For the Years Ended December 31,
INTEREST EARNING ASSETS:
Loans (2)
$ 263,545
$ 281,225
$ 267,263
Balances due from depository institutions
64,415
56,103
15,404
Available for sale securities:
Taxable securities
285,479
193,627
206,231
Non-taxable securities
5,802
6,426
8,953
Other securities
2,151
2,153
2,096
Held to maturity securities:
Taxable securities
66,216
42,468
37,987
Non-taxable securities
32,616
15,985
16,460
TOTAL INTEREST EARNING ASSETS
$ 720,224
$ 597,987
$ 554,394
INTEREST BEARING LIABILITIES:
Savings and negotiable interest bearing deposits
$ 407,150
$ 324,289
$ 291,152
Time deposits
73,399
72,782
87,606
Borrowings from FHLB
1,219
1,660
10,242
TOTAL INTEREST BEARING LIABILITIES
$ 481,768
$ 398,731
$ 389,000
(1) All averages are computed on a daily basis.
(2) Net of unearned income. Includes nonaccrual loans
Interest Earned or Paid on Major Categories of Interest Earning Assets
And Interest Bearing Liabilities (In thousands)
For the Years Ended December 31,
INTEREST EARNED ON:
Loans
$ 12,592
$ 13,076
$ 13,812
Balances due from depository institutions
Available for sale securities:
Taxable securities
5,004
4,140
4,788
Non-taxable securities
Other securities
Held to maturity securities:
Taxable securities
1,702
1,235
1,141
Non-taxable securities
TOTAL INTEREST EARNED (1)
$ 20,531
$ 19,470
$ 21,131
INTEREST PAID ON:
Savings and negotiable interest bearing deposits
$
$
$ 1,662
Time deposits
1,336
Other borrowed funds
TOTAL INTEREST PAID
$
$ 1,581
$ 3,246
(1) All interest earned is reported on a taxable equivalent basis using a tax rate of 21% for 2021, 2020 and 2019. See disclosure of non-GAAP financial measures on pages 32 and 33.
Average Interest Rate Earned or Paid for Major Categories of
Interest Earning Assets And Interest Bearing Liabilities
For the Years Ended December 31,
AVERAGE RATE EARNED ON:
Loans
4.78 %
4.65 %
5.17 %
Balances due from depository institutions
.15 %
.40 %
2.25 %
Available for sale securities:
Taxable securities
1.75 %
2.14 %
2.32 %
Non-taxable securities
3.07 %
3.74 %
4.71 %
Other securities
.37 %
1.25 %
3.39 %
Held to maturity securities:
Taxable securities
2.57 %
2.90 %
3.00 %
Non-taxable securities
2.92 %
3.28 %
3.35 %
TOTAL (weighted average rate)(1)
2.85 %
3.25 %
3.81 %
AVERAGE RATE PAID ON:
Savings and negotiable interest bearing deposits
.13 %
.26 %
.57 %
Time deposits
.37 %
.98 %
1.53 %
Other borrowed funds
1.97 %
1.93 %
2.42 %
TOTAL (weighted average rate)
.17 %
.40 %
.83 %
(1) All interest earned is reported on a taxable equivalent basis using a tax rate of 21% for 2021, 2020 and 2019. See disclosure of non-GAAP financial measures on pages 32 and 33.
Net Interest Earnings and Net Yield on Interest Earning Assets
(In thousands, except percentages)
For the Years Ended December 31,
Total interest income (1)
$ 20,531
$ 19,470
$ 21,131
Total interest expense
1,581
3,246
Net interest earnings
$ 19,701
$ 17,889
$ 17,885
Net yield on interest earning assets
2.74 %
2.99 %
3.23 %
(1) All interest earned is reported on a taxable equivalent basis using a tax rate of 21% for 2021, 2020 and 2019. See disclosure of non-GAAP financial measures on pages 32 and 33.
Analysis of Changes in Interest Income and Interest Expense
(In thousands)
Increase
For the Years Ended December 31,
(Decrease)
Volume
Rate
Rate/Volume
INTEREST EARNED ON:
Loans (1)
$ 12,592
$ 13,076
$ (484 )
$ (822 )
$
$ (23 )
Balances due from depository institutions
(132 )
(144 )
(22 )
Available for sale securities:
Taxable securities
5,004
4,140
1,964
(746 )
(354 )
Non-taxable securities
(62 )
(23 )
(43 )
Other securities
(19 )
(19 )
Held to maturity securities:
Taxable securities
1,702
1,235
(139 )
(76 )
Non-taxable securities
(58 )
(61 )
TOTAL INTEREST EARNED (2)
$ 20,531
$ 19,470
$ 1,061
$ 2,381
$ (788 )
$ (532 )
INTEREST PAID ON:
Savings and negotiable interest bearing deposits
$
$
$ (308 )
$
$ (415 )
$ (106 )
Time deposits
(435 )
(437 )
(4 )
Other borrowed funds
(8 )
(9 )
TOTAL INTEREST PAID
$
$ 1,581
$ (751 )
$
$ (851 )
$ (110 )
(1) Loan fees of $1,444 and $814 for 2021 and 2020, respectively, are included in these figures. Of the loan fees recognized in 2021 and 2020, $958 and $448, respectively, were related to PPP loans.
(2) All interest earned is reported on a taxable equivalent basis using a tax rate of 21% for 2021 and 2020. See disclosure of non-GAAP financial measures on pages 32 and 33.
Analysis of Changes in Interest Income and Interest Expense
(In thousands)
Increase
For the Years Ended December 31,
(Decrease)
Volume
Rate
Rate/Volume
INTEREST EARNED ON:
Loans (1)
$ 13,076
$ 13,812
$ (736 )
$
$ (1,385 )
$ (73 )
Balances due from depository institutions
(119 )
(284 )
(749 )
Available for sale securities:
Taxable securities
4,140
4,788
(648 )
(293 )
(378 )
Non-taxable securities
(182 )
(119 )
(88 )
Other securities
(44 )
(45 )
(1 )
Held to maturity securities:
Taxable securities
1,235
1,141
(41 )
(5 )
Non-taxable securities
(26 )
(16 )
(10 )
TOTAL INTEREST EARNED (2)
$ 19,470
$ 21,131
$ (1,661 )
$ 1,350
$ (2,231 )
$ (780 )
INTEREST PAID ON:
Savings and negotiable interest bearing deposits
$
$ 1,662
$ (829 )
$
$ (914 )
$ (104 )
Time deposits
1,336
(620 )
(226 )
(474 )
Federal funds purchased
Other borrowed funds
(216 )
(208 )
(51 )
TOTAL INTEREST PAID
$ 1,581
$ 3,246
$ (1,665 )
$ (245 )
$ (1,439 )
$
(1) Loan fees of $814 and $304 for 2020 and 2019, respectively, are included in these figures. Of the loan fees recognized in 2020, $448 were related to PPP loans.
(2) All interest earned is reported on a taxable equivalent basis using a tax rate of 21% for 2020 and 2019. See disclosure of non-GAAP financial measures on pages 32 and 33.
Maturity of Securities Portfolio at December 31, 2021
And Weighted Average Yields of Such Securities
(In thousands, except percentage data)
Maturity
Within one year
After one year but
within five years
After five years but
within ten years
After ten years
December 31, 2021
Amount
Yield
Amount
Yield
Amount
Yield
Amount
Yield
Available for sale securities:
U.S. Treasuries, Mortgage-backed securities and Collateralized
Mortgage Obligations
$
$ 42,371
3.24 %
$ 92,194
1.33 %
$ 140,559
1.44 %
States and political subdivisions
3.75 %
4.22 %
28,133
1.62 %
72,110
2.04 %
Total
$
3.75 %
$ 43,037
3.26 %
$ 120,327
1.43 %
$ 212,669
1.70 %
Held to maturity securities:
States and political subdivisions
$ 5,976
2.40 %
$ 16,954
2.72 %
$ 44,337
2.33 %
$ 42,941
2.36 %
Total
$ 5,976
2.40 %
$ 16,954
2.72 %
$ 44,337
2.33 %
$ 42,941
2.36 %
Note: The weighted average yields are calculated on the basis of cost. Average yields on investments in states and political subdivisions are based on their contractual yield. Available for sale securities are stated at fair value and held to maturity securities are stated at amortized cost.
Maturities and Sensitivity to Changes in
Interest Rates of the Loan Portfolio as of December 31, 2021
(In thousands)
Maturity
December 31, 2021
One year or
less
Over one
year through
5 years
Over 5 years
through 15
years
Over 15
years
Total
Gaming
$
$ 7,900
$
$
$ 7,900
Hotel/motel
2,745
24,326
23,694
50,765
Real estate, construction
13,650
10,163
3,378
27,191
Real estate, mortgage
4,065
41,852
82,435
128,352
Commercial and industrial
4,817
6,551
4,514
15,882
All other loans
4,793
3,996
9,072
Total
$ 30,070
$ 94,788
$ 114,304
$
$ 239,162
Loans with pre-determined interest rates
$ 24,012
$ 82,237
$ 97,093
$
$ 203,342
Loans with floating interest rates
6,058
12,551
17,211
35,820
Total
$ 30,070
$ 94,788
$ 114,304
$
$ 239,162
Credit Quality Indicators
(In thousands except ratios)
Gaming
Hotel/Motel
Real Estate,
Construction
Real Estate,
Mortgage
Commercial and Industrial
Other
Total
December 31, 2021:
Allowance for loan losses
$
$
$
$ 2,049
$
$ 3,311
Nonaccrual loans
Total loans
7,900
50,765
27,191
128,352
15,882
9,072
239,162
Average loans
13,333
48,132
26,900
136,314
26,656
7,458
258,793
Net charge-offs (recoveries)
(16 )
(4,597 )
(102 )
(4,548 )
Allowance for loan losses to total loans ratio
1.29 %
1.36 %
0.51 %
1.60 %
1.59 %
0.86 %
1.38 %
Nonaccrual Loans to total loans ratio
0.51 %
0.44 %
0.29 %
Allowance for loan losses to nonaccrual loans ratio
101.72 %
363.94 %
472.33 %
Net charge-offs (recoveries) to average loans ratio
(.06 )%
(3.37 )%
(1.76 )%
December 31, 2020:
Allowance for loan losses
2,849
4,426
Nonaccrual loans
2,656
3,027
Total loans
18,765
45,499
26,609
144,276
37,429
5,843
278,421
Average loans
19,332
46,397
24,909
142,841
34,028
6,179
273,686
Net charge-offs (recoveries)
5,472
5,783
Allowance for loan losses to total loans ratio
0.99 %
1.66 %
0.42 %
1.97 %
1.11 %
1.87 %
1.59 %
Nonaccrual loans to total loans ratio
1.30 %
1.84 %
0.09 %
1.09 %
Allowance for loan losses to nonaccrual Loans ratio
32.08 %
107.27 %
1668.00 %
146.22 %
Net charge-offs (recoveries) to average loans ratio
0.01 %
3.83 %
2.08 %
Allocation of the Allowance for Loan Losses
(In thousands except percentage data)
% of
% of
Loans to
Loans to
Total
Total
December 31,
Amount
Loans
Amount
Loans
Gaming
$
$
Hotel/Motel
Real estate, construction
Real estate, mortgage
2,049
2,849
Commercial and industrial (1)
Other
Total
$ 3,311
$ 4,426
(1)
At December 31, 2021 and 2020, the commercial and industrial portfolio included $2,825 and $16,780, respectively in PPP loans.
Summary of Average Deposits and Their Yields
(In thousands, except percentage data)
Years Ended December 31,
Amount
Rate
Amount
Rate
Amount
Rate
Non-interest bearing demand deposits
$ 192,071
N/A
$ 151,729
N/A
$ 121,829
N/A
Interest bearing demand deposits
318,212
.15 %
255,700
.31 %
230,492
.69 %
Savings deposits
88,938
.05 %
68,589
.06 %
60,660
.13 %
Time deposits
73,399
.37 %
72,782
.98 %
87,606
1.53 %
Total (1)
$ 672,620
.22 %
$ 548,800
.61 %
$ 500,587
1.05 %
(1) All deposits are domestic.
Total uninsured deposits were (in thousands):
December 31,
Uninsured deposits (1)
$ 369,678
$ 288,729
(1) Total for December 31, 2021 is actual. Total for December 31, 2020 is estimated based on 2021 percentage of uninsured deposits to total deposits.
Certificates of deposit in amounts of $250,000 or more by the amount of time remaining until maturity as of December 31, 2021, are as follows (in thousands):
Remaining maturity:
3 months or less
$ 12,290
Over 3 months through 6 months
25,518
Over 6 months through 12 months
1,454
Over 12 months
4,351
Total
$ 43,613
Capital Resources
Information about the Company’s capital resources is included in “Note J - Shareholders’ Equity” to the 2021 Consolidated Financial Statements in this Annual Report on Form 10-K.

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ITEM 1A. RISK FACTORS
ITEM 1A - RISK FACTORS
As a smaller reporting company, the Company is not required to provide this information.

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ITEM 1B. UNRESOLVED STAFF COMMENTS
ITEM 1B - UNRESOLVED STAFF COMMENTS
None.

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ITEM 2. PROPERTIES
ITEM 2 - PROPERTIES
The principal properties of the Company are its 18 business locations, including the Main Office, which is located at 152 Lameuse Street in Biloxi, MS, 39530. The Armed Forces Retirement Home (“AFRH”) Branch located at 1800 Beach Drive, Gulfport, MS 39507, is located in space provided by the AFRH. The Keesler Branch located at 1507 Meadows Drive, Keesler AFB, MS 39534, is rented from the Department of Defense. All other branch locations are owned by the Company. We believe that our facilities are in good condition and are adequate to meet our operating needs for the foreseeable future. The addresses of the other branch locations are:
Bay St. Louis Office 408 Highway 90 East, Bay St. Louis, MS 39520
Cedar Lake Office 1740 Popps Ferry Road, Biloxi, MS 39532
Diamondhead Office 5429 West Aloha Drive, Diamondhead, MS 39525
D’Iberville-St. Martin Office 10491 Lemoyne Boulevard, D’Iberville, MS 39540
Downtown Gulfport Office 1105 30th Avenue, Gulfport, MS 39501
Gautier Office 2609 Highway 90, Gautier, MS 39553
Handsboro Office 0412 E. Pass Road, Gulfport, MS 39507
Long Beach Office 298 Jeff Davis Avenue, Long Beach, MS 39560
Ocean Springs Office 2015 Bienville Boulevard, Ocean Springs, MS 39564
Orange Grove Office 12020 Highway 49 North, Gulfport, MS 39503
Pass Christian Office 301 East Second Street, Pass Christian, MS 39571
Saucier Office 17689 Second Street, Saucier, MS 39574
Waveland Office 470 Highway 90, Waveland, MS 39576
West Biloxi Office 2560 Pass Road, Biloxi, MS 39531
Wiggins Office 1312 S. Magnolia Drive, Wiggins, MS 39577

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ITEM 3. LEGAL PROCEEDINGS
ITEM 3 - LEGAL PROCEEDINGS
Information relating to legal proceedings is included in Note M - Contingencies to the 2021 Consolidated Financial Statements which is in Item 8 in this Annual Report on Form 10-K.

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ITEM 4. MINE SAFETY DISCLOSURE
ITEM 4 - MINE SAFETY DISCLOSURES
Not applicable.
PART II

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ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
ITEM 5 - MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Dividends to the Company’s shareholders can generally be paid only from dividends paid to the Company by the Bank. Consequently, dividends are dependent upon the earnings, capital needs, regulatory policies and statutory limitations affecting the Bank. The Bank may not declare or pay any cash dividends without prior written approval of the Mississippi Department of Banking and Consumer Finance.
At March 11, 2022, there were 381 holders of the common stock of the Company, which does not reflect persons or entities that hold the common stock in nominee or “street” name through various brokerage firms. At March 11, 2022, there were 4,678,186 shares of common stock issued and outstanding.
Share Repurchases
On October 1, 2021, the Company completed its then current stock repurchase program, which commenced in November 2019 under which the Company repurchased a total of 65,000 shares at an average price per shares of $11.42. Under this program, 371 shares of Company common stock were repurchased during the fourth quarter of 2021.
On April 28, 2021, the Board authorized the repurchase of up to 200,000 shares of the Company’s outstanding common stock which was completed on November 3, 2021. During that time the Company repurchased 200,000 shares of its common stock at a weighted average price of $16.88 per share.
At December 31, 2021, there were no remaining shares that may be repurchased under a Board-approved plan.
Information concerning the Company’s repurchase of its outstanding common stock during the three-month period ended December 31, 2021, is set forth in the following table:
Period
Total Number of
of Shares
Purchased
Average Price
Per
Share
Total Number of
Shares Purchased as Part of Publicly Announced
Plans or Programs
Maximum Number
of Shares that May
Yet Be Purchased
Under the Plans
or Programs
October 1 - 31, 2021
9,600
$ 16.00
9,600
190,771
November 1 - 30, 2021
190,771
$ 16.92
190,771
The Company’s common stock is traded under the symbol PFBX on the OTCQX Best Market (“OTCQX”).
Any over-the-counter market quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions.

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ITEM 6. SELECTED FINANCIAL DATA
ITEM 6 - [RESERVED]

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Peoples Financial Corporation (the “Company”) is a one-bank holding company headquartered in Biloxi, Mississippi. The following presents Management’s discussion and analysis of the consolidated financial condition and results of operations of the Company and its consolidated subsidiaries for the years ended December 31, 2021, 2020 and 2019. These comments highlight the significant events for these years and should be considered in combination with the Consolidated Financial Statements and Notes to Consolidated Financial Statements included in this annual report.
FORWARD-LOOKING INFORMATION
Congress passed the Private Securities Litigation Act of 1995 in an effort to encourage corporations to provide information about a company’s anticipated future financial performance. This act provides a safe harbor for such disclosure which protects the companies from unwarranted litigation if actual results are different from management expectations. This report contains forward-looking statements and reflects industry conditions, company performance and financial results. These forward-looking statements are subject to a number of factors and uncertainties which could cause the Company’s actual results and experience to differ from the anticipated results and expectations expressed in such forward-looking statements. Such factors and uncertainties include, but are not limited to: the effects of the COVID-19 pandemic on the Company’s business, customers, employees and third-party service providers, changes in interest rates and market prices, changes in local economic and business conditions, increased competition for deposits and loans, a deviation in actual experience from the underlying assumptions used to determine and establish the allowance for loan losses, changes in the availability of funds resulting from reduced liquidity, changes in statutes, government regulations or regulatory policies and practices in general and specifically as a result of the COVID-19 pandemic and acts of terrorism, weather or other events beyond the Company’s control.
NEW ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board (“FASB”) issued new accounting standards updates in 2021, one of which is disclosed in Note A to the Consolidated Financial Statements. The Company does not expect that this update discussed in the Notes will have a material impact on its financial position, results of operations or cash flows. Further disclosure relating to this and other updates is included in Note A.
CRITICAL ACCOUNTING POLICIES
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires Management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company evaluates these estimates and assumptions
on an on-going basis using historical experience and other factors, including the current economic environment. We adjust such estimates and assumptions when facts and circumstances dictate. Certain critical accounting policies affect the more significant estimates and assumptions used in the preparation of the consolidated financial statements.
Investments
Investments which are classified as available for sale are stated at fair value. A decline in the market value of an investment below cost that is deemed to be other-than-temporary is charged to earnings for the decline in value deemed to be credit related and a new cost basis in the security is established. The decline in value attributed to non-credit related factors is recognized in other comprehensive income. The determination of the fair value of securities may require Management to develop estimates and assumptions regarding the amount and timing of cash flows.
Allowance for Loan Losses
The Company’s allowance for loan losses (“ALL”) reflects the estimated losses resulting from the inability of its borrowers to make loan payments. The ALL is established and maintained at an amount sufficient to cover the estimated loss associated with the loan portfolio of the Company as of the date of the financial statements. Credit losses arise not only from credit risk, but also from other risks inherent in the lending process including, but not limited to, collateral risk, operation risk, concentration risk and economic risk. As such, all related risks of lending are considered when assessing the adequacy of the ALL. On a quarterly basis, Management estimates the probable level of losses to determine whether the allowance is adequate to absorb reasonably foreseeable, anticipated losses in the existing portfolio based on our past loan loss experience, known and inherent risk in the portfolio, adverse situations that may affect the borrowers’ ability to repay and the estimated value of any underlying collateral and current economic conditions. Management believes that the ALL is adequate and appropriate for all periods presented in these financial statements. If there was a deterioration of any of the factors considered by Management in evaluating the ALL, the estimate of loss would be updated, and additional provisions for loan losses may be required. The analysis divides the portfolio into two segments: a pool analysis of loans based upon a five-year average loss history which is updated on a quarterly basis and which may be adjusted by qualitative factors by loan type and a specific reserve analysis for those loans considered impaired under GAAP. All credit relationships with an outstanding balance of $100,000 or greater that are included in Management’s loan watch list are individually reviewed for impairment. All losses are charged to the ALL when the loss actually occurs or when a determination is made that a loss is likely to occur; recoveries are credited to the ALL at the time of receipt.
Other Real Estate
Other real estate (“ORE”) includes real estate acquired through foreclosure. Each other real estate property is carried at fair value, less estimated costs to sell. Fair value is principally based on appraisals performed by third-party valuation specialists. If Management determines that the fair value of a property has decreased subsequent to foreclosure, the Company records a write-down which is included in non-interest expense.
Employee Benefit Plans
Employee benefit plan liabilities and pension costs are determined utilizing actuarially determined present value calculations. The valuation of the benefit obligation and net periodic expense is considered critical, as it requires Management and its actuaries to make estimates regarding the amount and timing of expected cash outflows including assumptions about mortality, expected service periods and the rate of compensation increases.
Income Taxes
GAAP requires the asset and liability approach for financial accounting and reporting for deferred income taxes. We use the asset and liability method of accounting for deferred income taxes and provide deferred income taxes for all significant income tax temporary differences. See Note I to the Consolidated Financial Statements for additional details. As part of the process of preparing our consolidated financial statements, the Company is required to estimate our income taxes in each of the jurisdictions in which we operate. This process involves estimating our actual current tax exposure together with assessing temporary differences resulting from differing treatment of items, such as the provision for the allowance for loan losses, for tax and financial reporting purposes. These differences result in deferred tax assets and liabilities that are included in our consolidated statement of condition. We must also assess the likelihood that our deferred tax assets will be recovered from future taxable income, and to the extent we believe that recovery is not likely, we must establish a valuation allowance. Significant management judgment is required in determining our provision for income taxes, our deferred tax assets and liabilities and any valuation allowance recorded against our net deferred tax assets. To the extent the Company establishes a valuation allowance or adjusts this allowance in a period, we must include an expense within the tax provision in the consolidated statement of income.
GAAP Reconciliation and Explanation
This report contains non-GAAP financial measures determined by methods other than in accordance with GAAP. Such non-GAAP financial measures include taxable equivalent interest income and taxable equivalent net interest income. Management uses these non-GAAP financial measures because it believes they are useful for evaluating our operations and performance over periods of time, as well as in managing and evaluating our business and in discussions about our operations and performance. Management believes these non-GAAP financial measures provide users of our financial information with a meaningful measure for assessing our financial results, as well as comparison to financial results for prior periods. These non-GAAP financial measures should not be considered as a substitute for operating results determined in accordance with GAAP and may not be comparable to other similarly titled financial measures used by other companies. A reconciliation of these operating performance measures to GAAP performance measures for the years ended December 31, 2021, 2020 and 2019 is included below.
RECONCILIATION OF NON-GAAP PERFORMANCE MEASURES
(in thousands)
Years Ended December 31,
Interest income reconciliation:
Interest income - taxable equivalent
$ 20,531
$ 19,470
$ 21,131
Taxable equivalent adjustment
(239 )
(162 )
(203 )
Interest income (GAAP)
$ 20,292
$ 19,308
$ 20,928
Net interest income reconciliation:
Net interest income - taxable equivalent
$ 19,701
$ 17,889
$ 17,885
Taxable equivalent adjustment
(239 )
(162 )
(203 )
Net interest income (GAAP)
$ 19,462
$ 17,727
$ 17,682
OVERVIEW
The Company is a community bank serving the financial and trust needs of its customers in our trade area, which is defined as those portions of Mississippi, Louisiana and Alabama which are within a fifty mile radius of the Waveland, Wiggins and Gautier branches, the bank subsidiary’s three most outlying locations. Maintaining a strong core deposit base and providing commercial and real estate lending in our trade area are the traditional focuses of the Company. Growth has largely been achieved through de novo branching activity, and it is expected that these strategies will continue to be emphasized in the future.
The World Health Organization declared the coronavirus COVID-19 (“COVID-19”) a pandemic in March 2020. The pandemic resulted in, among other things, a significant stock and global markets volatility, disruption in business, leisure and tourism activities as nation-wide stay-at-home orders were mandated, significant strain on the health care industry as it addressed the severity of the health crisis and significant impact on the general economy including high unemployment, a 150-basis point decline in Federal funds rates and unprecedented government stimulus programs. Although many businesses have been able to remain in operation, they continue to have staffing challenges and supply chain disruptions. Concerns about inflation and its potential impact on the economy and individual households are among the issues being considered by the Federal Reserve. Raising the Federal fund rate may be a strategy pursued in 2022 to address this issue.
The Company has been proactive in ensuring the safety and health of its employees and customers during the pandemic. These steps include limiting access to branch lobbies as appropriate, installing germ shields in branch lobbies, limiting in person meetings and endorsing the usage of face coverings by staff and customers. The Company has followed guidance from the Centers for Disease Control and state and local orders. During 2021, the Company implemented certain vaccine incentives and mandates for the protection of its employees and customers.
Assisting our customers during the pandemic is a priority. The Company granted modifications by extending payments 90 days or allowing interest only payments to certain customers as a result of the economic challenges of business closures and unemployment resulting from COVID-19. We also actively participated in the Paycheck Protection Program (“PPP”), a specific stimulus resource designed to provide assistance to small businesses.
The Company reported net income of $8,579,000 for 2021 compared with a net loss of $2,751,000 and net income of $1,679,000 for 2020 and 2019, respectively. Results in 2021 included an increase in net interest income and a reduction in the allowance for loans losses which were partially offset by a decrease in non-interest income and an increase in non-interest expense as compared with 2020. Results in 2020 included an increase in the provision for loan losses which was partially offset by an increase in non-interest income and a decrease in non-interest expense as compared with 2019.
Managing the net interest margin is a key component of the Company’s earnings strategy. In March 2020, the Federal Reserve reduced rates by 150 basis points in two emergency moves to respond to the unprecedented economic disruptions of the COVID-19 pandemic. The Company adopted new investment strategies in 2021 to improve yields on its securities while not compromising duration or credit risk. As a result, total interest income increased $984,000 in 2021 as compared with 2020. The reduction in rates decreased total interest expense $751,000 in 2021 as compared with 2020. The reduction in rates in 2020 decreased total interest income $1,620,000 and total interest expense decreased $1,665,000 as compared with 2019.
Monitoring asset quality, estimating potential losses in our loan portfolio and addressing non-performing loans continue to be a major focus of the Company. A reduction in the allowance for loan losses of $5,663,000 was recorded in 2021 as compared with a provision for the allowance for loan losses of $6,002,000 in 2020. The reduction during 2021 was the result of a large recovery of previously charged-off principal. The large provision in 2020, which was non-COVID-19 related, was primarily the result of specific events impacting one credit. The Company is working diligently to address and reduce its non-performing assets. The Company’s nonaccrual loans totaled $701,000 and $3,027,000 at December 31, 2021 and 2020, respectively. Most of these loans are collateral-dependent, and the Company has rigorously evaluated the value of its collateral to determine potential losses.
Non-interest income decreased $781,000 in 2021 as compared with 2020 results and increased $716,000 in 2020 as compared with 2019 results. The decrease in 2021 was primarily the result of the prior year including several non-recurring gains. Results for 2020 included non-recurring gains on sales and calls of securities of $539,000, a gain from the redemption of death benefits on bank owned life insurance of $224,000 and a gain from the sale of banking house of $318,000.
Non-interest expense increased $1,227,000 in 2021 as compared with 2020 and decreased $811,000 for 2020 as compared with 2019. The increase in 2021 was primarily due to the increase in other expense, more specifically the settlement of a lawsuit for $1,125,000 and other legal and consulting costs associated with the contested 2021 annual shareholders’ meeting. The decrease in 2020 was primarily the result of the decrease in salaries and employee benefits of $334,000, net occupancy of $322,000 and other expense of $258,000 as compared with 2019.
Total assets at December 31, 2021 increased $150,787,000 as compared with December 31, 2020. Total deposits increased $154,340,000 primarily as governmental entities’ balances increased due to tax collections and some customers maintained their PPP loan proceeds in their deposit accounts. This increase in deposits, as well as the decrease in cash and due from banks of $41,551,000 and loans of $39,259,000 funded an increase in an increase in available for sale and held to maturity investments of $196,673,000 and the $34,520,000, respectively.
RESULTS OF OPERATIONS
Net Interest Income
Net interest income, the amount by which interest income on loans, investments and other interest-earning assets exceeds interest expense on deposits and other borrowed funds, is the single largest component of the Company's income. Management's objective is to provide the largest possible amount of income while balancing interest rate, credit, liquidity and capital risk. Changes in the volume and mix of interest-earning assets and interest-bearing liabilities combined with changes in market rates of interest directly affect net interest income.
2021 as compared with 2020
The Company’s average interest-earning assets increased approximately $122,058,000, or 20%, from approximately $598,166,000 for 2020 to approximately $720,224,000 for 2021. Average taxable held to maturity securities increased approximately $23,567,000, average nontaxable held to maturity securities increased approximately $16,631,000 and average taxable available for sale securities increased approximately $91,853,000 as investment purchases exceeded maturities, sales and calls of these securities. Average loans decreased approximately $17,680,000 as principal payments, particularly on PPP loans, maturities, charge-offs and foreclosures on existing loans exceeded new loans. Funds available from the decrease in average loans and the increase in average deposits were used to increase the investment in securities. The average yield on interest-earning assets was 3.25% for 2020 compared with 2.85% for 2021. The yield on average investment securities decreased as a result of the decrease in prime rate during 2020 as discussed in the Overview.
Average interest-bearing liabilities increased approximately $83,037,000, or 21%, from approximately $398,731,000 for 2020 to approximately $481,768,000 for 2021. Average savings and interest-bearing DDA balances increased approximately $82,861,000 primarily as several large public fund customers maintained higher balances with the bank subsidiary and some of the PPP loan proceeds were deposited and maintained in customers’ accounts. The average rate paid on interest-bearing liabilities decreased from .40% for 2020 to .17% for 2021. This decrease was the result of decreased rates in 2020.
The Company’s net interest margin on a tax-equivalent basis, which is net interest income as a percentage of average earning assets, was 2.99% for 2020 as compared with 2.74% for 2021.
2020 as compared with 2019
The Company’s average interest-earning assets increased approximately $43,772,000, or 8%, from approximately $554,394,000 for 2019 to approximately $598,166,000 for 2020. Average balances due from depository institutions increased $40,699,000 as an increase in deposits and proceeds from sales, calls and maturities of securities were held in balances due to depository institutions, primarily at the Federal Reserve Bank, as the Company managed its liquidity position. Average loans increased approximately $13,962,000 due to new loans, primarily as part of the PPP, exceeding principal payments, maturities, charge-offs and foreclosures on existing loans. Average taxable available for sale securities decreased approximately $12,605,000 as maturities, sales and calls of these securities exceeded investment purchases. The average yield on interest-earning assets was 3.81% for 2019 compared with 3.25% for 2020. The yield on average loans decreased from 5.17% for 2019 to 4.65% for 2020 as a result of the decrease in prime rate during 2019 and 2020 on the Company’s floating rate loans.
Average interest-bearing liabilities increased approximately $9,731,000, or 3%, from approximately $389,000,000 for 2019 to approximately $398,731,000 for 2020. Average savings and interest-bearing DDA balances increased approximately $33,137,000 primarily as several large public fund customers maintained higher balances with the bank subsidiary in 2020 and some of the PPP loan proceeds were deposited and maintained in customers’ accounts. Average time deposits decreased approximately $14,824,000 as some customers invested their matured time deposit proceeds in savings and interest bearing DDA deposits. The average rate paid on interest-bearing liabilities decreased 43 basis points, from .83% for 2019 to .40% for 2020. This decrease was the result of decreased rates in 2019 and 2020.
The Company’s net interest margin on a tax-equivalent basis, which is net interest income as a percentage of average earning assets, was 3.23% for 2019 as compared with 2.99% for 2020.
The tables below analyze the changes in tax-equivalent net interest income for the years ended December 31, 2021, 2020 and 2019.
ANALYSIS OF AVERAGE BALANCES, INTEREST EARNED/PAID AND YIELD
(in thousands)
Average
Interest
Average
Interest
Average
Interest
Balance
Earned/Paid
Rate
Balance
Earned/Paid
Rate
Balance
Earned/Paid
Rate
Loans (1)(2)
$ 263,545
$ 12,592
4.78 %
$ 281,225
$ 13,076
4.65 %
$ 267,263
$ 13,812
5.17 %
Balances due from depository institutions
64,415
0.15 %
56,103
0.40 %
15,404
2.25 %
Held to maturity:
Taxable
66,216
1,702
2.57 %
42,649
1,235
2.90 %
37,987
1,141
3.00 %
Non taxable (3)
32,616
2.92 %
15,985
3.28 %
16,460
3.35 %
Available for sale:
Taxable
285,479
5,004
1.75 %
193,626
4,140
2.14 %
206,231
4,788
2.32 %
Non taxable (3)
5,802
3.07 %
6,425
3.74 %
8,953
4.71 %
Other
2,151
0.37 %
2,153
1.25 %
2,096
3.39 %
Total
$ 720,224
$ 20,531
2.85 %
$ 598,166
$ 19,470
3.25 %
$ 554,394
$ 21,131
3.81 %
Savings and interest- bearing DDA
$ 407,150
$
0.13 %
$ 324,289
$
0.26 %
$ 291,152
$ 1,662
0.57 %
Time deposits
73,399
0.37 %
72,782
0.98 %
87,606
1,336
1.53 %
Borrowings from FHLB
1,219
1.97 %
1,660
1.93 %
10,242
2.42 %
Total
$ 481,768
$
0.17 %
$ 398,731
$ 1,581
0.40 %
$ 389,000
$ 3,246
0.83 %
Net tax-equivalent spread
2.68 %
2.86 %
2.98 %
Net tax-equivalent margin on earning assets
2.74 %
2.99 %
3.23 %
(1) Loan fees of $1,444, $814 and $304 for 2021, 2020 and 2019, respectively, are included in these figures. Of the loan fees recognized in 2021 and 2020, $958 and $448, respectively, were related to PPP loans.
(2) Includes nonaccrual loans.
(3) All interest earned is reported on a taxable equivalent basis using a tax rate of 21% in 2021, 2020 and 2019. See disclosure of Non-GAAP financial measures on pages 31 and 32.
ANALYSIS OF CHANGES IN INTEREST INCOME AND EXPENSE
(in thousands)
For the Year Ended
December 31, 2021 Compared With December 31, 2020
Volume
Rate
Rate/Volume
Total
Interest earned on:
Loans
$ (822 )
$
$ (23 )
$ (484 )
Balances due from depository institutions
(144 )
(22 )
(132 )
Held to maturity securities:
Taxable
(139 )
(76 )
Non taxable
(58 )
(61 )
Available for sale securities:
Taxable
1,964
(746 )
(354 )
Non taxable
(23 )
(43 )
(62 )
Other
(19 )
(19 )
Total
$ 2,381
$ (788 )
$ (532 )
$ 1,061
Interest paid on:
Savings and interest-bearing
DDA
$
$ (415 )
$ (106 )
$ (308 )
Time deposits
(437 )
(4 )
(435 )
Borrowings from FHLB
(9 )
(8 )
Total
$
$ (851 )
$ (110 )
$ (751 )
ANALYSIS OF CHANGES IN INTEREST INCOME AND EXPENSE
(in thousands)
For the Year Ended
December 31, 2020 Compared With December 31, 2019
Volume
Rate
Rate/Volume
Total
Interest earned on:
Loans
$
$ (1,385 )
$ (73 )
$ (736 )
Balances due from depository institutions
(284 )
(749 )
(119 )
Held to maturity securities:
Taxable
(41 )
(5 )
Non taxable
(16 )
(10 )
(26 )
Available for sale securities:
Taxable
(293 )
(378 )
(648 )
Non taxable
(119 )
(88 )
(182 )
Other
(45 )
(1 )
(44 )
Total
$ 1,350
$ (2,231 )
$ (780 )
$ (1,661 )
Interest paid on:
Savings and interest-bearing
DDA
$
$ (914 )
$ (104 )
$ (829 )
Time deposits
(226 )
(474 )
(620 )
Borrowings from FHLB
(208 )
(51 )
(216 )
Total
$ (245 )
$ (1,439 )
$
$ (1,665 )
Provision for Allowance for Loan Losses
In the normal course of business, the Company assumes risk in extending credit to its customers. This credit risk is managed through compliance with the loan policy, which is approved by the Board of Directors. The policy establishes guidelines relating to underwriting standards, including but not limited to financial analysis, collateral valuation, lending limits, pricing considerations and loan grading. The Company’s Loan Review and Special Assets Departments play key roles in monitoring the loan portfolio and managing problem loans. New loans and, on a periodic basis, existing loans are reviewed to evaluate compliance with the loan policy. Loan customers in concentrated industries such as gaming and hotel/motel, as well as the exposure for out of area; residential and land development; construction and commercial real estate loans, and their direct and indirect impact on the Company’s operations are evaluated on a monthly basis. Loan delinquencies and deposit overdrafts are closely monitored in order to identify developing problems as early as possible. Lenders experienced in workout scenarios consult with loan officers and customers to address non-performing loans. A monthly watch list of credits which pose a potential loss to the Company is prepared based on the loan grading system. This list forms the foundation of the Company’s allowance for loan loss computation.
Management relies on its guidelines and existing methodology to monitor the performance of its loan portfolio and to identify and estimate potential losses based on the best available information. The potential effect of declines in real estate values and actual losses incurred by the Company were key factors in our analysis. Much of the Company’s loan portfolio is collateral-dependent, requiring careful consideration of changes in the value of the collateral. Note A to the Consolidated Financial Statements discloses a summary of the accounting principles applicable to impaired and nonaccrual loans as well as the allowance for loan losses. Note C to the Consolidated Financial Statements presents additional analyses of the composition, aging, credit quality and performance of the loan portfolio as well as the transactions in the allowance for loan losses.
The Company’s analysis includes evaluating the current value of collateral securing all nonaccrual loans. Nonaccrual loans totaled $701,000 and $3,027,000 with specific reserves on these loans of $20,000 and $50,000 as of December 31, 2021 and 2020, respectively. The specific reserves allocated to nonaccrual loans are relatively low as collateral values appear sufficient to cover loan losses or the loan balances have been charged down to their realizable value.
Additional consideration was given to the impact of COVID-19 on the loan portfolio. The Company granted modifications by extending payments 90 days or granting interest only payments for 3 - 6 months for certain customers as a result of the economic challenges of business closures and unemployment resulting from COVID-19. These credits were generally current at the time they were modified. In compliance with guidance from the regulatory and accounting authorities, these modifications were not classified as troubled debt restructurings. As of September 30, 2021, all of these modifications had expired and the customers had resumed making regular payments. The Company continues its policy of closely monitoring past due loans and deposit overdrafts which may serve as indicators of performance issues. Proactive outreach to our loan customers has also been emphasized.
In addition to the factors considered when assessing risk in the loan portfolio which are identified in the Note A, the Company included the potential negative impact of COVID-19 on its loan portfolio, particularly the gaming and hotel/motel concentrations, in performing this risk assessment as of December 31, 2021. As of December 31, 2021, a general reserve of approximately $287,000 was allocated to non-classified loans as a result of COVID-19. As of December 31, 2021, no specific reserves were allocated to classified loans as a result of COVID-19, as customers in potentially vulnerable industries have resources through business interruption insurance, proceeds from PPP or other loan programs and/or have been able to begin to return to normal operations.
The Company’s on-going, systematic evaluation resulted in the Company not recording a provision for the allowance for loan losses in 2019 and recording a total provision for (reduction of) the allowance for loan losses of $(5,663,000) and $6,002,000 in 2021 and 2020, respectively. As a result of recoveries of $4,838,000 during 2021, the Company recorded a reduction in the allowance for loan losses. The provision for the allowance for loan losses in 2020 was the direct result of a charge-off of $5,429,000 of one credit that was on nonaccrual and in bankruptcy. This loss is the result of specific events impacting this specific customer and was not related to COVID-19. The allowance for loan losses as a percentage of loans was 1.38%, 1.59% and 1.56% at December 31, 2021, 2020 and 2019, respectively. The Company believes that its allowance for loan losses is appropriate as of December 31, 2021.
The allowance for loan losses is an estimate, and as such, events may occur in the future which may affect its accuracy. The Company anticipates that it is possible that additional information will be gathered in the future which may require an adjustment to the allowance for loan losses. Management will continue to closely monitor its portfolio and take such action as it deems appropriate to accurately report its financial condition and results of operations.
Non-interest Income
2021 as compared with 2020
Total non-interest income decreased $781,000 in 2021 as compared with 2020. Results in 2020 included several non-recurring items. These included a gain of $224,000 from the redemption of death benefits on bank owned life insurance and a gain of $318,000 from the sale of banking premises. In addition, gains on liquidation, sales and calls of securities were $539,000 as the Company had opportunities to sell securities which generated gains in 2020 as compared with a loss of $45,000 in 2021. Trust department income and fees increased $154,000 in 2021 as compared with 2020 as a result of new account relationships. Service charges on deposit accounts increased $197,000 as customer transactions have begun to return to pre-COVID-19 activity.
2020 as compared with 2019
Total non-interest income increased $716,000 in 2020 as compared with 2019. Gains on liquidation, sales and calls of securities increased $392,000 as the Company had opportunities to sell securities which generated gains in 2020. The Company realized a gain of $224,000 from the redemption of death benefits on bank owned life insurance and a gain of $318,000 from the sale of banking premises. This increase was partially offset by the decrease in service charges on deposit accounts of $354,000 due to the impact of COVID-19 on the local economy and consumer spending in 2020.
Non-interest Expense
2021 as compared with 2020
Total non-interest expense increased $1,227,000 in 2021 as compared with 2020. Salaries and employee benefits increased $247,000 primarily due to merit bonuses. Equipment rentals, depreciation and maintenance decreased $130,000 primarily as IT-related equipment became fully depreciated. Other expense increased $1,057,000 primarily as data processing, legal and accounting and ATM expense increased while other real estate expense decreased. Data processing costs increased $182,000 due to the implementation of new applications in the current year. Legal and accounting costs increased $1,398,000 due to the settlement of a lawsuit for $1,125,000 and non-recurring legal and consulting costs relating to the contested 2021 annual shareholders’ meeting. ATM expense increased $167,000 as a result of costs associated with debit card processing charges since conversion to a new provider. Other real estate costs decreased $958,000 as a result of decreased write-downs and other expense of holding and selling ORE in 2021 as compared with 2020.
2020 as compared with 2019
Total non-interest expense decreased $811,000 in 2020 as compared with 2019. Salaries and employee benefits decreased $334,000 primarily due to attrition and a reduction in costs associated with the retiree health plan. Net occupancy costs decreased $322,000 as the Company was able to eliminate some redundant telecommunications costs and resources were reconfigured for reduced costs and increased functionality. Equipment rentals, depreciation and maintenance increased $103,000 due to costs associated with contracts related to technology services. Other expense decreased $258,000 primarily as advertising, courier, consulting, conferences and classes and stationery and supplies were reduced as a part of the Company’s strategies to reduce overhead costs as well as the impact of COVID-19. In addition, legal fees were reduced by $182,000, primarily as the Company incurred costs of $201,000 to settle a lawsuit in 2019. Other real estate expense increased $491,000 as a result of increased write-downs and other expenses of holding and selling ORE in 2020 as compared with 2019.
Income Taxes
During 2014, Management established a valuation allowance against its net deferred tax asset of approximately $8,140,000. As of December 31, 2021, 2020 and 2019, the valuation allowance is still in place. The 2018 Tax Cuts and Jobs Act began limiting NOL usage to 80% of taxable income, which resulted in the Company recording income tax expense for 2021. Note I to the Consolidated Financial Statements presents a reconciliation of income taxes for these three years and further analysis of the valuation allowance.
FINANCIAL CONDITION
Cash and due from banks decreased $41,551,000 at December 31, 2021 compared with December 31, 2020 as the Company utilized some of its excess liquidity to fund investment purchases.
Available for sale securities and held to maturity securities increased $196,673,000 and $34,520,000, respectively, at December 31, 2021 compared with December 31, 2020 as the Company increased its investment purchases, which were funded by using funds available from cash and due from banks, decreased loans and the increase in deposits.
Loans decreased $39,259,000 at December 31, 2021 compared with December 31, 2020, as principal payments, particularly from PPP loan forgiveness, maturities, charge-offs and foreclosures on existing loans outpaced new loans.
Total deposits increased $154,340,000 at December 31, 2021, as compared with December 31, 2020. Typically, significant increases or decreases in total deposits and/or significant fluctuations among the different types of deposits from year to year are anticipated by Management as customers in the casino industry and county and municipal entities reallocate their resources periodically. In addition, some of the PPP loan proceeds were deposited into customers’ accounts.
SHAREHOLDERS’ EQUITY AND CAPITAL ADEQUACY
Strength, security and stability have been the hallmark of the Company since its founding in 1985 and of its bank subsidiary since its founding in 1896. A strong capital foundation is fundamental to the continuing prosperity of the Company and the security of its customers and shareholders. The primary and risk-based capital ratios are important indicators of the strength of a Company’s capital. These figures are presented in the Five-Year Comparative Summary of Selected Financial Information. The Company has established the goal of being classified as “well-capitalized” by the banking regulatory authorities.
Significant transactions affecting shareholders’ equity during 2021 are described in Note J to the Consolidated Financial Statements. The Statement of Changes in Shareholders’ Equity also presents all activity in the Company’s equity accounts.
LIQUIDITY
Liquidity represents the Company’s ability to adequately provide funds to satisfy demands from depositors, borrowers and other commitments by either converting assets to cash or accessing new or existing sources of funds. Note L to the Consolidated Financial Statements discloses information relating to financial instruments with off-balance-sheet risk, including letters of credit and outstanding unused loan commitments. The Company closely monitors the potential effects of funding these commitments on its liquidity position. Management monitors these funding requirements in such a manner as to satisfy these demands and to provide the maximum return on its earning assets.
The Company monitors and manages its liquidity position diligently through a number of methods, including through the computation of liquidity risk targets and the preparation of various analyses of its funding sources and utilization of those sources on a monthly basis. The Company also uses proforma liquidity projections which are updated on a continuous basis in the management of its liquidity needs and also conducts contingency testing on its liquidity plan. The Company has also been approved to participate in the Federal Reserve’s Discount Window Primary Credit Program, which it intends to use only as a contingency. Management carefully monitors its liquidity needs, particularly relating to potentially volatile deposits, and the Company has encountered no problems with meeting its liquidity needs.
Deposits, payments of principal and interest on loans, proceeds from maturities of investment securities and earnings on investment securities are the principal sources of funds for the Company.
The Company also uses other sources of funds, including borrowings from the FHLB. The Company generally anticipates relying on deposits, purchases of federal funds and borrowings from the FHLB for its liquidity needs in 2022.
The Company actively participated in the PPP, facilitating approximately $23 million and $6 million, respectively, in funding during 2020 and 2021. As an additional liquidity resource, the Company was approved to participate in the Federal Reserve Bank’s PPP Liquidity Facility.
OFF-BALANCE SHEET ARRANGEMENTS
The Company is a party to off-balance-sheet arrangements in the normal course of business to meet the financing needs of its customers. The Company uses the same credit policies in making commitments and conditional obligations as it does for on-balance-sheet arrangements. Since some of the commitments and irrevocable letters of credit may expire without being drawn upon, the total amount does not necessarily represent future cash requirements. As discussed previously, the Company carefully monitors its liquidity needs and considers its cash requirements, especially for loan commitments, in making decisions on investments and obtaining funds from its other sources. Further information relating to off-balance-sheet instruments can be found in Note L to the Consolidated Financial Statements.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
ITEM 7A - QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
As a smaller reporting company, the Company is not required to provide this information.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Consolidated Statement of Condition
Consolidated Statements of Operations
Consolidated Statements of Comprehensive Income (Loss)
Consolidated Statements of Changes in Shareholders’ Equity
Consolidated Statements of Cash Flows
NOTES To CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm:
Wipfli LLP
Atlanta, Georgia
PCAOB ID 344
Peoples Financial Corporation and Subsidiaries
Consolidated Statements of Condition
(in thousands except share data)
December 31,
Assets
Cash and due from banks
$ 49,991 $ 91,542
Available for sale securities
376,803 180,130
Held to maturity securities, fair value of $111,340 - 2021; $78,474 - 2020
110,208 75,688
Other investments
2,404 2,593
Federal Home Loan Bank Stock, at cost
2,153 2,149
Loans
239,162 278,421
Less: Allowance for loan losses
3,311 4,426
Loans, net
235,851 273,995
Bank premises and equipment, net of accumulated depreciation
15,799 15,679
Other real estate
1,891 3,475
Accrued interest receivable
2,841 2,100
Cash surrender value of life insurance
20,150 19,609
Other assets
722 1,066
Total assets
$ 818,813 $ 668,026
Peoples Financial Corporation and Subsidiaries
Consolidated Statements of Condition (continued)
(in thousands except share data)
December 31,
Liabilities and Shareholders' Equity Liabilities:
Deposits:
Demand, non-interest bearing
$ 193,473 $ 170,269
Savings and demand, interest bearing
428,411 319,165
Time, $100,000 or more
62,040 38,581
Other time deposits
20,914 22,483
Total deposits
704,838 550,498
Borrowings from Federal Home Loan Bank
889 969
Employee and director benefit plans liabilities
19,332 18,882
Other liabilities
2,162 2,811
Total liabilities
727,221 573,160
Shareholders' Equity:
Common stock, $1 par value, 15,000,000 shares authorized, 4,678,186 and 4,878,557 shares issued and outstanding at December 31, 2021 and 2020
4,678 4,879
Surplus
65,780 65,780
Undivided profits
22,965 18,335
Accumulated other comprehensive income (loss)
(1,831 ) 5,872
Total shareholders' equity
91,592 94,866
Total liabilities and shareholders' equity
$ 818,813 $ 668,026
See Notes to Consolidated Financial Statements.
Peoples Financial Corporation and Subsidiaries
Consolidated Statements of Operations
(in thousands except per share data)
Years Ended December 31,
Interest income:
Interest and fees on loans
$ 12,592
$ 13,076
$ 13,812
Interest and dividends on securities:
U. S. Treasuries
1,077
U.S. Government agencies
Mortgage-backed securities
2,076
2,530
3,208
Collateralized mortgage obligations
States and political subdivisions
3,903
2,126
1,745
Other investments
Interest on balances due from depository institutions
Total interest income
20,292
19,308
20,928
Interest expense:
Deposits
1,549
2,998
Borrowings from Federal Home Loan Bank
Total interest expense
1,581
3,246
Net interest income
19,462
17,727
17,682
Provision for (reduction of) allowance for loan losses
(5,663 )
6,002
Net interest income after provision for (reduction of) allowance for loan losses
$ 25,125
$ 11,725
$ 17,682
Peoples Financial Corporation and Subsidiaries
Consolidated Statements of Operations (continued)
(in thousands except per share data)
Years Ended December 31,
Non-interest income:
Trust department income and fees
$ 1,849
$ 1,695
$ 1,614
Service charges on deposit accounts
3,645
3,448
3,802
Gain (loss) on liquidation, sales and calls of securities
(45 )
Increase in cash surrender value of life insurance
Gain from death benefits from life insurance
Gain on sale of banking house
Other income
Total non-interest income
6,470
7,251
6,535
Non-interest expense:
Salaries and employee benefits
10,614
10,367
10,701
Net occupancy
1,918
1,865
2,187
Equipment rentals, depreciation and maintenance
3,057
3,187
3,084
Other expense
7,365
6,308
6,566
Total non-interest expense
22,954
21,727
22,538
Income (loss) before income taxes
8,641
(2,751 )
1,679
Income tax
Net income (loss)
$ 8,579
$ (2,751 )
$ 1,679
Basic and diluted earnings (loss) per share
$ 1.77
$ ( .56 )
$ .34
Dividends declared per share
$ .16
$ .02
$ .03
See Notes to Consolidated Financial Statements.
Peoples Financial Corporation and Subsidiaries
Consolidated Statements of Comprehensive Income (Loss)
(in thousands)
Years Ended December 31,
Net income (loss)
$ 8,579
$ (2,751 )
$ 1,679
Other comprehensive income (loss):
Net unrealized gain (loss) on available for sale securities
(7,519 )
4,225
6,411
Reclassification adjustment for realized (gains) losses on available for sale securities called or sold in current year
(539 )
(147 )
Gain (loss) from unfunded post-retirement benefit obligation
(229 )
(359 )
Total other comprehensive income (loss)
(7,703 )
3,327
6,658
Total comprehensive income
$
$
$ 8,337
See Notes to Consolidated Financial Statements.
Peoples Financial Corporation and Subsidiaries
Consolidated Statements of Changes in Shareholders’ Equity
(in thousands except share and per share data)
Accumulated
Number of
Other
Common
Common
Undivided
Comprehensive
Shares
Stock
Surplus
Profits
Income (Loss)
Total
Balance, January 1, 2020
4,943,186 $ 4,943 $ 65,780 $ 21,855 $ 2,545 $ 95,123
Net loss
(2,751 ) (2,751 )
Cash dividend ($.02 per share)
(98 ) (98 )
Other comprehensive income
3,327 3,327
Stock repurchase
(64,629 ) (64 ) (671 ) (735 )
Balance, December 31, 2020
4,878,557 4,879 65,780 18,335 5,872 94,866
Net income
8,579 8,579
Cash dividend ($.16 per share)
(769 ) (769 )
Other comprehensive loss
(7,703 ) (7,703 )
Stock repurchase
(200,371 ) (201 ) (3,180 ) (3,381 )
Balance, December 31, 2021
4,678,186 $ 4,678 $ 65,780 $ 22,965 $ (1,831 ) $ 91,592
See Notes to Consolidated Financial Statements.
Peoples Financial Corporation and Subsidiaries
Consolidated Statements of Cash Flows
(in thousands)
Years Ended December 31,
Cash flows from operating activities:
Net income (loss)
$ 8,579
$ (2,751 )
$ 1,679
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation
1,824
1,954
1,914
Provision for (reduction of) allowance for loan losses
(5,663 )
6,002
Write-down of other real estate
(Gain) loss on sales of other real estate
(284 )
(387 )
Loss from other investments
Amortization (accretion) of available for sale securities
(29 )
Amortization of held to maturity securities
(Gain) loss on liquidation, sales and calls of securities
(539 )
(147 )
Gain on sale of bank premises and equipment
(318 )
Increase in cash surrender value of life insurance
(434 )
(483 )
(440 )
Gain from death benefits from life insurance
(224 )
Change in accrued interest receivable
(741 )
(413 )
Change in other assets
Change in employee and director benefit plan liabilities and other liabilities
(428 )
1,424
Net cash provided by operating activities
$ 4,584
$ 5,922
$ 4,149
Peoples Financial Corporation and Subsidiaries
Consolidated Statements of Cash Flows (continued)
(in thousands)
Years Ended December 31,
Cash flows from investing activities:
Proceeds from maturities, liquidation, sales and calls of available for sale securities
$ 54,627
$ 183,726
$ 65,658
Purchases of available for sale securities
(259,231 )
(163,291 )
(33,631 )
Proceeds from maturities of held to maturity securities
4,937
9,365
5,705
Purchases of held to maturity securities
(39,899 )
(33,093 )
(3,604 )
Purchase of Federal Home Loan Bank Stock
(4 )
(20 )
(60 )
Proceeds from sales of other real estate
1,583
3,890
3,142
Proceeds from insurance on other real estate
Loans, net change
43,793
(16,008 )
1,557
Acquisition of bank premises and equipment
(1,944 )
(441 )
(456 )
Proceeds from sale of bank premises and equipment
Investment in cash surrender value of life insurance
(107 )
(69 )
(100 )
Proceeds from death benefits from life insurance
Net cash provided by (used in) investing activities
(196,245 )
(14,769 )
38,211
Cash flows from financing activities:
Demand and savings deposits, net change
132,450
103,689
(7,539 )
Time deposits, net change
21,890
(29,334 )
10,176
Cash dividends
(769 )
(98 )
(148 )
Stock repurchase
(3,381 )
(735 )
Borrowings from Federal Home Loan Bank
79,523
59,500
984,856
Repayments to Federal Home Loan Bank
(79,603 )
(62,057 )
(1,017,472 )
Net cash provided by (used in) financing activities
150,110
70,965
(30,127 )
Net increase (decrease) in cash and cash equivalents
(41,551 )
62,118
12,233
Cash and cash equivalents, beginning of year
91,542
29,424
17,191
Cash and cash equivalents, end of year
$ 49,991
$ 91,542
$ 29,424
See Notes to Consolidated Financial Statements.
PEOPLES FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Business of The Company
Peoples Financial Corporation (the “Company”) is a one-bank holding company headquartered in Biloxi, Mississippi. Its two subsidiaries are The Peoples Bank, Biloxi, Mississippi (the “Bank”), and PFC Service Corp. Its principal subsidiary is the Bank, which provides a full range of banking, financial and trust services to state, county and local government entities and individuals and small and commercial businesses operating in those portions of Mississippi, Louisiana and Alabama which are within a fifty mile radius of the Waveland, Wiggins and Gautier branches, the Bank’s three most outlying locations (the “trade area”).
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation.
Basis of Accounting
The Company and its subsidiaries recognize assets and liabilities, and income and expense, on the accrual basis of accounting. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires Management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. Material estimates common to the banking industry that are particularly susceptible to significant change in the near term include, but are not limited to, the determination of the allowance for loan losses, the valuation of other real estate acquired in connection with foreclosure or in satisfaction of loans, assumptions relating to employee and director benefit plan liabilities and valuation allowances associated with the realization of deferred tax assets, which are based on future taxable income.
Revenue Recognition
Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers (Topic 606), prescribes the process related to the recognition of revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU 2014-09 excludes revenue streams relating to loans and investment securities, which are the major source of revenue for the Company, from its scope. Consistent with this guidance, the Company recognizes non-interest income within the scope of this guidance as services are transferred to its customers in an amount that reflects the consideration it expects to be entitled to in exchange for those services. Other types of revenue contracts, the income from which is included in non-interest income, that are within the scope of ASU 2014-09 are:
Trust department income and fees: A contract for fiduciary and/or investment administration services on personal trust accounts and corporate trust services. Personal trust fee income is determined as a percentage of assets under management and is recognized over the period the underlying trust is serviced. Corporate trust fee income is recognized over the period the Company provides service to the entity.
Service charges on deposit accounts: The deposit contract obligates the Company to serve as a custodian of the customer’s deposited funds and is generally terminable at will by either party. The contract permits the customer to access the funds on deposit and request additional services for which the Company earns a fee, including NSF and analysis charges, related to the deposit account. Income for deposit accounts is recognized over the statement cycle period (typically on a monthly basis) or at the time the service is provided, if additional services are requested.
ATM fee income: A contract between the Company, as a card-issuing bank, and its customers whereby the Company receives a transaction fee from the merchant’s bank whenever a customer uses a debit or credit card to make a purchase. These fees are earned as the service is provided (i.e., when the customer uses a debit or ATM card).
Other non-interest income: Other non-interest income includes several items, such as wire transfer income, check cashing fees, gain (loss) from sales of other real estate, the increase in cash surrender value of life insurance, rental income from bank properties and safe deposit box rental fees. This income is generally recognized at the time the service is provided and/or the income is earned.
New Accounting Pronouncements
Accounting Standards Update 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), is intended to provide financial statement users with more decision-useful information related to expected credit losses on financial instruments and other commitments to extend credit by replacing the current incurred loss impairment methodology with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to determine credit loss estimates. ASU 2016-13 does not specify the method for measuring expected credit losses, and an entity is allowed to apply methods that reasonably reflect its expectations of the credit loss estimate. Additionally, the amendments of ASU 2016-13 require that credit losses on available for sale debt securities be presented as an allowance rather than as a write-down. The Company has established a Current Expected Credit Loss (CECL) Committee which includes the appropriate members of management, credit administration and accounting to evaluate the impact this ASU will have on the Company’s financial position, results of operations and financial statement disclosures and determine the most appropriate method of implementing this ASU. The Company selected a third-party vendor to provide allowance for loan loss software as well as advisory services in developing a new methodology that would be compliant with ASU 2016-13, and is working with the approved third-party vendor to develop the CECL model and evaluate its impact. ASU 2016-13 was originally to become effective for the Company for interim and annual periods beginning after December 15, 2019. In November 2019, the FASB issued Accounting Standards Update 2019 - 10, Financial Instruments - Credit Losses (Topic 326), Derivatives and Hedging (Topic 815) and Leases (Topic 842): Effective Dates (“ASU 2019-10”). ASU 2019-10 amends the effective date for certain entities, including the Company, for ASU 2016-13, Financial Instruments - Credit Losses. Because the Company is a smaller reporting company, ASU 2016-13 is now effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years.
In August 2021, the Financial Accounting Standards Board issued Accounting Standards Update 2021-06 (“ASU 2021-06”), Presentation of Financial Statements (Topic 205), Financial Services - Depository and Lending (Topic 942), and Financial Services - Investment Companies (Topic 946). The FASB issued ASU 2021-06 to amend Securities and Exchange Commission (“SEC”) paragraphs in the Accounting Standards Codification to reflect the issuance of SEC Release No. 33-10786, Amendments to Financial Disclosures about Acquired and Disposed Businesses, and No. 33-10835, Update of Statistical Disclosures for Bank and Savings and Loan Registrants. The update is effective upon issuance. The adoption of this ASU will impact disclosures in the Annual Report on Form 10-K only.
Cash and Due from Banks
Until March 26, 2020, the Company was required to maintain average reserve balances in its vault or on deposit with the Federal Reserve Bank. At that time, the Federal Reserve Bank reduced the reserve requirement to zero percent across all deposit tiers. The average amount of these reserve requirements was approximately $17,000 for the year ending December 31, 2020.
Securities
The classification of securities is determined by Management at the time of purchase. Securities are classified as held to maturity when the Company has the positive intent and ability to hold the security until maturity. Securities held to maturity are stated at amortized cost. Securities not classified as held to maturity are classified as available for sale and are stated at fair value. Unrealized gains and losses, net of tax, on these securities are recorded in shareholders’ equity as accumulated other comprehensive income. The amortized cost of available for sale securities and held to maturity securities is adjusted for amortization of premiums and accretion of discounts to maturity, determined using the interest method. Such amortization and accretion is included in interest income on securities. A decline in the market value of any investment below cost that is deemed to be other-than-temporary is charged to earnings for the decline in value deemed to be credit related and a new cost basis in the security is established. The decline in value attributed to non-credit related factors is recognized in other comprehensive income. In estimating other-than-temporary losses, Management considers the length of time and the extent to which the fair value has been less than cost, the financial condition and nature of the issuer, the cause of the decline, especially if related to a change in interest rates, and the intent and ability of the Company to retain the investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value. The specific identification method is used to determine realized gains and losses on sales of securities, which are reported as gain (loss) on sales and calls of securities in non-interest income.
Other Investments
Other investments include a low income housing partnership in which the Company is a 99% limited partner. The partnership has qualified to receive annual low income housing federal tax credits that are recognized as a reduction of the current tax expense. The investment is accounted for using the equity method.
Federal Home Loan Bank Stock
The Company is a member of the Federal Home Loan Bank of Dallas (“FHLB”) and as such is required to maintain a minimum investment in its stock that varies with the level of FHLB advances outstanding. The stock is bought from and sold to the FHLB based on its $100 par value. The stock does not have a readily determinable fair value and as such is classified as restricted stock, carried at cost and evaluated for impairment in accordance with GAAP.
Loans
The loan portfolio consists of commercial and industrial and real estate loans within the Company’s trade area that we have the intent and ability to hold for the foreseeable future or until maturity. The loan policy establishes guidelines relating to pricing; repayment terms; collateral standards including loan to value limits, appraisal and environmental standards; lending authority; lending limits and documentation requirements.
Loans are stated at the amount of unpaid principal, reduced by unearned income and the allowance for loan losses. Interest on loans is recognized on a daily basis over the terms of each loan based on the unpaid principal balance. Loan origination fees are recognized as income when received. Revenue from these fees is not material to the financial statements. Fees received for processing PPP loans are amortized over the life of the loan and recognized in full upon forgiveness.
The Company continuously monitors its relationships with its loan customers in concentrated industries such as gaming and hotel/motel, as well as the exposure for out of area, land development, construction and commercial real estate loans, and their direct and indirect impact on its operations. Loan delinquencies and deposit overdrafts are monitored on a weekly basis in order to identify developing problems as early as possible. On a monthly basis, a watch list of credits based on our loan grading system is prepared. Grades are applied to individual loans based on factors including repayment ability, financial condition of the borrower and payment performance. Loans with lower grades are placed on the watch list of credits. The watch list is the primary tool for monitoring the credit quality of the loan portfolio. Once loans are determined to be past due, the loan officer and the special assets department work vigorously to return the loans to a current status.
The Company places loans on a nonaccrual status when, in the opinion of Management, they possess sufficient uncertainty as to timely collection of interest or principal so as to preclude the recognition in reported earnings of some or all of the contractual interest. Accrued interest on loans classified as nonaccrual is reversed at the time the loans are placed on nonaccrual. Interest received on nonaccrual loans is applied against principal. Loans are restored to accrual status when the obligation is brought current or has performed in accordance with the contractual terms for a reasonable period of time and the ultimate collectibility of the total contractual principal and interest is no longer in doubt. The placement of loans on and removal of loans from nonaccrual status must be approved by Management.
Loans which become 90 days delinquent are reviewed relative to collectibility. Unless such loans are in the process of terms revision to bring them to a current status or foreclosure or in the process of collection, these loans are placed on nonaccrual and, if deemed uncollectible, are charged off against the allowance for loan losses. That portion of a loan which is deemed uncollectible will be charged off against the allowance as a partial charge off. All charge offs must be approved by Management and are reported to the Board of Directors.
Allowance for Loan Losses
The allowance for loan losses (“ALL”) is a valuation account available to absorb losses on loans.
The ALL is established through provisions for loan losses charged against earnings. Loans deemed to be uncollectible are charged against the ALL, and subsequent recoveries, if any, are credited to the allowance.
The ALL is based on Management's evaluation of the loan portfolio under current economic conditions and is an amount that Management believes will be adequate to absorb probable losses on loans existing at the reporting date. On a quarterly basis, the Company’s problem asset committee meets to review the watch list of credits, which is formulated from the loan grading system. Members of this committee include loan officers, collection officers, the special assets director, the chief lending officer, the chief credit officer, the chief financial officer and the chief executive officer. The evaluation includes Management’s assessment of several factors: review and evaluation of specific loans, changes in the nature and volume of the loan portfolio, current and anticipated economic conditions and the related impact on specific borrowers and industry groups, a study of loss experience, a review of classified, non-performing and delinquent loans, the estimated value of any underlying collateral, an estimate of the possibility of loss based on the risk characteristics of the portfolio, adverse situations that may affect the borrower’s ability to repay and the results of regulatory examinations. This evaluation is inherently subjective as it requires material estimates that may be susceptible to significant change.
The ALL consists of specific and general components. The specific component relates to loans that are classified as impaired. The general component of the allowance relates to loans that are not impaired. Changes to the components of the ALL are recorded as a component of the provision for the allowance for loan losses. Management must approve changes to the ALL and must report its actions to the Board of Directors. The Company believes that its allowance for loan losses is appropriate at December 31, 2021.
The Company considers a loan to be impaired when, based upon current information and events, it believes it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement. The Company’s impaired loans include troubled debt restructurings and performing and non-performing major loans for which full payment of principal or interest is not expected. Payments received for impaired loans not on nonaccrual status are applied to principal and interest.
All impaired loans are reviewed, at a minimum, on a quarterly basis. The Company calculates the specific allowance required for impaired loans based on the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s observable market price or the fair value of its collateral. Most of the Company’s impaired loans are collateral-dependent.
The fair value of the collateral for collateral-dependent loans is based on appraisals performed by third-party valuation specialists, comparable sales and other estimates of fair value obtained principally from independent sources such as the Multiple Listing Service or county tax assessment valuations, adjusted for estimated selling costs. The Company has a Real Estate Appraisal Policy (the “Policy”) which is in compliance with the guidelines set forth in the “Interagency Appraisal and Evaluation Guidelines” which implement Title XI of the Financial Institutions Reform, Recovery and Enforcement Act of 1989 (“FIRREA”) and the revised “Interagency Appraisal and Evaluation Guidelines” issued in 2010. The Policy further requires that appraisals be in writing and conform to the Uniform Standards of Professional Appraisal Practice (“USPAP”). An appraisal prepared by a state-licensed or state-certified appraiser is required on all new loans secured by real estate in excess of $500,000. Loans secured by real estate in an amount of $500,000 or less, or that qualify for an exemption under FIRREA, must have a summary appraisal report or in-house evaluation, depending on the facts and circumstances. Factors including the assumptions and techniques utilized by the appraiser, which could result in a downward adjustment to the collateral value estimates indicated in the appraisal, are considered by the Company.
When Management determines that a loan is impaired and the loan is collateral-dependent, an evaluation of the fair value of the collateral is performed. The Company maintains established criteria for assessing whether an existing appraisal continues to reflect the fair value of the property for collateral-dependent loans. Appraisals are generally considered to be valid for a period of at least twelve months. However, appraisals that are less than 12 months old may need to be adjusted. Management considers such factors as the property type, property condition, current use of the property, current market conditions and the passage of time when determining the relevance and validity of the most recent appraisal of the property. If Management determines that the most recent appraisal is no longer valid, a new appraisal is ordered from an independent and qualified appraiser.
During the interim period between ordering and receipt of the new appraisal, Management considers if the existing appraisal should be discounted to determine the estimated fair value of collateral. Discounts are applied to the existing appraisal and take into consideration the property type, condition of the property, external market data, internal data, reviews of recently obtained appraisals and evaluations of similar properties, comparable sales of similar properties and tax assessment valuations. When the new appraisal is received and approved by Management, the valuation stated in the appraisal is used as the fair value of the collateral in determining impairment, if any. If the recorded investment in the impaired loan exceeds the measure of fair value, a valuation allowance is required as a specific component of the allowance for loan losses. Any specific reserves recorded in the interim are adjusted accordingly.
The general component of the ALL is the loss estimated by applying historical loss percentages to non-classified loans which have been divided into segments. These segments include gaming; hotel/motel; real estate, construction; real estate, mortgage; commercial and industrial and all other. The loss percentages are based on each segment’s historical five-year average loss experience which may be adjusted by qualitative factors such as changes in the general economy, or economy or real estate market in a particular geographic area or industry.
Management considers the following when assessing risk in the Company's loan portfolio segments: gaming - loans in this segment are primarily susceptible to declines in tourism and general economic conditions; hotel/motel - loans in this segment are primarily susceptible to tourism, declines in occupancy rates, business failure, industry concentrations and general economic conditions; real estate, construction - loans in this segment are primarily susceptible to cost overruns, changes in market demand for property, delay in completion of construction and declining real estate values; real estate, mortgage - loans in this segment are primarily susceptible to general economic conditions, declining real estate values, industry concentrations and business failure; commercial and industrial - loans in this segment are primarily susceptible to general economic conditions, declining real estate values, industry concentrations and business failure; and other - loans in this segment, most of which are consumer loans, are primarily susceptible to regulatory risks, unemployment and general economic conditions.
Bank Premises and Equipment
Bank premises and equipment are stated at cost, less accumulated depreciation. Depreciation is computed by the straight-line method based on the estimated useful lives of the related assets.
Other Real Estate
Other real estate (“ORE”) includes real estate acquired through foreclosure. Each other real estate property is carried at fair value, less estimated costs to sell. Fair value is principally based on appraisals performed by third-party valuation specialists. Any excess of the carrying value of the related loan over the fair value of the real estate at the date of foreclosure is charged against the ALL. Any expense incurred in connection with holding such real estate or resulting from any write-downs in value subsequent to foreclosure is included in non-interest expense. When the other real estate property is sold, a gain or loss is recognized on the sale for the difference, if any, between the sales proceeds and the carrying amount of the property. If the fair value of the ORE, less estimated costs to sell at the time of foreclosure, decreases during the holding period, the ORE is written down with a charge to non-interest expense. Generally, ORE properties are actively marketed for sale and Management is continuously monitoring these properties in order to minimize any losses.
Trust Department Income and Fees
Corporate trust fees are accounted for on an accrual basis and personal trust fees are recorded when the underlying trust is serviced.
Income Taxes
Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Additionally, the recognition of future tax benefits, such as net operating loss carry forwards, is required to the extent that realization of such benefits is more likely than not. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which the assets and liabilities are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income tax expense in the period that includes the enactment date.
In the event the future tax consequences of differences between the financial reporting bases and the tax bases of the Company’s assets and liabilities results in deferred tax assets, an evaluation of the probability of being able to realize the future benefits indicated by such asset is required. A valuation allowance is provided for the portion of the deferred tax asset when it is more likely than not that some portion or all of the deferred tax asset will not be realized. In assessing the realizability of the deferred tax assets, Management considers the scheduled reversals of deferred tax liabilities, projected future taxable income and tax planning strategies. The Company currently evaluates income tax positions judged to be uncertain. A loss contingency reserve is accrued if it is probable that the tax position will be challenged, it is probable that the future resolution of the challenge will confirm that a loss has been incurred and the amount of such loss can be reasonably estimated.
Post-Retirement Benefit Plan
The Company accounts for its post-retirement benefit plan under Accounting Standards Codification (“Codification” or “ASC”) Topic 715, Retirement Benefits (“ASC 715”). The under or over funded status of the Company’s post-retirement benefit plan is recognized as a liability or asset in the statement of condition. Changes in the plan’s funded status are reflected in other comprehensive income. Net actuarial gains and losses and adjustments to prior service costs that are not recorded as components of the net periodic benefit cost are charged to other comprehensive income.
Earnings Per Share
Basic and diluted earnings per share are computed on the basis of the weighted average number of common shares outstanding of 4,844,248 for 2021, 4,893,151 for 2020, and 4,943,186 for 2019.
Accumulated Other Comprehensive Income (Loss)
At December 31, 2021, 2020 and 2019, accumulated other comprehensive income (loss) consisted of net unrealized gains (losses) on available for sale securities and over (under) funded liabilities related to the Company’s post-retirement benefit plan.
Statements of Cash Flows
The Company has defined cash and cash equivalents to include cash and due from banks. The Company paid $840,992, $1,610,864, and $3,231,710 in 2021, 2020 and 2019, respectively, for interest on deposits and borrowings. Income tax payments of $165,000 were paid in 2021. No income tax payments were paid in 2020 and 2019. Loans transferred to other real estate amounted to $13,648, $753,620 and $1,707,389 in 2021, 2020 and 2019, respectively.
Fair Value Measurement
The Company reports certain assets and liabilities at their estimated fair value. These assets and liabilities are classified and disclosed in one of three categories based on the inputs used to develop the measurements. The categories establish a hierarchy for ranking the quality and reliability of the information used to determine fair value.
NOTE B - SECURITIES:
The amortized cost and fair value of securities at December 31, 2021 and 2020, respectively, are as follows (in thousands):
Gross
Gross
Unrealized
Unrealized
December 31, 2021
Amortized Cost
Gains
Losses
Fair Value
Available for sale securities:
U.S. Treasuries
$ 73,889
$
$ (735 )
$ 73,154
Mortgage-backed securities
71,187
1,236
(441 )
71,982
Collateralized mortgage obligations
130,181
(1,035 )
129,987
States and political subdivisions
103,704
(2,317 )
101,680
Total available for sale securities
$ 378,961
$ 2,370
$ (4,528 )
$ 376,803
Held to maturity securities:
States and political subdivisions
$ 110,208
$ 1,760
$ (628 )
$ 111,340
Total held to maturity securities
$ 110,208
$ 1,760
$ (628 )
$ 111,340
Gross
Gross
Unrealized
Unrealized
December 31, 2020
Amortized Cost
Gains
Losses
Fair Value
Available for sale securities:
U.S. Treasuries
$ 19,999
$
$
$ 20,124
U.S. Government agencies
2,500
2,583
Mortgage-backed securities
69,485
3,237
(46 )
72,676
Collateralized mortgage obligations
44,230
1,207
45,437
States and political subdivisions
38,600
(41 )
39,310
Total available for sale securities
$ 174,814
$ 5,403
$ (87 )
$ 180,130
Held to maturity securities:
States and political subdivisions
$ 75,688
$ 2,809
$ (23 )
$ 78,474
Total held to maturity securities
$ 75,688
$ 2,809
$ (23 )
$ 78,474
The amortized cost and fair value of debt securities at December 31, 2021, (in thousands) by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
Amortized Cost
Fair Value
Available for sale securities:
Due in one year or less
$
$
Due after one year through five years
Due after five years through ten years
102,511
101,288
Due after ten years
73,652
72,110
Mortgage-backed securities
71,187
71,982
Collaterized mortgage obligations
130,181
129,987
Total
$ 378,961
$ 376,803
Held to maturity securities:
Due in one year or less
$ 5,976
$ 6,014
Due after one year through five years
16,954
17,437
Due after five years through ten years
44,337
44,414
Due after ten years
42,941
43,475
Total
$ 110,208
$ 111,340
Available for sale and held to maturity securities with gross unrealized losses at December 31, 2021 and 2020, aggregated by investment category and length of time that individual securities have been in a continuous loss position, are as follows (in thousands):
Less Than Twelve Months
Over Twelve Months
Total
Gross
Gross
Gross
Unrealized
Unrealized
Unrealized
Fair Value
Losses
Fair Value
Losses
Fair Value
Losses
December 31, 2021:
U.S. Treasuries
$ 73,154
$
$
$
$ 73,154
$
Mortgage-backed securities
26,288
26,288
Collateralized mortgage obligations
66,369
1,035
66,369
1,035
States and political subdivisions
102,413
2,577
7,470
109,883
2,945
Total
$ 268,224
$ 4,788
$ 7,470
$
$ 275,694
$ 5,156
December 31, 2020:
Mortgage-backed securities
$ 6,278
$
$ 1,619
$
$ 7,897
$
States and political subdivisions
12,335
12,335
Total
$ 18,613
$
$ 1,619
$
$ 20,232
$
At December 31, 2021, 6 of the 6 Treasuries, 6 of the 48 mortgage-backed securities, 16 of the 34 collateralized mortgage obligations and 90 of the 224 securities issued by states and political subdivisions contained unrealized losses.
Management evaluates securities for other-than-temporary impairment on a monthly basis. In performing this evaluation, the length of time and the extent to which the fair value has been less than cost, the fact that the Company’s securities are primarily issued by U.S. Treasury and U.S. Government agencies and the cause of the decline in value are considered. In addition, the Company does not intend to sell and it is not more likely than not that we will be required to sell these securities before maturity. While some available for sale securities have been sold for liquidity purposes or for gains, the Company has traditionally held its securities, including those classified as available for sale, until maturity. As a result of this evaluation, the Company has determined that the declines summarized in the tables above are not deemed to be other-than-temporary.
Proceeds from sales of available for sale debt securities were $29,457,361 during 2020. Available for sale debt securities were sold for realized gains of $539,023 during 2020. There were no sales of available for sale debt securities during 2021.
Securities with a fair value of $229,092,900 and $206,544,282 at December 31, 2021 and 2020, respectively, were pledged to secure public deposits, federal funds purchased and other balances required by law.
NOTE C - LOANS:
The composition of the loan portfolio at December 31, 2021 and 2020 is as follows (in thousands):
December 31,
Gaming
$ 7,900 $ 18,765
Hotel/motel
50,765 45,499
Real estate, construction
27,191 26,609
Real estate, mortgage
128,352 144,276
Commercial and industrial
15,882 37,429
Other
9,072 5,843
Total
$ 239,162 $ 278,421
On March 27, 2020, the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”), a stimulus package intended to provide relief to businesses and consumers in the United States struggling as a result of COVID-19, was signed into law. A provision in the CARES Act included funding for the creation of the Paycheck Protection Program (“PPP”). PPP is intended to provide loans to small businesses to pay their employees, rent, mortgage interest and utilities. PPP loans are forgivable, in whole or in part, if the proceeds are used for payroll and other permitted purposes in accordance with the requirements of the PPP. If not forgiven, in whole or in part, these loans extended in 2020 carry a fixed rate of 1.00% and a maturity date of two years, with payments deferred until the date the Small Business Administration (the “SBA”) remits the borrower’s loan forgiveness amount to the lender or, if the borrower does not apply for loan forgiveness, ten months after the end of the borrowers’ loan forgiveness covered period. The loans are 100% guaranteed by the SBA. The SBA paid the originating bank a processing fee ranging for 1.00% to 5.00%, based on the size of the loan.
The Company worked with its customers to close 363 PPP loans for a total outstanding balance of $22,445,026. As of December 31, 2021, most of these loans were partially or completely forgiven by the SBA with the bank subsidiary receiving principal and interest payments directly from the SBA. Only 2 loans with a balance of $4,878 were still outstanding as of December 31, 2021 and are reported in the commercial and industrial segment within the loan portfolio.
Additional funds were provided in 2021 legislation for another round of PPP loans. Under this new round, 166 loans with a balance of $9,801,304 were issued. These loans carry a fixed rate of 1.00% and a maturity date of five years, with similar terms as to deferred payments, guarantees and processing fees as with prior PPP rounds. As of December 31, 2021, 40 loans with a total balance of $2,819,944 were outstanding and are reported in the commercial and industrial segment within the loan portfolio.
In the ordinary course of business, the Company’s bank subsidiary extends loans to certain officers and directors and their personal business interests at, in the opinion of Management, the same terms, including interest rates and collateral, as those prevailing at the time for comparable loans of similar credit risk with persons not related to the Company or its subsidiaries. These loans do not involve more than normal risk of collectability and do not include other unfavorable features. An analysis of the activity with respect to such loans to related parties is as follows (in thousands):
Balance, January 1
$ 4,458 $ 9,190
January 1 balance, loans of officer appointed during the year
January 1 balance, loans of directors retired or deceased during the year
(4,441 )
New loans and advances
2,049 126
Repayments
(529 ) (664 )
Balance, December 31
$ 5,978 $ 4,458
As part of its evaluation of the quality of the loan portfolio, Management monitors the Company’s credit concentrations on a monthly basis. Total outstanding concentrations were as follows (in thousands):
December 31,
Gaming
$ 7,900 $ 18,765
Hotel/motel
50,765 45,499
Out of area
6,987 7,995
The age analysis of the loan portfolio, segregated by class of loans, as of December 31, 2021 and 2020 is as follows (in thousands):
Number of Days Past Due
Loans Past Due Greater Than 90
30 - 59 60 - 89 Greater Than 90
Total Past Due
Current
Total Loans
Days and Still Accruing
December 31, 2021:
Gaming
$ $ $ $ $ 7,900 $ 7,900 $
Hotel/motel
50,765 50,765
Real estate, construction
105 105 27,086 27,191
Real estate, mortgage
1,996 60 63 2,119 126,233 128,352
Commercial and industrial
21 320 341 15,541 15,882
Other
209 209 8,863 9,072
Total
$ 2,331 $ 380 $ 63 $ 2,774 $ 236,388 $ 239,162 $
December 31, 2020:
Gaming
$ $ $ $ $ 18,765 $ 18,765 $
Hotel/motel
45,499 45,499
Real estate, construction
277 277 26,332 26,609
Real estate, mortgage
2,865 263 118 3,246 141,030 144,276
Commercial and industrial
80 80 37,349 37,429
Other
63 63 5,780 5,843
Total
$ 3,285 $ 263 $ 118 $ 3,666 $ 274,755 $ 278,421 $
The Company monitors the credit quality of its loan portfolio through the use of a loan grading system. A score of 1 - 5 is assigned to the loan based on factors including repayment ability, trends in net worth and/or financial condition of the borrower and guarantors, employment stability, management ability, loan to value fluctuations, the type and structure of the loan, conformity of the loan to bank policy and payment performance. Based on the total score, a loan grade of A, B, C, S, D, E or F is applied. A grade of A will generally be applied to loans for customers that are well known to the Company and that have excellent sources of repayment. A grade of B will generally be applied to loans for customers that have excellent sources of repayment which have no identifiable risk of collection. A grade of C will generally be applied to loans for customers that have adequate sources of repayment which have little identifiable risk of collection. A grade of S will generally be applied to loans for customers who meet the criteria for a grade of C but also warrant additional monitoring by placement on the watch list. A grade of D will generally be applied to loans for customers that are inadequately protected by current sound net worth, paying capacity of the borrower, or pledged collateral. Loans with a grade of D have unsatisfactory characteristics such as cash flow deficiencies, bankruptcy filing by the borrower or dependence on the sale of collateral for the primary source of repayment, causing more than acceptable levels of risk. Loans 60 to 89 days past due receive a grade of D. A grade of E will generally be applied to loans for customers with weaknesses inherent in the D classification and in which collection or liquidation in full is questionable. In addition, on a monthly basis the Company determines which loans are 90 days or more past due and assigns a grade of E to them.
A grade of F is applied to loans which are considered uncollectible and of such little value that their continuance in an active bank is not warranted. Loans with this grade are charged off, even though partial or full recovery may be possible in the future.
An analysis of the loan portfolio by loan grade, segregated by class of loans, as of December 31, 2021 and 2020 is as follows (in thousands):
Loans With A Grade Of:
A, B or C
S
D
E
F
Total
December 31, 2021:
Gaming
$ 7,900 $ $ $ $ $ 7,900
Hotel/motel
50,765 50,765
Real estate, construction
26,980 6 205 27,191
Real estate, mortgage
124,289 87 3,344 632 128,352
Commercial and industrial
15,834 27 21 15,882
Other
9,060 12 9,072
Total
$ 234,828 $ 87 $ 3,389 $ 858 $ $ 239,162
December 31, 2020:
Gaming
$ 15,938 $ $ 2,827 $ $ $ 18,765
Hotel/motel
45,499 45,499
Real estate, construction
26,098 61 450 26,609
Real estate, mortgage
129,825 7,977 3,741 2,733 144,276
Commercial and industrial
31,810 5,525 45 49 37,429
Other
5,822 21 5,843
Total
$ 254,992 $ 13,502 $ 6,695 $ 3,232 $ $ 278,421
A loan may be impaired but not on nonaccrual status when the loan is well secured and in the process of collection. Total loans on nonaccrual as of December 31, 2021 and 2020 are as follows (in thousands):
December 31,
Real estate, construction
$ 138 $ 346
Real estate, mortgage
563 2,656
Commercial and industrial
Total
$ 701 $ 3,027
The CARES Act also addressed COVID-19-related loan modifications and specified that such modifications executed between March 1, 2020 and the earlier of (i) 60 days after the date of the termination of the national emergency declared by the President and (ii) December 31, 2020, on loans that were current as of December 31, 2019, are not classified as a troubled debt restructuring (“TDR”). Additionally, under guidance from the federal banking agencies encouraging financial institutions to work prudently with borrowers, other short-term modifications made on a good faith basis in response to COVID-19 to borrowers that were current prior to any relief are not TDRs. During 2020, the Company modified 249 loans with a total balance of $95,010,325 for certain customers by extending payments for 90 days or granting interest only payments for 3 - 6 months as a result of the impact of COVID-19. Accordingly, such loans were not classified as TDRs. As of December 31, 2021, all extensions have expired and the customers have resumed making regular payments.
Prior to 2020, certain loans were modified by granting interest rate concessions to these customers with such loans being classified as TDRs. During 2021 and 2020 the Company did not restructure any additional loans. Specific reserves of $50,000 were allocated to TDRs as of December 31, 2021 and 2020. The Bank had no commitments to lend additional amounts to customers with outstanding loans classified as troubled debt restructurings as of December 31, 2021 and 2020.
Impaired loans, which include loans classified as nonaccrual and TDRs, segregated by class of loans, as of December 31, 2021 and 2020 were as follows (in thousands):
Unpaid
Principal
Balance
Recorded
Investment
Related
Allowance
Average
Recorded
Investment
Interest
Income
Recognized
December 31, 2021:
With no related allowance recorded:
Real estate, construction
$ 272 $ 205 $ $ 369 $ 7
Real estate, mortgage
1,014 1,014 1,075 21
Total
1,286 1,219 1,444 28
With a related allowance recorded:
Real estate, mortgage
199 199 70 203 5
Total
199 199 70 203 5
Total by class of loans:
Real estate, construction
272 205 369 7
Real estate, mortgage
1,213 1,213 70 1,278 26
Total
$ 1,485 $ 1,418 $ 70 $ 1,647 $ 33
Unpaid
Principal
Balance
Recorded
Investment
Related
Allowance
Average
Recorded
Investment
Interest
Income
Recognized
December 31, 2020:
With no related allowance recorded:
Real estate, construction
$ 304 $ 239 $ $ 246 $ 11
Real estate, mortgage
3,112 3,112 3,496 39
Total
3,416 3,351 3,742 50
With a related allowance recorded:
Real estate, construction
211 211 20 214
Real estate, mortgage
253 253 76 250 6
Commercial and industrial
25 25 4 31
Total
489 489 100 495 6
Total by class of loans:
Real estate, construction
515 450 20 460 11
Real estate, mortgage
3,365 3,365 76 3,746 45
Commercial and industrial
25 25 4 31
Total
$ 3,905 $ 3,840 $ 100 $ 4,237 $ 56
Transactions in the allowance for loan losses for the years ended December 31, 2021, 2020 and 2019, and the balances of loans, individually and collectively evaluated for impairment, as of December 31, 2021, 2020 and 2019 are as follows (in thousands):
Gaming
Hotel/Motel
Real Estate,
Construction
Real Estate,
Mortgage
Commercial and Industrial
Other
Total
December 31, 2021:
Allowance for Loan Losses:
Beginning Balance
$ 186 $ 754 $ 111 $ 2,849 $ 417 $ 109 $ 4,426
Charge-offs
(2 ) (2 ) (286 ) (290 )
Recoveries
18 4,599 102 119 4,838
Provision
(84 ) (63 ) 12 (5,397 ) (267 ) 136 (5,663 )
Ending Balance
$ 102 $ 691 $ 139 $ 2,049 $ 252 $ 78 $ 3,311
Allowance for Loan Losses:
Ending balance: individually evaluated for impairment
$ $ $ $ 115 $ 27 $ $ 142
Ending balance: collectively evaluated for impairment
$ 102 $ 691 $ 139 $ 1,934 $ 225 $ 78 $ 3,169
Total Loans:
Ending balance: individually evaluated for impairment
$ $ $ 211 $ 3,976 $ 48 $ 12 $ 4,247
Ending balance: collectively evaluated for impairment
$ 7,900 $ 50,765 $ 26,980 $ 124,376 $ 15,834 $ 9,060 $ 234,915
December 31, 2020:
Allowance for Loan Losses:
Beginning Balance
$ 223 $ 779 $ 102 $ 2,454 $ 553 $ 96 $ 4,207
Charge-offs
(17 ) (5,472 ) (261 ) (227 ) (5,977 )
Recoveries
15 34 145 194
Provision
(37 ) (25 ) 11 5,867 91 95 6,002
Ending Balance
$ 186 $ 754 $ 111 $ 2,849 $ 417 $ 109 $ 4,426
Allowance for Loan Losses:
Ending balance: individually evaluated for impairment
$ $ $ 20 $ 200 $ 40 $ $ 260
Ending balance: collectively evaluated for impairment
$ 186 $ 754 $ 91 $ 2,649 $ 377 $ 109 $ 4,166
Total Loans:
Ending balance: individually evaluated for impairment
$ 2,827 $ $ 511 $ 6,474 $ 94 $ 21 $ 9,927
Ending balance: collectively evaluated for impairment
$ 15,938 $ 45,499 $ 26,098 $ 137,802 $ 37,335 $ 5,822 $ 268,494
Gaming
Hotel/Motel
Real Estate,
Construction
Real Estate,
Mortgage
Commercial and Industrial
Other
Total
December 31, 2019:
Allowance for Loan Losses:
Beginning Balance
$ 416 $ 1,442 $ 429 $ 2,444 $ 476 $ 133 $ 5,340
Charge-offs
(404 ) (63 ) (591 ) (270 ) (1,328 )
Recoveries
25 4 55 111 195
Provision
(193 ) (663 ) 52 69 613 122
Ending Balance
$ 223 $ 779 $ 102 $ 2,454 $ 553 $ 96 $ 4,207
Allowance for Loan Losses:
Ending balance: individually evaluated for impairment
$ $ $ 20 $ 180 $ 57 $ 4 $ 261
Ending balance: collectively evaluated for impairment
$ 223 $ 779 $ 82 $ 2,274 $ 496 $ 92 $ 3,946
Total Loans:
Ending balance: individually evaluated for impairment
$ $ $ 597 $ 12,228 $ 390 $ 15 $ 13,230
Ending balance: collectively evaluated for impairment
$ 19,899 $ 47,294 $ 22,612 $ 129,178 $ 30,236 $ 6,500 $ 255,719
NOTE D - BANK PREMISES AND EQUIPMENT:
Bank premises and equipment are shown as follows (in thousands):
December 31,
Estimated Useful Lives
Land
$ 5,554 $ 5,554
Building
5 - 40 years
32,334 30,791
Furniture, fixtures and equipment
3 - 10 years
16,482 17,117
Totals, at cost
54,370 53,462
Less: Accumulated depreciation
38,571 37,783
Totals
$ 15,799 $ 15,679
NOTE E - OTHER REAL ESTATE:
The Company’s other real estate consisted of the following as of December 31, 2021 and 2020, respectively (in thousands except number of properties):
December 31,
Number of
Number of
Properties
Balance
Properties
Balance
Construction, land development
and other land
$
$ 2,303
1 - 4 family residential properties
Nonfarm nonresidential
Other
Total
$ 1,891
$ 3,475
NOTE F - DEPOSITS:
At December 31, 2021, the scheduled maturities of time deposits are as follows (in thousands):
$ 67,320
12,069
2,064
Total
$ 82,954
Time deposits of more than $250,000 totaled approximately $43,613,000 and $20,564,000 at December 31, 2021 and 2020, respectively.
Deposits held for related parties amounted to $5,372,218 and $4,396,827 at December 31, 2021 and 2020, respectively.
Overdrafts totaling $770,542 and $470,700 were reclassified as loans at December 31, 2021 and 2020, respectively.
NOTE G - FEDERAL FUNDS PURCHASED:
At December 31, 2021, the Company had facilities in place to purchase federal funds up to $40,000,000 under established credit arrangements.
NOTE H - BORROWINGS:
At December 31, 2021, the Company was able to borrow up to $6,300,000 from the Federal Reserve Bank Discount Window Primary Credit Program. The borrowing limit is based on the amount of collateral pledged, with certain loans from the Bank’s portfolio serving as collateral. Borrowings bear interest at the primary credit rate, which is established periodically by the Federal Reserve Board, and have a maturity of one day. The primary credit rate was .25% at December 31, 2021. There was no outstanding balance at December 31, 2021.
At December 31, 2021, the Company had $888,886 outstanding in advances under a $123,796,693 line of credit with the FHLB. New advances may subsequently be obtained based on the liquidity needs of the bank subsidiary. The balance at December 31, 2021 bears interest at 2.604% with a maturity date of 2034. Advances are collateralized by a blanket floating lien on the Company’s residential first mortgage loans.
NOTE I - INCOME TAXES:
Deferred taxes (or deferred charges) as of December 31, 2021 and 2020, included in other assets, were as follows (in thousands):
December 31,
Deferred tax assets:
Allowance for loan losses
$ 695 $ 930
Employee benefit plans' liabilities
3,240 3,223
Loss on credit impairment of securities
356 356
Earned retiree health benefits plan liability
1,098 1,048
General business and AMT credits
1,525 1,707
Tax net operating loss carryforward
1,575 2,558
Other
523 854
Valuation allowance
(6,889 ) (7,209 )
Deferred tax assets
2,123 3,467
Deferred tax liabilities:
Unrealized gain on available for sale securities, charged from equity
3 1,116
Unearned retiree health benefits plan asset
257 305
Bank premises and equipment
1,575 1,797
Other
288 249
Deferred tax liabilities
2,123 3,467
Net deferred taxes
$ $
Income taxes consist of the following components (in thousands):
Years Ended December 31,
Current
$ 62 $ $
Deferred:
Federal
1,482 (809 ) 166
Change in valuation allowance
(1,482 ) 809 (166 )
Total deferred
Totals
$ 62 $ $
Income taxes amounted to less than the amounts computed by applying the U.S. Federal income tax rate of 21.0% for 2021, 2020 and 2019 income before income taxes. The reasons for these differences are shown below (in thousands):
Tax
Rate
Tax
Rate
Tax
Rate
Taxes computed at statutory rate
$ 1,815 21 $ (578 ) (21 ) $ 321 21
Increase (decrease) resulting from:
Tax-exempt interest income
(187 ) (2 ) (127 ) (5 ) (172 ) (11 )
Income from BOLI
(91 ) (1 ) (148 ) (5 ) (92 ) (6 )
Federal tax credits
(20 ) (1 )
Other
6 44 2 129 8
Other changes in valuation allowance
(1,481 ) (17 ) 809 29 (166 ) (11 )
Total income tax expense
$ 62 1 $ $
During 2021, the Company recorded income tax expense of $62,000. During 2020 and 2019, the Company recorded no income tax expense or benefit. On December 22, 2017, the President signed into law The Tax Cuts and Jobs Act (the “Act”). In addition to reducing U.S. corporate income tax rates from 34% to 21%, the Act repealed the alternative minimum tax (“AMT”) regime for tax years beginning after December 31, 2017. For tax years beginning in 2018, 2019 and 2020, the AMT credit carryforward could be utilized to offset regular tax with any remaining AMT carryforwards eligible for a refund of 50%. Any remaining AMT credit carryforwards will become fully refundable beginning in the 2021 tax year. The Act also limits NOL usage to 80% of taxable income, which resulted in the Company recording income tax expense for 2021.
A valuation allowance is recognized against deferred tax assets when, based on the consideration of all available positive and negative evidence using a more likely than not criteria, it is determined that all or a portion of these tax benefits may not be realized. This assessment requires consideration of all sources of taxable income available to realize the deferred tax asset including taxable income in prior carry-back years, future reversals of existing temporary differences, tax planning strategies and future taxable income exclusive of reversing temporary differences and carryforwards. The Company incurred losses on a cumulative basis for the three-year period ended December 31, 2014, which is considered to be significant negative evidence. The positive evidence considered in support was insufficient to overcome this negative evidence. As a result, the Company established a full valuation allowance for its net deferred tax asset in the amount of $8,140,000 as of December 31, 2014. As of December 31, 2021, the valuation allowance was $6,888,984.
The Company intends to maintain this valuation allowance until it determines it is more likely than not that the asset can be realized through current and future taxable income. If not utilized, the Company’s federal net operating loss of $12,091,000 will begin to expire in 2035.
The Company has reviewed its income tax positions and specifically considered the recognition and measurement requirements of the benefits recorded in its financial statements for tax positions taken or expected to be taken in its tax returns. The Company currently has no unrecognized tax benefits that, if recognized, would favorably affect the income tax rate in future periods.
NOTE J - SHAREHOLDERS' EQUITY:
Shareholders’ equity of the Company includes the undistributed earnings of the bank subsidiary. Dividends to the Company’s shareholders can generally be paid only from dividends paid to the Company by its bank subsidiary. Consequently, dividends are dependent upon the earnings, capital needs, regulatory policies and statutory limitations affecting the bank subsidiary. Dividends paid by the bank subsidiary are subject to the written approval of the Commissioner of Banking and Consumer Finance of the State of Mississippi and the Federal Deposit Insurance Corporation (the “FDIC”). At December 31, 2021, $15,256,269 of undistributed earnings of the bank subsidiary included in consolidated surplus and retained earnings was available for future distribution to the Company as dividends without regulatory approval.
On November 8, 2019, the Board approved the repurchase of up to 65,000 of the outstanding shares of the Company’s common stock. As a result of this repurchase plan, 65,000 shares have been repurchased for $741,574 and retired through December 31, 2021.
On April 28, 2021, the Board approved the repurchase of 200,000 of the outstanding shares of the Company’s common stock. As a result of this repurchase plan, 200,000 shares have been repurchased for $3,375,309 and retired through December 31, 2021.
On April 22, 2020, the Board declared a dividend of $.02 per share payable May 8, 2020 to shareholders of record as of May 4, 2020.
On March 24, 2021, the Board of Directors declared a dividend of $ .10 per share, which was payable on April 8, 2021, to shareholders of record as of April 5, 2021.
On November 23, 2021, the Board of Directors declared a dividend of $ .06 per share, which was payable on December 8, 2021, to shareholders of record as of December 3, 2021.
The Company and the bank subsidiary are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by the regulators that, if undertaken, could have a direct material effect on the financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, specific capital guidelines must be met that involve quantitative measures of the assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices. The capital amounts and classification of the bank subsidiary and the Company are also subject to qualitative judgments by the regulators about components, risk weightings and other factors.
As of December 31, 2021, the most recent notification from the FDIC categorized the bank subsidiary as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, the bank subsidiary must have a Total risk-based capital ratio of 10.00% or greater, a Common equity tier 1 capital ratio of 6.50% or greater, a Tier 1 risk-based capital ratio of 8.00% or greater and a Leverage capital ratio of 5.00% or greater. The Company must have a capital conservation buffer above these requirements of 2.50%. There are no conditions or events since that notification that Management believes have changed the bank subsidiary’s category.
The Company’s actual capital amounts and ratios and required minimum capital amounts and ratios for 2021 and 2020, are as follows (in thousands):
Actual
For Capital Adequacy Purposes
Amount
Ratio
Amount
Ratio
December 31, 2021:
Total Capital (to Risk Weighted Assets)
$ 96,582
21.44 %
$ 36,033
8.00 %
Common Equity Tier 1 Capital (to Risk Weighted Assets)
93,271
20.71 %
20,269
4.50 %
Tier 1 Capital (to Risk Weighted Assets)
93,271
20.71 %
27,025
6.00 %
Tier 1 Capital (to Average Assets)
93,271
12.55 %
29,737
4.00 %
December 31, 2020:
Total Capital (to Risk Weighted Assets)
$ 93,268
23.00 %
$ 32,442
8.00 %
Common Equity Tier 1 Capital (to Risk Weighted Assets)
88,842
21.91 %
18,249
4.50 %
Tier 1 Capital (to Risk Weighted Assets)
88,842
21.91 %
24,331
6.00 %
Tier 1 Capital (to Average Assets)
88,842
14.07 %
25,255
4.00 %
The bank subsidiary’s actual capital amounts and ratios and required minimum capital amounts and ratios and capital amounts and ratios to be well capitalized for 2021 and 2020, are as follows (in thousands):
For Capital
To Be Well
Actual
Adequacy Purposes
Capitalized
Amount
Ratio
Amount
Ratio
Amount
Ratio
December 31, 2021:
Total Capital (to Risk Weighted Assets)
$ 93,988
20.98 %
$ 35,839
8.00 %
$ 44,799
10.00 %
Common Equity Tier 1 Capital (to Risk Weighted Assets)
90,677
20.24 %
20,160
4.50 %
29,119
6.50 %
Tier 1 Capital (to Risk Weighted Assets)
90,677
20.24 %
26,879
6.00 %
35,839
8.00 %
Tier 1 Capital (to Average Assets)
90,677
11.13 %
32,599
4.00 %
40,749
5.00 %
December 31, 2020:
Total Capital (to Risk Weighted Assets)
$ 90,559
22.87 %
$ 31,683
8.00 %
$ 39,603
10.00 %
Common Equity Tier 1 Capital (to Risk Weighted Assets)
86,133
21.75 %
17,821
4.50 %
25,742
6.50 %
Tier 1 Capital (to Risk Weighted Assets)
86,133
21.75 %
23,762
6.00 %
31,683
8.00 %
Tier 1 Capital (to Average Assets)
86,133
12.53 %
27,504
4.00 %
34,380
5.00 %
NOTE K - OTHER INCOME AND EXPENSES:
Other income consisted of the following (in thousands):
Years Ended December 31,
Other service charges, commissions and fees
$
$
$
Rentals
Other
Totals
$
$
$
Other expenses consisted of the following (in thousands):
Years Ended December 31,
Advertising
$
$
$
Data processing
1,408
1,226
1,356
FDIC and state banking assessments
Legal and accounting
1,930
Other real estate
1,044
ATM expense
1,084
Trust expense
Other
1,718
1,542
1,975
Totals
$ 7,365
$ 6,308
$ 6,566
NOTE L - FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK:
The Company is a party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit and irrevocable letters of credit. These instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the balance sheet. The contract amounts of those instruments reflect the extent of involvement the bank subsidiary has in particular classes of financial instruments. The Company's exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and irrevocable letters of credit is represented by the contractual amount of those instruments. The Company uses the same credit policies in making commitments and conditional obligations as it does for on-balance-sheet instruments.
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any conditions established in the agreement. Irrevocable letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. Commitments and irrevocable letters of credit generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since some of the commitments and irrevocable letters of credit may expire without being drawn upon, the total amounts do not necessarily represent future cash requirements. The Company evaluated each customer's creditworthiness on a case-by-case basis. The amount of collateral obtained upon extension of credit is based on Management's credit evaluation of the customer. Collateral obtained varies but may include equipment, real property and inventory.
The Company generally grants loans to customers in its trade area.
At December 31, 2021 and 2020, the Company had outstanding irrevocable letters of credit aggregating $138,318 and $141,000, respectively. At December 31, 2021 and 2020, the Company had outstanding unused loan commitments aggregating approximately $55,297,000 and $37,739,000, respectively. Approximately $34,623,000 and $22,290,000 of outstanding commitments were at fixed rates and the remainder were at variable rates at December 31, 2021 and 2020, respectively.
NOTE M - CONTINGENCIES:
The Bank is involved in various legal matters and claims which are being defended and handled in the ordinary course of business. None of these matters are expected, in the opinion of Management, to have a material adverse effect upon the financial position or results of operations of the Company. However, the Company settled a lawsuit for $1,125,000 during 2021 after consulting with legal counsel in the long-term best interest of the Company.
NOTE N - CONDENSED PARENT COMPANY ONLY FINANCIAL INFORMATION:
Peoples Financial Corporation began its operations September 30, 1985, when it acquired all the outstanding stock of The Peoples Bank, Biloxi, Mississippi. A condensed summary of its financial information is shown below.
CONDENSED BALANCE SHEETS (IN THOUSANDS):
December 31,
Assets
Investments in subsidiaries, at underlying equity:
Bank subsidiary
$ 88,998 $ 92,157
Nonbank subsidiary
1 1
Cash in bank subsidiary
166 92
Other assets
2,427 2,616
Total assets
$ 91,592 $ 94,866
Liabilities and Shareholders' Equity:
Other liabilities
$ $
Total liabilities
Shareholders' equity
91,592 94,866
Total liabilities and shareholders' equity
$ 91,592 $ 94,866
CONDENSED STATEMENTS OF OPERATIONS (IN THOUSANDS):
Years Ended December 31,
Income
Distributed income of bank subsidiary
$ 4,610 $ 250 $ 700
Undistributed income (loss) of bank subsidiary
4,544 (2,888 ) 1,240
Other loss
(186 ) (46 ) (164 )
Total income
8,968 (2,684 ) 1,776
Expenses
Other
389 67 97
Total expenses
389 67 97
Income (loss) before income taxes
8,579 (2,751 ) 1,679
Income tax
Net income (loss)
$ 8,579 $ (2,751 ) $ 1,679
CONDENSED STATEMENTS OF CASH FLOWS (IN THOUSANDS):
Years Ended December 31,
Cash flows from operating activities:
Net income (loss)
$ 8,579 $ (2,751 ) $ 1,679
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Loss from other investments
190 50 166
Undistributed (income) loss of subsidiaries
(4,544 ) 2,888 (1,240 )
Other assets
(1 ) (2 )
Net cash provided by operating activities
4,224 185 605
Cash flows from investing activities:
Net cash provided by investing activities
Cash flows from financing activities:
Stock repurchase
(3,381 ) (735 )
Dividends paid
(769 ) (98 ) (148 )
Net cash used in financing activities
(4,150 ) (833 ) (148 )
Net increase (decrease) in cash
74 (648 ) 457
Cash, beginning of year
92 740 283
Cash, end of year
$ 166 $ 92 $ 740
NOTE O - EMPLOYEE AND DIRECTOR BENEFIT PLANS:
The Company sponsors the Peoples Financial Corporation Employee Stock Ownership Plan (“ESOP”). Employees who are in a position requiring at least 1,000 hours of service during a plan year and who are 21 years of age are eligible to participate in the ESOP. The Plan included 401(k) provisions and the former Gulf National Bank Profit Sharing Plan. Effective January 1, 2001, the ESOP was amended to separate the 401(k) funds into the Peoples Financial Corporation 401(k) Profit Sharing Plan. The separation had no impact on the eligibility or benefits provided to participants of either plan. The 401(k) provides for a matching contribution of 75% of the amounts contributed by the employee (up to 6% of compensation). Contributions are determined by the Board of Directors and may be paid either in cash or Peoples Financial Corporation common stock. Total contributions to the plans charged to operating expense were $260,000 for each of 2021, 2020 and 2019.
The ESOP was frozen to further contributions and eligibility effective January 1, 2019. The ESOP held 222,891, 223,976 and 237,923 allocated shares at December 31, 2021, 2020 and 2019, respectively.
The Company established an Executive Supplemental Income Plan and a Directors' Deferred Income Plan, which provide for pre-retirement and post-retirement benefits to certain key executives and directors. Benefits under the Executive Supplemental Income Plan are based upon the position and salary of the officer at retirement or death. Normal retirement benefits under the plan are equal to 67% of salary for the president and chief executive officer, 58% of salary for the executive vice president and 50% of salary for all other executive officers and are payable monthly over a period of fifteen years. Under the Directors’ Deferred Income Plan, the directors are given an opportunity to defer receipt of their annual directors’ fees until retirement from the board. For those who choose to participate, benefits are payable monthly for ten years beginning the first day of the month following the director’s normal retirement date. The normal retirement date is the later of the normal retirement age (65) or separation of service. Interest on deferred fees accrues at an annual rate of ten percent, compounded annually. Beginning at December 31, 2022, interest on deferred fees will accrue at prime rate, compounded annually. The Company has acquired insurance policies, with the bank subsidiary as owner and beneficiary, which it may use as a source to pay potential benefits to the plan participants. These contracts are carried at their cash surrender value, which amounted to $17,544,449 and $17,145,869 at December 31, 2021 and 2020, respectively. The present value of accumulated benefits under these plans, using an interest rate of 3.50% and 4.00% at December 31, 2021 and 2020, respectively, and the interest ramp-up method has been accrued. The accrual amounted to $13,556,638 and $13,416,820 at December 31, 2021 and 2020, respectively, and is included in Employee and director benefit plans liabilities.
The Company also has additional plans for post-retirement benefits for certain key executives. The Company has acquired insurance policies, with the bank subsidiary as owner and beneficiary, which it may use as a source to pay potential benefits to the plan participants. These contracts are carried at their cash surrender value, which amounted to $2,109,593 and $1,976,912 at December 31, 2021 and 2020, respectively. The present value of accumulated benefits under these plans using an interest rate of 3.50% and 4.00% at December 31, 2021 and 2020, respectively, and the projected unit cost method has been accrued. The accrual amounted to $1,559,728 and $1,594,591 at December 31, 2021 and 2020, respectively, and is included in Employee and director benefit plans liabilities.
Additionally, there are two endorsement split dollar policies, with the bank subsidiary as owner and beneficiary, which provide a guaranteed death benefit to the participants’ beneficiaries. These contracts are carried at their cash surrender value, which amounted to $324,538 and $318,861 at December 31, 2021 and 2020, respectively. The present value of accumulated benefits under these plans using an interest rate of 3.50% and 4.00% at December 31, 2021 and 2020, respectively, and the projected unit cost method has been accrued. The accrual amounted to $105,076 and $105,358 at December 31, 2021 and 2020, respectively, and is included in Employee and director benefit plans liabilities.
The Company has additional plans for post-retirement benefits for directors. The Company has acquired insurance policies, with the bank subsidiary as owner and beneficiary, which it may use as a source to pay potential benefits to the plan participants. These contracts are carried at their cash surrender value, which amounted to $172,034 and $167,262 at December 31, 2021 and 2020, respectively. The present value of accumulated benefits under these plans using an interest rate of 3.50% and 4.00% at December 31, 2021 and 2020, respectively, and the projected unit cost method has been accrued. The accrual amounted to $208,590 and $230,337 at December 31, 2021 and 2020, respectively, and is included in Employee and director benefit plans liabilities.
The Company provides post-retirement health insurance to certain of its retired employees. Employees are eligible to participate in the retiree health plan if they retire from active service no earlier than age 60. In addition, the employee must have at least 25 continuous years of service with the Company immediately preceding retirement. However, any active employee who was at least age 65 as of January 1, 1995, does not have to meet the 25 years of service requirement. The Company reserves the right to modify, reduce or eliminate these health benefits. The Company has chosen to not offer this post-retirement benefit to individuals entering the employment of the Company after December 31, 2006. Employees who are eligible and enroll in the bank subsidiary’s group medical and dental health care plans upon their retirement must enroll in Medicare Parts A, B and D when first eligible upon their retirement from the bank subsidiary. This results in the bank subsidiary’s programs being secondary insurance coverage for retired employees and any dependent(s), if applicable, while Medicare Parts A and B will be their primary coverage, and Medicare Part D will be the sole and exclusive prescription drug benefit plan for retired employees.
The net postretirement benefit cost was as follows (in thousands):
For the Year Ended December 31,
Net Postretirement Benefit Cost
$ 139 $ 61
The accumulated postretirement benefit obligation and the balance in accumulated other comprehensive income was as follows (in thousands):
December 31,
Accumulated Postretirement Benefit Obligation
$ 4,003 $ 3,625
Fair Value of Plan Assets
Funded Status
$ 4,003 $ 3,625
Balance in Accumulated Other Comprehensive Income
$ 1,224 $ 1,453
Amounts recognized in Accumulated Other Comprehensive Income were as follows (in thousands):
For the Year Ended December 31,
Net Gain
$ 606 $ 754
Prior Service Credit
618 699
Total
$ 1,224 $ 1,453
The prior service credit that will be recognized in accumulated other comprehensive income during 2022 is $81,381.
The following is a summary of the actuarial assumptions used to determine the accumulated postretirement benefit obligation:
December 31,
Equivalent APBO Single Discount Rate
2.80 % 2.50 %
Rate of Increase in Future Compensation Levels
N/A N/A
Current Pre 65 Health Care Trend Rate
5.50 % 5.75 %
Current Post 64 Health Care Trend Rate
5.50 % 5.75 %
Ultimate Health Care Trend Rate
4.50 % 4.50 %
Year Ultimate Trend Rate Reached
The following is a summary of the assumptions used to determine the net postretirement benefit cost:
January 1,
Equivalent APBO Single Discount Rate
2.50 % 3.20 %
Rate of Increase in Future Compensation Levels
N/A N/A
Current Pre 65 Health Care Trend Rate
5.75 % 6.00 %
Current Post 64 Health Care Trend Rate
5.75 % 6.00 %
Ultimate Health Care Trend Rate
4.50 % 4.50 %
Year Ultimate Trend Rate Reached
The following is a reconciliation of the accumulated postretirement benefit obligation, which is included in Employee and director benefit plans liabilities (in thousands):
Accumulated
Postretirement
Benefit
Fair Value of
Funded
Reconciliation of Funded Status
Obligation
Plan Assets
Status
December 31, 2020:
$ (3,625 ) $ $ (3,625 )
Service cost
(120 ) (120 )
Interest cost
(100 ) (100 )
Losses
(148 ) (148 )
Benefits paid
44 (44 )
Participant contributions
(54 ) 54
Employer Contributions
(10 ) (10 )
December 31, 2021
$ (4,003 ) $ $ (4,003 )
The following is a reconciliation of the accumulated other comprehensive income (in thousands):
Accumulated Other
Net
Prior Service
Comprehensive
Gain/Loss
Cost/(Credit)
Income
December 31, 2020:
$ (754 ) $ (699 ) $ (1,453 )
Amortization payment
81 81
Liability (Gain)/Loss
148 148
December 31, 2021
$ (606 ) $ (618 ) $ (1,224 )
The following is a reconciliation of the Accrued Postretirement Cost (in thousands):
Accrued Postretirement Cost at December 31, 2020
$ (5,079 )
Employer Contributions
(10 )
Total Net Postretirement Benefit cost
(139 )
Accrued Postretirement Cost at December 31, 2021
$ (5,228 )
NOTE P - FAIR VALUE MEASUREMENTS AND DISCLOSURES:
The Company utilizes fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. Available for sale securities are recorded at fair value on a recurring basis. Additionally, from time to time, the Company may be required to record other assets at fair value on a non-recurring basis, such as impaired loans and ORE. These non-recurring fair value adjustments typically involve the application of lower of cost or market accounting or write-downs of individual assets. Additionally, the Company is required to disclose, but not record, the fair value of other financial instruments.
Fair Value Hierarchy
The Company groups assets and liabilities at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. These levels are:
Level 1 - Valuation is based upon quoted prices for identical instruments traded in active markets.
Level 2 - Valuation is based upon quoted market prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-based valuation techniques for which all significant assumptions are observable in the market.
Level 3 - Valuation is generated from model-based techniques that use at least one significant assumption not observable in the market. These unobservable assumptions reflect estimates of assumptions that market participants would use in pricing the asset or liability. Valuation techniques include the use of option pricing models, discounted cash flow models and similar techniques.
Following is a description of valuation methodologies used to determine the fair value of financial assets and liabilities.
Cash and Due from Banks
The carrying amount shown as cash and due from banks approximates fair value.
Available for Sale Securities
The fair value of available for sale securities is based on quoted market prices. The Company’s available for sale securities are reported at their estimated fair value, which is determined utilizing several sources. The primary source is ICE Data Pricing and Reference Date, LLC (“ICE”) which purchased Interactive Data Corporation (“IDC”) but kept the IDC methodologies. Those methodologies include utilizing pricing models that vary based on asset class and include available trade, bid and other market information and whose methodology includes broker quotes, proprietary models and vast descriptive databases. Another source for determining fair value is matrix pricing, which is a mathematical technique used widely in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities’ relationship to other benchmark securities. The Company’s available for sale securities for which fair value is determined through the use of such pricing models and matrix pricing are classified as Level 2 assets.
Held to Maturity Securities
The fair value of held to maturity securities is based on quoted market prices. The Company’s held to maturity securities are reported at their amortized cost, and their estimated fair value, which is determined utilizing several sources, is disclosed in the financial statements and footnotes. The primary source is ICE Data Pricing and Reference Date, LLC (“ICE”) which purchased Interactive Data Corporation (“IDC”) but kept the IDC methodologies. Those methodologies include utilizing pricing models that vary based on asset class and include available trade, bid and other market information and whose methodology includes broker quotes, proprietary models and vast descriptive databases. Another source for determining fair value is matrix pricing, which is a mathematical technique used widely in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities’ relationship to other benchmark securities. The Company’s held to maturity securities for which fair value is determined through the use of such pricing models and matrix pricing are classified as Level 2 assets.
Other Investments
The carrying amount shown as other investments approximates fair value.
Federal Home Loan Bank Stock
The carrying amount shown as Federal Home Loan Bank Stock approximates fair value.
Loans
The fair value of fixed rate loans is estimated by discounting the future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings for the remaining maturities. The cash flows considered in computing the fair value of such loans are segmented into categories relating to the nature of the contract and collateral based on contractual principal maturities. Appropriate adjustments are made to reflect probable credit losses. Cash flows have not been adjusted for such factors as prepayment risk or the effect of the maturity of balloon notes. The fair value of floating rate loans is estimated to be its carrying value. At each reporting period, the Company determines which loans are impaired. Accordingly, the Company’s impaired loans are reported at their estimated fair value on a non-recurring basis. An allowance for each impaired loan, which are generally collateral-dependent, is calculated based on the fair value of its collateral. The fair value of the collateral is based on appraisals performed by third-party valuation specialists. Factors including the assumptions and techniques utilized by the appraiser are considered by Management. If the recorded investment in the impaired loan exceeds the measure of fair value of the collateral, a valuation allowance is recorded as a component of the allowance for loan losses. Impaired loans are non-recurring Level 3 assets.
Other Real Estate
In the course of lending operations, Management may determine that it is necessary to foreclose on the related collateral. Other real estate acquired through foreclosure is carried at fair value, less estimated costs to sell. The fair value of the collateral is based on appraisals performed by third-party valuation specialists. Factors including the assumptions and techniques utilized by the appraiser are considered by Management. If the current appraisal is more than one year old and/or the loan balance is more than $200,000, a new appraisal is obtained. Otherwise, the Bank’s in-house property evaluator and Management will determine the fair value of the collateral, based on comparable sales, market conditions, Management’s plans for disposition and other estimates of fair value obtained from principally independent sources, adjusted for estimated selling costs. Other real estate is a non-recurring Level 3 asset.
Cash Surrender Value of Life Insurance
The carrying amount of cash surrender value of bank-owned life insurance approximates fair value.
Deposits
The fair value of non-interest bearing demand and interest bearing savings and demand deposits is the amount reported in the financial statements. The fair value of time deposits is estimated by discounting the cash flows using current rates for time deposits with similar remaining maturities. The cash flows considered in computing the fair value of such deposits are based on contractual maturities, since approximately 98% of time deposits provide for automatic renewal at current interest rates.
Borrowings from Federal Home Loan Bank
The fair value of FHLB fixed rate borrowings is estimated using discounted cash flows based on current incremental borrowing rates for similar types of borrowing arrangements. The fair value of FHLB variable rate borrowings is estimated to be its carrying value.
The balances of available for sale securities, which are the only assets measured at fair value on a recurring basis, by level within the fair value hierarchy and by investment type, as of December 31, 2021 and 2020, were as follows (in thousands):
Fair Value Measurements Using
Total
Level 1
Level 2
Level 3
December 31, 2021:
U.S. Treasuries
$ 73,154
$
$ 73,154
$
Mortgage-backed securities
71,982
71,982
Collateralized mortgage obligations
129,987
129,987
States and political subdivisions
101,680
101,680
Total
$ 376,803
$
$ 376,803
$
December 31, 2020:
U.S. Treasuries
$ 20,124
$
$ 20,124
$
U.S. Government agencies
2,583
2,583
Mortgage-backed securities
72,676
72,676
Collateralized mortgage obligations
45,437
45,437
States and political subdivisions
39,310
39,310
Total
$ 180,130
$
$ 180,130
$
Impaired loans, which are measured at fair value on a non-recurring basis, by level within the fair value hierarchy as of December 31, 2021 and 2020 were as follows (in thousands):
Fair Value Measurements Using
December 31:
Total
Level 1
Level 2
Level 3
$
$
$
$
Other real estate, which is measured at fair value on a non-recurring basis, by level within the fair value hierarchy as of December 31, 2021 and 2020 are as follows (in thousands):
Fair Value Measurements Using
December 31:
Total
Level 1
Level 2
Level 3
$ 1,891
$
$
$ 1,891
3,475
3,475
The following table presents a summary of changes in the fair value of other real estate which is measured using Level 3 inputs (in thousands):
Balance, beginning of year
$ 3,475
$ 7,453
Loans transferred to ORE
Sales
(1,299 )
(4,070 )
Write-downs
(299 )
(661 )
Balance, end of year
$ 1,891
$ 3,475
The carrying value and estimated fair value of financial instruments, by level within the fair value hierarchy, at December 31, 2021 and 2020 are as follows (in thousands):
Carrying
Fair Value Measurements Using
Amount
Level 1
Level 2
Level 3
Total
December 31, 2021:
Financial Assets:
Cash and due from banks
$ 49,991
$ 49,991
$
$
$ 49,991
Available for sale securities
376,803
376,803
376,803
Held to maturity securities
110,208
111,340
111,340
Other investments
2,404
2,404
2,404
Federal Home Loan Bank stock
2,153
2,153
2,153
Loans, net
235,851
238,305
238,305
Cash surrender value of life insurance
20,150
20,150
20,150
Financial Liabilities:
Deposits:
Non-interest bearing
193,473
193,473
193,473
Interest bearing
511,365
512,034
512,034
Borrowings from Federal Home Loan
Bank
1,072
1,072
Carrying
Fair Value Measurements Using
Amount
Level 1
Level 2
Level 3
Total
December 31, 2020:
Financial Assets:
Cash and due from banks
$ 91,542
$ 91,542
$
$
$ 91,542
Available for sale securities
180,130
180,130
180,130
Held to maturity securities
75,688
78,474
78,474
Other investments
2,593
2,593
2,593
Federal Home Loan Bank stock
2,149
2,149
2,149
Loans, net
273,995
278,898
278,898
Cash surrender value of life insurance
19,609
19,609
19,609
Financial Liabilities:
Deposits:
Non-interest bearing
170,269
170,269
170,269
Interest bearing
380,229
380,733
380,733
Borrowings from Federal Home Loan
Bank
1,316
1,316
NOTE Q: SUBSEQUENT EVENTS:
On March 11, 2022, the Board declared a dividend of $ .09 per share payable March 30, 2022 to shareholders of record as of March 23, 2022.
On March 17, 2022, the bank subsidiary signed a definitive agreement with Trustmark National Bank (“Trustmark”) to acquire substantially all of Trustmark’s corporate trust business for a purchase price of $650,000. This book of business will be added to the bank subsidiary’s existing corporate trust portfolio in its Asset Management and Trust Services Department. The purchase is subject to approval by the Federal Deposit Insurance Corporation. It is expected that the transaction will close during the second quarter of 2022.
235 Peachtree Street, NE
Suite 1800
Atlanta, GA 30303
404 588 4200
wipfli.com
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To The Shareholders and Board of Directors
Peoples Financial Corporation
Biloxi, Mississippi
Opinion on the Financial Statements
We have audited the accompanying consolidated statements of condition of Peoples Financial Corporation and subsidiaries (the Company) as of December 31, 2021 and 2020, and the related consolidated statements of operations, comprehensive income (loss), and cash flows for the three years in the period ended December 31, 2021, and changes in shareholder’s equity for each of the two years in the period ended December 31, 2021, and the related notes to the financial statements (collectively, the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.
Estimate of allowance for loan losses - reserves related to loans collectively evaluated for impairment
As described in Notes A and C to the financial statements, the Company’s allowance for loan losses (“ALL”) totaled $3,169,000 relating to loans collectively evaluated for impairment (general reserve). The Company estimated the general reserve using the historical loss method which utilizes historical loss rates of pools of loans with similar risk characteristics applied to the respective loan pool balances. These amounts are then adjusted for certain qualitative factors related to current economic and general conditions currently observed by management.
We identified the estimate of the general reserve portion of the ALL as a critical audit matter because auditing this portion of the ALL required significant auditor judgment and involved significant estimation uncertainty requiring industry knowledge and experience.
The primary audit procedures we performed to address this critical audit matter included:
• We tested the completeness and accuracy of the data used by management to calculate historical loss rates.
• We tested the completeness and accuracy of the data used by management in determining qualitative factor adjustments, including the reasonable and supportable factors, by agreeing them to internal and external information.
• We analyzed the qualitative factors in comparison to historical periods to evaluate the directional consistency in relation to the Bank’s loan portfolio and local economy.
/s/ Wipfli LLP
We have served as the Company’s auditor since 2006.
Atlanta, Georgia
March 25, 2022

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.

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ITEM 9A. CONTROLS AND PROCEDURES
ITEM 9A - CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
As of December 31, 2021, an evaluation was performed under the supervision and with the participation of the Chief Executive Officer and Chief Financial Officer of the effectiveness of the Company’s disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)). Based on that evaluation, the Chief Executive Officer and the Chief Financial Officer have concluded that the Company’s disclosure controls and procedures are effective to ensure that the information required to be disclosed by the Company in the reports it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms.
Changes in Internal Control over Financial Reporting
There were no changes in the Company’s internal control over financial reporting that occurred during the period ended December 31, 2021 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
Management’s Annual Report on Internal Control Over Financial Reporting
The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rules 13(a) - 15(f) and 15(d) - 15(f) of the Securities Exchange Act of 1934. In meeting its responsibility, management relies on its accounting and other related control systems. The internal control systems are designed to ensure that transactions are properly authorized and recorded in the Company’s financial records and to safeguard the Company’s assets from material loss or misappropriation.
Management of the Company, including its Chief Executive Officer and Chief Financial Officer, assessed the effectiveness of internal control over financial reporting as of December 31, 2021, using the criteria set forth in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Our assessment included a review of the documentation of controls, evaluations of the design of the internal control system and tests of operating effectiveness of the internal controls. Based on the assessment, management has concluded that the Company had effective internal control over financial reporting as of December 31, 2021.
/s/ Chevis C. Swetman
Chevis C. Swetman
Chairman, President and Chief Executive Officer
March 25, 2022
/s/ Lauri A. Wood
Lauri A. Wood
Chief Financial Officer
March 25, 2022

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ITEM 9B. OTHER INFORMATION
ITEM 9B - OTHER INFORMATION
None.
PART III

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ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
ITEM 10 - DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Except as provided below, the information required by this item will be contained in Sections II, III, VIII and IX of our definitive proxy statement to be filed on March 25, 2022, relating to our 2022 Annual Meeting of stockholders to be April 27, 2022, and is incorporated herein by reference.
The Company’s Board of Directors has adopted a Code of Conduct that applies to not only the Chief Executive Officer and the Chief Financial Officer, but also all of the officers, directors and employees of the Company and its subsidiaries. A copy of this Code of Conduct can be found at the Company’s internet website at www.thepeoples.com. The Company intends to disclose any amendments to its Code of Conduct, and any waiver from a provision of the Code of Conduct granted to the Company’s Chief Executive Officer or Chief Financial Officer on the Company’s internet website within four business days following such amendment or waiver. The information contained on or connected to the Company’s internet website is not incorporated by reference into this Annual Report on Form 10-K and should not be considered part of this or any other report that the Company may file with or furnish to the SEC.

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ITEM 11. EXECUTIVE COMPENSATION
ITEM 11 - EXECUTIVE COMPENSATION
The information in Section VI contained in the Proxy Statement in connection with the Annual Meeting of Shareholders to be held April 27, 2022 which will be filed by the Company in definitive form with the Commission on March 25, 2022, is incorporated herein by reference.

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The information in Sections IV and V contained in the Proxy Statement in connection with the Annual Meeting of Shareholders to be held April 27, 2022, which was filed by the Company in definitive form with the Commission on March 25, 2022, is incorporated herein by reference.

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
The information in Sections III and VII contained in the Proxy Statement in connection with the Annual Meeting of Shareholders to be held April 27, 2022, which will be filed by the Company in definitive form with the Commission on March 25, 2022, is incorporated herein by reference.

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ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
ITEM 14 - PRINCIPAL ACCOUNTING FEES AND SERVICES
The information in Section XI contained in the Proxy Statement in connection with the Annual Meeting of Shareholders to be held April 27, 2022, which will be filed by the Company in definitive form with the Commission on March 25, 2022, is incorporated herein by reference.
PART IV

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ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
ITEM 15 - EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) 1. Index of Financial Statements:
See Item 8.
(a) 2. Index of Financial Statement Schedules:
All other schedules have been omitted as not applicable or not required or because the information has been included in the financial statements or applicable notes.
(a) 3. Index of Exhibits:
Description
Incorporated by Reference to
Registration or File Number
Form of
Report
Date of
Report
Exhibit Number
in Report
(2.1) Asset Purchase Agreement By and Between Trustmark National Bank and The Peoples Bank
001-12103
8-K
3/17/2022
2.1
(3.1) Articles of Incorporation
001-12103
10-K
12/31/2020
3.1
(3.2) Bylaws
001-12103
10-K
12/31/2020
3.2
(4.1) Description of Common Stock
001-12103
10-K
12/31/2020
4.1
(10.1) Description of Automobile Plan
0-30050
10-K
12/31/2003
10.1
(10.2) Directors' Deferred Income Plan Agreements
0-30050
10-K
12/31/2003
10.2
(10.3) Executive Supplemental Income Plan Agreement - Chevis C. Swetman
001-12103
10-Q
9/30/2007
10.2
(10.4) Executive Supplemental Income Plan Agreement - A. Wes Fulmer
001-12103
10-Q
9/30/2007
10.3
(10.5) Executive Supplemental Income Plan Agreement - Lauri A. Wood
001-12103
10-Q
9/30/2007
10.4
(10.6) Split Dollar Agreements
0-30050
10-K
12/31/2003
10.4
(10.7) Deferred Compensation Plan
001-12103
10-Q
9/30/2007
10.1
(10.8) Description of Stock Incentive Plan
33-15595
10-K
12/31/2001
10.6
(10.9) Description of Bonus Plan
001-12103
10-Q
9/30/2010
10.1
(21) Subsidiaries of the registrant (P)
33-15595
10-K
12/31/1988
(23.1) Consent of Independent Registered Public Accounting Firm - Wipfli LLP*
(31.1) Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes - Oxley Act of 2002 *
(31.2) Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes - Oxley Act of 2002 *
(32.1) Certification of Principal Executive Officer Pursuant to 18 U.S.C. ss. 1350*
(32.2) Certification of Principal Financial Officer Pursuant to 18 U.S.C. ss. 1350*
(101) The following materials from the Company’s 2021 Annual Report to Shareholders, formatted in iXBRL (inline Extensible Business Reporting Language): (i) Consolidated Statements of Condition at December 31, 2021 and 2020, (ii) Consolidated Statements of Operations for the years ended December 31, 2021, 2020 and 2019, (iii) Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2021, 2020 and 2019, (iv) Consolidated Statement of Changes in Shareholders’ Equity for the years ended December 31, 2021 and 2020, (v) Consolidated Statements of Cash Flows for the years ended December 31, 2021, 2020 and 2019 and (vi) Notes to the Consolidated Financial Statements for the year ended December 31, 2021, 2020 and 2019 *
(104) Cover Page Interactive Data File (embedded within the Inline XBRL and contained in Exhibit 101)
* Filed Herewith.
(P) Paper filing.