Exhibit 13.2

Exhibit 13.2: Summary Report to Stockholders

DEAR SHAREHOLDERS

     ECONOMISTS WILL TELL YOU that the recession may be technically over. I can tell you the hangover lingers. I previously mentioned that we may finally be seeing a turn in our local economy, as your bank started to show increased earnings from levels that had been severely depressed by large provisions for loan losses in previous quarters. Today, I am optimistic — though cautious — to report that the worst may be behind us.

Our earnings at Peoples Financial Corporation largely mirrored the progress of the broad American economy and capital markets. Our earnings held up through the first quarter, were slammed during the second quarter, showed life in the third quarter, then struggled through the fourth to set the stage for what we hope are better times ahead in 2010.

Throughout the year and into the fourth quarter of 2009, we continued adding to our loan loss provision, putting aside another $1,500,000 in the fourth quarter for an annual provision total of $5,225,000. Virtually all of our problem loans have been in the real estate development sector that has plagued banks and all other financial institutions across the nation. Most of the losses have been in South Mississippi, but some of our losses were a result of an attempt to diversify our loan portfolio after Hurricane Katrina. We can report that asset quality is stabilizing this year.

Despite all these challenges, we were able to show a profit every quarter of 2009. For the year, we earned in excess of $3.2 million, down 40% from 2008.

Those earnings did not come without pain. Prudence demanded that we take a number of difficult steps, make a number of tough decisions in order to preserve our capital base. We eliminated management bonuses and froze management salaries. Clearly, we have swallowed the bitter medicine our distant relatives on Wall Street have not.

The most difficult decision during the year was to reduce the size of our common stock dividend not once but twice. We have consistently maintained a policy of sharing about 35% of our earnings with our stockholders, and by mid-year, it was clear that the dividend would have to be reduced to match the payout ratio. By the end of the year, we had no choice but to adjust dividends downward again.

While our common dividend has been lowered, it has not been reduced to insignificance, as so many other regional and national banks have been forced to do.

Peoples Green

In the fourth quarter of 2009, we launched our innovative Peoples Green online banking campaign. Unlike conventional electronic banking offerings that force customers to choose stand-alone products, Peoples Green offers new and existing customers the choice of “greening” any demand deposit account, personal or business.

Customers simply sign up for free electronic statements to their new or existing accounts, and receive free Online Bill Pay, which saves time and money. In addition, Peoples Green offers customers a package of special online and electronic services at no additional cost.

Peoples Green program was promoted externally through advertising and a drawing for three Kindle^® e-book readers. Internally, an employee incentive program offered prizes of Apple gift cards, iPods^® and a grand prize of an Apple notebook computer.

The Peoples Green program achieved notable success in hitting its goals, signing up as many customers in the quarter as normally sign up for electronic banking in a full year.

The current administration now proposes to tax large banks basically for being large, whether or not they repaid TARP funds, even at a profit to the federal government. Perversely, this may represent a real competitive advantage for community banks like ours, because the large national banks will simply raise their fees to customers to pay for the additional punitive taxes.

Last year, because of our strong equity position, our bank declined the use of TARP funds to bolster our capital account. We declined to participate last year and now community banks around the country are being offered a similar program. Again, we say, “Thanks, but no thanks.”

Despite the unprecedented challenges of this recession and the inconsistent, sometimes contradictory response from Washington, D.C., our bank was able to turn a profit every quarter of 2009 and remains as fundamentally strong as ever.

Our primary capital ratio remains well above 12%, more than twice the regulatory minimum. Our loan volume remains stable, although not growing at the pace we would prefer. Our deposit base is reasonably priced, as we let high-interest accounts run off rather than pay unsustainable rates to retain them.

We are not simply waiting passively for the inevitable turn of the business cycle to happen. Our loan officers continue to aggressively seek business from quality customers. At the beginning of the fourth quarter of 2009, we launched our new Peoples Green accounts, which offer new and existing customers an attractive package of benefits at no cost simply by ordering online statements.

The Peoples Green campaign so far has proven to be quite a success. After the campaign started, more customers enrolled for online Bill Pay in the last quarter of the year than had signed up the entire year before. This is the future of financial transactions, and we intend to stay on the leading edge of the trend.

At the same time, we have maintained our level of support for the local community. Our employees continue to raise funds for their selected charities. This year’s non-profit beneficiaries are Home of Grace Recovery Program and Mississippi Gulf Coast Multiple Sclerosis Society, each of which also received a $5,000 corporate donation at the end of 2009.

On a higher level, The Peoples Bank has taken a leading role in the development of mixed income housing that is so desperately needed to support our local population and economic growth.

We formed a partnership with Mercy Housing and Human Development (MHHD) dedicated to assist low and moderate income residents qualify for work-force housing loans at our bank. It is important to note that these loans are not in any way the same as the old “subprime” mortgages that led to the bubble in housing prices and the ultimate near collapse of financial markets around the world. These are loans to city and county employees, teachers, bank employees and casino workers.

Mercy Housing and Human Development assists first time homebuyers by offering a broad spectrum of assistance and information, including homebuyer education, credit counseling, first time homebuyer grants and insurance information. Statistics from federal government agencies show that pre-purchase counseling and education reduce mortgage defaults by 34% and low income homeowners have a net worth 12 times that of renters at the same income level. (Sources: Freddie Mac and NeighborWorks America.)

Bethel Estates rendering by Gulf Coast Community Design Studio

Affordable Housing

The Peoples Bank has taken a leading role in the development of mixed income housing on the Mississippi Gulf Coast. We have worked primarily with two leading non-profit organizations dedicated to helping low and moderate income residents buy homes and contribute to the growth and stability of their neighborhoods.

We formed a partnership with Mercy Housing and Human Development (MHHD) to assist low and moderate income residents qualify for work-force housing loans at our bank. Most prospective home buyers are city and county employees, teachers, bank employees, casino workers and first responders.

Working with MHHD, we designed an affordable housing loan program for applicants up to 80% of the median income. The Peoples Bank works with Mercy Housing and others to provide education and technical assistance to help residents purchase their homes, pay their mortgages and contribute to the stability of their local neighborhoods.

In Pass Christian, we have committed to Back Bay Mission for nearly $3,000,000 in construction financing to build 32 new affordable homes in a development named Bethel Estates. These new homes will offer the latest modern amenities and energy efficiencies in a design that reflects the distinctive character of “The Pass.”

Bethel Estates will be the Gulf Coast’s first residential development under Smart Code, a new community planning system that promotes sustainability and protects small-town quality of life. Like Mercy Housing, Back Bay Mission will offer mortgage assistance to qualified low and moderate income homebuyers to make these homes affordable.

Quarter Ended, 2009		March 31				June 30				September 30				December 31
Interest income		$	8,568			$	8,595			$	8,671			$	8,455
Net interest income			6,274				6,569				7,019				7,026
Provision for loan losses			348				1,502				1,875				1,500
Income before income taxes			1,993				151				1,069				961
Net income			1,703				201				974				342
Basic and diluted earnings per share			.33				.04				.19				.06

Quarter Ended, 2008		March 31				June 30				September 30				December 31
Interest income		$	12,081			$	10,901			$	10,706			$	9,885
Net interest income			7,201				7,084				7,217				7,108
Provision for loan losses			46				48				2,001				252
Income before income taxes			3,128				3,262				(1,658	)			2,279
Net income			2,089				2,178				(1,053	)			1,820
Basic and diluted earnings per share			.39				.41				(.20	)			.35

Market Information

The Company’s stock is traded under the symbol PFBX and is quoted in publications under “PplFnMS”. The following table sets forth the high and low sale prices of the Company’s common stock as reported on the NASDAQ Stock Market.

Year		Quarter				High				Low				Dividend per share
2009		1st				$	20.00			$	15.76			$	.30
		2nd					21.49				16.00
		3rd					21.49				17.30				.20
		4th					21.39				15.35
2008		1st				$	25.49			$	19.89			$	.27
		2nd					23.35				20.50
		3rd					23.57				18.00				.29
		4th					22.60				17.80

		2009				2008				2007				2006				2005
Balance Sheet Summary
Total assets		$	869,007			$	896,408			$	927,357			$	964,023			$	845,325
Available for sale securities			311,434				340,642				386,029				396,907				178,394
Held to maturity securities			3,202				3,394				4,630				85,574				134,047
Loans, net of unearned discount			464,976				467,377				450,992				401,194				349,346
Deposits			470,701				510,476				569,130				613,170				592,217
Borrowings from FHLB			104,270				36,938				7,100				7,267				7,352
Shareholders’ equity			103,588				107,000				106,542				98,233				87,503
Summary of Operations
Interest income		$	34,289			$	43,573			$	55,971			$	48,894			$	32,343
Interest expense			7,401				14,963				25,452				18,785				7,550
Net interest income			26,888				28,610				30,519				30,109				24,793
Provision for loan losses			5,225				2,347				(1,045	)			141				3,614
Net interest income after provision for loan losses			21,663				26,263				31,564				29,968				21,179
Non-interest income			10,147				7,268				9,767				12,309				7,237
Non-interest expense			27,636				26,520				25,263				23,050				20,468
Income before taxes and extraordinary gain			4,174				7,011				16,068				19,227				7,948
Applicable income taxes			954				1,977				5,042				6,459				2,604
Extraordinary gain																			538
Net income		$	3,220			$	5,034			$	11,026			$	12,768			$	5,882
Per Share Data
Basic and diluted earnings per share		$	.62			$	.94			$	2.01			$	2.30			$	1.06
Basic and diluted earnings per share before extraordinary gain			.62				.94				2.01				2.30				.96
Dividends per share			.50				.56				.52				.44				.38
Book value			20.11				20.27				19.56				17.71				15.77
Weighted average number of shares			5,170,430				5,342,470				5,489,861				5,548,300				5,550,477
Selected Ratios
Return on average assets			.36	%			.55	%			1.15	%			1.41	%			.82	%
Return on average equity			3.06	%			4.73	%			10.77	%			13.75	%			6.79	%
Primary capital to average assets			12.49	%			12.81	%			12.13	%			11.91	%			13.67	%
Risk-based capital ratios:
Tier 1			17.83	%			18.03	%			18.38	%			19.87	%			20.26	%
Total			19.08	%			19.28	%			19.63	%			21.12	%			21.51	%

Main Office       152 Lameuse Street, Biloxi, Mississippi 39530       (228) 435-5511

Asset Management & Trust Services

758 Vieux Marché, Biloxi, MS 39530

(228) 435-8208

Bay St. Louis

408 Highway 90 East, Bay St. Louis, Mississippi 39520

(228) 467-9296

Cedar Lake

1740 Popps Ferry Road, Biloxi, Mississippi 39532

(228) 435-8688

Diamondhead

5429 West Aloha Drive, Diamondhead, Mississippi 39525

(228) 255-4450

D’Iberville-St. Martin

10491 Lemoyne Boulevard, D’Iberville, Mississippi 39540

(228) 435-8202

Downtown Gulfport

1105 30th Avenue, Gulfport, Mississippi 39501

(228) 897-8715

Gautier

2609 Highway 90, Gautier, Mississippi 39553

(228) 497-1766

Handsboro

412 E. Pass Road, Gulfport, Mississippi 39507

(228) 897-8717

Long Beach

298 Jeff Davis Avenue, Long Beach, Mississippi 39560

(228) 897-8712

Ocean Springs

2015 Bienville Boulevard, Ocean Springs, Mississippi 39564

(228) 435-8204

Orange Grove

12020 Highway 49 North, Gulfport, Mississippi 39503

(228) 897-8718

Pass Christian

301 East Second Street, Pass Christian, Mississippi 39571

(228) 897-8719

Saucier

17689 Second Street, Saucier, Mississippi 39574

(228) 897-8716

Waveland

470 Highway 90, Waveland, Mississippi 39576

(228) 467-7257

West Biloxi

2560 Pass Road, Biloxi, Mississippi 39531

(228) 435-8203

Wiggins

1312 S. Magnolia Drive, Wiggins, Mississippi 39577

(601) 928-1761 or (228) 897-8722

CORPORATE OFFICE

Mailing Address

P. O. Box 529

Biloxi, MS 39533-0529

Physical Address

152 Lameuse Street

Biloxi, MS 39530

(228) 435-8205

Website

www.thepeoples.com

Corporate Stock

The common stock of Peoples Financial Corporation is traded on the NASDAQ Capital Market under the symbol: PFBX. The current market makers are:

FIG Partners

FTN Midwest Research Secs.

Howe Barnes Hoefer & Arnett

Knight Equity Markets, L.P.

Morgan Keegan & Company, Inc.

Sterne, Agee & Leach, Inc.

Stifel Nicolaus & Co.

Shareholder Information

For complete information concerning the common stock of Peoples Financial Corporation, including dividend reinvestment, or general information about the Company, direct inquiries to transfer agent/investor relations:

Asset Management & Trust Services Department

The Peoples Bank, Biloxi, Mississippi

P. O. Box 1416, Biloxi, Mississippi 39533-1416

(228) 435-8208, e-mail: investorrelations@thepeoples.com

Independent Auditors

Porter Keadle Moore, LLP

Atlanta, Georgia

S.E.C. Form 10-K Requests

A copy of the Annual Report on Form 10-K, as filed with the Securities and Exchange Commission, may be obtained without charge by directing a written request to:

Lauri A. Wood, Chief Financial Officer and Controller

Peoples Financial Corporation

P. O. Drawer 529, Biloxi, Mississippi 39533-0529

(228) 435-8412, e-mail: lwood@thepeoples.com

BOARD OF DIRECTORS

Peoples Financial Corporation
Chevis C. Swetman, Chairman of the Board
Dan Magruder, Vice-Chairman; President, Rex Distributing Co., Inc.
Drew Allen, President, Allen Beverages, Inc.
Rex E. Kelly, Consultant, Strategic Communications/Corporate and Public Relations
Lyle M. Page, Partner, Page, Mannino, Peresich & McDermott, PLLC

OFFICERS

Peoples Financial Corporation
Chevis C. Swetman, President and CEO
A. Wes Fulmer, Executive Vice-President
Thomas J. Sliman, First Vice-President
Jeannette E. Romero, Second Vice-President
Robert M. Tucei, Vice-President
Lauri A. Wood, Chief Financial Officer and Controller
Ann F. Guice, Vice-President and Secretary
J. Patrick Wild, Vice-President

BOARD OF DIRECTORS

The Peoples Bank, Biloxi, Mississippi
Chevis C. Swetman, Chairman of the Board
Tyrone J. Gollott, Vice-Chairman; President, G & W Enterprises, Inc.
Drew Allen, President, Allen Beverages, Inc.
Liz Corso Joachim, President, Frank P. Corso, Inc.

Rex E. Kelly, Consultant, Strategic Communications/Corporate and Public Relations
Dan Magruder, President, Rex Distributing Co., Inc.
Jeffrey H. O’Keefe, President, Bradford-O’Keefe Funeral Homes, Inc.
Lyle M. Page, Partner, Page, Mannino, Peresich & McDermott, PLLC

SENIOR MANAGEMENT

The Peoples Bank, Biloxi, Mississippi
Chevis C. Swetman, President and CEO
A. Wes Fulmer, Executive Vice-President
Thomas J. Sliman, Senior Vice-President
Jeannette E. Romero, Senior Vice-President
Robert M. Tucei, Senior Vice-President
Lauri A. Wood, Senior Vice-President and Cashier
Ann F. Guice, Senior Vice-President
J. Patrick Wild, Senior Vice-President

Seated from left: Lyle M. Page*, Liz Corso Joachim, Tyrone J. Gollott

Standing from left: Rex E. Kelly*, Jeffrey H.O’Keefe, Chevis C. Swetman*, Drew Allen*, Dan Magruder*

*Member of both boards