EDGAR 10-K Filing

Company CIK: 770460
Filing Year: 2025
Filename: 770460_10-K_2025_0001558370-25-003310.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, 2024, 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, 2024, 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 one non-proprietary location.
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.
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. On March 17, 2022, the bank subsidiary signed a definitive agreement with Trustmark National Bank (“Trustmark”) to acquire substantially all of the Trustmark’s corporate trust business. This book of business was added to the bank subsidiary’s existing corporate trust portfolio in its Asset Management and Trust Services Department. The purchase was closed on August 15, 2022.
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 23 ATMs at its branch locations and another other off-site, proprietary location, 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, 2024, the Bank employed 134 total employees, with 131 full-time employees and 3 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, 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 credit 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 (the “DIF”) 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, such as the Bank, are based on financial measures and supervisory ratings derived from statistical modeling estimating the probability of an institution’s failure within three years.
In October 2022, the FDIC adopted a final rule that increased the initial base deposit insurance assessment rate schedules uniformly by 2 basis points beginning with the first quarterly assessment period of 2023. The FDIC increased the insurance assessment rates in response to the 2020 decline in the DIF reserve ratio below the statutory minimum of 1.35% established by the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”). The increased assessment is expected to improve the likelihood that the reserve ratio would be restored to 1.35% by September 30, 2028 which is prescribed under the FDIC’s restoration plan. 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. Effective January 1, 2023 the FDIC’s assessment rates range for most depository institutions (which are subject to change) was 3 basis points to 30 basis points.
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 Bank is required to comply with applicable capital adequacy requirements adopted by the FDIC and the other federal bank regulatory agencies (the “Federal Capital Rules”). The Federal 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 Federal Capital Rules require 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 Federal Capital Rules also establish a minimum leverage ratio of at least 4% Tier 1 capital to average consolidated assets. In addition to the above minimum requirements, the Federal Capital Rules limit 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 financial institution’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.
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, 2024, the Bank qualified to use the CBLR and made the election to opt in to the CBLR framework during the third quarter ended September 30, 2023.
As of December 31, 2024, the Bank was in compliance with all regulatory capital requirements and qualified as “well-capitalized” under the prompt corrective action regulations.
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.
On October 24, 2023, the Office of the Comptroller of the Currency (“OCC”), Federal Reserve, and the FDIC issued a final rule to modernize their respective CRA regulations. The revised rules substantially alter the methodology for assessing compliance with the CRA, with material aspects taking effect January 1, 2026, and revised data reporting requirements taking effect January 1, 2027. Among other things, the revised rules evaluate lending outside traditional assessment areas generated by the growth of non-branch delivery systems, such as online and mobile banking, apply a metrics-based benchmarking approach to assessment, and clarify eligible CRA activities. The final rules are likely to make it more challenging and/or costly for the Bank to receive a rating of at least “satisfactory” on a CRA exam.
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.
Cybersecurity
The federal bank regulatory agencies have adopted guidelines for establishing information security standards and cybersecurity programs for implementing safeguards under the supervision of a banking organization’s board of directors. This guidance, along with related regulatory materials, increasingly focuses on risk management, processes related to information technology and the use of third parties in the provision of financial products and services. The federal bank regulatory agencies expect financial institutions to establish appropriate security controls and to ensure that their risk management processes address the risk posed by compromised customer credentials. They also expect financial institutions to maintain sufficient business continuity planning processes to ensure rapid recovery, resumption, and maintenance of the institution’s operations after a cyberattack. If we fail to meet the expectations set forth in such regulatory guidance, we could be subject to various regulatory sanctions, including financial penalties.
In November 2021, the federal bank regulatory agencies issued a final rule to improve the sharing of information about cyber incidents that may affect the U.S. banking system. The rule, which became effective on May 1, 2022, requires a banking organization to notify its primary federal regulator within 36 hours of determining that a “computer-security incident” has materially affected, or is reasonably likely to materially affect, the viability of the banking organization’s operations, its ability to deliver banking products and services, or the stability of the financial sector. In addition, the rule requires a bank service provider to notify affected banking organization customers as soon as possible when the provider determines that it has experienced a computer security incident that has materially affected, or is reasonably likely to materially affect, banking organization customers for four or more hours.
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 and the Anti-Money Laundering Act of 2020. 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 laws and regulations and unsafe or unsound practices.
Regulatory Capital Requirements
The Federal Capital Rules apply to all depository institutions as well as to bank holding companies with consolidated assets of $3 billion or more. The Federal Capital Rules 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 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% and State Income Tax rate of 3.95% in 2024, 2023 and 2022 on tax-exempt items (primarily interest on municipal securities). Non-taxable security amounts are different from 2023 and 2022 to include both the federal tax rate of 21.00% and the state tax rate of 3.95%.
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 28 and 29 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 Credit Loss Experience
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 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 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 credit loss on loans computation.
Management relies on its guidelines and existing methodology to monitor the performance of its loan portfolio and 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 secured by real estate requiring careful consideration of real estate changes in value to properly monitor risk.
The Company has adopted the CECL (Current Expected Credit Losses) methodology for estimating allowances for credit losses effective January 1, 2023. Under CECL, the allowance for credit losses (ACL) is a valuation account, measured as the difference between the Bank’s amortized cost basis and the net amount expected to be collected on the financial assets (i.e., lifetime credit losses). The CECL methodology described in FASB Accounting Standards Update (ASU) 2016-13, Financial Instruments-Credit Losses (Topic 326), applies to financial assets measured at amortized cost, and off-balance-sheet credit exposures (collectively, financial assets) including: financing receivables such as loans held for investment, held to maturity debt securities, off-balance-sheet credit exposures (unfunded commitments) including off-balance sheet loan commitments; standby letters of credit; and other similar instruments.
Further information concerning the provision for credit losses on loans, unfunded commitments and securities 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 2024 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 2020 - 2024 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 $0.44, $0.53, and $0.19 per share for the years ended December 31, 2024, 2023 and 2022, respectively.
Distribution of Average Assets, Liabilities and Shareholders’ Equity (1) (In thousands)
For the Years Ended December 31,
ASSETS:
Cash and due from banks
$
20,287
$
24,542
$
27,008
Available for sale securities:
Taxable securities
365,023
331,458
392,645
Non-taxable securities
3,699
3,873
4,740
Other securities
2,116
2,215
2,155
Held to maturity securities:
Taxable securities
105,249
170,161
105,047
Non-taxable securities
32,986
36,222
37,557
Other investments
Net loans (2)
233,455
230,927
232,430
Balances due from depository institutions
33,261
33,556
49,550
Other assets
50,330
47,278
42,947
TOTAL ASSETS
$
846,756
$
880,582
$
894,429
LIABILITIES AND SHAREHOLDERS' EQUITY:
Non-interest bearing deposits
$
169,533
$
189,084
$
197,789
Interest bearing deposits
539,720
602,333
605,665
Total deposits
709,253
791,417
803,454
Other liabilities
61,089
28,747
26,921
Total liabilities
770,342
820,164
830,375
Shareholders' equity
76,414
60,418
64,054
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
$
846,756
$
880,582
$
894,429
(1) All averages are computed on a daily basis.
(2) Gross loans and discounts, net of unearned income and allowance for credit 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)
$
236,596
$
234,189
$
235,801
Balances due from depository institutions
33,261
33,556
49,550
Available for sale securities:
Taxable securities
365,023
331,458
392,645
Non-taxable securities
3,699
3,873
4,740
Other securities
2,116
2,215
2,155
Held to maturity securities:
Taxable securities
105,249
170,161
105,047
Non-taxable securities
32,986
36,222
37,557
TOTAL INTEREST EARNING ASSETS
$
778,930
$
811,674
$
827,495
INTEREST BEARING LIABILITIES:
Savings and negotiable interest bearing deposits
$
506,404
$
566,737
$
527,273
Time deposits
33,317
35,596
78,392
Borrowings under Federal Reserve Bank Term Funding Program
28,689
-
-
Borrowings from Federal Home Loan Bank
10,488
7,382
5,561
TOTAL INTEREST BEARING LIABILITIES
$
578,898
$
609,715
$
611,226
(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
$
14,821
$
12,945
$
11,135
Balances due from depository institutions
1,776
1,625
Available for sale securities:
Taxable securities
12,630
11,250
8,482
Non-taxable securities
Other securities
Held to maturity securities:
Taxable securities
2,885
5,793
2,713
Non-taxable securities
1,009
1,090
1,105
TOTAL INTEREST EARNED (1)
$
33,374
$
32,932
$
24,023
INTEREST PAID ON:
Savings and negotiable interest bearing deposits
$
6,947
$
5,507
$
1,636
Time deposits
Other borrowed funds
2,006
TOTAL INTEREST PAID
$
9,643
$
6,155
$
2,158
(1) All interest earned is reported on a taxable equivalent basis using a tax rate of 24.95% for 2024, 2023 and 2022. See disclosure of non-GAAP financial measures on pages 24 and 25.
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
6.26
%
5.53
%
4.72
%
Balances due from depository institutions
5.34
%
4.84
%
0.83
%
Available for sale securities:
Taxable securities
3.46
%
3.39
%
2.16
%
Non-taxable securities
2.94
%
3.20
%
3.23
%
Other securities
6.81
%
4.74
%
1.02
%
Held to maturity securities:
Taxable securities
2.74
%
3.40
%
2.58
%
Non-taxable securities
3.06
%
3.01
%
2.94
%
TOTAL (weighted average rate)(1)
4.28
%
4.05
%
2.90
%
AVERAGE RATE PAID ON:
Savings and negotiable interest bearing deposits
1.37
%
0.97
%
0.31
%
Time deposits
2.07
%
0.67
%
0.45
%
Other borrowed funds
5.12
%
5.54
%
3.11
%
TOTAL (weighted average rate)
1.67
%
1.01
%
0.35
%
(1) All interest earned is reported on a taxable equivalent basis using a tax rate of 24.95% for 2024, 2023 and 2022. See disclosure of non-GAAP financial measures on pages 24 and 25.
Net Interest Earnings and Net Yield on Interest Earning Assets
(In thousands, except percentages)
For the Years Ended December 31,
Total interest income (1)
$
33,374
$
32,932
$
24,023
Total interest expense
9,643
6,155
2,158
Net interest earnings
$
23,731
$
26,777
$
21,865
Net interest margin
3.05
%
3.29
%
2.64
%
(1) All interest earned is reported on a taxable equivalent basis using a tax rate of 24.95% for 2024, 2023 and 2022. See disclosure of non-GAAP financial measures on pages 24 and 25.
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)
$
14,821
$
12,945
$
1,876
$
$
1,725
$
Balances due from depository institutions
1,776
1,625
(14)
(2)
Available for sale securities:
Taxable securities
12,630
11,250
1,380
1,139
Non-taxable securities
(15)
(6)
(10)
Other securities
(5)
(2)
Held to maturity securities:
Taxable securities
2,885
5,793
(2,908)
(2,210)
(1,128)
Non-taxable securities
1,009
1,090
(81)
(97)
(2)
TOTAL INTEREST EARNED (2)
$
33,374
$
32,932
$
$
(1,060)
$
1,037
$
INTEREST PAID ON:
Savings and negotiable interest bearing deposits
$
6,947
$
5,507
$
1,440
$
(586)
$
2,268
$
(242)
Time deposits
(15)
(33)
Other borrowed funds
2,006
1,597
1,762
(31)
(134)
TOTAL INTEREST PAID
$
9,643
$
6,155
$
3,488
$
1,161
$
2,736
$
(409)
(1) Loan fees of $515 and $397 for 2024 and 2023, respectively, are included in these figures.
(2) All interest earned is reported on a taxable equivalent basis using a tax rate of 24.95% for 2024 and 2023. See disclosure of non-GAAP financial measures on pages 24 and 25.
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)
$
12,945
$
11,135
$
1,810
$
(76)
$
1,899
$
(13)
Balances due from depository institutions
1,625
1,212
(133)
1,987
(642)
Available for sale securities:
Taxable securities
11,250
8,482
2,768
(1,322)
4,845
(755)
Non-taxable securities
(29)
(28)
(1)
-
Other securities
Held to maturity securities:
Taxable securities
5,793
2,713
3,080
1,682
Non-taxable securities
1,090
1,105
(15)
(39)
(1)
TOTAL INTEREST EARNED (2)
$
32,932
$
24,023
$
8,909
$
$
9,698
$
(874)
INTEREST PAID ON:
Savings and negotiable interest bearing deposits
$
5,507
$
1,636
$
3,871
$
$
3,488
$
Time deposits
(110)
(191)
(97)
Other borrowed funds
TOTAL INTEREST PAID
$
6,155
$
2,158
$
3,997
$
(11)
$
3,800
$
(1) Loan fees of $397 and $659 for 2023 and 2022, respectively, are included in these figures. Of the loan fees recognized in 2023 and 2022, $0 and $125, respectively, were related to PPP loans.
(2) All interest earned is reported on a taxable equivalent basis using a tax rate of 24.95% for 2023 and 2022. See disclosure of non-GAAP financial measures on pages 24 and 25.
Maturity of Securities Portfolio at December 31, 2024
And Weighted Average Yields of Such Securities
(In thousands, except percentage data)
Maturity
After one year but
After five years but
Within one year
within five years
within ten years
After ten years
December 31, 2024
Amount
Yield
Amount
Yield
Amount
Yield
Amount
Yield
Available for sale securities:
U.S. Treasuries, Mortgage-backed securities and Collateralized Mortgage Obligations
$
31,467
4.24
%
$
132,852
2.67
%
$
58,251
3.74
%
$
5,851
1.56
%
States and political subdivisions
4.71
%
6,764
1.55
%
41,679
1.88
%
31,644
2.11
%
Total
$
31,607
4.24
%
$
139,616
2.62
%
$
99,930
2.90
%
$
37,495
2.02
%
Held to maturity securities:
U.S. Treasuries, Mortgage-backed securities and Collateralized Mortgage Obligations
$
24,995
3.53
%
$
14,983
3.39
%
$
-
-
%
$
-
-
%
States and political subdivisions
3,450
3.34
%
30,676
2.57
%
30,691
2.42
%
18,401
3.00
%
Total
$
28,445
3.51
%
$
45,659
2.84
%
$
30,691
2.42
%
$
18,401
3.00
%
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, 2024
(In thousands)
The maturity distribution for loans are summarized below:
Maturity
Over one year
Over 5 years
through 5
through 15
December 31, 2024
One year or less
years
years
Over 15 years
Total
Real estate, residential
$
3,144
$
29,742
$
45,339
$
$
78,952
Real estate, construction
3,795
9,354
2,960
17,016
Real estate, nonresidential
3,471
47,685
53,395
9,712
114,263
Commercial and industrial
2,419
7,600
3,362
-
13,381
Other
1,441
8,189
-
9,964
Total
$
14,270
$
102,570
$
105,390
$
11,346
$
233,576
The dollar amount, as of December 31, 2024, of fixed and floating rate loans that mature after December 31, 2025, are presented in the following table:
Fixed Rate
Floating Rate Loans
Loans
Loans
Total
Real estate, residential
$
72,996
$
2,812
$
75,808
Real estate, construction
10,439
2,782
13,221
Real estate, nonresidential
90,398
20,394
110,792
Commercial and industrial
3,593
7,369
10,962
Other
8,523
-
8,523
Total
$
185,949
$
33,357
$
219,306
Credit Quality Indicators
(In thousands except ratios)
Real Estate,
Real Estate,
Real Estate,
Commercial
Residential
Construction
Nonresidential
and Industrial
Other
Total
December 31, 2024:
Allowance for credit losses
$
$
$
1,835
$
$
2,982
Nonaccrual loans
-
-
-
-
Total loans
78,952
17,016
114,263
13,381
9,964
233,576
Average loans
76,624
22,185
115,276
12,939
9,572
236,596
Net charge-offs (recoveries)
(2)
-
(85)
(42)
Allowance for credit losses to total loans ratio
0.86
%
0.79
%
1.61
%
0.69
%
2.45
%
1.28
%
Nonaccrual loans to total loans ratio
0.53
%
-
-
-
-
0.18
%
Allowance for credit losses to nonaccrual loans ratio
161.72
%
-
-
-
-
713.40
%
Net charge-offs (recoveries) to average loans ratio
-
0.18
%
0.01
%
-
%
(0.89)
%
(0.02)
%
December 31, 2023:
Allowance for credit losses
$
$
$
1,807
$
$
3,224
Nonaccrual loans
-
-
-
-
Total loans
74,296
27,353
115,014
12,496
9,180
238,339
Average loans
71,091
27,129
116,447
11,758
7,764
234,189
Net charge-offs (recoveries)
-
(9)
(467)
(140)
Allowance for credit losses to total loans ratio
1.31
%
0.63
%
1.57
%
0.43
%
2.39
%
1.35
%
Nonaccrual loans to total loans ratio
0.29
%
-
-
-
-
0.09
%
Allowance for credit losses to nonaccrual Loans ratio
455.87
%
-
-
-
-
1,513.62
%
Net charge-offs (recoveries) to average loans ratio
-
(0.03)
%
0.21
%
(4.06)
%
1.11
%
(0.06)
%
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
Real estate, residential
$
%
$
%
Real estate, construction
%
%
Real estate, nonresidential
1,835
%
1,807
%
Commercial and industrial (1)
%
%
Other
%
%
Total
$
2,982
%
$
3,224
%
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
$
169,533
N/A
$
189,084
N/A
$
197,789
N/A
Interest bearing demand deposits
423,152
1.60
%
468,857
1.15
%
423,883
0.38
%
Savings deposits
83,252
0.23
%
97,880
0.10
%
103,390
0.04
%
Time deposits
33,316
2.07
%
35,596
0.67
%
78,392
0.45
%
Total (1)
$
709,253
1.42
%
$
791,417
1.01
%
$
803,454
0.35
%
(1) All deposits are domestic.
Total uninsured deposits were (in thousands):
December 31,
Uninsured deposits
$
460,720
$
354,152
Certificates of deposit in amounts of $250,000 or more by the amount of time remaining until maturity as of December 31, 2024, are as follows (in thousands):
Remaining maturity:
3 months or less
$
5,944
Over 3 months through 6 months
6,455
Over 6 months through 12 months
7,392
Over 12 months
Total
$
20,563
Capital Resources
Information about the Company’s capital resources is included in “Note J - Shareholders’ Equity” to the 2024 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.

---

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

---

ITEM 2. PROPERTIES
ITEM 2 - PROPERTIES
The principal properties of the Company are its 17 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. 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

---

ITEM 3. LEGAL PROCEEDINGS
ITEM 3 - LEGAL PROCEEDINGS
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.
Additionally, on June 30, 2023, Stilwell Activist Investments, L.P., issued a letter to the Company and each of the directors of the Company demanding that they immediately commence litigation on behalf of the Company for an alleged breach by the Company’s Board of Directors of its fiduciary duties in allegedly failing to properly oversee and supervise Chevis and Tanner Swetman’s management of the Company. At its July meeting, the Board of Directors of the Company established a Special Litigation Committee made up of the independent directors to investigate the allegations made in the letter. Rather than wait for the Special Litigation Committee to conclude its inquiry, Stilwell Activist Investments, L.P., filed a Complaint against the Company and Directors Chevis Swetman, Padrick D. Dennis, Jeffrey H. O’Keefe, Paige Reed Riley, Ronald Barnes, and George Sliman, III, making the same allegations that appear in the demand letter. The Court stayed the lawsuit pending the Special Litigation Committee’s inquiry. The Special Litigation Committee concluded that pursuing the claims is not in the Company’s best interest, and the Company filed a motion to dismiss that the court denied. The Company has appealed that ruling.
The plaintiff, Stilwell Activist Investments, L.P., is a shareholder of record of the Company and is controlled by Joseph Stilwell, an individual who beneficially owns 14.0% of the issued and outstanding common stock of the Company according to an Amended Schedule 13D filed by Mr. Stilwell and his related entities with the SEC on January 23, 2025, disclosing Company stock beneficially owned by Mr. Stilwell’s group. Mr. Stilwell and his related entities, including Stilwell Activist Investments, L.P., have nominated an individual for election to the Board of Directors of the Company at its last four annual meetings, but each individual nominated was not elected to the Board of Directors of the Company. Mr. Stilwell and his related entities, including Stilwell Activist Investments, L.P., have again nominated an individual, Mr. Stewart F. Peck, for election to the Board of Directors of the Company at its 2025 annual meeting to be held on April 23, 2025.
Information relating to legal proceedings is included in Note M - Contingencies to the 2024 Consolidated Financial Statements which is in Item 8 in this Annual Report on Form 10-K, which is incorporated herein by reference.

---

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

---

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 05, 2025, there were 364 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 or other nominee accounts. At March 05, 2025, there were 4,617,466 shares of common stock issued and outstanding.
Share Repurchases
On April 24, 2024, the Board authorized the repurchase of up to $1,000,000 in additional shares of the Company’s outstanding common stock, subject to an expiration date of December 31, 2024. Prior to the expiration date, the Company repurchased 44,220 shares at an average price per share of $17.95. Under this program, 44,220 shares of the Company common stock were repurchased in November 2024.
At December 31, 2024 the plan expired and no remaining shares could be repurchased under the Board-approved plan, despite the fact that less than $1,000,000 of shares of the Company’s common stock were purchased under the plan.
Information concerning the Company’s repurchase of its outstanding common stock during the year ended December 31, 2024, is set forth in the following table:
Maximum Dollar Amount
Total Dollar Amount of
of Shares that May
Total Number of
Average
Shares Purchased as Part
Yet Be Purchased
of Shares
Price
of Publicly Announced
Under the Plans
Period
Purchased
Per Share
Plans or Programs
or Programs
November 1 - 30, 2024
44,220
$
17.90
$
791,538
$
11,646
December 1 - 31, 2024
-
$
-
$
791,538
$
-
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.

---

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

---

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 condition and results of operations of the Company and its consolidated subsidiaries for the years ended December 31, 2024, 2023 and 2022. 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: changes in interest rates and market prices, changes in local economic and business conditions, increased competition for deposits and loans, changes in the availability of funds resulting from reduced liquidity, changes in statutes, government regulations or regulatory policies or practices 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 2024, which are disclosed in Note A to the Consolidated Financial Statements. The Company does not expect that the 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. The determination of the fair value of securities may require Management to develop estimates and assumptions regarding the amount and timing of cash flows. On January 1, 2023 the Company adopted the Accounting Standards Codification (“ASC”) 326, “Financial Instruments-Credit Losses”, more commonly referred to as CECL which requires an assessment of the Company’s available for sale and held to maturity debt securities for expected credit losses.
Allowance for credit losses on loans and leases and unfunded lending commitments
On January 1, 2023 the Company adopted Accounting Standards Codification (“ASC”) 326, “Financial Instruments-Credit Losses”, more commonly referred to as CECL. Under CECL, the allowance for credit losses (ACL) is a valuation account, measured as the difference between the Bank’s amortized cost basis and the net amount expected to be collected on the financial assets (i.e., lifetime credit losses).
The CECL methodology described in FASB Accounting Standards Update (ASU) 2016-13, Financial Instruments-Credit Losses (Topic 326), applies to financial assets measured at amortized cost, and off-balance-sheet credit exposures (collectively, financial assets).
In general, the Bank uses a broad range of data to estimate expected credit losses under CECL, including information about past events, current conditions, and reasonable and supportable forecasts relevant to assessing the collectability of the cash flows of financial assets.
CECL requires the Bank to measure expected credit losses on financial assets carried at amortized cost on a collective or pool basis when similar risk characteristics exist. The Bank has determined that Call Report categories will be utilized, and Management will maintain the option to further segment the portfolio if we deem it beneficial to the analysis.
Estimating an appropriate ACL involves a high degree of Management judgment. As such, it is Management’s responsibility to record the Bank’s best estimate of expected credit losses and provide it to the Board of Directors.
The analysis is prepared and reported to the Board of Directors on a quarterly basis. The option and decision to prepare the analysis more frequently will remain with Management.
One of the Company’s critical accounting policies relates to its allowance for credit losses, which reflects the estimated losses resulting from the inability of its borrowers to make loan payments. The allowance for credit losses is established and maintained at an amount sufficient to absorb losses on loans and leases held for investment. 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 allowance for credit losses.
Management believes that the allowance for credit losses is adequate and appropriate for all periods presented in these financial statements. All credit relationships with an outstanding balance of $50,000 or greater that are included in Management’s loan watch list are individually reviewed for credit losses.
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
The Company uses the asset and liability method of accounting for deferred income taxes and provides deferred income taxes for all significant income tax temporary differences. As part of the process of preparing the consolidated financial statements, the Company is required to estimate income taxes in each of the jurisdictions in which it operates. This process involves estimating the actual current tax exposure together with assessing temporary differences resulting from differing treatment of items, such as the provision for credit losses, for tax and financial reporting purposes. These differences result in deferred tax assets and liabilities that are included in the consolidated statement of condition. The Company must also assess the likelihood that the deferred tax assets will be recovered from future taxable income, and, to the extent Management believes that recovery is not likely, the Company must establish a valuation allowance. Significant Management judgment is required in determining the provision for income taxes, the deferred tax assets and liabilities and any valuation allowance recorded against the net deferred tax assets. To the extent the Company establishes a valuation allowance or adjusts this allowance in a period, the Company must include an expense or a benefit within the tax provisions in the consolidated statement of operations.
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, 2024, 2023 and 2022 is included below.
RECONCILIATION OF NON-GAAP PERFORMANCE MEASURES
(in thousands)
Years Ended December 31,
Interest income (GAAP)
Interest income - taxable equivalent
$
33,094
$
32,629
$
23,708
Taxable equivalent adjustment
Interest income reconciliation:
$
33,374
$
32,932
$
24,023
Net interest income (GAAP)
Net interest income - taxable equivalent
$
23,451
$
26,474
$
21,550
Taxable equivalent adjustment
Interest income reconciliation:
$
23,731
$
26,777
$
21,865
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.
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 funds rate has been a strategy pursued in 2023 and 2022 to address this issue. The Federal Reserve has raised interest rates a total of 100 basis points during 2023 and 425 basis points during 2022 in an effort to promote maximum employment, keep prices stable and have moderate long-term interest rates. Due to a weakening labor market the Federal Reserve has changed its course of action and has reduced interest rates by 100 basis points during 2024.
Assisting our customers during the pandemic was 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 recorded loan fees associated with the PPP loan program in the amount of approximately $125,000 in 2022.
The Company reported net income of $21,703,000 for 2024 compared with net income of $9,166,000 for 2023 compared with net income of $8,941,000 for 2022, respectively. Results in 2024 included a discrete item recorded as a tax benefit for the reversal of the Company’s valuation allowance on federal and state deferred tax assets during the third quarter of 2024, an increase in total interest income, a decrease in the allowance for credit losses, and in increase in total interest expense. Results in 2023 included an increase in net interest income, a decrease in the allowance for credit losses, which were partially offset by an increase in non-interest expense, and the recording of tax expense. Results in 2022 included an increase in net interest income, an increase in the allowance for loans losses which were partially offset by an increase in non-interest income, a decrease in non-interest expense, and the recording of a tax benefit.
Managing the net interest margin is a key component of the Company’s earnings strategy. During 2022, the Federal Reserve increased rates by 425 basis points and increased again 50 basis points in the first quarter of 2023, 25 basis points in the second quarter of 2023 and another 25 basis points in the third quarter of 2023 in an effort to slow inflation. During 2024, due to a weakening labor market and a change in its course of action, the Federal Reserve has decreased rates by 50 basis points in the third quarter of 2024, and another 50 basis points in the fourth quarter of 2024.
As a result, net interest income decreased $3,023,000 as compared with 2023. This decrease was attributable to higher interest expense mainly on borrowed funds. The Company did see an increase in total interest income of $465,000 as compared to 2023 which was due to yields on loans remaining strong and higher loan fees. However, the increase in rates during 2023 caused total interest expense to increase $3,488,000 in 2024 as compared with 2023. The decrease in rates during 2024 has not started to impact the cost of funds.
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 of the provision for the allowance for credit losses of $162,000 was recorded in 2024 compared to a reduction in the allowance for credit losses of $272,000 recorded in 2023. An increase in the allowance for loan losses of $80,000 was recorded in 2022. On June 30, 2023, following a foreclosure, a large loan was charged off in the amount of $186,000 and the related property was moved into other real estate. This increased the Bank’s other real estate balance to $952,000. In October 2023, funds were received to settle the sale of one property in other real estate reducing the balance to $1. On December 30, 2024, following a repossession, related property was moved into other real estate increasing the balance to $9,000 at December 31, 2024. The Company’s nonaccrual loans totaled $418,000 and $213,000 at December 31, 2024 and 2023. 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 increased $120,000 in 2024 as compared with 2023 results and decreased $1,000 in 2023 as compared with 2022 results. The increase in 2024 was primarily the result of an increase in trust department income and fees and an increase in Bank-owned Life Insurance (“BOLI”) income along with other income offset slightly by a decrease in service charges on deposits accounts. The decrease in 2023 was primarily the result of a decrease in service charge and other income offset mostly by an increase in trust income related to an acquisition.
Non-interest expenses decreased $106,000 in 2024 as compared with 2023 and increased $498,000 in 2023 as compared with 2022. The decrease in 2024 was primarily due to lower salaries and employee benefits of $645,000 which was the result of an increase in the discount rate that decreased the liability on deferred compensation expense, although that decrease was offset mostly by higher depreciation and maintenance expenses of $229,000 and higher other expense of $212,000 as compared with 2023. The increase in 2023 was primarily due to higher net occupancy, legal, accounting, compliance and trust expenses.
Total assets at December 31, 2024 increased $34,111,000 as compared with December 31, 2023. Total deposits increased $32,240,000 primarily because the asset management and trust department’s deposit account brought in funds to pay bond principal and interest payments which funds were transferred back out of the Bank at the beginning of January 2025 to satisfy these payments. This increase in deposits resulted in an increase in overnight cash and due from banks of $84,950,000 while loans decreased $4,763,000. In order to stay liquid, there was a decrease in net securities, since the funds have been placed in cash and due from banks and used to pay off borrowings as securities mature.
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.
2024 as compared with 2023
The Company’s average interest-earning assets decreased approximately $32,744,000, or 4.03%, from approximately $811,674,000 for 2023 to approximately $778,930,000 for 2024. Average taxable held to maturity securities decreased approximately $64,912,000, average nontaxable held to maturity securities decreased approximately $3,236,000 and average taxable available for sale securities increased approximately $33,565,000 as investment maturities and calls exceeded purchases of securities in total. Average fed funds sold decreased approximately $295,000. These decreases
were caused by the decrease in savings and interest-bearing DDA balances during the same period due to the runoff of several large public fund depositors. Average loans increased approximately $2,407,000 as new loans exceeded principal payments, paydowns, maturities, and charge-offs on existing loans. The increase in average loans and the decrease in average deposits, as discussed below, caused less new purchases in investments in securities and an increase in borrowed funds. The average yield on interest-earning assets was 4.28% for 2024 compared with 4.05% for 2023. The yield on average loans increased as a result of the lingering effects of the increase in prime rate during 2023 as discussed in the Overview.
Average interest-bearing liabilities decreased approximately $30,817,000, or 5.05%, from approximately $609,715,000 for 2023 to approximately $578,898,000 for 2024. Average savings and interest-bearing DDA balances decreased approximately $60,333,000 primarily because several large public fund customers maintained lower balances throughout the year with the bank subsidiary prior to withdrawing funds. The average rate paid on interest-bearing liabilities increased from 1.01% for 2023 to 1.67% for 2024. This increase was the result of increased rates in 2023, but rates should start to decrease into 2025 due to a decrease in market rates at the end of 2024.
The Company’s net interest margin on a nontax-equivalent basis, which is net interest income as a percentage of average earning assets, was 3.26% for 2023 as compared with 3.01% for 2024.
The Company’s net interest margin on a tax-equivalent basis, which is net interest income as a percentage of average earning assets, was 3.29% for 2023 as compared with 3.05% for 2024.
2023 as compared with 2022
The Company’s average interest-earning assets decreased approximately $15,821,000, or 1.91%, from approximately $827,495,000 for 2022 to approximately $811,674,000 for 2023. Average taxable held to maturity securities increased approximately $65,114,000, average nontaxable held to maturity securities decreased approximately $1,335,000 and average taxable available for sale securities decreased approximately $61,187,000 as investment maturities and calls exceeded purchases of these securities. Average fed funds sold decreased approximately $15,994,000. These decreases were caused by the decrease in savings and interest-bearing DDA balances during the same period due to the runoff of several large public fund depositors. Average loans decreased approximately $1,612,000 as principal payments, paydowns, maturities, and charge-offs on existing loans exceeded new loans. The decrease in average loans and the decrease in average deposits, as discussed below, caused less new purchases in investments in securities and an increase in borrowed funds. The average yield on interest-earning assets was 4.05% for 2023 compared with 2.90% for 2022. The yield on average investment securities increased as a result of the increase in prime rate during 2023 as discussed in the Overview.
Average interest-bearing liabilities decreased approximately $1,511,000, or 0.25%, from approximately $611,226,000 for 2022 to approximately $609,715,000 for 2023. Average savings and interest-bearing DDA balances increased approximately $39,464,000 primarily as several large public fund customers maintained higher balances throughout the year with the bank subsidiary prior to withdrawing funds, while interest-bearing time deposits decreased approximately $42,796,000 mainly due to higher competitive rates paid by other local financial institutions. The average rate paid on interest-bearing liabilities increased from 0.35% for 2022 to 1.01% for 2023. This increase was the result of increased rates in 2022 and 2023.
The Company’s net interest margin on a nontax-equivalent basis, which is net interest income as a percentage of average earning assets, was 2.60% for 2022 as compared with 3.26% for 2023.
The Company’s net interest margin on a tax-equivalent basis, which is net interest income as a percentage of average earning assets, was 2.64% for 2022 as compared with 3.29% for 2023.
The tables below analyze the changes in tax-equivalent net interest income for the years ended December 31, 2024, 2023 and 2022.
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)
$
236,596
$
14,821
6.26
%
$
234,189
$
12,945
5.53
%
$
235,801
$
11,135
4.72
%
Balances due from depository institutions
33,261
1,776
5.34
%
33,556
1,625
4.84
%
49,550
0.83
%
Held to maturity:
Taxable
105,249
2,885
2.74
%
170,161
5,793
3.40
%
105,047
2,713
2.58
%
Non taxable (3)
32,986
1,009
3.06
%
36,222
1,090
3.01
%
37,557
1,105
2.94
%
Available for sale:
Taxable
365,023
12,630
3.46
%
331,458
11,250
3.39
%
392,645
8,482
2.16
%
Non taxable (3)
3,699
2.94
%
3,873
3.20
%
4,740
3.23
%
Other
2,116
6.81
%
2,215
4.74
%
2,155
1.02
%
Total
$
778,930
$
33,374
4.28
%
$
811,674
$
32,932
4.05
%
$
827,495
$
24,023
2.90
%
Savings and interest-bearing DDA
$
506,404
$
6,947
1.37
%
$
566,737
$
5,507
0.97
%
$
527,273
$
1,636
0.31
%
Time deposits
33,317
2.07
%
35,596
0.67
%
78,392
0.45
%
Other borrowed funds
39,177
2,006
5.12
%
7,382
5.54
%
5,561
3.11
%
Total
$
578,898
$
9,643
1.67
%
$
609,715
$
6,155
1.01
%
$
611,226
$
2,158
0.35
%
Net tax-equivalent spread
2.62
%
3.04
%
2.55
%
Net tax-equivalent margin on earning assets
3.05
%
3.29
%
2.64
%
(1) Loan fees of $515, $397 and $659 for 2024, 2023 and 2022, respectively, are included in these figures. Of the loan fees recognized in 2024, 2023 and 2022, $0, $0 and $125, 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 24.95% in 2024, 2023 and 2022. See disclosure of Non-GAAP financial measures on pages 24 and 25.
ANALYSIS OF CHANGES IN INTEREST INCOME AND EXPENSE
(in thousands)
For the Year Ended
December 31, 2024 Compared With December 31, 2023
Volume
Rate
Rate/Volume
Total
Interest earned on:
Loans
$
$
1,725
$
$
1,876
Balances due from depository institutions
(14)
(2)
Held to maturity securities:
Taxable
(2,210)
(1,128)
(2,908)
Non taxable
(97)
(2)
(81)
Available for sale securities:
Taxable
1,139
1,380
Non taxable
(6)
(10)
(15)
Other
(5)
(2)
Total
$
(1,060)
$
1,037
$
$
Interest paid on:
Savings and interest-bearing DDA
$
(586)
$
2,268
$
(242)
$
1,440
Time deposits
(15)
(33)
Other borrowed funds
1,762
(31)
(134)
1,597
Total
$
1,161
$
2,736
$
(409)
$
3,488
ANALYSIS OF CHANGES IN INTEREST INCOME AND EXPENSE
(in thousands)
For the Year Ended
December 31, 2023 Compared With December 31, 2022
Volume
Rate
Rate/Volume
Total
Interest earned on:
Loans
$
(76)
$
1,899
$
(13)
$
1,810
Balances due from depository institutions
(133)
1,987
(642)
1,212
Held to maturity securities:
Taxable
1,682
3,080
Non taxable
(39)
(1)
(15)
Available for sale securities:
Taxable
(1,322)
4,845
(755)
2,768
Non taxable
(28)
(1)
-
(29)
Other
Total
$
$
9,698
$
(874)
$
8,909
Interest paid on:
Savings and interest-bearing DDA
$
$
3,488
$
$
3,871
Time deposits
(191)
(97)
(110)
Other borrowed funds
Total
$
(11)
$
3,800
$
$
3,997
Provision for Credit 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 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 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 credit loss on loans computation.
Management relies on its guidelines and existing methodology to monitor the performance of its loan portfolio and 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 secured by real estate requiring careful consideration of real estate changes in value to properly monitor risk.
The Company has adopted the CECL (Current Expected Credit Losses) methodology for estimating allowances for credit losses effective January 1, 2023. Under CECL, the allowance for credit losses (ACL) is a valuation account, measured as the difference between the Bank’s amortized cost basis and the net amount expected to be collected on the financial assets (i.e., lifetime credit losses). The CECL methodology described in FASB Accounting Standards Update (ASU) 2016-13, Financial Instruments-Credit Losses (Topic 326), applies to financial assets measured at amortized cost, and off-balance-sheet credit exposures (collectively, financial assets) including: financing receivables such as loans held for investment, held to maturity debt securities, off-balance-sheet credit exposures (unfunded commitments) including off-balance sheet loan commitments; standby letters of credit; and other similar instruments.
In general, the Bank uses a broad range of data to estimate expected credit losses under CECL, including information about past events, current conditions, and reasonable and supportable forecasts relevant to assessing the collectability of the cash flows of financial assets. The following represents an overview of key factors regarding CECL: CECL requires the Bank to measure expected credit losses on financial assets carried at amortized cost on a collective or pool basis when
similar risk characteristics exist. The Bank has determined that Call Report categories will be utilized, and Management will maintain the option to further segment the portfolio if we deem it beneficial to the analysis.
As stated above, CECL also applies to held to maturity debt securities since they are carried at amortized cost and are within the scope of the standard. Therefore, it is the responsibility of management to establish any required allowances for credit losses on the Bank’s held to maturity debt securities as of the date the Bank adopts CECL and to maintain such allowances thereafter. Because CECL requires the Bank to measure expected credit losses on a collective or pool basis when similar risk characteristics exist, held to maturity debt securities that share similar risk characteristics are collectively assessed for credit losses.
Estimating an appropriate ACL involves a high degree of management judgment. As such, it is Management’s responsibility to record the Bank’s best estimate of expected credit losses and provide it to the Board of Directors. The analysis is prepared and reported to the Board of Directors on a quarterly basis. The option and decision to prepare the analysis more frequently will remain with management.
Estimation Methods for Expected Credit Losses-Accounting Standards Codification (“ASC”) 326, “Financial Instruments-Credit Losses,” does not require the use of a specific loss estimation method for purposes of determining ACLs. Various methods may be used to estimate the expected collectability of financial assets, with those methods generally applied consistently overtime. The same loss estimation method does not need to be applied to all financial assets. Loss-rate methods can involve a variety of approaches, and Management incorporates the methods below:
Open Pool or Snapshot Method
The starting point for the calculation consists of assets that are outstanding at the end of a given time frame and are made up of assets that were originated in various years. Additional assets may be added to pools of loans under an open pool method.
Qualitative Factor Adjustments
The estimation of ACLs is to reflect consideration of all significant factors relevant to the expected collectability of the Bank’s financial assets as of the reporting date. Management begins their expected credit loss estimation process by determining the Bank’s historical loss information.
Management is to consider the need to qualitatively adjust expected credit loss estimates for information not already captured in the loss estimation process. These qualitative factor adjustments may increase or decrease management’s estimate of expected credit losses.
Historical loss experience generally provides a quantitative starting point for Management’s estimate of expected credit losses. Consistent with FASB ASU Topic 326, Management must consider relevant qualitative factors that may cause the CECL estimate of the financial asset portfolio as of the evaluation date to differ from the historical loss experience.
Management is to consider the qualitative factors that are relevant to the Bank as of the reporting date.
The Company’s on-going, systematic evaluation resulted in the Company recording a provision for the allowance for credit losses on unfunded commitments of $28,000, a provision of $10,000 for credit losses on held to maturity securities and a negative provision of ($200,000) for the allowance for credit losses in 2024. The Company recorded a negative provision for the allowance for credit losses on unfunded commitments of $(17,000), a negative provision for the allowance for credit losses on held to maturity securities of $(11,000) and a negative provision for the allowance for credit losses of $(244,000) in 2023. The Company recorded a provision of $80,000 for the allowance for loan losses in 2022.
During the year ended December 31, 2024 one piece of equipment was repossessed resulting in a balance of $9,000 in other real estate at the end of the year. During the year ended December 31, 2023 one large loan on nonaccrual prior to foreclosure was moved to other real estate then later sold during the year along with a recovery of another loan in the amount of $468,000. The Company’s analysis includes evaluating the current values of collateral securing all nonaccrual
loans. Nonaccrual loans totaled $418,000 and $213,000 with specific reserves on these loans of $0 and $39,500 as of December 31, 2024 and 2023, 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.
The allowance for credit losses as a percentage of loans was 1.28%, 1.35% and 1.40% at December 31, 2024, 2023, and 2022, respectively. The Company believes that its allowance of credit losses is appropriate as of December 31, 2024.
The allowance for credit 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 future quarters on loan performance, which may require an adjustment to the allowance for credit 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
2024 as compared with 2023
Total non-interest income increased $120,000 in 2024 compared with 2023. Trust department income and fees increased $130,000, BOLI income increased by $47,000 and other income increased by $25,000 offset somewhat by a decrease of $61,000 in service charges on deposit accounts in 2024 as compared with 2023.
2023 as compared with 2022
Total non-interest income decreased $1,000 in 2023 as compared with 2022. Service charges on deposit accounts decreased $216,000 and other income decreased $206,000 which included some nonrecurring income items in 2022 offset mostly by Trust department income and fees which increased $351,000 in 2023 as compared with 2022 as a result of the recent trust acquisition.
Non-interest Expense
2024 as compared with 2023
Total non-interest expense decreased $106,000 in 2024 as compared with 2023. Salaries and employee benefits decreased $645,000 which was the result of an increase in the discount rate that decreased the liability on deferred compensation expense. That decrease was offset mostly by higher depreciation and maintenance expenses of $229,000 and higher other expense of $212,000 as compared with 2023. Other expenses consisted of an increase in ATM expenses of $327,000 in 2024 as compared with 2023.
2023 as compared with 2022
Total non-interest expense increased $498,000 in 2023 as compared with 2022. Net occupancy increased $332,000 primarily due to increases in insurance expense in 2023. Other expenses increased $494,000 primarily as legal, compliance, accounting, dues and subscriptions and trust expenses increased while ATM and data processing expenses decreased. Legal expenses increased $576,000 due to a nonrecurring partial recovery received at the end of 2022 in the amount of $486,000. Salaries and employee benefits decreased $197,000 primarily due to a reduction in estimated expenses on other postretirement benefits due to the increase in the discount rate.
Income Taxes
During the fourth quarter of 2022, the Company determined that it was more likely than not that it would realize a certain amount of its deferred tax assets. As of December 31, 2022, the Company no longer had a net operating loss carryforward and its projections of future income indicated that reversal of a portion of the valuation allowance was appropriate. Accordingly, an income tax benefit of $2,446,000 was recorded in the fourth quarter of 2022. As of December 31, 2023 the Company had recorded income tax expenses in the amount of $2,121,000.
During the third quarter of 2024, the Company determined that there was sufficient evidence to support (at the more likely than not threshold) that the Company will have sufficient future sources of taxable income to remove substantially all of the valuation allowance established as of the beginning of the year and as of September 30, 2024. This change in circumstances resulted in a discrete item of $15,194,000 recognized as a reduction of income tax expense for the year ended December 31, 2024.
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
On December 31, 2024, cash and due from banks increased by $84,950,000 compared to December 31, 2023. This increase was primarily due to the asset management and trust department’s deposit account bringing in funds to pay bond principal and interest payments. These funds were transferred back out of the Bank at the beginning of January 2025 to satisfy these payments.
Available for sale securities decreased $30,829,000 and held to maturity securities decreased $27,755,000, respectively at December 31, 2024 compared with December 31, 2023 as the Company decreased its held to maturity and available for sale investment purchases to pay off borrowings and remain liquid.
Gross loans decreased $4,763,000 at December 31, 2024 compared with December 31, 2023, as principal payments, maturities, and charge-offs on existing loans outpaced new loans.
Total deposits increased $32,240,000 at December 31, 2024, as compared with December 31, 2023. 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.
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 which is included in the Company’s annual report. The Company has established the goal of being classified as “well-capitalized” by the banking regulatory authorities.
During the third quarter of 2023, the community bank leverage ratio (CBLR) framework was elected. The CBLR framework is an optional framework that is designed to reduce burden by removing the requirements for calculating and reporting risk-based capital ratios for qualifying community banking organizations that opt into the framework. The framework provides a simple measure of capital adequacy for qualifying community banking organizations, consistent with section 201 of the Economic Growth, Regulatory Relief and Consumer Protection Act.
Significant transactions affecting shareholders’ equity during 2024 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. Management monitors these funds requirements in such a manner as to satisfy these demands and provide the maximum earnings on its earning assets. The Company manages and monitors its liquidity position 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 monthly basis in the management of its liquidity needs and also conducts periodic contingency testing on its liquidity plan.
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. Borrowings from the FHLB, federal funds sold and federal funds purchased are utilized by the Company to manage its daily liquidity position. The Company has also been approved to participate in the Federal Reserve Bank’s Discount Window Primary Credit Program , which it intends to use only as a contingency. As of December 31, 2024, the Company was able to borrow up to $10,094,000 from the Federal Reserve Bank Discount Window Primary Credit Program. The borrowing limit was based on the amount of collateral pledged, with certain loans from the Bank’s portfolio serving as collateral. The Company has $116,383,000 available under a line of credit with the Federal Home Loan Bank of Dallas. The Company has additional contingency funding capacity with various other financial institutions in the amount of $30,500,000.
The Company maintains a well-capitalized balance sheet which includes strong capital and liquidity. The Bank provides a full range of banking, financial and trust services in our local markets. Approximately half of the Bank’s deposits are fully FDIC insured, and the vast majority of uninsured deposits are public funds deposits secured by Bank securities pledged at fair value. The Company evaluates on an ongoing and continuous basis its financial health by preparing for various moderate to severe economic scenarios.
Determining liquidity adequacy requires an ongoing analysis of the Company’s current and expected liquidity position, including historical funding obligations and anticipated funding needs, as well as an understanding of retention prospects for all Bank deposits. In particular, consideration is given to public funds and other large depositors for potential runoffs due to expected uses or other withdrawals from Bank accounts.
The Company was advised during the second quarter of 2023 that the Bank would not be retaining certain public funds deposits following competitive bid processes whereby those accounts were awarded to other local banks. While the majority of those deposits were withdrawn during the third quarter of 2023, approximately $21 million remained on the Company’s statement of condition at the end of the fourth quarter of 2023, the Company experienced the funds withdrawn from the Bank during the first and second quarter of 2024. The Bank ran several special time deposit rates during 2024 to replace the withdrawn public fund accounts.
Funding obtained to replace the withdrawn deposits were at a higher cost than the interest rate paid on the deposits withdrawn and therefore impacted the Bank’s net interest margin. However, the Company replaced the deposit withdrawals through growth in other deposit accounts, proceeds from maturities of investment securities and earnings on investment securities, and through other borrowings with the FHLB or other counterparties, without having to liquidate any securities within its existing portfolio at a loss.
The Company participates in competitive bids throughout the year and anticipates bidding on new public fund customers as the opportunity arises.
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 2025.
The Board of Directors requires management to implement and administer appropriate internal controls commensurate with Company’s risk profile. Management carefully monitors the Company’s liquidity risk, particularly with respect to
volatile and large deposits. The Company has not encountered, and does not anticipate problems with meeting its liquidity needs.
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 Statements of Condition page 36
Consolidated Statements of Operations page 37
Consolidated Statements of Comprehensive Income (Loss) page 38
Consolidated Statements of Changes in Shareholders’ Equity page 39
Consolidated Statements of Cash Flows page 40
Notes to Consolidated Financial Statements page 41-78
Reports of Independent Registered Public Accounting Firm: page 79-83
EisnerAmper LLP
Baton Rouge, LA
PCAOB ID 247
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
$
107,744
$
22,794
Available for sale securities, amortized cost of $345,867 at December 31, 2024; $379,195 at December 31, 2023
308,648
339,477
Held to maturity securities, fair value of $111,112 at December 31, 2024; $138,523 at December 31, 2023
123,196
150,941
Less: Allowance for credit losses on held to maturity securities
Held to maturity securities, net
123,156
150,911
Other investments
Federal Home Loan Bank Stock, at cost
2,334
Loans
233,576
238,339
Less: Allowance for credit losses
2,982
3,224
Loans, net
230,594
235,115
Bank premises and equipment, net of accumulated depreciation
18,712
19,470
Other real estate
-
Accrued interest receivable
3,516
3,520
Cash surrender value of life insurance
22,026
21,375
Intangible asset
Other assets
16,010
1,854
Total assets
$
831,849
$
797,738
Liabilities and Shareholders' Equity
Liabilities:
Deposits:
Demand, non-interest bearing
$
235,183
$
174,933
Savings and demand, interest bearing
434,680
483,662
Time, $250,000 or more
20,563
7,518
Other time deposits
30,304
22,377
Total deposits
720,730
688,490
Advances from Federal Home Loan Bank
-
18,500
Employee and director benefit plans liabilities
19,201
19,581
Other liabilities
1,917
1,884
Total liabilities
741,848
728,455
Shareholders' Equity:
Common stock, $1 par value, 15,000,000 shares authorized, 4,617,466 and 4,661,686 shares issued and outstanding at December 31, 2024 and December 31, 2023
4,617
4,662
Surplus
65,780
65,780
Undivided profits
56,491
37,574
Accumulated other comprehensive loss
(36,887)
(38,733)
Total shareholders' equity
90,001
69,283
Total liabilities and shareholders' equity
$
831,849
$
797,738
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
$
14,821
$
12,945
$
11,135
Interest and dividends on securities:
U. S. Treasuries
7,108
6,560
3,173
Mortgage-backed securities
2,397
3,621
2,586
Collateralized mortgage obligations
3,040
3,495
1,919
States and political subdivisions
3,808
4,278
4,460
Other investments
Interest on balances due from depository institutions
1,776
1,625
Total interest income
33,094
32,629
23,708
Interest expense:
Deposits
7,637
5,746
1,985
Borrowings
2,006
Total interest expense
9,643
6,155
2,158
Net interest income
23,451
26,474
21,550
Provision for (reduction of) credit losses
(162)
(272)
Net interest income after provision for (reduction of) credit losses
23,613
26,746
21,470
Non-interest income:
Trust department income and fees
2,482
2,352
2,001
Service charges on deposit accounts
3,178
3,239
3,455
(Loss) gain on liquidation, sales and calls of securities
-
-
-
Increase in cash surrender value of life insurance
Gain (loss) on sale of property, plant and equipment, net
-
Other income
Total non-interest income
7,014
6,894
6,895
Non-interest expense:
Salaries and employee benefits
10,499
11,144
11,341
Net occupancy
2,185
2,087
1,755
Equipment rentals, depreciation and maintenance
3,003
2,774
2,905
Other expense
6,560
6,348
5,854
Total non-interest expense
22,247
22,353
21,855
Income before income taxes
8,380
11,287
6,510
Income tax (benefit) expense
(13,323)
2,121
(2,431)
Net income
$
21,703
$
9,166
$
8,941
Basic and diluted earnings per share
$
4.66
$
1.96
$
1.91
Dividends declared per share
$
0.44
$
0.53
$
0.19
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
$
21,703
$
9,166
$
8,941
Other comprehensive income (loss):
Net unrealized gain (loss) on available for sale securities, net of tax
1,875
8,042
(45,600)
Reclassification adjustment for realized losses (gains) on available for sale securities called or sold in current year
-
-
-
Gain (loss) from unfunded post-retirement benefit obligation, net of tax
(29)
(357)
1,013
Total other comprehensive income (loss)
1,846
7,685
(44,587)
Total comprehensive income (loss)
$
23,549
$
16,851
$
(35,646)
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, 2022
4,678,186
$
4,678
$
65,780
$
23,102
$
(1,831)
$
91,729
Net income
-
-
-
8,941
-
8,941
Cash dividend ($0.19 per share)
-
-
-
(889)
-
(889)
Other comprehensive loss
-
-
-
-
(44,587)
(44,587)
Balance, December 31, 2022
4,678,186
4,678
65,780
31,154
(46,418)
55,194
Cumulative effect of accounting change
-
-
-
(81)
-
(81)
Total shareholders' equity at beginning of period, as adjusted
4,678,186
4,678
65,780
31,073
(46,418)
55,113
Net income
-
-
-
9,166
-
9,166
Cash dividend ($0.53 per share)
-
-
-
(2,473)
-
(2,473)
Other comprehensive loss
-
-
-
-
7,685
7,685
Stock repurchase
(16,500)
(16)
-
(192)
-
(208)
Balance, December 31, 2023
4,661,686
4,662
65,780
37,574
(38,733)
69,283
Net income
-
-
-
21,703
-
21,703
Cash dividend ($0.44 per share)
-
-
-
(2,039)
-
(2,039)
Other comprehensive income
-
-
-
-
1,846
1,846
Stock repurchase
(44,220)
(45)
-
(747)
-
(792)
Balance, December 31, 2024
4,617,466
$
4,617
$
65,780
$
56,491
$
(36,887)
$
90,001
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
$
21,703
$
9,166
$
8,941
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation
1,678
1,551
1,664
(Reduction of) provision for credit losses
(162)
(272)
Write-down of other real estate
-
-
Loss (gain) on sales of other real estate
-
(87)
Amortization of intangible asset
(Accretion) amortization of available for sale securities
(2,101)
(237)
(12)
(Accretion) amortization of held to maturity securities
(2,091)
(Gain) loss on sale or disposition of bank premises and equipment
(9)
(30)
-
Increase in cash surrender value of life insurance
(532)
(486)
(445)
Change in accrued interest receivable
(246)
(433)
Change in deferred tax expense (benefit)
(13,760)
(1,690)
(2,446)
Change in other assets
(1,009)
2,789
Change in employee and director benefit plan liabilities and other liabilities
(403)
Net cash provided by operating activities
6,034
9,051
7,908
Cash flows from investing activities:
Proceeds from maturities, liquidation and calls of available for sale securities
198,497
54,123
89,879
Purchases of available for sale securities
(163,069)
(35,153)
(108,832)
Proceeds from maturities of held to maturity securities
27,172
209,307
23,751
Purchases of held to maturity securities
-
(162,970)
(108,831)
Purchases (redemptions) of Federal Home Loan Bank Stock
1,726
(159)
(22)
Proceeds from sales of other real estate
1,114
1,564
Purchase of trust department book of business
-
-
(621)
Loans, net change
4,703
(1,272)
1,231
Acquisition of bank premises and equipment
(977)
(2,537)
(2,173)
Proceeds from sale of bank premises and equipment
-
Investment in cash surrender value of life insurance
(119)
(121)
(173)
Net cash provided by (used in) investing activities
68,007
62,378
(104,227)
Cash flows from financing activities:
Demand and savings deposits, net change
11,268
(86,067)
122,778
Time deposits, net change
20,972
(11,223)
(41,836)
Cash dividends paid
(2,039)
(2,473)
(889)
Stock repurchase
(792)
(208)
-
Borrowings from Federal Home Loan Bank
840,650
769,350
567,750
Repayments to Federal Home Loan Bank
(859,150)
(750,850)
(568,639)
Net cash (used in) provided by financing activities
10,909
(81,471)
79,164
Net (decrease) increase in cash and cash equivalents
84,950
(10,042)
(17,155)
Cash and cash equivalents, beginning of period
22,794
32,836
49,991
Cash and cash equivalents, end of period
$
107,744
$
22,794
$
32,836
Supplemental disclosures of noncash investing activities
Transfer from loans to other real estate owned
$
$
$
-
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 wholly owned 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 or 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 credit losses and valuation allowances associated with the realization of deferred tax assets, which are based on future taxable income.
Segment Reporting
The Company is managed as a single operating segment on a consolidated basis. The Company determines its operating segments based on how the chief operating decision maker (“CODM”) makes decisions regarding the allocation of resources and operational strategy, assesses performance, and manages the organization at a consolidated level. The Chief Executive Officer (“CEO”), is the CODM. The products and services from which this segment derives its revenues are described below in the discussion of revenue recognition.
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 -In November 2024, the Financial Accounting Standards Board issued Accounting Standards Update 2024-03 (“ASU 2024-03”), Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40). ASU 2024-03 (Subtopic 220-40) will require public companies to disclose, in the notes to financial statements, specified information about certain costs and expenses at each interim and annual reporting period. Specifically, they will be required to: 1. Disclose the amounts of (a) purchases of inventory; (b) employee compensation; (c) depreciation; (d) intangible asset amortization; and (e) depreciation, depletion, and amortization recognized as part of oil- and gas-producing activities (or other amounts of depletion expense) included in each relevant expense caption. 2. Include certain amounts that are already required to be disclosed under current generally accepted accounting principles (GAAP) in the same disclosure as the other disaggregation requirements. 3. Disclose a qualitative description of the amounts remaining in relevant expense captions that are not separately disaggregated quantitatively. 4. Disclose the total amount of selling expenses and, in annual reporting periods, an entity’s definition of selling expenses. The amendments in ASU 2024-03 are effective for public business entities for annual reporting periods beginning after December 15, 2026, and interim reporting periods within annual reporting periods beginning after December 15, 2027. Early adoption is permitted. Management has evaluated the impact of the adoption of this standard and determined there would be no material impact to the Company’s consolidated financial position or results of operations.
Accounting Standards Update -In November 2024, the Financial Accounting Standards Board issued Accounting Standards Update 2024-04 (“ASU 2024-04”), Debt with Conversion and Other Options (Subtopic 470-20). ASU 2024 04 (Subtopic 470-20) improves the relevance and consistency in application of the induced conversion guidance in Subtopic 470-20. Current generally accepted accounting principles (GAAP) provides guidance for determining whether a settlement of convertible instruments at terms different from the original conversion terms should be accounted for as an induced conversion (as opposed to a debt extinguishment). The amendments in the ASU clarify requirements for determining whether certain settlements of convertible debt instruments, including convertible debt instruments with cash conversion features or convertible debt instruments that are not currently convertible, should be accounted for as an induced conversion. The amendments in the ASU are effective for annual reporting periods beginning after December 15, 2025, and interim reporting periods within those annual reporting periods. Early adoption is permitted. Management has evaluated the impact of the adoption of this standard and determined there would be no material impact to the Company’s consolidated financial position or results of operations.
Accounting Standards Update -In March 2024, the Financial Accounting Standards Board issued Accounting Standards Update 2024-02 (“ASU 2024-02”), Codification Improvements-Amendments to Remove References to the Concepts Statements. ASU 2024-02 removes various references to the FASB’s Concepts Statements from the FASB’s Accounting Standards Codification (Codification or GAAP). The Concepts Statements are non-authoritative guidance issued by the FASB that provide the objectives, qualitative characteristics and other concepts that govern the development of accounting principles by the FASB. ASU 2024-02 applies to all reporting entities and updates the Codification by eliminating 16 discrete references to the Concepts Statements across a variety of defined terms and Topics within the Codification. The
amendments in ASU 2024-02 are effective for public business entities for fiscal years beginning after December 15, 2024. Early application of the amended guidance is permitted for all entities, for any fiscal year or interim period for which financial statements have not yet been issued or made available for issuance. Management has evaluated the impact of the adoption of this standard and determined there would be no material impact to the Company’s consolidated financial position or results of operations.
Accounting Standards Update -In March 2024, the Financial Accounting Standards Board issued Accounting Standards Update 2024-01 (“ASU 2024-01”), Compensation-Stock Compensation (Topic 718): Scope of Application of Profits Interest and Similar Awards. ASU 2024 01 provides illustrative guidance to clarify the scope application of profits interest and similar awards. It clarifies how an entity determines where a profits interest or similar award is within the scope of ASC 718 or not a share-based payment arrangement and therefore within the scope of other guidance. For certain public business entities, the amendments in this Update are effective for annual periods beginning after December 15, 2024, and interim periods within those annual periods. Early adoption is permitted for both interim and annual financial statements that have not yet been issued or made available for issuance. Management has evaluated the impact of the adoption of this standard and determined there would be no impact to the Company’s consolidated financial position or results of operations.
Accounting Standards Update -In December 2023, the Financial Accounting Standards Board issued Accounting Standards Update 2023-09 (“ASU 2023-09”), Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The amendments of ASU 2023-09 relate to the rate reconciliation and income taxes paid disclosures to improve the transparency of income tax disclosures by requiring (1) consistent categories and greater disaggregation of information in the rate reconciliation and (2) income taxes paid disaggregated by jurisdiction. For public business entities, the amendments in this update are effective for annual periods beginning after December 15, 2024. Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance. The amendments in this update should be applied on a prospective basis. Retrospective application is permitted. Management has evaluated the impact of the adoption of this standard and determined there may be additional information required within the Company’s notes to consolidated financial statements on income taxes.
Accounting Standards Update -In December 2023, the Financial Accounting Standards Board issued Accounting Standards Update 2023-08 (“ASU 2023-08”), Intangibles-Goodwill and Other-Crypto Assets (Subtopic 350-60): Accounting for and Disclosure of Crypto Assets. The amendments in ASU 2023-08 require that an entity measure crypto assets at fair value in the statement of financial position each reporting period and recognize changes from remeasurement in net income. The amendments also require that an entity provide enhanced disclosures for both annual and interim reporting periods. The update is effective for all entities for fiscal years beginning after December 15, 2024, including interim periods within those fiscal years. Early adoption is permitted for both interim and annual financial statements that have not yet been issued (or made available for issuance). The update also requires a cumulative-effect adjustment to the opening balance of retained earnings (or other appropriate components of equity or net assets) as of the beginning of the annual reporting period in which an entity adopts the amendments. Management has evaluated the impact of the adoption of this standard and determined there would be no impact to the Company’s consolidated financial position or results of operations since the Company does not own any such assets.
Accounting Standards Update -In October 2023, the Financial Accounting Standards Board issued Accounting Standards Update 2023-06 (“ASU 2023-06”), Disclosure Improvements: Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative. ASU 2023-06 addresses changes to clarify or improve disclosure and presentation requirements of a variety of topics. For entities subject to the SEC’s existing disclosure requirements and for entities required to file or furnish financial statements with or to the SEC in preparation for the sale of or for purposes of issuing securities that are not subject to contractual restrictions on transfer, the effective date for each amendment will be the date on which the SEC’s removal of that related disclosure from Regulation S-X or Regulation S-K becomes effective, with early adoption prohibited. For all other entities, the amendments will be effective two years later. The amendments in this update should be applied prospectively. For all entities, if by June 30, 2027, the SEC has not removed the applicable requirement from Regulation S-X or Regulation S-K, the pending content of the related amendment will be removed from the codification and will not become effective for any entity. Management has evaluated the impact of the adoption of this standard and determined there would be no impact to the Company’s consolidated financial position or results of operations.
Accounting Standards Update -In August 2023, the Financial Accounting Standards Board issued Accounting Standards Update 2023-05 (“ASU 2023-05”), Business Combinations-Joint Venture Formations (Subtopic 805-60), Recognition and Initial Measurement. ASU 2023-05 addresses the accounting for contributions made to a joint venture, upon formation, in a joint venture’s separate financial statements. The objectives of the amendments are to (1) provide decision-useful information to investors and other allocators of capital (collectively, investors) in a joint venture’s financial statements and (2) reduce diversity in practice. The amendments in ASU 2023-05 are effective prospectively for all joint venture formations with a formation date on or after January 1, 2025. Management has evaluated the impact of the adoption of this standard and determined there would be no impact to the Company’s consolidated financial position or results of operations.
New Accounting Standards Adopted
Accounting Standards Update-In November 2023, the Financial Accounting Standards Board issued Accounting Standards Update 2023-07 (“ASU 2023-07”), Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The guidance issued in this update requires improvement to the disclosures about a public entity’s reportable segments and more detailed information about a reportable segment’s expenses and other segment items. Even though the Company has a single reportable segment, all the disclosures required by this update are required. Under this guidance, public entities are required to disclose segment expenses and other segment items on an annual and interim basis and to provide in interim periods all disclosures about a reportable segment that are currently required annually. This update is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. The amendments in this update should be applied retrospectively to all previous periods presented. Adoption of this standard did not have a material effect on the reporting entity’s financial position or results of operations.
Cash and Due from Banks
For purposes of the Consolidated Statements of Cash Flows, cash and cash equivalents include cash on hand, balances due from banks, and federal funds sold, all of which mature within ninety days.
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 (loss). 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. The decline in value attributed to non-credit related factors is recognized in other comprehensive income (loss) for available for sale securities.
The CECL standard also requires an assessment of the Bank’s held to maturity debt securities for expected credit losses and the available for sale debt securities for credit-related impairment. The Bank applies the practical expedient to exclude the accrued interest receivable balance of $1,032,000 and $1,129,000 as of December 31, 2024 and December 31, 2023 from the amortized cost basis of held to maturity debt securities. The allowance for credit losses on held to maturity debt securities is estimated on a collective or pool basis when similar risk characteristics exist; held to maturity debt securities that share similar risk characteristics are collectively assessed for credit losses. A separate contra valuation account is available to absorb losses on securities. The allowance for credit loss is limited to the amount by which the fair value is less than the amortized cost basis. The Bank evaluates credit impairment on available for sale debt securities at an individual security level. This evaluation is done for securities whose fair value is below amortized cost with a more than inconsequential risk of default and where the Bank has assessed the decline in fair value is significant enough to suggest a credit event occurred. Credit events are generally assessed based on adverse conditions specifically related to the security, an industry, or geographic area, changes in the financial condition of the issuer of the security, or in the case of an asset-backed debt security, changes in the financial condition of the underlying loan obligors. The allowance for credit losses for such securities is measured using a discounted cash flow methodology, through which management compares the present value of expected cash flows with the amortized cost basis of the security. The allowance for credit loss is limited
to the amount by which the fair value is less than the amortized cost basis. If the Bank intends to sell the debt security, or more likely than not will be required to sell the security before recovery of its amortized cost basis, the security is charged down to fair value against the allowance for credit losses, with any incremental impairment reported in earnings.
Available-for-Sale Securities- Securities not classified as held-to-maturity are classified as available-for-sale and are stated at fair value. Unrealized gains and losses on these securities are recorded in shareholder’s equity as accumulated other comprehensive income. Currently, all Treasury/Agency security purchases are being classified as available-for-sale. The Company evaluates credit impairment on available for sale debt securities at an individual security level. This evaluation is done for securities whose fair value is below amortized cost with a more than inconsequential risk of default and where the Company has assessed the decline in fair value is significant enough to suggest a credit event occurred. Credit events are generally assessed based on adverse conditions specifically related to the security, an industry, or geographic area, changes in the financial condition of the issuer of the security, or in the case of an asset-backed debt security, changes in the financial condition of the underlying loan obligors. The allowance for credit losses for such securities is measured using a discounted cash flow methodology, through which management compares the present value of expected cash flows with the amortized cost basis of the security. The allowance for credit loss is limited to the amount by which the fair value is less than the amortized cost basis. If the Company intends to sell the debt security, or more likely than not will be required to sell the security before recovery of its amortized cost basis, the security is charged down to fair value against the allowance for credit losses, with any incremental impairment reported in earnings. Accrued interest receivable is excluded from the amortized cost basis in measuring expected credit losses on the investment securities, and no allowance for credit losses is recorded on accrued interest receivable. The Company’s current securities available for sale portfolio consists of U.S. Treasury securities, mortgage-backed securities, U.S. agency securities, and municipal bonds. The Company’s securities available for sale, other than the municipal bonds, are considered treasuries, agencies, and instrumentalities of the U.S. government, which have a zero credit loss assumption. These securities have the full faith and credit backing of the U.S. government or one of its agencies. Municipal bonds available for sale do not fall under the zero credit loss assumption and are evaluated quarterly using the considerations mentioned above to determine whether there is a credit loss associated with a decline in fair value.
Other Investments
The Company is a shareholder of the First National Bankers Bankshares, Inc., a federally insured holding company for First National Bankers Bank, and as such owns an investment in its stock. The stock is bought from and sold to the First National Bankers Bankshares, Inc. based on its prevalent book value. The stock does not have a readily determinable fair value and is carried at cost and evaluated for impairment in accordance with GAAP.
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 credit losses. Interest on loans is recognized on a daily basis over the terms of each loan based on the unpaid principal balance.
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 collectability of the total contractual principal and interest is no longer in doubt.
Loans which become 90 days delinquent are reviewed relative to collectability. 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 credit losses. That portion of a loan which is deemed uncollectible will be charged off against the allowance as a partial charge off.
The Company’s loan portfolio segments and related credit risks as of December 31, 2024 and December 31, 2023 were as follows:
Real Estate Loans
Residential-Residential mortgage loans are susceptible to weakening general economic conditions, increases in unemployment rates, and declining real estate values.
Construction-Risks common to commercial construction loans are cost overruns, changes in market demand for property, inadequate long-term financing arrangements, and declines in real estate values. Residential construction loans are susceptible to those same risks as well as those associated with residential mortgage loans. Changes in market demand for property could lead to longer marketing times resulting in higher carrying costs, declining values, and higher interest rates.
Nonresidential-Risks common to this loan category include industry concentration and the inability to monitor the condition of collateral. Declines in general economic conditions and other events can cause cash flows to fall to levels insufficient to service debt, declines in real estate values, and lack of suitable alternative use for properties. These loans are also susceptible to declines in occupancy rates, business failure, and general economic conditions.
Commercial and Industrial-Risks common to this loan category include industry concentration and the practical limitations associated with monitoring the condition of the collateral which often consists of inventory, accounts receivable, and other non-real estate assets. Equipment and inventory obsolescence can also pose a risk. Declines in general economic conditions and other events can cause cash flows to fall to levels insufficient to service debt.
Other-Risks common to these loans include regulatory risks, unemployment, changes in local economic conditions, and the inability to monitor collateral consisting of personal property.
Allowance for credit losses on loans and leases and unfunded lending
On January 1, 2023 the Company adopted Accounting Standards Codification (“ASC”) 326, “Financial Instruments-Credit Losses”, more commonly referred to as CECL. Under CECL, the allowance for credit losses (ACL) is a valuation account, measured as the difference between the Company’s amortized cost basis and the net amount expected to be collected on the financial assets (i.e., lifetime credit losses).
The CECL methodology described in FASB Accounting Standards Update (ASU) 2016-13, Financial Instruments-Credit Losses (Topic 326), applies to financial assets measured at amortized cost, and off-balance-sheet credit exposures (collectively, financial assets).
In general, the Company uses a broad range of data to estimate expected credit losses under CECL, including information about past events, current conditions, and reasonable and supportable forecasts relevant to assessing the collectability of the cash flows of financial assets.
CECL requires the Bank to measure expected credit losses on financial assets carried at amortized cost on a collective or pool basis when similar risk characteristics exist. The Bank has determined that Call Report categories will be utilized, and Management will maintain the option to further segment the portfolio if we deem it beneficial to the analysis.
Estimating an appropriate ACL involves a high degree of Management judgment. As such, it is Management’s responsibility to record the Bank’s best estimate of expected credit losses and provide it to the Board of Directors.
The analysis is prepared and reported to the Board of Directors on a quarterly basis. The option and decision to prepare the analysis more frequently will remain with Management.
Estimation Methods for Expected Credit Losses-Accounting Standards Codification (“ASC”) 326, “Financial Instruments-Credit Losses,” does not require the use of a specific loss estimation method for purposes of determining ACLs. Various methods may be used to estimate the expected collectability of financial assets, with those methods generally applied consistently overtime. The same loss estimation method does not need to be applied to all financial assets. Loss-rate methods can involve a variety of approaches, and Management incorporates the open pool or snapshot method.using various qualitative factor adjustments as management deems necessary and relevant to the Bank as of the reporting date.
These qualitative factor adjustments may increase or decrease management’s estimate of expected credit losses.
Historical loss experience generally provides a quantitative starting point for Management’s estimate of expected credit losses. Consistent with FASB ASU Topic 326, Management must consider relevant qualitative factors that may cause the CECL estimate of the financial asset portfolio as of the evaluation date to differ from the historical loss experience.
The analysis and methodology used for estimating the ACL includes two primary elements: a collective approach for pools of loans that have similar risk characteristics and a specific reserve analysis for credits individually evaluated for credit loss.
CECL also requires capturing estimated credit losses on unfunded commitments that meet certain criteria. Any allowance for credit losses on off balance sheet exposures is reported as an other liability on the Consolidated Statement of Condition and is increased or decreased via the provision for credit losses account on the Consolidated Statement of Operations.
The allowance for credit losses on off-balance sheet credit exposures is adjusted as a provision for credit loss expense. The estimate includes consideration of the likelihood that funding will occur, which is based on a historical study and empirical data calculated by the Federal Deposits Insurance Corporation, and an estimate of expected credit losses on commitments expected to be funded over its estimated life. The allowance is classified on the Consolidated Statement of Condition within other liabilities.
The Bank reassesses the credit losses at each reporting period and records subsequent changes in the allowance for credit losses on loans, unfunded commitments and held to maturity debt securities with a corresponding adjustment recorded in the provision for credit loss expense.
One of the Company’s critical accounting policies relates to its allowance for credit losses, which reflects the estimated losses resulting from the inability of its borrowers to make loan payments. The allowance for credit losses is established and maintained at an amount sufficient to absorb losses on loans. 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 allowance for credit losses .
Management believes that the allowance for credit losses is adequate and appropriate for all periods presented in these financial statements. All loan relationships with an outstanding balance of $50,000 or greater that are included in Management’s loan watch list are individually reviewed for credit losses.
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. 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.
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 or repossession. Each other real estate property is carried at fair value, less estimated costs to sell. Fair value is principally based on appraisals or other valuations performed by third-party valuation specialists. Any excess of the carrying value of the related loan over the fair value of the real estate or property at the date of foreclosure or repossession is charged against the ACL. Any expense incurred in connection with holding such real estate or property or resulting from any write-downs in value subsequent to foreclosure or repossession is included in non-interest expense. When the other real estate property or other nonreal 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 or repossession, decreases during the holding period, the ORE is written down with a charge to non-interest expense. Generally, ORE properties or nonreal estate properties are actively marketed for sale and Management is continuously monitoring these properties in order to minimize any losses.
Intangible Asset
Intangible asset represents the purchase price paid in the Company’s acquisition of the Trustmark trust department book of business. The intangible asset is being amortized over 10 years and is evaluated for impairment at least annually.
Trust Department Income and Fees
Corporate trust fees are accounted for on an accrual basis and personal trust fees are billed and recorded on a monthly basis when collected.
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 consolidated 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 4,656,370 for 2024, 4,675,067 for 2023, and 4,678,186 for 2022. The Company has no potentially dilutive shares.
Accumulated Other Comprehensive Income (Loss)
At December 31, 2024, 2023 and 2022, 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 $9,601,972, $6,133,216, and $2,156,429 in 2024, 2023 and 2022, respectively, for interest on deposits and borrowings. Income tax payments of $835,000 were paid in 2024. Income tax payments of $495,000 were paid in 2023. No income tax payments were paid in 2022. Loans transferred to other real estate amounted to $9,300, $952,000 and $0 in 2024, 2023 and 2022, 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.
Reclassification of Prior Year Presentation
Certain prior year amounts have been reclassified for consistency with the current year presentation. These reclassifications had no effect on the reported results of operations.
NOTE B - SECURITIES:
Effective January 1, 2023, in conjunction with the adoption of CECL, and again at December 31, 2023 and December 31, 2024, the Company evaluated credit impairment for individual securities available for sale whose fair value was below amortized cost with a more than inconsequential risk of default and where the Company had assessed the decline in fair value significant enough to suggest a credit event occurred. There were no securities that met the criteria of a credit loss event and therefore, no allowance for credit loss was recorded for either period. The Company also evaluated impairment for individual securities held to maturity and determined an allowance for credit loss of $41,000 should be established as of January 1, 2023. A reversal of a portion of the impairment of $(11,346) was recorded as of December 31, 2023. An increase of the impairment of $9,980 was recorded for a total ACL of $40,000 as of December 31, 2024.
The amortized cost, fair value and allowance for credit losses related to securities at December 31, 2024 and December 31, 2023, are as follows (in thousands):
Gross
Gross
Amortized
Unrealized
Unrealized
Estimated
December 31, 2024
Cost
Gains
Losses
Fair Value
Available for sale securities:
U.S. Treasuries
$
124,320
$
$
(7,425)
$
117,045
Mortgage-backed securities
46,845
(4,368)
42,512
Collateralized mortgage obligations
73,857
(5,070)
68,864
States and political subdivisions
100,845
-
(20,618)
80,227
Total available for sale securities
$
345,867
$
$
(37,481)
$
308,648
There was no allowance for credit losses on available-for-sale securities as of December 31, 2024 and December 31, 2023.
Gross
Gross
Allowance
Net
Amortized
Unrealized
Unrealized
Estimated
for Credit
Carrying
December 31, 2024
Cost
Gains
Losses
Fair Value
Losses
Amount
Held to maturity securities:
U.S. Treasuries
$
39,978
$
$
(450)
$
39,548
$
-
$
39,978
States and political subdivisions
83,218
(11,668)
71,564
(40)
83,178
Total held to maturity securities
$
123,196
$
$
(12,118)
$
111,112
$
(40)
$
123,156
Gross
Gross
Amortized
Unrealized
Unrealized
Estimated
December 31, 2023
Cost
Gains
Losses
Fair Value
Available for sale securities:
U.S. Treasuries
$
123,945
$
$
(8,542)
$
115,458
Mortgage-backed securities
52,374
(4,603)
47,785
Collateralized mortgage obligations
101,316
(6,327)
95,006
States and political subdivisions
101,560
-
(20,332)
81,228
Total available for sale securities
$
379,195
$
$
(39,804)
$
339,477
Gross
Gross
Allowance
Net
Amortized
Unrealized
Unrealized
Estimated
for Credit
Carrying
December 31, 2023
Cost
Gains
Losses
Fair Value
Losses
Amount
Held to maturity securities:
U.S. Treasuries
$
59,901
$
$
(907)
$
59,035
$
-
$
59,901
States and political subdivisions
91,040
(11,575)
79,488
(30)
91,010
Total held to maturity securities
$
150,941
$
$
(12,482)
$
138,523
$
(30)
$
150,911
Management analyzed financial data on the state and political subdivision held-to-maturity securities. The securities that do not have ratings management assigned a rating based on ratings for similar municipalities. This evaluation is done for securities whose fair value is below amortized cost with a more than inconsequential risk of default and where the Company has assessed the decline in fair value is significant enough to suggest a credit event occurred. Credit events are generally assessed based on adverse conditions specifically related to the security, an industry, or geographic area, changes in the financial condition of the issuer of the security, or in the case of an asset-backed debt security, changes in the financial condition of the underlying loan obligors. Management utilized a model to calculate the potential reserve required on the specific securities. The approach utilizes many inputs including enhanced and underlying ratings, maturity, issuer type/subtype, NAICS code, origination date, refunding status as well as state and region. At the end of the year an analysis was performed, and management determined an increase of the provision for credit losses on held to maturity securities was appropriate as of December 31, 2024.
The following table shows a rollforward of the allowance for credit losses on held-to-maturity securities for the years ended December 31, 2024 and December 31, 2023 (in thousands):
State and political
subdivisions
Balance, December 31, 2022
$
-
Adjustment for adoption of ASU 2016-13
Provision for credit losses
(11)
Charge-offs of securities
-
Recoveries
-
Balance, December 31, 2023
$
Balance, December 31, 2023
$
Provision for credit losses
Charge-offs of securities
-
Recoveries
-
Balance, December 31, 2024
$
The Company monitors the credit quality of the debt securities held-to-maturity through the use of credit ratings. The Company monitors the credit ratings on a quarterly basis. The following table summarizes the amortized cost of debt securities held-to-maturity at December 31, 2024 and December 31, 2023, aggregated by credit quality indicators (in thousands):
December 31, 2024
December 31, 2023
Aaa
$
39,978
$
59,901
Aa1/Aa2/Aa3
33,961
38,496
A1/A2
3,164
3,195
Baa1/Baa2
1,000
1,003
Not rated
45,093
48,346
Total
$
123,196
$
150,941
At December 31, 2024, the Company had no securities held-to-maturity that were past due 30 days or more as to principal or interest payments. The Company had no securities held-to-maturity classified as nonaccrual for the year ended December 31, 2024.
The amortized cost and fair value of debt securities at December 31, 2024, (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
$
25,052
$
25,018
Due after one year through five years
106,901
98,931
Due after five years through ten years
50,841
41,679
Due after ten years
42,371
31,644
Mortgage-backed securities
46,845
42,512
Collaterized mortgage obligations
73,857
68,864
Total
$
345,867
$
308,648
Held to maturity securities:
Due in one year or less
$
28,445
$
28,318
Due after one year through five years
45,659
43,115
Due after five years through ten years
30,691
26,291
Due after ten years
18,401
13,388
Total
$
123,196
$
111,112
The Company evaluates securities available for sale for impairment when there has been a decline in fair value below the amortized cost basis of a security to determine whether there is a credit loss associated with the decline in fair value on at least a quarterly basis, and more frequently when economic or market concerns warrant such evaluation. Due to the zero credit loss assumption and the considerations applied to the securities available for sale, no allowance for credit losses was recorded on January 1, 2023, and there was no allowance for credit losses for securities available for sale as of December 31, 2023 or December 31, 2024. Also, as part of the Company’s evaluation of its intent and ability to hold investments for a period of time sufficient to allow for any anticipated recovery in the market, the Company considers its investment strategy, cash flow needs, liquidity position, capital adequacy, and interest rate risk position. Management does not intend to sell these securities prior to recovery, and it is more likely than not that the Company will have the ability to hold them, primarily due to adequate liquidity, until each security has recovered its cost basis.
Available for sale securities with gross unrealized losses at December 31, 2024, 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
Available for Sale
Fair Value
Losses
Fair Value
Losses
Fair Value
Losses
December 31, 2024:
U.S. Treasuries
$
-
$
-
$
81,991
$
7,425
$
81,991
$
7,425
Mortgage-backed securities
3,993
36,388
4,348
40,381
4,368
Collateralized mortgage obligations
1,728
51,513
5,061
53,241
5,070
States and political subdivisions
-
-
80,087
20,618
80,087
20,618
Total
$
5,721
$
$
249,979
$
37,452
$
255,700
$
37,481
Available for sale securities with gross unrealized losses at December 31, 2023, 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
Available for Sale
Fair Value
Losses
Fair Value
Losses
Fair Value
Losses
December 31, 2023:
U.S. Treasuries
$
24,750
$
$
85,660
$
8,520
$
110,410
$
8,542
Mortgage-backed securities
2,811
38,521
4,583
41,332
4,603
Collateralized mortgage obligations
-
-
90,290
6,327
90,290
6,327
States and political subdivisions
-
-
81,088
20,332
81,088
20,332
Total
$
27,561
$
$
295,559
$
39,762
$
323,120
$
39,804
At December 31, 2024, 9 of the 16 Treasuries, 41 of the 46 mortgage-backed securities, 23 of the 30 collateralized mortgage obligations and 74 of the 75 securities issued by states and political subdivisions contained unrealized losses.
There were no sales of available for sale debt securities during 2024, 2023 or 2022.
Securities with a fair value of $311,774,135 and $296,945,649 at December 31, 2024 and 2023, respectively, were pledged to secure public deposits, federal funds purchased and other balances required by law.
NOTE C - LOANS:
Certain items previously reported have been reclassified to conform to the current year’s reporting format due to the adoption of CECL.
The composition of the loan portfolio at December 31, 2024 and 2023 is as follows (in thousands):
December 31,
Real estate, residential
$
78,952
$
74,296
Real estate, construction
17,016
27,353
Real estate, nonresidential
114,263
115,014
Commercial and industrial
13,381
12,496
Other
9,964
9,180
Total
$
233,576
$
238,339
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
$
6,953
$
6,947
Change in directors/officers loans during the year
(226)
-
New loans and advances
Repayments
(887)
(446)
Balance, December 31
$
6,668
$
6,953
The age analysis of the loan portfolio, segregated by class of loans, as of December 31, 2024 and 2023 is as follows (in thousands):
Loans Past
Due Greater
Number of Days Past Due
Than 90
Greater
Total
Total
Days and
30 - 59
60 - 89
Than 90
Past Due
Current
Loans
Still Accruing
December 31, 2024:
Real estate, residential
$
$
$
$
$
78,172
$
78,952
$
-
Real estate, construction
-
-
16,955
17,016
-
Real estate, nonresidential
-
-
113,514
114,263
-
Commercial and industrial
-
13,330
13,381
-
Other
-
9,934
9,964
-
Total
$
1,280
$
$
$
1,671
$
231,905
$
233,576
$
-
December 31, 2023:
Real estate, residential
$
$
$
-
$
$
73,549
$
74,296
$
-
Real estate, construction
-
-
27,222
27,353
-
Real estate, nonresidential
-
-
114,956
115,014
-
Commercial and industrial
-
-
12,475
12,496
-
Other
-
9,075
9,180
-
Total
$
$
$
-
$
1,062
$
237,277
$
238,339
$
-
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.
The following tables further disaggregates credit quality disclosures by amortized cost by class and vintage for term loans and by revolving and revolving converted to amortizing as of December 31, 2024 and December 31, 2023 (in thousands). The Company defines vintage as the later of origination, or restructure date.
Term Loans
Revolving
Amortized Cost Basis by Origination Year
Loans
Revolving
Converted to
Prior
Loans
Term Loans
Total
December 31, 2024:
Real Estate, Residential Loans:
A, B, or C
$
10,203
$
11,135
$
14,611
$
10,386
$
4,348
$
19,348
$
4,448
$
3,537
$
78,016
S
-
-
-
-
-
-
-
D
-
-
-
-
-
-
E
-
-
-
-
-
-
F
-
-
-
-
-
-
-
-
-
Total Real Estate Residential Loans
$
10,203
$
11,135
$
14,611
$
10,681
$
4,472
$
19,865
$
4,448
$
3,537
$
78,952
Real Estate, Construction Loans:
A, B, or C
$
2,876
$
$
1,464
$
1,916
$
$
2,701
$
6,578
$
-
$
16,814
S
-
-
-
-
-
-
-
-
-
D
-
-
-
-
-
-
E
-
-
-
-
-
-
-
-
F
-
-
-
-
-
-
-
-
-
Total Real Estate, Construction Loans
$
2,876
$
$
1,464
$
1,916
$
$
2,701
$
6,578
$
-
$
17,016
Real Estate,Nonresidential Loans:
A, B, or C
$
2,711
$
11,191
$
24,434
$
10,290
$
13,344
$
34,096
$
17,672
$
-
$
113,738
S
-
-
-
-
-
-
-
D
-
-
-
-
-
-
-
E
-
-
-
-
-
-
-
-
-
F
-
-
-
-
-
-
-
-
-
Total Real Estate, Nonresidential Loans
$
2,711
$
11,191
$
24,434
$
10,290
$
13,344
$
34,621
$
17,672
$
-
$
114,263
Commercial and industrial
A, B, or C
$
1,187
$
$
$
$
$
2,542
$
7,813
$
-
$
13,359
S
-
-
-
-
-
-
-
-
-
D
-
-
-
-
-
-
-
E
-
-
-
-
-
-
-
-
-
F
-
-
-
-
-
-
-
-
-
Total Commercial and Industrial Loans
$
1,187
$
$
$
$
$
2,542
$
7,813
$
-
$
13,381
Consumer/Other Loans
A, B, or C
$
4,725
$
3,258
$
$
$
$
$
$
-
$
9,958
S
-
-
-
-
-
-
-
-
-
D
-
-
-
-
-
-
E
-
-
-
-
-
-
-
-
-
F
-
-
-
-
-
-
-
-
-
Total Consumer/Other Loans
$
4,725
$
3,258
$
$
$
$
$
$
-
$
9,964
Term Loans
Revolving
Amortized Cost Basis by Origination Year
Loans
Revolving
Converted to
Prior
Loans
Term Loans
Total
December 31, 2023:
Real Estate, Residential Loans:
A, B, or C
$
11,865
$
17,053
$
12,158
$
4,695
$
5,451
$
17,502
$
4,147
$
$
73,272
S
-
-
-
-
-
-
-
D
-
-
-
-
-
-
E
-
-
-
-
-
F
-
-
-
-
-
-
-
-
-
Total Real Estate Residential Loans
$
11,865
$
17,053
$
12,280
$
4,740
$
5,478
$
18,332
$
4,147
$
$
74,296
Real Estate, Construction Loans:
A, B, or C
$
1,069
$
2,119
$
2,133
$
1,379
$
$
3,966
$
12,827
$
-
$
23,531
S
-
-
-
-
-
-
3,735
-
3,735
D
-
-
-
-
-
-
-
E
-
-
-
-
-
-
-
-
-
F
-
-
-
-
-
-
-
-
-
Total Real Estate, Construction Loans
$
1,069
$
2,119
$
2,133
$
1,466
$
$
3,966
$
16,562
$
-
$
27,353
Real Estate,Nonresidential Loans:
A, B, or C
$
12,387
$
20,951
$
11,056
$
15,008
$
5,497
$
34,330
$
14,959
$
$
114,916
S
-
-
-
-
-
-
-
-
-
D
-
-
-
-
-
-
-
E
-
-
-
-
-
-
-
-
-
F
-
-
-
-
-
-
-
-
-
Total Real Estate, Nonresidential Loans
$
12,387
$
20,951
$
11,056
$
15,008
$
5,497
$
34,428
$
14,959
$
$
115,014
Commercial and industrial
A, B, or C
$
$
1,008
$
$
$
2,742
$
$
6,763
$
-
$
12,496
S
-
-
-
-
-
-
-
-
-
D
-
-
-
-
-
-
-
-
-
E
-
-
-
-
-
-
-
-
-
F
-
-
-
-
-
-
-
-
-
Total Commercial and Industrial Loans
$
$
1,008
$
$
$
2,742
$
$
6,763
$
-
$
12,496
Consumer/Other Loans
A, B, or C
$
5,346
$
1,417
$
$
$
$
$
$
$
9,141
S
-
-
-
-
-
-
-
-
-
D
-
-
-
E
-
-
-
-
-
-
-
-
-
F
-
-
-
-
-
-
-
-
-
Total Consumer/Other Loans
$
5,353
$
1,423
$
$
$
$
$
$
$
9,180
The following table is a summary of the Company’s nonaccrual loans by major categories for the periods indicated (in thousands):
December 31, 2024
Nonaccrual Loans with
Nonaccrual Loans
Total Nonaccrual
No Allowance
with an Allowance
Loans
Real estate, residential
$
$
-
$
Total
$
$
-
$
December 31, 2023
Nonaccrual Loans with
Nonaccrual Loans
Total Nonaccrual
No Allowance
with an Allowance
Loans
Real estate, residential
$
$
$
Total
$
$
$
The Company recognized no interest income on nonaccrual loans during the years ended December 31, 2024 and December 31, 2023.
The following table represents the accrued interest receivables written off by reversing interest income during the years ended December 31, 2024 and December 31, 2023 (in thousands):
December 31, 2024
December 31, 2023
Real estate, residential
$
$
Total loans
$
$
The Company designates individually evaluated loans on nonaccrual status as collateral-dependent loans, as well as other loans that management of the Company designates as having higher risk. Collateral-dependent loans are loans for which the repayment is expected to be provided substantially through the operation or sale of the collateral and the borrower is experiencing financial difficulty. These loans do not share common risk characteristics and are not included within the collectively evaluated loans for determining the allowance for credit losses. Under CECL, for collateral-dependent loans, the Company has adopted the practical expedient to measure the allowance for credit losses based on the fair value of collateral. The allowance for credit losses is calculated on an individual loan basis based on the shortfall between the fair value of the loan’s collateral, which is adjusted for liquidation costs/discounts, and amortized cost. If the fair value of the collateral exceeds the amortized cost, no allowance is required.
The following table presents an analysis of collateral-dependent loans of the Company as of December 31, 2024 and December 31, 2023 (in thousands):
December 31, 2024
December 31, 2023
Residential
Residential
Properties
Properties
Real estate, residential
$
$
Total loans
$
$
The following tables further disaggregates nonaccrual disclosures by amortized cost by class and vintage for term loans and by revolving and revolving converted to amortizing as of December 31, 2024 and December 31, 2023 (in thousands). The Company defines vintage as the later of origination or restructure date.
Term Loans
Revolving
Amortized Cost Basis by Origination Year
Loans
Revolving
Converted to
Prior
Loans
Term Loans
Total
December 31, 2024:
Real estate, residential
$
-
$
-
$
-
$
$
-
$
$
-
$
-
$
Real estate, construction
-
-
-
-
-
-
-
-
-
Real estate, nonresidential
-
-
-
-
-
-
-
-
-
Commercial and industrial
-
-
-
-
-
-
-
-
-
Consumer/Other
-
-
-
-
-
-
-
-
-
Total Loans on Nonaccrual
$
-
$
-
$
-
$
$
-
$
$
-
$
-
$
Term Loans
Revolving
Amortized Cost Basis by Origination Year
Loans
Revolving
Converted to
Prior
Loans
Term Loans
Total
December 31, 2023:
Real estate, residential
$
-
$
-
$
-
$
-
$
-
$
$
-
$
-
$
Real estate, construction
-
-
-
-
-
-
-
-
-
Real estate, nonresidential
-
-
-
-
-
-
-
-
-
Commercial and industrial
-
-
-
-
-
-
-
-
-
Consumer/Other
-
-
-
-
-
-
-
-
-
Total Loans on Nonaccrual
$
-
$
-
$
-
$
-
$
-
$
$
-
$
-
$
The Company had one loan modification made to borrowers experiencing financial difficulty as of December 31, 2024 and no loan modifications as of December 31, 2023.
The following table shows the amortized cost basis as of December 31, 2024 of the loans modified to borrowers experiencing financial difficulty, disaggregated by class of loans and type of concession granted and describes the financial effect of the modifications made to borrowers experiencing financial difficulty (in thousands):
Term Extension
December 31, 2024
Amortized Cost
% of Total Loan
Basis
Type
Financial Effect
Real estate, residential
$
0.02
%
Added a weighted average 3 years to the life of loan, which reduced monthly payment amounts for the borrowers. Provided 3 month payment deferrals to borrowers through our standard deferral program. The 3 monthly payments were added to the end of the original loan terms of these.
Total
$
The Company closely monitors the performance of the loans that are modified to borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts. The following table depicts the performance of loans that have been modified in the last 12 months (in thousands):
Payment Status (Amortized Cost Basis)
December 31, 2024
30-89 Days Past
90+ Days Past
Current
Due
Due
Real estate, residential
$
$
-
$
-
Total
$
$
-
$
-
The following tables show activity in the allowance for credit losses by portfolio class for the years ended December 31, 2024, 2023, and 2022 as well as the corresponding recorded investment in loans at the end of each period. Effective January 1, 2023, the Company adopted the provisions of ASC 326 (CECL) using a modified retrospective basis. The difference between the December 31, 2023 incurred allowance and the CECL allowance is reflected as a cumulative effect of change in accounting principle in the table below. For further discussion of the day one impact of the CECL adoption, refer to Note A.
The calculation of the allowance for credit losses under CECL is performed using two primary approaches: a collective approach for pools of loans that have similar risk characteristics using a loss rate analysis, and a specific reserve analysis for credits individually evaluated.
The following table summarizes the activity related to the allowance for credit losses for the year ended December 31, 2024 and December 31, 2023 and the balances of loans and unfunded commitments, individually and collectively evaluated for credit losses, as of December 31, 2024 and December 31, 2023 are as follows (in thousands):
Real Estate,
Real Estate,
Real Estate,
Commercial and
Residential
Construction
Nonresidential
Industrial
Other
Total
December 31, 2024
Allowance for credit losses
Beginning balance
$
$
$
1,807
$
$
$
3,224
Charge-offs
(59)
-
-
-
(210)
(269)
Recoveries
-
Net provision for loan losses
(293)
(77)
(200)
Ending Balance
$
$
$
1,835
$
$
$
2,982
Reserve for unfunded lending commitments
Beginning balance
$
$
$
$
$
$
Provision for losses on unfunded commitments
-
(11)
Ending balance-reserve for unfunded commitments
$
$
$
$
$
$
Total allowance for credit losses
$
$
$
1,845
$
$
$
3,065
Allowance for credit losses
Individually evaluated
$
-
$
-
$
-
$
-
$
$
Collectively evaluated
1,835
2,978
Total allowance for credit losses:
$
$
$
1,835
$
$
$
2,982
Reserve for unfunded lending commitments
Individually evaluated
$
-
$
-
$
-
$
-
$
-
$
-
Collectively evaluated
Reserve for unfunded lending commitments:
$
$
$
$
$
$
Total allowance for credit losses, December 31, 2024
$
$
$
1,845
$
$
$
3,065
Loans, December 31, 2024
Individually evaluated
$
$
$
$
$
$
1,571
Collectively evaluated
78,073
16,814
113,800
13,359
9,959
232,005
Total loans, December 31, 2024
$
78,952
$
17,016
$
114,263
$
13,381
$
9,964
$
233,576
Real Estate,
Real Estate,
Real Estate,
Commercial and
Residential
Construction
Nonresidential
Industrial
Other
Total
December 31, 2023
Allowance for credit losses
Beginning balance
$
1,018
$
$
1,535
$
$
$
3,338
Cumulative effect of change in accounting principle
(58)
(215)
(84)
(49)
(10)
Charge-offs
-
-
(270)
-
(197)
(467)
Recoveries
-
Net provision for loan losses
(443)
(170)
(472)
(244)
Ending Balance
$
$
$
1,807
$
$
$
3,224
Reserve for unfunded lending commitments
Beginning balance
$
-
$
-
$
-
$
-
$
-
$
-
Cumulative effect of change in accounting principle
Provision for losses on unfunded commitments
(2)
-
(5)
(14)
(17)
Ending balance-reserve for unfunded commitments
$
$
$
$
$
$
Total allowance for credit losses
$
$
$
1,812
$
$
$
3,279
Allowance for credit losses
Individually evaluated
$
$
-
$
-
$
-
$
$
Collectively evaluated
1,807
3,163
Total allowance for credit losses:
$
$
$
1,807
$
$
$
3,224
Reserve for unfunded lending commitments
Individually evaluated
$
-
$
-
$
-
$
-
$
-
$
-
Collectively evaluated
Reserve for unfunded lending commitments:
$
$
$
$
$
$
Total allowance for credit losses, December 31, 2024
$
$
$
1,812
$
$
$
3,279
Loans, December 31, 2023
Individually evaluated
$
$
$
$
-
$
$
1,182
Collectively evaluated
73,338
27,266
114,916
12,496
9,141
237,157
Total loans, December 31, 2023
$
74,296
$
27,353
$
115,014
$
12,496
$
9,180
$
238,339
Prior to the adoption of ASC 326 on January 1, 2023, the Company calculated the allowance for loan losses under the incurred loss methodology. The following tables are disclosures related to the allowance for loan losses in prior periods (in thousands).
Real Estate,
Real Estate,
Real Estate,
Commercial and
Residential
Construction
Nonresidential
Industrial
Other
Total
December 31, 2022:
Allowance for Loan Losses:
Beginning Balance
$
$
$
1,781
$
$
$
3,311
Charge-offs
-
-
-
-
(240)
(240)
Recoveries
-
-
Provision
(294)
(100)
Ending Balance
$
1,018
$
$
1,535
$
$
$
3,338
Allowance for Loan Losses:
Ending balance: individually evaluated for impairment
$
$
-
$
$
-
$
-
$
Ending balance: collectively evaluated for impairment
$
$
$
1,451
$
$
$
3,109
Total Loans:
Ending balance: individually evaluated for impairment
$
$
$
1,811
$
-
$
$
2,801
Ending balance: collectively evaluated for impairment
$
66,567
$
30,115
$
120,422
$
10,497
$
7,476
$
235,077
The following table further disaggregates gross charge-off disclosures by amortized cost by credit quality indicator, class, and year of origination as of December 31, 2024 and December 31, 2023 (in thousands). The Company defines vintage as the later of origination or restructure date.
Term Loans
Revolving
Amortized Cost Basis by Origination Year
Loans
Revolving
Converted to
Prior
Loans
Term Loans
Total
December 31, 2024:
Real estate, residential
$
-
$
-
$
-
$
-
$
-
$
-
$
-
$
-
$
-
A,B, or C
-
-
-
-
-
-
-
-
-
S
-
-
-
-
-
-
-
-
-
D
-
-
-
-
-
-
-
-
-
E
-
-
-
-
-
-
-
F
-
-
-
-
-
-
-
-
-
Total Real estate, nonresidential loans
$
-
$
-
$
-
$
-
$
-
$
$
-
$
-
$
Consumer/Other
A,B, or C
$
$
-
$
-
$
-
$
-
$
-
$
-
$
-
$
S
-
-
-
-
-
-
-
D
-
-
-
-
-
-
E
-
-
-
-
-
F
-
-
-
-
-
-
-
-
-
Total Consumer/Other Loans
$
$
$
$
-
$
-
$
$
-
$
-
$
Total Gross Loan Chargeoffs:
$
$
$
$
-
$
-
$
$
-
$
-
$
Term Loans
Revolving
Amortized Cost Basis by Origination Year
Loans
Revolving
Converted to
Prior
Loans
Term Loans
Total
December 31, 2023:
Real estate, nonresidential
$
-
$
-
$
-
$
-
$
-
$
-
$
-
$
-
$
-
A,B, or C
-
-
-
-
-
-
-
-
-
S
-
-
-
-
-
-
-
-
-
D
-
-
-
-
-
-
-
-
-
E
-
-
-
-
-
-
-
F
-
-
-
-
-
-
-
-
-
Total Real estate, nonresidential loans
$
-
$
-
$
-
$
-
$
-
$
$
-
$
-
$
Consumer/Other
A,B, or C
$
$
$
-
$
-
$
-
$
-
$
-
$
-
$
S
-
-
-
-
-
-
-
-
-
D
-
-
-
-
-
-
-
-
-
E
-
-
-
-
-
-
-
F
-
-
-
-
-
-
-
-
-
Total Consumer/Other Loans
$
$
$
-
$
$
-
$
-
$
-
$
-
$
Total Gross Loan Chargeoffs:
$
$
$
-
$
$
-
$
$
-
$
-
$
NOTE D - BANK PREMISES AND EQUIPMENT:
Bank premises and equipment are shown as follows (in thousands):
December 31,
Estimated Useful Lives (in years)
Land
$
5,515
$
5,534
Building
5 - 40
35,777
35,739
Furniture, fixtures and equipment
3 - 10
10,482
10,474
Construction-in-progress
-
Totals, at cost
51,774
52,320
Less: Accumulated depreciation
33,062
32,850
Totals
$
18,712
$
19,470
Depreciation and amortization related to bank premises and equipment charged to noninterest expense was approximately $1,678,000, $1,551,000 and $1,664,000 for the years ended December 31, 2024, 2023, 2022, respectively.
During the year ended December 31, 2024, the Bank sold one tract of land and one piece of equipment at a gain of $46,000, the Bank had disposals of equipment at a loss of $37,000. During the year ended December 31, 2023, the Bank sold one tract of land for a gain of approximately $30,000. There were no sales or disposals for the year ended December 31, 2022.
NOTE E - OTHER REAL ESTATE:
The Company’s other real estate and equipment consisted of the following as of December 31, 2024 and 2023 (in thousands except number of properties):
December 31,
Number of
Number of
Properties
Balance
Properties
Balance
Construction, land development and other land and equipment
$
$
-
Total
$
$
-
NOTE F - DEPOSITS:
At December 31, 2024, the scheduled maturities of time deposits are as follows (in thousands):
$
43,275
5,266
1,144
Total
$
50,867
Deposits held for related parties amounted to $7,119,035 and $5,079,055 at December 31, 2024 and 2023, respectively.
Overdrafts totaling $139,974 and $406,951 were reclassified as loans at December 31, 2024 and 2023, respectively.
NOTE G - FEDERAL FUNDS PURCHASED:
At December 31, 2024, the Company had facilities in place to purchase federal funds up to $30,500,000 under established credit arrangements.
NOTE H - BORROWINGS:
At December 31, 2024, the Company was able to borrow up to $10,093,628 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 4.50% at December 31, 2024. There was no outstanding balance at December 31, 2024 or 2023.
At December 31, 2024, the Company had $116,383,248 in advances available under a line of credit with the FHLB, there were no outstanding advances. At December 31, 2023, the Company had $18,500,000 outstanding in advances under a $112,192,242 line of credit with the FHLB at a rate of 5.58% and a maturity date of January 5, 2024. New advances may subsequently be obtained based on the liquidity needs of the bank subsidiary. 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, 2024 and 2023, included in other assets, were as follows (in thousands):
December 31,
As adjusted
As originally
Deferred tax assets:
reported
Allowance for credit losses
$
$
$
Employee benefit plans' liabilities
4,029
4,079
3,434
Unrealized loss on available for sale securities, charged from equity
9,286
9,909
8,341
Loss on credit impairment of securities
Earned retiree health benefits plan liability
1,222
1,276
1,074
General business and AMT credits
1,033
State income tax net operating loss carryforward
1,111
-
Other
Valuation allowance
(423)
(15,617)
(11,534)
Deferred tax assets
16,468
3,326
2,920
Deferred tax liabilities:
Unearned retiree health benefits plan asset
Bank premises and equipment
2,106
2,088
1,759
Other
-
Deferred tax liabilities
2,566
2,570
2,164
Net deferred taxes
$
13,902
$
$
During the preparation of its third quarter 2024 consolidated financial statements the Company determined that the disclosures of deferred income tax assets and liabilities in the footnotes to its December 31, 2023, consolidated financial statements improperly excluded deferred state income taxes. The above amounts as of December 31, 2023 have been restated to include deferred federal and state income taxes. The correction of this disclosure error had no impact on the recorded amount of net deferred taxes in the Company’s December 31, 2023 consolidated statement of condition.
Income taxes consist of the following components (in thousands):
Years Ended December 31,
Current
$
$
$
Deferred:
Federal
1,434
-
1,188
Change in valuation allowance
(15,194)
1,711
(3,634)
Total deferred
(13,760)
1,711
(2,446)
Totals
$
(13,323)
$
2,121
$
(2,431)
Income taxes amounted to less than the amounts computed by applying the U.S. Federal income tax rate of 21.0% for 2024, 2023 and 2022 to income before income taxes and State income tax rate of 3.95% for 2024. The reasons for these differences are shown below (in thousands):
Tax
Rate
Tax
Rate
Tax
Rate
Taxes computed at statutory rate
$
1,760
%
$
2,370
%
$
1,367
%
Increase (decrease) resulting from:
State income tax expense, net of federal effect
2.7
-
-
-
-
Tax-exempt interest income
(176)
(2.1)
(191)
(2)
(198)
(3)
Income from BOLI
(112)
(1.3)
(102)
(1)
(93)
(1)
Tefra disallowance
0.9
-
-
-
-
Federal tax credits
-
-
(1,416)
(12)
(45)
(1)
Other
1.1
(251)
(2)
Other changes in valuation allowance
(15,194)
(181.3)
1,711
(3,634)
(55)
Total income tax (benefit) expense
$
(13,323)
(159.0)
%
$
2,121
%
$
(2,431)
(37)
%
During 2024, the Company recorded current and deferred income tax expense (benefit) of $437,000 and ($13,760,000), respectively or a net income tax benefit of ($13,323,000). During 2023, the Company recorded current and deferred income tax expense of $410,000 and $1,711,000, respectively or a net income tax expense of $2,121,000. During 2022, the Company recorded current and deferred income tax expense (benefit) of $15,000 and ($2,446,000), respectively or a net income tax benefit of $2,431,000.
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 had a valuation allowance on federal and state deferred tax assets totaling $15,617,000 as of December 31, 2023. In the third quarter of 2024, the Company reassessed the valuation allowance based upon its projections of future sources of taxable income in accordance with applicable accounting guidance and determined it was appropriate to reverse substantially all the valuation allowance which resulted in a one-time discrete reduction to income tax expense of $15,194,000 in the third quarter of 2024. Excluding the discrete item, income tax expense for the year ended December 31, 2024, totaled $1,871,000 based upon the expected annual tax rate for 2024 of 22.3% compared to income tax expense of $2,121,000 for the year ended December 31, 2023, at an effective rate of 18.8%. Excluding the change in valuation allowance of ($3,634,000), income tax expense totaled $1,203,000 for the year ended December 31, 2022, at an effective tax rate if 18.5%.
As of December 31, 2024, the net deferred tax asset was $13,902,000. As of December 31, 2023 the net deferred tax asset was $756,000.
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, 2024, $50,708,141 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 April 24, 2024, the Board approved the repurchase of up to $1,000,000 of the outstanding shares of the Company’s common stock. As a result of this repurchase plan, 44,220 shares have been repurchased for $747,000 and retired through December 31, 2024. The repurchase plan expired on December 31, 2024.
On July 31, 2023, the Board approved the repurchase of up to $1,000,000 of the outstanding shares of the Company’s common stock. As a result of this repurchase plan, 16,500 shares have been repurchased for $208,000 and retired through December 31, 2023. The repurchase plan expired on December 31, 2023.
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, 2024, 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.
During the third quarter of 2023, the community bank leverage ratio (CBLR) framework was elected. The CBLR framework is an optional framework that is designed to reduce burden by removing the requirements for calculating and reporting risk-based capital ratios for qualifying community banking organizations that opt into the framework. The framework provides a simple measure of capital adequacy for qualifying community banking organizations, consistent with section 201 of the Economic Growth, Regulatory Relief and Consumer Protection Act.
Qualifying community banking organizations that elect to use the CBLR framework and that maintain a leverage ratio of greater than 9.00% are considered to have satisfied the risk-based and leverage capital requirements in the generally applicable capital rule. In addition, these institutions are considered to have met the well-capitalized ratio requirements for purposes of section 38 of the Federal Deposit Insurance Act.
The main components and requirements of the CBLR framework are as follows:
As of December 31, 2024, the bank subsidiary’s community bank leverage ratio was 13.95%. As of December 31, 2023, the bank subsidiary’s community bank leverage ratio was 12.59%. The leverage ratio requirement is maintaining a leverage ratio greater than 9.00%.
The components of accumulated other comprehensive income, net of tax, as of December 31, 2024 and 2023, are as follows:
December 31,
Beginning balance accumulated other comprehensive (loss) income
$
(38,733)
$
(46,418)
Net unrealized gain (loss) on available for sale securities, net of tax
1,875
8,042
(Loss) gain from unfunded post-retirement benefit obligation, net of tax
(29)
(357)
Ending balance accumulated other comprehensive (loss) income
$
(36,887)
$
(38,733)
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
1,243
1,273
1,430
FDIC and state banking assessments
Legal
(130)
Accounting
Other real estate
ATM expense
1,217
Trust expense
Other
1,837
1,897
1,564
Totals
$
6,560
$
6,348
$
5,854
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 statement of condition. 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, 2024 and 2023, the Company had outstanding irrevocable letters of credit aggregating $133,000 and $142,406, respectively. At December 31, 2024 and 2023, the Company had outstanding unused loan commitments aggregating approximately $59,414,000 and $40,080,000 respectively. Approximately $33,184,000 and $24,465,000 of outstanding commitments were at fixed rates and the remainder were at variable rates at December 31, 2024 and 2023, 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.
During the quarter ended June 30, 2023, a shareholder issued a letter to the Company and each of the directors of the Company demanding that they immediately commence litigation on behalf of the Company for an alleged breach by the Company’s Board of Directors of its fiduciary duties in allegedly failing to properly oversee and supervise the management of the Company. During the quarter ended September 30, 2023, the Board of Directors of the Company established a Special Litigation Committee made up of three independent directors to investigate the allegations made in the letter. Rather than wait for the Special Litigation Committee to conclude its inquiry, the shareholder filed a Complaint against the Company and Directors, making the same allegations that appear in the demand letter. The Court stayed the lawsuit pending the Special Litigation Committee’s inquiry. The Special Litigation Committee concluded that pursuing the claims is not in the Company’s best interest, and the Company filed a motion to dismiss that the court denied. The Company has appealed that ruling.
The Company assesses its liabilities and contingencies in connection with outstanding legal proceedings utilizing the latest information available. Where it is probable that the Company will incur a loss and the amount of the loss can be reasonably estimated, the Company records a liability in its consolidated financial statements. These legal reserves may be increased or decreased to reflect any relevant developments on a quarterly basis. Where a loss is not probable or the amount of loss is not estimable, the Company does not accrue legal reserves. While the outcome of legal proceedings is inherently uncertain, based on information currently available and available insurance coverage, the Company’s management believes that it has established appropriate legal reserves. If an accrual is not made, and there is at least a reasonable possibility that a loss or additional loss may have been incurred, the Company discloses the nature of the contingency and an estimate of the possible loss or range of loss or a statement that such an estimate cannot be made. Any incremental liabilities arising from pending legal proceedings are not expected to have a material adverse effect on the Company’s consolidated financial position, consolidated results of operations, or consolidated cash flows. However, it is possible that the ultimate resolution of these matters, if unfavorable, may be material to the Company’s consolidated financial position, consolidated results of operations, or consolidated cash flows.
As of the date of this filing, the Company believes the amount of losses associated with legal proceedings that it is reasonably possible to incur is not material.
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
$
89,291
$
68,672
Nonbank subsidiary
-
-
Cash in bank subsidiary
Other assets
Total assets
$
90,001
$
69,283
Liabilities and Shareholders' Equity:
Other liabilities
-
-
Total liabilities
$
-
$
-
Shareholders' equity
90,001
69,283
Total liabilities and shareholders' equity
$
90,001
$
69,283
CONDENSED STATEMENTS OF OPERATIONS (IN THOUSANDS):
Years Ended December 31,
Income
Distributed income of bank subsidiary
$
3,350
$
3,268
$
1,243
Undistributed income of bank subsidiary
18,773
6,404
8,061
Other income
Total income
22,126
9,676
9,311
Expenses
Other
Total expenses
Net income
$
21,703
$
9,166
$
8,941
CONDENSED STATEMENTS OF CASH FLOWS (IN THOUSANDS):
Years Ended December 31,
Cash flows from operating activities:
Net income
$
21,703
$
9,166
$
8,941
Adjustments to reconcile net income to net cash provided by operating activities:
Undistributed (income) of subsidiaries
(18,773)
(6,404)
(8,061)
Change in other assets
(78)
(38)
Net cash provided by operating activities
2,852
2,724
Cash flows from investing activities:
-
-
-
Net cash provided by investing activities
-
-
-
Cash flows from financing activities:
Stock repurchase
(792)
(208)
-
Dividends paid
(2,039)
(2,473)
(889)
Net cash used in financing activities
(2,831)
(2,681)
(889)
Net increase in cash
Cash, beginning of year
Cash, end of year
$
$
$
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 $265,000 for 2024, $274,000 for 2023, and $260,000 for 2022.
The ESOP was frozen effective January 1, 2019. The ESOP held 210,947, 216,010 and 214,961 allocated shares at December 31, 2024, 2023 and 2022, 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. Through December 31, 2021, interest on deferred fees accrued at an annual rate of 10%, compounded annually. Also through December 31, 2021, after payments
commenced, interest accrued at an annual rate of 7.50%, compounded monthly. The Board amended the plan on November 23, 2021, providing that, effective January 1, 2022, on a prospective basis, interest on deferred fees shall accrue at an annual rate equal to the Chase Manhattan Bank Prime Rate as of December 31st of each year, compounded annually, before payments commence under the plan, and that after payments have commenced, interest will accrue on the account balance at an annual fixed rate equal to Chase Manhattan Bank Prime Rate as of the Director’s separation from service, compounded monthly. 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 $18,862,950 and $18,404,490 at December 31, 2024 and 2023, respectively. The present value of accumulated benefits under these plans, using an interest rate of 5.00% and 3.50% at December 31, 2024 and 2023, respectively, and the interest ramp-up method has been accrued. The accrual amounted to $14,329,854 and $14,422,984 at December 31, 2024 and 2023, 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 $3,304,283 and $3,115,923 at December 31, 2024 and 2023, respectively. The present value of accumulated benefits under these plans using an interest rate of 5.00% and 3.50% at December 31, 2024 and 2023, respectively, and the projected unit cost method has been accrued. The accrual amounted to $1,484,904 and $1,593,985 at December 31, 2024 and 2023, 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 $338,527 and $334,346 at December 31, 2024 and 2023, respectively. The present value of accumulated benefits under these plans using an interest rate of 5.00% and 3.50% at December 31, 2024 and 2023, respectively, and the projected unit cost method has been accrued. The accrual amounted to $114,871 and $114,269 at December 31, 2024 and 2023, 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 $197,771 and $188,851 at December 31, 2024 and 2023, respectively. The present value of accumulated benefits under these plans using an interest rate of 5.00% and 3.50% at December 31, 2024 and 2023, respectively, and the projected unit cost method has been accrued. The accrual amounted to $217,422 and $218,853 at December 31, 2024 and 2023, 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
$
(159)
$
(191)
The accumulated postretirement benefit obligation and the balance in accumulated other comprehensive income was as follows (in thousands):
December 31,
Accumulated Postretirement Benefit Obligation
$
3,054
$
3,231
Fair Value of Plan Assets
-
-
Unfunded Status
$
3,054
$
3,231
Balance in Accumulated Other Comprehensive Income
$
1,843
$
1,881
Amounts recognized in Accumulated Other Comprehensive Income were as follows (in thousands):
For the Year Ended December 31,
Net Gain
$
1,684
$
1,518
Prior Service Credit
Total
$
1,843
$
1,881
The prior service credit and net gain that will be recognized in accumulated other comprehensive income during 2025 is $386,519.
The following is a summary of the actuarial assumptions used to determine the accumulated postretirement benefit obligation:
December 31,
Equivalent APBO Single Discount Rate
5.60
%
5.00
%
Rate of Increase in Future Compensation Levels
N/A
N/A
Current Pre 65 Health Care Trend Rate
8.65
%
8.35
%
Current Post 64 Health Care Trend Rate-Non Grandfathered
5.68
%
5.38
%
Current Post 64 Health Care Trend Rate-Granfathered
7.98
%
7.23
%
Ultimate Health Care Trend Rate
4.59
%
4.59
%
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
5.00
%
5.20
%
Rate of Increase in Future Compensation Levels
N/A
N/A
Current Pre 65 Health Care Trend Rate
8.35
%
8.64
%
Current Post 64 Health Care Trend Rate-Non Grandfathered
5.38
%
5.32
%
Current Post 64 Health Care Trend Rate-Grandfathered
7.23
%
7.35
%
Ultimate Health Care Trend Rate
4.59
%
4.59
%
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, 2023:
$
(3,231)
$
-
$
(3,231)
Service cost
(72)
-
(72)
Interest cost
(157)
-
(157)
Gains/(Losses)
-
Benefits paid
(136)
-
Participant contributions
(78)
-
Employer Contributions
-
December 31, 2024
$
(3,054)
$
-
$
(3,054)
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, 2023:
$
(1,518)
$
(363)
$
(1,881)
Amortization payment
Liability (Gain)/Loss
(348)
-
(348)
December 31, 2024
$
(1,684)
$
(159)
$
(1,843)
The source of the liability gain/(loss) is based upon demographic experience during 2024, claims and retiree contributions, medical trend assumptions, and the change in the discount rate from 5.00% to 5.60%.
The following table displays the benefits expected to be paid from the plan during each of the next five fiscal years, and in aggregate for the five fiscal years thereafter (in thousands):
Fiscal 2025
$
Fiscal 2026
Fiscal 2027
Fiscal 2028
Fiscal 2029
Fiscal 2030-2034
$
1,126
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, ORE and intangible assets. These non-recurring fair value adjustments typically involve 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.
Investments
The fair value of available for sale securities and held to maturity securities is based on quoted market prices. The Company’s available for sale and 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 Data, 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 and 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.
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 collateral dependent. Accordingly, the Company’s collateral dependent loans are reported at their estimated fair value on a non-recurring basis. An allowance for each 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 collateral dependent loan exceeds the measure of fair value of the collateral, a valuation allowance is recorded as a component of the allowance for credit losses. Collateral dependent 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 or internally prepared valuations. Other real estate is a non-recurring Level 3 asset.
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 of 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. Non-interest deposits are non-recurring Level 1 liabilities, while interest bearing deposits are classified as Level 3 liabilities.
Borrowings from Federal Home Loan Bank
The fair value of Federal Home Loan Bank (“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. Borrowings from Federal Home Loan Bank are classified as Level 2 liabilities.
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, 2024 and 2023, were as follows (in thousands):
Fair Value Measurements Using
Total
Level 1
Level 2
Level 3
December 31, 2024:
U.S. Treasuries
$
117,045
$
-
$
117,045
$
-
Mortgage-backed securities
42,512
-
42,512
-
Collateralized mortgage obligations
68,864
-
68,864
-
States and political subdivisions
80,227
-
80,227
-
Total
$
308,648
$
-
$
308,648
$
-
December 31, 2023:
U.S. Treasuries
$
115,458
$
-
$
115,458
$
-
Mortgage-backed securities
47,785
-
47,785
-
Collateralized mortgage obligations
95,006
-
95,006
-
States and political subdivisions
81,228
-
81,228
-
Total
$
339,477
$
-
$
339,477
$
-
Collateral dependent loans, which are measured at fair value on a non-recurring basis, by level within the fair value hierarchy as of December 31, 2024 and 2023 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, 2024 and 2023 are as follows (in thousands):
Fair Value Measurements Using
December 31:
Total
Level 1
Level 2
Level 3
$
$
-
$
-
$
$
-
$
-
$
-
$
-
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
$
-
$
Loans transferred to ORE
Sales
(9)
(1,114)
Write-downs
-
(97)
Balance, end of year
$
$
-
The carrying value and estimated fair value of financial instruments, by level within the fair value hierarchy, at December 31, 2024 and 2023 are as follows (in thousands):
Carrying
Fair Value Measurements Using
Amount
Level 1
Level 2
Level 3
Total
December 31, 2024:
Financial Assets:
Cash and due from banks
$
107,744
$
107,744
$
-
$
-
$
107,744
Available for sale securities
308,648
-
308,648
-
308,648
Held to maturity securities, net
123,156
-
111,112
-
111,112
Loans, net
230,594
-
-
225,422
225,422
Financial Liabilities:
Deposits:
Non-interest bearing
235,183
235,183
-
-
235,183
Interest bearing
434,680
-
-
377,233
377,233
Time deposits
50,867
-
-
50,212
50,212
Borrowings Federal Home Loan Bank
Bank
-
-
-
-
-
Carrying
Fair Value Measurements Using
Amount
Level 1
Level 2
Level 3
Total
December 31, 2023:
Financial Assets:
Cash and due from banks
$
22,794
$
22,794
$
-
$
-
$
22,794
Available for sale securities
339,477
-
339,477
-
339,477
Held to maturity securities, net
150,911
-
138,523
-
138,523
Loans, net
235,115
-
-
221,896
221,896
Financial Liabilities:
Deposits:
Non-interest bearing
174,933
174,933
-
-
174,933
Interest bearing
483,662
-
-
424,398
424,398
Time deposits
29,895
-
-
28,939
28,939
Borrowings from Federal Home Loan Bank
Bank
18,500
-
18,500
-
18,500
NOTE Q: SEGMENT REPORTING
The Company is engaged in a single line of business as a financial institution, 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. The Company has identified its President and Chief Executive Officer as the chief operating decision maker (“CODM”), who uses consolidated net income (see Consolidated Statements of Operation) to determine how resources should be allocated and manage the Company. The Company’s operations constitute a single operating segment and therefore, a single reportable segment, because the CODM manages the business activities using information of the Company as a whole. The accounting policies used to measure the profit and loss of the segment are the same as those described in the summary of significant accounting policies described in Note A. The Company’s most significant reported source of income and expense are interest income and interest expense (see Consolidated Statements of Operations). The remaining significant segment income and expenses are described in the Consolidated Statements of Operations and in Note K of these financial statements.
NOTE R: SUBSEQUENT EVENTS:
The Company has evaluated subsequent events through the time of the filing of its Annual Report on Form 10K. As of the time of filing on March 19, 2025, there were no material, reportable subsequent events.
EisnerAmper LLP
8550 United Plaza Blvd.
Suite 1001
Baton Rouge, LA 70809
T 225.922.4600
F 225.922.4611
www.eisneramper.com
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of
Peoples Financial Corporation
Opinion on the Financial Statements
We have audited the accompanying consolidated statement of condition of Peoples Financial Corporation and Subsidiaries (the “Company”) as of December 31, 2024, and December 31, 2023, and the related consolidated statements of operations, comprehensive income (loss), changes in shareholders’ equity, and cash flows for each of the years then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2024, and December 31, 2023, and the consolidated results of their operations and their cash flows for the years then ended, 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 audit 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 audit 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.
“EisnerAmper” is the brand name under which EisnerAmper LLP and Eisner Advisory Group LLC and its subsidiary entities provide professional services. EisnerAmper LLP and Eisner Advisory Group LLC are independently owned firms that practice in an alternative practice structure in accordance with the AICPA Code of Professional Conduct and applicable law, regulations and professional standards. EisnerAmper LLP is a licensed CPA firm that provides attest services, and Eisner Advisory Group LLC and its subsidiary entities provide tax and business consulting services. Eisner Advisory Group LLC and its subsidiary entities are not licensed CPA firms.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of the 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 matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Allowance for Credit Losses
The Company’s loan portfolio totaled $234 million as of December 31, 2024, and the allowance for credit losses on loans was $2.98 million. The Company’s unfunded loan commitments totaled $59.5 million, with an allowance for credit loss of $83,000. These amounts are included in the allowance for credit losses (“ACL”). As more fully described in Notes A and C to the Company’s consolidated financial statements, the Company estimates its exposure to expected credit losses as of the statement of condition date, for existing financial instruments held at amortized cost, and off-balance sheet exposures, such as unfunded loan commitments, letters of credit and other financial guarantees that are not unconditionally cancellable by the Company. The Company measures expected credit losses of financial assets on a collective (pool) basis when the financial assets share similar risk characteristics.
We identified the valuation of the ACL as a critical audit matter as the determination of the ACL requires management to exercise significant judgment and could have a material impact on the Company’s financial statements. Management must consider numerous subjective factors, including determining qualitative factors used to adjust the calculated allowance for credit losses, loan credit risk grading and identifying loans requiring individual evaluation among others. As disclosed by management, different assumptions and conditions could result in a materially different amount for the estimate of the ACL. As such, there is a high degree of auditor judgement and subjectivity, and significant audit effort was required in performing procedures in auditing the ACL.
Addressing the critical audit matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the financial statements. The primary procedures we performed to address this critical audit matter included:
● Testing the design and operating effectiveness of controls over the allowance for credit losses including
o completeness and accuracy of loan data including credit ratings and risk classification of loans,
o classifications of loans by loan segment, and
o the identification of problems loans,
● Performing analysis of prepayment speeds used to calculate the weighted average remaining maturity,
● Evaluating the qualitative factors for completeness and reasonableness,
● Verification of historical net loss,
● Testing the accuracy and validation of the ACL model,
● Testing the loan review function and evaluating the accuracy of loan credit ratings and reasonableness of specific reserves on individually evaluated loans, and
● Evaluating the disclosures in the consolidated financial statements.
EisnerAmper LLP
www.eisneramper.com
Reversal of Deferred Tax Asset Valuation Allowance
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. The Company determines its valuation allowance on deferred tax assets by considering both positive and negative evidence to ascertain whether it is more likely than not that deferred tax assets will be realized. The Company concluded that a valuation allowance on federal and state deferred tax assets totaling $15,617,000 was required as of December 31, 2023. As noted in Note I to the consolidated financial statements, in the third quarter of 2024, the Company reassessed the valuation allowance based upon its projections of future sources of taxable income and recovery of its unrealized losses on available-for-sale securities based on its intent and ability to hold the securities until they recover in value or until maturity, in accordance with applicable accounting guidance and determined it was appropriate to reverse substantially all the valuation allowance. The reversal resulted in a one-time discrete reduction to income tax expense of $15,194,000 in the third quarter of 2024.
We identified the reversal of the deferred tax asset valuation allowance as a critical audit matter as the determination of the reversal requires management to exercise significant judgment and could have a material impact on the Company’s financial statements. There is a high degree of auditor judgement and subjectivity, and significant audit effort was required in performing procedures in auditing the reversal of the deferred tax asset valuation allowance and evaluating the reasonableness over the nature and timing of the transaction.
Addressing the critical audit matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the financial statements. The primary procedures we performed to address this critical audit matter included:
● With the assistance of our income tax specialists, evaluating the nature of the deferred tax assets and whether the sources of future taxable income were appropriate and sufficient to utilize the deferred tax assets,
● Evaluating the reasonableness of management’s assertion of intent and ability to hold its available-for-sale securities until they recover in value or until maturity, and
● Testing the reasonableness of management’s projections of future taxable income by comparing the estimates to the Company’s financial forecasts; historical taxable income; and available industry data.
We have served as the Company’s auditor since 2023. (Note: Partners of Postlethwaite & Netterville, APAC joined EisnerAmper LLP in 2023. Postlethwaite & Netterville, APAC had served as the Company’s auditor since 2022).
/s/ EisnerAmper LLP
EISNERAMPER LLP
Baton Rouge, Louisiana
March 19, 2025
EisnerAmper LLP
www.eisneramper.com
7000 Central Parkway NE
404 588 4200
Suite 1000
wipfli.com
Atlanta, GA 30328
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 operations, comprehensive loss, changes in shareholders’ equity and cash flows of Peoples Financial Corporation and subsidiaries (the Company) for the year ended December 31, 2022, and the related notes to the consolidated financial statements (collectively, the financial statements). In our opinion, the financial statements present fairly, in all material respects, the results of its operations and its cash flows for the year ended December 31, 2022, 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 audit. 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 audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit 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 audit 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 audit 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 audit 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 audit provides 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 $3,109,000 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 Company’s loan portfolio and local economy.
We have served as the Company’s auditor since 2006.
Atlanta, Georgia
March 15, 2023

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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
Wipfli LLP (“Wipfli”) had served as the independent registered public accounting firm for the Company since October 2019 following its acquisition of Porter Keadle Moore, LLC, a predecessor firm which had served as the independent registered public accounting firm for the Company since 2006. However, as announced on its Form 8-K Report filed on October 3, 2022, the Board of the Company, through its Audit Committee, conducted a competitive process to determine the Company’s independent registered public accounting firm commencing with the Company’s fiscal year ending December 31, 2023. The Audit Committee invited several independent registered public accounting firms to participate in this process, including Wipfli.
Following review of proposals from the independent registered public accounting firms that participated in the process, on September 28, 2022, upon recommendation from the Audit Committee, the Board of the Company approved the engagement of Postlethwaite & Netterville (“P&N”) as the Company’s independent registered public accounting firm for the Company’s fiscal year ending December 31, 2023, which was ratified at the 2023 Annual Meeting.
Wipfli continued as the Company’s independent registered public accounting firm for the year ended December 31, 2022. Wipfli’s reports on the Company’s consolidated financial statements as of and for the fiscal years ended December 31, 2021 and 2022 did not contain any adverse opinion or disclaimer of opinion, nor were they qualified or modified as to uncertainty, audit scope, or accounting principles.
During the fiscal years ended December 31, 2021 and 2022, there were: (i) no disagreements within the meaning of Item 304(a)(1)(v) of Regulation S-K and the related instructions between the Company and Wipfli on any matters of accounting principles or practices, financial statement disclosure, or auditing scope or, procedure which, if not resolved to Wipfli’s satisfaction, would have caused Wipfli to make reference in their reports; and (ii) no “reportable events” within the meaning of Item 604(a)(1)(v) of Regulation S-K.
The Company provided Wipfli a copy of the March 22, 2023 Form 8-K/A, as well as the September 28, 2022, Form 8-K it amended, prior to their filings with the Securities and Exchange Commission (the “Commission”) and requested that Wipfli furnish it with a letter addressed to the SEC stating whether or not it agreed with the above statements in this Current Report. A copy of Wipfli’s letter to the Commission is filed as Exhibit 16.1 on Form 8-K/A filed on March 22, 2023.
During the fiscal years ended December 31, 2021 and 2022 and the subsequent interim period through March 15, 2023, neither the Company nor anyone on its behalf consulted with P&N regarding: (i) the application of accounting principles to a specific transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Company’s financial statements, and neither a written report or oral advice was provided to the Company that P&N concluded was an important factor considered by the Company in reaching a decision as to any accounting, auditing, or financial reporting issue; (ii) any matter that was the subject of a disagreement within the meaning of Item 304(a)(1)(iv) of Regulation S-K and the related instructions; or (iii) any reportable event within the meaning of Item 304(a)(1)(v) of Regulation SK.
The Company has since been notified P&N has combined with EisnerAmper LLP (“EisnerAmper”) (“the Practice Combination”), and independent audits previously conducted by P&N will be conducted by EisnerAmper as a result of the Practice Combination. Therefore, P&N effectively resigned as the Company’s independent registered public accounting firm and EisnerAmper, as the successor to P&N following the Practice Combination, will serve as the Company’s independent registered public accounting firm. On December 6, 2023 the Company’s Board of Directors approved the retention of EisnerAmper as the Company’s independent registered public accounting firm. As of December 6, 2023, EisnerAmper was registered with the Public Company Accounting Oversight Board.
From the date of P&N’s appointment as the Company’s independent registered public accounting firm through December 6, 2023, there were no disagreements with P&N on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedures, which disagreements, if not resolved by P&N’s satisfaction, would have caused P&N to make reference to the subject matter of the disagreement in their reports on the company’s consolidated financial statement for 2023. Additionally, during the interim periods through December 06, 2023, there were no “reportable events” as that term is defined in Item 304(a)(1)(v) of Regulation S- K. The Company provided P&N a
copy of the December 6, 2023 Form 8-K prior to its filing with the Securities and Exchange Commission (the “Commission”) and requested that P&N furnish it with a letter addressed to the SEC stating whether or not it agreed with the above statements in this Current Report. A copy of P&N’s letter to the Commission is filed as Exhibit 16.1 on Form 8-K filed on December 6, 2023.
During the fiscal years ended December 31, 2021 and 2022 and interim periods through December 6, 2023, the Company did not consult with EisnerAmper on any matter that (i) involved the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Company’s financial statements, in each case where a written report was provided or oral advice was provided that EisnerAmper concluded was an important factor considered by the Company in reaching a decision as to the accounting, auditing or financial reporting issue; or (ii) was either the subject of a disagreement, as that term is defined in Item 304(a)(1)(iv) of Regulation S-K and the related instructions to Item 304 of Regulation S-K, or a reportable event, as that term is defined in Item 304(a)(1)(v) of Regulation S-K.

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ITEM 9A. CONTROLS AND PROCEDURES
ITEM 9A - CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
As of December 31, 2024, 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, 2024 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, 2024, 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, 2024.
/s/ Chevis C. Swetman
/s/ Leslie B. Fulton
Chevis C. Swetman
Leslie B. Fulton
Chairman, President and Chief Executive Officer
Chief Financial Officer
March 19, 2025
March 19, 2025

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ITEM 9B. OTHER INFORMATION
ITEM 9B - OTHER INFORMATION
Pursuant to Item 408(a) of Regulation S-K, none of our directors or executive officers adopted, terminated or modified a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement during the quarter ended December 31, 2024.

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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, IV, and X of our definitive proxy statement to be filed on March 19 2025, relating to our 2025 Annual Meeting of stockholders to be held April 23, 2025, 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.
The Company has adopted a Statement of Policy and Procedures Governing Trading in Shares of Peoples Financial Corporation (“Insider Trading Policy”) which is reasonably designed to promote compliance with insider trading laws, rules and regulations, and standards of OTCQX. The Insider Trading Policy governs the purchase, sale and/or other disposition of the Company’s common stock by the Company’s directors, executive officers and the Company itself. The Insider Trading Policy can be found as Exhibit 19 to this Current Report on Form 10-K.

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ITEM 11. EXECUTIVE COMPENSATION
ITEM 11 - EXECUTIVE COMPENSATION
The information in Section VII contained in the Proxy Statement in connection with the Annual Meeting of Shareholders to be held April 23, 2025 which will be filed by the Company in definitive form with the Commission on March 19, 2025, 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 V and VI contained in the Proxy Statement in connection with the Annual Meeting of Shareholders to be held April 23, 2025, which was filed by the Company in definitive form with the Commission on March 19, 2025, 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 IV and VIII contained in the Proxy Statement in connection with the Annual Meeting of Shareholders to be held April 23, 2025, filed by the Company in definitive form with the Commission on or about March 19, 2025, 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 III and Section XII contained in the Proxy Statement in connection with the Annual Meeting of Shareholders to be held April 23, 2025, which will be filed by the Company in definitive form with the Commission on March 19, 2025, 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 note.
(a) 3. Index of Exhibits:
Description
Incorporated by Reference to
Registration or File Number
Form of
Report
Date of
Report
Exhibit Number
in Report
(3.1) Articles of Incorporation
001-12103
10-K
12/31/2021
3.1
(3.2) Amended and Restated Bylaws
001-12103
8-K
11/22/2022
3.2
(4.1) Description of Common Stock
001-12103
10-K
12/31/2021
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
(10.6) 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
(19) Insider Trading Policy and Procedures
(21) Subsidiaries of the registrant (P)
33-15595
10-K
12/31/1988
(23.1) Consent of Independent Registered Public Accounting Firm - *
(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 2024 Annual Report to Shareholders, formatted in iXBRL (inline Extensible Business Reporting Language): (i) Consolidated Statements of Condition at December 31, 2024 and 2023, (ii) Consolidated Statements of Operations for the years ended December 31, 2024, 2023 and 2022, (iii) Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2024, 2023 and 2022, (iv) Consolidated Statement of Changes in Shareholders’ Equity for the years ended December 31, 2024 and 2023, (v) Consolidated Statements of Cash Flows for the years ended December 31, 2024, 2023 and 2022 and (vi) Notes to the Consolidated Financial Statements for the year ended December 31, 2024, 2023 and 2022 *
(104)Cover Page Interactive Data File (embedded within the Inline XBRL and contained in Exhibit 101)
*
Filed Herewith.
(P)
Paper filing.