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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of RegulationS-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files.) Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, anon-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule12b-2 of the Exchange Act. (Check one):

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 Rule12b-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 ~~October 31, 2017,~~April 30, 2018, there were 15,000,000 shares of $1 par value common stock authorized, with ~~5,123,186~~5,072,794 shares issued and outstanding.


	September 30, 2017		December 31, 2016
	(unaudited)		(audited)		March 31, 2018 (unaudited)		December 31, 2017 (audited)
Assets
Cash and due from banks	$	42,278	$	41,116	$	31,519	$	25,281
Available for sale securities		245,788		233,578		239,937		245,206
Held to maturity securities, fair value of $49,303 at September 30, 2017; $46,935 at December 31, 2016		49,405		48,150
Held to maturity securities, fair value of $49,558 at March 31, 2018; $50,538 at December 31, 2017						50,882		51,163
Other investments		2,729		2,693		3,154		3,193
Federal Home Loan Bank Stock, at cost		544		539		1,432		1,370
Loans		272,823		315,355		275,452		280,449
Less: Allowance for loan losses		6,152		5,466		6,212		6,153

Loans, net		266,671		309,889		269,240		274,296
Bank premises and equipment, net of accumulated depreciation		20,541		21,644		19,919		20,153
Other real estate		8,081		8,513		8,845		8,232
Accrued interest receivable		1,991		1,855		2,098		1,904
Cash surrender value of life insurance		18,153		19,249		18,430		18,301
Other assets		806		788		1,390		1,325

Total assets	$	656,987	$	688,014	$	646,846	$	650,424


	September 30, 2017		December 31, 2016			March 31, 2018 (unaudited)			December 31, 2017 (audited)
	(unaudited)		(audited)
Liabilities and Shareholders’ Equity Liabilities:
Liabilities and Shareholders’ Equity
Liabilities:
Deposits:
Demand,non-interest bearing	$	147,975	$	132,381		$	162,495		$	127,274
Savings and demand, interest bearing		310,725		364,975			289,437			318,278
Time, $100,000 or more		55,719		38,650			58,168			43,991
Other time deposits		30,648		39,010			28,836			40,027

Total deposits		545,067		575,016			538,936			529,570
Borrowings from Federal Home Loan Bank		1,216		6,257			1,184			11,198
Employee and director benefit plans liabilities		17,217		16,768			18,503			18,370
Other liabilities		1,688		1,512			1,171			1,787

Total liabilities		565,188		599,553			559,794			560,925

Shareholders’ Equity:
Common stock, $1 par value, 15,000,000 shares authorized, 5,123,186 shares issued and outstanding at September 30, 2017 and December 31, 2016		5,123		5,123
Common stock, $1 par value, 15,000,000 shares authorized, 5,072,794 and 5,083,186 shares issued and outstanding at March 31, 2018 and December 31, 2017							5,073			5,083
Surplus		65,780		65,780			65,780			65,780
Undivided profits		20,730		19,318			21,720			21,563
Accumulated other comprehensive income (loss), net of tax		166		(1,760	)
Accumulated other comprehensive loss, net of tax							(5,521	)		(2,927	)

Total shareholders’ equity		91,799		88,461			87,052			89,499

Total liabilities and shareholders’ equity	$	656,987	$	688,014		$	646,846		$	650,424


	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended March 31,
	2017		2016		2017		2016		2018		2017
Interest income:
Interest and fees on loans	$	3,165	$	3,568	$	9,734	$	10,833	$	3,233	$	3,274
Interest and dividends on securities:
U.S. Treasuries		413		283		1,203		740		379		415
U.S. Government agencies		126		161		404		728		122		142
Mortgage-backed securities		343		137		876		414		550		265
States and political subdivisions		420		333		1,199		954		439		393
Corporate bonds				7		8		23				8
Other investments		8		9		14		19		3		3
Interest on balances due from depository institutions		148		95		384		212		39		101

Total interest income		4,623		4,593		13,822		13,923		4,765		4,601

Interest expense:
Deposits		381		237		981		661		476		264
Borrowings from Federal Home Loan Bank		8		30		32		115		20		15

Total interest expense		389		267		1,013		776		496		279

Net interest income		4,234		4,326		12,809		13,147		4,269		4,322
Provision for allowance for loan losses		29				85		137		35		26

Net interest income after provision for allowance for loan losses	$	4,205	$	4,326	$	12,724	$	13,010	$	4,234	$	4,296


	Three Months Ended September 30,					Nine Months Ended September 30,						Three Months Ended March 31,
	2017		2016			2017			2016			2018			2017
Non-interest income:
Trust department income and fees	$	430	$	429		$	1,224		$	1,192		$	433		$	366
Service charges on deposit accounts		947		946			2,799			2,796			911			922
Gain on liquidation, sales and calls of securities				67			137			158						17
Income (loss) from other investments		7		(14	)		36			(27	)		(39	)		12
Increase in cash surrender value of life insurance		98		102			326			295			107			99
Gain from death benefits from life insurance							429
Other income		128		236			376			523			111			126

Totalnon-interest income		1,610		1,766			5,327			4,937			1,523			1,542

Non-interest expense:
Salaries and employee benefits		2,746		2,776			8,344			8,305			2,829			2,849
Net occupancy		493		559			1,548			1,798			440			535
Equipment rentals, depreciation and maintenance		722		763			2,251			2,229			758			794
FDIC and state banking assessments		130		232			327			661			114			98
Data processing		322		334			972			1,006			327			331
ATM expense		141		147			399			422			138			122
Other real estate expense		305		26			635			500			120			62
Other expense		720		849			2,450			2,405			739			973

Totalnon-interest expense		5,579		5,686			16,926			17,326			5,465			5,764

Income before income taxes		236		406			1,125			621
Income tax expense (benefit)							(338	)		78

Net income	$	236	$	406		$	1,463		$	543		$	292		$	74

Basic and diluted earnings per share	$	.05	$	.08		$	.29		$	.10		$	.06		$	.01

Dividends declared per share	$	.01	$			$	.01		$			$			$


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended March 31,
	2017			2016			2017			2016			2018			2017
Net income	$	236		$	406		$	1,463		$	543		$	292		$	74
Other comprehensive income (loss):
Net unrealized gain (loss) on available for sale securities		(319	)		(598	)		2,063			2,132			(2,594	)		1,111
Reclassification adjustment for realized gain on available for sale securities called or sold					(67	)		(137	)		(158	)
Reclassification adjustment for realized gains on available for sale securities called or sold																	(17	)

Total other comprehensive income (loss)		(319	)		(665	)		1,926			1,974			(2,594	)		1,094

Total comprehensive income (loss)	$	(83	)	$	(259	)	$	3,389		$	2,517		$	(2,302	)	$	1,168

See ~~notes~~Notes to ~~consolidated financial statements.~~Consolidated Financial Statements.


	Nine Months Ended September 30,						Three Months Ended March 31,
	2017			2016			2018			2017
Cash flows from operating activities:
Net income	$	1,463		$	543		$	292		$	74
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		1,426			1,356			480			473
Provision for allowance for loan losses		85			137			35			26
Writedown of other real estate		397			420			17			20
(Gains) losses on sales of other real estate		95			(199	)
Loss on sales of other real estate								4			15
(Income) loss from other investments		(36	)		27			39			(12	)
Gain from death benefits from life insurance		(429	)
Amortization of available for sale securities								113			(5	)
Amortization of held to maturity securities		190			111			61			71
Amortization of available for sale securities		130			17
Gain on sales and calls of securities		(137	)		(158	)
Gain on liquidation, sales and calls of securities											(17	)
Change in accrued interest receivable		(136	)		155			(194	)		(77	)
Increase in cash surrender value of life insurance		(326	)		(295	)		(107	)		(99	)
Change in other assets		(18	)		(274	)		(65	)		92
Change in other liabilities		574			217			(483	)		(108	)

Net cash provided by operating activities	$	3,278		$	2,057		$	192		$	453


	Nine Months Ended September 30,						Three Months Ended March 31,
	2017			2016			2018			2017
Cash flows from investing activities:
Proceeds from maturities, sales and calls of available for sale securities	$	58,201		$	141,834		$	13,285		$	20,123
Proceeds from maturities of held to maturity securities		7,725			510
Purchases of available for sale securities		(68,478	)		(145,832	)		(10,723	)		(8,774	)
Purchases of held to maturity securities		(9,170	)		(17,120	)
(Purchase) redemption of Federal Home Loan Bank stock		(5	)		1,101
Proceeds from maturities and calls of held to maturity securities								220			390
Purchases of Federal Home Loan Bank stock								(62	)		(2	)
Proceeds from sales of other real estate		1,296			2,017			120			276
Loans, net change		41,777			10,431			4,267			12,108
Acquisition of bank premises and equipment		(323	)		(583	)		(247	)		(24	)
Investment in cash surrender value of life insurance		(78	)		(85	)		(21	)		(40	)
Proceeds from death benefits from life insurance		1,929

Net cash provided by (used in) investing activities		32,874			(7,727	)
Net cash provided by investing activities								6,839			24,057

Cash flows from financing activities:
Demand and savings deposits, net change		(38,656	)		47,707			6,380			35,768
Time deposits, net change		8,707			3,146			2,986			5,559
Borrowings from Federal Home Loan Bank					98,920			161,400
Repayments to Federal Home Loan Bank		(5,041	)		(110,990	)		(171,414	)		(5,014	)
Retirement of common stock								(145	)

Net cash provided by (used in) financing activities		(34,990	)		38,783			(793	)		36,313

Net increase in cash and cash equivalents		1,162			33,113			6,238			60,823
Cash and cash equivalents, beginning of period		41,116			31,396			25,281			41,116

Cash and cash equivalents, end of period	$	42,278		$	64,509		$	31,519		$	101,939

See notes to consolidated financial statements.

For the ~~Nine~~three Months Ended ~~September 30,~~March 31, 2018 and 2017 ~~and 2016~~

Peoples Financial Corporation (the “Company”) is aone-bank holding company headquartered in Biloxi, Mississippi. ItThe Company has two operating 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 ~~September 30, 2017~~March 31, 2018 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 ~~2016~~2017 Annual Report and Form10-K.

The results of operations for the quarter ~~or nine months~~ ended ~~September 30, 2017,~~March 31, 2018, 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 ~~reporting~~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 Form10-K for the year ended December 31, ~~2016.~~2017.

Revenue Recognition - As of January 1, 2018, the Company adopted Accounting Standards Update (“ASU”)2014-09,Revenue from Contracts with Customers (Topic 606), using the modified retrospective method. Disclosures of revenue from contracts with customers for periods beginning after January 1, 2018 are presented under ASC Topic 606 and have not materially changed from the prior year amounts. This update prescribes the process related to the recognition of revenue to depict the transfer of promised goods or services

to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU2014-09 excludes revenue streams relating to loans and investment securities, which are the major source of revenue for the Company from its scope. As a result, the adoption of the guidance had no material impact on the measurement or recognition of revenue. Consistent with this guidance, the Company recognizes non-interest income within the scope of this guidance as services are transferred to its customers in an amount that reflects the consideration it expects to be entitled to in exchange for those services. Other types of revenue contracts, the income from which is included innon-interest income, that are within the scope of ASU2014-09 are:

Trust department income and fees: A contract for fiduciary and/or investment administration services on personal trust accounts and corporate trust services. Personal trust fee income is determined as a percentage of assets under management and is recognized over the period the underlying trust is serviced. Corporate trust fee income is recognized over the period the Company provides service to the entity.

Service charges on deposit accounts: The deposit contract obligates the Company to serve as a custodian of the customer’s deposited funds and is generally terminable at will by either party. The contract permits the customer to access the funds on deposit and request additional services for which the Company earns a fee, including NSF and analysis charges, related to the deposit account. Income for deposit accounts is recognized over the statement cycle period (typically on a monthly basis) or at the time the service is provided, if additional services are requested.

ATM fee income: A contract between the Company, as a card-issuing bank, and its customers whereby the Company receives a transaction fee from the merchant’s bank whenever a customer uses a debit or credit card to make a purchase. These fees are earned as the service is provided (i.e., when the customer uses a debit or ATM card).

Other noninterest income: Other noninterest income includes several items, such as wire transfer income, check cashing fees, the increase in cash surrender value of life insurance, rental income from bank properties and safe deposit box rental fees. This income is generally recognized at the time the service is provided and/or the income is earned.

New Accounting Pronouncements -– In ~~January 2017,~~February 2018, the Financial Accounting Standards Board (the “FASB”) issued ~~Accounting Standards Update (“ASU”)~~ASU~~2017-03,~~2018-03,~~Accounting Changes~~Technical Corrections and ~~Error Corrections~~Improvements to Financial Instruments – Overall (Subtopic825-10): Recognition and Measurement of Financial Assets and Financial Liabilities, that Clarifies the Guidance in ASU No. 2016-01, Financial Instruments – Overall (Subtopic825-10).ASU2018-03 clarifies guidance in ASUNo. 2016-01 relating to equity securities without a readily determinable fair value, forward contracts and purchased options and fair value option liabilities. This update is effectivefor fiscal years, and interim periods within those fiscal years, beginning after June 15, 2018.The Company adopted the amendments in this ASU effective January 1, 2018. The adoption of this ASU did not have a material effect on the Company’s financial position, result of operations or cash flows.

In March 2018, the FASB issued ASU2018-05,Income Taxes (Topic ~~250) and Investments - Equity Method and Joint Ventures (Topic 323)~~740): Amendments to SEC Paragraphs Pursuant to SEC Staff ~~Announcements at the September~~Accounting Bulletin No. ~~22, 2016 and~~~~November~~ ~~17, 2016 EITF Meetings.~~118.ASU~~2017-03~~2018-05 ~~incorporates into~~adds SEC guidance to the ~~Accounting Standards~~accounting standards codification regarding the Tax Cuts and Jobs Act. This

~~Codification recent SEC guidance about disclosing the effect on financial statements of adopting the revenue, leases and credit losses standards. This~~ update isbecame effective upon ~~issuance.~~addition to the FASB Codification. The adoption of this ASU is not expected to have a material effect on the Company’s financial position, ~~results of operations or cash flows.~~

~~In February 2017, the FASB issued ASU2017-05,~~~~Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic610-20):~~ ~~Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets~~.~~ASU 2017-05~~ conforms the derecognition guidance on nonfinancial assets with the model for transactions in the new revenue standard. This update will be effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. The adoption of this ASU is not expected to have a material effect on the Company’s financial position, results of operations or cash flows.

~~In March 2017, the FASB issued ASU2017-07,~~~~Compensation - Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit~~~~Cost.~~ ~~ASU2017-07~~ amends the requirements related to the income statement presentation of the components of net periodic benefit cost for an entity’s sponsored defined benefit pension and other postretirement plans. This update will be effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. The adoption of this ASU is not expected to have a material effect on the Company’s financial position, results of operations or cash flows.

~~In March 2017, the FASB issued ASU2017-08,~~~~Receivables - Nonrefundable Fees and Other Costs (Subtopic310-20):~~ ~~Premium Amortization on Purchased Callable Debt Securities~~~~. ASU2017-08~~ shortens the amortization period for the premium on such securities to the earliest call date. This update will be effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The adoption of this ASU is not expected to have a material effect on the Company’s financial position, resultsresult of operations or cash flows.

Per share data is based on the weighted average shares of common stock outstanding of 5,080,514 and 5,123,186 for the ~~quarters and nine~~three months ended ~~September 30,~~March 31, 2018 and 2017, ~~and 2016.~~respectively.

The Company has defined cash and cash equivalents as cash and due from banks. The Company paid ~~$1,006,350~~$489,389 and ~~$761,440~~$259,953 for the ~~nine~~three months ended ~~September 30,~~March 31, 2018 and 2017, ~~and 2016,~~ respectively, for interest on deposits and borrowings. No income tax payments were made during the ~~nine~~three months ended ~~September 30,~~March 31, 2018 and 2017. ~~Income tax payments of $78,435 were made during the nine months ended September 30, 2016.~~ Loans transferred to other real estate amounted to ~~$1,355,642~~$753,674 and ~~$1,758,764~~$44,391 during the ~~nine~~three months ended ~~September 30,~~March 31, 2018 and 2017, ~~and 2016,~~ respectively.

The amortized cost and fair value of securities at ~~September 30, 2017~~March 31, 2018 and December 31, ~~2016,~~2017, are as follows (in thousands):


September 30, 2017	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
March 31, 2018										Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Available for sale securities:
Debt securities:
U.S. Treasuries	$	134,806	$	5	$	(1,234	)	$	133,577	$	119,831	$		$	(2,994	)	$	116,837
U.S. Government agencies		19,988		70		(86	)		19,972		14,989				(323	)		14,666
Mortgage-backed securities		77,415		349		(561	)		77,203		96,952		27		(2,508	)		94,471
States and political subdivisions		14,176		402					14,578		13,746		217					13,963

Total debt securities		246,385		826		(1,881	)		245,330
Equity securities		458							458

Total available for sale securities	$	246,843	$	826	$	(1,881	)	$	245,788	$	245,518	$	244	$	(5,825	)	$	239,937

Held to maturity securities:
U.S. Government agencies	$	8,185	$		$	(220	)	$	7,965	$	8,185	$		$	(408	)	$	7,777
States and political subdivisions		41,220		424		(306	)		41,338		42,697		80		(996	)		41,781

Total held to maturity securities	$	49,405	$	424	$	(526	)	$	49,303	$	50,882	$	80	$	(1,404	)	$	49,558


December 31, 2016	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
December 31, 2017										Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Available for sale securities:
Debt securities:
U.S. Treasuries	$	149,676	$	39	$	(2,091	)	$	147,624	$	124,820	$		$	(2,176	)	$	122,644
U.S. Government agencies		24,973		58		(206	)		24,825		19,989				(158	)		19,831
Mortgage-backed securities		43,939		74		(1,305	)		42,708		89,207		96		(1,042	)		88,261
States and political subdivisions		17,513		450					17,963		14,178		292					14,470

Total debt securities		236,101		621		(3,602	)		233,120
Equity securities		458							458

Total available for sale securities	$	236,559	$	621	$	(3,602	)	$	233,578	$	248,194	$	388	$	(3,376	)	$	245,206

Held to maturity securities:
U.S. Government agencies	$	10,009	$		$	(315	)	$	9,694	$	8,185	$		$	(302	)	$	7,883
States and political subdivisions		36,677		29		(927	)		35,779		42,978		227		(550	)		42,655
Corporate bond		1,464				(2	)		1,462

Total held to maturity securities	$	48,150	$	29	$	(1,244	)	$	46,935	$	51,163	$	227	$	(852	)	$	50,538

The amortized cost and fair value of debt securities at ~~September 30, 2017~~March 31, 2018 (in thousands), by contractual maturity, are shown ~~on the following page.~~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.

Available for sale and held to maturity securities with gross unrealized losses at ~~September 30, 2017~~March 31, 2018 and December 31, ~~2016,~~2017, 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				Less Than Twelve Months				Over Twelve Months				Total
September 30, 2017:	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
													Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
March 31, 2018:
U.S. Treasuries													$	39,351	$	602	$	77,486	$	2,392	$	116,837	$	2,994
U.S. Government agencies														13,035		149		9,408		582		22,443		731
States and political subdivisions														18,678		451		6,829		545		25,507		996
Mortgage-backed securities														73,089		1,624		13,220		884		86,309		2,508

TOTAL													$	144,153	$	2,826	$	106,943	$	4,403	$	251,096	$	7,229

December 31, 2017:
U.S. Treasuries	$	113,777	$	1,058	$	9,815	$	176	$	123,592	$	1,234	$	49,586	$	364	$	73,058	$	1,812	$	122,644	$	2,176
U.S. Government agencies		8,085		90		9,783		216		17,868		306		8,145		37		14,567		423		22,712		460
Mortgage-backed securities		31,326		382		3,902		179		35,228		561		60,230		415		13,492		627		73,722		1,042
States and political subdivisions		4,729		168		4,054		138		8,783		306		11,552		168		7,010		382		18,562		550

TOTAL	$	157,917	$	1,698	$	27,554	$	709	$	185,471	$	2,407	$	129,513	$	984	$	108,127	$	3,244	$	237,640	$	4,228

December 31, 2016:
U.S. Treasuries	$	97,634	$	2,091	$		$		$	97,634	$	2,091
U.S. Government agencies		24,478		521						24,478		521
Mortgage-backed securities		37,663		1,305						37,663		1,305
States and political subdivisions		24,627		926		589		1		25,216		927
Corporate bond						1,462		2		1,462		2

TOTAL	$	184,402	$	4,843	$	2,051	$	3	$	186,453	$	4,846

At ~~September 30, 2017, 25~~March 31, 2018, 24 of 27the 24 securities issued by the U.S. Treasury, 45 of the 65 securities issued by U.S. Government agencies, 2762 of the ~~155~~156 securities issued by states and political subdivisions and 1634 of the 3239 mortgage-backed securities contained unrealized losses.

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

Proceeds from sales and calls of available for sale debt securities were ~~$23,703,484 and $29,250,806~~$1,227,141 during the ~~nine~~three months ended ~~September 30,~~March 31, 2017 ~~and 2016, respectively. Available~~which resulted in a realized gain of $16,729 for the three months ended March 31, 2017. There were no sales or calls of available for sale debt securities ~~were sold or called for a realized gain of $136,781 and $157,918 for the nine months ended September 30, 2017 and 2016, respectively.~~in 2018.

Securities with a fair value of ~~$180,107,293~~$225,527,287 and ~~$180,659,168~~$196,702,218 at ~~September 30, 2017~~March 31, 2018 and December 31, ~~2016,~~2017, respectively, were pledged to secure public deposits, federal funds purchased and other balances required by law.

The composition of the loan portfolio at ~~September 30, 2017~~March 31, 2018 and December 31, ~~2016,~~2017, is as follows (in thousands):


	September 30, 2017		December 31, 2016		March 31, 2018		December 31, 2017
Gaming	$	18,824	$	31,311	$	24,475	$	26,142
Residential and land development		273		291		253		263
Real estate, construction		30,998		32,503		35,282		31,947
Real estate, mortgage		190,003		206,172		185,238		189,201
Commercial and industrial		26,009		37,035		23,938		26,360
Other		6,716		8,043		6,266		6,536

Total	$	272,823	$	315,355	$	275,452	$	280,449

The age analysis of the loan portfolio, segregated by class of loans, as of ~~September 30, 2017~~March 31, 2018 and December 31, ~~2016,~~2017, is as follows (in thousands):


	Number of Days Past Due												Loans Past Due Greater Than 90 Days & Still Accruing		Number of Days Past Due												Loans Past Due Greater Than 90
	30 - 59		60 - 89		Greater Than 90		Total Past Due		Current		Total Loans		Loans Past Due Greater Than 90 Days & Still Accruing		30 - 59		60 - 89		Greater Than 90		Total Past Due		Current		Total Loans		Days & Still Accruing
September 30, 2017:
March 31, 2018:
Gaming	$		$		$		$		$	18,824	$	18,824	$		$		$		$		$		$	24,475	$	24,475	$
Residential and land development						273		273				273												253		253
Real estate, construction		1,343		130		747		2,220		28,778		30,998				183		207		621		1,011		34,271		35,282
Real estate, mortgage		4,640		139		7,815		12,594		177,409		190,003		256		4,960		678		4,614		10,252		174,986		185,238
Commercial and industrial		882		1,364		668		2,914		23,095		26,009				318		5		2,133		2,456		21,482		23,938
Other		45		8				53		6,663		6,716				18		1				19		6,247		6,266

Total	$	6,910	$	1,641	$	9,503	$	18,054	$	254,769	$	272,823	$	256	$	5,479	$	891	$	7,368	$	13,738	$	261,714	$	275,452	$

December 31, 2016:
December 31, 2017:
Gaming	$		$		$		$		$	31,311	$	31,311	$		$		$		$		$		$	26,142	$	26,142	$
Residential and land development						291		291				291												263		263
Real estate, construction		902		216		1,082		2,200		30,303		32,503				747		121		522		1,390		30,557		31,947
Real estate, mortgage		4,608		1,923		4,471		11,002		195,170		206,172				5,321		790		4,884		10,995		178,206		189,201
Commercial and industrial		867				8		875		36,160		37,035				375		2		2,344		2,721		23,639		26,360
Other		44		36		80		160		7,883		8,043				26		3				29		6,507		6,536

Total	$	6,421	$	2,175	$	5,932	$	14,528	$	300,827	$	315,355	$		$	6,469	$	916	$	7,750	$	15,135	$	265,314	$	280,449	$

The Company monitors the credit quality of its loan portfolio through the use of a loan grading system. A score of 1 – 5 is assigned to the loan based on factors including repayment ability, trends in net worth and/or financial condition of the borrower and guarantors, employment stability, management ability, loan to value fluctuations, the type and structure of the loan, conformity of the loan to bank policy and payment performance. Based on the total score, a loan grade of A, B, C, S, D, E or F is applied. A grade of A will generally be applied to loans for customers that are well known to the Company and that have excellent sources of repayment. A grade of B will generally be applied to loans for customers that have excellent sources of repayment which have no identifiable risk of collection. A grade of C will generally be applied to loans for customers that have adequate sources of repayment which have little identifiable risk of collection. A grade of S will generally be applied to loans for customers who meet the criteria for a grade of C but who also warrant additional monitoring by placement on the watch list. A grade of D will generally be applied to loans for customers that are inadequately protected by current sound net worth, paying capacity of the borrower, or pledged collateral. Loans with a grade of D have unsatisfactory characteristics such as cash flow deficiencies, bankruptcy filing by the borrower or dependence on the sale of collateral for the primary source of repayment, causing more than acceptable levels of risk. Loans 60 to 89 days past due receive a grade of D. A grade of E will generally be applied to loans for customers with weaknesses inherent in the “D” classification and in which collection or liquidation in full is questionable. In addition, on a monthly basis the Company determines which loans are 90 days or more past due and assigns a grade of E to them. A grade of F is applied to

loans which are considered uncollectible and of such little value that their continuance in an active bank is not warranted. Loans with this grade are charged off, even though partial or full recovery may be possible in the future.

An analysis of the loan portfolio by loan grade, segregated by class of loans, as of ~~September 30, 2017~~March 31, 2018 and December 31, ~~2016,~~2017, is as follows (in thousands):


	Loans With A Grade Of:											Loans With A Grade Of:
	A, B or C		S		D		E		F	Total		A, B or C		S		D		E		F	Total
September 30, 2017:
March 31, 2018:
Gaming	$	18,824	$		$		$		$	$	18,824	$	24,475	$		$		$		$	$	24,475
Residential and land development								273			273								253			253
Real estate, construction		29,323				368		1,307			30,998		33,880				257		1,145			35,282
Real estate, mortgage		142,805		15,833		20,861		10,504			190,003		150,338		11,244		14,553		9,103			185,238
Commercial and industrial		13,720		9,132		271		2,886			26,009		21,025				181		2,732			23,938
Other		6,688				24		4			6,716		6,254				9		3			6,266

Total	$	211,360	$	24,965	$	21,524	$	14,974	$	$	272,823	$	235,972	$	11,244	$	15,000	$	13,236	$	$	275,452

December 31, 2016:
December 31, 2017:
Gaming	$	31,311	$		$		$		$	$	31,311	$	26,142	$		$		$		$	$	26,142
Residential and land development								291			291								263			263
Real estate, construction		29,954		435		517		1,597			32,503		30,412				358		1,177			31,947
Real estate, mortgage		155,671		17,651		22,901		9,949			206,172		148,284		11,550		19,606		9,761			189,201
Commercial and industrial		13,926		21,680		867		562			37,035		23,133				265		2,962			26,360
Other		7,996				42		5			8,043		6,516				16		4			6,536

Total	$	238,858	$	39,766	$	24,327	$	12,404	$	$	315,355	$	234,487	$	11,550	$	20,245	$	14,167	$	$	280,449

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 ~~September 30, 2017~~March 31, 2018 and December 31, ~~2016,~~2017, are as follows (in thousands):


	September 30, 2017		December 31, 2016		March 31, 2018		December 31, 2017
Residential and land development	$	273	$	291	$	253	$	263
Real estate, construction		1,307		1,598		1,145		1,177
Real estate, mortgage		9,992		9,445		8,888		9,548
Commercial and industrial		2,808		515		2,597		2,818
Other		4		5		3		4

Total	$	14,384	$	11,854	$	12,886	$	13,810

Prior to ~~2016,~~2017, certain loans were modified by granting interest rate concessions to these customers with such loans being classified as troubled debt restructurings. During ~~2016~~2017 and ~~2017,~~2018, the Company did not restructure any additional loans. Specific reserves of ~~$88,000~~$80,000 and ~~$100,000~~$86,000 were allocated to troubled debt restructurings as of ~~September 30, 2017~~March 31, 2018 and December 31, ~~2016,~~2017, respectively. The Bank had no commitments to lend additional amounts to customers with outstanding loans classified as troubled debt restructurings as of ~~September 30, 2017~~March 31, 2018 and December 31, ~~2016.~~2017.

Impaired loans, which include loans classified as nonaccrual and troubled debt restructurings, segregated by class of loans, as of ~~September 30, 2017~~March 31, 2018 and December 31, ~~2016,~~2017, are as follows (in thousands):


	Unpaid Principal Balance		Recorded Investment		Related Allowance		Average Recorded Investment		Interest Income Recognized		Unpaid Principal Balance		Recorded Investment		Related Allowance		Average Recorded Investment		Interest Income Recognized
September 30, 2017:
December 31, 2017:
With no related allowance recorded:
Real estate, construction	$	1,562	$	1,088	$		$	1,132	$		$	1,441	$	967	$		$	1,024	$
Real estate, mortgage		9,354		8,382				9,053		21		8,920		8,025				8,654		31
Commercial and industrial		2,797		2,758				2,780				922		884				916
Other		4		4				4				4		4				4

Total		13,717		12,232				12,969		21		11,287		9,880				10,598		31

With a related allowance recorded:
Residential and land development		273		273		49		278				263		263		40		275
Real estate, construction		219		219		112		230				210		210		105		226
Real estate, mortgage		3,653		2,769		722		2,751		23		3,556		2,672		725		2,676		28
Commercial and industrial		50		50		15		49				1,934		1,934		342		1,923

Total		4,195		3,311		898		3,308		23		5,963		5,079		1,212		5,100		28

Total by class of loans:
Residential and land development		273		273		49		278				263		263		40		275
Real estate, construction		1,781		1,307		112		1,362				1,651		1,177		105		1,250
Real estate, mortgage		13,007		11,151		722		11,804		44		12,476		10,697		725		11,330		59
Commercial and industrial		2,847		2,808		15		2,829				2,856		2,818		342		2,839
Other		4		4				4				4		4				4

Total	$	17,912	$	15,543	$	898	$	16,277	$	44	$	17,250	$	14,959	$	1,212	$	15,698	$	59

Transactions in the allowance for loan losses for the ~~quarters and nine~~three months ended ~~September 30,~~March 31, 2018 and 2017, ~~and 2016,~~ and the balances of loans, individually and collectively evaluated for impairment, as of ~~September 30,~~March 31, 2018 and 2017, ~~and 2016,~~ are as follows (in thousands):


	Gaming			Residential and Land Development			Real Estate, Construction		Real Estate, Mortgage			Commercial and Industrial			Other			Total				Gaming			Residential and Land Development		Real Estate, Construction			Real Estate, Mortgage			Commercial and Industrial			Other			Total
For the Nine Months Ended September 30, 2017:
Allowance for Loan Losses:
Beginning balance	$	545		$	66		$	199	$	3,800		$	651		$	205		$	5,466
Charge-offs										(8	)		(32	)		(158	)		(198	)
Recoveries					685			31		12			11			60			799
Provision		(119	)		(701	)		43		854			(99	)		107			85

Ending Balance	$	426		$	50		$	273	$	4,658		$	531		$	214		$	6,152

For the Quarter Ended September 30, 2017:
For the Quarter Ended March 31, 2018:																					For the Quarter Ended March 31, 2018:
Allowance for Loan Losses:
Beginning Balance	$	396		$	58		$	232	$	3,916		$	672		$	207		$	5,481			$	536		$	40	$	202		$	4,305		$	892		$	178		$	6,153
Charge-offs													(32	)		(63	)		(95	)											(14	)		(44	)		(94	)		(152	)
Recoveries					685			19		4						29			737												118			13			45			176
Provision		30			(693	)		22		738			(109	)		41			29				(98	)				(12	)		176			(63	)		32			35

Ending Balance	$	426		$	50		$	273	$	4,658		$	531		$	214		$	6,152			$	438		$	40	$	190		$	4,585		$	798		$	161		$	6,212

Allowance for Loan Losses, September 30, 2017:
Allowance for loan losses, March 31, 2018:																					Allowance for loan losses, March 31, 2018:
Ending balance: individually evaluated for impairment	$			$	50		$	112	$	999		$	211		$	14		$	1,386			$			$	40	$	98		$	1,080		$	560		$	3		$	1,781

Ending balance: collectively evaluated for impairment	$	426		$			$	161	$	3,659		$	320		$	200		$	4,766			$	438		$		$	92		$	3,505		$	238		$	158		$	4,431

Total Loans, September 30, 2017:
Total Loans, March 31, 2018:																					Total Loans, March 31, 2018:
Ending balance: individually evaluated for impairment	$			$	273		$	1,675	$	31,365		$	3,157		$	28		$	36,498			$			$	253	$	1,402		$	23,656		$	2,913		$	12		$	28,236

Ending balance: collectively evaluated for impairment	$	18,824		$			$	29,323	$	158,638		$	22,852		$	6,688		$	236,325			$	24,475		$		$	33,880		$	161,582		$	21,025		$	6,254		$	247,216


	Gaming		Residential and Land Development		Real Estate, Construction			Real Estate, Mortgage			Commercial and Industrial			Other			Total				Gaming			Residential and Land Development		Real Estate, Construction		Real Estate, Mortgage		Commercial and Industrial		Other			Total
For the Nine Months Ended September 30, 2016:
Allowance for Loan Losses:
Beginning balance	$	582	$	189	$	589		$	5,382		$	1,075		$	253		$	8,070
Charge-offs						(173	)		(700	)		(509	)		(153	)		(1,535	)
Recoveries						57			107			61			50			275
Provision		48		20		(113	)		(24	)		127			79			137

Ending Balance	$	630	$	209	$	360		$	4,765		$	754		$	229		$	6,947

For the Quarter Ended September 30, 2016:
For the Quarter Ended March 31, 2017:																				For the Quarter Ended March 31, 2017:
Allowance for Loan Losses:
Beginning Balance	$	582	$	202	$	375		$	4,976		$	718		$	256		$	7,109			$	545		$	66	$	199	$	3,800	$	651	$	205		$	5,466
Charge-offs									(147	)					(59	)		(206	)														(59	)		(59	)
Recoveries						19			8			1			16			44									10		8		11		20			49
Provision		48		7		(34	)		(72	)		35			16							(168	)				2		128		21		43			26

Ending Balance	$	630	$	209	$	360		$	4,765		$	754		$	229		$	6,947			$	377		$	66	$	211	$	3,936	$	683	$	209		$	5,482

Allowance for Loan Losses, September 30, 2016:
Allowance for loan losses, March 31, 2017:																				Allowance for loan losses, March 31, 2017:
Ending balance: individually evaluated for impairment	$		$	109	$	239		$	1,311		$	218		$	17		$	1,894			$			$	66	$	141	$	485	$	210	$	18		$	920

Ending balance: collectively evaluated for impairment	$	630	$	100	$	121		$	3,454		$	536		$	212		$	5,053			$	377		$		$	70	$	3,451	$	473	$	191		$	4,562

Total Loans, September 30, 2016:
Total Loans, March 31, 2017:																				Total Loans, March 31, 2017:
Ending balance: individually evaluated for impairment	$		$	300	$	2,285		$	35,260		$	1,733		$	33		$	39,611			$			$	282	$	2,067	$	32,489	$	1,349	$	32		$	36,219

Ending balance: collectively evaluated for impairment	$	33,442	$	610	$	38,062		$	167,348		$	37,359		$	7,675		$	284,496			$	20,379		$		$	29,381	$	171,913	$	37,159	$	8,141		$	266,973

~~Time deposits of $100,000 or more at December 31, 2016 included brokered deposits of $5,000,000, which matured in 2017.~~

Time deposits of $250,000 or more totaled approximately ~~$32,483,000~~$34,108,000 and ~~$25,143,000~~$20,494,000 at ~~September 30, 2017~~March 31, 2018 and December 31, ~~2016,~~2017, respectively.

~~On September 20, 2017, the Company declared a dividend of $ .01 per share. The dividend had a record date of October 2, 2017 and a payment date of October 13, 2017.~~

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 anon-recurring basis, such as impaired loans and ORE. Thesenon-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.

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

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

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

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

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

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 Interactive Data Corporation, which utilizes 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. If the fair value of available for sale securities is generated through model-based techniques, including the discounting of estimated cash flows, such securities are classified as Level 3 assets.

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

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 anon-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 arenon-recurring Level 3 assets.

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’sin-house property evaluator and Management will determine the fair value of the collateral, based on comparable sales, market conditions, Management’s plans for disposition and other estimates of fair value obtained from principally independent sources, adjusted for estimated selling costs. Other real estate is anon-recurring Level 3 asset.

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

The fair value ofnon-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

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 ~~September 30, 2017~~March 31, 2018 and December 31, ~~2016~~2017 are as follows (in thousands):


			Fair Value Measurements Using						Fair Value Measurements Using
	Total		Level 1	Level 2		Level 3	Total		Level 1	Level 2		Level 3
September 30, 2017:
March 31, 2018:
U.S. Treasuries	$	133,577	$	$	133,577	$	$	116,837	$	$	116,837	$
U.S. Government agencies		19,972			19,972			14,666			14,666
Mortgage-backed securities		77,203			77,203			94,471			94,471
States and political subdivisions		14,578			14,578			13,963			13,963
Equity securities		458			458

Total	$	245,788	$	$	245,788	$	$	239,937	$	$	239,937	$

December 31, 2016:
December 31, 2017:
U.S. Treasuries	$	147,624	$	$	147,624	$	$	122,644	$	$	122,644	$
U.S. Government agencies		24,825			24,825			19,831			19,831
Mortgage-backed securities		42,708			42,708			88,261			88,261
States and political subdivisions		17,963			17,963			14,470			14,470
Equity securities		458			458

Total	$	233,578	$	$	233,578	$	$	245,206	$	$	245,206	$

Impaired loans, which are measured at fair value on anon-recurring basis, by level within the fair value hierarchy as of ~~September 30, 2017~~March 31, 2018 and December 31, ~~2016~~2017 are as follows (in thousands):

Other real estate, which is measured at fair value on anon-recurring basis, by level within the fair value hierarchy as of ~~September 30, 2017~~March 31, 2018 and December 31, ~~2016~~2017 are as follows (in thousands):

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
	For the Nine Months Ended September 30, 2017			For the Year Ended December 31, 2016			March 31, 2018			December 31, 2017
Balance, beginning of period	$	8,513		$	9,916		$	8,232		$	8,513
Loans transferred to ORE		1,356			1,903			754			1,946
Sales		(1,391	)		(2,524	)		(124	)		(1,767	)
Writedowns		(397	)		(782	)		(17	)		(460	)

Balance, end of period	$	8,081		$	8,513		$	8,845		$	8,232

The carrying value and estimated fair value of financial instruments, by level within the fair value hierarchy, at ~~September 30, 2017~~March 31, 2018 and December 31, ~~2016,~~2017, are as follows (in thousands):


	Carrying Amount			Fair Value Measurements Using												Carrying			Fair Value Measurements Using
			Level 1			Level 2			Level 3			Total			Amount			Level 1			Level 2			Level 3			Total
September 30, 2017:	Carrying Amount
March 31, 2018:
Financial Assets:
Cash and due from banks	$	42,278		$	42,278		$			$			$	42,278		$	31,519		$	31,519		$			$			$	31,519
Available for sale securities		245,788						245,788						245,788			239,937						239,937						239,937
Held to maturity securities		49,405						49,303						49,303			50,882						49,558						49,558
Other investments		2,729			2,729									2,729			3,154			3,154									3,154
Federal Home Loan Bank stock		544						544						544			1,432						1,432						1,432
Loans, net		266,671									262,170			262,170			269,240									264,041			264,041
Other real estate		8,081									8,081			8,081			8,845									8,845			8,845
Cash surrender value of life insurance		18,153						18,153						18,153			18,430						18,430						18,430
Financial Liabilities:
Deposits:
Non-interest bearing		147,975			147,975									147,975			162,495			162,495									162,495
Interest bearing		397,092									397,562			397,562			376,441									376,860			376,860
Borrowings from Federal Home Loan Bank		1,216						1,509						1,509
Borrowings from Federal Home Loan
Bank																	1,184						1,351						1,351

Certain reclassifications have been made to prior year statements to conform to current year presentation. The reclassifications had no effect on prior year net income.

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

The Company is aone-bank holding company headquartered in Biloxi, Mississippi. The Company has two operating 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 Form10-Q and the Consolidated Financial Statements, Notes to Consolidated Financial Statements and Management’s Discussion and Analysis included in the Company’s Form10-K for the year ended December 31, ~~2016.~~2017.

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

The Financial Accounting Standards Board (“FASB”) ~~has~~ issued several new accounting standards updates ~~for~~and several accounting standards became effective during the first ~~three quarters~~quarter of ~~2017~~2018, which ~~are~~have been disclosed in the Notes to Unaudited Consolidated Financial Statements. The Company adopted ASU 2014-09 and ASU 2018-03 effective January 1, 2018, neither of which had a material effect on its financial position, results of operations or cash flows. The Company does not ~~generally~~ expect that ~~these~~the other updates discussed in the Notes will have a material effect on its financial position, or results of operations ~~but~~or cash flows. The Company is in the process of determining the effect of ASU~~2016-13~~ ~~is still being considered.~~ 2016-03, which will be effective for the Company on January 1, 2020, on its financial position, results of operations or cash flows.

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 anon-going basis using historical experience and other factors, including the current economic environment. We adjust such estimates and assumptions when facts and circumstances dictate. Certain critical accounting policies affect the more significant estimates and assumptions used in the preparation of the consolidated financial statements.

Investments 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 tonon-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.

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 (“ORE”) includes real estate acquired through foreclosure. Each ~~ORE~~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 innon-interest expense.

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.

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 ~~the allowance for~~ loan losses, for tax and financial reporting purposes. These differences result in deferred tax assets and liabilities that are included in our consolidated statement of condition. We must also assess the likelihood that our deferred tax assets will be recovered from future taxable income, and to the extent we believe that recovery is not likely, we must establish a valuation allowance. Significant management judgment is required in determining our provision for income taxes, our deferred tax assets and liabilities and any valuation allowance recorded against our net deferred tax assets. To the extent the Company establishes a valuation allowance or adjusts this allowance in a period, we must include an expense or a benefit within the tax ~~provision~~provisions in the consolidated statement of income.

This Form10-Q containsnon-GAAP financial measures determined by methods other than in accordance with GAAP. Suchnon-GAAP financial measures include taxable equivalent interest income and taxable equivalent net interest income. Management uses thesenon-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 thesenon-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. Thesenon-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, 2018 and ~~nine months ended September 30,~~ 2017 ~~and 2016~~ is included in the table on the following page.


	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
For the Three Months Ended March 31,													2018			2017
Interest income reconciliation:
Interest income - taxable equivalent	$	4,751		$	4,753		$	14,232		$	14,401		$	5,023		$	4,742
Taxable equivalent adjustment		(128	)		(160	)		(410	)		(478	)		(258	)		(141	)

Interest income (GAAP)	$	4,623		$	4,593		$	13,822		$	13,923		$	4,765		$	4,601

Net interest income reconciliation:
Net interest income - taxable equivalent	$	4,362		$	4,486		$	13,219		$	13,625		$	4,527		$	4,463
Taxable equivalent adjustment		(128	)		(160	)		(410	)		(478	)		(258	)		(141	)

Net interest income (GAAP)	$	4,234		$	4,326		$	12,809		$	13,147		$	4,269		$	4,322

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 Company ~~earned~~reported net income of ~~$236,000~~$292,000 for the ~~third~~first quarter of ~~2017~~2018 compared with net income of ~~$406,000 for the third quarter of 2016 and net income of $1,463,000~~$74,000 for the first ~~three quarters~~quarter of ~~2017~~2017. Results in 2018 included the decrease innon-interest expense which was partially offset by a decrease in net interest income as compared with ~~net income of $543,000 for the first three quarters of 2016. Results for the first three quarters of 2017 were significantly impacted by anon-recurring~~ ~~gain of $429,000 from the redemption of death benefits on bank owned life insurance and a tax benefit of $338,000, which reflects a correction to expected refunds for prior years.~~2017.

Managing the net interest margin in the Company’s highly competitive market and in ~~the~~ context of larger economic conditions has been very challenging and will continue to be so, for the foreseeable future. Net interest income ~~for the third quarter of 2017 as compared with the third quarter of 2016 decreased $92,000 as the reduction in interest and fees on loans~~ was ~~offset~~impacted primarily by the increase in interest income on taxable held to maturity securities of $204,000 and ~~dividends~~ on ~~securities. Net interest income~~taxable available for ~~the three quarters ended September 30, 2017, decreased $338,000 as compared with the three quarters ended September 30, 2016~~sale securities of $225,000 as the ~~reduction in interest~~Company changed its investment strategy to improve yield while not compromising duration and ~~fees on loans decreased more than the increase in interest expense on deposits.~~credit risk.

Monitoring asset quality, estimating potential losses in our loan portfolio and addressingnon-performing loans continue to be emphasized during these difficult economic times, as the local economy continues to negatively impact collateral values and borrowers’ ability to repay their

loans. ~~The~~A provision for the allowance for loan losses of $35,000 was ~~$29,000 and $85,000 for the third quarter and first three quarters of 2017, respectively,~~recorded in 2018 as compared with ~~no provision and $137,000, respectively, for the third quarter and first three quarters of 2016.~~$26,000 in 2017. The Company is working diligently to address and reduce itsnon-performing assets. The Company’s nonaccrual loans totaled ~~$14,384,000~~$12,886,000 and ~~$11,854,000~~$13,810,000 at ~~September 30, 2017~~March 31, 2018 and December 31, ~~2016,~~2017, respectively. Most of these loans are collateral-dependent, and the Company has rigorously evaluated the value of its collateral to determine potential losses.

Non-interest income decreased ~~$156,000 and increased $390,000~~$19,000 for the ~~third quarter and first~~ three ~~quarters of 2017~~months ended March 31, 2018 as compared with ~~2016. The decrease~~2017 results. Trust department income and fees increased $67,000 for ~~the third quarter of 2017~~2018 as compared with ~~the third quarter of 2016 was primarily the result of the prior year including~~2017. The Company did not realize a gain from any sales or calls of securities in 2018 while such gains were $17,000 in 2017. The Company realized a loss from the ~~sale~~operations of ~~bank premises. The increase for the first three quarters of 2017~~an investment in a low income housing partnership in 2018 as compared with ~~the first three quarters of 2016 was~~income from operations in 2017 results as a result of ~~the gain discussed in the Overview.~~decreased occupancy.

Non-interest expense decreased ~~$107,000 and $400,000~~$299,000 for the ~~third quarter and first~~ three ~~quarters of 2017~~months ended March 31, 2018 as compared with ~~2016~~2017 results. ~~The~~This decrease for the ~~third quarter of 2017~~three months ended March 31, 2018 was primarily the result of decreases in net occupancy ~~expenses~~expense of ~~$66,000~~$95,000 and ~~FDIC and state banking assessments~~other expense of ~~$102,000, which were partially offset by an increase in Other~~$234,000, while other real estate ~~expense of $279,000~~expenses increased $58,000 in 2018 as compared with 2016. This decrease for the first three quarters of 2017 was the result of decreases in net occupancy expenses of $250,000 and FDIC and state banking assessments of $334,000, which were partially offset by an increase in Other real estate expense of $135,000 as compared with 2016.2017.

Total assets at ~~September 30, 2017~~March 31, 2018 decreased ~~$31,027,000~~$3,578,000 as compared with December 31, ~~2016.~~2017. Cash and due from banks increased $6,238,000 in the management of the Company’s liquidity position. Available for sale securities ~~increased $12,210,000 as excess funds were invested to increase earnings. Total~~decreased $5,269,000 and loans decreased ~~$42,532,000~~$4,997,000 at March 31, 2018 as compared with December 31, 2017. Proceeds from maturities, sales and calls of available for sale securities funded liquidity needs. Loans decreased as principal payments, maturities, charge-offs and foreclosures ~~relating to~~on existing loans ~~outpaced~~exceeded new loans. Total deposits decreased $29,949,000 at September 30, 2017 as compared with December 31, 2016 as customers in the casino industry and county and municipal entities reallocate their resources periodically.

Net interest income, the amount by which interest income on loans, investments and other ~~interest-earning~~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~~interest earning assets and interest-bearing liabilities combined with changes in market rates of interest directly affect net interest income.

~~Quarter Ended September 30, 2017 as Compared with Quarter Ended September 30, 2016~~

The Company’s average ~~interest-earning~~interest earning assets decreased approximately ~~$12,876,000,~~$41,396,000 or 2%7%, from approximately ~~$604,008,000~~$626,368,000 for the ~~third~~first quarter of ~~2016~~2017 to approximately ~~$591,132,000~~$584,972,000 for the ~~third~~first quarter of ~~2017. Average held to maturity taxable securities increased approximately~~2018. The Company’s average balance sheet decreased primarily as

~~$21,538,000~~average loans decreased approximately $29,202,000 and ~~average available for sale taxable securities increased approximately $46,819,000 as a result of the decrease in average balances due from financial institutions and average loans. Average~~ balances due from financial institutions decreased ~~$29,325,000~~$23,858,000 while average taxable available for sale securities increased approximately $10,444,000 for the first quarter of 2018 as compared with the ~~Company’s liquidity needs decreased. The Company’s average~~first quarter of 2017. Average loans decreased ~~approximately $44,389,000~~ as principal payments, maturities, charge-offs and foreclosures relating to existing loans outpaced new loans.

~~The average yield on earning assets increased by 6 basis points,~~ Average balances due from 3.15% for the third quarter of 2016 to 3.21% for the third quarter of 2017. The yield on average loans increased from 4.40% for the third quarter of 2016 to 4.53% for the third quarter of 2017 primarily as a result of the effect of the increase in prime rate during 2016financial institutions decreased and ~~2017 on the Company’s floating rate loans. The yield on~~ average taxable available for sale securities increased as excess funds were invested to increase interest income.

The average yield on interest-earning assets increased from ~~1.27%~~3.03% for the ~~third quarter of 2016 to 1.52% for the third~~first quarter of 2017 ~~as the Company has changed its investment strategy~~ to ~~improve yield while not compromising duration and credit risk.~~

~~Average interest-bearing liabilities decreased approximately $10,639,000, or 2%, from approximately $443,591,000~~3.43% for the ~~third~~first quarter of ~~2016 to approximately $432,952,000 for~~2018. This increase is primarily the ~~third quarter~~result of ~~2017. Average savings and interest-bearing DDA balances decreased $7,850,000 primarily~~the yield on average loans increasing as a result of ~~one large public fund reallocating most of their balance to another institution.~~ the increase in prime rate in 2017 and 2018.

Average ~~borrowings from the Federal Home Loan Bank~~interest bearing liabilities decreased approximately ~~$5,694,000 due~~$37,094,000, or 8%, from approximately $465,870,000 for the first quarter of 2017 to approximately $428,776,000 for the ~~reduced liquidity needs~~first quarter of 2018. Average savings and interest bearing DDA decreased $45,155,000 primarily as several large customers reallocated their funds to other institutions in the ~~bank subsidiary.~~current year.

The average rate paid on ~~interest-bearing~~interest bearing liabilities for the ~~third~~first quarter of ~~2016~~2017 was .24% as compared with ~~.36%~~.46% for the ~~third~~first quarter of ~~2017. The~~2018. This increase ~~was~~is primarily due to the ~~result of time deposit~~increased rates ~~increasing~~ in ~~our trade area and~~ the ~~Company being able to pay off lower rate borrowings from FHLB.~~current year.

The Company’s net interest margin on atax-equivalent basis, which is net interest income as a percentage of average earning assets, was ~~2.97%~~2.85% for the ~~third~~ quarter ~~of 2016 as compared with 2.95%~~ended March 31, 2017 and 3.10% for the ~~third~~ quarter ~~of 2017.~~

~~Nine Months Ended September 30, 2017 as Compared with Nine Months Ended September 30, 2016~~

The Company’s average interest-earning assets increased approximately $13,349,000, or 2%, from approximately $592,372,000 for the first three quarters of 2016 to approximately $605,721,000 for the first three quarters of 2017. Average held to maturity taxable securities increased approximately $24,538,000 and average available for sale taxable securities increased approximately $27,743,000 as a result of the decrease in average loans. The Company’s average loans decreased approximately $36,530,000 as principal payments, maturities, charge-offs and foreclosures relating to existing loans outpaced new loans.

The average yield on earning assets decreased by 11 basis points, from 3.24% for the first three quarters of 2016 to 3.13% for the first three quarters of 2017. This decrease was the result of the increase in volume in lower yielding assets, such as investment securities, as compared with higher yielding assets, such as loans.

Average interest-bearing liabilities increased approximately $638,000, or 1%, from approximately $446,475,000 for the first three quarters of 2016 to approximately $447,113,000 for the first three quarters of 2017. Average savings and interest bearing DDA balances increased approximately $4,605,000 and average time deposits increased $3,483,000 primarily as customers in the casino industry and county and municipal entities reallocate their balances periodically. Average borrowings from the Federal Home Loan Bank decreased approximately $7,450,000 due to the liquidity needs of the bank subsidiary.

~~The average rate paid on interest-bearing liabilities for the first three quarters of 2016 was .23% compared with .30% for the first three quarters of 2017 as a result of the increase in prime rate.~~

~~The Company’s net interest margin on atax-equivalent~~ ~~basis, which is net interest income as a percentage of average earning assets, was 3.07% for the first three quarters of 2016 as compared with 2.91% for the first three quarters of 2017.~~ended March 31, 2018.

The tables on the following pages analyze the changes intax-equivalent net interest income for the quarters ended March 31, 2018 and ~~nine months ended September 30, 2017 and 2016.~~2017.


	Quarter Ended September 30, 2017							Quarter Ended September 30, 2016							Three Months Ended March 31, 2018							Three Months Ended March 31, 2017
	Average Balance		Interest Earned/Paid		Rate			Average Balance		Interest Earned/Paid		Rate			Average Balance		Interest Earned/Paid		Rate			Average Balance		Interest Earned/Paid		Rate
Loans (2)(3)	$	279,771	$	3,165		4.53	%	$	324,160	$	3,568		4.40	%	$	278,042	$	3,233		4.65	%	$	307,244	$	3,274		4.26	%
Balances due from depository institutions		25,409		148		2.33	%		54,734		95		0.69	%
Balances due from financial institutions																10,778		38		1.41	%		34,636		101		1.17	%
HTM:
Taxable		30,131		207		2.75	%		8,593		60		0.01	%		32,517		364		4.48	%		28,173		160		2.27	%
Non taxable (1)		18,802		177		3.77	%		19,981		191		3.82	%		18,547		176		3.80	%		19,667		182		3.70	%
AFS:
Taxable		221,196		842		1.52	%		174,377		553		1.27	%		228,931		1,011		1.77	%		218,487		786		1.44	%
Non taxable (1)		14,821		204		5.51	%		20,422		277		5.43	%		14,302		198		5.54	%		17,162		236		5.50	%
Other		1,002		8		3.19	%		1,741		9		2.07	%		1,855		3		0.65	%		999		3		1.20	%

Total	$	591,132	$	4,751		3.21	%	$	604,008	$	4,753		3.15	%	$	584,972	$	5,023		3.43	%	$	626,368	$	4,742		3.03	%

Savings & interest-bearing DDA	$	350,100	$	218		0.25	%	$	357,950	$	116		0.13	%
Savings & interest- bearing DDA															$	340,384	$	282		0.33	%	$	385,539	$	136		0.14	%
Time deposits		81,632		163		0.80	%		78,727		121		0.61	%		83,909		189		0.90	%		78,309		128		0.65	%
Federal funds purchased																769		5		2.60	%		107		1		3.74	%
Borrowings from FHLB		1,220		8		2.62	%		6,914		30		1.74	%		3,714		20		2.15	%		1,915		14		2.92	%

Total	$	432,952	$	389		0.36	%	$	443,591	$	267		0.24	%	$	428,776	$	496		0.46	%	$	465,870	$	279		0.24	%

Nettax-equivalent spread						2.86	%						2.91	%						2.97	%						2.79	%

Nettax-equivalent margin on earning assets						2.95	%						2.97	%						3.10	%						2.85	%


	For the Nine Months Ended											For the Three Months Ended
	September 30, 2017 compared with September 30, 2016											March 31, 2018 compared with March 31, 2017
	Volume			Rate		Rate/Volume			Total			Volume			Rate			Rate/Volume			Total
Interest earned on:
Loans	$	(1,195	)	$	108	$	(12	)	$	(1,099	)	$	(311	)	$	299		$	(29	)	$	(41	)
Balances due from financial institutions		30			124		18			172
Balances due from finanicial institutions													(70	)		21			(14	)		(63	)
Held to maturity securities:
Taxable		383			11		69			463			25			155			24			204
Non taxable		(7	)		7								(10	)		5			(1	)		(6	)
Available for sale securities:
Taxable		281			190		29			500			38			179			8			225
Non taxable		(219	)		25		(6	)		(200	)		(39	)		2			(1	)		(38	)
Other		(9	)		8		(4	)		(5	)		3			(2	)		(1	)

Total	$	(736	)	$	473	$	94		$	(169	)	$	(364	)	$	659		$	(14	)	$	281

Interest paid on:
Savings & interest-bearing DDA	$	4		$	198	$	3		$	205
Savings & interest-bearing
DDA												$	(16	)	$	183		$	(21	)	$	146
Time deposits		15			96		4			115			9			48			4			61
Federal funds purchased													6						(2	)		4
Borrowings from FHLB		(96	)		81		(68	)		(83	)		13			(4	)		(3	)		6

Total	$	(77	)	$	375	$	(61	)	$	237		$	12		$	227		$	(22	)	$	217

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 addressnon-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.

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 the continuing decline 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. Even though nonaccrual loans were ~~$14,384,000~~$12,886,000 and ~~$11,854,000~~$13,810,000 at ~~September 30, 2017~~March 31, 2018 and December 31, ~~2016,~~2017, respectively, specific reserves of only ~~$810,000~~$1,090,000 and ~~$303,000,~~$1,125,000, respectively, have been allocated to these loans as collateral values appear sufficient to cover loan losses or the loan balances have been charged down to their realizable value.

The Company’son-going, systematic evaluation resulted in the Company recording a provision for ~~the allowance for~~ loan losses of ~~$29,000 for the third quarter of 2017~~$35,000 and ~~$85,000 and $137,000~~$26,000 for the first ~~three~~ quarters of ~~2017~~2018 and ~~2016,~~2017, respectively. The allowance for loan losses as a percentage of loans was ~~2.25%~~2.26% and ~~1.73%~~2.19% at ~~September 30, 2017~~March 31, 2018 and December 31, ~~2016,~~2017, respectively. The Company believes that its allowance for loan losses is appropriate as of ~~September 30, 2017.~~March 31, 2018.

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 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.

~~Quarter Ended September 30, 2017 as Compared with Quarter Ended September 30, 2016~~

Non-interest income decreased ~~$156,000~~$19,000 for the ~~third~~first quarter of ~~2017~~2018 as compared with the ~~third~~first quarter of ~~2016~~2017 primarily as ~~the result of the decrease in gain~~Trust department income and fees increased $67,000, income from other investments decreased $51,000 and gains on ~~liquidation,~~ sales and calls of securities ~~and other income. The Company had opportunities to sell securities in order to generate gains in the prior year and, as a result, recognized $67,000 in 2016. Other income~~ decreased ~~$108,000 in 2017 as compared with 2016 primarily as a result of the prior year including a gain of $88,000 from the sale of bank premises.~~$17,000.

~~Nine Months Ended September 30, 2017 as Compared with Nine Months Ended September 30, 2016~~

~~Non-interest~~Trust income increased ~~$390,000 for the first three quarters of 2017 as compared with the first three quarters of 2016 primarily as the result of the increase~~due to several new account relationships in ~~income~~2018.

Income or loss from other investments ~~as well as the gain from death benefits from life insurance. These increases were partially offset by the decrease in other~~relates to income ~~of $147,000 in 2017 as compared with 2016. Income from other investments increased $63,000~~or loss from operations of ~~the~~an investment in a low income housing ~~partnership as~~partnership. In 2018, occupancy rates have decreased, which resulted in a ~~result~~loss.

There were no calls or sales of ~~increased occupancy~~securities in ~~2017 as compared with 2016. As a result of the death of a participant in the Company’s deferred compensation plans during 2017, anon-recurring~~2018.

gain of $429,000 from the redemption of bank owned life insurance was recorded. Other income decreased $108,000 in 2017 as compared with 2016 primarily as a result of the prior year including a gain of $88,000 from the sale of bank premises.

~~Quarter Ended September 30, 2017 as Compared with Quarter Ended September 30, 2016~~

Totalnon-interest expense decreased ~~$107,000~~$299,000 for the ~~third~~first quarter of ~~2017~~2018 as compared with the ~~third~~first quarter of ~~2016.~~2017. Net occupancy decreased ~~$66,000, Equipment rentals, depreciation and maintenance decreased $41,000, FDIC and state banking assessments decreased $102,000 and other expense decreased $129,000 while~~$95,000, other real estate expense increased ~~$279,000 in 2017~~$58,000 and other expenses decreased $234,000 for the first quarter of 2018 as compared with ~~2016.~~the first quarter of 2017.

Net occupancy expense decreased as a result of the Company’s continuing efforts to decrease its telecommunication and insurance costs.

~~Equipment rentals, depreciation and maintenance primarily decreased~~Other real estate expense increased as a result of ~~the Company reducing its janitorial costs.~~

~~FDIC and state banking assessments decreased as the regulators decreased the premiums for deposit insurance in the current year.~~

~~ORE expense increased due to the increase in writedowns in the value of ORE.~~repair costs associated with recent foreclosures.

Other expense decreased ~~as a result of the reduction of legal, advertising and other costs largely due to the time~~ in ~~which services were performed.~~

~~Nine Months Ended September 30, 2017 as Compared with Nine Months Ended September 30, 2016~~

~~Totalnon-interest~~ expense decreased $400,000 for the first three quarters of 2017 as compared with the first three quarters of 2016. Net occupancy decreased $250,000 and FDIC and state banking assessments decreased $334,000, while other real estate expense increased $135,000 in 2017 as compared with 2016.

~~Net occupancy expense decreased as result of the Company’s efforts to decrease its telecommunication and insurance costs.~~

~~FDIC and state banking assessments decreased~~2018 as the ~~regulators decreased the premiums for deposit insurance~~Company engaged consultants to assist with several projects relating to improve I/T security and operations in the ~~current~~prior year.

~~ORE expense increased due to the increase in writedowns in the value of ORE.~~

At December 31, 2014, the Company established a full valuation allowance on its deferred tax assets. Until such time as the Company returns to sustained earnings, and it is determined that it is more likely than not that the deferred tax asset will be realized, no income tax benefit or expense will ~~generally~~ be recorded.

~~The Company did record income tax expense of $78,000 during the second quarter of 2016 relating to the resolution of a recent examination by the Internal Revenue Service.~~FINANCIAL CONDITION

~~For the year ended~~Cash and due from banks increased $6,238,000 at March 31, 2018, compared with December 31, ~~2014,~~2017 in the Company estimated it would be able to carryback net operating losses and general business credits resulting in Federal refunds totaling $300,000. Accordingly, a $300,000 income tax receivable was recorded at December 31, 2014. Upon preparationmanagement of the amended 2011 and 2012 Federal tax returns, the actual refunds recoverable were $642,000. As a result, the Company recorded an income tax benefit of $338,000 during the second quarter of 2017 as an immaterial correction of an error.

Available for sale securities ~~increased $12,210,000~~decreased $5,269,000 at ~~September 30,~~March 31, 2018, compared with December 31, 2017 as maturities and unrealized losses exceeded investment purchases.

Loans decreased $4,997,000 at March 31, 2018 as compared with December 31, ~~2016. This is the result of the Company investing excess funds not needed currently for loans in order to improve earnings.~~

~~Loans decreased $42,532,000 at September 30,~~ 2017 ~~as compared with December 31, 2016~~ as principal payments, maturities, charge-offs and foreclosures ~~relating to~~on existing loans ~~outpaced~~exceeded new loans.

Total deposits ~~decreased $29,949,000~~increased $9,366,000 at ~~September 30, 2017,~~March 31, 2018, as compared with December 31, ~~2016.~~2017. 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 increase significantly during the first quarter of each year based on property tax collections.

Strength, security and stability have been the hallmark of the Company since its founding in 1985 and of its bank subsidiary since its founding in 1896. A strong capital foundation is fundamental to the continuing prosperity of the Company and the security of its customers and shareholders.

As of ~~September 30, 2017,~~March 31, 2018, 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. As of ~~January 1, 2017,~~January1, 2018, the Company must have a capital conservation buffer above these requirements of ~~1.25%~~1.875% for ~~2017.~~2018. 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 ~~September 30, 2017~~March 31, 2018 and December 31, ~~2016,~~2017, are as follows (in thousands):


	Actual					For Capital Adequacy Purposes					Actual					For Capital Adequacy Purposes
	Amount		Ratio			Amount		Ratio			Amount		Ratio			Amount		Ratio
September 30, 2017 :
March 31, 2018:
Total Capital (to Risk Weighted Assets)	$	96,231		25.41	%	$	30,293		8.00	%	$	97,065		26.23	%	$	29,604		8.00	%
Common Equity Tier 1 Capital (to Risk Weighted Assets)		91,480		24.16	%		17,040		4.50	%		92,420		24.98	%		16,652		4.50	%
Tier 1 Capital (to Risk Weighted Assets)		91,480		24.16	%		22,719		6.00	%		92,420		24.98	%		22,203		6.00	%
Tier 1 Capital (to Average Assets)		91,480		13.13	%		27,863		4.00	%		92,420		14.25	%		25,945		4.00	%

December 31, 2016:
December 31, 2017:
Total Capital (to Risk Weighted Assets)	$	95,262		22.94	%	$	33,220		8.00	%	$	97,122		25.12	%	$	30,930		8.00	%
Common Equity Tier 1 Capital (to Risk Weighted Assets)		90,068		21.69	%		18,687		4.50	%		92,273		23.87	%		17,398		4.50	%
Tier 1 Capital (to Risk Weighted Assets)		90,068		21.69	%		24,915		6.00	%		92,273		23.87	%		23,197		6.00	%
Tier 1 Capital (to Average Assets)		90,068		13.12	%		27,464		4.00	%		92,273		13.79	%		26,769		4.00	%

The actual capital amounts and ratios and required minimum capital amounts and ratios for the Bank as of ~~September 30, 2017~~March 31, 2018 and December 31, ~~2016,~~2017, are as follows (in thousands):


	For Capital Adequacy															For Capital Adequacy
	Actual					Purposes					To Be Well Capitalized					Actual					Purposes					To Be Well Capitalized
	Amount		Ratio			Amount		Ratio			Amount		Ratio			Amount		Ratio			Amount		Ratio			Amount		Ratio
September 30, 2017 :
March 31, 2018:
Total Capital (to Risk Weighted Assets)	$	92,980		24.68	%	$	30,142		8.00	%	$	37,678		10.00	%	$	92,643		25.14	%	$	29,477		8.00	%	$	36,846		10.00	%
Common Equity Tier 1 Capital (to Risk Weighted Assets)		88,252		23.42	%		16,955		4.50	%		24,491		6.50	%		88,018		23.89	%		16,581		4.50	%		23,950		6.50	%
Tier 1 Capital (to Risk Weighted Assets)		88,252		23.42	%		22,607		6.00	%		30,142		8.00	%		88,018		23.89	%		22,107		6.00	%		29,477		8.00	%
Tier 1 Capital (to Average Assets)		88,252		13.13	%		26,876		4.00	%		33,596		5.00	%		88,018		13.46	%		26,164		4.00	%		32,705		5.00	%

December 31, 2016:
December 31, 2017:
Total Capital (to Risk Weighted Assets)	$	91,882		22.29	%	$	32,975		8.00	%	$	41,219		10.00	%	$	92,493		24.04	%	$	30,778		8.00	%	$	38,473		10.00	%
Common Equity Tier 1 Capital (to Risk Weighted Assets)		86,726		21.04	%		18,548		4.50	%		26,792		6.50	%		87,668		22.79	%		17,313		4.50	%		25,007		6.50	%
Tier 1 Capital (to Risk Weighted Assets)		86,726		21.04	%		24,731		6.00	%		32,975		8.00	%		87,668		22.79	%		23,084		6.00	%		30,778		8.00	%
Tier 1 Capital (to Average Assets)		86,726		12.47	%		27,820		4.00	%		34,775		5.00	%		87,668		13.47	%		26,031		4.00	%		32,539		5.00	%

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

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.

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

As of ~~September 30, 2017,~~March 31, 2018, 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~~Rules~~ 13a-15(e)). Based on that evaluation, the Chief Executive Officer and the Chief Financial Officer have concluded that the Company’s disclosure controls and procedures are effective to ensure that the information required to be disclosed by the Company in the reports it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms.

There were no changes in the Company’s internal control over financial reporting that occurred during the period ended ~~September 30, 2017~~March 31, 2018 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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.



Exhibit 31.1:		Certification of Chief Executive Officer Pursuant to Section 302 of the ~~Sarbanes-Oxley~~Sarbanes - Oxley Act of 2002

Exhibit 31.2:		Certification of Chief Financial Officer Pursuant to Section 302 of the ~~Sarbanes-Oxley~~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~~Form~~ 10-Q for the quarter ended ~~September 30, 2017,~~March 31, 2018, formatted in XBRL (Extensible Business Reporting Language): (i) Consolidated Statements of Condition at ~~September 30, 2017~~March 31, 2018 and December 31, ~~2016,~~2017, (ii) Consolidated Statements of Income for the quarters ended March 31, 2018 and ~~nine months ended September 30,~~ 2017, ~~and 2016,~~ (iii) Consolidated Statements of Comprehensive Income for the quarters ended March 31, 2018 and ~~nine months ended September 30,~~ 2017, ~~and 2016,~~ (iv) Consolidated Statement of Changes in Shareholders’ Equity for the ~~nine months~~quarter ended ~~September 30, 2017,~~March 31, 2018, (v) Consolidated Statements of Cash Flows for the ~~nine months~~quarters ended ~~September 30,~~March 31, 2018 and 2017 ~~and 2016~~ and (vi) Notes to the Unaudited Consolidated Financial Statements for the ~~nine months~~quarters ended ~~September 30, 2017~~March 31, 2018 and ~~2016.~~2017.

A Form8-K was filed ~~onJuly~~onJanuary 24, 2018, April 25, 2018, April 26, ~~2017, September 20, 2017~~2018 and ~~October 25, 2017.~~May 7, 2018.

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.


Lameuse and Howard Avenues, Biloxi, Mississippi		39533
(Address of principal executive offices)		(Zip Code)


	Amortized Cost		Fair Value
Available for sale securities:
Due in one year or less	$	42,425	$	42,269
Due after one year through five years		83,351		81,607
Due after five years through ten years		22,457		21,242
Due after ten years		333		348
Mortgage-backed securities		96,952		94,471

Totals	$	245,518	$	239,937

Held to maturity securities:
Due in one year or less	$	995	$	995
Due after one year through five years		14,479		14,364
Due after five years through ten years		20,113		19,527
Due after ten years		15,295		14,672

Totals	$	50,882	$	49,558


	Amortized Cost		Fair Value
Available for sale securities:
Due in one year or less	$	46,961	$	46,895
Due after one year through five years		98,693		98,384
Due after five years through ten years		22,983		22,496
Due after ten years		333		352
Mortgage-backed securities		77,415		77,203

Totals	$	246,385	$	245,330

Held to maturity securities:
Due in one year or less	$	696	$	697
Due after one year through five years		11,641		11,724
Due after five years through ten years		20,588		20,576
Due after ten years		16,480		16,306

Totals	$	49,405	$	49,303


PEOPLES FINANCIAL CORPORATION
(Registrant)

Date:		~~November 13, 2017~~ May 11, 2018

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

Date:		~~November 13, 2017~~ May 11, 2018

By:		/s/ Lauri A. Wood
		Lauri A. Wood
		Chief Financial Officer and Controller
		(principal financial and accounting officer)


	Number of Common Shares		Common Stock		Surplus		Undivided Profits			Accumulated Other Comprehensive Income (Loss)			Total
Balance, January 1, 2017		5,123,186	$	5,123	$	65,780	$	19,318		$	(1,760	)	$	88,461
Net income								1,463						1,463
Dividend declared ($.01 per share)								(51	)					(51	)
Other comprehensive income											1,926			1,926

Balance, September 30, 2017		5,123,186	$	5,123	$	65,780	$	20,730		$	166		$	91,799


												Accumulated
	Number of											Other
	Common			Common					Undivided			Comprehensive
	Shares			Stock			Surplus		Profits			Loss			Total
Balance, January 1, 2018		5,083,186		$	5,083		$	65,780	$	21,563		$	(2,927	)	$	89,499
Net income										292						292
Other comprehensive loss													(2,594	)		(2,594	)
Retirement of stock		(10,392	)		(10	)				(135	)					(145	)

Balance, March 31, 2018		5,072,794		$	5,073		$	65,780	$	21,720		$	(5,521	)	$	87,052


	Nine Months Ended September 30, 2017							Nine Months Ended September 30, 2016
	Average Balance		Interest Earned/Paid		Rate			Average Balance		Interest Earned/Paid		Rate
Loans (2)(3)	$	294,492	$	9,734		4.41	%	$	331,022	$	10,833		4.36	%
Balances due from depository institutions		34,050		384		1.50	%		29,814		212		0.95	%
HTM:
Taxable		28,449		524		2.46	%		3,911		61		2.08	%
Non taxable (1)		19,239		541		3.75	%		19,473		541		3.70	%
AFS:
Taxable		212,435		2,370		1.49	%		184,692		1,870		1.35	%
Non taxable (1)		16,055		665		5.52	%		21,482		865		5.37	%
Other		1,001		14		1.86	%		1,978		19		1.28	%

Total	$	605,721	$	14,232		3.13	%	$	592,372	$	14,401		3.24	%

Savings & interest-bearing DDA	$	364,732	$	535		0.20	%	$	360,127	$	330		0.12	%
Time deposits		80,928		446		0.73	%		77,445		331		0.57	%
Borrowings from FHLB		1,453		32		2.94	%		8,903		115		1.72	%

Total	$	447,113	$	1,013		0.30	%	$	446,475	$	776		0.23	%

Nettax-equivalent spread						2.83	%						3.01	%

Nettax-equivalent margin on earning assets						2.91	%						3.07	%


	For the Quarter Ended
	September 30, 2017 compared with September 30, 2016
	Volume			Rate			Rate/Volume			Total
Interest earned on:
Loans	$	(489	)	$	99		$	(13	)	$	(403	)
Balances due from financial institutions		(51	)		224			(120	)		53
Held to maturity securities:
Taxable		150			(1	)		(2	)		147
Non taxable		(11	)		(3	)					(14	)
Available for sale securities:
Taxable		148			111			30			289
Non taxable		(76	)		4			(1	)		(73	)
Other		(4	)		5			(2	)		(1	)

Total	$	(333	)	$	439		$	(108	)	$	(2	)

Interest paid on:
Savings & interest-bearing DDA	$	(3	)	$	107		$	(2	)	$	102
Time deposits		4			36			2			42
Borrowings from FHLB		(25	)		15			(12	)		(22	)

Total	$	(24	)	$	158		$	(12	)	$	122

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