Peoples Financial Corp. in Biloxi, Miss., said it expects to take hits totaling $3 million in the third quarter to reflect the declining the value of its investment in Freddie Mac preferred stock and bigger losses in its portfolio of loans to home builders.
The $897 million-asset parent of Peoples Bank said late Thursday that it would take a $2 million loss on the Freddie Mac stock, whose value has plunged since the government put it and its sister company, Fannie Mae, into conservatorship this month. Peoples bought 60,000 shares of the preferred Freddie Mac shares in 1999 for about $3 million.
Peoples also said that it intends to bolster its loan-loss provision by $1.5 million to cover potential loan losses related to several residential real estate developments, with an after-tax impact of about $1 million.
The $3 million in hits could potentially wipe out its third-quarter earnings. Peoples earned $2.2 million in the second quarter, up 4.2% from the previous period.
In Thursday's press release the company said it would remain well-capitalized despite the charge.
