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PEOPLES FINANCIAL CORP /MS/ - Quarter Report: 2022 March (Form 10-Q)

pfbx20220331_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, 2022


      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:

 

Title of each class

Trading

Symbol(s) 

Name of each exchange on which registered
NonePFBX  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 29, 2022, there were 15,000,000 shares of $1 par value common stock authorized, with 4,678,186 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, 2022

  

December 31, 2021

 
  

(unaudited)

  

(audited)

 
         

Assets

        

Cash and due from banks

 $169,628  $49,991 
         

Available for sale securities

  380,901   376,803 
         

Held to maturity securities, fair value of

        

$102,717 at March 31, 2022;

        

$111,340 at December 31, 2021

  107,884   110,208 
         

Other investments

  350   350 
         

Federal Home Loan Bank Stock, at cost

  2,153   2,153 
         

Loans

  241,098   239,162 
         

Less: Allowance for loan losses

  3,368   3,311 
         

Loans, net

  237,730   235,851 
         

Bank premises and equipment, net of accumulated depreciation

  15,574   15,799 
         

Other real estate

  1,010   1,891 
         

Accrued interest receivable

  2,992   2,841 
         

Cash surrender value of life insurance

  20,317   20,150 
         

Other assets

  813   722 
         

Total assets

 $939,352  $816,759 

 

2

 

Peoples Financial Corporation and Subsidiaries

Consolidated Statements of Condition (continued)

(in thousands except share data)

 

  

March 31, 2022

  

December 31, 2021

 
  

(unaudited)

  

(audited)

 

Liabilities and Shareholders' Equity

        

Liabilities:

        
         

Deposits:

        
         

Demand, non-interest bearing

 $214,732  $193,473 
         

Savings and demand, interest bearing

  529,683   428,411 
         

Time, $100,000 or more

  82,250   62,040 
         

Other time deposits

  20,281   20,914 
         

Total deposits

  846,946   704,838 
         

Borrowings from Federal Home Loan Bank

  874   889 
         

Employee and director benefit plans liabilities

  19,311   19,332 
         

Other liabilities

  1,551   2,162 
         

Total liabilities

  868,682   727,221 
         

 

        

Shareholders' Equity:

        

Common stock, $1 par value, 15,000,000 shares authorized, 4,678,186 shares issued and outstanding at March 31, 2022 and December 31, 2021

  4,678   4,678 
         

Surplus

  65,780   65,780 
         

Undivided profits

  21,377   20,911 
         

Accumulated other comprehensive loss

  (21,165)  (1,831)
         

Total shareholders' equity

  70,670   89,538 
         

Total liabilities and shareholders' equity

 $939,352  $816,759 

 

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,

 
  

2022

  

2021

 

Interest income:

        
         

Interest and fees on loans

 $2,694  $3,254 
         

Interest and dividends on securities:

        
         

U.S. Treasuries

  231   62 
         

U.S. Government agencies

     26 
         

Mortgage-backed securities

  533   451 
         

Collateralized mortgage obligations

  274   170 
         

States and political subdivisions

  1,167   780 
         

Other investments

  1   2 
         

Interest on balances due from depository institutions

  39   36 
         

Total interest income

  4,939   4,781 
         

Interest expense:

        
         

Deposits

  153   260 
         

Borrowings from Federal Home Loan Bank

  6   6 
         

Total interest expense

  159   266 
         

Net interest income

  4,780   4,515 
         

Provision for (reduction of) allowance for loan losses

  25   (4,853)
         

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

 $4,755  $9,368 

 

4

 

Peoples Financial Corporation and Subsidiaries

Consolidated Statements of Income (continued)

(in thousands except per share data) (unaudited)

 

  

Three Months Ended March 31,

 
  

2022

  

2021

 

Non-interest income:

        
         

Trust department income and fees

 $444  $437 
         

Service charges on deposit accounts

  891   836 
         

Increase in cash surrender value of life insurance

  125   108 
         

Other income

  134   129 
         

Total non-interest income

  1,594   1,510 
         

Non-interest expense:

        
         

Salaries and employee benefits

  2,642   2,516 
         

Net occupancy

  482   461 
         

Equipment rentals, depreciation and maintenance

  771   781 
         

FDIC and state banking assessments

  108   109 
         

Data processing

  354   350 
         

ATM expense

  307   295 
         

Other real estate (income) expense

  (9)  129 
         

Loss from other investments

     32 
         

Other expense

  807   1,875 
         

Total non-interest expense

  5,462   6,548 
         

Net income

 $887  $4,330 
         

Basic and diluted earnings per share

 $.19  $.89 

Dividends declared per share

 $.09  $.10 

 

See Notes to Consolidated Financial Statements.

 

5

 

 

Peoples Financial Corporation and Subsidiaries

Consolidated Statements of Comprehensive Income (Loss)

(in thousands) (unaudited)

 

  

Three Months Ended March 31,

 
  

2022

  

2021

 
         

Net income

 $887  $4,330 
         

Other comprehensive income (loss):

        
         

Net unrealized (loss) on available for sale securities

  (19,334)  (4,248)
         
         

Total other comprehensive (loss)

  (19,334)  (4,248)
         

Total comprehensive income (loss)

 $(18,447) $82 

 

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 (loss)

  

Total

 
                         

Balance, January 1, 2021

  4,878,557  $4,879  $65,780  $16,225  $5,872  $92,756 

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  $20,067  $1,624  $92,350 
                         

Balance, January 1, 2022

  4,678,186  $4,678  $65,780  $20,911  $(1,831) $89,538 
                         

Net income

            887      887 
                         

Other comprehensive loss

               (19,334)  (19,334)
                         

Dividend declared ($ .09 per share)

            (421)     (421)
                         

Balance, March 31, 2022

  4,678,186  $4,678  $65,780  $21,377  $(21,165) $70,670 

 

Note: Balances as of January 1, 2021 and 2022 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,

 
  

2022

  

2021

 

Cash flows from operating activities:

        

Net income

 $887  $4,330 

 

        

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

        
         

Depreciation

  441   450 
         

Provision for (reduction of) allowance for loan losses

  25   (4,853)
         

Writedown of other real estate

     58 
         

Gain on sales of other real estate

  (33)  (3)
         

Loss from other investments

     32 
         

Amortization of available for sale securities

  210   88 
         

Amortization of held to maturity securities

  129   73 
         

Change in accrued interest receivable

  (151)  (322)
         

Increase in cash surrender value of life insurance

  (125)  (108)
         

Change in other assets

  (91)  41 
         

Change in employee and director benefit plan liabilities  and other liabilities

  (633)  943 

Net cash provided by operating activities

 $659  $729 

 

8

 

Peoples Financial Corporation and Subsidiaries

Consolidated Statements of Cash Flows (continued)

(in thousands) (unaudited)

 

  

Three Months Ended March 31,

 
  

2022

  

2021

 

Cash flows from investing activities:

        

Proceeds from maturities of available for securities

 $6,057  $9,591 
         

Purchases of available for sale securities

  (29,699)  (72,913)
         

Proceeds from maturities of held to maturity securities

  2,195   1,980 
         

Purchases of held to maturity securities

     (19,586)
         

Purchases of Federal Home Loan Bank stock

     (2)
         

Proceeds from sales of other real estate

  914   277 
         

Loans, net change

  (1,904)  10,647 
         

Acquisition of bank premises and equipment

  (216)  (332)
         

Investment in cash surrender value of life insurance

  (42)  (42)

Net cash used in investing activities

  (22,695)  (70,380)

Cash flows from financing activities:

        

Demand and savings deposits, net change

  122,531   79,858 
         

Time deposits, net change

  19,578   3,403 
         

Borrowings from Federal Home Loan Bank

     22 
         

Repayments to Federal Home Loan Bank

  (15)  (59)
         

Cash dividends

  (421)   
         

Net cash provided by financing activities

  141,673   83,224 

Net increase in cash and cash equivalents

  119,637   13,573 

Cash and cash equivalents, beginning of period

  49,991   91,542 

Cash and cash equivalents, end of period

 $169,628  $105,115 

 

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, 2022 and 2021

 

 

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, 2022 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 2021 Annual Report and Form 10-K.

 

The results of operations for the quarter ended March 31, 2022, 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, 2021.

 

10

 

Revision of Prior Period Financial Statements – Other investments includes a low income housing partnership in which the Company is a 99% limited partner (the “Investment”). After the Annual Report on Form 10-K was filed on March 25, 2022, the Company identified an error in the historical financial statements related to the accounting for the Investment. The Company accounted for the Investment under GAAP according to ASC 323, Equity Method and Joint Ventures, through the application of the equity method but should have also periodically evaluated the Investment for impairment. Management performed an impairment evaluation on the Investment with assistance from a third-party consultant, who is an expert in accounting for such investments. Based on the evaluation, management determined that the Investment had become impaired in prior years starting 2012 through 2018.

 

The aggregate amount of the errors at each period end represented 3% or less of our shareholders' equity in all prior periods. In accordance with the guidance set forth in SEC Staff Accounting Bulletin 99, Materiality, and SEC Staff Accounting Bulletin 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financials, the Company concluded that the error was not material, to any prior periods, the current period or the trend in earnings from a quantitative and qualitative perspective. However, correcting the cumulative effect of the errors in the current period would have resulted in a material misstatement in the current period and, as such, we have revised our previously reported financial information contained in our Quarterly Report on Form 10-Q for the three months ended March 31, 2022 to correct the immaterial error. We will also revise previously reported financial information for these immaterial errors in our future filings, as applicable.

 

The income statements presented have not been affected by the revision.

 

A summary of revisions to certain previously reported financial information is presented below:

 

Revised Consolidated Statements of Condition as of December 31, 2021 (in thousands):

 

  

As Reported

  

Adjustment

  

As Revised

 
             

Other investments

 $2,404  $(2,054) $350 

Total assets

  818,813   (2,054)  816,759 

Undivided profits

  22,965   (2,054)  20,911 

Total shareholders' equity

  91,592   (2,054)  89,538 

 

11

 

Revised Consolidated Statements of Shareholders’ Equity for the Three Months ended March 31, 2021 (in thousands):

 

  

Three Months Ended March 31, 2021

 
  

As Reported

  

Adjustment

  

As Revised

 
             

Beginning balance undivided profits

 $18,335  $(2,110) $16,225 

Beginning balance total shareholders' equity

  94,866   (2,110)  92,756 

Ending balance undivided profits

  22,177   (2,110)  20,067 

Ending balance total shareholders' equity

  94,460   (2,110)  92,350 

 

Accounting Standards Update –In March 2022, the Financial Accounting Standards Board issued Accounting Standards Update 2022-02 (“ASU 2022-02”), Financial Instruments-Credit Losses (Topic 326). ASU 2022-02 amends guidance relating to trouble debt restructurings for all entities after they have adopted ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The update is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The adoption of this ASU is not expected to have a material impact on the Company's financial position, results of operations or cash flows.

 

 

2. Earnings Per Share:

Per share data is based on the weighted average shares of common stock outstanding of 4,678,186 and 4,878,557 for the three months ended March 31, 2022 and 2021, respectively.

 

 

3. Statements of Cash Flows:

The Company has defined cash and cash equivalents as cash and due from banks. The Company paid $158,300 and $258,500 for the three months ended March 31, 2022 and 2021, respectively, for interest on deposits and borrowings. No income tax payments were made during the three months ended March 31, 2022 and 2021. No loans were transferred to other real estate during the three months ended March 31, 2022 and 2021.

 

12
 

 

 

4. Investments:

The amortized cost and fair value of securities at March 31, 2022 and December 31, 2021, are as follows (in thousands):

 

      

Gross

  

Gross

     
      

Unrealized

  

Unrealized

     

March 31, 2022

 

Amortized Cost

  

Gains

  

Losses

  

Fair Value

 

Available for sale securities:

                
                 

U.S. Treasuries

 $103,635  $12  $(5,041) $98,606 
                 

Mortgage-backed securities

  68,190   226   (1,748)  66,668 
                 

Collateralized mortgage obligations

  99,477   98   (2,820)  96,755 
                 

Commercial mortgage obligations non-agency

  27,490      (749)  26,741 
                 

States and political subdivisions

  103,602   3   (11,474)  92,131 
                 

Total available for sale securities

 $402,394  $339  $(21,832) $380,901 
                 

Held to maturity securities:

                

States and political subdivisions

 $107,884  $275  $(5,442) $102,717 
                 

Total held to maturity securities

 $107,884  $275  $(5,442) $102,717 

 

      

Gross

  

Gross

     
      

Unrealized

  

Unrealized

     

December 31, 2021

 

Amortized Cost

  

Gains

  

Losses

  

Fair Value

 

Available for sale securities:

                
                 

U.S. Treasuries

 $73,889  $  $(735) $73,154 
                 

Mortgage-backed securities

  71,187   1,236   (441) $71,982 
                 

Collateralized mortgage obligations

  130,181   841   (1,035) $129,987 
                 

States and political subdivisions

  103,704   293   (2,317)  101,680 
                 

Total available for sale securities

 $378,961  $2,370  $(4,528) $376,803 
                 

Held to maturity securities:

                

States and political subdivisions

 $110,208  $1,760  $(628) $111,340 
                 

Total held to maturity securities

 $110,208  $1,760  $(628) $111,340 

 

The amortized cost and fair value of debt securities at March 31, 2022 (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.

 

13

 
  

Amortized Cost

  

Fair Value

 

Available for sale securities:

        

Due in one year or less

 $15,637  $15,640 

Due after one year through five years

  15,495   15,484 

Due after five years through ten years

  103,541   95,756 

Due after ten years

  72,564   63,857 

Mortgage-backed securities

  68,190   66,668 

Collateralized mortgage obligations

  99,477   96,755 

Commercial mortgage obligations non-agency

  27,490   26,741 

Totals

 $402,394  $380,901 
         

Held to maturity securities:

        

Due in one year or less

 $4,666  $4,681 

Due after one year through five years

  17,810   17,921 

Due after five years through ten years

  43,338   41,078 

Due after ten years

  42,070   39,037 

Totals

 $107,884  $102,717 

 

Available for sale and held to maturity securities with gross unrealized losses at March 31, 2022 and December 31, 2021, 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, 2022:

                        

U.S. Treasuries

 $78,806  $5,041 $

 

 $

 

  $78,806  $5,041 

Mortgage-backed securities

  39,678   724   8,254   1,024   47,932   1,748 

Collateralized mortgage obligations

  104,092   3,569  

 

  

 

   104,092   3,569 

States and political subdivisions

  117,081   11,292   36,011   5,624   153,092   16,916 

TOTAL

 $339,657  $20,626  $44,265  $6,648  $383,922  $27,274 

December 31, 2021:

                        

U.S. Treasuries

 $73,154  $735 $

 

 $

 

  $73,154  $735 

Mortgage-backed securities

  26,288   441  

 

  

 

   26,288   441 

Collateralized mortgage obligations

  66,369   1,035  

 

  

 

   66,369   1,035 

States and political subdivisions

  102,413   2,577   7,470   368   109,883   2,945 

TOTAL

 $268,224  $4,788  $7,470  $368  $275,694  $5,156 

 

14

 

At March 31, 2022, 8 of the 12 U.S. Treasury securities, 32 of the 48 mortgage-backed securities, 28 of the 34 collateralized mortgage obligations and 118 of the 219 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.

 

There were no sales of available for sale debt securities for the three months ended March 31, 2022 and March 31, 2021.

 

Securities with a fair value of $386,206,596 and $229,092,900 at March 31, 2022 and December 31, 2021, respectively, were pledged to secure public deposits, federal funds purchased and other balances required by law.

 

 

 

5. Loans:

The composition of the loan portfolio at March 31, 2022 and December 31, 2021, is as follows (in thousands):

 

  

March 31, 2022

  

December 31, 2021

 
         

Gaming

 $10,680  $7,900 
         

Hotel/Motel

  48,326   50,765 
         

Real estate, construction

  28,951   27,191 
         

Real estate, mortgage

  127,941   128,352 
         

Commercial and industrial

  15,965   15,882 
         

Other

  9,235   9,072 
         

Total

 $241,098  $239,162 

 

15

 

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. At March 31, 2022, 27 loans with a balance of $1,606,105 were outstanding. At December 31, 2021, 40 loans with a balance of $2,819,944 were outstanding All PPP loans are reported in the commercial and industrial segment within the loan portfolio.

 

The age analysis of the loan portfolio, segregated by class of loans, as of March 31, 2022 and December 31, 2021, 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, 2022:

                            

Gaming

 

$

  

$

  

$

  

$

  $10,680  $10,680  

$

 

Hotel/Motel

 

 

  

 

  

 

  

 

   48,326   48,326  

 

 

Real estate, construction

  290   1,624  

 

   1,914   27,037   28,951  

 

 

Real estate, mortgage

  306   1,281   40   1,627   126,314   127,941   40 

Commercial and industrial

 

 

  

 

  

 

      15,965   15,965  

 

 

Other

  3   1  

 

   4   9,231   9,235  

 

 
                             

Total

 $599  $2,906  $40  $3,545  $237,553  $241,098  $40 

December 31, 2021:

                            

Gaming

 

$

  

$

  

$

  

$

  $7,900  $7,900  

$

 

Hotel/Motel

 

 

  

 

  

 

  

 

   50,765   50,765  

 

 

Real estate, construction

  105  

 

  

 

   105   27,086   27,191  

 

 

Real estate, mortgage

  1,996   60   63   2,119   126,233   128,352  

 

 

Commercial and industrial

  21   320  

 

   341   15,541   15,882  

 

 

Other

  209  

 

  

 

   209   8,863   9,072  

 

 
                             

Total

 $2,331  $380  $63  $2,774  $236,388  $239,162    

 

16

 

The Company monitors the credit quality of its loan portfolio through the use of a loan grading system. A score of 15 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.

 

17

 

An analysis of the loan portfolio by loan grade, segregated by class of loans, as of March 31, 2022 and December 31, 2021, is as follows (in thousands):

 

  

Loans With A Grade Of:

     
  

A, B or C

  

S

  

D

  

E

  

F

  Total 

March 31, 2022:

                        

Gaming

 $10,680  $   $   $   $   $10,680 
                         

Hotel/Motel

  48,326                   48,326 
                         

Real estate, construction

  28,755       5   191       28,951 
                         

Real estate, mortgage

  124,772   84   2,576   509       127,941 
                         

Commercial and industrial

  15,939      26          15,965 
                         

Other

  9,227       8           9,235 
                         
                         

Total

 $237,699  $84  $2,615  $700      $241,098 
                         

December 31, 2021:

                        

Gaming

 $7,900  $   $  $   $   $7,900 
                         

Hotel/Motel

  50,765                   50,765 
                         

Real estate, construction

  26,980       6   205       27,191 
                         

Real estate, mortgage

  124,289   87   3,344   632       128,352 
                         

Commercial and industrial

  15,834      27   21       15,882 
                         

Other

  9,060       12           9,072 
                         
                         

Total

 $234,828  $87  $3,389  $858      $239,162 

 

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, 2022 and December 31, 2021, are as follows (in thousands):

 

  

March 31, 2022

  

December 31, 2021

 
         

Real estate, construction

 $133  $138 
         

Real estate, mortgage

  441   563 
         

Total

 $574  $701 

 

18

 

Prior to 2021, certain loans were modified by granting interest rate concessions to these customers with such loans being classified as troubled debt restructurings. During 2021 and 2022, the Company did not restructure any additional loans. Specific reserves of $0 and $50,000 were allocated to troubled debt restructurings as of March 31, 2022 and December 31, 2021. The Bank had no commitments to lend additional amounts to customers with outstanding loans classified as troubled debt restructurings as of March 31, 2022 and December 31, 2021.

 

Impaired loans, which include loans classified as nonaccrual and troubled debt restructurings, segregated by class of loans, as of March 31, 2022 and December 31, 2021, are as follows (in thousands):

 

  

Unpaid

Principal

Balance

  

Recorded Investment

  

Related

Allowance

  

Average

Recorded Investment

  

Interest

Income

Recognized

 

March 31, 2022:

                    

With no related allowance recorded:

                    

Real estate, construction

 $133  $133  $   $135  $ 

Real estate, mortgage

  950   950       966   6 
                     

Total

  1,083   1,083       1,101   6 
                     

With a related allowance recorded:

                    

Real estate, mortgage

  50   50   20   50    
                     

Total

  50   50   20   50    
                    

Total by class of loans:

                    

Real estate, construction

  133   133      135    

Real estate, mortgage

  1,000   1,000   20   1,016   6 
                     

Total

 $1,133  $1,133  $20  $1,151  $6 
                     

December 31, 2021:

                    

With no related allowance recorded:

                    

Real estate, construction

 $272  $205  

$

  $369  $7 

Real estate, mortgage

  1,014   1,014  

 

   1,075   21 
                     

Total

  1,286   1,219  

 

   1,444   28 
                     

With a related allowance recorded:

                    

Real estate, mortgage

  199   199   70   203   5 

Total

  199   199   70   203   5 
                     

Total by class of loans:

                    

Real estate, construction

  272   205  

 

   369   7 

Real estate, mortgage

  1,213   1,213   70   1,278   26 
                     

Total

 $1,485  $1,418  $70  $1,647  $33 

 

19
 

 

 

6. Allowance for Loan Losses:

Transactions in the allowance for loan losses for the three months ended March 31, 2022 and 2021, and the balances of loans, individually and collectively evaluated for impairment, as of March 31, 2022 and 2021, 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, 2022:

                            

Allowance for Loan Losses:

                            

Beginning Balance

 $102  $691  $139  $2,049  $252  $78  $3,311 

Charge-offs

                 (76)  (76)

Recoveries

           48   9   51   108 

Provision

  36   (31)  35   (54)  14   25   25 

Ending Balance

 $138  $660  $174  $2,043  $275  $78  $3,368 
                             

Allowance for loan losses, March 31, 2022:

                            

Ending balance: individually evaluated for impairment

 $  $  $  $109  $26  $  $135 
                             

Ending balance: collectively evaluated for impairment

 $138  $660  $174  $1,934  $249  $78  $3,233 
                             

Total Loans, March 31, 2022:

                            
Ending balance: individually evaluated for impairment $  $  $196  $3,085  $26  $8  $3,315 
                             
Ending balance: collectively evaluated for impairment $10,680  $48,326  $28,755  $124,856  $15,939  $9,227  $237,783 

 

20

 
  

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  $24921  $131,827  $34,931   $9060   $262,839 

 

 

7. Deposits:

Time deposits of $250,000 or more totaled approximately $64,260,000 and $43,613,000 at March 31, 2022 and December 31, 2021, respectively.

 

 

8. Shareholders’ Equity:

On March 11, 2022, the Board declared a dividend of $ .09 per share payable March 30, 2022 to shareholders of record on March 23, 2022.

 

 

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.

 

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.

 

21

 

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.

 

22

 

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.

 

23

 

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, 2022 and December 31, 2021 are as follows (in thousands):

 

 

      

Fair Value Measurements Using

     
  

Total

  

Level 1

  

Level 2

  

Level 3

 

March 31, 2022:

                

U.S. Treasuries

 $98,606   $   $98,606   $  

Mortgage-backed securities

  66,668       66,668     

Collateralized mortgage obligations

  96,755       96,755     

Commercial Mortgage Obligations non-agency

  26,741       26,741     

States and political subdivisions

  92,131       92,131     

Total

 $380,901  $   $380,901  $  
                 

December 31, 2021:

 

 

  

 

  

 

     

U.S. Treasuries

 $73,154   $   $73,154  $  

Mortgage-backed securities

  71,982       71,982     

Collateralized mortgage obligations

  129,987       129,987     

States and political subdivisions

  101,680       101,680     

Total

 $376,803  $   $376,803  $  

 

Impaired loans, which are measured at fair value on a non-recurring basis, by level within the fair value hierarchy as of March 31, 2022 and December 31, 2021 are as follows (in thousands):

 

      

Fair Value Measurements Using

 
  

Total

  

Level 1

  

Level 2

  

Level 3

 

March 31, 2022

 $30   $   $    $30 

December 31, 2021

  129           129 

 

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, 2022 and December 31, 2021 are as follows (in thousands):

 

      

Fair Value Measurements Using

 
  

Total

  

Level 1

  

Level 2

  

Level 3

 

March 31, 2022

 $1,010  $   $   $1,010 

December 31, 2021

  1,891           1,891 

 

24

 

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, 2022

  

December 31, 2021

 

Balance, beginning of period

 $1,891  $3,475 
         

Loans transferred to ORE

     14 
         

Sales

  (881)  (1,299)
         

Writedowns

     (299)
         

Balance, end of period

 $1,010  $1,891 

 

The carrying value and estimated fair value of financial instruments, by level within the fair value hierarchy, at March 31, 2022 and December 31, 2021, are as follows (in thousands):

 

  

Carrying

  

Fair Value Measurements Using

     
  

Amount

  

Level 1

  

Level 2

  

Level 3

  

Total

 

March 31, 2022:

                    

Financial Assets:

                    

Cash and due from banks

 $169,628  $169,628  $  $  $169,628 

Available for sale securities

  380,901      380,901      380,901 

Held to maturity securities

  107,884      102,717      102,717 

Other investments

  350   350         350 

Federal Home Loan Bank stock

  2,153      2,153      2,153 

Loans, net

  237,730         237,445   237,445 

Cash surrender value of life insurance

  20,317      20,317      20,317 

Financial Liabilities:

                    

Deposits:

                    

Non-interest bearing

  214,732   214,732         214,732 

Interest bearing

  632,214         632,659   632,659 

Borrowings from Federal Home Loan

                    

Bank

  874      952      952 

 

25

 

December 31, 2021:

                    

Financial Assets:

                    
Cash and due from banks  $49,991   $49,991   $   $  $49,991 

Available for sale securities

  376,803      376,803      376,803 

Held to maturity securities

  110,208      111,340      111,340 

Other investments

  350   350         350 

Federal Home Loan Bank stock

  2,153      2,153      2,153 

Loans, net

  235,851         238,305   238,305 

Cash surrender value of life insurance

  20,150      20,150      20,150 

Financial Liabilities:

                    

Deposits:

                    

Non-interest bearing

  193,473   193,473         193,473 

Interest bearing

  511,365         512,034   512,034 

Borrowings from Federal Home Loan

                    

Bank

  889      1,072      1,072 

 

 

10. Aquisition of Corporate Trust Business:

On March 17, 2022, the bank subsidiary signed a definitive agreement with Trustmark National Bank (“Trustmark”) to acquire substantially all of the Trustmark’s corporate trust business for a purchase price of $650,000.  This book of business will be added to the bank subsidiary’s existing corporate trust portfolio in its Asset Management and Trust Services Department.  The purchase is subject to approval by the Federal Deposit Insurance Corporation. 

 

26

 
 

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, 2021.

 

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 issued several accounting standards updates during the first quarter of 2022. Further disclosure is included in Note 1.

 

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.

 

27

 

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.

 

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.

 

28

 

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, 2022 and 2021 is included in the table on the following page.

 

29

 

RECONCILATION OF NON-GAAP PERFORMANCE MEASURES (In thousands)

 

For the Three Months Ended March 31,  

2022

   

2021

 
                 

Interest income reconciliation:

               
                 

Interest income - taxable equivalent

  $ 5,033     $ 4,835  

Taxable equivalent adjustment

    (94 )     (54 )
                 

Interest income (GAAP)

  $ 4,939     $ 4,781  
                 

Net interest income reconciliation:

               
                 

Net interest income - taxable equivalent

  $ 4,874     $ 4,569  

Taxable equivalent adjustment

    (94 )     (54 )
                 

Net interest income (GAAP)

  $ 4,780     $ 4,515  

 

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. During 2021, the Company implemented certain vaccine incentives and mandates for the protection of its employees and customers.

 

30

 

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 $887,000 for the first quarter of 2022 compared with net income of $4,330,000 for the first quarter of 2021. 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.

 

Managing the net interest margin is a key component of the Company’s earnings strategy. Although in March 2022, the Federal Reserve increased rates by 25 basis points the current interest rate environment remains low. The Company adopted new investment strategies in 2021 to improve yields on its securities while not compromising duration or credit risk. As a result, total interest income increased $158,000 in 2022 as compared with 2021. The reduction in rates partially offset by an increase in volume decreased total interest expense $107,000 in 2022 as compared with 2021.

 

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 provision of $25,000 was recorded in the first quarter of 2022 as compared to a reduction of the allowance for loan losses of $4,853,000 recorded in the first quarter of 2021. 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 $574,000 and $701,000 at March 31, 2022 and December 31, 2021, 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 increased $84,000 for the three months ended March 31, 2022 as compared with 2021 results. The increase was mainly due to higher service charge income on deposit accounts.

 

Non-interest expense decreased $1,086,000 for the three months ended March 31, 2022, as compared with 2021 results. This decrease for the three months ended March 31, 2022 was primarily due to a decrease in other expense of $1,068,000. Included in other expense in 2021 was the accrual for the anticipated settlement of a lawsuit of $1,125,000 which settled later in 2021.

 

Total assets at March 31, 2022 increased $122,593,000 as compared with December 31, 2021. Total deposits increased $142,108,000 as governmental entities’ balances increased due to tax collections and some customers maintained their PPP loan proceeds in their deposit accounts. This increase in funds was primarily held in interest bearing cash, which increased $119,637,000 as compared with December 31, 2021.

 

31

 

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 $117,323,000, or 17%, from approximately $688,989,000 for the first quarter of 2021 to approximately $806,312,000 for the first quarter of 2022. The Company’s average balance sheet increased primarily as average investments increased approximately $194,440,000, partially offset by a decrease in average loans of approximately $39,083,000 and average balances due from financial institutions decreased approximately $38,034,000 for the first quarter of 2022 as compared with the first quarter of 2021. Average loans decreased as principal payments, particularly on PPP loans, maturities, and charge-offs on existing loans exceeded new loans. Funds available from the decrease in average loans and the decrease in balances due from financial institutions and the increase in average deposits were used to increase the investment in securities.

 

The average yield on interest-earning assets decreased from 2.81% for the first quarter of 2021 to 2.50% for the first quarter of 2022. This decrease is primarily due to a decrease in loan volume along with a decrease in PPP loan fee income recognized in 2022.

 

Average interest-bearing liabilities increased approximately $120,559,000, or 26%, from approximately $459,468,000 for the first quarter of 2021 to approximately $580,027,000 for the first quarter of 2022. Average interest-bearing deposit balances increased approximately $120,631,000 as several large public fund customers maintained higher balances with the bank subsidiary in 2022 and some of the PPP loan proceeds were deposited and maintained in customers’ accounts.

 

The average rate paid on interest bearing liabilities for the first quarter of 2021 was .23% as compared with .11% for the first quarter of 2022. Although in March 2022 the Federal Reserve increased rates by 25 basis points, the current interst rate environment remains low.

 

The Company’s net interest margin on a tax-equivalent basis, which is net interest income as a percentage of average earning assets, was 2.65% for the quarter ended March 31, 2021 and 2.42% for the quarter ended March 31, 2022.

 

The tables on the following pages analyze the changes in tax-equivalent net interest income for the quarters ended March 31, 2022 and 2021.

 

32

 

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

 

   

Three Months Ended March 31, 2022

   

Three Months Ended March 31, 2021

 
   

Average

Balance

   

Interest Earned/Paid

   

Rate

   

Average

Balance

   

Interest Earned/Paid

   

Rate

 

Loans (2)(3)

  $ 236,541     $ 2,694       4.56 %   $ 275,624     $ 3,254       4.72 %
                                                 

Balances due from financial institutions

    88,809       39       0.18 %     126,843       36       0.11 %
                                                 

HTM:

                                               

Taxable

    71,302       452       2.54 %     51,960       349       2.69 %
                                                 

Non taxable (1)

    37,694       262       2.78 %     26,914       211       3.14 %
                                                 

AFS:

                                               

Taxable

    364,326       1,543       1.69 %     199,489       937       1.88 %
                                                 

Non taxable (1)

    5,487       42       3.06 %     6,009       47       3.13 %
                                                 

Other

    2,153       1       0.19 %     2,150       1       0.19 %
                                                 

Total

  $ 806,312     $ 5,033       2.50 %   $ 688,989     $ 4,835       2.81 %

Savings & interest- bearing DDA

  $ 491,784     $ 104       0.08 %   $ 396,610     $ 173       0.17 %
                                                 

Time deposits

    87,361       49       0.22 %     61,904       86       0.56 %
                                                 

Borrowings from FHLB

    882       6       2.72 %     954       7       2.94 %
                                                 

Total

  $ 580,027     $ 159       0.11 %   $ 459,468     $ 266       0.23 %
                                                 

Net tax-equivalent spread

                    2.39 %                     2.58 %

Net tax-equivalent margin on earning assets

                    2.42 %                     2.65 %

 

(1) All interest earned is reported on a taxable equivalent basis using a tax rate of 21% in 2022 and 2021. See disclosure of Non-GAAP financial measures on pages 29 and 30.

(2) Loan fees of $230 and $396 for 2022 and 2021, respectively, are included in these figures. Of the loan fees recognized in 2022, $59 were related to PPP loans.

(3) Includes nonaccrual loans.

 

33

 

Analysis of Changes in Interest Income and Interest Expense

(In Thousands)

 

   

For the Three Months Ended

 
   

March 31, 2022 compared with March 31, 2021

 
   

Volume

   

Rate

   

Rate/Volume

   

Total

 

Interest earned on:

                               
                                 

Loans

  $ (461 )   $ (115 )   $ 16     $ (560 )
                                 

Balances due from financial institutions

    (11 )     20       (6 )     3  
                                 

Held to maturity securities:

                               

Taxable

    130       (20 )     (7 )     103  

Non taxable

    85       (24 )     (10 )     51  
                                 

Available for sale securities:

                               

Taxable

    774       (92 )     (76 )     606  

Non taxable

    (4 )     (1 )             (5 )
                                 
                                 

Total

  $ 513     $ (232 )   $ (83 )   $ 198  
                                 

Interest paid on:

                               
                                 

Savings & interest-bearing

                               

DDA

  $ 42     $ (89 )   $ (21 )   $ (68 )
                                 

Time deposits

    35       (51 )     (21 )     (37 )
                                 

Borrowings from FHLB

    (1 )     (1 )             (2 )
                                 

Total

  $ 76     $ (141 )   $ (42 )   $ (107 )

 

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.

 

34

 

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 $574,000 and $701,000 with specific reserves on these loans of $20,000 and $20,000, at March 31, 2022 and December 31, 2021, 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.

 

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 2021 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, 2022. As of March 31, 2022, a general reserve of approximately $287,000 was allocated to non-classified loans as a result of COVID-19. As of March 31, 2022, no specific reserves were allocated to classified loans as a result of COVID-19, as customers in potentially vulnerable industries have resources through business interruption insurance, proceeds from PPP or other loan programs and/or have been able to begin to return to normal operations.

 

The Company’s on-going, systematic evaluation resulted in the Company recording a provision of $25,000 for the first quarter of 2022 and a reduction of allowance for loan losses of $4,853,000 for the first quarter of 2021. The reduction of 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 1.40% and 1.38% at March 31, 2022 and December 31, 2021, respectively. The Company believes that its allowance for loan losses is appropriate as of March 31, 2022.

 

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.

 

35

 

Non-interest income

Non-interest income increased $84,000 for the first quarter of 2022 as compared with the first quarter of 2021. Service charges on deposit accounts increased $55,000 as customer transactions have begun to return to pre-COVID -19 activity.

 

Non-interest expense

Total non-interest expense decreased $1,086,000 for the first quarter of 2022 as compared with the first quarter of 2021. Other expense decreased $1,068,000 due to the settlement of a lawsuit for $1,125,000 during 2021. Other real estate costs decreased $138,000 as a result of decreased write-downs and other expense of holding and selling ORE in 2022 as compared to 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 $119,637,000 at March 31, 2022, compared with December 31, 2021 in the management of the bank subsidiary’s liquidity position.

 

Available for sale securities increased $4,098,000 at March 31, 2022, compared with December 31, 2021. During the first quarter of 2022, there was $29,699,000 in purchases offset by an unrealized loss recorded of $19,334,000 and maturities of $6,057,000. As discussed in Note 4, the Company evaluates securities for impairment on a monthly basis. This evaluation considers a number of factors including the cause of a decline in value. These unrealized losses relate to changes in interest rates rather than credit quality of the investments. Even though these securities have been classified as available for sale, the Company has traditionally held these securities until maturity. Although these unrealized losses recorded in the first quarter of 2022 were significant, management does not anticipate these losses to be other than temporary.

 

Held to maturity securities decreased $2,324,000 at March 31, 2022, compared with December 31, 2021. The decrease was due to maturities and normal paydowns during the first quarter of 2022.

 

Total deposits increased $142,108,000 at March 31, 2022, compared with December 31, 2021. 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.

 

36

 

As of March 31, 2022, 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, 2022 and December 31, 2021, are as follows (in thousands):

 

   

Actual

   

For Capital Adequacy Purposes

 
   

Amount

   

Ratio

   

Amount

   

Ratio

 

March 31, 2022:

                               

Total Capital (to Risk Weighted Assets)

  $ 95,051       21.21 %   $ 35,849       8.00 %

Common Equity Tier 1 Capital (to Risk Weighted Assets)

    91,683       20.46 %     20,165       4.50 %

Tier 1 Capital (to Risk Weighted Assets)

    91,683       20.46 %     26,887       6.00 %

Tier 1 Capital (to Average Assets)

    91,683       10.44 %     35,122       4.00 %
                                 

December 31, 2021:

                               

Total Capital (to Risk Weighted Assets)

  $ 94,528       21.08 %   $ 35,869       8.00 %

Common Equity Tier 1 Capital (to Risk Weighted Assets)

    91,217       20.34 %     20,176       4.50 %

Tier 1 Capital (to Risk Weighted Assets)

    91,217       20.34 %     26,902       6.00 %

Tier 1 Capital (to Average Assets)

    91,217       12.30 %     29,654       4.00 %

 

The actual capital amounts and ratios and required minimum capital amounts and ratios for the Bank as of March 31, 2022 and December 31, 2021, are as follows (in thousands):

 

                   

For Capital Adequacy

                 
   

Actual

   

Purposes

   

To Be Well Capitalized

 
   

Amount

   

Ratio

   

Amount

   

Ratio

   

Amount

   

Ratio

 

March 31, 2022:

                                               

Total Capital (to Risk Weighted Assets)

  $ 94,481       21.10 %   $ 35,820       8.00 %   $ 44,774       10.00 %

Common Equity Tier 1 Capital (to Risk Weighted Assets)

    91,112       20.35 %     20,148       4.50 %     29,103       6.50 %

Tier 1 Capital (to Risk Weighted Assets)

    91,112       20.35 %     26,865       6.00 %     35,820       8.00 %

Tier 1 Capital (to Average Assets)

    91,112       10.50 %     34,696       4.00 %     43,370       5.00 %
                                                 

December 31, 2021:

                                               

Total Capital (to Risk Weighted Assets)

  $ 93,988       20.98 %   $ 35,839       8.00 %   $ 44,799       10.00 %

Common Equity Tier 1 Capital (to Risk Weighted Assets)

    90,677       20.24 %     20,160       4.50 %     29,119       6.50 %

Tier 1 Capital (to Risk Weighted Assets)

    90,677       20.24 %     26,879       6.00 %     35,839       8.00 %

Tier 1 Capital (to Average Assets)

    90,677       11.13 %     32,599       4.00 %     40,749       5.00 %

 

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.

 

37

 

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 was approved to participate in the Federal Reserve Bank’s PPP Liquidity Facility.

 

Item 4: Controls and Procedures

As of March 31, 2022, 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, because a material weakness in the Company’s internal control over financial reporting existed at March 31, 2022 and had not been remediated by the end of the period covered by this Quarterly Report on Form 10-Q, the Company’s disclosure controls and procedures were not effective as of the end of the period covered by this Quarterly Report on Form 10-Q.  This material weakness in the Company’s internal control over financial reporting and the Company’s remediation efforts are described below. 

 

Material Weakness in Internal Control over Financial Reporting

 

The Company’s management, including our Chief Executive Officer and Chief Financial Officer, identified a material weakness related to the Company’s internal control over financial reporting.  A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.  The Company failed to design controls upon the adoption of ASC 323, Equity Method and Joint Ventures (“Accounting Guidance”), to assess periodically whether a limited partnership investment (the “Investment”) in a Low Income Housing Tax Credit entity (a “LIHTC Entity”) that is held by the Company separate from its investment in its wholly owned bank subsidiary, The Peoples Bank, Biloxi, Mississippi, was Impaired as required by the Accounting Guidance. As a result, the Company’s financial statements for prior periods contained an error (“Error”) that totaled $2,110,000 cumulatively, and should have been recorded in years ending December 31, 2018 and earlier. 

 

Even though the Company has concluded that the Error did not create any material misstatement to previously issued financial statements for any prior periods, the current period or the trend in earnings, the material weakness that caused the Error could result in a failure to evaluate similar investments for impairment that could result in a material misstatement to the annual or interim consolidated financial statements that would not be prevented or detected.

 

Remediation Measures

 

To address the material weakness described above the Company has designed and implemented new and enhanced controls to ensure that: (i) any investments in a LIHTC Entity are evaluated for impairment each period in accordance with the Accounting Guidance, and (ii) that in-house accounting personnel have training to ensure they have the relevant expertise related to such investments to the extent necessary to account for any similar investments made in the future.

 

We believe the actions described above will be sufficient to remediate the identified material weakness and strengthen our internal control over financial reporting.  However, the new and enhanced controls have not operated for a sufficient amount of time to conclude that the material weakness has been remediated.  We will continue to monitor the effectiveness of these controls and will make any further changes management determines appropriate.

 

 

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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 an agreement to settle a lawsuit during 2021. 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, 2022, formatted in iXBRL (Inline Extensible Business Reporting Language): (i) Consolidated Statements of Condition at March 31, 2022 and December 31, 2021, (ii) Consolidated Statements of Income for the quarters ended March 31, 2022 and 2021, (iii) Consolidated Statements of Comprehensive Income (Loss) for the quarters ended March 31, 2022 and 2021, (iv) Consolidated Statements of Changes in Shareholders’ Equity for the quarters ended March 31, 2022 and 2021, (v) Consolidated Statements of Cash Flows for the quarters ended March 31, 2022 and 2021 and (vi) Notes to the Unaudited Consolidated Financial Statements for the quarters ended March 31, 2022 and 2021.

 

Exhibit 104

Cover Page Interactive Data File (embedded within the Inline XBRL and contained in Exhibit 101)

 

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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 13, 2022          

 

By:    /s/ Chevis C. Swetman     

Chevis C. Swetman

Chairman, President and Chief Executive Officer

(principal executive officer)

 

 

Date:          May 13, 2022         

 

By:       /s/ Leslie B. Fulton       

Leslie B. Fulton

Chief Financial Officer and Controller

(principal financial and accounting officer)

 

 

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