SECURITIES AND EXCHANGE COMMISSION

FORM 10-K

þ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934       OR
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2004

Commission File Number 0-30050

PEOPLES FINANCIAL CORPORATION

228-435-5511

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

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

Common, $1.00 Par Value

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 þ NO o

Indicate by check mark if disclosure of delinquent filers pursuant to item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the Registrant’s knowledge in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to the Form 10-K. þ

Indicate by check mark whether the registrant is an accelerated filer (as defined by Rule 12b-2 of the Act.) YES o NO þ

At June 30, 2004, the aggregate market value of the registrant’s voting stock held by non-affiliates was approximately $71,851,000.

On March 1, 2005, the registrant had outstanding 5,552,859 shares of common stock, par value of $1.00 per share.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant’s Annual Report to Stockholders for the year ended December 31, 2004 are incorporated by reference into Parts I, II and III of this report. Portions of the Registrant’s Definitive Proxy Statement issued in connection with the Annual Meeting of Shareholders to be held April 13, 2005, are incorporated by reference into Part III of this report.

CONTENTS

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PART I

ITEM 1 — DESCRIPTION OF BUSINESS

THE REGISTRANT

Peoples Financial Corporation (the “Company”) was established as a one bank holding company on December 18, 1984. The Company is headquartered in Biloxi, Mississippi. At December 31, 2004, the Company operated in the state of Mississippi through its wholly-owned subsidiary, The Peoples Bank, Biloxi, Mississippi (“the Bank”). The Company is now engaged, through this subsidiary, in the banking business. The Bank is the Company’s principal asset and primary source of revenue.

NONBANK SUBSIDIARY

On August 22, 1985, PFC Service Corp. (“PFC”) was chartered and began operations as the second wholly-owned subsidiary of Peoples Financial Corporation on October 3, 1985. The purpose of PFC was principally the leasing of automobiles and equipment under direct financing and sales-type leases that expired in various periods through 1993. PFC is inactive at this time.

THE BANK SUBSIDIARY

The Company’s wholly-owned bank subsidiary is The Peoples Bank, which was originally chartered in 1896 in Biloxi, Mississippi. The Bank is a state chartered bank whose deposits are insured under the Federal Deposit Insurance Act. The Bank is not a member of the Federal Reserve System. The legal name of the Bank was changed to The Peoples Bank, Biloxi, Mississippi, during 1991.

The Bank currently offers a variety of loan and deposit services to individuals and small to middle market businesses within its trade area. Deposit services include interest bearing and non-interest bearing checking accounts, savings accounts, certificates of deposit, and IRA accounts. The Bank also offers a non-deposit funds management account, which is not insured by the FDIC. Loan services include business, real estate, construction, personal and installment loans, with an emphasis on commercial lending. The Bank also offers a variety of other functions including collection services, asset management and trust services, wire services, safe deposit box facilities, night drop facilities, cash management, automated teller machines and Internet, or home, banking.

The Bank has a large number of customers acquired over a period of many years and is not dependent upon a single customer or upon a few customers. The Bank also provides services to customers representing a wide variety of industries including seafood, retail, hospitality, gaming and construction. While the Company has pursued external growth strategies on a limited basis, its primary focus has been on internal growth by the Bank through the establishment of new branch locations and an emphasis on strong customer relationships.

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The Main Office, operations center and asset management and trust services of the Bank are located in downtown Biloxi, MS. At December 31, 2004, the Bank also had fifteen (15) branches located throughout Harrison, Hancock, Jackson and Stone Counties. The Bank has automated teller machines (“ATM”) at its Main Office, all branch locations and at numerous non-proprietary locations.

At December 31, 2004, the Bank employed 212 full-time employees and 16 part-time employees.

COMPETITION

The Bank is in direct competition with numerous local and regional commercial banks as well as other non-bank institutions. Interest rates paid and charged on deposits and loans are the primary competitive factors within the Bank’s trade area. The Bank also competes for deposits and loans with insurance companies, finance companies and automobile finance companies. The Bank intends to continue its strategy of being a local, community bank offering traditional bank services and providing quality service in its local trade area.

ASSET MANAGEMENT AND TRUST SERVICES

The Bank’s Asset Management and Trust Services Department offers personal trust, agencies and estate services including living and testamentary trusts, executorships, guardianships, and conservatorships. Benefit accounts maintained by the Department primarily include self-directed individual retirement accounts. Escrow management, stock transfer and bond paying agency accounts are available to corporate customers.

MISCELLANEOUS

The Bank holds no patents, licenses (other than licenses required to be obtained from appropriate bank regulatory agencies), franchises or concessions. During 1994, the Bank obtained the rights to the registered trademark, “The Mint”. There has been no significant change in the kind of services offered by the Bank during the last three fiscal years.

The Bank has not engaged in any research activities relating to the development of new services or the improvement of existing services except in the normal course of its business activities. The Bank presently has no plans for any new line of business requiring the investment of a material amount of total assets.

Most of the Bank’s business originates from within Harrison, Hancock, Stone and Jackson Counties in Mississippi; however, some business is obtained from other counties in southern Mississippi. There has been no material effect upon the Bank’s capital expenditures, earnings or competitive position as a result of federal, state or local environmental regulations.

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REGULATION AND SUPERVISION

The Company is required to file certain reports with, and otherwise comply with the rules and regulations of, the Securities and Exchange Commission under federal securities laws. The common stock of the Company is listed on the NASDAQ small market exchange, such listing subjecting the Company to compliance with the exchange’s requirements with respect to reporting and other rules and regulations. See the comments regarding The Sarbanes-Oxley Act of 2002 presented in “Management’s Discussion and Analysis ” at pages 5 - 9 of the 2004 Annual Report to Shareholders, which is incorporated herein by reference.

The Company is a registered one bank holding company under the Bank Holding Company Act. As such, the Company is required to file periodic reports and such additional information as the Federal Reserve may require. The Federal Reserve Board may also make examinations of the Company and its subsidiaries. The Bank Holding Company Act requires every bank holding company to obtain the prior approval of the Federal Reserve Board before it may acquire substantially all the assets of any bank or ownership or control of any voting shares of any bank if, after the acquisition, it would own or control, directly or indirectly, more than 5 percent of the voting shares of the bank.

A bank holding company is generally prohibited from engaging in, or acquiring direct or indirect control of, voting shares of any company engaged in non-banking activities. One of the principal exceptions to this prohibition is for activities found by the Federal Reserve to be so closely related to banking or the managing or controlling of banks as to be a proper incident thereto. Some of the activities the Federal Reserve Board has determined by regulation to be closely related to banking are the making and servicing of loans, performing certain bookkeeping or data processing services, acting as fiduciary or investment or financial advisor, making equity or debt investments in corporations or projects designed primarily to promote community welfare, leasing transactions if the functional equivalent of an extension of credit and mortgage banking or brokerage.

A bank holding company and its subsidiaries are also prohibited from acquiring any voting shares of or interest in, any banks located outside the state in which the operations of the bank holding company’s subsidiaries are located, unless the acquisition is specially authorized by the statute of the state in which the target is located. Mississippi has enacted legislation which authorizes interstate acquisitions of banking organizations by bank holding companies outside of Mississippi, and also interstate branching transactions, subject to certain conditions and restrictions.

The Bank is subject to the regulation of and examination by the Mississippi Department of Banking and Consumer Finance (“Department of Banking”) and the Federal Deposit Insurance Corporation (“FDIC”). Areas subject to regulation include reserves, investments, loans, mergers, branching, issuance of securities, payment of dividends, capital adequacy, management practices and all other aspects of banking operations. In addition to regular examinations, the Bank must furnish periodic reports to its regulatory authorities containing a full and accurate statement of affairs. The Bank is subject to deposit insurance assessments by the FDIC and the Department of Banking.

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The earnings of commercial banks and bank holding companies are affected not only by general economic conditions but also by the policies of various governmental regulatory authorities, including the Federal Reserve Board. In particular, the Federal Reserve Board regulates money and credit conditions, and interest rates, primarily through open market operations in U. S. Government securities, varying the discount rate of member and nonmember bank borrowing, setting reserve requirements against bank deposits and regulating interest rates payable by banks on certain deposits. These policies influence to a varying extent the overall growth and distribution of bank loans, investments and deposits and the interest rates charged on loans. The monetary policies of the Federal Reserve Board have had a significant effect on the operating results of commercial banks in the past and are expected to continue to do so in the future.

RECENT REGULATION AND SUPERVISION LEGISLATION

The Gramm-Leach-Bliley Act (the “Act”) allows bank holding companies to engage in a wider range of financial activities. In order to engage in such activities, which, among others, include underwriting and selling insurance, providing financial, investment or economic advisory services, and underwriting, dealing in or making a market in, services, a bank holding company must elect to become a financial holding company. The Act also authorized the establishment of financial subsidiaries in order to engage in such financial activities, with certain limitations.

The Act also contains a number of other provisions affecting the Company’s operations . One of the most important of these provisions relates to the issue of privacy. Federal banking regulators were authorized by the Act to adopt rules designed to protect the financial privacy of consumers. These rules implemented notice requirements and restrictions on a financial institution’s ability to disclose nonpublic personal information about consumers to non-affiliated third parties.

As of the date of this Form 10-K, the Company has not taken any action to adopt either the financial holding company or the financial subsidiary structures that were authorized by the Act.

SUPPLEMENTAL STATISTICAL INFORMATION

Schedules I-A through VII present certain statistical information regarding the Company. This information is not audited and should be read in conjunction with the Company’s Consolidated Financial Statements and Notes to Consolidated Financial Statements found at pages 10 - 29 of the 2004 Annual Report to Shareholders.

DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS’ EQUITY AND INTEREST RATES AND DIFFERENTIALS

Net Interest Income, the difference between Interest Income and Interest Expense, is the most significant component of the Company’s earnings. For interest analytical purposes, Management adjusts Net Interest Income to a “taxable equivalent” basis using a 34% Federal Income Tax rate on tax-exempt items (primarily interest on municipal securities).

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Another significant statistic in the analysis of Net Interest Income is the effective interest differential, also called the net yield on earning assets. The net yield is the difference between the rate of interest earned on earning assets and the effective rate paid for all funds, non-interest bearing as well as interest bearing. Since a portion of the Bank’s deposits do not bear interest, such as demand deposits, the rate paid for all funds is lower than the rate on interest bearing liabilities alone.

Recognizing the importance of interest differential to total earnings, Management places great emphasis on managing interest rate spreads. Although interest differential is affected by national, regional and area economic conditions, including the level of credit demand and interest rates, there are significant opportunities to influence interest differential through appropriate loan and investment policies which are designed to maximize the interest differential while maintaining sufficient liquidity and availability of “incremental funds” for purposes of meeting existing commitments and investment in lending and investment opportunities that may arise.

The information included in Schedule I-F presents the change in interest income and interest expense along with the reason(s) for these changes. The change attributable to volume is computed as the change in volume times the old rate. The change attributable to rate is computed as the change in rate times the old volume. The change in rate/volume is computed as the change in rate times the change in volume.

SUMMARY OF LOAN LOSS EXPERIENCE

In the normal course of business, the Bank assumes risks in extending credit. The Bank manages these risks through its lending policies, loan review procedures and the diversification of its loan portfolio. Although it is not possible to predict loan losses with complete accuracy, Management constantly reviews the characteristics of the loan portfolio to determine its overall risk profile and quality.

Constant attention to the quality of the loan portfolio is achieved by the loan review process. Throughout this ongoing process, Management is advised of the condition of individual loans and of the quality profile of the entire loan portfolio. Any loan or portion thereof which is classified “loss” by regulatory examiners or which is determined by Management to be uncollectible because of such factors as the borrower’s failure to pay interest or principal, the borrower’s financial condition, economic conditions in the borrower’s industry or the inadequacy of underlying collateral, is charged-off.

Provisions are charged to operating expense based upon historical loss experience, and additional amounts are provided when, in the opinion of Management, such provisions are not adequate based upon the current factors affecting loan collectibility.

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The allocation of the allowance for loan losses by loan category is based on the factors mentioned in the preceding paragraphs. Accordingly, since all of these factors are subject to change, the allocation is not necessarily indicative of the breakdown of future losses.

The comments concerning the provision for loan losses and the allowance for loan losses presented in “Management’s Discussion and Analysis” at pages 5 - 9 of the 2004 Annual Report to Shareholders and “Note A - Business and Summary of Significant Accounting Policies” at pages 15 - 29 of the 2004 Annual Report to Shareholders are incorporated herein by reference.

RETURN ON EQUITY AND ASSETS

The information under the captions “Five-Year Comparative Summary of Selected Financial Information” on page 31 and “Management’s Discussion and Analysis” on pages 5 - 9 of the 2004 Annual Report are incorporated herein by reference.

DIVIDEND PAYOUT

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SCHEDULE I-A
Distribution of Average Assets, Liabilities and Shareholders’ Equity for the Periods Indicated (2)

(2)     All averages are computed on a daily basis with the exception of deposits, which were computed on a monthly basis. Daily averages were not available for deposits.

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SCHEDULE I-B
Average (2) Amount Outstanding for Major Categories of Interest Earning Assets
and Interest Bearing Liabilities for the Periods Indicated

(2)     All averages are computed on a daily basis with the exception of deposits, which were computed on a monthly basis. Daily averages were not available for deposits.

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SCHEDULE I-C
Interest Earned or Paid on the Major Categories of Interest Earning Assets
and Interest Bearing Liabilities for the Periods Indicated

(2)     Loan fees of $588, $547 and $521 for 2004, 2003 and 2002, respectively, are included in these figures.

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SCHEDULE I-D
Average Interest Rate Earned or Paid for Major Categories of
Interest Earning Assets and Interest Bearing Liabilities for the Periods Indicated

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SCHEDULE I-E

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SCHEDULE I-F
Analysis of Changes In Interest Income and Interest Expense
(In thousands)

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SCHEDULE I-F (continued)
Analysis of Changes in Interest Income and Interest Expense
(In thousands)

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SCHEDULE II-A
Securities Portfolio
Book Value of Securities Portfolio at the Dates Indicated

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SCHEDULE II-B
Maturity of Securities Portfolio at December 31, 2004
And Weighted Average Yields of Such Securities

Note:	The weighted average yields are calculated on the basis of cost. Average yields on investments in states and political subdivisions are based on their contractual yield.

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SCHEDULE III-A
Loan Portfolio
Loans by Type Outstanding (1)

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SCHEDULE III-B
Maturities and Sensitivity to Changes in
Interest Rates of the Loan Portfolio as of December 31, 2004

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SCHEDULE III-C
Non-Performing Loans

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SCHEDULE IV-A
Summary of Loan Loss Expenses
(In thousands except percentage data)

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SCHEDULE IV-B
Allocation of the Allowance for Loan Losses

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SCHEDULE V
Summary of Average Deposits and Their Yields

Certificates of deposit outstanding in amounts $100,000 or more (in thousands) by the amount of time remaining until maturity as of December 31, 2004, are as follows:

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SCHEDULE VI
Short Term Borrowings
(In thousands except percentage data)

Note: Short term borrowings include federal funds purchased from other banks and securities sold under agreements to repurchase.

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SCHEDULE VII
Interest Sensitivity/Gap Analysis

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ITEM 2 — PROPERTIES

The principal properties of the Company are its 16 business locations, including the Main Office, which is located at 152 Lameuse Street in Biloxi, MS. All such properties are owned by the Company. The address of the Main Office and branch locations are listed on page 34 of the 2004 Annual Report to Shareholders.

ITEM 3 — LEGAL PROCEEDINGS

The information included in Note L to the Consolidated Financial Statements included in the 2004 Annual Report to Shareholders is incorporated herein by reference.

ITEM 4 — SUBMISSION OF MATTERS TO VOTE OF SECURITIES HOLDERS

None.

PART II

ITEM 5 — MARKET FOR THE REGISTRANT’S COMMON STOCK AND RELATED STOCKHOLDER MATTERS

The information provided on page 32 of the 2004 Annual Report is incorporated herein by reference.

ITEM 6 — SELECTED FINANCIAL DATA

The information under the caption “Five Year Comparative Summary of Selected Financial Information” on page 31 of the 2004 Annual Report is incorporated herein by reference.

ITEM 7 — MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The information under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations” on pages 5 - 9 of the 2004 Annual Report is incorporated herein by reference.

ITEM 7a — QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

The information under the caption “Quantitative and Qualitative Disclosures about Market Risk” on pages 8 - 9 of the 2004 Annual Report is incorporated herein by reference.

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ITEM 8 — FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA

The following consolidated financial statements of the Company and consolidated subsidiaries and the independent auditors’ report appearing on pages 10 - 30 of the 2004 Annual Report are incorporated herein by reference:

Consolidated Statements of Condition on page 10
Consolidated Statements of Income on page 11
Consolidated Statements of Shareholders’ Equity on page 12 - 13
Consolidated Statements of Cash Flows on page 14
Notes to Consolidated Financial Statements on pages 15 - 29
Independent Auditors’ Report on page 30

ITEM 9 — CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9a — CONTROLS AND PROCEDURES

As of December 31, 2004, 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
Rule 13(a)-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 information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act of 1934 are 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 December 31, 2004, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

ITEM 9b — OTHER INFORMATION

Reports on Form 8-K:

A Report on Form 8-K was filed on December 13, 2004, for the purpose of announcing, by press release, the declaration of a semi-annual dividend.

A Report on Form 8-K was filed on January 12, 2005, for the purpose of announcing, by press release, the earnings for the year ended December 31, 2004.

A Report on Form 8-K was filed on March 10, 2005, for the purpose of announcing the receipt of proceeds from the Pulse EFT Association Exchange which will be recorded as extraordinary income for the quarter ended March 31, 2005.

PART III

ITEM 10 — DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information in Sections II, VII, VIII and IX contained in the Proxy Statement in connection with the Annual Meeting of Shareholders to be held April 13, 2005, which was filed by the Company in definitive form with the Commission on March 11, 2005, is incorporated herein by reference.

The Company’s Board of Directors has adopted a Code of Conduct that applies to not only the chief executive officer and the chief financial officer, but also all of the officers, directors and employees of the Company and its subsidiaries. A copy of this Code of Conduct can be found at the Company’s internet website at www.thepeoples.com. The Company intends to disclose any amendments to its

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Code of Conduct, and any waiver from a provision of the Code of Conduct granted to the Company’s chief executive officer or chief financial officer on the Company’s internet website within five business days following such amendment or waiver. The information contained on or connected to the Company’s internet website is not incorporated by reference into this Form 10-K and should not be considered part of this or any other report that the Company may file with or furnish to the SEC.

ITEM 11 — EXECUTIVE COMPENSATION

The information in Section V contained in the Proxy Statement in connection with the Annual Meeting of Shareholders to be held April 13, 2005, which was filed by the Company in definitive form with the Commission on March 11, 2005, is incorporated herein by reference.

ITEM 12 — SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information in Sections III and IV contained in the Proxy Statement in connection with the Annual Meeting of Shareholders to be held April 13, 2005, which was filed by the Company in definitive form with the Commission on March 11, 2005, is incorporated herein by reference.

ITEM 13 — CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information in Sections V, VI, VII and IX contained in the Proxy Statement in connection with the Annual Meeting of Shareholders to be held April 13, 2005, which was filed by the Company in definitive form with the Commission on March 11, 2005, is incorporated herein by reference.

ITEM 14 — PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information in Section XII contained in the Proxy Statement in connection with the Annual Meeting of Shareholders to be held April 13, 2005, which was filed by the Company in definitive form with the Commission on March 11, 2005, is incorporated herein by reference.

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PART IV

ITEM 15 — EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8 - K

(a) 1. Index of Financial Statements:

     See Item 8.

(a) 2. Index of Financial Schedules:

     All other schedules have been omitted as not applicable or not required or because the information has been included in the financial statements or applicable notes.

(a) 3. Index of Exhibits:

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(b) Reports on Form 8-K:

A Form 8-K was filed on December 13, 2004, January 12, 2005 and March 10, 2005.

*

Filed herewith.

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SIGNATURES

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

PEOPLES FINANCIAL CORPORATION (Registrant)
	Date:	March 23, 2005
	BY:	/s/ Chevis C. Swetman
		Chevis C. Swetman, Chairman of the Board

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

	BY:	/s/ Chevis C. Swetman
	Date:	March 23, 2005
		Chevis C. Swetman, Chairman of the Board

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