Basis of Presentation	6 Months Ended
Jun. 30, 2026
Basis of Presentation
Basis of Presentation	1.Basis of Presentation: Peoples Financial Corporation (the “Company”) is a one-bank holding company headquartered in Biloxi, Mississippi. The Company has two subsidiaries, PFC Service Corp., an inactive company, and The Peoples Bank, Biloxi, Mississippi (the “Bank”). The Bank provides a full range of banking, financial and trust services to state, county and local government entities and individuals and small and commercial businesses operating in those portions of Mississippi, Louisiana and Alabama which are within a fifty-mile radius of the Waveland, Wiggins and Gautier branches, the Bank’s three most outlying locations (the “trade area”). The accompanying unaudited consolidated financial statements and notes thereto contain all adjustments, consisting only of normal recurring adjustments, necessary to present fairly, in accordance with accounting principles generally accepted in the United States of America (“GAAP”), the consolidated financial position of the Company and its subsidiaries as of June 30, 2026 and December 31, 2025 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 2025 Annual Report and Form 10-K. CRITICAL ACCOUNTING POLICIES The results of operations for the quarter and six months ended June 30, 2026, are not necessarily indicative of the results to be expected for the full year. Use of Estimates - The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reported periods. 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 credit losses (ACL) 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 were no material changes or developments during the reporting period with respect to methodologies that the Company uses when applying what management believes are critical accounting policies and developing critical accounting estimates as disclosed in its Annual Report on Form 10-K for the year ended December 31, 2025. Allowance for credit losses In general, the Company uses a broad range of data to estimate current expected credit losses (“CECL”), including information about past events, current conditions, and reasonable and supportable forecasts relevant to assessing the collectability of the cash flows of financial assets. CECL requires the Bank to measure expected credit losses on financial assets carried at amortized cost on a collective or pool basis when similar risk characteristics exist. The Bank has determined that Call Report categories will be utilized, and Management will maintain the option to further segment the portfolio if we deem it beneficial to the analysis. The Company’s loan portfolio segments as of June 30, 2026 and December 31, 2025 were as follows: Real Estate Loans Residential-Residential mortgage loans are susceptible to weakening general economic conditions, increases in unemployment rates, and declining real estate values. Construction-Risk common to commercial construction loans are cost overruns, changes in market demand for property, inadequate long-term financing arrangements, and declines in real estate values. Residential construction loans are susceptible to those same risks as well as those associated with residential mortgage loans. Changes in market demand for property could lead to longer marketing times resulting in higher carrying costs, declining values, and higher interest rates. Nonresidential-Risks to this loan category include industry concentration and the inability to monitor the condition of collateral. Declines in general economic conditions and other events can cause cash flows to fall to levels insufficient to service debt, declines in real estate values, and lack of suitable alternative use for properties. These loans are also susceptible to declines in occupancy rates, business failure, and general economic conditions. Commercial and Industrial-Risk to this loan category include industry concentration and the practical limitations associated with monitoring the condition of the collateral which often consists of inventory, accounts receivable, and other non-real estate assets. Equipment and inventory obsolescence can also pose a risk. Declines in general economic conditions and other events can cause cash flows to fall to levels insufficient to service debt. Other-Risk common to these loans include regulatory risks, unemployment, changes in local economic conditions, and the inability to monitor collateral consisting of personal property. RECENT ACCOUNTING PRONOUNCEMENTS Accounting Standards Update –In May 2026, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update 2026-02 (“ASU 2026-02”), Environmental Credits and Environmental Credit Obligations (Topic 818). ASU 2026-02 was issued to improve the financial accounting for and disclosure of environmental credits and environmental credit obligations. The update provides recognition, measurement, presentation, and disclosure requirements for all entities that generate, purchase, or receive environmental credits or have a regulatory compliance obligation that may be settled with environmental credits. The amendments in ASU 2026-02 are effective for all public entities for annual reporting periods beginning after December 15, 2027, and all other entities for annual reporting periods beginning after December 15, 2028, and interim reporting periods within those annual reporting periods. Early adoption is permitted. Management has evaluated the impact of the adoption of this standard and determined there would be no material impact to the Company’s consolidated financial position or results of operations. Accounting Standards Update –In April 2026, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update 2026-01 (“ASU 2026-01”), Equity (Topic 505) Initial Measurement of Paid-in-Kind Dividends on Equity-Classified Preferred Stock. ASU 2026-01 addresses a gap in generally accepted accounting principles (“GAAP”) regarding how issuers should initially measure paid-in-kind (“PIK”) dividends on equity-classified preferred stock. Prior to the update, U.S. (GAAP) did not provide explicit guidance, which resulted in diversity in practice. Some companies measured PIK dividends using fair value, while others used contractual rates or other methodologies. ASU 2026-01 provides guidance for in-scope instruments, an issuer should initially measure the PIK dividend based on the stated PIK dividend rate specified in the preferred stock agreement. This provides a consistent accounting model and improves comparability among entities. ASU 2026-01 is effective for all entities for annual reporting periods beginning after December 15, 2026, and interim reporting periods within those annual reporting periods. Early adoption is permitted. Management has evaluated the impact of the adoption of this standard and determined there would be no material impact to the Company’s consolidated financial position or results of operations. Accounting Standards Update –In December 2025, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update 2025-11 (“ASU 2025-11”), Interim Reporting (Topic 270): Narrow-Scope Improvements. ASU 2025-11 clarifies the applicability, form and content of interim financial statements and disclosures and improves the navigability of the interim reporting guidance in ASC 270. The amendments introduce a disclosure principle requiring entities to disclose events or changes occurring since the end of the most recent annual reporting period that have a material effect on the entity, and they consolidate interim disclosure requirements from other Topics into ASC 270. ASU 2025-11 is effective for public business entities for interim reporting periods within annual periods beginning after December 15, 2027, and for all other entities one year later. Early adoption is permitted. Management has evaluated the impact of the adoption of this standard and determined there would be no material impact to the Company’s consolidated financial position or results of operations. Accounting Standards Update –In November 2025, the Financial Accounting Standards Board issued Accounting Standards Update 2025-08 (“ASU 2025-08”), Purchased Loans (Topic 326). ASU 2025-08 updates the credit loss accounting model under Topic 326 by expanding the gross up approach—previously limited to Purchased Credit Deteriorated (PCD) assets—to a broader class of acquired loans called purchased seasoned loans (PSLs). Under the new guidance, entities recognize an allowance for expected credit losses at acquisition with a corresponding increase to the loan’s amortized cost basis, eliminating the prior requirement to record a Day 1 credit loss expense for non PCD loans. This change addresses long-standing stakeholder concerns that the old dual model framework was overly complex, subjective, and created inconsistent and economically counterintuitive outcomes, particularly because expected losses were already embedded in fair value at acquisition. ASU 2025-08 will be effective for interim and annual periods for fiscal years beginning after December 15, 2026. Early adoption is permitted for entities that have not yet issued their financial statements. Management has evaluated the impact of the adoption of this standard and determined there would be no material impact to the Company’s consolidated financial position or results of operation. 2. During the quarter ended June 30, 2026, the Company identified an error in its ASC 326 vintage disclosure related to the classification of certain loans among the "Revolving Loans," "Revolving Converted to Term Loans," and year-of-origination categories. Certain commercial real estate and residential construction loans were incorrectly included in the revolving loan categories and should have been reported in the applicable year-of-origination columns. The error affected only the presentation of loan balances within the vintage disclosure and did not impact total loans, the allowance for credit losses, credit quality indicators, regulatory capital, or any previously reported financial statement amounts. After evaluating the matter under ASC 250 and SEC Staff Accounting Bulletin Topic 1.M, management concluded the error was not material to any previously issued financial statements. The effect of the revision on the amounts previously reported as of December 31, 2025 was to decrease the “Revolving Loans” column by $34,025,000 and the “Revolving Converted to Term Loans” column by $2,982,000, with the corresponding increases to the year of origination columns as set forth in Note 6. The Company will similarly revise the vintage disclosure as of December 31, 2024 in future filings in which that period is presented. Accordingly, the June 30, 2026 vintage disclosure reflects the corrected presentation, and the comparative December 31, 2025 disclosure has been revised. See Note 6, Loans, for additional information.

Basis of Presentation

6 Months Ended

Jun. 30, 2026

1.Basis of Presentation:

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

The accompanying unaudited consolidated financial statements and notes thereto contain all adjustments, consisting only of normal recurring adjustments, necessary to present fairly, in accordance with accounting principles generally accepted in the United States of America (“GAAP”), the consolidated financial position of the Company and its subsidiaries as of June 30, 2026 and December 31, 2025 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 2025 Annual Report and Form 10-K.

CRITICAL ACCOUNTING POLICIES

The results of operations for the quarter and six months ended June 30, 2026, are not necessarily indicative of the results to be expected for the full year.

Use of Estimates - The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reported periods. 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 credit losses (ACL) 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 were no material changes or developments during the reporting period with respect to methodologies that the Company uses when applying what management believes are critical accounting policies and developing critical accounting estimates as disclosed in its Annual Report on Form 10-K for the year ended December 31, 2025.

Allowance for credit losses

In general, the Company uses a broad range of data to estimate current expected credit losses (“CECL”), including information about past events, current conditions, and reasonable and supportable forecasts relevant to assessing the collectability of the cash flows of financial assets.

CECL requires the Bank to measure expected credit losses on financial assets carried at amortized cost on a collective or pool basis when similar risk characteristics exist. The Bank has determined that Call Report categories will be utilized, and Management will maintain the option to further segment the portfolio if we deem it beneficial to the analysis.

The Company’s loan portfolio segments as of June 30, 2026 and December 31, 2025 were as follows:

Real Estate Loans

Residential-Residential mortgage loans are susceptible to weakening general economic conditions, increases in unemployment rates, and declining real estate values.

Construction-Risk common to commercial construction loans are cost overruns, changes in market demand for property, inadequate long-term financing arrangements, and declines in real estate values. Residential construction loans are susceptible to those same risks as well as those associated with residential mortgage loans. Changes in market demand for property could lead to longer marketing times resulting in higher carrying costs, declining values, and higher interest rates.

Nonresidential-Risks to this loan category include industry concentration and the inability to monitor the condition of collateral. Declines in general economic conditions and other events can cause cash flows to fall to levels insufficient to service debt, declines in real estate values, and lack of suitable alternative use for properties. These loans are also susceptible to declines in occupancy rates, business failure, and general economic conditions.

Commercial and Industrial-Risk to this loan category include industry concentration and the practical limitations associated with monitoring the condition of the collateral which often consists of inventory, accounts receivable, and other non-real estate assets. Equipment and inventory obsolescence can also pose a risk. Declines in general economic conditions and other events can cause cash flows to fall to levels insufficient to service debt.

Other-Risk common to these loans include regulatory risks, unemployment, changes in local economic conditions, and the inability to monitor collateral consisting of personal property.

RECENT ACCOUNTING PRONOUNCEMENTS

Accounting Standards Update –In May 2026, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update 2026-02 (“ASU 2026-02”), Environmental Credits and Environmental Credit Obligations (Topic 818). ASU 2026-02 was issued to improve the financial accounting for and disclosure of environmental credits and environmental credit obligations. The update provides recognition, measurement, presentation, and disclosure requirements for all entities that generate, purchase, or receive environmental credits or have a regulatory compliance obligation that may be settled with environmental credits. The amendments in ASU 2026-02 are effective for all public entities for annual reporting periods beginning after December 15, 2027, and all other entities for annual reporting periods beginning after December 15, 2028, and interim reporting periods within those annual reporting periods. Early adoption is permitted. Management has evaluated the impact of the adoption of this standard and determined there would be no material impact to the Company’s consolidated financial position or results of operations.

Accounting Standards Update –In April 2026, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update 2026-01 (“ASU 2026-01”), Equity (Topic 505) Initial Measurement of Paid-in-Kind Dividends on Equity-Classified Preferred Stock. ASU 2026-01 addresses a gap in generally accepted accounting principles (“GAAP”) regarding how issuers should initially measure paid-in-kind (“PIK”) dividends on equity-classified preferred stock. Prior to the update, U.S. (GAAP) did not provide explicit guidance, which resulted in diversity in practice. Some companies measured PIK dividends using fair value, while others used contractual rates or other methodologies. ASU 2026-01 provides guidance for in-scope instruments, an issuer should initially measure the PIK dividend based on the stated PIK dividend rate specified in the preferred stock agreement. This provides a consistent accounting model and improves comparability among entities. ASU 2026-01 is effective for all entities for annual reporting periods beginning after December 15, 2026, and interim reporting periods within those annual reporting periods. Early adoption is permitted. Management has evaluated the impact of the adoption of this standard and determined there would be no material impact to the Company’s consolidated financial position or results of operations.

Accounting Standards Update –In December 2025, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update 2025-11 (“ASU 2025-11”), Interim Reporting (Topic 270): Narrow-Scope Improvements. ASU 2025-11 clarifies the applicability, form and content of interim financial statements and disclosures and improves the navigability of the interim reporting guidance in ASC 270. The amendments introduce a disclosure principle requiring entities to disclose events or changes occurring since the end of the most recent annual reporting period that have a material effect on the entity, and they consolidate interim disclosure requirements from other Topics into ASC 270. ASU 2025-11 is effective for public business entities for interim reporting periods within annual periods beginning after December 15, 2027, and for all other entities one year later. Early adoption is permitted. Management has evaluated the impact of the adoption of this standard and determined there would be no material impact to the Company’s consolidated financial position or results of operations.

Accounting Standards Update –In November 2025, the Financial Accounting Standards Board issued Accounting Standards Update 2025-08 (“ASU 2025-08”), Purchased Loans (Topic 326). ASU 2025-08 updates the credit loss accounting model under Topic 326 by expanding the gross up approach—previously limited to Purchased Credit Deteriorated (PCD) assets—to a broader class of acquired loans called purchased seasoned loans (PSLs). Under the new guidance, entities recognize an allowance for expected credit losses at acquisition with a corresponding increase to the loan’s amortized cost basis, eliminating the prior requirement to record a Day 1 credit loss expense for non PCD loans. This change addresses long-standing stakeholder concerns that the old dual model framework was overly complex, subjective, and created inconsistent and economically counterintuitive outcomes, particularly because expected losses were already embedded in fair value at acquisition. ASU 2025-08 will be effective for interim and annual periods for fiscal years beginning after December 15, 2026. Early adoption is permitted for entities that have not yet issued their financial statements. Management has evaluated the impact of the adoption of this standard and determined there would be no material impact to the Company’s consolidated financial position or results of operation.

2. During the quarter ended June 30, 2026, the Company identified an error in its ASC 326 vintage disclosure related to the classification of certain loans among the "Revolving Loans," "Revolving Converted to Term Loans," and year-of-origination categories. Certain commercial real estate and residential construction loans were incorrectly included in the revolving loan categories and should have been reported in the applicable year-of-origination columns.

The error affected only the presentation of loan balances within the vintage disclosure and did not impact total loans, the allowance for credit losses, credit quality indicators, regulatory capital, or any previously reported financial statement amounts. After evaluating the matter under ASC 250 and SEC Staff Accounting Bulletin Topic 1.M, management concluded the error was not material to any previously issued financial statements.

The effect of the revision on the amounts previously reported as of December 31, 2025 was to decrease the “Revolving Loans” column by $34,025,000 and the “Revolving Converted to Term Loans” column by $2,982,000, with the corresponding increases to the year of origination columns as set forth in Note 6. The Company will similarly revise the vintage disclosure as of December 31, 2024 in future filings in which that period is presented.

Accordingly, the June 30, 2026 vintage disclosure reflects the corrected presentation, and the comparative December 31, 2025 disclosure has been revised. See Note 6, Loans, for additional information.