Peoples Financial reported a quarterly loss after two bad loans put a crater in the Biloxi, Miss., company's bottom line.

The $753 million-asset company lost $1.8 million, after recording a profit of $886,000 a year earlier.

A recent appraisal of two problem loans resulted in a $3.5 million loan-loss provision, a nearly sevenfold increase from the $542,000 set-aside in the same period in 2013. The provision included $1.7 million from an out-of-town commercial loan, for which the company charged off $1.9 in principal. It also included $2.1 million for troubled debt that was recently placed on nonaccural status.

"Because of our updated evaluation of the residential development outside our area, we had no choice but to write down the loan, and prudent business judgment dictated that we move the second loan to nonaccrual status," Chevis Swetman, the company's chairman and chief executive, said in a press release Wednesday.

Net interest income declined 10% from a year earlier, to $4.9 million. Total loans also fell 10%, to $358 million.

Fee-based income dropped 10%, to $2.1 million, while operating expenses were flat, at $6.4 million.

"The fundamental business of our bank remains solid," Swetman said in the release.

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