Peoples Financial Corporation (the “Company”) (OTCQX Best Market: PFBX), the parent company of The Peoples Bank (the “Bank”), has delivered exceptional financial results for the third quarter ending September 30, 2024, showcasing a substantial increase in earnings. The Company announced that net income for the third quarter surged by $13,521,000, reaching $15,431,000, compared to $1,910,000 reported for the same quarter in 2023. This translates to earnings per weighted average common share of $3.31, a significant leap from $0.41 per share a year prior, based on weighted average common shares outstanding of 4,661,686 in 2024 versus 4,677,827 in 2023.

Tax Benefit Fuels Earnings Surge

The dramatic rise in net income is largely attributed to a $15,194,000 tax benefit stemming from the reversal of the Company’s valuation allowance on federal and state deferred tax assets during the quarter. However, the pre-tax income for the third quarter did see a decline of $904,000, landing at $1,334,000, compared to $2,238,000 in the previous year. Total interest income experienced a slight drop of $9,000, coming in at $7,830,000 due to decreased yields on securities and overnight federal funds. In contrast, total interest expense rose by $1,061,000 to $2,551,000, primarily driven by escalating interest rates on deposit accounts and borrowings.

Over the first nine months of 2024, net income also climbed significantly, increasing by $12,732,000 to $20,175,000 compared to $7,443,000 in 2023. Earnings per weighted average common share for this period reached $4.33, a considerable increase from $1.59 in the prior year, driven again by the notable tax benefit.

Detailed Insights on Tax and Deferred Tax Assets

As of December 31, 2023, the Company maintained a valuation allowance of $15,617,000 on federal and state deferred tax assets. In the third quarter of 2024, the Company reassessed this allowance, determining it prudent to reverse almost all of it, thus generating a one-time discrete reduction in income tax expense. Excluding this discrete item, the income tax expense for the nine months ending September 30, 2024, amounted to $1,500,000, in line with an expected annual tax rate of 23.1%. This stands in contrast to an income tax expense of $1,586,000 for the same period in 2023 at a lower effective rate of 17.6%.

Asset Quality Amid Economic Challenges

Despite a challenging economic landscape marked by rising interest rates, the Company reported a commendable increase in gross loans, which rose by $9,577,000 to $239,259,000 year-over-year. The leadership at The Peoples Bank emphasised their commitment to maintaining high-quality assets, closely monitoring economic conditions for any shifts that could impact their strategy.

Strengthening Shareholders’ Equity

Total shareholders’ equity saw a significant increase of $37,280,000, reaching $96,393,000 as of September 30, 2024, bolstered by strong earnings and a reduction in unrealised losses on securities. The Company reported $50,735,000 in unrealised losses in its available-for-sale securities portfolio, reflecting the impacts of rising interest rates. Nevertheless, the Bank’s leverage ratio remains robust at 12.80% as of the end of September.

Robust Liquidity Position

Peoples Financial Corporation maintains a solid balance sheet characterised by strong capital and liquidity. However, as interest rates rise, attracting new deposits has become more costly, leading to a $22,404,000 decline in total deposits, which now stand at $666,086,000.

Founded in 1896, Peoples Financial Corporation operates 18 branches across the Mississippi Gulf Coast and has recently celebrated its third-best earnings year. The Company is also recognised in the 2024 OTCQX Best 50, a ranking of the top-performing companies in the OTCQX market.

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