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PEOPLES FINANCIAL CORP /MS/ - Quarter Report: 2021 March (Form 10-Q)

pfbx20210331_10q.htm
 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 or 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934

 

  For the quarterly period ended

             March 31, 2021

 

or

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

 

Commission File Number

                     001-12103

 

 

PEOPLES FINANCIAL CORPORATION

(Exact name of registrant as specified in its charter)

 

Mississippi

    64-0709834

(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)

 

Lameuse and Howard Avenues, Biloxi, Mississippi

39533

(Address of principal executive offices) (Zip Code)

 

(228) 435-5511

(Registrant's telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

 

    Trading  
  Title of each class Symbol(s) Name of each exchange on which registered
  None PFBX None

 

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes  ☒  No  ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files.) Yes  ☒  No  ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer” , “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer  ☐ Accelerated filer  ☐ Smaller reporting company  ☒
Non-accelerated filer  ☐   Emerging growth company  ☐

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes  ☐  No  ☒

 

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the last practicable date. Peoples Financial Corporation has only one class of common stock authorized. At April 30, 2021, there were 15,000,000 shares of $1 par value common stock authorized, with 4,878,557 shares issued and outstanding.

 

 

1

 

Part 1 Financial Information

Item 1: Financial Statements

 

 

Peoples Financial Corporation and Subsidiaries

Consolidated Statements of Condition

(in thousands except share data)

 

   

March 31, 2021

   

December 31, 2020

 
   

(unaudited)

   

(audited)

 
                 

Assets

               

Cash and due from banks

  $ 105,115     $ 91,542  
                 

Available for sale securities

    239,116       180,130  
                 

Held to maturity securities, fair value of $94,485 at March 31, 2021; $78,474 at December 31, 2020

    93,221       75,688  
                 

Other investments

    2,561       2,593  
                 

Federal Home Loan Bank Stock, at cost

    2,151       2,149  
                 

Loans

    272,273       278,421  
                 

Less: Allowance for loan losses

    4,072       4,426  
                 

Loans, net

    268,201       273,995  
                 

Bank premises and equipment, net of accumulated depreciation

    15,561       15,679  
                 

Other real estate

    3,143       3,475  
                 

Accrued interest receivable

    2,422       2,100  
                 

Cash surrender value of life insurance

    19,758       19,609  
                 

Other assets

    1,026       1,066  
                 

Total assets

  $ 752,275     $ 668,026  

 

2

 

 

Peoples Financial Corporation and Subsidiaries

Consolidated Statements of Condition (continued)

(in thousands except share data)

 

   

March 31, 2021

   

December 31, 2020

 
   

(unaudited)

   

(audited)

 

Liabilities and Shareholders' Equity

               

Liabilities:

               
                 

Deposits:

               
                 

Demand, non-interest bearing

  $ 196,957     $ 170,269  
                 

Savings and demand, interest bearing

    372,335       319,165  
                 

Time, $100,000 or more

    42,463       38,581  
                 

Other time deposits

    22,004       22,483  
                 

Total deposits

    633,759       550,498  
                 

Borrowings from Federal Home Loan Bank

    932       969  
                 

Employee and director benefit plans liabilities

    18,906       18,882  
                 

Other liabilities

    4,218       2,811  
                 

Total liabilities

    657,815       573,160  
                 

Shareholders' Equity:

               

Common stock, $1 par value, 15,000,000 shares authorized, 4,878,557 shares issued and outstanding at March 31, 2021 and December 31, 2020

    4,879       4,879  
                 

Surplus

    65,780       65,780  
                 

Undivided profits

    22,177       18,335  
                 

Accumulated other comprehensive income

    1,624       5,872  
                 

Total shareholders' equity

    94,460       94,866  
                 

Total liabilities and shareholders' equity

  $ 752,275     $ 668,026  

 

See Notes to Consolidated Financial Statements.

 

3

 

 

Peoples Financial Corporation and Subsidiaries

Consolidated Statements of Income

(in thousands except per share data) (unaudited)

 

   

Three Months Ended March 31,

 
   

2021

   

2020

 

Interest income:

               
                 

Interest and fees on loans

  $ 3,254     $ 3,205  
                 

Interest and dividends on securities:

               
                 

U.S. Treasuries

    62       291  
                 

U.S. Government agencies

    26       82  
                 

Mortgage-backed securities

    451       749  
                 

Collateralized mortgage obligations

    170       111  
                 

States and political subdivisions

    780       413  
                 

Other investments

    2       1  
                 

Interest on balances due from depository institutions

    36       155  
                 

Total interest income

    4,781       5,007  
                 

Interest expense:

               
                 

Deposits

    260       599  
                 

Borrowings from Federal Home Loan Bank

    6       12  
                 

Total interest expense

    266       611  
                 

Net interest income

    4,515       4,396  
                 

Provision for (reduction of) allowance for loan losses

    (4,853 )     64  
                 

Net interest income after provision for (reduction of) allowance for loan losses

  $ 9,368     $ 4,332  

 

 

4

 

 

Peoples Financial Corporation and Subsidiaries

Consolidated Statements of Income (continued)

(in thousands except per share data) (unaudited)

 

   

Three Months Ended March 31,

 
   

2021

   

2020

 

Non-interest income:

               
                 

Trust department income and fees

  $ 437     $ 371  
                 

Service charges on deposit accounts

    836       911  
                 

Gain on sales of available for sale securities

            433  
                 

Increase in cash surrender value of life insurance

    108       108  
                 

Other income

    129       443  
                 

Total non-interest income

    1,510       2,266  
                 

Non-interest expense:

               
                 

Salaries and employee benefits

    2,516       2,674  
                 

Net occupancy

    461       487  
                 

Equipment rentals, depreciation and maintenance

    781       794  
                 

FDIC and state banking assessments

    109       98  
                 

Data processing

    350       314  
                 

ATM expense

    295       185  
                 

Other real estate expense

    129       136  
                 

Loss from other investments

    32       38  
                 

Other expense

    1,875       749  
                 

Total non-interest expense

    6,548       5,475  
                 

Net income

  $ 4,330     $ 1,123  
                 

Basic and diluted earnings per share

  $ .89     $ .23  

Dividends declared per share

  $ .10     $    

 

See Notes to Consolidated Financial Statements.

 

5

 

 

Peoples Financial Corporation and Subsidiaries

Consolidated Statements of Comprehensive Income

(in thousands) (unaudited)

 

   

Three Months Ended March 31,

 
   

2021

   

2020

 
                 

Net income

  $ 4,330     $ 1,123  
                 

Other comprehensive income (loss):

               
                 

Net unrealized gain (loss) on available for sale securities

    (4,248 )     4,310  
                 

Reclassification adjustment for realized gains on available for sale securities sold in current year

            (433 )
                 

Total other comprehensive income (loss)

    (4,248 )     3,877  
                 

Total comprehensive income

  $ 82     $ 5,000  

 

See Notes to Consolidated Financial Statements.

 

6

 

 

Peoples Financial Corporation and Subsidiaries

Consolidated Statements of Changes in Shareholders Equity

(in thousands except share data)

 

                                   

Accumulated

         
   

Number of

                           

Other

         
   

Common

   

Common

           

Undivided

   

Comprehensive

         
   

Shares

   

Stock

   

Surplus

   

Profits

   

Income

   

Total

 
                                                 

Balance, January 1, 2020

    4,943,186     $ 4,943     $ 65,780     $ 21,855     $ 2,545     $ 95,123  
                                                 

Net income

                            1,123               1,123  
                                                 

Other comprehensive income

                                    3,877       3,877  
                                                 

Stock retirement

    (50,125 )     (50 )             (530 )             (580 )
                                                 

Balance, March 31, 2020

    4,893,061     $ 4,893     $ 65,780     $ 22,448     $ 6,422     $ 99,543  
                                                 

Balance, January 1, 2021

    4,878,557     $ 4,879     $ 65,780     $ 18,335     $ 5,872     $ 94,866  
                                                 

Net income

                            4,330               4,330  
                                                 

Other comprehensive loss

                                    (4,248 )     (4,248 )
                                                 

Dividend declared ($ .10 per share)

                            (488 )             (488 )
                                                 

Balance, March 31, 2021

    4,878,557     $ 4,879     $ 65,780     $ 22,177     $ 1,624     $ 94,460  

 

Note: Balances as of January 1, 2020 and 2021 were audited.

 

See Notes to Consolidated Financial Statements.

 

7

 

 

Peoples Financial Corporation and Subsidiaries

Consolidated Statements of Cash Flows

(in thousands) (unaudited)

 

   

Three Months Ended March 31,

 
   

2021

   

2020

 

Cash flows from operating activities:

               

Net income

  $ 4,330     $ 1,123  
                 

Adjustments to reconcile net income to net cash provided by operating activities:

               
                 

Depreciation

    450       471  
                 

Provision for (reduction of) allowance for loan losses

    (4,853 )     64  
                 

Writedown of other real estate

    58       98  
                 

Gain on sales of other real estate

    (3 )     (42 )
                 

Loss from other investments

    32       38  
                 

Gain on liquidation and sales of securities

            (433 )
                 

Gain from sale of bank premises and equipment

            (318 )
                 

Amortization (accretion) of available for sale securities

    88       (71 )
                 

Amortization of held to maturity securities

    73       63  
                 

Change in accrued interest receivable

    (322 )     (358 )
                 

Increase in cash surrender value of life insurance

    (108 )     (108 )
                 

Change in other assets

    41       238  
                 

Change in other liabilities

    943       (141 )

Net cash provided by operating activities

  $ 729     $ 624  

 

8

 

 

Peoples Financial Corporation and Subsidiaries

Consolidated Statements of Cash Flows (continued)

(in thousands) (unaudited)

 

   

Three Months Ended March 31,

 
   

2021

   

2020

 

Cash flows from investing activities:

               

Proceeds from maturities, sales or calls of available for securities

  $ 9,591     $ 57,886  
                 

Purchases of available for sale securities

    (72,913 )     (96,853 )
                 

Proceeds from maturities of held to maturity securities

    1,980       5,950  
                 

Purchases of held to maturity securities

    (19,586 )     (2,500 )
                 

Purchases of Federal Home Loan Bank stock

    (2 )        
                 

Proceeds from sales of other real estate

    277       747  
                 

Proceeds from insurance on other real estate

            77  
                 

Loans, net change

    10,647       (2,059 )
                 

Acquisition of bank premises and equipment

    (332 )     (32 )
                 

Proceeds from sale of banking premises and equipment

            547  
                 

Investment in cash surrender value of life insurance

    (42 )     (23 )

Net cash used in investing activities

    (70,380 )     (36,260 )

Cash flows from financing activities:

               

Demand and savings deposits, net change

    79,858       60,662  
                 

Time deposits, net change

    3,403       (10,980 )
                 

Borrowings from Federal Home Loan Bank

    22       59,500  
                 

Repayments to Federal Home Loan Bank

    (59 )     (62,014 )
                 

Retirement of common stock

            (580 )
                 

Net cash provided by financing activities

    83,224       46,588  

Net increase in cash and cash equivalents

    13,573       10,952  

Cash and cash equivalents, beginning of period

    91,542       29,424  

Cash and cash equivalents, end of period

  $ 105,115     $ 40,376  

 

See Notes to Consolidated Financial Statements.

 

9

 

PEOPLES FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

For the three Months Ended March 31, 2021 and 2020

 

 

1. Basis of Presentation:

Peoples Financial Corporation (the “Company”) is a one-bank holding company headquartered in Biloxi, Mississippi. The Company has two subsidiaries, PFC Service Corp., an inactive company, and The Peoples Bank, Biloxi, Mississippi (the “Bank”). The Bank provides a full range of banking, financial and trust services to state, county and local government entities and individuals and small and commercial businesses operating in those portions of Mississippi, Louisiana and Alabama which are within a fifty mile radius of the Waveland, Wiggins and Gautier branches, the Bank’s three most outlying locations (the “trade area”).

 

The accompanying unaudited consolidated financial statements and notes thereto contain all adjustments, consisting only of normal recurring adjustments, necessary to present fairly, in accordance with accounting principles generally accepted in the United States of America (“GAAP”), the financial position of the Company and its subsidiaries as of March 31, 2021 and the results of their operations and their cash flows for the periods presented. The interim financial information should be read in conjunction with the annual consolidated financial statements and the notes thereto included in the Company’s 2020 Annual Report and Form 10-K.

 

The results of operations for the quarter ended March 31, 2021, are not necessarily indicative of the results to be expected for the full year.

 

Use of Estimates - The preparation of financial statements in conformity with 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 consolidated financial statements and the reported amounts of revenues and expenses during the reported period. Actual results could differ from those estimates. Material estimates common to the banking industry that are particularly susceptible to significant change in the near term include, but are not limited to, the determination of the allowance for loan losses, the valuation of other real estate acquired in connection with foreclosure or in satisfaction of loans and valuation allowances associated with the realization of deferred tax assets, which are based on future taxable income.

 

Summary of Significant Accounting Policies - The accounting and reporting policies of the Company conform to GAAP and general practices within the banking industry. There have been no material changes or developments in the application of principles or in our evaluation of the accounting estimates and the underlying assumptions or methodologies that we believe to be Critical Accounting Policies as disclosed in our Form 10-K for the year ended December 31, 2020.

 

Accounting Standards Update – The Financial Accounting Standards Board issued several Accounting Standards Updates during the first quarter of 2021, none of which will impact the Company.

 

10

 

 

2. Earnings Per Share:

Per share data is based on the weighted average shares of common stock outstanding of 4,878,557 and 4,927,616 for the three months ended March 31, 2021 and 2020, respectively.

 

 

3. Statements of Cash Flows:

The Company has defined cash and cash equivalents as cash and due from banks. The Company paid $258,500 and $611,708 for the three months ended March 31, 2021 and 2020, respectively, for interest on deposits and borrowings. No income tax payments were made during the three months ended March 31, 2021 and 2020. No loans were transferred to other real estate during the three months ended March 31, 2021 and 2020.

 

 

4.

Investments:

The amortized cost and fair value of securities at March 31, 2021 and December 31, 2020, are as follows (in thousands):

 

           

Gross

   

Gross

         
           

Unrealized

   

Unrealized

         

March 31, 2021

 

Amortized Cost

   

Gains

   

Losses

   

Fair Value

 

Available for sale securities:

                               
                                 

U.S. Treasuries

  $ 29,916     $ 70     $       $ 29,986  
                                 

U.S. Government agencies

    2,500       64               2,564  
                                 

Mortgage-backed securities

    70,612       2,116       (282 )     72,446  
                                 

Collateralized mortgage obligations

    72,010       1,136       (60 )     73,086  
                                 

States and political subdivisions

    63,010       285       (2,261 )     61,034  
                                 

Total available for sale securities

  $ 238,048     $ 3,671     $ (2,603 )   $ 239,116  
                                 

Held to maturity securities:

                               

States and political subdivisions

  $ 93,221     $ 2,018     $ (754 )   $ 94,485  
                                 

Total held to maturity securities

  $ 93,221     $ 2,018     $ (754 )   $ 94,485  

 

11

 

           

Gross

   

Gross

         
           

Unrealized

   

Unrealized

         

December 31, 2020

 

Amortized Cost

   

Gains

   

Losses

   

Fair Value

 

Available for sale securities:

                               
                                 

U.S. Treasuries

  $ 19,999     $ 125     $       $ 20,124  
                                 

U.S. Government agencies

    2,500       83               2,583  
                                 

Mortgage-backed securities

    69,485       3,237       (46 )     72,676  
                                 

Collateralized mortgage obligations

    44,230       1,207               45,437  
                                 

States and political subdivisions

    38,600       751       (41 )     39,310  
                                 

Total available for sale securities

  $ 174,814     $ 5,403     $ (87 )   $ 180,130  
                                 

Held to maturity securities:

                               

States and political subdivisions

  $ 75,688     $ 2,809     $ (23 )   $ 78,474  
                                 

Total held to maturity securities

  $ 75,688     $ 2,809     $ (23 )   $ 78,474  

 

The amortized cost and fair value of debt securities at March 31, 2021 (in thousands), by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

 

   

Amortized Cost

   

Fair Value

 

Available for sale securities:

               

Due in one year or less

  $ 20,245     $ 20,315  

Due after one year through five years

    5,776       5,784  

Due after five years through ten years

    42,099       42,934  

Due after ten years

    99,316       97,637  

Mortgage-backed securities

    70,612       72,446  

Totals

  $ 238,048     $ 239,116  
                 

Held to maturity securities:

               

Due in one year or less

  $ 3,522     $ 3,532  

Due after one year through five years

    16,823       17,600  

Due after five years through ten years

    29,578       30,179  

Due after ten years

    43,298       43,174  

Totals

  $ 93,221     $ 94,485  

 

12

 

Available for sale and held to maturity securities with gross unrealized losses at March 31, 2021 and December 31, 2020, aggregated by investment category and length of time that individual securities have been in a continuous loss position, are as follows (in thousands):

 

   

Less Than Twelve Months

   

Over Twelve Months

   

Total

 
           

Gross

           

Gross

           

Gross

 
           

Unrealized

           

Unrealized

           

Unrealized

 
   

Fair Value

   

Losses

   

Fair Value

   

Losses

   

Fair Value

   

Losses

 

March 31, 2021:

                                               

Mortgage-backed securities

  $ 15,876     $ 265     $ 1,601     $ 17     $ 17,477     $ 282  
                                                 

Collateralized mortgage obligations

    18,353       60                       18,353       60  
                                                 

States and political subdivisions

    84,106       3,006       376       9       84,482       3,015  

TOTAL

  $ 118,335     $ 3,331     $ 1,977     $ 26     $ 120,312     $ 3,357  

December 31, 2020:

                                               

Mortgage-backed securities

  $ 6,278     $ 30     $ 1,619     $ 16     $ 7,897     $ 46  
                                                 

States and political subdivisions

    12,335       64                       12,335       64  

TOTAL

  $ 18,613     $ 94     $ 1,619     $ 16     $ 20,232     $ 110  

 

At March 31, 2021, 5 of the 46 mortgage-backed securities, 4 of the 18 collateralized mortgage obligations and 59 of the 166 securities issued by states and political subdivisions contained unrealized losses.

 

Management evaluates securities for other-than-temporary impairment on a monthly basis. In performing this evaluation, the length of time and the extent to which the fair value has been less than cost, the fact that the Company’s securities are primarily issued by U.S. Treasury and U.S. Government Agencies and the cause of the decline in value are considered. In addition, the Company does not intend to sell, and it is not more likely than not that it will be required to sell these securities before maturity. While some available for sale securities have been sold for liquidity purposes or for gains, the Company has traditionally held its securities, including those classified as available for sale, until maturity. As a result of the evaluation of these securities, the Company has determined that the unrealized losses summarized in the tables above are not deemed to be other-than-temporary.

 

Proceeds from sales of available for sale debt securities were $22,360,747 for the three months ended March 31, 2020 for a realized gain of $432,779. There were no sales of available for sale debit securities for the three months ended March 31, 2021.

 

Securities with a fair value of $296,705,292 and $206,544,282 at March 31, 2021 and December 31, 2020, respectively, were pledged to secure public deposits, federal funds purchased and other balances required by law.

 

13

 

 

5. Loans:

The composition of the loan portfolio at March 31, 2021 and December 31, 2020, is as follows (in thousands):

 

   

March 31, 2021

   

December 31, 2020

 
                 

Gaming

  $ 17,795     $ 18,765  
                 

Hotel/Motel

    46,943       45,499  
                 

Real estate, construction

    25,361       26,609  
                 

Real estate, mortgage

    138,077       144,276  
                 

Commercial and industrial

    35,019       37,429  
                 

Other

    9,078       5,843  
                 

Total

  $ 272,273     $ 278,421  

 

On March 27, 2020, the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”), a stimulus package intended to provide relief to businesses and consumers in the United States struggling as a result of COVID-19, was signed into law. A provision in the CARES Act included funding for the creation of the Paycheck Protection Program (“PPP”). PPP is intended to provide loans to small businesses to pay their employees, rent, mortgage interest and utilities. The Company worked with its customers to close 363 PPP loans for a total outstanding balance of $22,445,026 as of June 30, 2020. As of March 31, 2021, 127 loans with a balance of $8,693,897 were outstanding. Additional funds were provided in 2021 legislation for another round of PPP loans. Under this new round, as of March 31, 2021, 134 loans with a balance of $8,260,123 were outstanding. All PPP loans are reported in the commercial and industrial segment within the loan portfolio.

 

14

 

The age analysis of the loan portfolio, segregated by class of loans, as of March 31, 2021 and December 31, 2020, is as follows (in thousands):

 

                                                   

Loans Past

 
                                                   

Due Greater

 
   

Number of Days Past Due

                           

Than 90

 
                   

Greater

   

Total

           

Total

   

Days &

 
      30 - 59       60 - 89    

Than 90

   

Past Due

   

Current

   

Loans

   

Still Accruing

 

March 31, 2021:

                                                       

Gaming

  $       $       $       $       $ 17,795     $ 17,795     $    

Hotel/Motel

                                    46,943       46,943          

Real estate, construction

    324                       324       25,037       25,361          

Real estate, mortgage

    1,043       55       82       1,180       136,897       138,077          

Commercial and industrial

    8       22               30       34,989       35,019          

Other

    9                       9       9,069       9,078          
                                                         

Total

  $ 1,384     $ 77     $ 82     $ 1,543     $ 270,730     $ 272,273     $    

December 31, 2020:

                                                       

Gaming

  $       $       $       $       $ 18,765     $ 18,765     $    

Hotel/Motel

                                    45,499       45,499          

Real estate, construction

    277                       277       26,332       26,609          

Real estate, mortgage

    2,865       263       118       3,246       141,030       144,276          

Commercial and industrial

    80                       80       37,349       37,429          

Other

    63                       63       5,780       5,843          
                                                         

Total

  $ 3,285     $ 263     $ 118     $ 3,666     $ 274,755     $ 278,421     $    

 

The Company monitors the credit quality of its loan portfolio through the use of a loan grading system. A score of 1 – 5 is assigned to the loan based on factors including repayment ability, trends in net worth and/or financial condition of the borrower and guarantors, employment stability, management ability, loan to value fluctuations, the type and structure of the loan, conformity of the loan to bank policy and payment performance. Based on the total score, a loan grade of A, B, C, S, D, E or F is applied. A grade of A will generally be applied to loans for customers that are well known to the Company and that have excellent sources of repayment. A grade of B will generally be applied to loans for customers that have excellent sources of repayment which have no identifiable risk of collection. A grade of C will generally be applied to loans for customers that have adequate sources of repayment which have little identifiable risk of collection. A grade of S will generally be applied to loans for customers who meet the criteria for a grade of C but who 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.

 

15

 

An analysis of the loan portfolio by loan grade, segregated by class of loans, as of March 31, 2021 and December 31, 2020, is as follows (in thousands):

 

   

Loans With A Grade Of:

         
   

A, B or C

   

S

   

D

   

E

   

F

   

Total

 

March 31, 2021:

                                               

Gaming

  $ 15,157     $       $ 2,638     $       $       $ 17,795  
                                                 

Hotel/Motel

    46,943                                       46,943  
                                                 

Real estate, construction

    24,921               9       431               25,361  
                                                 

Real estate, mortgage

    123,919       7,909       3,592       2,657               138,077  
                                                 

Commercial and industrial

    29,911       5,020       43       45               35,019  
                                                 

Other

    9,060               18                       9,078  
                                                 
                                                 

Total

  $ 249,911     $ 12,929     $ 6,300     $ 3,133     $       $ 272,273  
                                                 

December 31, 2020:

                                               

Gaming

  $ 15,938     $       $ 2,827     $       $       $ 18,765  
                                                 

Hotel/Motel

    45,499                                       45,499  
                                                 

Real estate, construction

    26,098               61       450               26,609  
                                                 

Real estate, mortgage

    129,825       7,977       3,741       2,733               144,276  
                                                 

Commercial and industrial

    31,810       5,525       45       49               37,429  
                                                 

Other

    5,822               21                       5,843  
                                                 
                                                 

Total

  $ 254,992     $ 13,502     $ 6,695     $ 3,232     $       $ 278,421  

 

16

 

A loan may be impaired but not on nonaccrual status when the loan is well secured and in the process of collection. Total loans on nonaccrual as of March 31, 2021 and December 31, 2020, are as follows (in thousands):

 

   

March 31, 2021

   

December 31, 2020

 
                 

Real estate, construction

  $ 336     $ 346  
                 

Real estate, mortgage

    2,583       2,656  
                 

Commercial and industrial

    22       25  
                 

Total

  $ 2,941     $ 3,027  

 

The CARES Act also addressed COVID-19-related loan modifications and specified that such modifications executed between March 1, 2020 and the earlier of (i) 60 days after the date of the termination of the national emergency declared by the President and (ii) December 31, 2020, on loans that were current as of December 31, 2019, are not TDR’s. Additionally, under guidance from the federal banking agencies encouraging financial institutions to work prudently with borrowers, other short-term modifications made on a good faith basis in response to COVID-19 to borrowers that were current prior to any relief are not TDRs. During 2020, the Company modified 249 loans with a total balance of $95,010,325 for certain customers by extending payments for 90 days or granting interest only payments for 3 – 6 months as a result of the impact of COVID-19. Accordingly, such loans were not classified as troubled debt restructurings. As of March 31, 2021, the extension period for 6 loans with a total balance of $656,893 had expired. While these loans had resumed making regular payments, they are currently past due. As of March 31, 2021, the Company renewed the modification for 3 loans with a balance of $500,611. All other loans modified due to COVID-19 have either been paid off by the customer or are current.

 

Prior to 2019, certain loans were modified by granting interest rate concessions to these customers with such loans being classified as troubled debt restructurings. During 2020 and 2021, the Company did not restructure any additional loans. Specific reserves of $50,000 were allocated to troubled debt restructurings as of March 31, 2021 and December 31, 2020. The Bank had no commitments to lend additional amounts to customers with outstanding loans classified as troubled debt restructurings as of March 31, 2021 and December 31, 2020.

 

17

 

Impaired loans, which include loans classified as nonaccrual and troubled debt restructurings, segregated by class of loans, as of March 31, 2021 and December 31, 2020, are as follows (in thousands):

 

   

Unpaid

Principal

Balance

   

Recorded

Investment

   

Related

Allowance

   

Average

Recorded

Investment

   

Interest

Income

Recognized

 

March 31, 2021:

                                       

With no related allowance recorded:

                                       

Real estate, construction

  $ 230     $ 230     $       $ 233     $ 2  

Real estate, mortgage

    3,027       3,027               3,057       6  
                                         

Total

    3,257       3,257               3,290       8  
                                         

With a related allowance recorded:

                                       

Real estate, construction

    201       201       20       204          

Real estate, mortgage

    249       249       74       251       1  

Commercial and industrial

    22       22       4       23          
                                         

Total

    472       472       98       478       1  
                                         

Total by class of loans:

                                       

Real estate, construction

    431       431       20       437       2  

Real estate, mortgage

    3,276       3,276       74       3,308       7  

Commercial and industrial

    22       22       4       23          
                                         

Total

  $ 3,729     $ 3,729     $ 98     $ 3,768     $ 9  
                                         

December 31, 2020:

                                       

With no related allowance recorded:

                                       

Real estate, construction

  $ 304     $ 239     $       $ 246     $ 11  

Real estate, mortgage

    3,112       3,112               3,496       39  
                                         

Total

    3,416       3,351               3,742       50  
                                         

With a related allowance recorded:

                                       

Real estate, construction

    211       211       20       214          

Real estate, mortgage

    253       253       76       250       6  

Commercial and industrial

    25       25       4       31          
                                         

Total

    489       489       100       495       6  
                                         

Total by class of loans:

                                       

Real estate, construction

    515       450       20       460       11  

Real estate, mortgage

    3,365       3,365       76       3,746       45  

Commercial and industrial

    25       25       4       31          
                                         

Total

  $ 3,905     $ 3,840     $ 100     $ 4,237     $ 56  

 

18

 

 

6. Allowance for Loan Losses:

Transactions in the allowance for loan losses for the three months ended March 31, 2021 and 2020, and the balances of loans, individually and collectively evaluated for impairment, as of March 31, 2021 and 2020, are as follows (in thousands):

 

   

Gaming

   

Hotel/Motel

   

Real Estate, Construction

   

Real Estate, Mortgage

   

Commercial

and Industrial

   

Other

   

Total

 

For the Quarter Ended March 31, 2021:

                                                 

Allowance for Loan Losses:

                                                       

Beginning Balance

  $ 186     $ 754     $ 111     $ 2,849     $ 417     $ 109     $ 4,426  

Charge-offs

                    (2 )     (2 )             (81 )     (85 )

Recoveries

                    18       4,510       14       42       4,584  

Provision

    6       62       (1 )     (4,888 )     (82 )     50       (4,853 )

Ending Balance

  $ 192     $ 816     $ 126     $ 2,469     $ 349     $ 120     $ 4,072  
                                                         

Allowance for loan losses, March 31, 2021:

                                                 

Ending balance: individually evaluated for impairment

  $       $       $ 20     $ 181     $ 39     $       $ 240  

Ending balance: collectively evaluated for impairment

  $ 192     $ 816     $ 106     $ 2,288     $ 310     $ 120     $ 3,832  
                                                         

Total Loans, March 31, 2021:

                                                 

Ending balance: individually evaluated for impairment

  $ 2,638     $       $ 440     $ 6,250     $ 88     $ 18     $ 9,434  

Ending balance: collectively evaluated for impairment

  $ 15,157     $ 46,943     $ 24,921     $ 131,827     $ 34,931     $ 9,060     $ 262,839  

 

19

 

   

Gaming

   

Hotel/Motel

   

Real Estate, Construction

   

Real Estate, Mortgage

   

Commercial

and Industrial

   

Other

   

Total

 

For the Quarter Ended March 31, 2020:

                                                 

Allowance for Loan Losses:

                                                       

Beginning Balance

  $ 223     $ 779     $ 102     $ 2,454     $ 553     $ 96     $ 4,207  

Charge-offs

                            (8 )     (46 )     (88 )     (142 )

Recoveries

                                    16       46       62  

Provision

    (25 )     (45 )     (26 )     181       (52 )     31       64  

Ending Balance

  $ 198     $ 734     $ 76     $ 2,627     $ 471     $ 85     $ 4,191  
                                                         

Allowance for loan losses, March 31, 2020:

                                                 

Ending balance: individually evaluated for impairment

  $       $       $ 20     $ 212     $ 5     $ 4     $ 241  

Ending balance: collectively evaluated for impairment

  $ 198     $ 734     $ 56     $ 2,415     $ 466     $ 81     $ 3,950  
                                                         

Total Loans, March 31, 2020:

                                                 

Ending balance: individually evaluated for impairment

  $ 4,103     $       $ 570     $ 12,385     $ 328     $ 22     $ 17,408  

Ending balance: collectively evaluated for impairment

  $ 17,980     $ 45,226     $ 20,010     $ 137,174     $ 27,132     $ 5,998     $ 253,520  

 

 

7. Deposits:

Time deposits of $250,000 or more totaled approximately $24,300,000 and $20,564,000 at March 31, 2021 and December 31, 2020, respectively.

 

 

8. Shareholders’ Equity:

On March 24, 2021, the Board declared a dividend of $ .10 per share payable April 8, 2021 to shareholders of record on April 5, 2021.

 

 

9. Fair Value Measurements and Disclosures:

The Company utilizes fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. Available for sale securities are recorded at fair value on a recurring basis. Additionally, from time to time, the Company may be required to record other assets at fair value on a non-recurring basis, such as impaired loans and ORE. These non-recurring fair value adjustments typically involve 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.

 

20

 

Fair Value Hierarchy

The Company groups assets and liabilities at fair value in three levels, based on the markets in which the assets and liabilities are traded, and the reliability of the assumptions used to determine fair value. These levels are:

 

Level 1 - Valuation is based upon quoted prices for identical instruments traded in active markets.

 

Level 2 - Valuation is based upon quoted market prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-based valuation techniques for which all significant assumptions are observable in the market.

 

Level 3 - Valuation is generated from model-based techniques that use at least one significant assumption not observable in the market. These unobservable assumptions reflect estimates of assumptions that market participants would use in pricing the asset or liability. Valuation techniques include the use of option pricing models, discounted cash flow models and similar techniques.

 

Following is a description of valuation methodologies used to determine the fair value of financial assets and liabilities.

 

Cash and Due from Banks

The carrying amount shown as cash and due from banks approximates fair value.

 

Available for Sale Securities

The fair value of available for sale securities is based on quoted market prices. The Company’s available for sale securities are reported at their estimated fair value, which is determined utilizing several sources. The primary source is ICE Data Pricing and Reference Date, LLC (“ICE”) which purchased Interactive Data Corporation (“IDC”) but kept the IDC methodologies. Those methodologies include utilizing pricing models that vary based on asset class and include available trade, bid and other market information and whose methodology includes broker quotes, proprietary models and vast descriptive databases. Another source for determining fair value is matrix pricing, which is a mathematical technique used widely in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities’ relationship to other benchmark securities. The Company’s available for sale securities for which fair value is determined through the use of such pricing models and matrix pricing are classified as Level 2 assets.

 

Held to Maturity Securities

The fair value of held to maturity securities is based on quoted market prices. The Company’s held to maturity securities are reported at their amortized cost, and their estimated fair value, which is determined utilizing several sources, is disclosed in the financial statements and footnotes. The primary source is ICE Data Pricing and Reference Date, LLC (“ICE”) which purchased Interactive Data Corporation (“IDC”) but kept the IDC methodologies. Those methodologies include utilizing pricing models that vary based on asset class and include available trade, bid and other market information and whose methodology includes broker quotes, proprietary models and vast descriptive databases. Another source for determining fair value is matrix pricing, which is a mathematical technique used widely in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities’ relationship to other benchmark securities. The Company’s held to maturity securities for which fair value is determined through the use of such pricing models and matrix pricing are classified as Level 2 assets.

 

21

 

Other Investments

The carrying amount shown as other investments approximates fair value.

 

Federal Home Loan Bank Stock

The carrying amount shown as Federal Home Loan Bank Stock approximates fair value.

 

Loans

The fair value of fixed rate loans is estimated by discounting the future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings for the remaining maturities. The cash flows considered in computing the fair value of such loans are segmented into categories relating to the nature of the contract and collateral based on contractual principal maturities. Appropriate adjustments are made to reflect probable credit losses. Cash flows have not been adjusted for such factors as prepayment risk or the effect of the maturity of balloon notes. The fair value of floating rate loans is estimated to be its carrying value. At each reporting period, the Company determines which loans are impaired. Accordingly, the Company’s impaired loans are reported at their estimated fair value on a non-recurring basis. An allowance for each impaired loan, which are generally collateral-dependent, is calculated based on the fair value of its collateral. The fair value of the collateral is based on appraisals performed by third-party valuation specialists. Factors including the assumptions and techniques utilized by the appraiser are considered by Management. If the recorded investment in the impaired loan exceeds the measure of fair value of the collateral, a valuation allowance is recorded as a component of the allowance for loan losses. Impaired loans are non-recurring Level 3 assets.

 

Other Real Estate

In the course of lending operations, Management may determine that it is necessary to foreclose on the related collateral. Other real estate acquired through foreclosure is carried at fair value, less estimated costs to sell. The fair value of the collateral is based on appraisals performed by third-party valuation specialists. Factors including the assumptions and techniques utilized by the appraiser are considered by Management. If the current appraisal is more than one year old and/or the loan balance is more than $200,000, a new appraisal is obtained. Otherwise, the Bank uses a third-party desk top appraisal service to determine the fair value of the collateral, based on comparable sales, market conditions, Management’s plans for disposition and other estimates of fair value obtained from principally independent sources, adjusted for estimated selling costs. Other real estate is a non-recurring Level 3 asset.

 

Cash Surrender Value of Life Insurance

The carrying amount of cash surrender value of bank-owned life insurance approximates fair value.

 

Deposits

The fair value of non-interest bearing demand and interest bearing savings and demand deposits is the amount reported in the financial statements. The fair value of time deposits is estimated by discounting the cash flows using current rates 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.

 

22

 

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.

 

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 March 31, 2021 and December 31, 2020 are as follows (in thousands):

 

           

Fair Value Measurements Using

 
   

Total

   

Level 1

   

Level 2

   

Level 3

 

March 31, 2021:

                               

U.S. Treasuries

  $ 29,986     $       $ 29,986     $    

U.S. Government agencies

    2,564               2,564          

Mortgage-backed securities

    72,446               72,446          

Collateralized mortgage obligations

    73,086               73,086          

States and political subdivisions

    61,034               61,034          

Total

  $ 239,116     $       $ 239,116     $    
                                 

December 31, 2020:

                               

U.S. Treasuries

  $ 20,124     $       $ 20,124     $    

U.S. Government agencies

    2,583               2,583          

Mortgage-backed securities

    72,676               72,676          

Collateralized mortgage obligations

    45,437               45,437          

States and political subdivisions

    39,310               39,310          

Total

  $ 180,130     $       $ 180,130     $    

 

Impaired loans, which are measured at fair value on a non-recurring basis, by level within the fair value hierarchy as of March 31, 2021 and December 31, 2020 are as follows (in thousands):

 

           

Fair Value Measurements Using

 
   

Total

   

Level 1

   

Level 2

   

Level 3

 

March 31, 2021

  $ 374     $       $       $ 374  

December 31, 2020

    493                       493  

 

Other real estate, which is measured at fair value on a non-recurring basis, by level within the fair value hierarchy as of March 31, 2021 and December 31, 2020 are as follows (in thousands):

 

           

Fair Value Measurements Using

 
   

Total

   

Level 1

   

Level 2

   

Level 3

 

March 31, 2021

  $ 3,143     $       $       $ 3,143  

December 31, 2020

    3,475                       3,475  

 

23

 

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):

 

   

For the Three

   

For the Year

 
   

Months Ended

   

Ended

 
   

March 31, 2021

   

December 31, 2020

 

Balance, beginning of period

  $ 3,475     $ 7,453  
                 

Loans transferred to ORE

            753  
                 

Sales

    (274 )     (4,070 )
                 

Writedowns

    (58 )     (661 )
                 

Balance, end of period

  $ 3,143     $ 3,475  

 

The carrying value and estimated fair value of financial instruments, by level within the fair value hierarchy, at March 31, 2021 and December 31, 2020, are as follows (in thousands):

 

   

Carrying

   

Fair Value Measurements Using

         
   

Amount

   

Level 1

   

Level 2

   

Level 3

   

Total

 

March 31, 2021:

                                       

Financial Assets:

                                       

Cash and due from banks

  $ 105,115     $ 105,115     $       $       $ 105,115  

Available for sale securities

    239,116               239,116               239,116  

Held to maturity securities

    93,221               94,485               94,485  

Other investments

    2,561       2,561                       2,561  

Federal Home Loan Bank stock

    2,151               2,151               2,151  

Loans, net

    268,201                       272,505       272,505  

Cash surrender value of life insurance

    19,758               19,758               19,758  

Financial Liabilities:

                                       

Deposits:

                                       

Non-interest bearing

    196,957       196,957                       196,957  

Interest bearing

    436,802                       437,262       437,262  

Borrowings from Federal Home Loan Bank

    932               1,179               1,179  
                                         

December 31, 2020:

                                       

Financial Assets:

                                       

Cash and due from banks

  $ 91,542     $ 91,542     $       $       $ 91,542  

Available for sale securities

    180,130               180,130               180,130  

Held to maturity securities

    75,688               78,474               78,474  

Other investments

    2,593       2,593                       2,593  

Federal Home Loan Bank stock

    2,149               2,149               2,149  

Loans, net

    273,995                       278,898       278,898  

Cash surrender value of life insurance

    19,609               19,609               19,609  

Financial Liabilities:

                                       

Deposits:

                                       

Non-interest bearing

    170,269       170,269                       170,269  

Interest bearing

    380,229                       380,733       380,733  

Borrowings from Federal Home Loan Bank

    969               1,316               1,316  

 

 

10. Subsequent Events:

On April 28, 2021, the Board approved the repurchase of 200,000 of the outstanding shares of the Company’s common stock.

 

On May 3, 2021, the Company paid $1,125,000 in settlement of a lawsuit. The payment was accrued as of March 31, 2021.

 

24

 

 

Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations

 

GENERAL

 

The Company is a one-bank holding company headquartered in Biloxi, Mississippi. The Company has two subsidiaries, PFC Service Corp., an inactive company, and The Peoples Bank, Biloxi, Mississippi (the “Bank”). The Bank provides a full range of banking, financial and trust services to state, county and local government entities and individuals and small and commercial businesses operating in those portions of Mississippi, Louisiana and Alabama which are within a fifty mile radius of the Waveland, Wiggins and Gautier branches, the Bank’s three most outlying locations (the “trade area”).

 

The following presents Management's discussion and analysis of the consolidated financial condition and results of operations of Peoples Financial Corporation and Subsidiaries. These comments should be considered in combination with the Consolidated Financial Statements and Notes to Consolidated Financial Statements included in this report on Form 10-Q and the Consolidated Financial Statements, Notes to Consolidated Financial Statements and Management’s Discussion and Analysis included in the Company’s Form 10-K for the year ended December 31, 2020.

 

Forward-Looking Information

Congress passed the Private Securities Litigation Act of 1995 in an effort to encourage corporations to provide information about a company’s anticipated future financial performance. This act provides a safe harbor for such disclosure which protects the companies from unwarranted litigation if actual results are different from management expectations. This report contains forward-looking statements and reflects industry conditions, company performance and financial results. These forward-looking statements are subject to a number of factors and uncertainties which could cause the Company’s actual results and experience to differ from the anticipated results and expectations expressed in such forward-looking statements. Such factors and uncertainties include, but are not limited to: the effects of the COVID-19 pandemic on the Company’s business, customers, employees and third-party service providers, changes in interest rates and market prices, changes in local economic and business conditions, increased competition for deposits and loans, a deviation in actual experience from the underlying assumptions including the potential impact of the COVID-19 pandemic used to determine and establish the allowance for loan losses, changes in the availability of funds resulting from reduced liquidity, changes in statutes, government regulations or regulatory policies or practices in general and specifically as a result of the COVID-19 pandemic and acts of terrorism, weather or other events beyond the Company’s control.

 

New Accounting Pronouncements

The Financial Accounting Standards Board issues several accounting standards updates during the first quarter of 2021, none of which will impact the Company.

 

25

 

Critical Accounting Policies

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires Management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company evaluates these estimates and assumptions on an on-going basis using historical experience and other factors, including the current economic environment. We adjust such estimates and assumptions when facts and circumstances dictate. Certain critical accounting policies affect the more significant estimates and assumptions used in the preparation of the consolidated financial statements.

 

Investments

Investments which are classified as available for sale are stated at fair value. A decline in the market value of an investment below cost that is deemed to be other-than-temporary is charged to earnings for the decline in value deemed to be credit related and a new cost basis in the security is established. The decline in value attributed to non-credit related factors is recognized in other comprehensive income. The determination of the fair value of securities may require Management to develop estimates and assumptions regarding the amount and timing of cash flows.

 

Allowance for loan losses

The Company’s most critical accounting policy relates to its allowance for loan losses (“ALL”), which reflects the estimated losses resulting from the inability of its borrowers to make loan payments. The ALL is established and maintained at an amount sufficient to cover the estimated loss associated with the loan portfolio of the Company as of the date of the financial statements. Credit losses arise not only from credit risk, but also from other risks inherent in the lending process including, but not limited to, collateral risk, operation risk, concentration risk and economic risk. As such, all related risks of lending are considered when assessing the adequacy of the ALL. On a quarterly basis, Management estimates the probable level of losses to determine whether the allowance is adequate to absorb reasonably foreseeable, anticipated losses in the existing portfolio based on our past loan loss experience, known and inherent risk in the portfolio, adverse situations that may affect the borrowers’ ability to repay and the estimated value of any underlying collateral and current economic conditions. Management believes that the ALL is adequate and appropriate for all periods presented in these financial statements. If there was a deterioration of any of the factors considered by Management in evaluating the ALL, the estimate of loss would be updated, and additional provisions for loan losses may be required. The analysis divides the portfolio into two segments: a pool analysis of loans based upon a five year average loss history which is updated on a quarterly basis and which may be adjusted by qualitative factors by loan type and a specific reserve analysis for those loans considered impaired under GAAP. All credit relationships with an outstanding balance of $100,000 or greater that are included in Management’s loan watch list are individually reviewed for impairment. All losses are charged to the ALL when the loss actually occurs or when a determination is made that a loss is likely to occur; recoveries are credited to the ALL at the time of receipt.

 

26

 

Other Real Estate

Other real estate (“ORE”) includes real estate acquired through foreclosure. Each other real estate property is carried at fair value, less estimated costs to sell. Fair value is principally based on appraisals performed by third-party valuation specialists. If Management determines that the fair value of a property has decreased subsequent to foreclosure, the Company records a write down which is included in non-interest expense.

 

Employee Benefit Plans

Employee benefit plan liabilities and pension costs are determined utilizing actuarially determined present value calculations. The valuation of the benefit obligation and net periodic expense is considered critical, as it requires Management and its actuaries to make estimates regarding the amount and timing of expected cash outflows including assumptions about mortality, expected service periods and the rate of compensation increases.

 

Income Taxes

GAAP requires the asset and liability approach for financial accounting and reporting for deferred income taxes. We use the asset and liability method of accounting for deferred income taxes and provide deferred income taxes for all significant income tax temporary differences. As part of the process of preparing our consolidated financial statements, the Company is required to estimate our income taxes in each of the jurisdictions in which we operate. This process involves estimating our actual current tax exposure together with assessing temporary differences resulting from differing treatment of items, such as the provision for loan losses, for tax and financial reporting purposes. These differences result in deferred tax assets and liabilities that are included in our consolidated statement of condition. We must also assess the likelihood that our deferred tax assets will be recovered from future taxable income, and to the extent we believe that recovery is not likely, we must establish a valuation allowance. Significant management judgment is required in determining our provision for income taxes, our deferred tax assets and liabilities and any valuation allowance recorded against our net deferred tax assets. To the extent the Company establishes a valuation allowance or adjusts this allowance in a period, we must include an expense or a benefit within the tax provisions in the consolidated statement of income.

 

GAAP Reconciliation and Explanation

This Form 10-Q 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 three months ended March 31, 2021 and 2020 is included in the table on the following page.

 

27

 

RECONCILATION OF NON-GAAP PERFORMANCE MEASURES (In thousands)

 

For the Three Months Ended March 31,

 

2021

   

2020

 
                 

Interest income reconciliation:

               
                 

Interest income - taxable equivalent

  $ 4,835     $ 5,050  

Taxable equivalent adjustment

    (54 )     (43 )
                 

Interest income (GAAP)

  $ 4,781     $ 5,007  
                 

Net interest income reconciliation:

               
                 

Net interest income - taxable equivalent

  $ 4,569     $ 4,439  

Taxable equivalent adjustment

    (54 )     (43 )
                 

Net interest income (GAAP)

  $ 4,515     $ 4,396  

 

OVERVIEW

 

The Company is a community bank serving the financial and trust needs of its customers in our trade area, which is defined as those portions of Mississippi, Louisiana and Alabama which are within a fifty mile radius of the Waveland, Wiggins and Gautier branches, the bank subsidiary’s three most outlying locations. Maintaining a strong core deposit base and providing commercial and real estate lending in our trade area are the traditional focuses of the Company. Growth has largely been achieved through de novo branching activity, and it is expected that these strategies will continue to be emphasized in the future.

 

The World Health Organization declared the coronavirus COVID-19 (“COVID-19”) a pandemic in March 2020. The pandemic has resulted in, among other things, a significant stock and global markets volatility, disruption in business, leisure and tourism activities as nation-wide stay-at-home orders were mandated, significant strain on the health care industry as it addressed the severity of the health crisis and significant impact on the general economy including high unemployment, a 150-basis point decline in Federal funds rates and unprecedented government stimulus programs.

 

The Company has been proactive in ensuring the safety and health of its employees and customers during the pandemic. These steps include limiting access to branch lobbies as appropriate, installing germ shields in branch lobbies, allowing staff to work remotely, limiting in person meetings and endorsing the usage of face coverings by staff and customers. The Company is following guidance from the Centers for Disease Control and state and local orders.

 

28

 

Assisting our customers during the pandemic is a priority. The Company granted modifications by extending payments 90 days to certain customers as a result of the economic challenges of business closures and growing unemployment resulting from COVID-19. We have also actively participated in the Paycheck Protection Program (“PPP”), a specific stimulus resource designed to provide assistance to small businesses.

 

The Company reported net income of $4,330,000 for the first quarter of 2021 compared with net income of $1,123,000 for the first quarter of 2020. Results in 2021 included a reduction of the allowance for loan losses of $4,853,000 and the accrual for the anticipated settlement of a lawsuit of $1,125,000 which is included in non-interest expense as compared with 2020.

 

Managing the net interest margin is a key component of the Company’s earnings strategy. In March 2020, the Federal Reserve reduced rates by 150 basis points in two emergency moves to respond to the unprecedented economic disruptions of the COVID-19 pandemic. As a result of the material reduction in rates, total interest income decreased $226,000 in 2021 and total interest expense decreased $345,000 as compared with 2020.

 

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 allowance for loan losses of $4,853,000 was recorded in 2021 as compared with a provision of $64,000 in 2020. The reduction in the allowance for loan losses in 2021 was mainly the result of a significant recovery of a loan balance that was previously charged off. The Company is working diligently to address and reduce its non-performing assets. The Company’s nonaccrual loans totaled $2,941,000 and $3,027,000 at March 31, 2021 and December 31, 2020, respectively. Most of these loans are collateral-dependent, and the Company has rigorously evaluated the value of its collateral to determine potential losses.

 

Non-interest income decreased $756,000 for the three months ended March 31, 2021 as compared with 2020 results. Prior year results included non-recurring gains on sales and calls of securities of $433,000 and a gain from the sale of bank premises and equipment of $318,000.

 

Non-interest expense increased $1,073,000 for the three months ended March 31, 2021 as compared with 2020 results. This increase for the three months ended March 31, 2021 was primarily the result of the increase in ATM expenses of $110,000 and other expense of $1,126,000, in 2021 as compared with 2020. Included in other expense in 2021 is the accrual for the anticipated settlement of a lawsuit of $1,125,000.

 

Total assets at March 31, 2021 increased $84,249,000 as compared with December 31, 2020. Total deposits increased $83,261,000 as governmental entities’ balances increased due to tax collections. This increase in funds was primarily invested in available for sale securities, which increased $58,986,000, and held to maturity securities, which increased $17,533,000 at March 31, 2021 as compared with December 31, 2020.

 

29

 

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.

 

The Company’s average interest earning assets increased approximately $113,664,000, or 20%, from approximately $575,325,000 for the first quarter of 2020 to approximately $688,989,000 for the first quarter of 2021. The Company’s average balance sheet increased primarily as average loans increased approximately $11,998,000 and average balances due from financial institutions increased approximately $91,430,000 for the first quarter of 2021 as compared with the first quarter of 2020. Average loans increased as new loans, primarily as part of the PPP, outpaced principal payments, maturities, charge-offs and foreclosures relating to existing loans. Average balances due from financial institutions increased as an increase in deposits was held in balances at the Federal Reserve Bank, as the Company managed its liquidity position.

 

The average yield on interest-earning assets decreased from 3.51% for the first quarter of 2020 to 2.81% for the first quarter of 2021. This decrease is primarily the result of the decrease in rates in 2020 discussed in the Overview.

 

Average interest-bearing liabilities increased approximately $54,801,000, or 14%, from approximately $404,667,000 for the first quarter of 2020 to approximately $459,468,000 for the first quarter of 2021. Average savings and interest-bearing DDA balances increased approximately $79,952,000 as several large public fund customers maintained higher balances with the bank subsidiary in 2021 and some of the PPP loan proceeds were deposited and maintained in customers’ accounts. Average time deposits decreased approximately $22,245,000 as some customers invested their matured time deposits proceeds in the savings and interest-bearing DDA deposits.

 

The average rate paid on interest bearing liabilities for the first quarter of 2020 was .60% as compared with .23% for the first quarter of 2021. This decrease is primarily due to decreases in rates by the Federal Reserve Bank in 2020 discussed in the Overview.

 

The Company’s net interest margin on a tax-equivalent basis, which is net interest income as a percentage of average earning assets, was 3.09% for the quarter ended March 31, 2020 and 2.65% for the quarter ended March 31, 2021.

 

The tables on the following pages analyze the changes in tax-equivalent net interest income for the quarters ended March 31, 2021 and 2020.

 

30

 

Analysis of Average Balances, Interest Earned/Paid and Yield (In Thousands)

 

   

Three Months Ended March 31, 2021

   

Three Months Ended March 31, 2020

 
   

Average Balance

   

Interest Earned/Paid

   

Rate

   

Average Balance

   

Interest Earned/Paid

   

Rate

 

Loans (2)(3)

  $ 275,624     $ 3,254       4.72 %   $ 263,626     $ 3,205       4.86 %
                                                 

Balances due from financial institutions

    126,843       36       0.11 %     35,413       155       1.75 %
                                                 

HTM:

                                               

Taxable

    51,960       349       2.69 %     35,434       275       3.10 %
                                                 

Non taxable (1)

    26,914       211       3.14 %     15,073       126       3.34 %
                                                 

AFS:

                                               

Taxable

    199,489       937       1.88 %     217,595       1,216       2.24 %
                                                 

Non taxable (1)

    6,009       47       3.13 %     6,055       72       4.76 %
                                                 

Other

    2,150       1       0.19 %     2,129       1       0.19 %
                                                 

Total

  $ 688,989     $ 4,835       2.81 %   $ 575,325     $ 5,050       3.51 %

Savings & interest- bearing DDA

  $ 396,610     $ 173       0.17 %   $ 316,658     $ 313       0.40 %
                                                 

Time deposits

    61,904       86       0.56 %     84,329       286       1.36 %
                                                 

Borrowings from FHLB

    954       7       2.94 %     3,680       12       1.30 %
                                                 

Total

  $ 459,468     $ 266       0.23 %   $ 404,667     $ 611       0.60 %
                                                 

Net tax-equivalent spread

                    2.58 %                     2.91 %

Net tax-equivalent margin on earning assets

                    2.65 %                     3.09 %

 

(1) All interest earned is reported on a taxable equivalent basis using a tax rate of 21% in 2021 and 2020. See disclosure of Non-GAAP financial measures on pages 27 and 28.

(2) Loan fees of $396 and $97 for 2021 and 2020, respectively, are included in these figures. Of the loan fees recognized in 2021, $311 were related to PPP loans.

(3) Includes nonaccrual loans.

 

31

 

Analysis of Changes in Interest Income and Interest Expense

(In Thousands)

 

   

For the Three Months Ended

 
   

March 31, 2021 compared with March 31, 2020

 
   

Volume

   

Rate

   

Rate/Volume

   

Total

 

Interest earned on:

                               
                                 

Loans

  $ 146     $ (93 )   $ (4 )   $ 49  
                                 

Balances due from finanicial institutions

    400       (145 )     (374 )     (119 )
                                 

Held to maturity securities:

                               

Taxable

    128       (37 )     (17 )     74  

Non taxable

    99       (8 )     (6 )     85  
                                 

Available for sale securities:

                               

Taxable

    (101 )     (194 )     16       (279 )

Non taxable

    (1 )     (24 )             (25 )
                                 
                                 

Total

  $ 671     $ (501 )   $ (385 )   $ (215 )
                                 

Interest paid on:

                               
                                 

Savings & interest-bearing DDA

  $ 79     $ (175 )   $ (44 )   $ (140 )
                                 

Time deposits

    (76 )     (169 )     45       (200 )
                                 

Borrowings from FHLB

    (9 )     15       (11 )     (5 )
                                 

Total

  $ (6 )   $ (329 )   $ (10 )   $ (345 )

 

Provision for Loan Losses

In the normal course of business, the Company assumes risk in extending credit to its customers. This credit risk is managed through compliance with the loan policy, which is approved by the Board of Directors. The policy establishes guidelines relating to underwriting standards, including but not limited to financial analysis, collateral valuation, lending limits, pricing considerations and loan grading. The Company’s Loan Review and Special Assets Departments play key roles in monitoring the loan portfolio and managing problem loans. New loans and, on a periodic basis, existing loans are reviewed to evaluate compliance with the loan policy. Loan customers in concentrated industries such as gaming and hotel/motel, as well as the exposure for out of area; residential and land development; construction and commercial real estate loans, and their direct and indirect impact on its operations are evaluated on a monthly basis. Loan delinquencies and deposit overdrafts are closely monitored in order to identify developing problems as early as possible. Lenders experienced in workout scenarios consult with loan officers and customers to address non-performing loans. A watch list of credits which pose a potential loss to the Company is prepared based on the loan grading system. This list forms the foundation of the Company’s allowance for loan loss computation.

 

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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 collateral-dependent, requiring careful consideration of changes in the value of the collateral.

 

The Company’s analysis includes evaluating the current values of collateral securing all nonaccrual loans. Nonaccrual loans totaled $2,941,000 and $3,027,000 with specific reserves on these loans of $48,000 and $50,000, at March 31, 2021 and December 31, 2020, respectively. These specific reserves allocated to nonaccrual loans are relatively low as collateral values appear sufficient to cover loan losses or the loan balances have been charged down to their realizable value.

 

Additional consideration was given to the impact of COVID-19 on the loan portfolio. The Company granted modifications by extending payments 90 days or granting interest only payments for 3 – 6 months for certain customers as a result of the economic challenges of business closures and growing unemployment resulting from COVID-19. These credits were generally current at the time they were modified. In compliance with guidance from the regulatory and accounting authorities, these modifications were not classified as troubled debt restructurings. The Company continues its policy of closely monitoring past due loans and deposit overdrafts which may serve as indicators of performance issues. Proactive outreach to our loan customers has also been emphasized.

 

In addition to the factors considered when assessing risk in the loan portfolio which are identified in the Notes to the Consolidated Financial Statements included in the Company’s 2020 Annual Report, the Company included the potential negative impact of COVID-19 on its loan portfolio, particularly the gaming and hotel/motel concentrations, in performing this risk assessment as of March 31, 2021. As of March 31, 2021, a general reserve of approximately $307,000 was allocated to non-classified loans as a result of COVID-19. As of March 31, 2021, no specific reserves were allocated to classified loans as a result of COVID-19, as customers in potentially vulnerable industries have resources through business interruption insurance, proceeds from PPP or other loan programs and/or have been able to begin to return to normal operations in recent months.

 

The Company’s on-going, systematic evaluation resulted in the Company recording a reduction of the allowance for loan losses of $4,853,000 for the first quarter of 2021 and a provision for loan losses of $64,000 for the first quarter of 2020. The negative provision in 2021 is primarily the result of $4,510,000 recovery realized during the first quarter on one loan in the real estate, mortgage segment. The allowance for loan losses as a percentage of loans was 1.50% and 1.59% at March 31, 2021 and December 31, 2020, respectively. The Company believes that its allowance for loan losses is appropriate as of March 31, 2021.

 

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The allowance for loan losses is an estimate, and as such, events may occur in the future which may affect its accuracy. The Company anticipates that it is possible that additional information will be gathered in future quarters, particularly the potential effect of COVID-19 on loan performance, which may require an adjustment to the allowance for loan losses. Management will continue to closely monitor its portfolio and take such action as it deems appropriate to accurately report its financial condition and results of operations.

 

Non-interest income

Non-interest income decreased $756,000 for the first quarter of 2021 as compared with the first quarter of 2020. Results in 2020 included non-recurring gains of $433,000 from the sale and call of securities and a gain of $318,000 from the sale of bank premises and equipment.

 

Non-interest expense

Total non-interest expense increased $1,073,000 for the first quarter of 2021 as compared with the first quarter of 2020. Salaries and employee benefits decreased $158,000, while ATM expense increased $110,000 and other expenses increased $1,126,000 for the first quarter of 2021 as compared with the first quarter of 2020.

 

Salaries decreased as a result of attrition.

 

ATM expense increased as costs associated with debit card processing have increased since a conversion to a new provider.

 

Other expense increased in 2021 as the Company accrued $1,125,000 as a result of a preliminary agreement to settle a lawsuit. The agreement was finalized after March 31, 2021 and a cash payment of $1,125,000 was paid by the Company on May 3, 2021.

 

Income Taxes

During 2014, Management established a valuation allowance against its net deferred tax asset, which is still in place. As a result, the Company has no income tax benefit or expense.

 

FINANCIAL CONDITION

 

Cash and due from banks increased $13,573,000 at March 31, 2021, compared with December 31, 2020 in the management of the bank subsidiary’s liquidity position.

 

Available for sale securities increased $58,986,000 at March 31, 2021, compared with December 31, 2020. The large increase in total deposits, specifically public funds, was invested in short-term securities for pledging purposes.

 

Held to maturity securities increased $17,533,000 at March 31, 2021, compared with December 31, 2020. Some of the large increase in total deposits, specifically public funds, was invested in these securities.

 

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Total deposits increased $83,261,000 at March 31, 2021, compared with December 31, 2020. Typically, significant increases or decreases in total deposits and/or significant fluctuations among the different types of deposits from quarter to quarter are anticipated by Management as customers in the casino industry and county and municipal entities reallocate their resources periodically. Deposits from county and municipal entities increased significantly during the first quarter of each year based on property tax collections.

 

 

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.

 

As of March 31, 2021, the most recent notification from the Federal Deposit Insurance Corporation categorized the bank subsidiary as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, the bank subsidiary must have a Total risk-based capital ratio of 10.00% or greater, a Common Equity Tier 1 Capital ratio of 6.50% or greater, a Tier 1 risk-based capital ratio of 8.00% or greater and a Leverage capital ratio of 5.00% or greater. The Company must have a capital conservation buffer above these requirements of 2.50%. There are no conditions or events since that notification that Management believes have changed the bank subsidiary’s category.

 

The Company’s actual capital amounts and ratios and required minimum capital amounts and ratios as of March 31, 2021 and December 31, 2020, are as follows (in thousands):

 

   

Actual

   

For Capital Adequacy Purposes

 
   

Amount

   

Ratio

   

Amount

   

Ratio

 

March 31, 2021:

                               

Total Capital (to Risk Weighted Assets)

  $ 96,755       23.71 %   $ 32,648       8.00 %

Common Equity Tier 1 Capital (to Risk Weighted Assets)

    92,683       22.71 %     18,365       4.50 %

Tier 1 Capital (to Risk Weighted Assets)

    92,683       22.71 %     24,486       6.00 %

Tier 1 Capital (to Average Assets)

    92,683       13.05 %     28,406       4.00 %
                                 

December 31, 2020:

                               

Total Capital (to Risk Weighted Assets)

  $ 93,268       23.00 %   $ 32,442       8.00 %

Common Equity Tier 1 Capital (to Risk Weighted Assets)

    88,842       21.91 %     18,249       4.50 %

Tier 1 Capital (to Risk Weighted Assets)

    88,842       21.91 %     24,331       6.00 %

Tier 1 Capital (to Average Assets)

    88,842       14.07 %     25,255       4.00 %

 

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The actual capital amounts and ratios and required minimum capital amounts and ratios for the Bank as of March 31, 2021 and December 31, 2020, are as follows (in thousands):

 

                   

For Capital Adequacy

                 
   

Actual

   

Purposes

   

To Be Well Capitalized

 
   

Amount

   

Ratio

   

Amount

   

Ratio

   

Amount

   

Ratio

 

March 31, 2021:

                                               

Total Capital (to Risk Weighted Assets)

  $ 93,984       22.41 %   $ 33,551       8.00 %   $ 41,939       10.00 %

Common Equity Tier 1 Capital (to Risk Weighted Assets)

    89,912       21.44 %     18,872       4.50 %     27,260       6.50 %

Tier 1 Capital (to Risk Weighted Assets)

    89,912       21.44 %     25,163       6.00 %     33,551       8.00 %

Tier 1 Capital (to Average Assets)

    89,912       11.80 %     30,481       4.00 %     38,101       5.00 %
                                                 

December 31, 2020:

                                               

Total Capital (to Risk Weighted Assets)

  $ 90,559       22.87 %   $ 31,683       8.00 %   $ 39,603       10.00 %

Common Equity Tier 1 Capital (to Risk Weighted Assets)

    86,133       21.75 %     17,821       4.50 %     25,742       6.50 %

Tier 1 Capital (to Risk Weighted Assets)

    86,133       21.75 %     23,762       6.00 %     31,683       8.00 %

Tier 1 Capital (to Average Assets)

    86,133       12.53 %     27,504       4.00 %     34,380       5.00 %

 

Management continues to emphasize the importance of maintaining the appropriate capital levels of the Company and has established the goal of being “well-capitalized” by the banking regulatory authorities.

 

 

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. 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.

 

The Company has actively participated in the PPP, facilitating approximately $20 million in funding. As an additional liquidity resource for this funding, the Company will be seeking approval to participate in the Federal Reserve Bank’s PPP Liquidity Facility.

 

 

REGULATORY MATTERS

During 2016, Management identified opportunities for improving information technology operations and security, risk management and earnings, addressing asset quality concerns, analyzing and assessing the Bank’s management and staffing needs, and managing concentrations of credit risk as a result of its own investigation as well as examinations performed by certain bank regulatory agencies. In concert with the regulators, the Company had identified specific corrective steps and actions to enhance its information technology operations and security, risk management, earnings, asset quality and staffing. The Company and the Bank may not declare or pay any cash dividends without the prior written approval of their regulators.

 

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Item 4: Controls and Procedures

As of March 31, 2021, an evaluation was performed under the supervision and with the participation of the Chief Executive Officer and Chief Financial Officer of the effectiveness of the Company’s disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)). 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 Securities and Exchange Commission’s rules and forms.

 

There were no changes in the Company’s internal control over financial reporting that occurred during the period ended March 31, 2021 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

 

 

 

PART II - OTHER INFORMATION

 

Item 1: 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 is expected, in the opinion of Management, to have a material adverse effect upon the financial position or results of operations of the Company. However, as discussed in Management’s Discussion and Analysis of Financial Condition and Results of Operations, the Company reached a preliminary agreement to settle a lawsuit. This decision was made by Management after consulting with legal counsel in the long-term best interest of the Company.

 

 

Item 5: Other Information

 

None.

 

Item 6 - Exhibits

 

 

  Exhibit 31.1:

Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes - Oxley Act of 2002

  Exhibit 31.2:

Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes - Oxley Act of 2002

  Exhibit 32.1:

Certification of Chief Executive Officer Pursuant  to 18 U.S.C. ss. 1350

  Exhibit 32.2:

Certification of Chief Financial Officer Pursuant to 18 U.S.C. ss. 1350

  Exhibit 101 The following materials from the Company’s quarterly report on Form 10-Q for the quarter ended March 31, 2021, formatted in XBRL (Extensible Business Reporting Language): (i) Consolidated Statements of Condition at March 31, 2021 and December 31, 2020, (ii) Consolidated Statements of Income for the quarters ended March 31, 2021 and 2020, (iii) Consolidated Statements of Comprehensive Income for the quarters ended March 31, 2021 and 2020, (iv) Consolidated Statements of Changes in Shareholders’ Equity for the quarters ended March 31, 2021 and 2020, (v) Consolidated Statements of Cash Flows for the quarters ended March 31, 2021 and 2020 and (vi) Notes to the Unaudited Consolidated Financial Statements for the quarters ended March 31, 2021 and 2020.

 

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SIGNATURES

 

Pursuant to the requirement of Section 13 of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

PEOPLES FINANCIAL CORPORATION

(Registrant)

 

Date:

May 12, 2021

 
     
     

By:

/s/ Chevis C. Swetman

 
  Chevis C. Swetman  
  Chairman, President and Chief Executive Officer  
  (principal executive officer)  

 

 

Date:

May 12, 2021

 
     
     

By:

/s/ Lauri A. Wood

 
  Lauri A. Wood  
  Chief Financial Officer and Controller  
  (principal financial and accounting officer)  

 

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